Use Of Trademark In Keyword-Triggered Search Engine Advertising: A Hot Topic In Internet Law - Part I

Sunday, May 1, 2005 - 01:00
Sheldon H. Klein
Jason J. Mazur
David S. Modzeleski

Part II of this article appears in the June 2005 issue of The Metropolitan Corporate Counsel.

One of the hottest questions in trademark law today concerns the issue of whether Internet search engine providers, such as Google and Overture Services (Yahoo!'s commercial search engine division), are liable for infringement when they sell a party's trademark for use in keyword-triggered advertising - often by a competitor - which appears at the top of search result pages when the trademark is one of the terms being searched. An increasing number of trademark owners complain that the sale of their trademarks as keywords, and the resulting placement of competitor ads on search result pages, is an improper attempt to profit from the goodwill of their marks and constitutes, among other things, trademark infringement, trademark dilution, and unfair competition.

A. What Is Keyword Advertising?

Keyword advertising allows advertisers to select, for each of their ads, keywords that will cause those ads to appear on search result pages. The ads are often comprised of an enticing catch-phrase and/or a brief description of the advertiser's goods or services, with an underlined "title" that serves as a hyperlink to the advertiser's Web site. In Google, the ads are displayed under the heading "Sponsored Links" while, in Yahoo!, the ads appear under the heading "Sponsored Results." Both Google and Yahoo! display the ads to the right of, and above, the regular search results. The ads that appear above the regular search results are displayed in a lightly shaded box to help distinguish the ads (and draw attention to them).

In most keyword advertising programs, more than one advertiser is allowed to bid on a particular keyword. Advertisers bid on a keyword by indicating the maximum price they are willing to pay each time a user clicks on the ad. According to Google, the actual price charged to the advertiser is a function of that maximum bid, together with the bids of other advertisers. If more than one advertiser bids on a particular keyword, Google claims, the placement of the ads (which are presented in descending order) is a function not only of the bid, but also of certain factors that "increase relevance." The highest bidder, therefore, does not always get the highest ranking.

B. Why Keyword Advertising Is Such A Hot Topic - Business Considerations Of Search Engines

Keyword advertising is a significant revenue generator for search engines, and in fact has become a multibillion-dollar industry. Google, for example, derives more than 90 percent of its revenue from keyword advertising, with hundreds of thousands of advertisers participating in its program. It is therefore not surprising that search engines, like Google, are expected to vigorously fight lawsuits that seek to limit their ability to provide this type of service.

C. Search Engine Policies On Use Of Trademarks In Keyword Advertising

Two of the largest providers of keyword advertising, Google and Overture, have diverging policies governing what they deem to be acceptable use of trademarks in keyword advertising. Google's more permissive and hands-off policy allows advertisers to bid on any keyword, including trademarks. Google is responsive only to trademark complaints regarding the content of the advertisements (including the underlined "title" of the ads). Overture, however, has adopted a policy that is more responsive to trademark owners' concerns regarding the sale of the keywords themselves, but less responsive to concerns about the content of the ads themselves.

1. Google's Trademark Policy

a. Google's U.S. and Canadian Policy

Under Google's current policy, it will not disable keywords in response to a trademark complaint. Advertisers are permitted to bid on any keyword, including trademarks. When Google receives a complaint from a trademark owner, it will only investigate whether the advertisement itself contains the trademark in the content of the advertisement. If it does, Google will require the advertiser to remove the trademark from the content and prevent the advertiser from using the trademark in such content in the future. According to Google, this is the case even if the advertiser claims that the mark's use is "fair use or otherwise lawful," e.g., use that is descriptive or in the context of non-confusing comparative advertising.

In general, Google's position is that it does not arbitrate trademark disputes between advertisers and trademark owners. Google encourages trademark owners to resolve their disputes directly with advertisers, particularly because the advertisers may have similar advertisements on other Web sites.

b. Google's Policy Outside The U.S. And Canada

In the rest of the world, Google honors trademark owners' requests that their trademarks not be sold as keywords to other advertisers. When Google receives a complaint from a trademark owner, it conducts a "limited review" to ensure that the advertisement is using a term corresponding to the trademark in the ad content or as a keyword trigger . In such cases, Google requires the advertiser to remove the trademark from the ad content or keyword list and prevents the advertiser from using the trademark in the future. As in the United States and Canada, it appears that is the case even if the advertiser claims that the mark's use is fair use or otherwise lawful. Also, like the United States and Canada policy, Google's terms of use outside these countries requires advertisers to represent and warrant that they "hold and grant Google and Partners all rights to copy, distribute and display [the user's] ads" and that this, as well as Web sites linked from the ads (including services or products offered on the Web sites) "will not violate or encourage violation of any applicable laws."

2. Overture's Trademark Policy

Overture has adopted a worldwide policy more favorable, in some respects, to trademark owners than Google's U.S. and Canada policy. Overture requires advertisers to agree that their keyword search terms, ad titles and content, and the content of their Web sites, do not violate the trademark rights of others. In cases in which an advertiser has bid on a term that may be the trademark of another, Overture will allow the bid if the advertiser presents content on its Web site that (a) refers to the trademark or its owner or related product in a permissible nominative (fair use) manner without creating a likelihood of consumer confusion or (b) uses the term in a generic or merely descriptive manner. Unlike Google, therefore, Overture does not forbid all uses of trademarks in ads.

D. Does The Sale And Use Of Trademarks As Keywords Violate U.S. Trademark And Unfair Competition Laws?

1. The Position Of Trademark Owners

In general, trademark owners contend that the search engines are exploiting their trademarks for profit without authorization and thereby being unjustly enriched. None of the revenue derived from the search for the trademark is paid to the trademark owner; rather, the revenue goes to the search engine and, if a sale is made, the advertiser. When the competitor's ad that then appears on the search results page contains the trademark, the harm to the trademark owner is compounded. Specifically, trademark owners claim that a search engine's auction and sale of their trademarks to trigger third-party advertisements, and the act of triggering itself, constitutes trademark infringement, unfair competition, and dilution under the Lanham Act and state law.

Trademark owners argue that the elements for trademark infringement and unfair competition are met because search engines have used their mark in commerce in connection with the sale, offering for sale, distribution, or advertising of goods and services in a manner that is likely to cause confusion. In short, trademark owners believe that both keyword sales and keyword advertising constitute "use" of the trademark in commerce.

Additionally, trademark owners maintain that the "likelihood of confusion" prong of a trademark infringement and unfair competition claim is met. They assert that consumers can be and are easily confused by keyword triggered advertising, a situation which is exacerbated when the paid placement nature of the sponsored link is unclear, or where it is not readily apparent who actually is sponsoring a given link. In fact, trademark owners believe that, at times, consumers may not know what entity is doing the advertising, and consumers might believe they are securing the services of the trademark owner when, in fact, they end up doing business with a competitor who has taken advantage of the owner's trademark and goodwill. This is a classic likelihood of confusion situation.

Finally, at the very least, trademark owners assert that search engines should be held liable for (a) indirect infringement for intentionally inducing and facilitating the advertisers' infringements, and (b) vicarious infringement, which occurs when a defendant and infringer have an apparent or actual partnership and have authority to bind one another in transactions with third parties or exercise joint ownership or control over the infringing product.

2. The Position Of Search Engines

Search engines such as Google, on the other hand, argue that their keyword advertising service is no different from advertising that is perfectly acceptable in more traditional contexts outside of the Internet, where consumers are regularly presented with choices among competitors. In other words, according to search engines, deliberately targeting an ad to customers who are buying, considering buying, or seeking information about a competitor's product or service does not constitute a trademark violation.

In the trademark infringement context, search engines maintain that their keyword advertising service does not constitute actionable "use" of a trademark. They argue that the service utilizes trademarks only as a trigger for the display of advertisements, not to identify the source of goods or services. Google's position is that use of a trademark as a keyword does not constitute trademark use at all, so long as the resulting advertisement does not use the trademark to identify the source of goods and services or, in other words, so long as the ads themselves do not deceive the user into thinking that the ad is for, or sponsored by, the trademark owner. Additionally, search engines argue that there is no likelihood of confusion because the advertisers use their own names to identify the source of their goods or services. Moreover, because there is no direct infringement, search engines argue that they are not indirectly liable for contributory or vicarious infringement or inducement to infringe arising out of the purchase of keywords by advertisers, even where the text of the ads contains a trademark and may be confusing.

Part II of this article will look further into this hot topic in Internet law by examining several pending federal cases in which trademark owners have alleged that the sale of trademarks as search engine keywords, as well as allowing third party paid results ads that display others' trademarks, violates various laws including U.S. trademark and unfair competition laws.

Sheldon H. Klein is a Partner in the Intellectual Property Group of Arent Fox PLLC, Washington, DC. Jason J. Mazur and David S. Modzeleski are Associates in the Intellectual Property Group.

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