Trade Marks in Adwords - Infringement in China


It is common for internet search engine service providers to allow bidders to bid on keywords (or adwords) which results in the bidders' website link or advertisement being given position preference when internet users type that particular keyword into search engines. There is little argument over whether a bidder has a right to select and bid for a generic word. However, where the keyword happens to also be a registered trade mark, the question of the bidder's right to the word is raised. Under China's laws and according to published court decisions, a bidder's abovementioned actions may be considered trade mark infringement. However, the extent to which a search engine service provider will be held liable is still unsettled. This article explores the potential liabilities of the bidder and search engine service providers under current Chinese laws.
 
Bidder's Potential Liability in China
 
The current Chinese laws appear to disfavour the bidder.

Firstly, China's Trade Mark Law stipulates that "the registrant of a trade mark enjoys the exclusive right to use the trade mark". The term "use" is defined broadly to include advertising and other commercial activities. This wide interpretation suggests that selecting and purchasing the trademarked keyword for business purposes may be deemed as using another's trade mark illegally.

Secondly, China's Anti-unfair Competition Law states that "publicising goods by misleading means" is prohibited. There is a concern that after keywords have been typed into a search engine, internet users may misleadingly reach a conclusion that there is a connection between the trade mark and the bidder. Therefore it is likely that the bidder's selecting and bidding on such keyword may be considered misleading and a form of unfair competition.

Thirdly, China's Advertisement Law provides that "advertisements" refers to commercial advertisements for which a commodity producer or service provider pays and by which the same directly or indirectly introduces his commodities or services where the publication of an advertisement that cheats or misleads consumers shall be considered unfair competition. As the bidder's selecting and bidding on such keyword may be considered a form of advertisement that misleads consumers, such action may also be prohibited under the Advertisement Law.

Although court rulings do not set precedents and are not binding on future courts, there are two published cases in China that offer some insight as to how some courts may rule on such case in the future. The Guangzhou Baiyun District People's Court held that the bidder's act of selecting and purchasing the keyword in question from a search engine service provider to exhibit its website link to promote products and services should be a form of advertisement. Since the use of trade marks includes use in advertisements, the bidder's use of the trademarked keyword in this case was held to be trade mark infringement. In another case, the Shanghai No. 2 Intermediate People's Court ruled that the bidder's use of another's trade mark on its website and the selection and purchase of the trademarked keyword to advertise its website misled consumers and therefore infringed the trade mark owner's exclusive use right. The court also held that the keyword's bidder's actions constituted a form of unfair competition.

Search Engine Service Provider's Potential Liability in China

Under current laws in China, a search engine service provider's liabilities, for selling trademarked keywords in China, are unclear. According to the Advertisement Law, the advertiser and the advertising publisher who publish advertisements for advertisers are responsible for checking papers or certificates. It is questionable whether accepting keywords selected by bidders would make them advertisers or advertisement publishers. If selecting and purchasing keywords is considered a form of advertising, then, under Advertisement Law, the service provider may be required to check the bidder's trade mark certificates.

The aforementioned two cases provide little clarity in determining the extent in which a search engine service provider will be held liable in China.

In the first case, although the court held bidding for keyword is a form of advertisement, it did not address whether the service provider had any obligation to check whether the keywords were registered trade marks. The court in its judgment only commented that it was beyond the service provider's capability to supervise whether the information on the internet is illegal in nature or not.However, the court noted that any expedient removal from the website of any questionable material after being notified by the trade mark owner would not result in the service provider being held liable for trade mark infringement.

In the second case however, the court held that the service provider is jointly liable for trade mark infringement. Like the first court, it did not comment on whether the service provider's provision of the keyword to bidders would in itself constitute trade mark infringement or unfair competition where this question remains to be addressed.

Conclusion

It appears that under current Chinese laws, bidders' selecting and purchasing trademarked keywords may constitute trademark infringement and unfair competition. However, it is still uncertain whether an internet search engine service provider's provision of the trademarked keywords to bidders is illegal.

Written by Consultant John Wu.
Originally published in Legal Studio Magazine, July 2009.