Adwords: interacting with consumers

Online advertising is a massive business that generates billions of dollars of revenue— and it is growing. According to the annual Internet Advertising Bureau (IAB) Internet Advertising Revenue Report conducted by PricewaterhouseCoopers, Internet advertising revenue in the US alone totalled $7.2 billion in 2001.

Consumer brand advertisers represented the largest category of advertiser spending in that year—about 31 percent in the fourth quarter— and by far the biggest sub-category was online retail advertising (49 percent), followed by music (16 percent) and automotive (12 percent).

Fast forward to 2011. In the fi rst half of the year in the US, online advertising revenues have increased to $14.9 billion, a likely fourfold increase over 2001 by the end of the year, refl ecting a steady and signifi cant upward trend that has continued uninterrupted since the birth of Internet advertising and despite the various economic downturns of the last decade. Consumer retail advertising still makes up the largest category of Internet ad spending.

Since 2006, search advertising has been the largest online advertising revenue format—almost half— farsurpassing other advertising formats, such as online classifi ed advertising, lead generation and e-mail advertising. Search advertising involves advertisers paying Internet companies to list and, or, link their website/domain name to a specifi c search word or phrase in various ways.

Advertisers can pay to have text links appear in an article based on the context of the article content, instead of a user-submitted keyword; they can pay to ensure that their URL is indexed by a search engine or they can ‘optimise’ their websites to facilitate automatic indexing of the sites by search engines which, they hope, will result in better placement in search results.

In addition, advertisers can utilise paid listings in which their ads appear at the top or side of search results for specific keywords. Since the introduction in 1996 of keyword advertising by Yahoo!, all the major search engines have developed their own keyword advertising services, with Google’s AdWords now, arguably, the best known such service.

"Even though the evidence showed that some sales for the defendant were generated directly from the sponsored link, the court concluded that no actual damages or losses were shown to be suffered by the plaintiff."

Keyword advertising has brought its own challenges for trademark owners, which, not unexpectedly, are quite significant in most jurisdictions, given the magnitude of the online advertising business. The most fundamental problem faced by brand owners in the pay-perclick advertising world is the use of trademarks as keywords by third parties, and courts around the world have struggled with the question of whether the use of trademarks as keywords constitutes trademark infringement.

In the US, as early as 2003 Google had sought declaratory relief seeking an order that its keyword advertising policy and service did not violate the trademarks of American Blind and Wallpaper Factory.

In Google Inc v American Blind and Wallpaper Factory Inc it was confirmed that the use of trademarks as keywords could result in initial interest confusion, but ultimately where the trademarks in question are descriptive (and thus unenforceable) or common, inherently weak terms, there is little chance of successfully claiming infringement and dilution.

Subsequent jurisprudence in the US and in numerous cases in Europe has gone both ways, but nevertheless has not resulted in a single, consistent line of cases that clearly establishes the ability of trademark owners to enforce their rights in the online advertising world.

As has been the case in other areas of Internetlaw, Canada has been a bit of latecomer to the party when it comes to judicial consideration of the keyword advertising issue. The first decision to deal with keyword advertising was rendered on May 28, 2010 by the British Columbia Supreme Court in Private Career Training Institutions Agency v Vancouver Career College (Burnaby) Inc.

The court confirmed that the use of a competitor’s trade name (or trademark) in Internet keyword advertising is acceptable, provided that there is no misrepresentation in the use of the competitor’s trade name.

In Private Career Training, the court considered whether the defendant’s use of keywords consisting of the business names of competing educational institutions was confusing or misleading. The analysis was made in the context of the Private Career Training Institutions Act, a provincial statute, rather than the Trademarks Act, but the court did consider the issue of confusion from a trademark perspective when it looked at the question of whether the use of the keywords constituted misleading advertising.

The evidence showed at least two students who claimed to be misled when conducting Internet searches. One of them was confused to the point of actually enrolling in a course at the rival institution before realising the error, and the other noticed a problem only after booking a tour of the rival institution.

The court had no prior Canadian jurisprudence to look to for guidance in this area, so it turned to US authorities for assistance and ultimately determined that where a competitor’s name is being used only as a keyword and not in the actual advertisement itself, there is no likelihood of confusion. This position allowed the court to discount the students’ claims and conclude that the mistake that led them to the defendant’s website did not result from keyword use.

According to the court, it was not the keyword use per se that misled the students since the defendant’s advertisements did not misrepresent or misidentify who they were. Users of search engines such as Yahoo! and Google always have the opportunity to review the search results, in this case to determine or investigate which schools are listed in the search, and it was the students’ own carelessness in this regard that led to their errors.

As the Private Career Training case arose in the context of misleading advertising, its applicability may be limited in the context of infringement or passing off. However, a second Canadian case came to a similar conclusion at around the same time, this time in the province of Québec.

In Chocolat Lamontagne Inc v Humeur Group-conseil Inc, the defendant purchased the business names of a competitor as Google AdWords, which were then used to direct users searching the competitor’s trade name (Chocolat Lamontagne) in a Google search to a sponsored AdWords link which led to the defendant’s website.

The sponsored link was identified in the search results as “Alternative to Chocolat Lamontagne”. Even though the evidence showed that some sales for the defendant were generated directly from the sponsored link, the court concluded that no actual damages or losses were shown to be suffered by the plaintiff, and there was no passing off, confusion or likelihood of confusion, since consumers were clearly being advised that the sponsored link was leading to an alternative to the plaintiff ’s site.

In both cases, the courts took the position that keyword use represents the evolution of competition and marketing practices to adapt to new technologies, and the practice of purchasing competitors’ trademarks as keywords is no more false, deceptive or misleading than intentionally placing print advertisements close to competitors’ advertisements in printed publications.

The current Canadian position therefore seems to be that keywords are simply an aspect of “an economy of open competition” where “new ways of interacting with consumers” must be accepted and “information meant to provide an alternative to other business cannot be prohibited”.