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Google’s Ad Revenue Model Faces Challenges in India

The Delhi High Court ruled that Google’s advertising program falls within the legal scope of the Indian Trademark Law.

Google's Ad Revenue Model Faces Challenges in India

This court ruling is a landmark and, according to experts, in the future, it may become a precedent of transformative significance for the sphere of legal regulation of advertising in the digital environment.

The decision, which was made by a panel of judges Vibhu Bakhru and Amit Mahajan last week, indicates that the technology giant is involved in the use of the proprietor’s trademarks. The company’s practice, in which advertisers are offered the trademarks of competitors as keywords, has brought huge profits. In fact, in this case, the Internet search giant was selling keywords.

The trial began after the logistics firm DRS filed a complaint that a search for its trademark Agarwal Packers and Movers leads to a result in the form of competitor sites in the list of Internet pages offered by the corresponding request. The company said the tech giant’s advertising engine used its brand to redirect users to competing sites.

The court ordered Google to respond to the DRS complaint and remove the advertisement, which it described as offensive, although in this case, it does not mean the moral and ethical aspect of the advertising algorithm, but the commercial consequences of its functioning. The court’s ruling stipulates that the technology giant and other companies that own Internet search systems must constantly develop new solutions to overcome the problems associated with the use of trademarks.

Nithin Kamath, founder and executive director of the Zerodha trading platform, commenting on the court’s decision, said that one of the worst options for financing business development is the cost of advertising on their keywords. According to him, companies resort to such practices, because in this case there is a kind of closed-circle principle. This means that one or another firm will necessarily use the mentioned methodology and get the best positions in the search results, which is why companies are trying to get ahead of each other in this aspect of activity cause the fact that the algorithm will be used in any case, and in such a situation it is better to be the beneficiary, not the loser.

Nithin Kamath also noted that in many cases this advertising misleads consumers. According to him, this state of affairs is the result of the absence of legal mechanisms for trademark protection.

In the context of this trial, the court also stated that Google, within the framework of the practice of selling keywords, is not a passive intermediary, but manages the advertising business, which is in the space of its full control. Experts assess this statement as a serious blow to the technology giant.

The court ruled that the implementation of business processes in an online environment and the fact that Google is using the service as an intermediary is not a reason for the company to gain access to the benefits of section 79(1) of the IT (Information Technology) Act concerning the advertising program.

The tech giant insisted that its position as an intermediary grants the right to a so-called safe harbor, but the judicial panel stated that the previous ruling of the sole judge that the benefits of the aforementioned law are not available to the company is justified.

The decision of the judicial board does not prohibit Google’s advertising activities, but it is a negative circumstance from the point of view of reputation, which can potentially have specific practical consequences.

As we have reported earlier, Italy Accepts Data Portability Offer From Google.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.