Time to Revisit the Legality of Bidding on Competitors' Trademarked Search Terms

By Bennet Kelley

Greek mythology teaches us that in the beginning there was only confusion and chaos. That's a good starting point for understanding the current state of the law with respect to an advertiser's use of competitors' trademarks in keyword search ads. Courts have stumbled over two key points: 1) whether bidding on a competitor's trademark is a "use in commerce" so as to trigger federal trademark laws; and 2) if the mere use of the competitor's trademark as a search term alone (as opposed to using it in the displayed text) results in liability.

USE IN COMMERCE
Since the federal Lanham Trademark Act is derived from Congress' authority to regulate interstate commerce, the threshold element of any Lanham Act claim is that it involves a "use in commerce" of the disputed trademark. This would appear to be a no-brainer since we all know that keyword search advertising is big business, with revenue exceeding $50 million per day worldwide in 2007. In this context, most courts have had little difficulty in concluding that the purchase of keyword search advertisements satisfies the threshold of a use in commerce.
The Second Circuit Court of Appeals (which covers Connecticut, New York and Vermont) however, has taken a more literal interpretation of the statute, finding that there is no use in commerce in keyword search terms since the trademark is neither placed "on any product, good or service," nor is the use of the mark visible to the consumer.

ESTABLISHING LIABILITY
Establishing "use in commerce" merely gets you in the courthouse door, as a plaintiff still must prove use of a trademark by a party in a manner that "is likely to cause confusion, or to cause mistake, or to deceive [a consumer] as to the affiliation... origin, sponsorship, or approval" of such goods or services. Since this is inherently a subjective test, courts have created a series of factors to be weighed in evaluating whether there is a likelihood of confusion that includes the strength of the trademark, the degree of similarity between the marks at issue, the competitive proximity of the goods or services involved, evidence of actual confusion, the defendant's intent and the sophistication of the buyers for the goods or services involved.

Unfortunately for online advertisers, the real likelihood of confusion occurs when courts attempt to apply this standard in the keyword search context; they have struggled to find appropriate offline analogies to guide their decisions--and this may be the problem.
The lead case on this issue was decided in 1999 at a time when less than half of U.S. households had Internet access. In Brookfield Communications, Inc. v. West Coast Entertainment Corp, the Ninth Circuit compared West Coast Video's use of Brookfield's "MovieBuff" trademark in meta tags to posting a sign on the highway diverting would-be Brookfield consumers to the wrong exit. "Unable to locate [Brookfield], but seeing the [West Coast Video] store right by the highway entrance, they may simply rent there" instead of returning to the highway.

The court explained that while the consumer knows they are patronizing West Coast Video and not Brookfield, "there is nevertheless initial interest confusion in the sense that, by using [the trademark] to divert people looking for MovieBuff' to its website, West Coast improperly benefits from the goodwill that Brookfield developed in its mark." This "initial interest confusion," according to Professor McCarthy, the author of the leading treatise on trademark law, is simply a cyber-variation of "bait and switch." The fact that any confusion is later dispelled does not eliminate the infringement that has already occurred.

"The initial interest confusion doctrine is a mess." That is how one public interest group opened its argument in briefing the issue--and with good reason. As the doctrine has been adopted in several circuits, it has been applied in an inconsistent manner with no clear definition of its elements, the factors to be considered or even who bears the burden of proof (one court turned the Lanham Act on its head and placed the burden on the advertiser to disprove the absence of initial confusion). More fundamentally, there is disagreement as to whether the doctrine is one of the many factors to be considered in evaluating the likelihood of confusion or a separate standard in itself--a point on which the Ninth Circuit has reversed itself on three occasions. How can an advertiser effectively defend against such a claim when it essentially is a moving target?

A BATTLE OF ANALOGIES
A number of courts have disagreed with the Brookfield court's dim view of Internet users, noting that such users are unlikely to be discouraged by landing on the wrong website when all that is required to remedy the situation is the touch of the back key. In a battle of analogies, doctrine opponents argue that far from being a detour from a cyber highway, jumping from a website back to a search engine results page is merely a lane change. Doctrine opponents note that courts following Brookfield fail to recognize that a consumer typing in a trademarked term not only expects to see results involving other companies, but that it may, in fact, be their objective. Thus, instead of a bait and switch, displaying competing offers in response to a search using a trademarked term is equivalent to a supermarket placing competing brands adjacent to each other in the same aisle.

Opponents also argue that the doctrine loses sight of the purpose of trademark law: to protect consumers from being deceived and businesses from unfair competition. While the Lanham Act's goal is to foster legitimate competition, the mis-application of this doctrine stifles competition by limiting competitive advertising directed to search engine shoppers.

Although there is no clarity among courts applying the initial interest confusion doctrine, there is a clear line being drawn in jurisdictions rejecting the doctrine. Courts in these jurisdictions have held that an advertiser may freely bid on its competitors' trademarks as search terms without liability so long as the marks are not used in the display ad itself. Using a trademark in the search ad is problematic if not clearly used in a comparative setting; it is very difficult to include disclaimers in an ad that is limited to 70 characters.

BEYOND BROOKFIELD
In Greek mythology, chaos gave way to the birth of Titans. With U.S. search marketing accounting for $8.8 billion in revenue in 2007, it is clear a titan is emerging, but its continued growth may be hindered by a prolonged state of chaos over keyword search liability. It is time to recognize that Brookfield was decided in a different age. The Internet is no longer in its infancy and, despite the intervening dot-com crash, has enjoyed dramatic growth as evidenced by increases in U.S. Internet usage (75 percent), e-commerce sales (400-plus percent), domestic search revenue (10,000-plus percent) and the size of the Internet (it's doubled five times over).

Now that we are firmly planted in the digital age, courts should revisit the question of initial interest confusion and develop a solution that is both consistent with the Lanham Act and based on Internet realities--instead of tortured offline analogies.

Bennet Kelley is the founder of the Internet Law Center, a regular contributor to the Journal of Internet Law and chairman of the Legislative Subcommittee of California's State Bar's Cyberspace Committee. He can be reached at bkelley@Internetlawcenter.net.