Search Engines: Competitive Keyword Advertising 

publication 

February 2010 - (Business In Vancouver)

Business In Vancouver

All major search engines sell keywords to advertisers – when a user inputs selected keywords into the search engine, advertisements are displayed with the results. Recent actions by Google Inc., however, have generated tension between trademark holders and advertisers, creating a legal quagmire affecting not only the search-engine providers, but those who purchase keywords.

For advertisers who take on the standard terms and conditions of platforms like Google's AdWords program, the potential liabilities can be enormous.

Customarily, search-engine providers permitted advertisers to purchase keywords based on their own trademarks, or generic industry terms from their industry. For example, WidgetCo can purchase the keywords "WidgetCo" or "widget" to help drive traffic to its website.

This practice is analogous to a traditional telephone book directory listing by subject matter in the Yellow Pages® or by name in the white pages.

However, Google's AdWords program created controversy by permitting advertisers to purchase keywords consisting of third-party trademarks, whether registered or unregistered – an activity known as competitive keyword purchasing.

To return to our example, if WidgetCo is a small player in the widget industry and BigCo is dominant with its BigWidget product, WidgetCo might purchase the "BigCo" or "BigWidget" keywords so that users searching for BigCo or BigWidget are likely to find a WidgetCo advertisement among the results.

On July 15, 2009, Google took this practice a step further when it began to permit certain uses of others' trademarks in the actual text of advertisements (mostly for resellers, repairs or non-commercial uses).

For example, if WidgetCo sells parts that are compatible with BigCo's products, Google would permit WidgetCo to advertise "WidgetCo parts are BigWidget compatible," which could be displayed even if the user was only searching for "BigWidget" to begin with. Not surprisingly, trademark owners often take the position that competitive keyword purchases are unauthorized uses of their trademarks and that search-engine providers are permitting competitors to "hijack" trademarks causing damage to their goodwill and value. They contend that the sale of keywords creates confusion and misleads users.

Advertisers, however, take the position that keywords simply give search-engine users more information and options, drawing a more innocent analogy to supermarket aisles, where products are grouped together and shelf space is a marketable commodity based on its proximity to popular products.

Currently, Google's terms of service require the advertisers themselves to indemnify Google for any third-party claim or liability arising out of the advertisers' use of the AdWords program.

This makes Google's position on this issue quite simple; it merely sells advertising space, and the trademark owners and advertisers should fight it out among themselves.

Of course, Google is not totally removed from the advertising process because Google's pricing model depends upon the popularity of the search term, and it even has a service that will suggest competitive keywords.

The potential liability for competitive keyword advertising has yet to be tested in Canadian courts, but the practice may violate Canadian trademark law.

Registered trademark owners have a presumptive right to the exclusive use of their marks throughout Canada in association with specified goods and services.

Also, registered trademark owners are entitled to prevent others from using their trademarks in a manner depreciating the value of the goodwill attached thereto.

Even if the trademarks are not registered, the owner has the right to prevent others from holding out their goods or services as having some association or connection with their own in a manner that causes or is likely to cause confusion.

There is an emerging body of law in the United States on the topic of keyword advertising, with the ongoing Rescuecom Corp. vs. Google Inc. case being the current front-runner. Rescuecom has alleged that Google improperly uses Rescuecom's trademarks when suggesting and selling "Rescuecom" keywords to advertisers in the computer repair industry.

Initially, the trial court held that there was no triable issue as Google had not "used" the trademark under its interpretation of U.S. trademark legislation, but that decision was overturned on appeal and the matter has been sent back for trial.

Predictably, the appeal decision prompted a wave of followup lawsuits against Google: two class-action suits in May on behalf of all other trademark holders in Texas and throughout the United States, and a July 10 suit by popular translation software company Rosetta Stone Ltd.

As an unsurprising result of Google expanding its competitive keyword advertising practices worldwide, Consim Info, an Indian portal company, filed a competitive keyword advertising lawsuit against Google India on September 21, 2009, and more international lawsuits are expected to follow.

An advertiser's decision to competitively use trademarks on search engines will often involve a mix of a business and legal analysis.

Because Google and other search engines find themselves facing expensive legal battles over their competitive use of trademarks in online advertising, it is inevitable that advertisers will also face claims, if not directly by trademark holders, then indirectly under the terms of their covenants to indemnify Google and the other search-engine providers.

Google is merely the high-profile first target in what promises to become a massive and expensive worldwide legal battle.


This article appeared in Business in Vancouver February 2-8, 2010.