Court Decision in India Jeopardizes Google's Advertising Revenue Model

A recent landmark ruling by the Delhi High Court has shaken the foundation of Google's Ads Programme, potentially reshaping the legal landscape of online advertising in India.

In a decision delivered by a division bench consisting of Justice Vibhu Bakhru and Justice Amit Mahajan, the court declared that Google's Ads Programme falls within the scope of India's Trademarks Act. The court highlighted that Google actively participates in the utilization of trademarked properties and is a significant player in suggesting competitors' trademarks as keywords to advertisers, generating substantial profits through keyword sales.

This case emerged from a complaint lodged by logistics firm DRS, which pointed out that searches for its trademark, "Agarwal Packers and Movers," were yielding results from rival websites. DRS alleged that Google's ad mechanism exploited their trademark, diverting users towards competing sites.

Affirming the initial order, the division bench instructed Google to address DRS's concerns and remove objectionable ads. This ruling implies that platforms like Google must continually introduce innovative systems to handle trademark-related issues.

Nithin Kamath, the founder and CEO of trading platform Zerodha, commented on the ruling, noting that businesses often advertise against their own keywords to counter competitors who use those keywords to appear higher in search results. The lack of trademark protection had led to a counterproductive situation, Kamath explained.

The court's pronouncement that Google is more than a "passive intermediary" and is actively engaged in an advertising business over which it exercises "pervasive control" delivers a significant blow to the tech giant.

"The fact that the business is conducted online and integrated with its intermediary service does not grant Google the benefit of Section 79(1) of the IT (Information Technology) Act, especially concerning the Ads Programme," the bench concluded.