Use of Competitor's Trademark in Keyword Advertising: Infringement or Not?

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1 Use of Competitor's Trademark in Keyword Advertising: Infringement or Not? Grady M. Garrison and Laura P. Merritt Baker Donelson Bearman Caldwell & Berkowitz P.C. Michael M. Lafeber Briggs and Morgan, P.A. I. Introduction The world is spending more than $20 billion a year on pay-per-click advertising through Google alone. 1 Google s AdWords program, better known as keyword advertising, allows advertisers to purchase or bid on certain keywords. When a user searches for these words, links to the advertisers websites appear in a Sponsored Links section of the search results. In addition, Google advertisements with keywords can appear throughout the Google network including on Google Maps, Google Product Search and Google Groups websites along with websites of affiliated entities such as Virgin Media and Amazon.com which is estimated by Google to reach 86 percent of internet users worldwide. 2 When the keywords at issue are comprised of generic terms, there are few objections. But when the keywords include trademarks, intellectual property owners understandably believe the goodwill associated with their marks is being improperly utilized to direct traffic to thirdparty websites. Examples of these objection-raising third-party websites could include competitor websites, unauthorized retailers, sites offering counterfeit goods or services, or sites designed to appear as neutral information sources that are actually backed by a competing company. 1 David H. Freedman, Mastering Google AdWords, N.Y. Times, Dec. 7, 2010, (available at (last accessed Mar. 8, 2011). 2 See accessed Mar. 8, 2011). 1

2 For example, in the results below for a search of Tiffany, the jeweler Tiffany & Co. appears as the first result, a sponsored link, as indicated by the grey font Ad indication in the upper right corner of the beige colored text box, and as the first three non-sponsored links. However, several additional sponsored links related to jewelry that do not appear to be affiliated with Tiffany & Co. also appear on the right side of the screen: Google s AdWords Terms and Conditions prohibit intellectual property infringement by advertisers but Google does not prohibit users from selecting others trademarks (registered or 2

3 based on common law rights) as keywords. 3 The policy notes that advertisers are responsible for the keywords they choose to generate advertisements and the text that they choose to use in those advertisements. 4 However, as courts continue to determine whether and in what circumstances keyword advertising constitutes trademark infringement, the policy is likely of little guidance to those navigating the legal landscape. Rather, advertisers must be aware of varying legal standards that apply in their jurisdiction and trademark owners must determine the most effective ways to enforce their rights. Google has established a complaint mechanism for trademark owners to report complaints related to use of their trademarks in the text of a sponsored link or as a keyword. The complaint form allows trademark owners to identify its trademarks based on registration numbers or use and acknowledges that it applies different standards to different geographic regions. Google s policies also distinguish whether the trademark is used in the advertisement s text or whether the trademark is used as a keyword. For example, in the United States, Google s policy states that it will investigate the advertisement text only and will not disable keywords in response to a trademark complaint. 5 In contrast, in the European Union and the European Free Trade Association, Google s policy is to remove a specified advertisement that is the subject of a complaint if the keyword in combination with a particular advertisement text is confusing as to the origin of the advertised goods and services. 6 At the heart of the debate about whether use of trademarks as keywords constitutes trademark infringement is the philosophical split about the purpose of trademark law. Those in 3 See (last accessed Mar. 8, 2011). 4 Id. 5 See (last accessed Mar. 8, 2011). 6 Id. 3

4 favor of keyword advertisement programs believe the sole purpose of trademark law is to guard against and prevent consumer confusion as to the source or sponsorship of goods and services. According to those advocates, keyword advertisement programs benefit consumers and simply allow for fair and even competition in the online marketplace. Those proponents liken keyword advertising to the longstanding and accepted practice of placing competing brands next to one another on grocery store shelves. They note that while certain consumers undoubtedly head for the ketchup aisle with the sole purpose of purchasing Heinz ketchup, no one argues that the generic brand ketchup is misappropriating the goodwill associated with the Heinz brand by its location on the same shelf. They argue that just as a grocery store shopper understands that the generic brand ketchup is not affiliated with or sponsored by Heinz, the internet consumer is not misled into believing the Sponsored Links are affiliated with the trademark or brand utilized in the consumer s internet search. Those who advocate that keyword advertisement programs constitute trademark infringement object to what is viewed as the unauthorized sale of and profit from the goodwill associated with another s valuable trademark. Additionally, they often cite to unfair competition or state consumer protection laws to further support their positions. According to this viewpoint, competitors are free to direct traffic to their websites via the whole universe of generic and descriptive terms associated with the subject s goods and services, but they should not be allowed to utilize the goodwill associated with another s mark to profit or direct traffic to a competing website. 4

5 II. Lanham s Act Use in Commerce Requirement A trademark infringement action under the Lanham Act requires use of the plaintiff s trademark in commerce in connection with the sale, distribution or advertising of goods or services. 15 U.S.C. 1114, The Lanham Act defines use in commerce as follows: The term use in commerce means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this chapter, a mark shall be deemed to be in use in commerce (1) on goods when (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce, and (2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services. 15 U.S.C III.Recent Case Law Developments Tiffany v. ebay, 600 F.3d 93 (2nd Cir. 2010) The Second Circuit affirmed the district court s judgment concluding that ebay did not engage in trademark infringement or trademark dilution and remanded on the issue of false advertising. ebay purchased sponsored-link advertisements on various search engines to promote the availability of Tiffany items on its auction website. In one example, a search of 5

6 Yahoo! for Tiffany resulted in the sponsored advertisement Tiffany on ebay. Find tiffany items at low prices. With over 5 million items for sale every day, you ll find all kinds of unique [unreadable] Marketplace. The Second Circuit recognized that a defendant may lawfully use a plaintiff s trademark where doing so is necessary to describe the plaintiff s product and does not imply a false affiliation or endorsement by the plaintiff of the defendant. The Court affirmed that ebay s use of Tiffany s mark on its website and in sponsored links was lawful as nominative fair use because ebay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website. And none of ebay s uses of the mark suggested that Tiffany affiliated itself with ebay or endorsed the sale of its products through ebay s website. However, the Court held that even though ebay s advertisements constituted nominative fair use of Tiffany s trademark, it did not necessarily follow that the advertisements were not misleading or confusing and thus remanded on the issue of whether ebay s advertisements were likely to mislead or confuse consumers. On remand, the district court found insufficient extrinsic evidence in the trial record to support a finding that the challenged advertisements were misleading or confusing. Tiffany v. ebay, No. 04 Civ. 4607, 2010 U.S. Dist. LEXIS (S.D.N.Y. Sept. 13, 2010). Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2nd Cir. 2009) The Second Circuit vacated the district court s judgment dismissing plaintiff s claim on the grounds that Google did not use Rescuecom s trademark in commerce within the meaning of the Lanham Act and remanded for further proceedings. The Second Circuit rejected the argument that keyword searching was only internal and not use in commerce. As the Court 6

7 explained: What Rescuecom alleges is that by the manner of Google s display of sponsored links of competing brands in response to a search for Rescuecom s brand names (which fails adequately to identify the sponsored link as an advertisement, rather than a relevant search result), Google creates a likelihood of consumer confusion as to trademarks. If the searcher sees a different brand name as the top entry in response to a search for Rescuecom, the searcher is likely to believe mistakenly that the different name which appears is affiliated with the brand name sought in the search and will not suspect, because the fact is not adequately signaled by Google s presentation, that this is not the most relevant response to the search. Binder v. Disability Group, Inc., C.D. Cal., No. 2:07-cv (Jan. 25, 2011) The district court ruled after a bench trial that a law firm s purchase of a competitor s trademarks as Google AdWords was use in commerce and likely to cause consumer confusion. The Court awarded damages of nearly $300, for willful trademark infringement and held that Plaintiffs were entitled to reasonable attorneys fees and costs. Evidence presented included a survey of seventeen individuals and deposition testimony of several individuals who were confused by the advertisements. Jurin v. Google Inc., 09-cv (E.D. Cal. Sept. 9, 2010) Plaintiff s claims alleging Google misappropriated his trademark and facilitated infringement of the mark was dismissed for failure to show how the use of the term Styrotrim in defendant s AdWords program is harmful to plaintiff s ability to compete specifically with defendant. The Court noted that Plaintiff s Lanham Act claims were further doomed because Google is not a direct competitor with Plaintiff in the building materials business. Rosetta Stone Ltd. v. Google Inc., 730 F. Supp. 2d 531(E.D. Va. 2010) 7

8 Plaintiff s claim that Google s auction of Plaintiff s trademarks to third-party advertisers for use in sponsored links and advertisements constituted trademark infringement was dismissed upon the district court s finding that no reasonable juror would find that Google intended to confuse potential purchases or that Google was trying to pass off its own goods as those of Plaintiff s. Further the court held that [n]otwithstanding a favorable finding for Google under the relevant infringement elements, the functionality doctrine protects Google s use of the Rosetta Stone Marks as keyword triggers because the functionality doctrine provides that a product feature is functional "if it is essential to the use or purpose of the article or if it affects the cost or quality of the article." Rosetta Stone Ltd., 730 F. Supp. 2d at 545 (citing Traffix Devices, Inc. v. Mktg. Displays, Inc., 532 U.S. 23 (2001)(finding that whether the product configuration is a competitive necessity is an incomplete test for functionality, as a court must also consider whether the product feature is essential to the use or purpose of the device or affects its cost or quality). Based on the Court s finding that Google s keyword advertisement provides an essential indexing function, the Court held that the functionality doctrine prevents a finding of infringement. IV. Topics for Further Discussion 1. How much weight should courts give to the content of the Sponsored Ad text that is displayed in connection with the link? Would including text identifying the source of goods or services in the advertisement negate against a finding a likelihood of confusion? 2. What role should the functionality doctrine have in determining whether keyword advertisement programs constitute trademark infringement? 8

9 3. How would you advise a client who proposed purchasing a competitor s trademark as a keyword? 9

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