1 January 2010

Adwords and trademark infringement

Online search provides great opportunities for business, but some are concerned that their trademarks are being misused by competitors, says Aharon Factor.

Google, the popular Internet search engine, claims to capture 60 percent of all online search hits. The company derives 97 percent of its revenues from its AdWords programme, which in 2008, generated $21 billion in revenue.

AdWords offers pay-per-click (PPC) text and banner advertisements. These are generally concise, comprising a title followed by two lines of text. The ads are unobtrusively identified as Sponsored Links, either appearing highlighted above the main list of search results ‘found’ by the search engine or as a separate column in the right-hand margin of the web page.

Google allows advertisers to purchase keywords— descriptive words or phrases, which when typed by a searcher, cause the advertisement to be displayed on the search engine’s results page along with most relevant non-sponsored search results. Advertisers only pay for ads ‘clicked’ by users. The order in which ads are displayed is set by a combination of bids by the relevant advertisers and a ‘quality score’ set by Google, which takes into account the advertiser’s account history, previous click rates for the keyword, the relevance of the keyword to the text of the ad, and other criteria.

The Tel Aviv District Court examined the issue of trademarks used as keywords in Matim-Li Fashion Chain For Larger Sizes v. Crazy Line, and Google Israel. Both Matim-Li and CrazyLine are Israeli retail chains selling clothing and accessories for the larger woman.

The case centred on Crazy Line using the keyword ‘Matim’ and/or the abbreviated ‘ml’, which was registered in stylised form by Matim-Li. The term ‘Matim-Li’ is a common Hebrew phrase meaning ‘suitable for me’ or ‘it fits me’.

Matim-Li claimed to have acquired considerable good will and brand recognition for its trademarks, and argued that using the keyword Matim to divert a searcher to Crazy Line’s website amounted to passing-off, unfair competition, unfair interference in trade, theft and deception, as well as infringement and dilution of its trademarks.

Crazy Line’s position was that Matim-Li’s trademark protection should be limited to the specific, stylised registered trademarks, essentially arguing that the non-stylised words were generic and disclaimed. Furthermore, it denied a risk of deception since the keywords entered into the search engine are not read by the user, but are instead read by the computer as algorithms. It accused Matim-Li’s action of being a strategy for preventing fair competition, which itself harmed Crazy Line’s basic right of freedom of occupation.

Google Israel argued that the operator of the AdWords programme was Google Ireland, so it should not be a party to the proceedings.

Furthermore, Google explained that the order of the links on the search page is fixed by algorithms and the advertiser is unable to choose its position. Typing Matim-Li into Google does not enter the user into either Matim-Li’s website or Crazy Line’s website, but merely triggers the display of a list of search results, including those of the parties. Showing a link to Crazy Line’s site does not compel the user to enter that site nor does it prevent the user from entering any of the other website links listed. The burden on the user is minimal and there is no deception. Finally, the advertiser is solely responsible for both the choice of keywords and the content of the ads.

The court recognised that search engines such as Google’s are very helpful tools for locating information on the Internet and for facilitating user accessibility, even if the search engine provides both relevant information and information that is at best tangential and often not requested.

The court cited the UK High Court’s Lord Justice Jacob in Reed Executive and Others v. Reed Business Information and Others: “ The Web-using member of the public knows that all sorts of banners appear when he or she does a search and they are or may be triggered by something in the search. He or she also knows that searches produce fizzy results – results with much rubbish thrown in.”The court stressed that search engines serve a commercial function as a platform for businesses to advance and market their goods and services.

The court likened the search engine to an information shopping mall, where the user will pass over some links through lack of interest, will select several links that better relate to the keywords with which he began his search and will pursue some links that pique his interest for whatever reason. This information mall serves as a hoarding for advertisers that are well aware of the many users who will be exposed to the ads.

The court reasoned that “without the commercial nature of these ads, a substantial motive for developing and improving the search engines would be removed”. Accordingly, each party’s desire to advertise its websites through the search engine is legitimate. So too are the various advertising strategies adopted to capture or increase market share, provided they are within the law, are reasonable, and do not violate privacy or constitute unfair competition. The public has a right to receive information.

The court compared the case to the owner of a chain of stores hanging advertisements near the escalator or the mall exit leading to a rival store. By so doing, the owner is merely using information that the rival’s customers comprise a particular market sector that is interested in its goods. The ad did not directly infringe Matim-Li’s trademark, but merely distracted the attention of the searcher. The court held that the proprietary rights embodied in a trademark are not an absolute lever for the negation of conflicting rights and it is for the court to examine whether the owner of such rights is requesting to expand them beyond their intended purpose, via an erosion of conflicting rights that are, themselves, worthy of defence. The court must be wary of attempts to curb legitimate competition in the guise of protecting intellectual property rights, including trademarks, where such attempts are mal fides and unconventional. The court ruled that the use of trademarks as keywords for connecting to sponsored links does not amount to trademark infringement but merely constitutes an initial distraction. The court similarly dismissed claims of passing-off, unfair competition, unfair interference in trade, theft or deception on the part of Crazy Line since Crazy Line’s sponsored link did not contain or use the Matim-Li trademarks. Additionally, the use of AdWords does not lead directly to any other website and the user remains in Google’s site with a list of search findings. Entering the websites listed in the search findings requires an additional selection on the part of the user. Furthermore, the search engine clearly identifiesthe sponsored links. Therefore, the reasonable user is unlikely to be misled.

While accepting that the keyword ad may distract or divert the search engine user by piquing his curiosity, the court dismissed the argument that such distraction amounted to an undue obstacle to accessing Crazy Line’s website. Citing the US GEICO case, it said:

“To establish a likelihood of confusion, a plaintiff must prove that the defendant’s use of the plaintiff ’s trademark is likely to confuse an ‘ordinary consumer’ as to the source or sponsorship of the goods…The risk of losing customers who are initially confused is lessened on the internet as compared, for example, to when a billboard employs initial interest confusion to entice a customer down the wrong road because a customer can retrace his steps almost instantaneously online.”The court held that use of a trademark as a keyword to create links to rival companies to the trademark owner is not trademark infringement. It referred to the 2006 New York State decision in Merck & Co & MSD Technology v. Mediplan Health Consulting, relating to the Zocor drug brand, in which the Zocor trademark was used in the ad’s text: “ Here in the search engines context, the defendants do not ‘place’ the ZOCOR marks on any goods or containers or displays or associated documents, nor do they use them in any way to indicate source or sponsorship. Rather the ZOCOR mark is ‘used’ only in the sense that the computer user’s search of the keyword ‘ZOCOR’ will trigger the display of sponsored links to defendant’s websites. This internal use of the mark ‘ZOCOR’ as a keyword to trigger the display of sponsored links is not use of the mark in a trademark sense…a company’s internal utilization of a trademarkin a way that does not communicate it to the public is analogous to an individual’s private thoughts about a trademark.

“This internal use of the Keyword ‘ZOCOR’ is not use of the mark in the trademark sense, rather this use is more akin to the product placement marketing strategy employed in retail stores…The sponsored link marketing strategy is the electronic equivalent of product placement in retail stores.”

Following the Matim-Li case, the Israeli courts have tended to permit the use by competitors of trademarks as advertising keywords, providing the trademark does not explicitly appear in the competitor’s advert. This approach favours freedom of expression and access of information over trademark proprietary rights, in order to facilitate the streaming of information over the Internet.

In 2007, Hannah Koren, a famous Israeli graphologist, sued Google and the Sela Group for use of her name as a keyword advertising rival services. This case was settled out of court and the details remain confidential.

Dr Klein, a leading Israeli plastic surgeon, has filed several actions against Google for using his name as a keyword for advertising rival plastic surgery services. These cases are pending.

However, Israeli legal precedents in this area are subject to change in the light of continuing technological development and consolidation of Internet advertising

Aharon Factor is an attorney at JMB, Fa©tor & Co. He can be contacted at: aharon@israel-patents.co.il

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