This is the second update in the 2010 Perkins Coie Wrapping Paper Series. Over the next few months, Perkins Coie will be publishing additional updates regarding issues and trends facing the retail industry during the holiday season.

When consumers type your brand names into an Internet search engine this holiday season, do you expect that your website or the stores that sell your product will be at the top of the results list?  They might.  But the first link could direct those consumers to your fiercest competitor's site. 

Keyword advertising refers to the process of bidding on and placing advertisements against particular search terms, which can include recognized brand names, general product categories, or complicated word combinations.  When consumers use those search terms, paid advertisements appear in the search results, usually on the side or  top of the page, and usually in a box or with some other indication that these results are paid for and not "natural" search results. 

What can you do when your competitors purchase your brands as search terms?  Can you bid on their trademarked terms?  The courts have not yet resolved all of the many, unique problems raised by trademark disputes involving keyword advertising.  This wrapping paper outlines the state of the law as it relates to keyword advertising and offers some practical suggestions to ensure that consumers can find you and your brands this holiday season. 

Highlights

• The law relating to keyword advertising continues to evolve.
• After Rescuecom v. Google, courts find that keyword advertising constitutes use in commerce.
• Keyword advertising might be likely to confuse consumers; courts need to consider a number of factors.

In order to establish trademark infringement under the Lanham Act, a trademark owner must show, among other things, that the alleged infringer (1) uses the trademark in commerce; (2) without the owner's consent; and (3) in a way that is likely to cause confusion with consumers as to the source of the goods or services.  Plaintiffs frequently allege "initial interest confusion," a slight variation on the "likelihood of confusion" prong, when a consumer seeks a particular trademark owner's product, is lured to a competitor's website by a paid advertisement, and then chooses to purchase products from that website rather than rerunning the search, even if there's no confusion at the time of purchase. [1] 

To start with, until recently there was some debate about whether keyword advertising constituted "use in commerce," because the keyword used often does not appear in the resulting advertisement.  The Second Circuit case, Rescuecom v. Google[2] however, has essentially put this question to rest, holding that keyword advertising does constitute use in commerce.  Subsequent cases have generally agreed with this result.

Whether such use is likely to confuse consumers remains unresolved.  Although the test for likelihood of confusion is not uniform across different jurisdictions, as a general rule, courts consider a number of factors — such as the similarity of the marks, relatedness of the goods, evidence of actual confusion, if any, the sophistication of likely customers, and the marketing channels used — to determine if the competitor's use of the trademark is likely to confuse.  The Ninth Circuit has modified this test for Internet-based advertising, noting that the three key factors in this unique environment are the similarity of the marks, the relatedness of the goods, and whether both companies use the Internet for marketing purposes.[3]  A court may also take into account the intent of the alleged infringer in using the mark, or if the context of the ad clearly identifies that a search result is for a competitor's good. [4] 

Based on these considerations, the use of keywords may not be confusing to consumers if the resulting paid advertisement is set off from the natural search results and/or clearly identified as a paid advertisement, or if the resulting advertisement does not explicitly reference the trademark owner's mark.[5]  On the other hand, if the alleged infringer appears to be intentionally trading on the goodwill of the trademark owner's mark, as may be evidenced by additional use of the trademark on the infringer's website or an advertisement that fails to clearly state the sponsor of the advertisement, then courts may find that keyword advertising does create a likelihood of confusion.[6] 

As always, the impetus remains on the trademark owner to protect its marks.  In this context, a trademark owner may want to consider the following:

1.  Secure and police your rights. 

• Register your marks with the United States Patent and Trademark Office (USPTO).
• Bid on your own marks as keywords.
• Monitor third-party use of your marks and contact those whose use appears to infringe your trademarks.
• Use search engine dispute resolution procedures to notify the search engine when you identify infringing use.

2.  Use caution in bidding on keywords that are trademarks owned by other parties.  Make it clear in the text of your advertisement that you are providing a comparable good, not the trademarked good itself.  Do not use the trademarked term in the advertisement itself.

3.  Keep in mind that whether an alleged infringer's use of a trademarked keyword is likely to confuse is a fact-based test not likely to be resolved at the motion to dismiss or even summary judgment stage.  Evidence of actual confusion, such as through commissioned surveys, may be essential to proving your case. 

4.  Having evidence of a competitor's use of your trademarks as keywords may be helpful in litigation regarding related trademark infringement.  Such evidence may support, for example, a claim of willful infringement or counterfeiting, or it could serve to demonstrate that the two products are sold in the same marketing channels.

5.  Stay tuned!  The law relating to keyword advertising continues to evolve, and future cases may shed additional light on what type of keyword advertising may result in a finding of likelihood of confusion. 

[1] See 1-800Contacts, Inc. v. Mem'l Eye, P.A., No. 2:08-CV-983, 2010 WL 988524 (D. Utah Mar. 15, 2010).
[2] 562 F.3d 123 (2d Cir. 2009).
[3] Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1173 (9th Cir.2007).
[4] See id.

[5] See, e.g., Coll. Network, Inc. v. Moore Educ. Publishers, Inc., No. 09-50596, 2010 WL 1923763 (5th Cir. May 12, 2010) (unpublished).

[6] See Am. Auto. Ass'n, Inc. v. Advance Quotes, LLC, No. 6:10-cv-06020, 2010 WL 2985505 (W.D. Ark. June 29, 2010).

© 2010 Perkins Coie LLP