European Court ruling forces Google to mince its AdWords

September 22, 2011

The world of marketing may little note, but long find itself remembering, an obscure judgement handed down by the Court of Justice of the European Union today.

It concerns the endemic practice of buying someone else’s brand name (or, more specifically, trademark) as a search term and then having all resulting enquiries directed, heretofore quite legally, towards your own enterprise. The practice is enshrined in such services as Google AdWords.

A good example of the wheeze in action is Virgin Media. Tee’d up for a mega-marketing launch back in 2006, it was mortified to discover that its principal rival, BSkyB, had bought up all Google search references to the VM brand name and was redirecting any interest to Sky.

Marks & Spencer sought to pull off a similar stunt when it “bought” the Interflora AdWord search term in 2009, with the intention of substituting its own online flower shop every time an internet user searched for “interflora” on Google.

A bouquet of barbed wire for Google

Sadly for M&S, Interflora had a sense of humour loss and sued in the English law courts – which referred the matter to the supreme jurisdiction of the CJEU.

Well, the ruling has come in and it’s not going to be to M&S’s liking, or that of any other brand owner seeking to poach a rival’s name online. The court has decreed that buying your competitor’s name infringes trademark law on two counts: the ability to identify the origin of goods and services; and the right to preservation of a brand proprietor’s reputation. Crucially, it has ruled that proprietors of a trademark (let’s call them brand owners) can actually prevent a competitor using their name where they can prove free-riding or brand denigration is taking place. Which in practice will have a chilling effect on AdWord activity.

The ruling will cause widespread dismay, not least at Google – which has heavy investment in the practice. And all the more so because in a previous case, that of Google v Louis Vuitton (2010), the court had seemed to lean the other way. It said that Google, as intermediary, did nothing wrong in allowing AdWords to promote the practice of buying other people’s brand names, and that the existence of the service in no way infringed trademark law.

What it did not do was rule upon the legal responsibility of the search term purchaser, as opposed to the intermediary. In other words, the subsequent M&S case is a landmark judgement, which will now be handed back to the English courts for enforcement.

In the words of Kirsten Gilbert, partner at intellectual property specialist Marks & Clerk Solicitors: “Brand owners will be encouraged that their competitors no longer have a completely free rein over use of their trademark as a keyword. But, the practice of purchasing rivals’ trademarks as keywords is widespread, and marketers may now have to think of other creative ways to advertise their brands on the web.”

How two-edged the sword of justice is.


I-Level default sends tremors through the industry

May 6, 2010

For those in marcoms, the descent of digital agency I-Level into administration has some alarming echoes of the sovereign debt crisis being played out in Greece.

Just a few short months ago, no one would have seriously contemplated the possibility of either event. Now, we’re beginning to worry that this portends the second leg of financial meltdown, and that a domino effect will ensue.

I don’t want to push the parallel too far, of course. I-Level’s management was always infinitely more competent than that of the Greek economy. Nonetheless, for those who had eyes to see it, this was a calamity waiting to happen. The detonator clock started ticking in February when I-Level, in alliance with Starcom MediaVest, lost out to WPP’s GroupM in a pitch for the COI’s £250m consolidated media planning/buying account. Up to that point, government digital media business accounted for £40m of I-Level’s billings, or about 40% of its revenue. Replacing a slug of income that big was never going to be easy, but the difficulty was exacerbated by I-Level’s financing mechanism. Private equity investors ECI bought a 60% chunk of the group in April 2008, as a precursor to its international expansion. The deal valued I-Level at about £46.5m, but had the effect of burdening it with debt of £32m – much of it redeemed at an unsustainable interest rate of 12%pa. Put another way, that meant the group had to earn pre-tax profits of at least £3m a year merely to cover its interest payments. Guess what? The punitive interest payments kicked in just as I-Level was beginning to lose business. And that was before the coup de grâce delivered by the COI.

Even so, its disappearance is a shock. Set up in 1999 by Andrew Walmsley and Charlie Dobres, I-Level had near-iconic status as one of the few first-wave digital agencies that surfed the dotcom bust and managed to retain its independence. Among its blue chip clients are Procter & Gamble, The Sun, Orange, Sky, Renault, Comet and Samsung. Its top brass, who are now all out of a job, include respected industry figures such as Walmsley himself, chief executive Steve Rust and chairman David Pattison. Up to 100 people are expected to be made redundant. I-Level’s demise is a warning, not merely to those who would sell out to private equity investors, but of the fragility of fortunes, even in the relatively buoyant digital sector.

UPDATE: RIP I-Level. The administrator, Zolfo Cooper, has liquidated I-Level. Media owners such as Microsoft, Yahoo and Google will be faced with multi-million pound losses. It’s the biggest and most spectacular implosion of a high-profile agency since Yellowhammer went bust in 1990. The only part of I-Level to survive is the fast-growing social media operation, Jam, which was sold to Engine yesterday. That means about 20 staff out of a total of 120 have been reprieved.

ELSEWHERE IN ADLAND, I note the champagne corks are popping – and for good reason. DDB London learned this week that it had scooped the £75m Virgin Media account, previously with RKC&R/Y&R.

Woodford: Walking tall

Its understandably chipper chief executive Stephen Woodford tells me that the agency’s proposed integrated strategy was key to winning the business. Whatever, it’s not every day an agency wins an account that instantly boosts its income by 10%. And it gets better. DDB is heavily dependent upon international business, such as VW. Virgin is almost entirely domestic. It thus provides the London office with some valuable “shop window” advertising that should in time attract other local buyers.


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