The Court of Palermo (Italy) held that Google as an hosting provider is not obliged to monitor the AdWords keywords selected by its users but found liable a local rental company, Sicily by Car, for the usage of the trademark "maggiore" held by a major rental company, Maggiore Rent SpA, only when done in connection with the usage of AdWords "dynamic keyword insertion" tool allowing to show the selected keyword as ad text in the sponsored link when users were searching such term.     

Maggiore had challenged not only the conduct of Sicily by Car but also the contributory liability of Google because of its active role in the selection of AdWords keywords in breach of Maggiore's rights. The court in its decision referred to the decisions of the European Court of Justice in the  Bergspechte case and in the more recent Interflora case and held that the usage of the term "maggiore" per se was not affecting the advertising function of the trademark. However, it held that an unfair competition and misleading advertising activity occurred during the period in which the above mentioned dynamic keyword insertion functionality had been used. In the view of the judges of Palermo, when the dynamic keyword insertion functionality was NOT used, users were indeed able to understand that the advertiser was an entity different from the trademark holder because of the reference to Sicily by Car in the sponsored link. For the same reason, during such period there was neither trademark dilution nor frustration of the trademark investment function nor unfair competition conduct.

On the contrary, the usage of the dynamic keyword insertion by Sicily by Car had generated a risk of confusion and association between the sponsored products and services of the Maggiore site and those offered through Sicily by Car site. Therefore the court held that, only during the period in which such tool had been used, a trademark breach and an unfair competition conduct had taken place. Because of such conduct, Sicily By Car has been obliged to refund an amount equal to the car rental fees illegitimately obtained when the dynamic keywords insertion tool had been used. As to Google's liability, the court held that they provide a mere service to users that are the only ones selecting the keywords.

In particular, the court qualified Google as an hosting provider for the purposes of the EU E-Commerce Directive as implemented in Italy and as such it held that they enjoy the liability exemption prescribed therein and are not obliged to monitor the conduct of their users. Furthermore the peculiarity of the Italian law implementing the EU E-Commerce Directive is that a take-down obligation on the hosting provider is triggered only following a court order that had not been issued in this particular scenario.  

It will be interesting to see whether the future discussions will follow the same path. In the meantime feel free to contact me, Giulio Coraggio (giulio.coraggio@dlapiper.com), if you want to discuss.

Posted by Giulio Coraggio on Monday 24 Jun 2013