Trademarks / Fair Trade Act: Use of keyword ads based on a well-known trademark may be unfair competition under FTA.

[2016/07/16]

Early this year, in an appeal from a case of alleged trademark infringement involving keyword advertising, the ROC Supreme Court upheld the lower court’s opinion that there had been no infringement under the Trademark Act, but that the advertising service provider was liable for damages under the Fair Trade Act.

In the case concerned, Google Taipei, the Taiwan branch office of Google International LLC, had sold the phrase “xingfu kongjian” (幸福空間—“happy space”), which was registered as a trademark by the interior design firm Gorgeous Space Co. Ltd., to an advertising agency as a keyword advertisement. The agency had subsequently sold the keyword ad on to various interior design companies (“the advertisers”), so that when consumers searched for the phrase in Google’s search engine, ad blocks were displayed containing advertising copy that might attract consumers to access the advertisers’ websites. In response, Gorgeous Space filed a suit in the Intellectual Property Court, petitioning the court to order Google Taipei not to use Gorgeous Space’s trademark xingfu kongjian for keyword ads, and to pay damages to Gorgeous Space. The Supreme Court’s judgment in the case (Civil Judgment Tai-Shang-Zi No. 81 of 2016, issued in January 2016) upheld the previous appeal judgment of the IPC. The court found that Google Taipei’s use of xingfu kongjian as a keyword might indeed mislead consumers into believing that the ad blocks appearing on search result pages belonged to Gorgeous Space, leading such consumers to click on the ads and so access the advertisers’ websites. This effect is known as “initial interest confusion.” However, the advertisers’ web pages did not display the xingfu kongjian trademark, and their use of the textual phrase xingfu kongjian was always descriptive in nature. Moreover, the pages clearly displayed the advertisers’ company names, enabling them to be correctly identified. Therefore, relevant consumers would not be misled into believing they were visiting Great Space’s website, and on this basis the court determined that there had been no trademark infringement under the Trademark Act. However, the xingfu kongjian trademark had been announced by the Taiwan Intellectual Property Office as a well-known trademark, and by purchasing keyword ads for xingfu kongjian from Google Taipei, the advertisers had made use of the trademark, which was well known in domains related to interior design, as a means to lead potential clients of Great Space to access and browse the websites of the advertisers, thus increasing the advertisers’ opportunities to trade. In this way they had clearly taken improper advantage of the fame established by Great Space in diligently operating its trademark, and had enjoyed the fruits of Great Space’s labors by deception. Moreover, Google Taipei had been offering keyword ads for xingfu kongjian over a period of several years, and its search engine held a market share of more than half in the Taiwan Area; this longstanding practice was likely to affect the orderly conduct of trade in areas of activity related to interior design. Therefore the court held that Google Taipei’s actions were acts of unfair competition in violation of Article 24 of the old Fair Trade Act (Article 25 of the Act as amended in February 2015). Accordingly, the court forbade Google Taipei to sell keyword advertisements with xingfu kongjian as the keyword, and ordered Google Taipei to pay damages to Great Space.