Why AdWords are not set in stone

February 2013

By: Anderson J. Duff


IP Magazine

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As businesses become ever more tech-savvy, companies with established brands are more often confronting third parties that purchase their trademarks as search engine keywords through programs such as Google AdWords. Unfortunately, the law regarding the use of a trademark as a search engine keyword is murky at best, if not slightly favourable to the search engine companies.

The US District Court of California’s 2011 ruling in Automation, Inc v Advance System Concepts, Inc, suggests companies could purchase competitors’ trademarks as search engine keywords if the sponsored links triggered by those keyword searches do not result in consumer confusion. While courts continue to debate whether the purchase of a trademark as a search engine keyword is itself infringement, the Second Circuit’s 2009 decision in Rescuecom Corp v Google Inc, has focused recent analyses on the links resulting from keyword purchases and whether consumers find those links confusing.

Google’s AdWord history

Although there are many search engines selling keywords, Google is a clear industry leader and will likely set the standards for the sale of keywords unless a court interjects and prevents Google from selling them. Prior to 2004, Google did not allow the purchase of trademarks as AdWords or the use of trademarks in ad text or ad titles, unless the advertiser had authorisation from the trademark holder. However, after finding that roughly 7% of its total revenue came from the purchase of trademarks as AdWords, Google revised this policy and began allowing the purchase of trademarks as AdWords only, while still preventing the use of trademarks in ad text or ad titles. Bing and Yahoo! Search did not allow the purchase of trademarks as keywords until 3 March 2011.

Documents uncovered in the Rosetta Stone case, discussed in this article, drew attention to Google’s own research that showed significant confusion was created when trademarks were used in ad text or ad titles.

In 2009, Google once again changed its policy and began allowing unauthorised use of third-party trademarks in ad text and ad titles if the resulting ad would not be confusing as to the origin of the advertised goods or services. This means that Google will sell a trademark as an AdWord to a competitor of that mark holder and allow the competitor to reference the same trademark in the text of the resulting advertisement or link, provided that Google does not believe the advertisement or link is confusing.

Enter Rosetta Stone

Understandably, many trademark owners are not happy with Google’s policy. Rosetta Stone, the foreign language educational software company, which led the charge against Google to prevent third parties from using its trademarks to advertise websites selling counterfeit software, recently reached a private agreement with Google and dropped its lawsuit. On 31 October 2012, the parties issued the following joint statement, “Rosetta Stone and Google have agreed to dismiss the three-year old trademark infringement lawsuit between them and to meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the internet.”

The lawsuit began because less than one year after Google’s 2009 policy change, Rosetta Stone reported to Google that there were 190 links using its trademarks to sell counterfeit software. Rather than continue to attack this problem on a case-by-case basis, Rosetta Stone filed a lawsuit alleging Google committed trademark infringement by selling its trademarks as AdWords.

To prove trademark infringement, a brand owner must show that (1) it owns a valid trademark; (2) the defendant used the trademark in commerce without the plaintiff’s authorisation; (3) the defendant used the mark in connection with the sale, offering for sale, distribution, or advertising of goods or services; and (4) that the defendant’s use of the mark is likely to confuse consumers.

Prior to 2009, there was a great deal of argument regarding whether the purchase or sale of a trademark as a search engine keyword established a “use in commerce” as required for a finding of infringement. This argument was largely settled by a New York court that determined Google’s sale of the plaintiff’s trademarks as AdWords constituted “use in commerce” but left open the question of likelihood of confusion.

The Central District of California’s 2011 decision in Binder v Disability Group, Inc, agrees that the purchase of a trademark as an Adword is a “use of commerce”, but demonstrates that the question of likelihood of confusion is far from resolved in the AdWords context. Whether a use of a mark creates a likelihood of confusion is a fact intensive inquiry. For this reason, even slight differences in the facts of a given circumstance may have a significant impact on the outcome of a court’s holding. Now that Rosetta Stone has settled, we can expect no further clarification from that case. What it did tell us is summarised below.

In April 2012, an appellate court revived claims that had been dismissed by the lower court against Google for trademark infringement based on the sale of Rosetta Stone’s trademarks as AdWords. The court determined that the use of Rosetta Stone’s trademarks as AdWords could create a likelihood of confusion, and it directed the lower court to allow the lawsuit to move forward. The court stated that the most relevant factors for determining whether Google’s AdWords program created a likelihood of confusion were (1) Google’s intent in selling the AdWords; (2) instances of actual confusion; and (3) the sophistication of the relevant consumers.

As described previously, Google’s own research in 2004 indicated that there was significant confusion caused by the use of third-party trademarks in ad text and ad titles. The court found that a reasonable jury viewing this information could find that Google intended to cause confusion “in that it acted with knowledge that confusion was very likely to result from its use of the marks”.

With respect to the second factor, Rosetta Stone provided testimony from five individuals who had experienced actual confusion (the maximum allowed) as well as 139 complaints that Rosetta Stone received from consumers who purchased counterfeit software thinking it was from Rosetta Stone. The court also looked at in-house studies conducted by Google that showed 94% of users were confused at least once as a result of Google’s AdWords policy. Ironically, at trial, two of Google’s in-house trademark attorneys were themselves unable to determine which sponsored links were authorised resellers of Rosetta Stone software. Finally, with regard to actual confusion, Rosetta Stone introduced survey evidence indicating that 17% of consumers were confused by the sponsored links appearing in Google’s search results. Viewing this evidence together, the court found that a reasonable trier of facts could find that Google’s AdWords sale of Rosetta Stone’s trademarks could create a likelihood of confusion.

The third factor in creating a likelihood of confusion assumes there is less of a chance that a highly sophisticated consumer will be confused by a third party’s use of its trademarks because this consumer will carefully inspect a product before purchasing it. However, the court noted that one highly sophisticated consumer, who founded his own software company, was duped into purchasing counterfeit Rosetta Stone software despite the $259 price tag.

Although the court’s decision was not a decisive loss for Google, it did muddy the waters and seemed to open the door ever so slightly for future lawsuits, which likely encouraged Google to settle. While the settlement likely gives Rosetta Stone special treatment with regard to how its trademarks are used in the AdWords program, it does nothing for third parties who may have been hoping for a decision in Rosetta Stone’s favour further down the line.

With this settlement, Google has continued its mostly successful defence of roughly 20 lawsuits centered on its AdWords program. While the earlier decision in this case may be viewed as opening the door for more lawsuits, taken in context, it shows that Google is willing to spend large amounts of money defending its AdWords program, probably more than any one trademark holder is willing to spend. Rosetta Stone may have been the last player large enough to have seen its suit through to the end. In that sense, this settlement is a real victory for Google.

There are now only two pending lawsuits against the AdWords program, one filed by CYBERsitter and the other by Home Décor Center. Several of CYBERsitter’s claims recently survived Google’s motion to dismiss in the Central District of California, although this may be a short-lived victory since these claims would be scrutinised more harshly at a later stage in the litigation. If Google successfully resolves these two cases, it may emerge from the slew of litigation against its AdWords program relatively unscathed, if not immune from future suits.

Takeaways

While the first factor considered by the court will not change from case-to-case, the second and third factors will. A party seeking to challenge Google’s sale of its trademarks as AdWords should carefully document all instances of actual confusion. A common source of evidence of confusion is complaints from consumers who thought they were purchasing official goods, but were actually purchasing counterfeit goods from a third-party. The third factor will vary according to the goods or services at issue. In general, less expensive goods will support a finding of likelihood of confusion.

If third parties are purchasing your trademarks as search engine keywords, you may take the position that those purchases create a likelihood of confusion, meaning that such a party would be liable for trademark infringement. Your chances of successfully showing infringement increase significantly if the third-party is using your trademark in the text or the title of the sponsored link that appears after consumers run a search for your trademark.

Google, while continuing to sell trademarks as keywords, will consider complaints about competitors using trademarks in sponsored links on a case-by-case basis to determine if they are confusing to consumers. If your competitors are using your trademarks not only as keywords, but also in the text of the sponsored links that those keywords trigger, Google may agree to disable those links.

If, however, your competitors are merely purchasing your trademarks as keywords, your only recourse, short of a lawsuit, is contacting the competitor directly to demand an end to the practice. Unfortunately, Rosetta Stone’s case against Google will not be shedding more light on these issues.

Related Practice Areas

Trademark & Copyright