The purchasing of branded or trademarked keywords by an entity other than the owner of the keywords in a paid advertising medium is a practice that commonly occurs. The extent to which it occurs is impossible to know. But one can look at the legal landscape and get some idea of the pervasiveness of the practice. The best indicator of its prevalence is that Google has been vigorously defending a number of trademark suits over the past five years that stem from its Adword product.
Google had proven successful in a majority of the suits but last year Google was delivered a bit of a setback in the case of Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. April 3, 2009). There the Second Circuit reversed the lower court and said that Rescuecom properly alleged that Google’s keyword ad practices constituted a “use in commerce”. Given the fact that Google is fighting so tenaciously the lawsuits filed against it one could assume that the practice is widespread, and Google is making considerable amount of money from it. The Rescuecom Corp, ruling may have opened the door for many other suits against Google, and revivified others that were “on the mat”. It is not clear that Google is going to lose any of them, but the momentum has shifted.
Notwithstanding whether Google has any liability, from an on-line marketer’s perspective one should ask the following two questions before diving into the purchasing of another company’s trademarked keyword: is it legal and what are the risks?
As to whether it is legal, stated simply, the law is not settled in this area. Assuming that there is an enforceable trademark interest, the analysis then turns to whether the trademark was actually infringed upon. Under the standard infringement analysis, if a party owns the rights to a particular trademark, that party can sue subsequent parties for trademark infringement. The standard is “likelihood of confusion. The plaintiff would also have to show that the trademark had acquired a secondary meaning, and was used in commerce.
In an advertiser on advertiser suit, however, the courts are looking primarily at what has come to be called initial interest confusion. (Although there are a few district cases that do not reach the initial interest confusion doctrine analysis because the courts held that there was no “use in commerce” in the first instance.) Unlike the likelihood of confusion test that is found in section 43 of the Lanham Act, the courts created the initial interest confusion test in the 1970′s. An amorphous legal concept it has generally been used to prove actual confusion by implying the confusion occurred more quickly on the part of the consumer.
In branded keyword suits, the courts have looked to see whether the branded keyword was used in the ad. If it was not, then there appear to be no plaintiffs who have been successful in bringing a trademark infringement suit of course that is not to say that suit have not been brought and settled out of court. If the branded keyword is used to not only trigger the ad but also the branded keyword is used in the advertisement, the few courts that have looked at this issue then determine whether the consumer was diverted from the search in which he was interested, thereby creating possible confusion as to the origination of product.
One of the primary cases in advertiser-on-advertiser (competitor v. competitor) trademark infringement suits is Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008). In Storus, a federal district court held that displaying a competitor’s trademark in an Adwords ad copy constitutes impermissible initial interest confusion, leading to a summary judgment win for the trademark owner. This is one of the few advertiser-on -advertiser search advertising cases where the plaintiff has won the trademark claims.
The commentary on this case from the legal community has generally been rather critical. See generallyhttp://blog.ericgoldman.org/archives/2008/03/adwords_ad_crea.htm.
It is so because the defense’s challenge is problematic where a court places the burden on the defendant to disprove that consumers experienced initial interest confusion. What the initial interest confusion doctrine requires is for the defense to undertake the task of proving that a “diversion” did not occur. (As an aside, the initial interest confusion doctrine is a legal example of exactly what Karl Popper was criticizing in science with his exposition on the concept of falsifiability.)
This case is also instructive in so far as the fact pattern demonstrates why these advertiser-on-advertiser cases are not likely to proliferate—it does not make economic sense to do so. As Professor Goldman points out, in Storus the court determined that over 11 months Aroa (defendant) got 1,374 clicks on its ads (from 36,164 ad impressions, yielding a 3.7% rate). If you value each click at $1/click, Storus could have acquired the “diverted” clicks for $1,374. $1,374 would amount to a fraction of the cost to litigate a case like this.
Therefore, if one decides that there is a sufficient ROI on the branded keyword purchase one might also reasonably assume that even if one was to receive a cease and desist letter from the trademark owner, the likelihood that an actual suit would result from the infringement is minimal. At the end of the day, however, if one buys another company’s branded keyword and the trademark name is displayed in the ad and/or copy text there exists a violation of the Lanham Act and one is subject to the penalties set forth in same.
If, however, one wants to roll the dice and ignore the cease and desist letter because there is a tremendous ROI on the purchase of the branded keyword, well, then that is an option. But it does not come without risks. For at the end of the day, if the ROI is high for the purchase of trademarked keywords then the owner of the trademark has more incentive to see that the infringement cease AND be paid for the damage to its brand.