Legality Of 'Keyword-Advertising' Programs On Search Engines Remains In Limbo

The Internet has become ubiquitous due to its ease of use, its affordability, and the wealth of information it provides. It is difficult to imagine times prior to its advent.

However, despite its great utility in introducing the electronic age into the general public’s homes and businesses, the Internet has also introduced many legal issues into courtrooms.

One such issue revolves around Internet search engines’ keyword-advertising programs, such as, Google’s AdWords® program.

Under a keyword-advertising program, an advertiser can purchase an advertising link associated with a certain term or phrase. For example, under Google’s AdWords® program, the search engine company sells a package to an advertiser containing key terms relating to the advertiser’s website.

These key terms are often trademarks owned by the advertiser’s competitor. When conducting an Internet search, once an Internet user types in the trademark(s) contained in the advertising package, banner advertisements or other type of advertisements sponsored by the advertiser appear on Google’s search results page.

Rather than clicking on the trademark owner’s website, the Internet user may instead click on the advertiser’s link. Therefore, the search engine profits from the use and sale of other’s trademark(s) in its keyword-advertising program, and potentially diverts Internet users from the trademark owner’s website to the website(s) of the owner’s competitor(s).

Because these programs are relatively new, their legality has been largely left to the legal pundits and theoreticians to decide.

However, in October 2003, theory became reality when a French court held that Google’s sale of two French companies’ trademarks through Google’s AdWords® program was illegal under French law. As a result, the French court fined Google the U.S. equivalent of about $81,400.

The question now is whether a U.S. court would reach the same conclusion applying and interpreting U.S. trademark law to the same, or largely similar, fact pattern as presented in the French case.

American Blind and Wallpaper Factory ("ABWF") hopes so.

In November 2003, soon after publication of the French court’s decision, Google asked a U.S. District Court judge in California to determine whether Google’s keyword-triggered advertising services infringes trademarks belonging to ABWF (Google Inc. v. American Blind & Wallpaper Factory, Inc., Case No. 5:03-cv-05340-JF).

ABWF quickly responded by filing a trademark infringement suit against Google in the U.S. District Court for the Southern District of New York (American Blind and Wallpaper Factory, Inc. v. Google, Inc. et al., Case No. 1:04-cv-00642-LLS.) As of this writing, the two cases are pending, and the outcomes are uncertain.

Although the French court’s decision will be helpful in providing direction, a definitive ruling by the U.S. courts will have large public policy ramifications such that the courts will likely tread lightly on this particular Internet frontier.

Nevertheless, a recent decision by the 9th U.S. Circuit Court of Appeals may also lend some assistance to the California and New York district courts. In January, the 9th Circuit denied defendant search engine providers Netscape and Excite’s motion for summary judgment, allowing Playboy Enterprises, Inc. ("Playboy") to proceed with its trademark infringement and dilution claims (Playboy Enterprises, Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir., 2004)).

At the heart of the Playboy case was the defendants’ use of Playboy’s trademarks in a package sold to advertisers of adult oriented entertainment websites. When an Internet browser keyed in terms contained in the package, e.g., certain trademarks owned by Playboy, banner ads for the advertisers who purchased the package from Netscape and Excite, were displayed on the search results page on a rotating basis.

The 9th Circuit reasoned that a court could find trademark infringement under the "initial interest confusion" doctrine, which protects a trademark owner from a competitor’s improper capitalization on the good will associated with the owner’s mark.

Although, the 9th Circuit’s ruling provided great hope that the legality of a search engine’s unauthorized use and sale of a trademark owner’s mark soon would be determined, the hope was extinguished when the parties entered into an undisclosed settlement agreement in January 2004.

Accordingly, search engine companies’ paid keyword search programs live to see another day. Trademark owners look towards the future and wait for the California and New York district courts’ rulings on the ABWF cases.

Karen K. Chadwell is an associate with the intellectual property department of the Springfield, Mass. law firm of Doherty, Wallace Pillsbury and Murphy, P.C. She can be reached at [email protected] or (413) 733-3111. For more information on the firm, visit www.dwpm.com.