LONDON (AdAge.com) -- Google has won the latest round of a long-running legal battle against Louis Vuitton Moet Hennessy, but courting premium brands may now be more difficult for the search giant.
In a case that came before the European Court of Justice this week, LVMH, whose brands include Louis Vuitton, Moet & Chandon and Tag Heuer, had objected to Google's trademark policy for its AdWords system. But the court ruled in Google's favor, finding that LVMH's rivals should be allowed to buy slots alongside Google's main search results in the "sponsored links" section of a search results page.
Neil Eatson, head of media and search at AKQA Europe, said, "I think it's the wrong decision. LVMH is just the kind of premium brand that Google has been trying for years to get on board and educate about digital. Suddenly digital is having a bad effect on their brands -- will other premium marketers have the same thought process?"
Mr. Eatson recalls that, three or four years ago, advertisers could work closely with Google to find bespoke solutions to competitors bidding on a brand's search terms. "There used to be more cooperation, but now it's become much more aggressive. This makes the market a lot more competitive, and even more so for luxury goods online, which are competing against rivals, retailers and gray-market goods."
The advocate general, Poiares Maduro, said in a statement, "Google has not committed a trademark infringement by allowing advertisers to select keywords corresponding to trademarks."
Although he agreed that advertising does establish a link between the brand's keyword and the sponsored link, Mr. Maduro ruled, "The mere display of relevant sites in response to keywords is not enough to establish a risk of confusion on the part of consumers as to the origin of goods or services."
Google relaxed its trademark policy in May 2008 to allow anybody to bid on a brand keyword -- although it does not allow a marketer to use it in their ad. Since then, the cost of buying keywords has inflated significantly. Google was thought to be considering a move to relax the rules even further, but it is now expected to bide its time and watch reactions to this and other court cases before making a move.
For marketers that have spent years developing their identities, it can be frustrating to see themselves cheapened by associations with lesser brands and goods.
"In a supermarket, you can work with a retailer to secure prominence, position and space," Mr. Eatson said. "Now search is like walking into a supermarket magazine rack where you can't do that -- it's as if top-shelf magazines, kids' stuff and women's weeklies are all bundled up together in a hotch-potch at eye level."
Paul Mead, managing director of VCCP search, welcomes the ruling. He said, "From the consumer perspective, this is the right call. Big brands argue that they don't want others taking advantage of the search volumes they generate, but if one brand takes up all the space and others can't offer alternatives, consumer choice is stifled."
Mr. Mead also believes that it is difficult for competitor brands to pull consumers off track. "Nine out of ten people still choose the website of the brand they were searching on," he said. "When Google first opened up the rules, people went crazy bidding for competitor keywords, but the reality is that it didn't make much difference."
In 2005, a French court ruled in favor of LVMH in the dispute, and Google appealed, sending the case to the Court of Justice. Later this year, a full panel of judges will make a final decision, but LVMH's chances are limited -- the panel backs up initial justice rulings in 80% of cases.
Mr. Eatson concluded, "Brands that have been around long before the internet and spent years developing their identity are now thrown into the middle of nowhere because of this ruling. They don't know where to go. It's great for Google, but not good for brands and companies. Search engines are the new home page -- and this ruling allows competitors to take potential customers away to other sites."