The use of “iwatch” as an AdWords keyword by Apple does not infringe an earlier third party’s trademark, says the IP Court of Milan

On 14 December 2015, the IP division of the Court of Milan ruled in preliminary injunction proceedings (docket number 40511/2015) on a case of alleged trademark infringement by means of the well-known Google AdWords service (a topic already discussed here on this blog).

A company operating in the field of software and TLC services, holder of the Community trademark “iwatch”, filed in 2008 for safety systems, requested the Court to have Apple Inc. and Apple Italia S.r.l. (herein “Apple”) enjoined from using the sign “iwatch” and, in particular, from using it as keyword for AdWords ads regarding the product Apple Watch. The applicant claimed that Apple was actually appropriating its trademark and damaging its visibility – in this respect, the applicant pointed out that its site, following a Google search using the term “iwatch”, was ranked behind the 120th position.

Apple defended itself, inter alia, pointing out that the word “iwatch”, which it did not deny to have been using in the context of the AdWords service, did not appear in the sponsored ad or in the linked Apple site; it also noted the different nature of the claimant’s products compared to its own. Such circumstances in Apple’s view would exclude (in accordance with the EU and national case law) any real likelihood of association and, consequently, the infringement of the trademark “iwatch”.

The Judge, building upon the Interflora case-law, found that the use of the sign “iwatch” by Apple through AdWords was not likely to have an adverse effect on the typical functions of the trademark in suit (i.e. indicating origin, advertising and investment functions) and dismissed the motion.

He did not detect a violation of the function of indicating origin, on the grounds that “the ad allows the informed and reasonably observant user to know whether the goods or services to which it refers do not come from the trademark holder or a company economically linked to it, but from an unrelated third party (…), nor it can be said that such ad overshadows the existence of an economic link between that third party and the trademark holder“. In this regard, the absence of the term “iwatch” in the ad and in the website linked to it and the difference in nature between the products advertised were considered to be decisive.

With regard to the advertising function of the trademark, the Court found that, although in the case at issue the ad did not propose alternatives to the trademark holder’s goods and services (that is, the “pro-competitive” scenario which in a number of instances led the ECJ and national courts to rule that the use of third-party trademarks as adwords was legitimate), nevertheless the violation of the advertising function should be ruled out, on the grounds that Apple did not use the term “iwatch” to take advantage of the publicity enjoyed by the claimant’s products, but rather to exploit the fact that the sign in question recalled the trademark family that Apple itself had been successfully using for years (i.e. the various i- words).

In this context, the low ranking position of the applicant’s website was considered irrelevant, as it likely depended on factors outside the control of the defendant and/or the stronger reputation of the defendant’s trademark family.

As for the investment function, in the Court’s view the different types of products sold by the parties excluded per se the possibility that it was negatively affected: far from damaging the trademark’s reputation, Apple’s use of the sign had “the only consequence to force the trademark’s holder to increase its efforts in order to acquire or preserve a reputation capable of attracting consumers and making them loyal” in the context of a fair business competition.

Unfair competition was ruled out by the proceeding Judge on similar grounds.

Readers should note that the order is subject to direct appeal and, due to its provisional nature, could be overturned by a judgment issued in the context of ordinary merits proceedings.