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WebFuel welcomes back James Katz, Ottawa Lawyer with BrazeauSeller as our guest blogger. This is his fourth blog post in a regular series related to legal search issues in Canada. WebFuel blogs about AdWords, one of our core services, but this topic is related to trademarks from a legal perspective.

Guest Post by: James Katz

In my last blog post, I focused on legal issues that can arise by the unethical use of Google Places listings, such as the use of a third party’s trade-mark in order to draw attention to what is in fact, a competitor’s website. As I indicated back then, there is no Canadian case law that deals directly with this ever more common scenario. As a result, I was forced to go to recent case law from the Courts of Australia for guidance, which can provide us Canadians with some indication as to what a Canadian Court would decide if faced with such a scenario. Well, it’s time for us to go Down Under again in order to shed legal light on how a Canadian Court might deal with a dispute concerning Google AdWords.

Many of the legal issues surrounding the misuse of AdWords overlap with those that can arise with Google Places. These disputes generally involve allegations that an advertiser has misled the buying public by the use of AdWords that are comprised of the names or trade-marks of competitors. It had already been decided in Australia and other jurisdictions that in such cases, there was no doubt that the advertiser (the person selling their products or services online) can be held liable in such cases for breaches of various unfair competition laws. But, thanks to an interesting April 3rd Court decision, again from Australia, it now turns out that someone else could also be liable for such illegal Internet content: Google.

In a unanimous decision from a panel of three judges, the Australian Federal Court ruled that Google had engaged in misleading advertising, contrary to Australia’s Trade Practices Act, when it allowed advertisers to use competitors’ trade-names as AdWords keywords which then triggered their own advertisements. The complete decision can be found here. The provisions of that law at issue (which has since been repealed and replaced with new legislation) basically stated that it was unlawful for a business to engage in conduct that is either misleading or deceptive or likely to mislead or deceive. Google’s main defence to this charge was that it was only a passive (and therefore innocent) conduit for the activities of the advertisers in questions (who had all been found liable in earlier proceedings). It was therefore Google’s position that, as an ad hosting platform, only the advertisers that misuse the AdWords system should be held to account. After all, Google argued, it was the advertisers that put in place the AdWords which turned out to be deceptive, not Google.

The Court, however, rebuffed Google’s arguments in their entirety, and found that Google was no mere passive conduit for the advertisers’ activities. This finding, which was key to the whole case against Google, was in turn based on several findings of fact made by the judges, which included: 1) The contents that appear on a Google web page in response to a user’s query is Google generated content. More specifically, it is the program that Google employs that generates the search results page, pursuant to the AdWords facility that is made available to the advertisers by Google; 2) An ordinary and reasonable user of Google’s search engine would conclude that it was Google that displayed the advertisers’ sponsored links in response to the user’s search query. Critical to this finding was also the fact that what is in fact occurring when a user executes a Google search is that a) the user is asking a question of Google, and b) the search results (whether misleading or not) are Google’s response; and 3) the conduct in providing a URL in response to a search query (which in turn leads to the advertisers’ website) is Google’s. In all, the falsity of the conduct engaged in by Google is that, in response to a searched keyword phrase which identifies a competitor, it is Google that displays the misleading URL in its sponsored link search results. This is, the Court concluded, very unlike the typical case of a passive advertiser who simply disseminates words and images as an agent of its advertising client (which would generally not attract liability), simply because it is Google (more accurately its computer program) that created the message that it then represents.

It is assumed that, given the ramifications of this decision, Google will be appealing to Australia’s High Court, mainly because this decision could form the basis for other similar decisions in the Courts of the UK and Commonwealth.

Shifting back from Down Under to the Great White North, it is difficult to say whether or not Google could end up facing a similar decision in Canada. Although Canada’s Competition Act contains language that mirrors that of Australia’s trade law, it does differ in one material way: it requires showing that the person who makes the misleading or deceptive statement in its advertising did so either knowingly or recklessly. This requirement of subjective proof that Google was either aware of the misrepresentation being made by an advertiser or wilfully blind to that activity taking place would be a significant bar to someone trying to successfully sue Google for committing an unfair trade practice. Further, Google would likely argue that, under Canadian law, by requiring advertisers to agree to its terms and conditions of use which specifically prohibit forms of deceptive conduct, such as the misappropriation of a competitor’s trade-marks for an AdWords campaign, it would be entitled to rely fully on the available defence of due diligence.

So, we again see that, when it comes to the Internet, the legal landscape in Canada is murky at best. Although we draw on the legal experience from other countries to see how things will shape up here, until we get a decision from a Canadian Court, consumers and advertisers here will just have to continue using good (ethical) judgment and common sense in how they market their goods and services online.

Related Blog Posts:

Legal Issues with Google Places: From a Canadian Perspective
Domain Name Disputes: From a Canadian Perspective
Domain Name Dispute Resolution Set to Change for dot-Ca Domains

James Katz is Lawyer and Trade-mark Agent with the Ottawa law firm BrazeauSeller LLP. James’ practice focuses primarily on Internet related legal issues and litigation, including trade-mark and copyright infringement, defamation and online privacy issues.

Disclaimer: The contents of this Blog post, and associated opinions  are those of its Author, and do not necessarily represent the opinions of WebFuel, or its employees.