Tech Law is feature that appears every Wednesday on Local Tech Wire

Editor’s Note: John Lindsey is a member of the Research Triangle Park law firm of Daniels Daniels & Verdonik, P.A.

You type “Nike soccer shoes” into a Google search and together within the search results you get ads for Brine soccer shoes. This is known as keyword advertising. Google has recently raised the stakes in its gamble that keyword advertising is not trademark infringement.

In the United States and Canada, Google will no longer restrict use of trademarks as keywords, meaning it will permit its advertisers to buy not only generic terms (such as soccer shoes) as keywords to generate ads with search results, but also trademarks, even trademarks of their competitors.

Trademark owners whose marks are used as keywords are not likely to be pleased with this policy change. Prior to the policy change, several suits had been filed against Google for trademark infringement based on its keyword program, and more suits are expected as a result of the new policy. It is a high stakes gamble. If Google loses these cases, its ad revenue could be significantly reduced (as could the ad revenues of other search engine companies relying on keyword advertising).

Trademark owners complain that using trademarks in keyword advertising is trademark infringement, since an ad for a competitor of the owner of that trademark appears along with the search results based on that trademark. At first blush, it seems a bit unfair for a competitor to be able to piggy-back on its rival’s trademark to get its message in front of the consumer. The trademark owner is, obviously, not going to be happy if you or I decide, after reviewing the ads that appear with the search results, to purchase the product of the advertiser, and not the product of the trademark owner whose trademark we entered when initiating our search.

But does the use of trademarks as keywords result in trademark infringement? This remains an open question–at least for now.

A key element required for a successful trademark infringement case brought in the U.S. may be missing in a complaint arising from the use of trademarks as keywords. To prevail in these cases, the trademark owner must show that the use of the mark as a keyword results in a likelihood of confusion. That is, the party doing the search is likely to be confused over the relationship between the owner of the trademark that was the search term and the owner of the sponsored ad that appeared with the search results.

To meet this test, trademark owners have argued that the appearance of keyword ads with search results creates “initial interest confusion” on the part of the person doing the search. More specifically, they content that this person is initially confused that the sponsor of the ads is the owner of the trademark that was the search term used in the search.

Although the searching party may quickly realize that the trademark owner and the advertiser are not the same, by then, the trademark owners claim, the damage is done. The initial confusion was relied on by the advertiser to attract the consumer’s interest, which it may not have been able to do without using the trademark as a keyword. Initial interest confusion has been used with some success to limit the use of a competitor’s trademarks in meta-tags and domain names.

It remains to be seen whether the “initial interest confusion” argument will carry the day in infringement cases involving keywords. Last January, a federal appeals court sent back to the lower court for further consideration a decision that the practice of keyword banner advertising linked to trademarks was not infringement, in part because the court found that the plaintiff may be able to show infringement under the theory of initial interest confusion.

This case has since been settled by the parties without a final decision on its merits. Several other trademark infringement cases have been filed in the U.S. against Google and other search engine companies over the practice of keyword advertising, but no decision has been reached in these cases to date.

Ultimate decision

Whether keyword ads triggered by trademarks will ultimately be found to infringe such marks may depend on whether the person doing the search is merely distracted when presented by another choice in the ads that appear with the search results, or whether this person is likely to be confused by the keyword ads. This may turn on whether the ads are “labeled” with the advertiser’s name, meaning the searcher does not know the ad is for a competitor before the ad was opened. It may be that labeled ads do not create the necessary likelihood of confusion to sustain an infringement claim even if unlabelled ads are found to do so.

One argument, as has been suggested by courts considering this issue, is that the presentation of choices to consumers on the Internet should not result in infringement when such choices would not be infringement if presented in a bricks and mortar setting. For example, consider a potential customer who goes into a large department store to buy a shirt made by a major vendor.

He asks where the major vendor’s shirts are located, and is directed to the second floor. En route to the second floor, the customer passes store displays for shirts by other vendors, including the store’s own line. Since all the brands were clearly labeled, neither the department store nor the other brands infringed the major vendor’s mark, even though the consumer may have been distracted on the way to the major vendor’s display. In short, though possibly distracted, the consumer was not likely to be confused, so no trademark infringement occurred.

No clear guidelines

Similarly, if the consumer went to the department store’s web site and searched for the major vendor’s shirts by using the major vendor’s trademark, it is unlikely that the department store or other competitors would infringe the major vendor’s trademark if the store displayed pictures of shirts the store carried made by other vendors together with displays of the shirts of the major vendor.

Until at least a federal appeals court, if not the U.S. Supreme Court, reaches a decision in one of the keyword advertising cases, no clear guidelines will be available for advertisers and search engine companies, such as Google, to know whether keyword advertising based on trademarks will result in trademark infringement liability. The earliest decision suggests that by using labeled ads, advertisers and search engine companies may avoid such liability, but this is not settled even in the jurisdiction of that court.

If your business purchases keyword advertising or offers it as a search engine company, unless you are a high stakes roller like Google, you may, at the least, want to label your ads that appear with search results, particularly if you are using, or could be accused of using, trademarks as keywords. Otherwise, you risk being swept into one or more of the trademark infringement cases likely to occur following Google’s policy change. Only time will tell if keyword advertising will suffer the same fate as the copyrights for which Napster also tried the in your face approach.

Daniels Daniels & Verdonik, P.A. has been serving the legal needs of entrepreneurial and high technology clients for more than 20 years. John Lindsey concentrates his practice in the areas of copyright, trademark, immigration, international trade and corporate law. Questions or Comments can be sent to