• by Wendy Davis  @wendyndavis, March 23, 2010

Europe's highest court has cleared Google of trademark infringement for allegedly allowing other companies to use the Louis Vuitton brand name to trigger search ads for counterfeits.

But the European Court of Justice also indicated that in the future, Google could be liable if it doesn't remove some ads that incorporate trademarks upon the owners' complaints. The court also ruled that advertisers themselves might be liable for using other companies' trademarks in a way that confuses consumers.

Both Google and Louis Vuitton found something to praise in the decision. "We believe that user interest is best served by maximizing the choice of keywords, ensuring relevant and informative advertising for a wide variety of different contexts," Google's Harjinder S. Obhi, senior litigation counsel, wrote on the company blog. Obhi added that Google already has policies banning ads for counterfeits.

Pierre Gode, senior executive vice president at Louis Vuitton's parent company, LVMH, said the decision "represents a critical step toward the clarification of the rules governing online advertising."

He added: "We are committed to working with all parties, including Google, to eradicate illicit online practices and to promote a framework that fosters the continued growth of the digital economy."

The ruling grew out of challenges to the AdWords program by Louis Vuitton and others who argued that Google infringes trademark by allowing brand names to serve as keywords triggering pay-per-click ads.

While the decision protects Google, it also leaves some advertisers facing the threat of litigation. Analyst Greg Sterling, principal of Sterling Market Intelligence, predicts that some search advertisers might temporarily pull back as a result of the decision. "There might be a little bit of a chilling effect on some search advertising, as people find out where the boundaries are," he says.

Norman Simon, a false advertising and trademark law expert with the firm Kramer Levin Naftalis & Frankel, adds that the legality of marketers' use of trademarks in Europe will likely depend on whether consumers are confused. That's also a key factor in the U.S. -- but, says Simon, European courts might not necessarily analyze confusion the same way that U.S. courts would.

Google currently faces a host of trademark infringement lawsuits in the U.S. stemming from its AdWords policies. While the European decision has no legal weight in the U.S., it could still prove influential to U.S. judges.

"One would think that U.S. courts would look to this decision in the overall picture of the landscape," Simon says.