Has the Law of Fair Use Caught Up with Keyword Litigation?

Here's Where the Issue Stands in the Courts

By Published on .

David M. Kelly
David M. Kelly

Is using someone else's trademark in search-engine advertising -- either as part of the keyword that triggers the ad or the ad itself -- infringement? It's a multibillion-dollar industry, and courts have issued more than 25 keyword decisions, but trademark law is still catching up and the answer is far from clear.

When does using another's trademark in search advertising create a liability risk? And can advertisers rely on fair use to successfully defend against such claims? Here are six cases that have helped shape this area of the law and what brand owners and advertisers can learn from them.

Use in commerce
Brand owners can assert several trademark claims in keyword cases, including infringement and dilution. Infringement occurs when a person uses another's mark or a similar mark in a way that is likely to confuse consumers. Dilution occurs when a person uses a trademark that is identical, or nearly identical, to a famous mark in a way likely to tarnish the mark or blur its distinctiveness. But both claims require "use in commerce" -- meaning a person must use the allegedly infringing or diluting mark in connection with the sale, distribution, or advertising of goods or services.

Most courts have decided that buying or selling keywords does constitute use of the trademarks in commerce because these transactions are commercial and the advertisers are using other brands' marks to attract customers to their websites.

However, seven cases -- all but one decided by New York district courts -- have found that these activities did not equal "use in commerce" and denied the trademark owner's claims. But these cases were effectively overruled by an April 2009 federal-appeals-court decision that Google's recommendation and sale of a trademarked keyword to trigger competitors' paid advertisements constituted a use in commerce.

Trademarks in ad content
In four cases where courts have examined this issue, the result has turned on whether the brand owner's mark appeared in the sponsored ads. In 2005, Geico sued Google for selling keywords containing the Geico mark. The ads shown below were triggered by a search for Geico. Some of the sponsored ads contained the Geico mark, while others did not.

Geico ad

The court said ads containing the Geico mark (left, top) were likely to confuse people while those that didn't (left, bottom), weren't likely to confuse. Because the court did not discuss any possible exceptions for "fair" uses of the Geico mark in the ads, it appeared to impose a "strict liability" test of whether or not an ad contained the mark. Consistent with the Geico case, some courts have ruled that as long as the trademark is not in the advertiser's sponsored ads, there's no infringement.

But a trademark doesn't have to show up in an ad to constitute infringement. Two decisions found infringement even though the sponsored ads did not contain the brand owner's marks. These decisions were based on "initial-interest" confusion. What's that, you say? It's when an advertiser bids on another marketer's trademarked keyword -- and consumers searching for the trademark or its owner instead go to the advertiser's website thinking it's the brand mark's website. Even though consumers may quickly realize they did not reach the brand owner's website, this "initial" confusion may be actionable if the advertiser profits from the confusion.

For example, in a case involving two software competitors, the court found that Nowcom's purchase of keywords containing Finance Express's trademark constituted infringement -- even though the sponsored ad shown below did not contain Finance Express's mark.

Manage your Dealership ad

But the court left the door open to a possible fair use defense. In this case, the advertiser's URL, Nowcom.com, was located in small font at the bottom of the ad -- insufficient to avoid infringement. The court stated, however, that the result might have been different had Nowcom's name appeared in a large font in the headline, or possibly even anywhere in the text of the ad, which would have allowed consumers to clearly identify the source of the ad before clicking on it.

When is it fair use?
So when is it OK to use another marketer's trademark in an ad? Some courts have said it's fine as long as the advertiser fairly uses the brand owner's trademark to identify the brand owner's products or services in connection with its own products or services. These cases typically arise when advertisers resell the trademark owner's branded products or when advertisers compare their products to the trademark owner's.

In a recent reseller case, a New York court ruled that eBay's use of the Tiffany trademark in its listings on eBay.com was a fair use.

Tiffany ad
After all, listing the trademarked brand name identified items for sale on the auction site. It then found that eBay's use of the Tiffany mark in keyword-triggered sponsored ads was effectively identical to its allowed uses of Tiffany in product listings and also a fair use.

However, in the most recent reseller case, a Texas court ruled that a reseller's prominent use of the Mary Kay mark in the headline of the sponsored ad shown below was potentially misleading because it could give the impression of sponsorship by or affiliation with Mary Kay.

In a comparative-advertising case involving two manufacturers of exercise equipment, the court found that Icon Health's use of Nautilus's Bowflex mark in a sponsored ad titled "Compare CrossBow to Bowflex" did not infringe or dilute Nautilus' mark. The description that followed the ad title invited users to compare the two products and summarized the benefits of Icon Health's machine over Nautilus's machine.

ABOUT THE AUTHORS
David M. Kelly chairs the trademark and copyright practice group at the intellectual-property law firm Finnegan, Henderson, Farabow, Garrett & Dunner.
Matthew J. Slowik is a law clerk at Finnegan, Henderson, Farabow, Garrett & Dunner and a student at George Mason University School of Law.

A New Test On The Horizon?
In March 2009, Blue Nile was accused of bidding on a competitor's trademarked name; sometimes it also included the trademarked name in the ad copy. It sought a dismissal of the case, but a Massachusetts court denied it. Although the court did not decide the merits of the case, it was the first court to say that keyword advertising on the internet is a unique situation and that courts needed a more modern test to look at it.

What might those tests be? They have to do with the content and context of the internet and audience: Who's doing the search? How sophisticated and web-savvy is the searcher? And how do the nature and mechanics of the internet affect the likelihood of confusion? How this court applies those tests and whether other courts adopt them remains to be seen.

Guiding principles
Although the law governing keyword disputes is far from settled, certain principles are emerging. Here are three key principles to take away from these cases:

  • The presence or absence of the brand owner's mark in the sponsored ads may determine trademark liability.
  • Some courts recognize that certain uses of a trademark in sponsored ads may constitute a fair use, as with the reseller and the comparative advertiser in the Nautilus and Tiffany cases.
  • Because some courts have found infringement even when sponsored ads do not contain the brand owner's mark, advertisers should consider prominently identifying themselves in their ads.

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