Off piste? ECJ decides Austrian Supreme Court's ‘Adwords’ jurisdiction question in Wintersteiger

Author: Birgit Clark (Baker & McKenzie)

Wintersteiger AG v Products 4U Sondermaschinenbau GmbH, Case C-523/10, Court of Justice of the European Union, 19 April 2012

Journal of Intellectual Property Law & Practice (2012), doi: 10.1093/jiplp/jps127, first published online: August 24, 2012

In response to a request for a preliminary ruling by the Austrian Supreme Court (Oberster Gerichtshof, OGH), the Court of Justice of the European Union (ECJ) held that an action for trade mark infringement in cases of keyword advertising may be heard by the courts in the jurisdiction in which the mark is registered as well as by the courts in the jurisdiction in which the advertiser is established.

Legal context

In contrast to the recent high profile ECJ cases relating to the permissibility of keyword advertising (such as Google France (Joined Cases C-236/08, C-237/08 and C-238/08; see S Ott and M Schubert ‘It's the Ad Text, Stupid: Cryptic Answers Won't Establish Legal Certainty for Online Advertisers’ (2009) 6(1) JIPLP 23); BergSpechte (Case C-278/08), Portakabin (Case C-588/08); Eis.de (C-91/09); Interflora (C-323/09)), this referral by the Austrian Supreme Court (Case 17 OB 8/10s) is not so much about whether use of keyword adverting may amount to trade mark infringement, but addresses instead the question of relevant jurisdiction where a foreign-registered trade mark is infringed by keyword adverting which is triggered by a sign identical with a national trade mark but shown on a search engine which aims at users in a different European jurisdiction.

With trade mark infringement under §10(1) of the Austrian Trade Mark Act qualifying as a delict (the Austrian law equivalent of a tortious act), the relevant legal provisions are found in Regulation 44/2001 on the jurisdiction and the recognition and enforcement of judgments in civil and commercial matters (‘Brussels Regulation’). Article 2 of the Brussels Regulation stipulates that persons domiciled in ‘a Member State’ shall, whatever their nationality, be sued in the courts of that member state. Article 5(3) of the Brussels Regulation, which is an exception to Article 2, provides that a ‘person domiciled in a Member State may, in another Member State, be sued … in matters relating to tort, delict or quasi-delict, in the courts for the place where the harmful event occurred or may occur.’

Facts

The claimant was an Austrian manufacturer of machines for the servicing and maintenance of skis and snowboards. The defendant produced similar machines in Germany and sold accessories for machines of different producers and/or origin, which the claimant neither produced nor authorized. The German defendant booked the claimant's registered Austrian trade mark (‘Wintersteiger’) as a keyword with AdWords Germany from December 2008 with the consequence that when a third party entered ‘Wintersteiger’ as a search term into the German search engine www.google.de, the defendant's ads, which did not include the term ‘Wintersteiger’, were displayed alongside the natural search results on the results page of the search engine.

By way of background: while advertisers on AdWords can restrict the display of ads triggered by the keywords chosen by, for example, language regions, countries or even cities, Google displays as ads to users, irrespective of their actual origin/location, only those ads which were booked for the respective top-level-domain (TLD), in this case: ‘.de’. The text of the ad displayed in January 2010 on google.de was as follows (translated from German into English):
title: ‘ski repair shop accessories’;
first line: ‘ski and snowboard machines’;
second line: ‘maintenance and repair’;
Display URL: ‘URL of the defendant’.
The claimant was not impressed and filed an application for an injunction together with an application for protective measures at an Austrian first instance court, requiring the defendant to stop using the trade mark Wintersteiger as an AdWord on google.de. The first instance court refused this application as inadmissible on the grounds of lack of international jurisdiction: since the AdWord concerned was limited to google.de, there was no sufficient connection with Austrian territory.

On appeal, the Higher Regional Court of Linz found that, even though there was jurisdiction, the application still had to be dismissed as to the substance. On further appeal, the OGH suspended its proceedings and referred the following questions to the ECJ for a preliminary ruling:
In the case of an alleged infringement by a person established in another Member State of a trade mark granted in the State of the court seised through the use of a keyword (AdWord) identical to that trade mark in an internet search engine which offers its services under various country-specific top-level domains, is the phrase ‘place where the harmful event occurred or may occur’ in Article 5(3) of Regulation … 44/2001 (‘the Brussels I Regulation’) to be interpreted as meaning that:

1.1 jurisdiction is established only if the keyword is used on the search engine website the top-level domain of which is that of the State of the court seised;

1.2 jurisdiction is established only if the search engine website on which the keyword is used can be accessed in the State of the court seised;

1.3 jurisdiction is dependent on the satisfaction of other requirements additional to the accessibility of the website?

If Question 1.3 is answered in the affirmative: Which criteria are to be used to determine whether jurisdiction under Article 5(3) of the Brussels I Regulation is established where a trade mark granted in the State of the court seised is used as an AdWord on a search engine website with a country-specific top-level domain different from that of the State of the court seised?
The Advocate General's opinion

In his Opinion of 16 February 2012, Advocate General Cruz Villalón took the view that Article 5(3) of the Brussels Regulation attributes jurisdiction to the courts of the Member State where the mark was registered (here: Austria), as well as to the courts of the Member State ‘where the means necessary to produce an actual infringement of a trade mark registered in another Member State are used’ (here: Germany). The Advocate General explained his reasoning with the effect the defendant's conduct, objectively, had on the ‘Wintersteiger’ mark in Austria: the fact that the keyword registration was intended to only cover Germany, did ‘not preclude—or come close to precluding’— Austrian customers of the ‘Wintersteiger’ mark from using the google.de. search engine either in Austria or in Germany. Further, the claimant's market was international: Germany and Austria were neighbouring countries and shared the same language and the google.de website was freely accessible in Austria. Finally the link included in the ad that was displayed on the google.de website took users directly to the defendant's website, without any reference to the fact that it was a national trade mark linked to an Austrian undertaking.

Analysis

In its decision, the ECJ partly confirmed and partly disagreed with the Advocate General's opinion by holding that Article 5(3) of the Brussels Regulation:
… must be interpreted as meaning that an action relating to infringement of a trade mark registered in a Member State because of the use, by an advertiser, of a keyword identical to that trade mark on a search engine website operating under a country-specific top-level domain of another Member State may be brought before either the courts of the Member State in which the trade mark is registered or the courts of the Member State of the place of establishment of the advertiser.
Referring to its recent precedent concerning an of an alleged infringement of personality rights on the internet in eDate Advertising and Others (Cases C-509/09 and C-161/10), the ECJ explained that, ‘for reasons relating to the sound administration of justice and the efficacious conduct of proceedings’, Article 5(3) of the Brussels Regulation required the ‘existence of a particularly close connecting factor between the dispute and the courts of the place where the harmful event occurred.’

Further, again in reference to eDate Advertising and Others, the court emphasized that the expression ‘place where the harmful event occurred or may occur’ in Article 5(3) of the Brussels Regulation was intended to cover both: ‘the place where the damage occurred’ as well as the ‘place of the event giving rise to it’, so that the defendant may be sued, at the option of the applicant, in the courts for either of those places. Either place could constitute a significant connecting factor from the point of view of jurisdiction, since each of them could, depending on the circumstances, be particularly helpful in relation to the evidence and the conduct of the proceedings.

‘The place where the damage occurred’

In determining the jurisdiction under Article 5(3) of the Brussels Regulation for infringement cases involving keyword advertising, the ECJ considered the objective of foreseeability and the objective of sound administration of justice. The judges agreed with Advocate General Cruz Villalón in this regard and found that the courts of the Member State where the national trade mark was registered (here: Austria) were best able to assess whether a particular keyword advertising scenario actually infringed the protected national mark.

‘The place where the event giving rise to the damage occurred’

Concerning the interpretation of ‘the place where the event giving rise to the damage occurred’, the ECJ, inter alia, considered the ease with which that court could gather evidence of the infringement. The court explained that it was ‘the activation by the advertiser of the technical process displaying, according to pre-defined parameters, the advertisement which it created for its own commercial communications which should be considered to be the event giving rise to an alleged infringement, and not the display of the advertisement itself.’ While it was ‘true that the technical display process by the advertiser is activated, ultimately, on a server belonging to the operator of the search engine used by the advertiser’, again referring to eDate Advertising and Others, the judges took the view that, due to its uncertain location, the place of establishment of the server could not be considered to be ‘the place where the event giving rise to the damage occurred’.

Since it was ‘a definite and identifiable place’ for both claimant and defendant and likely to facilitate the gathering of evidence and conduct of proceedings, the judges concluded that it was the place of establishment of the advertiser (here, Germany) where the activation of the display process was decided and where an action relating to alleged infringement based on keyword advertising could thus also be brought.

Practical significance

After its decision in eDate Advertising and Others, the ECJ in Wintersteiger handed down another extensive interpretation of the expression ‘place where the harmful event occurred’ in internet cases.

Insofar as the ECJ in Wintersteiger follows Advocate General Cruz Villalón's opinion that an action for trade mark infringement based on keyword advertising may be brought before the courts of the Member State of registration of the trade mark, the decision did not come as much of a surprise. However, the court's interpretation of Article 5(3) of the Brussels Regulation, providing that such cases may also be brought before the courts of the Member State in which the defendant advertiser is established, differs from the Advocate General's approach and appears more ambiguous. How this interpretation is to be read in the context of Article 2 of the Brussels Regulation, which already grants the courts of member states in which defendants are domiciled jurisdiction and the definition of the term establishment in Article 5(5) of the Brussels Regulation is unclear. There are further questions that remain open, albeit mostly because this case was highly fact specific. What remains unclear is whether the court's reasoning in Wintersteiger is meant to be limited to a situation in which the allegedly infringing use is committed ‘by an advertiser, of a keyword identical to that trade mark’ where that use is ‘on a search engine website operating under a country-specific top-level domain of another Member State’? In this context, Advocate General Cruz Villalón's reasoning (‘where the means necessary to produce an actual infringement of a trade mark registered in another Member State are used’) provided clearer guidance. Nonetheless, even though the ECJ does not say so, it seems fairly safe to suggest, however, that the reasoning in Wintersteiger will equally apply to an alleged infringement by use of a similar keyword, bearing in mind the ECJ's decision in BergSpechte, where the ECJ expressly extended its reasoning in Google France relating to the use of keywords that are identical to a trade mark to cases of keywords that are similar to a trade mark. By the same token, there are also no obvious reasons why Wintersteiger should only apply to search engines operating under a country-specific top-level domain. However, again the ECJ did not expressly say so.

What makes this decision more intriguing is the fact that, as regards to cases of keyword advertising, most observers regard the Austrian OGH as the most brand owner-friendly court in the European Union (OGH, 17 Ob 3/10p of 21 June 2010 BergSpechte III; also see: M Schubert and B Clark ‘“Wintersteiger”—Austrian Supreme Court Refers Jurisdiction Question in AdWord Cases to the ECJ' (2011) 6(5) JIPLP 288). In contrast, the German Federal Supreme Court has adopted what is generally regarded as a more keyword advertising-friendly approach (BGH, I ZR125/07 of 13 January 2011 Bananabay II; see: B Clark ‘Going bananas? Bundesgerichtshof decides Bananabay II’ (2012) 7(2) JIPLP 84).

While the Wintersteiger decision may certainly serve as a reminder to brand owners to perfect the coverage of their EU trade mark portfolio, it will also be interesting to see whether Wintersteiger may indeed give rise to forum shopping, as already predicted by some observers.

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