Adwords and Trademark Law

We have earlier blogged on the Consim-Google Adwords controversy here and here. In this post, I shall try to make sense of the issues involved in the dispute. But first, what exactly are Adwords? Adwords are advertising keywords which advertisers of products and services may specify so that when the specified keyword is entered as a search string on Google’s search engine, the sponsored advertisement of the advertiser appears on the right hand side of the search results page.

Naturally, the keywords specified by the advertiser would have some relation to the advertiser’s field of business. For a detailed explanation of how the whole system works and how Adword ads are shown in a particular order, visit Google’s Adwords site and Wikipedia.

How does trademark infringement figure in the working of this system? According to Consim, if Google allows registered trademarks of an entity, say X, to be used as keywords by its competitors, every time a surfer searches for X, sponsored advertisements of X’s competitors appear on the right-hand side of the search results.

This, according to Consim, leads to either the surfer assuming that the ad belongs to X or ends up diverting visitor traffic to the competitor’s site. Specifically, Consim contends that this amounts to free-riding on X’s goodwill and amounts to passing off.

Interestingly, luring a surfer away from a site to a particular site is an issue we had come across in the OkTaTaByeBye domain dispute as well. In that case, the defendant had reasons to host a site by that name, but here the defendants/competitors specify a particular registered trademark to be used as a keyword. How does this lead to trademark infringement?

The question that needs to be asked is, does the law proscribe use of trademarks as keywords for search? This is to be answered in light of the fact that in the past, use of metatags to attract customers has been held to infringe trademarks. If so, why shouldn’t this apply to specification of registered trademarks as keywords by a competitor?

I think I ought to clarify that I raise these questions, not in a rhetorical sense to lead readers to a particular conclusion, but to merely rephrase issues to bring out the possibility of counter-perspectives to instinctive popular reactions.

Let’s take a cursory look at recent decisions on the issue, all of which needless to say, are not Indian. In Rescuecom Corp. v. Google Inc., the US Court of Appeals for the Second Circuit equated the use of trademarks as keywords to use of trademarks as metatags. Google too was held liable for recommending the use of the trademarked word in its Keyword Suggestion Tool.

A few decisions have revolved around the issue of “use in commerce” i.e. would the use of a trademark to generate a sponsored link on a search engine amount to “use in commerce”? A few Courts have held in the affirmative and a few, otherwise. The key question that needs to be addressed here is, what would constitute “use in commerce” as far as search keywords are concerned?

One case that has been cited often is the 1-800 Contacts v. WhenU.com which related to Adware (Advertising Software). In that case, WhenU sold dowloadable software that displayed ads; the feature in contention was that whenever a user searched for popular brands/trademarks like Walmart or Apple, a WhenU pop-up featuring ads of Walmart or Apple’s competitors would appear on the user’s desktop. This according to the 2nd US Court of Appeals did not attract trademark infringement because the purpose of the software was to provide the customer with alternative options to that of established brands and that customer was aware of the purpose of the software before downloading it.

In other words, trademark owners cannot deploy trademarks to restrict availability of customer choices. The Court further held that WhenU’s use of the keywords did not constitute “use in commerce” under the Lanham Act for the purposes of trademark infringement since neither were the trademarks used in the ads nor were the trademarks sold as keywords to competitors.

The latter part of the Court’s observation could mean that if WhenU had sold trademarks, it would have been in violation of the law. Does this observation warrant drawing an adverse conclusion against the Google Adword program?

With specific regard to WhenU’s Adware, if one were to construct an analogy in real-world advertising terms, what this means is, it is not wrong for a retailer to place the product of, say 3M, with that of a relatively lesser known brand. This, however, in my opinion, is subject to deliberate attempts to create confusion in identities. For instance, if the competitor were to name his product or style it in ways similar to that of a known brand, one could raise the prospect of likelihood of confusion. Even otherwise, does this real-world retail product placement defense apply to Google’s program?

In Merck & Co. v. Mediplan Health Consulting, Inc., the Court was of the opinion that such use would amount to “internal use” and compared it with retail product placement. In contrast, Courts in the Ninth Circuit have held that the intention of the competitor to piggy-back on the plaintiff’s goodwill and reputation is writ large in such cases, particularly when the advertiser is a competitor. The non-binding opinion of the Advocate General before the European Court of Justice in a case involving Google and Louis Vuitton assumes relevance in light of divergence in jurisprudence.

This opinion was given with respect to two distinct instances, the first instance where trademarks, registered and well-known, were used by genuine competitors to reference their sites; and the second, where the marks were to refer to sites which sold counterfeit products. In the latter instance, Google allowed selection of keywords/phrases which were a combination of the trademark and words such as imitation/replica/copy. An interpretation of Article 5(1) of EU Directive 89/104 was sought with regard to the use of trademarks in the aforesaid instances.

Interestingly, Article 5(3) of the same directive prohibits use of trademarks in business papers and advertising. Article 14 of another directive, (Directive 2000/31) provides for an exception from infringement for hosting activities. The provision, in effect, states that an information society service which stores information provided by the recipient of a service shall not be liable for infringement, provided he does not have knowledge of the illegality of the information and when in possession of such knowledge, acts expeditiously.

It does however state that Member States can require the service provider to terminate or prevent an infringement or lay down guidelines to that end. The directive defines information society service as any service which is normally provided by electronic means for remuneration at the individual request of recipient of services. The question here is, can Google use this provision to defend its Adword program?

Before I discuss the opinion of the Advocate General, I would like to make sense of the exception to liability provided for information society services.

Information society services, in the manner in which they have been defined, may have to be distinguished from advertisements i.e. something provided in yellow pages is not the same as content provided in classifieds. The former is meant to provide information and the latter, in addition to providing information, is intended to influence the choice of potential customers. (I am aware that this distinction stands the risk of being run down as academic and hence naive)

So strictly speaking, Google Adword is not an innocent information society service since it provides sponsored links for advertisement. Google’s primary search function may be in the nature of an information society service, but the Adword program is distinct owing to the very nature of the listing of results and the purpose for which they are listed by specific entities.

The generalized second-price auction mechanism the Adword program uses, shows the advertisements in a particular order. The mechanism is not as objective as Google’s primary search results. Ergo, the Adword program is of commercial nature and the use of the marks, either internally to trigger results or in the results themselves, ought to be seen as “use in commerce”.

Merely because Google’s technology provides circumvention from express use of trademarks in the competitor’s advertisements, the purpose behind proscription of use of such trademarks by other entities cannot be lost sight of.

Moving to the opinion, as mentioned earlier, use of trademarks has to be analysed (1) with respect to sale of counterfeit goods and (2) with respect to promotion of competitor’s goods.

The first situation is relatively simple because encouraging a combination of keywords which facilitates access to counterfeit products contributes to infringement of trademarks. So it is the only second instance which needs greater scrutiny.

As far as the second situation is concerned, one needs to understand if Google Adword is being accused of contributory infringement or infringement itself. If Google allows advertisers to choose trademarks as keywords and receives revenue based on number of clicks to the advertiser’s site, would that use by Google amount to “use in commerce”? If yes, Google could be liable for trademark infringement.

The Advocate General (AG) has addressed this question as a subsidiary issue. According to him, the intention of trademark owners is to pre-empt the use of their trademarks from being used as keywords to advertise sites which deal with counterfeit products and therefore, they seek a blanket ban on Google using their trademarks to prevent the possibility of infringement. His analysis starts off by saying:

“my examination of the question whether there is trademark infringement will reveal, first, that the use of Adwords of keywords which correspond to trademarks does not, in itself, constitute trademark infringement, and secondly, that the connection with other (potentially infringing) uses is better addressed, as it has been hitherto, through the rules of liability.”

To the issue of Google’s act of allowing advertisers to choose trademarks as Adwords, the AG is of the opinion that it does not satisfy the criterion of use of the mark in relation to goods or services because no good or service is being sold under the trademark and that Google was merely using it for an internal selection procedure.

The AG states his opinion on this issue thus in para 68:

“The essential factor is therefore the link that is established between the trademark and the good or service being sold. In the traditional example of a use in advertising, the link is thus established between the trademark and the good or service sold to the general public. This, happens, for example, when the advertiser sells a good under the trademark. That is not the case with the use by Google consisting in allowing advertisers to select keywords so that their ads as presented as results. There is no good or service sold to the public. The use is limited to a selection procedure which is internal to Adwords and concerns only Google and advertisers.”

I find myself unable to accept this interpretation because it refuses to recognise the possibility of new ways of using trademarks in connection with goods or services.

If Google is involved in a transaction wherein it benefits by specifically dealing in a registered trademark without the authorization of the owner of the mark, which right belongs exclusively to the owner of the mark, how is the Adword system free from liability for infringement?

In my opinion, use in relation to advertising is not restricted to use of trademarks in the text of the ads itself, but includes or atleast ought to include, instances where the trademarks are used specifically to trigger ads of competitors at the instance of competitors. In real world product placement, this translates to a competitor paying retailers to strategically place his product next to a well-known brand. Of course, it is entirely possible that my understanding of the issue and the concept is way off the mark. I am open to being convinced otherwise.

The AG too endorses the opinion that Google Adwords is not as neutral as Google’s primary search engine and observes that the liability for information society service may not be applicable to Google Adwords. However, he states that this does not by itself mean that he holds the view that Google Adwords is liable for trademark infringement.

The long and short of it is that the nature of the Adword program or similar programs of other entities is yet to be fully understood and an outmoded interpretation of “use in commerce” in the light of new business models could erode the rights of trademark owners. That said, a balance between a consumer’s right to information on alternative choices and the trademark owner’s legitimate interests has to be struck.

We look forward to hearing from our better-informed and articulate readers on this issue.

Also, to understand typical responses from Yahoo or Google to complaints of trademark infringement, please visit this site.