Thursday, May 08, 2008

Online Advertising

On April 3, 2008, the Court of Appeals for the Second Circuit heard oral
argument in the case Rescuecom Corp. v. Google, Inc., 456 F. Supp. 2d 393
(N.D.N.Y. 2006), where the district court, following an increasing number of
New York decisions, held that search engines do not use trademarks "in
commerce" under the Lanham Act (i.e., the federal trademark statute) when
they sell keyword advertisements. A decision can be expected soon.

In finding that search engines and advertisers do not engage in "use in
commerce" by simply "using" (and charging money for) unseen computer programs
and algorithms to key advertisements to internet searches for a competitor's
goods or services, what the original Rescuecom decision and the other recent
New York cases all have in common is a reliance on the definition of how one
ACQUIRES rights in a trademark in the first place, a statutory provision that
indeed requires that the mark be "used or displayed" on the goods or
services. However, because the internet advertisers and search engines are
not trying to establish or acquire rights in their competitors' trademarks,
it is curious that none of the new York decisions has addressed the separate
statutory provision for proving infringement of a trademark. Those parts of
the Lanham Act (Sections 32(1) and 43(a)) simply require that a name, mark,
word or other false designation of origin be used "in connection with" the
accused product or service in a manner that causes confusion - not that it be
displayed on the product or service.

Other courts throughout the country (whether or not they have found keyword
ads confusing) have not hesitated to find use in commerce. However, they too
have not analyzed which part of the statute should be looked at to determine
why or if an accused infringement is a use in commerce.

Does it matter how the Rescuecom case is decided? If internet users
generally are confused by keyword ads and don't make mistaken purchasing
decisions because of them, perhaps it does not matter. Most of the cases
either finding or suggesting that keyword ads can cause confusion have
relied simply on a theory called "initial interest confusion" which, as
applied on the internet has not focused at all on whether there are any lost
sales or mistaken purchasing decisions (as is typically the rule in trademark
cases). Instead, the initial interest confusion theory seems simply to ask
whether the keyword ads attract the attention of internet users, irrespective
whether that affects what they buy or don't buy. These cases give no clue
whether keyword ads confuse PURCHASERS (or prospective purchasers) or are
simply interesting to internet users or present them with choices (just as
such users can choose among brand name shampoos and store brands all stocked
together when they go to the market in the real world, or just as they can
find all the local car dealers listed together in the Yellow Pages)

One way it may matter that courts use the right statutory provision in
deciding keyword cases is that even if most or all keyword ads are not
confusing, we can not know for sure now what other unseen ways trademarks can
or will be used to mislead consumers on the Internet. Perhaps we should be
careful therefore before making blanket rules that there can be no
infringement of trademarks on the internet so long as the marks are not
visibly displayed on an actual product or service. Many mischievous or
possibly deceptive "spamdexing" techniques are already in use. The ingenuity
of software engineers to design new secret (or even sinister) uses of
trademarks should not be underestimated. In the meantime, a closer analysis
of whether keyword ads really are confusing in any way that matters might
make it unnecessary to develop such broad per se rules at all.

-Jonathan Moskin
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Anonymous said...

In sports, one considers 'ambush marketing' as illegal, but it has not be decided by a court, per se. So, when Nike sponsors athletes but is not a gold level Olympic is considered ambush marketing since attendees polled believe Nike is an Olympic Sponsor at the gold level. When in reality, Reebok paid a large sum to be a gold level and dress the medal winners.

Do you believe this is a type of 'ambush marketing'?

Jonathan Moskin said...

There is at least one decision involving Sprint and Mastercard dealing with ambush marketing (and I know I had a case for Cannondale where summary judgment was granted dismissing a claim of ambush marketing although I don't think the court used those words). In some ways the idea in ambush marketing is the same as in keyword advertising: that the defendant is unfairly trading on the either the right or the goodwill another has rightly acquired in order to market its competing product. That's the heart of the argument against keyword ads: that it's unfair for a competitor to be able to trade on the goodwill of an established brand owner.

However, particularly as courts and internet users become accustomed to keyword ads, it's less clear the keyword advertiser is getting an "unfair" advantage, but instead is simply presenting a choice to internet users in the same way (for example) drug stores place thier store brand analgesics alongside Bayer and Excedrin and so forth. They are in some ways trading on the goodwill of brand owners but purchasers know the store brand is not the same as the name brand. Where the store brand goes too far in copying the appearance of the name brand, it's an infringement, but where it simply presents a non-misleading choice, that's competition. (Of course it's the grey area in the middle that makes for most of the difficulty)

When using terms such as "fair" and "unfair", there is undoubtedly some measure of value judgment being made by courts no matter which way they rule but, ultimately, if consumers are not misled as to who places the keyword ad or as to the advertiser's relationship to the brand owner, the purpose of the Lanham Act is not violated. Perhaps implicit in your question, therefore, is the assumption (which may well be true) that ambush marketing works precisely because the consumer does not know what is the relationship between the ambusher and the ambushed legitimate marketer.