The trademark world has been holding its collective breath for almost eight months, eagerly awaiting the written opinion of Judge Leonie Brinkema of the Eastern District of Virginia to issue in the highly touted Geico v. Google keyword advertising case. Many trademark owners, exasperated at having their trademarks used by competitors as keywords, hoped that case would signal the death knell for this controversial advertising practice. Others, such as Internet search engine companies, feared a decision that would effectively end the unauthorized use of trademarks as keywords, cutting off the lucrative revenues generated by keyword advertising.
Unfortunately, when the decision finally was issued on August 8, 2005, it posed more questions than answers - and trademark owners are finding themselves blue in the face once again. See Gov't Employees Ins. Co. v. Google, Inc., No. 1:04CV507, 2005 WL 1903128 (E.D. Va. Aug. 8, 2005).
Since the debut of the commercial Internet, on-line advertising has increased exponentially. And, as the Internet has matured, there are those who have found ways to unfairly exploit its vagaries - thus, the explosion of search engine spamming and infringing keyword advertising. Keyword advertising (known in marketing circles as pay per click ("PPC") advertising) is an Internet marketing technique wherein advertisers pay a fee every time a user "clicks through" to a website from an advertised or "sponsored" link in a search engine's results.
"Keywords" are terms typed into a search engine when conducting an online search. In the early days of the commercial Internet, online advertising was largely a "hit or miss" proposition because search engines could not tie advertisements to specific search terms. Through the development of keyword technology, however, advertising can now be tied or "keyed" to particular search terms, i.e., keywords. With the Internet becoming a primary source for consumers to obtain product or service information, many marketers, not surprisingly, are willing to pay search companies handsomely to link advertisements for their goods and services and/or their company websites to one or more keywords, thereby ensuring that the links will be returned to a user each time a particular keyword is searched. These "sponsored" links generally appear above or to the right of search results. To place a sponsored link, advertisers pay a search engine such as Google or Yahoo an amount per click (called a "bid") for a specific keyword; the higher the bid, the higher the sponsored link site will appear in the sponsored search results.
The industry, despite rising bid costs charged by search engines, shows no signs of slowing down. For example, JupiterResearch estimates that by 2010, "search engine advertising will generate more revenue than standard display advertising." Press Release, "JupiterResearch Forecasts Online Advertising Market To Reach $18.9 Billion By 2010; Search Advertising Revenue To Surpass Display," JupiterResearch.com (Aug. 15, 2005). The cost of generic terms - such as "new car" or "online auction" - has risen dramatically in recent years, prompting online advertisers to narrow their keyword bidding and advertising content to a set more focused to convert clickers to consumers. This brings keyword advertising on known brands sharply into focus.
The use of generic terms raises no legal issues. The effectiveness of keyword advertising and the resulting advertising revenues led Internet search engine companies, most notably Google, to begin selling third-party trademarks as keywords; and, at least in some cases, the purchasers are competitors looking to draw prospective customers to their own websites. Hence, when a prospective purchaser researching a product types in the name of the product or its manufacturer into an Internet search engine, the search results returned often include not only the desired search results, but also sponsored links to advertisements and/or websites for competing products or unrelated advertisers. The result of an improperly placed keyword advertisement or spamdexing, complain trademark owners, is diversion of sales. And, not surprisingly, trademark owners, anxious to protect their rights, are challenging the legality of search companies selling trademarks as keywords in a spate of lawsuits both in the United States and abroad.
In an early case, the United States Court of Appeals for the Ninth Circuit seemed to strike a blow for trademark owners. In 1999, the court recognized the doctrine of "initial interest confusion," in finding that the registration of "moviebuff.com" infringed the plaintiff's federal registration for MOVIEBUFF despite lack of confusion. Brookfield Communications v. West Coast Entm't Corp., 174 F.3d 1036, 1062 (9th Cir. 1999) ("the use of another's trademark in a manner calculated 'to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion, may be still [sic] an infringement.") As a result, trademark owners began to pursue aggressively uses of their marks by third parties.
The pendulum swung the other way in 2003 when several decisions regarding the use of keyed pop-up advertising issued. In U Haul v. WhenU.com, 279 F. Supp. 2d 723 (E.D. Va. 2003) and Wells Fargo v. WhenU.com, 293 F. Supp. 2d 734 (E.D. Mich. 2003), both courts held that WhenU's use of a trademarked term to trigger third party "pop-up" ads was not an actionable infringement because the mark was not "used" to identify WhenU as a source of goods or services. WhenU won a third victory in the Court of Appeals for the Second Circuit.
The Ninth Circuit sided again with trademark owners when it returned to the issue in the 2004 decision in Playboy Enterprises Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir. 2004). In Playboy, defendants Netscape Communications Corporation and Excite, Inc. sold unlabeled banner advertisements tied to the federally registered terms "playboy" and "playmate." Consumers entering these terms into a search engine would receive, in addition to their search results, unlabeled advertisements for marketers unrelated to Playboy Enterprises. The court applied Brookfield to the issue of keyword advertising and found that use of trademarks as keywords may give rise - under certain circumstances - to infringement. The court found that receipt of the unlabeled advertisements could cause consumer to believe - at least initially - that the advertisements were sponsored by or somehow connected with Playboy Enterprises. And, notwithstanding that consumers would realize - perhaps immediately - after clicking through to the websites tied to the unlabeled advertisements that the sites were not affiliated with Playboy, the court found that the initial reason for accessing the sites was a mistaken belief that the sites were affiliated with or, perhaps, would lead to Playboy Enterprise's website.
Although the parties settled immediately after issuance of the decision in January 2004, some industry analysts predicted that the court's decision in Playboy would curtail - if not eliminate altogether - the use of third-party trademarks in keyword advertising. Significantly, however, the court expressly recognized that the dispute involved unlabeled banner advertisements, thereby suggesting that the court might have reached a different conclusion had the source of the advertisements been clearly identified without the need for consumers to click through to the their websites. The court appeared to contemplate circumstances when use of third-party trademarks in keyword advertising may not conflict with trademark owners' rights.
The issue of sale of trademarks as keywords to third parties came sharply into focus in a pair of cases brought in late 2003 and early 2004 between search engine Google and e-tailer American Blind & Wall Paper Factory. See Google, Inc. v. American Blind and Wallpaper Factory, Inc., No. C-03-5340 (N.D. Cal.) (declaratory judgment action); American Blind and Wallpaper Factory, Inc. v. Google, Inc ., Civ. No. 04-cv-00642 (S.D.N.Y.). Prior to April 2004, Google would accept complaints from trademark owners regarding the sale and use of trademarks to third parties through its AdWords PPC program. American Blind complained that Google's practice of selling components of its registered trademarks (such as "american wallpaper" and "american blind") as keywords was unlawful. Google countered that it is not required to block third parties from purchasing descriptive or generic phrases such as "american blind" as keywords. Relying on the WhenU cases, Google argued that it did not use American Blind's marks to identify itself as the source of goods or services.1
In the days leading up to filing for its initial public offering in late April 2004, however, and in the wake of the Playboy decision, Google took the step of disclaiming any liability for confusion from the sale of trademarks as keywords through AdWords in the United States and Canada. Google now will investigate a complaint "as a courtesy" only as to "whether the advertisements at issue are using terms corresponding to the trademarked term in the advertisement's content" and will "require the advertiser to remove the trademarked term from the content of the ad and prevent the advertiser from using the trademarked term in ad content in the future." ( See http://www.google.com/tm_complaint_adwords.html#1). This change in policy positioned Google to argue that its sale of the keywords is not a qualified "use" under the Lanham Act, and distance itself from claims by trademark owners for contributory infringement for the advertising content.
Geico immediately responded to this change in policy. Gov't Employees Ins. Co. v. Google, Inc ., No. 1:04CV507 (filed May 4, 2004). In many ways, the Geico case is a near-perfect (some would say too perfect) test case for the keyword advertising issue. Consumers can receive insurance quotes only directly from Geico via phone or on the Internet - thus, any use of its trademarks must be either fair use or infringing. Unlike the descriptive and/or generic terms at issue in the American Blind cases, the trademark GEICO is arbitrary and highly protectible. The publicity that the case has received, therefore, it understandable.
The court initially seemed to find Geico's argument persuasive. In denying Google's Motion to Dismiss in August 2004, the court found that the search engine's activities in selling trademarks as keywords constitutes trademark "use" under the Lanham Act, although not necessarily infringing use, requiring Geico to prove that Google's sale of the GEICO trademark as a keyword resulted in likelihood of confusion.
The court found no evidence "that [the sale of trademarks as keywords] alone causes confusion." The court's finding was issued in response to Google's motion for judgment on partial findings and is limited to instances where a trademark is used only as a keyword to trigger an advertisement, but does not appear in an advertisement. The court's opinion has been touted as a significant victory for Google and as giving the green light to keyword advertising. And many who were reluctant to engage in keyword advertising using a competitor's trademark while the case remained pending, have readily embraced the practice in the wake of the court's findings. The court's decision leaves trademark owners frustrated and pondering their next step. It already is clear that the court's decision ensures that litigation over keyword advertising will continue in to the future.
Indeed, some anticipate that the Google decision will trigger a wave of litigation by trademark owners directly against competitors and other purchasers of their marks as keywords, rather than against Google and other search engines. For example, in the weeks following the Google decision, Geico apparently issued cease and desist demands to some of its competitors threatening to sue if the GEICO name is purchased as a keyword. More recently, Office Depot filed suit against Staples in U.S. District Court in Florida alleging, among other things, trademark infringement stemming from Staples' purchase of VIKING, an Office Depot trademark, as a keyword ( Office Depot, Inc. v. Staples, Inc., 05-CV-8090 (S.D. Fl. filed Oct. 4, 2005)). Some commentators have expressed skepticism that cases against competitors will result in findings much different than that in the Google case - at least in the absence of sound survey evidence showing likelihood of confusion or evidence of actual confusion.
Following the Google decision some trademark owners have themselves turned to keyword advertising, attempting to "lock up" all use of their own trademarks as keywords. Still others have retaliated against their competitors by placing bids on their competitors' marks as keywords.
The use of third-party trademarks in keyword advertising is among the latest in a long line of trademark disputes engendered by the development of the commercial Internet. And, as the Google decision suggests, it is an issue that trademark owners will continue to grapple with going forward.
1 These cases currently are pending. In March 2005, the California court denied Google's motion to dismiss the trademark infringement and dilution claims asserted by American Blind, but did dismiss its tortious interference with prospective business advantage claim because American Blind had failed to allege interference with sufficiently certain economic relationships.
Christopher Kelly is a partner in Wiley Rein & Fielding's Intellectual Property Practice. He represents clients in connection with all aspects of trademark enforcement, procurement and management, including trademark and unfair competition litigation in the federal courts and proceedings before the Trademark Trial and Appeal Board, domestic and international trademark clearance and prosecution, licensing and client counseling. Mr. Kelly can be reached at (202) 719-7115. Jennifer L. Elgin is Of Counsel to WRF's Intellectual Property Practice. She specializes in a wide range of trademark matters, intellectual property licensing and merchandising and copyright and Internet infringement matters. Ms. Elgin can be reached at (202) 719-7453.