1 January 2010

Keyword advertising: predictability remains elusive

Internet advertising has become a multibillion dollar industry and an essential component of advertising and marketing programmes. But there are still areas of confusion, say Anna Maria Lagerqvist and Niels Lagerkvist Lehmann.

Keyword advertising programmes enable advertisers to purchase or bid on keywords that trigger the display of their adverts in search engine results. When Internet users search the keywords, the search engine’s computer algorithms link the advertiser’s keyword advert to the search results page. When Internet users click on the advertiser’s keyword ad, they are redirected to the advertiser’s website. A fee is paid to the sponsoring search engine provider for each click. Advertising programmes such as Google Adwords and Keyword Suggestion Tool, Yahoo’s Sponsored Search Service and Microsoft’s adCenter allow businesses to purchase keywords.

The purpose of buying keywords is to target consumers and increase the effectiveness of Internet advertising. The use of trademarked keywords may increase the chances of consumers seeking a competitor’s product, instead, ending up on the advertiser’s website. Consequently, the unauthorised use of third-party trademarks and trade names as keywords is a growing concern for brand owners.

The question arises: is keyword advertising just an effective marketing tool or can it be considered trademark infringement? If so, who is liable? Courts in the US and Europe have debated whether use of a trademark as a keyword constitutes ‘use in commerce’ and whether such use creates a ‘likelihood of confusion’. Their views on whether keyword advertising constitutes trademark infringement and how brand owners should conduct their businesses while awaiting further clarification from the courts or legislature on this matter have differed. The debate continues, and a conclusive answer remains elusive.

Search engine providers

Search engine providers recognise the importance of trademarks and claim to take allegations of trademark infringement seriously. Most search engine providers have keyword advertising policies or trademark policies that allow trademark holders to address possible infringements.

Google’s AdWords Trademark Policy is the most liberal. Intellectual property infringement by advertisers is prohibited and advertisers are responsible for their choice of keywords to generate advertisements and advertising text. Google takes action depending on where the complainant has trademark rights and, in most cases, investigates the use of trademarks in advertising text only and not in the actual keyword.

Yahoo’s Search Marketing Trademark Policy is much stricter. It allows bids on trademarks only under certain circumstances and does not permit the use of another’s trademark in advertising text.

Microsoft’s adCenter forbids advertisers from bidding on or using trademarked terms in a way that constitutes trademark infringement.

However, none of the search engine providers conducts any preliminary control of the advertiser’s right to the chosen keyword. Instead, they all act according to the principle of ‘notice and take down’.

US courts on the move

Several new infringement lawsuits followed the liberalisation of policies to allow competitors to bid on others’ trademarks as keywords. However, courts in the US have come to different conclusions about whether the purchase of a competitor’s trademark as a keyword constitutes trademark infringement.

The key issues are whether exploiting thirdparty trademarks as keywords constitutes use in commerce by the search engine provider or advertiser, and whether this could result in the likelihood of confusion.

It has not always been possible to apply the traditional likelihood of confusion analysis, as consumers deceived into visiting a site via a trademarked keyword may not complete a sale or may realise the deception at the moment of sale. In order to bypass the likelihood of confusion test, some courts have applied the Initial Interest Confusion Doctrine. The doctrine looks at whether the search engine provider’s or advertiser’s use of the trademark was done “in a manner calculated to capture initial consumer attention even though no actual sale is finally completed as a result of the confusion”. Accordingly, some courts have found that ‘initial interest confusion’ violates the Lanham Act [US trademark law], because it impermissibly capitalises on the goodwill associated with a mark.

Based on the US Court of Appeals for the Second Circuit’s more narrow definition of use in commerce in 1-800 Contacts v. WhenU.com, until recently, it was possible to get cases dismissed by arguing that “use[...] in commerce only [occurs] when it is used or displayed in the sale or advertising of services and the services are rendered in commerce”. This definition excluded any use that did not involve the display of the actual mark. However, in Rescuecom v. Google, the difference between distraction and outright hijacking was settled by establishing that the purchase of a keyword does indeed constitute use in commerce.

Outside the Second Circuit, the consensus view has been that the purchase of trademarks to trigger advertisements does constitute ‘use’ under the Lanham Act.

Establishing trademark infringement based on likelihood of confusion can depend on whether or not the exact trademark is displayed in the advert.

Where the sponsored ad displays the exact trademark, the courts have been more inclined to find infringement. In Google v. American Blinds & Wallpaper Factory, it was argued that Google, by selling keyword-triggered advertising to competing retailers, was violating the company’s trademark when Google users searched for ‘American Blind’ or ‘American Blinds’. Moreover, through its AdWords Keyword Suggestion Tool, Google deliberately and illegally capitalised on American Blind’s trademarks by encouraging competitors to purchase keywords identical or substantially similar to its marks. In Storusv. Aroa Marketing, the court found trademark infringement where the sponsored ad displayed the protected mark.

In situations where the keyword triggers advertising that does not contain the trademark, uncertainty still rules. However, the District of Massachusetts appears to have been the first to articulate a specific test to assess Internetbased likelihood of confusion claims relating to keyword-triggered sponsored ads.

In the case Hearts on Fire v. Blue Nile, the court denied Blue Nile’s motion to dismiss trademark infringement claims related to its purchase of the search engine keyword ‘hearts on fire’. The court determined that such purchases constituted use in commerce under the Lanham Act, based on the broad definition of ‘use’ in the civil remedies section of the act. In addition to the traditional likelihood of confusion factors, the court believed that likelihood of confusion would “ultimately turn on what the consumer saw on the screen and reasonably believed, given the context”. It articulated a list of non-exclusive factors that it would consider when judging the “content and context”. These include: the overall mechanics of web-browsing and Internet navigation, in which a consumer can easily reverse course; the mechanics of the specific consumer search at issue; the content of the search results web page displayed, including the content of the sponsored link; the downstream content on the defendant’s linked website likely to compound anythe web-savviness and sophistication of the plaintiff ’s potential customers; the specific context of a consumer who has deliberately searched for trademarked diamonds only to find a sponsored link to a diamond retailer; and in view of the foregoing factors, the duration of any resulting confusion.

This case gives a good indication of how the US courts may approach the problem in the future.

Europe at a standstill

Keyword advertising has also started an avalanche of litigation in Europe over whether the sale of trademarks as sponsored keywords amounts to trademark use and infringement. Many national courts have referred questions to the European Court of Justice (ECJ).

It seems as if Europe has come to a standstill on this issue. The ECJ’s advocate general recently concluded that the sale of keywords does not amount to trademark infringement. This clarification of the issue is welcome; however, too many court decisions are still leaving too many questions unanswered, and the advocate general’s opinion doesn’t carry the force of law.

In 2008, the UK High Court contributed to the clarification of keyword advertising in Vilson v. Yahoo!. The owner of the Community Trade Mark (CTM) ‘Mr Spicy’ sued Yahoo UK and its sister company Overture Services for trademark infringement since sponsored links to third-party websites appeared when Mr Spicy was typed into Yahoo’s search engine. The court held that, since the trademark had only been used by the search engine users, Yahoo UK was only responding to third-party use, which does not amount to trademark infringement—even if the advertisers had bid on the keyword Mr Spicy. Yahoo UK only engages in broad matching as it was not Mr Spicy that produced the sponsored result but the word ‘spicy’. The court held that even if Yahoo UK had directly used Mr Spicy, it would not be use “as a trademark”, as the use cannot affect the trademark owner’s interest as proprietor of the mark.

The case of Interflora, Inc. Interflora British Unit v. Marks and Spencer PLC Flowers Direct Online remains open after a May 2009 judgment, which referred the main issues to the ECJ for guidance. The case concerned the purchase by Marks & Spencer of Google AdWords, including not only ‘Interflora’, but several combinations of Interflora with a descriptive term, some misspellings and variants, and the domain names interflora. co.uk and interflora.com. When the search term Interflora (or any of the variants) was entered into Google, ‘M&S Flowers Online’ appeared as a sponsored link. Interflora claimed trademarkinfringement by M&S and also by Google, for which M&S was jointly liable. The court refused to grant the interim injunction sought by Interflora pending the ECJ’s guidance.

L’Oréal SA v. eBay International AG concerned eBay’s liability for trademark infringements committed by its users and whether eBay itself committed infringement by using trademarks in relation to infringing goods. Arnold J held that eBay was not jointly liable with individual sellers for the sale of infringing and counterfeit products on its website, although he did find eBay primarily liable for trademark infringement in respect of the use of trademarks in the sponsored link advertising and on the website. However, since the law was unclear in a number of aspects, he decided to refer questions to the ECJ.

In 2008, the Dutch Supreme Court referred five questions to the ECJ about a dispute between Portkabin and Primakabin, an authorised reseller of second-hand Portkabin products. Primakabin had bought the terms ‘portkain’, ‘portakabin’, ‘portacabin’, ‘portokabin’ and ‘portocabin’ as Google AdWords. The following questions were referred to the ECJ: does the purchase of ‘portakabin’ by Primakabin amount to trademark use?; does it make a difference that the link to the defendant’s website appears as a main search result or in the sponsored links on the side of the page; does it make a difference if the offer for sale of the defendant’s goods, which are identical to those covered by the trademark, appear on the search results page or only appear on a web page linked to that results page?; do AdWords constitute use of a trademark, or are the trademark owner’s rights exhausted?; will the answer to any of the preceding questions change if the AdWord is a misspelling of a registered trademark?; and if AdWords does not constitute trademark use, can a member state then apply a national provision of its trademark law to prohibit the display of a mark as an AdWord when the AdWord takes unfair advantage of or is detrimental to the distinctive character of the trademark?

In September 2009, the advocate general handed down his opinion in the Joined Cases C-236/08, C-237/08 and C-238/08, involving Google and various claimants. The three references all posed the same basic question: does Google’s use, in its AdWords advertising system, of keywords corresponding to trademarks, constitute an infringement of those trademarks? The advocate general concluded that Google was not liable for trademark infringement for allowing advertisers to purchase third-party trademarks as sponsored keywords in the AdWords programme on the basis that when selecting keywords, no productor service was being sold to the public. The advertisements displayed in response to such keywords only established a link between the keywords and the advertised site. Such links did not constitute trademark infringement since the display of websites that resulted from the input of keywords was not enough to lead to confusion on the part of the public.

It remains to be seen whether the ECJ will adopt the same view as the advocate general. But if it does, trademark proprietors face a problematic future as the view will make it easier for springboard marketers and imitators to exploit a trademark’s goodwill and reputation.

Brand owner considerations and protective measures

Because the majority of cases relating to keyword advertising do not proceed to trial, many unanswered questions remain.

The courts’ decisions to date suggest that brand owners will need evidence, such as survey evidence from observations of how Internet consumers perceive and interact with keyword adverts, in order to substantiate the likelihood of confusion.

Brand owners should also consider purchasing their own trademarks as keywords to trigger defensive keyword advertising that inoculates themselves against their competitors’ advertising.

Brand owners should monitor use of their trademarks in keyword advertising by searching their own trademarks, as well as confusingly similar variations or misspellings of their trademark, and try to track competitor keyword ads. Search results and search queries should be printed and saved as evidence of unauthorised use.

Further, in addition to filing a trademark complaint with a search engine provider, brand owners should also consider contacting competing advertisers directly when they discover infringing trademark use in order to come to a cost-efficient and direct solution.

Conclusion

The use of keyword advertising is a very lucrative business for the search engine providers, and it has so far provided good opportunities, with little risk, for parties to utilise the fame of third-party trademarks for their own benefit. Unlike the protection of trademarks as domain names and metatags, so far, courts of law have not established any precedents that give clear guidance on whether or not the use of keyword advertising should constitute trademark infringement. Sadly for those who prefer legal certainty, the battle for clarification seems set to continue.

Anna Maria Lagerqvist is an intellectual property attorney at Valea. She can be contacted at:  anna-maria.lagerqvist@valea.se

Niels Lagerkvist Lehmann is an intellectual property attorney at Valea. He can be contacted at: niels.lehmann@valea.se

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