Trademark & PPC Keywords, The Debate Over Adwords Advertising

The Minnesota Federal District Court is currently hearing arguments regarding whether a company can use Google AdWords to place ads on a SERP (search engine results page) when someone searches for a competitor’s name.

The strategy makes perfect sense from a business perspective. If someone is using Google to search for your competitor, get your advertisement displayed on the search engine results page. That’s what MTS Systems Corp. did when someone search for its competitor, Hysitron.

The problem is, according to Hysitron, use of Google Adwords in that way violated Hysitron’s trademark. MTS Systems disagreed, and tried to get the case dismissed on summary judgment. The Minnesota Federal District Court denied the motion on August 1, 2008, allowing the case to move forward.

The court discussed the legal issues in the case.

Trademark Legal Standard

A Lanham Act claim requires that the trademark be used in commerce. See DaimlerChrysler AG v. Bloom, 315 F.3d 932, 939 (8th Cir. 2003).

Trademark: Use in Commerce

“Use in commerce” is defined in the Lanham Act (15 U.S.C. § 1127) as:

“the bona fide use of a mark,

(1) on goods when-

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sales, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce[.]“

The court recognized that some courts have decided that the use of keywords in online advertising was not a “use in commerce” under the Lanham Act:

These decisions reason that using a trademark to generate sponsored links or other advertising is an internal utilization of the mark and that, “a company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual’s private thoughts about a trademark.” 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400, 409 (2nd Cir.2005) (finding no use in commerce where the defendants generated internet pop-up ads by including another plaintiff’s trademark in an unpublished directory of terms); see also Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393, 403 (N.D.N.Y.2006) (finding no use in commerce where a company used another company’s trademark for sponsored link advertising in internet search engine).

However, the court agreed with other courts who have held a different view:

The majority of courts that have addressed the issue have disagreed with the Second Circuit’s reasoning and found that using a competitor’s trademark to create a sponsored link or other advertising does constitute a “use in commerce.” See e.g. N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1219 (11th Cir.2008); Playboy Enters., Inc. v. Netscape Commc’n Corp., 354 F.3d 1020 (9th Cir.2004); Boston Duck Tours, LP v. Super Duck Tours, LLC, 527 F.Supp.2d 205, 205 (D.Mass.2007); Edina Realty, Inc. v. The MLSonline.com, No. Civ. 04-4371, 2006 WL 737064 at *3 (D.Minn. March 20, 2006) (Tunheim, J.). These cases reason that a company’s use of a trademark to generate advertising is a “use in commerce,” even when the customer never sees the mark.

The court reasoned that “use” is merely “use,” and not limited to “use” that a consumer might observe:

This Court adopts the majority view that using a trademark to generate advertising constitutes a “use in commerce” under the Lanham Act. This approach adheres to the plain meaning of the Lanham Act’s definition of “use in commerce.” The language used in the definition suggests that a “use in commerce” is not limited to affixing another’s mark to one’s own goods but also encompasses any use of another’s mark to advertise or sell one’s own goods and services. MTS used the HYSITRON mark to generate a sponsored link as part of its effort to advertise and sell its own goods over the internet. Johns Decl. ¶ 12. Under the plain language of the Lanham Act, MTS used the HYSITRON mark in commerce.

However, attorney Eric Goldman points out on his blog and in his keyword law paper that the “majority view” is just barely a majority.

Trademark: Consumer Confusion

The next issue in this trademark infringement claim is whether any “consumer confusion” existed. The likelihood of consumer confusion is determined by evaluating a number of factors:

1. the strength of the plaintiff’s mark;
2. the similarity between the plaintiff’s and the defendant’s mark;
3. the degree to which the allegedly infringing product competes with the plaintiff’s goods;
4. the alleged infringer’s intent to confuse the public;
5. the degree of care reasonably expected of potential consumers, and
6. evidence of actual confusion.

Davis v. Walt Disney Co., 430 F.3d 901, 903 (8th Cir.2005).

This issue has not yet been determined in this case.

Trademark: Actual or Potential Harm

The final issue in this case is whether an infringement caused actual or potential harm. This issue hinges on whether consumers were confused. Thus, this issue remains unresolved for now.

Commentary: Trademark law should not prevent PPC advertising based on trademarked keywords

Search engine keyword advertising cases like this are interesting to watch. Adwords is one of many PPC (pay-per-click) online advertising programs. Keyword PPC advertising appears to be beyond the original purpose of trademark laws. That is, trademark laws are intended to prevent the use of one merchant’s mark in a way that would confuse consumers into thinking a competitor’s products were made by a holder of the trademark. Trademark laws were then expanded to include trademark dilution. However, the application of trademark law to keyword purchases on Adsense seems outside the scope of trademark law.

Buying keywords on Adsense is similar to buying a sign next to your competitor’s building. Assuming that the advertisement doesn’t trick consumers, there is nothing wrong with promoting your company in the same vicinity. Of course, using trickery to lure web visitors to your link would be wrong. But reminding search engine users that your company exists when they search for your competitor is just well placed advertising.

This case will be interesting to watch. Regardless of the outcome, a diversity of opinions are arising in courts across the country. I predict that the prevailing view will ultimately be to allow advertising purchases using a competitor’s mark as long as the advertisement itself does not confuse consumers or dilute the competitor’s mark.

Note: This case is available at Hysitron Inc. v. MTS Systems Corp., No. CIV 07-01533 ADM/AJB, 2008 WL 3161969 (D. Minn. Aug. 1, 2008) (Slip Copy).