A showdown is looming with huge ramifications on the advertising revenues and practices of Internet search engines. Litigation has commenced in two courts, on opposite ends of the country, between Google, Inc. and American Blind & Wallpaper Factory, Inc., triggered by Google's AdWords program. At issue is the lucrative advertising practice of auctioning keyword placements that allow advertisers to bid on and buy advertising placements on the Internet search engine results pages whenever the keywords appear in the queries posted to the search engine. Another challenged practice is "sponsored links," which provides placement of ads at the top of or alongside the advertisers' links on results pages.
Both practices are aimed at increasing the effectiveness of online advertising. By allowing the display of advertising when the Internet user initiates a search for a related topic, the advertiser maximizes the likelihood that interested eyes see its ads and links.
The dispute arose when American Blind sent a letter asking Google to discontinue selling keyword and sponsored advertising for 37 phrases, including "american blind," "american blind discount" and "american blind factory." The letter stated that use of the phrases by Google's advertisers constituted infringement of American Blind's federally registered trademarks.
Unable to settle the matter with American Blind, Google brought suit for declaratory judgment in the U.S. District Court in San Jose, Calif., on Nov. 26, 2003. In its filing, Google noted that terms such as "blind," "wallpaper" and "factory," are descriptive; therefore, no one party can claim exclusive trademark rights to those terms under U.S. trademark laws. For that reason, Google claims that its sale of keyword-triggered advertising does not violate the Lanham Act.
Perhaps fearing the California forum, American Blind sued Google, AOL, Ask Jeeves and EarthLink in New York District Court on Jan. 27, 2004. American Blind is proceeding under claims of trademark infringement, false representation, dilution under federal laws, injury to business reputation and dilution under New York law, and certain common law trademark claims. Among the relief requested by American Blind is an injunction prohibiting the search engines from posting "listings for American Blind's competitors when Internet users run a search on Defendants' search engines using keywords that are identical or substantially similar to the American Blind Marks." In other words, the relief requested is a prohibition of any listings, paid or unpaid, of competitors of American Blind when the search query contains the allegedly confusing phrases.
Courts have ruled on keyword searching when commonly used trademarks are involved in other recent cases. Playboy Enterprises, Inc. (PEI) brought suit against Netscape Communications Corporation, now part of AOL, alleging that the keyword ad placement sold for searches using "playboy" and "playmate" constituted trademark infringement and dilution of its famous mark based on a theory known as "initial interest confusion." Initial interest confusion permits a finding of a likelihood of confusion even if the consumer quickly becomes aware of the source's actual identity and no purchase is made as a result of the confusion. The Ninth Circuit Court of Appeals indicated that PEI's claim of initial interest confusion raised sufficient issues of fact and law to withstand summary judgment. The court relied heavily on the case of Brookfield Communications, Inc. v. West Coast Entertainment Corporation, 174 F.3d 1036 (9th Cir. 1999) and the strong secondary meaning of the "playboy" marks. The parties in the PEI case eventually settled the matter.
A variation of the eight-factor test used in Brookfield may be applied to one or both of the Google cases. If so, the court will review: (1) the similarity of the conflicting designations; (2) relatedness or proximity of the two companies' products or services; (3) strength of the marks in question; (4) marketing channels used; (5) degree of care likely to be exercised by purchasers in selecting goods; (6) the intent of the allegedly infringing party in selecting its mark; (7) evidence of actual confusion; and (8) the likelihood of expansion in product lines. Additionally, initial interest confusion will undoubtedly play a predominant role in these cases.
The Google cases are distinguishable from the earlier keyword cases, however. As opposed to the metatag and domain name cases that rely on initial interest confusion claims, Google is not using the marks in question in a trademark sense. Google is allowing use of the phrases as text queries by Internet users who are searching for specific information contained in the more than three billion Web pages on the Internet. Of course, in its AdWords program, Google is "selling" placements based on the phrases to competitors of American Blind.
Two of the three marks in question in the Google cases were registered by American Blind in stylized form, and exclusive rights to "blind factory" and "blind & wallpaper factory" are disclaimed. The keyword searching in AdWords is text based, and no designs are used. This may play a role in the analysis relating to the strength of the marks in question.
Of interest is whether the court believes consumers are likely to be confused by the advertising that appears on the sides of search results, or are savvy enough to recognize the displays as part of the many ads and links that appear on Web pages. The courts may also explore whether consumers are harmed by these practices, or actually benefited as they allow immediate access to competitors from the results pages, giving the consumer a broader range of links from which to choose. American Blind's motion to dismiss the California litigation was denied in April 2004, and so the cases still proceed on parallel tracks.
The online advertising market is a $2.1 billion business, estimated to grow to $2.6 billion by 2005. That market is no doubt watching with great anticipation the outcome of these cases.
Jocelyn West Brittin is a partner in the Northern Virginia office of Holland & Knight LLP. She can be contacted at (703) 720-8604.