Trademarks and service marks are valuable assets of companies. They are the symbols of the good will built up by companies over time, and they act as indicators of the source and quality of a product or service. Volumes of case law have developed over the years relating to what constitutes infringement of another's trademark rights. The classic case of trademark infringement involves passing off one's goods or services as those of another by use of an identical or confusingly similar mark. Unfair competition laws such as the Federal Lanham Act also create liability for deceptive or misleading practices that are likely to confuse the public as to source, affiliation, and sponsorship of particular goods or services.
With the growth in Internet advertising, new opportunities have arisen for the potential infringement of another's protected marks. A hot area of the law right now is whether or not purchasing and using another's trademarks as search terms, such as with the Google Adwords program, creates liability for trademark infringement or unfair competition. Google's Adwords is a program by which Google sells certain search terms (or "keywords") to advertisers, so that every time someone searches for a particular word the advertiser's page or advertisement will "pop-up" or appear. Similar programs are in use by others on the Internet.
The sale and use of keyword search terms creates two potential sources of liability - one against the Internet search company selling the terms for use and the other against the purchaser who uses the terms. The courts have had an easier time finding infringement by the user than by the seller of the keyword search terms. To prevail on a trademark infringement claim under the Lanham Act, a plaintiff must establish, among other things, that the defendant used the mark in commerce. A purchaser of the search terms is almost certainly "using" the trademark of a competitor to divert business to itself. Indeed, a California federal district court recently held that a company was liable for trademark infringement where it purchased a competitor's trademark ("smart money clip") under Google's Adwords program, and used the Adword to divert potential customers to its web site, even thought the potential customers might ultimately realize that the site was not the plaintiff's. See Storus Corp. v. Aroa Marketing, Inc., 2008 WL 449835 (N.D. Cal.). This type of liability is known as creating "initial interest confusion."
The case authority is in conflict, however, as to whether the sale of a trademarked keyword constitutes use in commerce under the Lanham Act. Compare Rescuecom Corporation v. Google, Inc., 456 F. Supp. 2d 393 (N.D.N.Y 2006) (holding that sale of trademarks as keywords does not constitute "use" under the Lanham Act), with 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp. 2d 273 (D.N.J. 2006) (holding that sale of trademarks as keywords did constitute "use" under the Lanham Act).
The courts in California have been particularly active in this area. Recently the United States District Court for the Northern District of California took another stab at clarifying the law on whether the use of trademarked words in the Adwords program constituted trademark infringement. See Google Inc. v. American Blind and Wallpaper Factory, Inc. 2007 WL 1159950 (N.D. Cal.). According to the court in that case, Google has a policy that if it receives a complaint from a trademark owner it will investigate and potentially require that the offending advertiser remove a trademarked term from the content of their advertisement. However, Google typically will not disable keywords.
American Blind brought a trademark infringement suit against Google, claiming that by selling the use of trademarked keywords Google was violating various provisions of federal and state law. Google moved for summary judgment on all claims and asked the court to declare as a matter of law that use of trademarked keywords in an Adwords program does not constitute "use in commerce" under the Lanham Act. The court refused to find absence of trademark "use in commerce" in Adword purchasing programs, although it explicitly left open the possibility of revisiting the issue in the future. Interestingly, the case ultimately settled favorably to Google after approximately four years of litigation.
Even if there is a determination that there is use in commerce, there also must be a finding of likelihood of confusion for liability to attach. Some courts have found no likelihood of confusion where the pop up ad sold does not display the third party's trademark. Other courts, however, have found that it is the diversion to a competitor's web site that is the wrongful act because it creates "initial interest confusion." This is another area that is a likely source of ongoing litigation.
The bottom line is that purchasing keyword search terms is a risky proposition, both for the buyer and the seller. There is a significant risk that a purchaser of keyword search terms will be found liable for trademark infringement or unfair competition if it purchases and uses another's mark to divert business to itself. As for sellers of keyword search terms, the result will depend in large part on which jurisdiction suit is brought in. Nevertheless, the trend seems to be towards protecting the trademark owner. In the case of Internet search terms - buyer and seller beware.
This article is intended to serve as a summary of the issues outlined herein. While it may include some general guidance, it is not intended as, nor is it a substitute for, legal advice. Your receipt of Good Company or any of its individual articles does not create an attorney-client relationship between you and Sheehan Phinney Bass + Green or the Sheehan Phinney Capitol Group. The opinions expressed in Good Company are those of the authors of the specific articles.
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