Europe's top court, the Court of Justice of the European Union, will next week rule on whether or not Google can use trade marks to trigger ads when brands battle to reach online consumers.
The ruling is due on Tuesday and will determine when brand-protection laws apply online and will have a major impact on the way companies advertise on the internet, one expert said.
Luxury goods maker Moët Hennessy Louis Vuitton (LVMH) and two other companies took action against Google. They argued that if a company bought the right for its ads to be displayed when a rival's trade marks were searched, this constituted trade mark infringement.
When LVMH's trade marked terms were typed into Google, ads for counterfeit products would appear. The AdWords system allows anyone to pay Google to have their advertisement appear when a certain search term is entered by a user. Where there is competition for advertising space, Google gives the highest spots according to the amounts paid and the advert's relevance.
Intellectual property law expert John MacKenzie of Pinsent Masons, the law firm behind OUT-LAW.COM, said that the case will establish some major principles of online commerce.
"This case will help determine how far trade mark protection extends online," said MacKenzie. "It is vital not just for companies' advertising strategies, but also for their ability to protect their brand names from being used online by their competitors."
The ruling could also be significant for Google, which makes the vast bulk of its money through AdWords.
"This is a challenge to Google's business model and that of any firm based on a context-sensitive ad model," he said. "These kinds of sophisticated systems will only grow in number and complexity, and this ruling will establish the legal basis on which they will work."
One of the Court of Justice's legal advisors, an Advocate General, has already published his opinion on the issue and believes that the use should be allowed.
The Advocate General said that the use of other people's trade marks in AdWords should be allowed because to ban that activity would be to extend trade mark protection too far.
MacKenzie disagrees, and believes that the Advocate General was wrong. "Enforcing the trade mark against a company that is letting others use trade marks without permission doesn't expand the scope of trade mark protection at all," he said. "This case is the opportunity for the Court to restate established trade mark law but in the context of a new advertising model."
Pinsent Masons is acting for Interflora in a dispute with Marks and Spencer over the use of AdWords – a case that has also been referred to the Court of Justice of the EU.