The European Court of Justice has backed Google in its protracted battle over the use of trademarks in AdWords.
French luxury goods maker LVMH took Google to court for using its brand names as keywords to trigger ads.
The Court concluded that "Google has not infringed trademark law by allowing advertisers to purchase keywords corresponding to their competitors' trademarks."
However, advertisers themselves "cannot, by using such keywords, arrange for Google to display ads which do not allow Internet users easily to establish from which undertaking the goods or services covered by the ad in question originate," the court added.
The case sets important precedents for e-commerce, by appearing to uphold the right of Internet service providers to protection from liability for the content they carry on their networks.
The Luxembourg-based court, Europe's highest legal authority, said in a statement that this protection applies only if the service provider is "neutral" about the content it carries, a matter it left lower courts in the 27 member states of the EU to decide.
"It is for the referring court to examine whether the role played by that service provider is neutral, in the sense that its conduct is merely technical, automatic and passive, pointing to a lack of knowledge of, or control over, the data which it stores," the Court of Justice said.
"If it proves to be the case that it has not played an active role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser's activities, it failed to act expeditiously to remove or to disable access to the data concerned," the court said.