Financial Cryptography

IP versus Economics - the Google Trademarks disputes

Googles sales of other people's trademarks for advertising purposes gets right to the core of Intelletual Property. As the economics of coordination shifts, some age-old institutions such as intellectual property devices (trademarks, patents, copyright) discover they are too clunky to ease commerce in the new world. Whether they migrate, adjust, survive or die won't be seen for a few years yet, but here's an interesting article that lays out the fault lines in the war of IP versus the Internet and economics.

Google ensnared in a war of words

By Doreen Carvajal International Herald Tribune
Monday, March 28, 2005

PARIS Fabrice Dariot's travel agency, Bourse des Vols, boasts a terrace lined with potted plants and sweeping views of 17th-century apartments in the center of the city.

The compact fifth-floor office is an unlikely front line for a battle of words with the online search engine Google - or "Omnigoogle," as some French critics scornfully call the giant company.

Dariot, a mathematician turned Internet entrepreneur, is an even more unlikely standard-bearer for a series of proliferating lawsuits and legal disputes that challenge Google's sacrosanct business routines.

"Google is a giant, but they cannot dictate the law," said Dariot, 41, a chief executive in a casual sweater and denim who took on the international company with some inspiration, he said, from independent French icons like Joan of Arc who were not afraid to challenge authority.

This month, Dariot triumphed in his year-and-a-half-old lawsuit against Google's French subsidiary, which has been ordered to pay him €75,000, or $97,000, in fines and legal costs. Dariot and his travel companies, Luteciel and Viaticum, successfully challenged Google's practice of selling Internet advertising from rivals designed to appear with Web searches for his trademarked Web site name, Bourse des Vols, which means flight exchange.

Keyword advertising, as it is known, is the main source of revenue for Google, which posted $3.19 billion in sales in 2004, largely through charges of a few cents each time a user clicks on an ad.

The growing number of lawsuits against Google around the world could diminish that advertising revenue by reducing the number of search words that could be sold to competitors - a threat to Google's business model that the company has acknowledged in regulatory filings.

Dariot's company is one of the first to win against Google; similar cases in the United States and Germany that challenged the search engine's use of keywords have failed.

But more companies are piling on. France is home to as many as 15 cases, according to lawyers involved.

Elsewhere, other companies are pressing Google with varying results on different legal points.

The Associated Press in New York and Kyodo News Agency in Tokyo have been negotiating with Google in connection with what they contend is its unauthorized use of material from the two news services.

Agence France-Presse, which had been talking to Google for almost six months in the same kind of dispute, sued the search engine in France in February and in the United States this month for $17.5 million in damages.

"The core issue is the same," said Joshua Kaufman, AFP's lawyer in Washington. "Google is using AFP pictures and stories without authorization in violation of copyright."

The keyword lawsuits have been filed by companies ranging from the hotel chain Accor to LVMH Moët Hennessy Louis Vuitton, the luxury goods manufacturer, which in February won its case. Keyword advertising is particularly sensitive for luxury retailers because manufacturers of knockoffs and counterfeits could advertise alongside trademarked names.

That has quietly changed in France, where rival advertising has been eliminated on Google's French Web site next to search results for prominent brand perfumes like Dior or Chanel. Yet similar advertising still surfaces with the same brand names on Google's Web sites in Britain and Germany.

Asked about those international differences in advertising from rivals, Google's spokeswoman in France, Myriam Boublil, said: "I can't really get into technical specifics. What I can tell you is that it was necessary to take down when a trademark issue is raised in France. Companies get back to us and let us know, and then we take it down."

She said that it was likely that companies had raised the trademark issue in some countries but not others.

Google itself is keenly aware of the perils of its keywords policy, which took effect in the spring of 2004 in the United States and Canada.

Basically, Google abandoned its policy of screening for trademarks when companies choose keywords for its popular advertising program, a gamble that could increase revenue but, as the company acknowledged, could also create legal problems.

According to Google's Web site: "When we receive a complaint from a trademark owner, we will only investigate whether the advertisements at issue are using the trademarked term in ad text. If they are, we will require the advertiser to remove the trademarked term from the text of the ad and prevent the advertiser from using the trademarked term in ad text in the future."

In Dariot's case, that meant that if users searched for his trademarked name, "Bourse des Vols," rival advertising would emerge alongside the name of his Web site.

In a Google filing with the U.S. Securities and Exchange Commission, the company admitted that the new policy could lead to more legal attacks. "Adverse results in these lawsuits," it said, "may result in, or even compel, a change in this practice, which could result in a loss of revenue for us, which could harm our business."

When companies do try to raise complaints about trademark or copyright issues, some complain that the issues can drag for months or even years.

In a recent California case, Norm Zada, the chief executive and founder of Perfect 10, a publisher of nude photographs and adult material based in Beverly Hills, said he started sending legal notices to Google about the unauthorized use of his images in 2001.

"After 16 notices, they said they couldn't do anything," Zada said.

Since then, he said, his attorney has issued a blizzard of 44 notices in the past two years that covered 9,000 unauthorized images. In January, he sued Google in U.S. court in Los Angeles.

Dariot, the owner of the French online travel agency, said that he also had resorted to a lawsuit out of frustration that his complaints were largely being ignored. Other search engines, he said, responded to similar complaints and withdrew rival advertising.

"First, Google said to give them proof of the trademark, and I did," he said. "And then a month passed. And then two more months passed and two more. Nothing happened."

Now, when a Google search is conducted for his company name, Bourse des Vols, the right side of the screen is as empty as the white sand beaches in the ads for vacation packages that he sells online. Google still can appeal Dariot's judicial victory. The French subsidiary's spokeswoman, Boublil, said last week that "for the moment Google is thinking of appealing, but I haven't gotten any confirmation yet."

Dariot's attorney, Cyril Fabre, is not waiting. He said he already had four other cases against Google, including one on behalf of Hotels Méridien.

Copyright © 2005 The International Herald Tribune | www.iht.com

Posted by iang at March 28, 2005 01:50 PM | TrackBack