"Google has not infringed trade mark law by allowing advertisers to purchase keywords corresponding to their competitors’ trade marks."They did warn however that:
"Advertisers themselves, however, cannot, by using such keywords, arrange for Google to display ads which do not allow internet users easily to establish from which undertaking the goods or services covered by the ad in question originate"Court of Justice of the European Union, PRESS RELEASE No 32/10 gives an outline of the decision. The full text of case number C-236/08 is also available at the http://curia.europa.eu website.
Update: The Grand Chamber of the Court takes 21 paragraphs to outline the technicalities of EU trademark law involved in the case and then explains the Google adwords service (paras 22 -27). Then -
"28 Vuitton, which markets, in particular, luxury bags and other leather goods, is the proprietor of the Community trade mark ‘Vuitton’ and of the French national trade marks ‘Louis Vuitton’ and ‘LV’. It is common ground that those marks enjoy a certain reputation.
Similar cases were brought by Viaticum, Luteciel and CNRRH.29 At the beginning of 2003, Vuitton became aware that the entry, by internet users, of terms constituting its trade marks into Google’s search engine triggered the display, under the heading ‘sponsored links’, of links to sites offering imitation versions of Vuitton’s products. It was also established that Google offered advertisers the possibility of selecting not only keywords which correspond to Vuitton’s trade marks, but also those keywords in combination with expressions indicating imitation, such as ‘imitation’ and ‘copy’.30 Vuitton brought proceeding against Google with a view, inter alia, to obtaining a declaration that Google had infringed its trade marks.31 Google was found guilty of infringing Vuitton’s trade marks by a judgment of 4 February 2005 of the Tribunal de grande instance de Paris (Regional Court, Paris), and subsequently, on appeal, by judgment of 28 June 2006 of the Cour d’appel de Paris (Court of Appeal, Paris). Google has brought an appeal on a point of law (cassation) against that latter judgment."
Paragraphs 55 - 58, 97 - 99, 104 -105 and 114 - 120 get to the heart of the trademark infringement issues in the case:
"55 Although it is clear from those factors that the referencing service provider operates ‘in the course of trade’ when it permits advertisers to select, as keywords, signs identical with trade marks, stores those signs and displays its clients’ ads on the basis thereof, it does not follow, however, from those factors that that service provider itself ‘uses’ those signs within the terms of Article 5 of Directive 89/104 and Article 9 of Regulation No 40/94.
56 In that regard, suffice it to note that the use, by a third party, of a sign identical with, or similar to, the proprietor’s trade mark implies, at the very least, that that third party uses the sign in its own commercial communication. A referencing service provider allows its clients to use signs which are identical with, or similar to, trade marks, without itself using those signs.57 That conclusion is not called into question by the fact that that service provider is paid by its clients for the use of those signs. The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign. To the extent to which it has permitted its client to make such a use of the sign, its role must, as necessary, be examined from the angle of rules of law other than Article 5 of Directive 89/104 and Article 9 of Regulation No 40/94, such as those referred to in paragraph 107 of the present judgment.58 It follows from the foregoing that a referencing service provider is not involved in use in the course of trade within the meaning of the abovementioned provisions of Directive 89/104 and of Regulation No 40/94.59 Consequently, the conditions relating to use ‘in relation to goods or services’ and to the effect on the functions of the trade mark need to be examined only in relation to the use, by the advertiser, of the sign identical with the mark...
62 The facts giving rise to the dispute in the main proceedings in Case C‑236/08 are similar to certain of the situations described in those provisions of Directive 89/104 and of Regulation No 40/94, namely the offering of goods by a third party under a sign identical with the trade mark and the use of that sign in advertising. It is apparent from the file that signs identical with Vuitton’s trade marks have appeared in ads displayed under the heading ‘sponsored links’.63 In Cases C‑237/08 and C‑238/08, by contrast, there is no use in the third party’s ad of a sign identical with the trade mark.64 Google submits that, in the absence of any mention of a sign in the actual ad, it cannot be argued that use of that sign as a keyword equates to use in relation to goods or services. The trade mark proprietors challenging Google and the French Government take the opposite view.
65 In this connection, it should be borne in mind that Article 5(3) of Directive 89/104 and Article 9(2) of Regulation No 40/94 provide only a non-exhaustive list of the kinds of use which the proprietor may prohibit (Arsenal Football Club, paragraph 38; Case C‑228/03 Gillette Company and Gillette Group Finland  ECR I‑2337, paragraph 28; and Adam Opel, paragraph 16). Accordingly, the fact that the sign used by the third party for advertising purposes does not appear in the ad itself cannot of itself mean that that use falls outside the concept of ‘[use] … in relation to goods or services’ within the terms of Article 5 of Directive 89/104.66 Furthermore, an interpretation according to which only the uses mentioned in that list are relevant would fail to have regard for the fact that that list was drawn up before the full emergence of electronic commerce and the advertising produced in that context. It is those electronic forms of commerce and advertising which can, by means of computer technology, typically give rise to uses which differ from those listed in Article 5(3) of Directive 89/104 and Article 9(2) of Regulation No 40/94...
97 It follows from those factors that, when internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list. That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’.98 Having regard to those facts, it must be concluded that use of a sign identical with another person’s trade mark in a referencing service such as that at issue in the cases in the main proceedings is not liable to have an adverse effect on the advertising function of the trade mark.
d) Conclusion99 In the light of the foregoing, the answer to the first question in Case C‑236/08, the first question in Case C‑237/08 and the first and second questions in Case C‑238/08 is that:– Article 5(1)(a) of Directive 89/104 and Article 9(1)(a) of Regulation No 40/94 must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that ad does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party;– an internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of ads on the basis of that keyword does not use that sign within the meaning of Article 5(1) of Directive 89/104 or of Article 9(1)(a) and (b) of Regulation No 40/94...
104 However, with regard to the question whether a referencing service provider, when it stores those signs, in combination with terms such as ‘imitation’ and ‘copy’, as keywords and permits the display of ads on the basis thereof, itself uses those signs in a way which the proprietor of those marks is entitled to prohibit, it must be borne in mind, as has been pointed out in paragraphs 55 to 57 of the present judgment, that those acts of the service provider do not constitute use for the purposes of Article 5 of Directive 89/104 and Article 9 of Regulation No 40/94.105 Accordingly, the answer to the second question referred in Case C‑236/08 is that an internet referencing service provider which stores, as a keyword, a sign identical with a reputable trade mark and arranges the display of ads on the basis of that keyword does not use that sign within the meaning of Article 5(2) of Directive 89/104 or of Article 9(1)(c) of Regulation No 40/94...
114 Accordingly, in order to establish whether the liability of a referencing service provider may be limited under Article 14 of Directive 2000/31, it is necessary to examine whether the role played by that service provider is neutral, in the sense that its conduct is merely technical, automatic and passive, pointing to a lack of knowledge or control of the data which it stores.
The bottom line appears to be that Google is not liable for trademark infringement in the operation of its adwords service unless it has actual knowledge of the piggybacking of its advertisers on that service to deliver advertisments deliberately designed to mislead consumers and thereafter fails to take down such adverts. So there are circumstances in which Google could be held to be guilty of trademark infringement by national courts but effectively this decision constitutes a big win for the seach giant.115 With regard to the referencing service at issue in the cases in the main proceedings, it is apparent from the files and from the description in paragraph 23 et seq. of the present judgment that, with the help of software which it has developed, Google processes the data entered by advertisers and the resulting display of the ads is made under conditions which Google controls. Thus, Google determines the order of display according to, inter alia, the remuneration paid by the advertisers.116 It must be pointed out that the mere facts that the referencing service is subject to payment, that Google sets the payment terms or that it provides general information to its clients cannot have the effect of depriving Google of the exemptions from liability provided for in Directive 2000/31.117 Likewise, concordance between the keyword selected and the search term entered by an internet user is not sufficient of itself to justify the view that Google has knowledge of, or control over, the data entered into its system by advertisers and stored in memory on its server.118 By contrast, in the context of the examination referred to in paragraph 114 of the present judgment, the role played by Google in the drafting of the commercial message which accompanies the advertising link or in the establishment or selection of keywords is relevant.119 It is in the light of the foregoing considerations that the national court, which is best placed to be aware of the actual terms on which the service in the cases in the main proceedings is supplied, must assess whether the role thus played by Google corresponds to that described in paragraph 114 of the present judgment.120 It follows that the answer to the third question in Case C‑236/08, the second question in Case C‑237/08 and the third question in Case C‑238/08 is that Article 14 of Directive 2000/31 must be interpreted as meaning that the rule laid down therein applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned."
Update 2: Here's Google's take on the decision.
"Some companies want to limit choice for users by extending trade mark law to encompass the use of keywords in online advertising. Ultimately they want to be able to exercise greater control over the infomation available to users by preventing other companies from advertising when a user enters their trade mark as a search query. In other words, controlling and restricting the amount of information that users may see in response to their searches.Update 3: WSJ report on the case as do the Guardian.
Today, the Court confirmed that Google has not infringed trade mark law by allowing advertisers to bid for keywords corresponding to their competitors’ trade marks. It also confirmed that European law that protects internet hosting services applies to Google’s AdWords advertising system. This is important because it is a fundamental principle behind the free flow of information over the internet."