A Fools Bargain: Want to Sue Over Keyword Advertising?  Think Again.


One thing is guaranteed, the law will always lag technology.  That’s just the way it is.  However, eventually the law catches up and usually comes up with the right result.  Such is the case with paid search advertising such as Google Ad-words.  In case you have been living under a rock for the past decade, paid search advertising is where a company purchases web based advertising that is triggered by users typing certain keywords into a search engine.  When the user types in their query the search engine will display the paid ads in addition to the organic search results.  The ads generally contain a few lines of text and will have a link that directs you to the advertiser’s website.  Advertisers pay per click and the dollar amount paid as well as the order in which the ads are displayed are determined through a bidding system.  One of the most common practices and thus far controversial practices is to bid on competitor’s names as keywords.  Recent decisions have indicated that while this practice may be annoying to trademark holders, such activities are not a violation of trademark law.


Before going much further I must disclose that our firm is involved in one of the most recent and broadest reaching decisions in this area in the case of General Steel Domestic Sales, LLC v. Chumley, 2013 WL 1900562 (D.Colo. May 7, 2013).  Since the case is still ongoing with post-trial activities I will not comment specifically on it, but it is available for your reading pleasure at http://digitalcommons.law.scu.edu/cgi/viewcontent.cgi?article=1382&context=historical.  However, the case does represent the continuing evolution in the law and acknowledges that as a society our use and understanding of technology is also an evolutionary process and as consumers in the marketplace our sophistication also increases as technology advances.


When dealing with keyword advertising, they basically come in two flavors: 1) cases in which an ad is trigger by keyword that utilizes a competitor’s trademark, but does not mention the trademark in the text and 2) one in which the person is so brazen (insert sarcasm) as to use the trademark as a keyword and mention the trademark in the ad text.  In the past there have been decisions regarding merely using a competitor’s trademark to trigger an ad, but very few cases dealt with using a competitor’s trademark in the ad itself.


In recent years there has been a lot of confusion amongst trademark owners about what these rights actually cover.  We have seen an increasing rise in what a commonly called trademark bully’s.  These are individuals or companies that take an overly broad and often time unjustifiable position concerning the breadth of their rights.  A lot of times trademark owners feel as if they “own” words, phrases or symbols and that no one can ever use the same or similar marks– ever.   Contrary to these positions, trademark law does not solely exist for the benefit of the trademark holder.  In fact, the thrust and most important aspect of trademark law (as recited by courts) is to present consumer confusion about the source or sponsorship of goods or services.  Trademarks are an exclusionary right, meaning that a trademark owner can prevent others from using a mark that causes confusion amongst consumers as to the source, sponsorship or endorsement of the goods or services in question.  If there is no confusion or a likelihood of confusion, then there is no trademark infringement.  Therefore as our society changes and evolves so does the concept of what trademark infringement is.


In the early days of the keyword advertising cases the courts struggled with some threshold concepts such as was bidding on someone else’s trademark a use in commerce.  Some courts said yes and some said no.  After many years everyone seems to agree that even though the consumer never sees the keyword bidding process, that the act of bidding on another’s trademark as a keyword is a use in commerce.  The next question is whether the company’s actions cause a likelihood of confusion.  The situation in which the ad text doesn’t mention the trademark is almost universally accepted as not causing a likelihood of confusion.  But what about ads that do mention the trademark?  This situation is a little less cut and dry and this is where society’s use and understanding of technology starts to play a role.  Whenever courts are dealing with novel legal questions, they often try to look back to something that is known to compare the current situation to.  The legal arguments start to become a battle of analogies.  Sometimes they can get quite humorous.  In the keyword advertising context several competing analogies have evolved.  One is of a driver driving down a desolate highway (picture something on Route 66 in New Mexico) that sees a billboard advertising that a store sells a certain product, let’s say for example Coca Cola.  The driver exits the highway and drives a few miles to the store.  When they get to the store the driver finds out that the store does not sell Coke, but instead sells their own house brand cola.  Tired, dejected and thirsty the driver buys the house brand cola, turns around and drives back to the highway.  Early courts advocating this analogy often found trademark infringement for use of a trademark in the add text.  The rationale was that just as the driver was duped to exit the highway and drive to the store expecting to buy a Coke, so to are internet users who type search quarries into a search engine expecting to find a certain product and upon landing on a website, they to are so tired, dejected and thirsty that they buy the “house cola” instead of the cold refreshing Coke that they were originally seeking.


While the above analogy works well for misleading billboards and weary interstate travelers, it doesn’t necessarily represent the realities of the internet world and online advertising, at least not in its current state.  It is conceivable that in the early days of the internet, people just shopped at the first site they came across.  But as time has gone on, consumers searching habits have evolved and become more savvy.  As this has happened the transaction costs of searching on-line have dropped and the Billboard example has become less and less appropriate.  In the billboard example the consumer purchases the house brand cola because the transactions costs are too high – they would have to drive back to the highway, go down to another exit and try a different store.  It is much easier to buy the house brand cola, even though it was not what they were looking for.  One of the great benefits of the internet is that it vastly reduces transactions costs.  Almost an infinite amount of information is available to users at the click of a button.  If someone does a search clicks on a result and doesn’t get what they are looking for, the remedy is as simple as clicking the back button on their browser.


Consequently, the analogies used by courts has also changed.  One of the more prominent ones is that of a consumer at a drug store where the brand name medication sits right next to the generic store brand with its packaging that says “same active ingredient as ____”.  In these case the courts rationalize that the use of the competing trademark benefits society in that it gives consumers more options to choose from.  Since the consumer is not confused by the presence of the generic medication and understands that it is an alternative to the branded medication, the use of the trademark on the packaging is not considered a trademark infringement.  My own analogy that we used in arguing the General Steel case is that search engine results and keyword advertising are more like a menu, where the possible choices are presented before a consumer and that the consumer can pick or choose the ones that fit their needs.  If they click an ad that they think is for the product they want and it leads to a different product they can easily hit the back button, chose another item off the menu and see if that takes them where they need to be.  Courts have come around to this reality and the changing direction in trademark law reflects it.


So what is a company to do?  Well if you are a trademark owner, you better get used to other companies using your trademark as a keyword.  That’s just life in the digital age.  I would suggest that you do the same.  As for mentioning the trademark in the ad text, well we will have to wait and see.  Things seem to indicate that those types of activities will be allowed as well.  However, one thing can be guaranteed – trademark owners will not like that sort of activity and will more likely take issue with it and potentially even continue to sue on it.  However, the odds are that those trademark holders will continue to loose.  For trademark holders it is probably wiser to develop other strategies to deal with keyword advertising than to spend massive amounts on litigation and enter into a fool bargain.  As with any sort of trademark matter, it is always important for business owners to seek out the advice of qualified trademark counsel before embarking on any keyword advertising or other marketing strategy.  Failure to do so could end up costing a company in the future.