Issue # 6: Keyword Advertising and the Effect of Trademark Law

Keyword Advertising

Keyword advertising is a growing marketing method for e-commerce businesses and a growing revenue source for Internet search engines. The success of keyword advertising, coupled with aggressive marketing approaches involving the use of trademarks owned by competing businesses, has resulted in a recent flood of litigation testing applying traditional trademark principles to this fairly new form of advertising. It is imperative that e-commerce businesses appreciate not only the value of keyword advertising but also the potential legal exposure attendant to its use.

Federal Trademark Law

A "trademark" is "any word, name, symbol, or device, or any combination thereof . . . used by a person, or . . . [intended to be used in commerce] . . . to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown." 15 U.S.C.S. § 1127 (2005) Trademarks serve as an indicator of the source or sponsorship of goods or services and, in a derivative fashion, may serve as an indicator of their quality.

The Lanham Act, 15 U.S.C.S. § 1051, et seq., provides federal protection for both registered and unregistered trademarks, with the greatest protection being afforded to highly distinctive marks. The Lanham Act prohibits both infringement and dilution, permitting "trademark owners to obtain injunctions and, in some cases, monetary damages, for the improper use of their marks." Id.

Trademark Infringement

Under the Lanham Act, "any person who shall, without the consent of the registrant use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive" can be found liable for trademark infringement. 15 U.S.C.S. § 1114(1)(a) (2005).

Unfair Competition

The Lanham Act also affords protection to unregistered trademarks, imposing liability for unfair competition where a person "uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which . . . is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person without another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another . . . ." 15 U.S.C.S. 1125(a)(1) (2005). The tests for infringement of registered and unregistered marks are nearly identical.

Trademark Dilution

The Lanham Act protects trademarks from dilution, as well as infringement. Dilution "refers to the decreased capacity of a famous mark to identify and distinguish goods or services, regardless of competition between the parties or likelihood of confusion." Kurt M. Saunders, Confusion is the Key: A Trademark Law Analysis of Keyword Banner Advertising, 71 FORDHAM L. REV. 543, 543 (2002) [hereinafter Saunders]. Trademark dilution "usually takes the form of ‘blurring’ or ‘tarnishment.’ Blurring occurs where consumers mistakenly associate the famous mark with goods and services of another’s mark, thereby weakening the power of the famous mark owner to identify and distinguish its goods and services. . . . By contrast, tarnishment occurs ‘where an accused, junior mark is used on unwholesome or inferior goods or services that may [degrade or] create a negative association with the goods or services protected by the famous mark.’" Id. In determining whether a mark is distinctive and famous the federal dilution statute outlines eight factors for courts to use, along with other relevant factors:

• "the degree of inherent or acquired distinctiveness of the mark;

• the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

• the duration and extent of advertising and publicity of the mark;

• the geographical extent of the trading area in which the mark is used;

• the channels for trade for the goods or services with which the mark is used;

• the degree of recognition of the mark in the trading areas and channels of trade of the mark’s owner and the [adverse party];

• the nature and extent of use of the same or similar marks by third parties; and

• whether the mark was registered . . ." 15 U.S.C.S. § 1125(c)(1) (2005).

Trademark Infringement Claims Based Upon Keyword Advertising

In this area of the law, only uncertainty is certain. The lack of appellate court decisions on this issue and the incomplete or competing analysis of the district courts who have addressed the matter make it difficult to develop an effective strategy for reducing the risk of trademark liability for keyword advertisers who purchase competing trademarks. The only safe approach may be to avoid the use of another’s trademarks in any keyword advertising campaign.

Certainly, search engines that use a party’s trademark to sell advertising and then link that advertising to search results created as a result of the use of the trademark in an Internet search have reason for concern that their conduct may be considered a "use in commerce" of the trademark. Their concern should be shared equally by the advertisers who use another’s trademark as a source identifier in the advertising links posted on a search results page, though the potential exposure may be reduced or eliminated where the advertiser does not use the trademark as a source identifier and does not otherwise display the trademark on its website.

A keyword advertisement that actually uses another’s trademark (or a substantially similar mark) is certainly more likely to mislead consumers as to the source of goods or services than one that does not make any reference to the subject mark (or any substantially similar mark). As such, the potential exposure of this conduct is significant though at least one commentator has opined that "keyword…ads triggered by trademarks as search terms should be considered a privileged form of comparative advertising when they allow a firm to offer an alternate product or service in competition with that of a competitor." Id. at 573.

The evaluation of whether a particular use may constitute trademark infringement involves a particularly complex legal analysis. As such, e-commerce businesses considering using another’s trademarks in keyword advertising should seek the advice of an experienced and properly-licensed attorney.

Other Posts in this Series

Issue # 1:  Protection of Domain Names

Issue # 2:  Protection of Original Website Content

Issue # 3:  Website Terms of Use

Issue #4:  The Potential for Universal Jurisdiction

Issue # 5:  E-Mail Marketing and Managing Risk Under the CAN-SPAM Act of 2003

Issue #7 Pay Per Click Advertising and Click Fraud