The Supreme Court of Argentina addressed the controversial issue of using third-party trademarks as “keywords” in Google’s sponsored ads (AdWords). The case, Organización Veraz S.A. v. Open Discovery S.A., revolved around the use of well-known trademarks belonging to Organización Veraz as keywords in Google’s AdWords advertising system by its competitor, Open Discovery. The Court’s ruling, which partially upheld the appeal, has significant implications for trademark protection in the digital environment.
Case Background
Organización Veraz S.A., a company specializing in credit information services, sued Open Discovery S.A., alleging that the latter had unlawfully used its trademarks, including “VERAZ” and “ORGANIZACIÓN VERAZ,” as keywords in Google’s AdWords advertising system. Open Discovery, a competitor in the credit reporting market, had paid Google to use these keywords, causing its ads to appear prominently in search results when users looked up Organización Veraz’s trademarks. Organización Veraz argued that this practice constituted trademark infringement and an act of unfair competition.
At first instance, the judge ruled in favor of Organización Veraz, ordering Open Discovery to cease using the trademarks and awarding damages. The Third Chamber of the National Court of Appeals in Civil and Commercial Matters upheld the decision, concluding that Open Discovery’s use of Organización Veraz’s trademarks as keywords constituted both unfair competition and trademark infringement. The Court of Appeals emphasized that Open Discovery had taken advantage of Organización Veraz’s reputation to position itself in the market and divert customers with minimal investment.
Supreme Court’s Decision
The Supreme Court, adhering to the Attorney General’s opinion, partially upheld Open Discovery’s extraordinary appeal.
The majority of the Court, led by Vice President Carlos Fernando Rosenkrantz, ruled that merely using a competitor’s trademark as a keyword does not, in itself, constitute trademark infringement or unfair competition. Instead, the Court determined that such use is only unlawful if it creates a risk of consumer confusion regarding the offered products or services or suggests a connection between the advertiser and the trademark owner. The ruling highlighted that the key factor is whether the ad, as presented to the user, could lead a reasonably informed and attentive consumer to believe that the advertiser’s services are associated with the trademark owner.
Furthermore, the Court stressed that trademark protection is not absolute and that not all third-party uses are illegitimate. Therefore, sponsored link advertising can be a lawful practice, provided that it does not undermine the distinctive character of the trademark by creating consumer confusion or improperly leveraging the reputation of another company’s brand.
Based on these principles, the Supreme Court overturned the Court of Appeals’ decision and remanded the case to the lower court for a new ruling to determine whether the ads created a risk of confusion or an improper association with Organización Veraz’s trademarks.
Dissenting Opinion
Justice Horacio Rosatti dissented, arguing that the use of the trademarks “VERAZ” and “ORGANIZACIÓN VERAZ,” as well as similar terms like “Veras,” “Beraz,” or “Beras,” creates obvious consumer confusion. He emphasized that this situation is a well-known fact that does not require specific proof and is presumed under applicable law. Accordingly, he held that the trademark owner is entitled to preventive and compensatory protection to safeguard its rights.
According to Justice Lorenzetti, the fact that the defendant paid for a service to position its ads in searches related to the plaintiff’s trademark demonstrates an intention to capitalize on its reputation. He argued that search engines already provide organic search results, and if a company invests in ads linked to a competitor’s brand, it is attempting to mislead consumers or, at the very least, create an improper association with the well-known brand. This constitutes trademark infringement and unfair competition, justifying the sanctions imposed by the Court of Appeals.
He also highlighted that the digital context, based on algorithms and persuasive advertising, increases the risk of consumer confusion.
Implications of the Ruling
The Supreme Court’s decision in this case sets an important precedent regarding the use of “keywords” in digital advertising. By requiring proof of consumer confusion or some degree of improper association, the Court adopted a more nuanced approach than that previously applied by the Court of Appeals.
Although the case remains open, as a new ruling is pending, it represents a significant shift in the legal standards applicable to the use of trademarks in the digital landscape in Argentina.
If your company is facing challenges related to trademark use in digital advertising in Argentina and needs legal advice, contact us.