A recent ruling of the Delhi High Court in a long-running trademark dispute initiated by Hindware Limited could shape how Google handles keyword advertising, especially when trademarks are used in sponsored search results.

In a 163-page judgment delivered on May 22, Justice Mini Pushkarna examined whether a company can purchase another company’s registered trademark as a keyword under Google Ads so that their advertisements appear on top of the list when users search for that trademark.

What was the dispute about?

In early 2013, Hindware Limited, which is in the business of sanitaryware products, discovered that its rival sanitaryware companies, Grohe India Private Limited and Cera Sanitaryware Limited, had purchased the trademark ‘Hindware’ as a keyword through Google’s AdWords programme.

The result was that whenever a consumer searched for the word ‘Hindware’ on the Google search engine, the first result that appeared was for the website of Cera. Also, when someone searched ‘Hindware Sanitary’ or ‘Hindware Sanitaryware’, the first result came from the website of Grohe.

Hindware argued that its registered and well-known trademark is being used by Google by offering or suggesting it to competitors or any other entity for the generation of advertisements. Hindware said this was being done without their prior consent or approval.

Subsequently, Cera and Grohe settled with Hindware, leaving the core legal battle to continue against Google India and Google LLC.

What exactly is keyword advertising?

Google runs a programme known as ‘Google AdWords’, which is a form of keyword advertising that allows advertisers to place advertisements along with search results in their search engine, www.google.com.

Under Google AdWords, advertisers bid for words or phrases called ‘keywords’ that trigger or generate a sponsored advertisement when a user enters those terms into Google Search.

For example, if someone specifically searches for Nokia or Sony, another company could purchase the keywords ‘Nokia’ or ‘Sony’ in return for a fee earned by Google, so that instead of the organic result, i.e., websites of Nokia or Sony, the user would be shown the advertisement or websites of the ad purchaser.

Why did Hindware object?

Hindware claimed that ‘HINDWARE’ is a registered and well-known trademark with substantial goodwill built over decades.

The company contended that the use of its trademark as a keyword for the display of advertisements clearly amounts to use of the trademark “in advertising” within the meaning of Section 29(6) of the Trade Marks Act.

It argued that if a consumer specifically searches the term ‘Hindware’, it is clear that he is specifically looking for their products. The fact that the first search result of another company is shown to the consumer is bound to cause confusion and divert potential customers to rival brands.

Until 2009, Google did not permit the use of trademarks as keywords in India, but the policy was changed post the year 2009. It said that the policy applicable in India is a deviation from the policy of Google followed for countries in the European Union (EU) and European Free Trade Association (EFTA).

What was Google’s defence?

Google argued keywords act as a backend trigger for displaying the advertisements in response to the search query entered by a user. Since users cannot see the keywords provided by the advertiser, such use of trademarks as keywords cannot be said to amount to ‘use’ under the Trade Marks Act.

When multiple advertisers seek to choose the same word as a keyword, including a trademarked term, Google conducts an auction or bidding on the trademarked term and earns a Cost-Per-Click amount as revenue.

On the question of confusion among users, Google argued that the inorganic or sponsored search results are labelled with a prefix ‘ad’ to distinguish them from organic search results, eliminating the likelihood of confusion among the users.

Why is the judgment important?

The case touches upon a growing global conflict between trademark law and digital advertising models.

Search engines earn revenue through keyword advertising systems. By auctioning the registered trademark to rivals, Google generates revenue from multiple competitors of the trademark owner.

The court ruled in favour of Hindware restraining Google from using the name ‘Hindware’ or any combination of related words as part of advertising keywords.

It observed that Google’s conduct amounts to “free-riding” as it monetises the investments made by the trademark owner over the years. By actively suggesting, prompting and auctioning trademarks to third parties, the court said Google rides on the goodwill of the trademark’s reputation, selling off the power of the mark in attracting consumers to other rivals in order to increase enrolment in its own AdWords Policy and earn more profits.

“In doing so, Google has attempted to sell something that it simply does not own.”

Why does the ruling matter beyond this case?

The decision is likely to influence trademark disputes involving online advertising in India. It could affect how freely companies can use competitors’ brand names in online advertisements and search results.

“We duly respect and operate in accordance with all local laws, and in instances where the orders are overbroad or inconsistent with our policies, we work to explain our position as per the legal process in the country,” Google said in a statement to The Hindu. “Specifically on our Ads policy on trademark keywords, we have a clear and stated policy that does not allow competitor advertisers to use trademarked terms in the ad-text of an ad. This policy is consistently applied globally and is in accordance with the Indian trademark law.”

The company has held that so-called backend use of a trademark keyword is permissible to allow for small firms to compete with established incumbents, and said that it therefore only bans the deceptive use of competing trademark keywords in the actual text of ads, and not in the bidding process.