Study of the effective knowledge requirement necessary for determining the liability for third party contents of advertising service providers through sponsored links on Internet search engines and web sites with links.
On 22 September 2009 the conclusions of the Advocate General were presented to the Appeals Court of Paris in relation to various pre-trial issues posed in the proceedings. The case involves the use of registered trademarks by the advertisers using Google’s AdWords advertising service, but the questions posed in the case can be applicable to any other contextual advertising service in search engines using sponsored links, and, naturally, to any other data housing/hosting or storage service. Accordingly, any allusion to AdWords and Google in this article must be understood in reference to search engine advertising services, to search and link compiling services and to data housing/hosting and storage services in general.
The Advocate General stated in his writ of conclusions that the liability exemption for data storage under article 14 of Directive 2000/31 cannot be applied to the contents offered through AdWords, due to the fact that Google is not neutral in respect thereof. The Advocate General based this criterion on the fact that Google has a direct interest in the user clicking on the sponsored links.
In section 144 of his writ of conclusions he distinguished between sponsored and search results, indicating that the latter were the result of automatic algorithms that use objective criteria for popping up websites that may be of interest to the Internet user. In other words, the presentation of these websites and the order in which they are classified depends on their pertinence to the keywords that are input and not the interest of Google in a specific website or in its relationship with it. The Advocate General believes that Google has an interest –even a pecuniary interest- in showing the websites that are the most pertinent to the Internet user. However, it does not have an interest in bringing a specific website to the attention of the Internet user.
However, the Advocate General stated in point 145 that this is not what happens with respect to the contents offered in AdWords. According to him, the sample of advertisements offered by Google is the result of its relationship with the advertisers. Consequently, he believes that AdWords is not a vehicle for neutral information because Google has a direct interest in Internet users clicking on the links of the advertisements (contrary to the natural results presented by the search engine).
I will analyse below the characteristics of the services provided by Google, the conclusions of the Advocate General in relation to neutrality and the requirements laid down under the Directive permitting the application of the liability exemption under article 14.
2. Contextual Advertising
The AdWords service uses so-called contextual advertising, which is not only offered by Google, but also by other Internet search engines, such as Microsoft and Yahoo!.
The effectiveness of advertising of this type is based on the association of the advertisements or sponsored links to the words used by the search engine user. The operation is very simple: the advertiser opens an account on the AdWords website and selects the key words with which it wants to associate its advertising. When a user visits Google and searches for a word that matches one of the keywords contracted by the advertiser, its website appears in the sponsored links section. The rank that the advertiser occupies in this section will depend on a series of variables, amongst which of special note is the priority that the advertiser itself has given in its account in relation to the requests of the other advertisers. Priority is established on the basis of the price that each advertiser pays for each click that a user makes on its sponsored link. Each time an Internet user clicks on the link of the advertisement, Google is paid a price agreed in advance ("price per click").
There is no limit to the number of advertisers that can choose a keyword and if all the advertisements cannot be shown at the same time, they are prioritised, as I have mentioned above, on the basis of the price per click and other statistical information, such as the number of times that the Internet users have clicked on the link of the announcement previously.
These advertisements or sponsored links not only appear in Google, but also in any website that assigned space for the posting of advertisements by Google. In this case, the advertising is still contextual, i.e., the adverts that appear in the section limited to it are automatically related to the topics dealt with on that website. Thus, if the website deals with a certain city, the advertisements will probably refer to tourist offerings for that city. Please bear in mind that the owners of the websites that host/house AdWords advertisements obtain a percentage of the income earned through the clicks of the users on these advertisements.
Under the criteria of the Advocate General, the search results, i.e., the links that appear neutrally on the home page of the search engine, are not neutral either, since Google could have an interest in the user clicking on the links that connect to websites that are financed by advertising in Google. It is evident that Google will have a greater likelihood of earning profits from these websites than from others that do not contain its advertisements, and the degree of its relationship with them will also be greater.
Finally, it is natural that the advertisers contract keywords with AdWords related to their activity. The conflict arises when the advertiser contracts a keyword that matches a registered trademark in order to carry out activities that could damage the owner of the trademark. This is absolutely prohibited under the terms and conditions of the AdWords service and, if the advertiser does this, it will always be contrary to the wishes of Google and will empower Google to rescind the contract as soon as it becomes aware of the infringement.
3. Automated Service
The AdWords service is provided to the advertiser without human intervention, i.e., in no part of the process is there a rational act of acceptance or rejection of the advertising campaign of the advertiser. The Advertiser is free to select its keywords and it is obligated to comply with the terms and conditions that regulate the service.
In a conventional advertising service a series of actions are carried out that do not occur in the AdWords service. The main differences lie in the following points.
- Degree of knowledge of the campaign and the contents.
- Level of participation in the design of the creative elements.
- Freedom of the advertiser to select that place where the ads will appear.
- Freedom of the advertiser to determine the size of the ads.
- Campaign preparation and launch time.
- Sale of advertising services versus sale of advertising space.
- Personal attention versus self-service platform.
These differences show that Google does not have the capacity to supervise the contents of the campaigns engaged by the advertisers since it is not involved in the campaign design and creation process and has no knowledge of any future damages that may be caused to third parties.
On the other hand, please note that Google is not an advertising agency, since its function is not to design advertising campaigns but to sell advertising space on its search engine and third-party websites.
4. Impossibility of establishing preventive controls
According to Business Week, in April 2004 the number of advertisers using AdWords exceeded 200,000. According to an article in the New York Times of 8 January 2009, the number of advertisers on AdWords in 2007 exceeded 1,000,000. The analyst calculated that the current figure could reach between 1,300,000 and 1,600,000.
This number of advertisers gives us an understanding that the contracting and management process of campaigns is automated and that it would not be feasible to set up control systems that could detect and impede the misuse of the service. This is the same situation in which the other services providers in the information society find themselves, the same situation that inspired the prior control obligations exemption in the Directive and which configured the liability exclusion regime set down in the Directive.
We could say that there is no conventional advertising company that could handle as many campaigns as Google AdWords, and, accordingly, the personalised contracting and monitoring schemes of the conventional ad agencies are not applicable in this case. However, as I have said above, we must bear in mind that Google is not an advertising agency, but a company that sells advertising space in an automated fashion. All this automation does not stop Google from demanding under its terms and conditions that the advertiser comply with the law and respect the industrial and intellectual property rights of third parties.
On the other hand, the number of registered trademarks across the world number into the tens of millions and some may be local, i.e., registered only in the country where the product or service related to the trademarks is commercialised. In order for Google to be able to know of the existence of all these trademarks, it would have to have direct access to all the registries of trademarks around the world, without taking into account the possible conflicts between various territorial trademarks and would have to make a case by case valuation of the rights of the owners and the priority of the rights of the parties in the event of a dispute. We must also take into account that the trademarks may be graphic or three dimensional and that they are also protected de facto, and that the guarantees of origin, domain names and other distinctive signs may not appear in a registry.
As if that were not enough, the number of registered trademarks varies every day due to the new registrations of trademarks and the expiries of others. This would mean there would have to be daily access to the databases of the trademark registries of the entire world.
Finally, the advertiser may have rights of use of the trademark because it is a distributor or a concessionaire directly authorised by the holder of the mark, and, accordingly, it would not be lawful to blindly impede the use of the trademark in AdWords either. Moreover, there are uses of the mark that the owner is used to allowing or that are established by legislation, for example, in the case of commercialisation of spare parts for products, comparative advertising, benchmarks, the merely descriptive use of the mark, and other cases that the Advocate General analyses in detail in his conclusions, in which the reference to the trademark of the product is necessary.
The establishment of preventive controls would force the service provider to visit the website to which the contracted sponsored link is connected in order to be able to verify whether possible illicit or damaging use of the contracted trademark is being made as a key word in AdWords.
This type of evaluation would require the service provider to have specialised legal knowledge and carry out a function that is confined to legal bodies.
In conclusion, a control system that would allow for the rejection or removal of campaigns based on registered trademarks that could be illicit or damaging to their owners would have to take into account all of the following variables:
- Number of advertisers
- Number of campaigns
- Number of registered trademarks
- Daily access to the databases of the national trademark registries
- Knowledge of unregistered trademarks and other distinctive signs
- Daily updating of new trademarks
- Daily updating of expired trademarks
- Geographic area in which the mark is protected
- Geographic area at which the campaign is directed
- Types of goods or services for which the mark is registered
- Rights of the advertiser on the mark used as a keyword
- Possible licenses or authorisation that the owner has granted to the advertiser
- Contents of the website to which the sponsored link is addressed
- Evaluation of the illicit nature or potential damage of these contents
- Trademarks with dual meanings (for example, Puma)
Such control would be materially impossible.
5. Control based on notifications from the damaged parties
In the debate on the Directive, in which I had the honour to participate, the conclusion was reached that a control of the contents by the service providers in the information society would create a serious roadblock to the development of the Internet and that the best option would be a system based on the removal of the contents after actual awareness of their illicit nature occurred.
One of the first services involved in the development of the Internet that simultaneously showed the risk of conflicts arising with registered trademarks and impracticality of instituting prior controls was the issue of the registration of domain names. In the mid-nineties, Network Solutions had the monopoly on the registration of “.com” domain names and had to deal with a major challenge to its business. When there was a dispute between a domain name and a mark it had to bear the risk of cancelling the domain name and being sued by its owner or maintaining the domain and being sued by the holder of the trademark. Whatever it did, Network Solutions could be sued by one of the parties and the number of complaints became unsustainable.
From the beginning the conclusion was reached that establishing a control prior to the registration of the domain names would have paralysed the development of the Internet. Imagine for a moment that the frenetic pace of the registration of “.com” domain names in the nineties had been subject to prior verification of the rights of the applicant for a domain name in relation to the registered trade marks around the world.
The eventual solution was to uphold the “first come, first served” principle, which the provider had applied until then, and to submit the disputes that arose after the registration of the domain name to the arbitration of organisations such as the WIPO, following the procedure adopted by the ICANN in 1999. This has proved to be the best solution and has inspired the application of a reactive strategy to all the services affecting the development of the Internet.
In Spain, the territorial domain administrator “.es.” corrected its initial error and moved from prior control to the “first come, first served” principle, creating an arbitration procedure to resolve disputes.
Article 15 of Directive 2000/31 states that the member States cannot impose on the service providers a general obligation to supervise the information that they transmit or store, or a general obligation to make active searches of facts or circumstances that are indications of illicit activities, in relation to content storage and services.
The only obligation of the storage service provider is to remove illicit contents or make it impossible to access then when it becomes aware of their actual illicit nature.
Everything, therefore, leads to determining in which cases there is actual knowledge of the illicit nature of the contents, and it is evident that effective knowledge is not related to the economic interest of the service provider. As we have seen so far, it is impossible for the service provider to ascertain the future illicit contents of the client, since the entire contracting and management process of the campaign is automated.
On the other hand, we must recall that Google, like other providers, offers a direct channel for the notification of any damage that the activity of its advertisers may cause to third parties and for the notification of legal rulings that impose the removal of contents administered by its customers.
6. Terms and conditions of the service
Under the terms and conditions of the AdWords service, which the advertiser accepts when creating a campaign, there are two clauses that corroborate the total automation of the campaigns and their diligence in relation to the protection of third-party marks, as the advertiser is required to give guarantees that it is complying with legislation in this area.
In relation to the total automation of the campaigns, clause 2.3 of the terms and conditions of AdWords states that:
"Google does not guarantee: (i) the location, positioning or delivery time of any advertisement,, or (ii) the number, copies, publications, conversions or clicks on any advertisement, either in a Partner Property, of Google,..."
Such is the level of automation of the service that Google cannot guarantee, as I have said above, certain services that would be essential to conventional advertising.
In respect of the diligence of Google in contracting the service, clause 10 of the terms and conditions of AdWords states that:
The Customer represents and warranties .../... (iii) that the Use under this Agreement and the destination websites linked to the Customer’s advertisements (including, but not limited to, related Advertiser Services): (a) will not infringe or induce the infringement of any legislation or applicable codes of conduct (including, but not limited to, the CAP Code of the UK and the self-regulating advertising codes of Autocontrol in Spain, or any other equivalent code of practice in any other jurisdiction); (b) will not infringe any industrial or intellectual property right of third parties, and do not contain any materials that could be considered damaging, abusive, obscene, threatening or defamatory.
Google applied, accordingly, a preventive strategy, based on soliciting guarantees from the advertiser as to the licit nature of its contents, and a reactive strategy consisting of the termination of the contract and/or the removal of the campaign and the sponsored links as soon as it has effective knowledge of a possible infringement.
7. Direct interest
In his conclusions, the Advocate General stated that the samples of advertisements offered by Google are a product of its relationship with the advertisers. Consequently, he asserts that AdWords is not a neutral information vehicle because Google has a direct interest in the Internet users clicking on the advertising links (contrary to the natural results presented by the search engine).
The interest to which the Advocate General refers is a general interest, which all service providers have and which is oriented, as can be expected, to achieving their business targets and those of their customers. It is understood that the goal of Google in providing the AdWords service is to obtain the maximum satisfaction of the customer by their finding what every advertiser seeks: the maximum volume of advertising impact.
For the same reason a website hosting service provider has the maximum interest in its customers receiving hits, especially if the service is financed by advertising.
This interest would be relevant if the provider was aware of the contents, but the automated contracting and management systems of the service impedes this, and, accordingly, interest is absolutely irrelevant. The interest that the provider has is insufficient to obtain effective knowledge of what is hidden behind the sponsored links.
The interest of the provider in the success of the business is not set down in the Directive as an element making up the concept of effective knowledge of the illicit nature of the contents. On the contrary, the information society services that fall within the Directive scope will be, in most cases, remunerated, and, accordingly, the economic interest of the provider is presumed to exist in all service types under the provisions of the Directive.
On the other hand, Google has exactly the same interest in the sponsored links based on third-party marks as in those of the advertiser’s own marks. Google will probably have more interest in the users not clicking on the links addressed to illicit contents, or even that advertisers of this type do not engage its services, since in this way it would avoid disputes and a loss of time and money spent on complaints such as the one that inspired this article.
The mention of the neutrality of the algorithm used in the search results is unfortunate, since in the presentation of the sponsored links a mathematical algorithm is also involved. This algorithm must analyse, for example, the relevance or pertinence of the sponsored links in relation to the words used by the user in its search when these refer to various keywords contracted by several advertisers.
For example, if a user googles "mortgage on a country bed and breakfast", the sponsored links could contain advertisement of companies in the financial sector, the real estate sector and the tourism sector. The algorithm must, amongst other functions, work out these possible conflicts and make sure that the most useful or relevant sponsored links for the user and the advertiser pop up.
Moreover, a search result could lead you to a website financed by Google advertising, and, accordingly, based on the thesis of the Advocate General, Google could have an interest in the user clicking on these links, in spite of their not being sponsored by an advertiser.
Accordingly, it would be completely erroneous to confuse the interest of Google in ensuring that its search engine and its AdWords service functions properly and that it is good tool for ensuring that users and advertisers meet each other with a lack of neutrality. Such possible interest is not sufficient to impede the liability exemption. Applying such a criterion would make it impossible to apply article 14 to all the hosting service providers, since all have such an interest, and, since it would run contrary to the spirit of the Directive.
8. Relationship with the advertiser
In all data storage services there is a contractual relationship between the provider and its customer.
The Google browser has a relationship of which the user is perfectly aware, since the sponsored links are clearly separated from the search results. In other words, the user can distinguish between a central part of the screen, in which the links may relate to websites that are connected or not to Google, and an adjacent area, which is clearly marked, in which the links relating to the advertisers are listed, which in most cases will have a direct relationship to Google or to the advertising agency contracted by the advertiser. I say in most cases because it is possible that an advertiser may sponsor a link to an NGO or another third-party website, with which Google has no direct relationship.
This means that we cannot categorically claim that the search results point to websites that are unrelated to Google but that the sponsored websites do point websites related to Google.
In some cases the search results could relate to website in which there is a space reserved for Google ads. Perhaps this is a small percentage of the whole comprised by the search results, but it is evident that such a possibility exists.
We must also bear in mind that the search results lead to websites whose administrators know that Google tracks and indexes their contents to add them to the browser database and include them in the results of user searches. The vast majority of these administrators are waiting for the Google robots to hit their servers and they bear this in mind and keep them properly indexed in their browser, because they are right in thinking that if they do not occupy a good position in the results, it will be difficult to for them to be found.
Those who do not want to be found by Google have the option of including instructions similar to “no robots” to notify the Google robot that they do not want to be indexed or appear on the browser.
Those that want to appear in the top spots in searches on their activity but cannot achieve this usually contract SEO (Search Engine Optimisation) Services in order to improve their positioning.
There are many manuals and websites that explain how to achieve good positioning in Google.
This constant interaction means we can assert that, in spite of not being advertisers, the websites indexed to the search engine maintain a relationship with Google at a certain level, although the possibility that Google would know the contents of their websites is just as remote as in the case of the advertisers.
However, in this case, the Advocate General does not consider that this relationship and could make Google responsible for future illicit or damaging contents that the linked services may contain.
9. Neutrality requirements of the Directive
Both the Directive and national legislation that has transposed it speak exclusively of effective knowledge. Nowhere in the Directive does it speak of interest or benefit.
The liability exemption set down in article 14 of the Directive only ceases to be applicable if it shown that the service provider had effective knowledge of the illicit nature of the contents or activities of its customers.
The Directive does not contemplate specific cases in which one could speak of effective knowledge.
Spanish law, for example, goes further and defines a full, although equally limited, form of what is understood by effective knowledge. Articles 16 and 17 of the Information Society Services and Electronic Business Act states that:
"It shall be understood that the service provider has effective knowledge to what is referred in paragraph a) when a competent body has declared the data to be illicit, has ordered its removal or impediment to access to it, or when damages have been declared, and the provider is aware of the respective ruling, without prejudice to the detection procedures and removal of contents that the provider applies by virtue of voluntary agreements and other means of effective knowledge that could be laid down".
Please note that this legislation extends the same liability regime for the hosting and storage service providers to the service providers that provide links to contents or search instruments .
Finally, the Directive stipulates that the liability exemption established for the storage service providers will not apply in the event that the receiver of the services acts under the authority or control of the provider. This reference is the one that comes closest to the neutrality principle in the legislation, but the law relates it to the fact that the customer, in this case the advertiser, is hierarchically beneath the provider or under its control. At no time can we speak of the legitimate relationship between the provider and the customer or the natural interest of both parties in benefiting from this relationship.
In Spain we can refer to the issue of the neutrality of the storage service provider in the judgement of 6 February 2006 of Section 19 of the Provincial Court of Madrid, which states that the neutrality requirement is broken when the provider offers its own contents, i.e., compiles them, identifies with them and offers them as its own.
In the final judgement on the Vesatec case of 29 January 2008, the Provincial Court of Barcelona (section 7) understood that there was not only effective knowledge of the illicit nature of the contents and links stored in its server but that it was even the author of the crime, since it was proved that the contents were supplied to the customer of the hosting service.
To sum up, neither Directive 2000/31, nor national the legislation transposing it, nor the jurisprudence that construes it, take into consideration the interest of the provider, nor is the latter’s relationship with its customers construed as proof of the provider’s effective knowledge of its customer’s illicit contents.
The question of interpretation that has been discussed in this paper does not refer exclusively to the liability of companies such as Google, Microsoft or Yahoo! with respect to the sponsored links that they post on their browsers. We are dealing with a criterion that could affect the liability for contents of any natural or legal persons that offer information society services.
Everything pivots around the interpretation that is given to the concept of effective knowledge and the judgement as to whether the relationship of the provider to its customer and the level of interest of the service provider in the success of its customer’s business constitute a form of effective knowledge.
With respect to the relationship with the client, the provision of the service is something inevitable and natural. How can a service be understood without customers? How can we imagine providing a service without having a contractual relationship with one’s customers?
Directive 2000/31 does not identify at anytime the interest of the provider or its relationship vis-à-vis the customer with effective knowledge.
European jurisprudence has been analysing the different forms of providing effective consent, and situations have been identified in which a provider has been involved in the exploitation of illicit contents. But, in my opinion, having the view that a simple generic interest in a service, which is useful and beneficial to customers, violates the neutrality of the provider would be a huge error.
If the criteria of the Advocate General were accepted, it would run contrary to the spirit that inspired the drafting of the Directive and would represent an obstacle to the development of the Internet and the provision of information society services in Europe.
If the Court finally adopts the opinion of the Advocate General, the exemption under the Directive would not be applicable in these cases and we would have to look to national legislation. The immediate consequence could be the fragmentation of the domestic EU market into various national regulations on information society services.
This could generate different legal treatments of the sponsored links and of any storage services in general in which the provider has a direct interest in the users accessing the website and clicking on the links and the advertisements. This fragmentation and absence of uniformity would be totally opposed to the objectives set down in Directive 2000/31, and especially opposed to the elimination of interior borders and obstacles to the provision of services.