Intellectual Property

Trademark Troubles

By Lisa Hooker
From the November 2013 issue of Columbus CEO

Trademark violations in web searches are difficult to prove. Courts allow competitors to purchase one another’s keywords from search engines.

How many online searches will you initiate today? Ever click through the advertisements, or sponsored links, that pop up? It’s those links that worry some businesses.

“Sophisticated companies are targeting the market leaders in their niche. They’re buying relevant key words, so their ads pop up at the same time as the market leader or owner of a well-known trademark,” says Keith Shumate, partner at Squire Sanders.

While it would seem that the trademark owner could sue for infringement, it’s not that simple. Buying competitors’ keywords isn’t enough to rise to the threshold of trademark infringement. Courts look at how the trademark is used: Is the ad content misleading and does online consumer confusion result? Area experts explain how third-party users legally can utilize your company’s trademarks and what you can do about it.

BIDDING ON KEYWORDS

Search engines sell keywords, words or phrases, to advertisers. Very often, those advertisers are competitors looking for an advantage.

When an online search is initiated, the search engine provides organic results. These free, relevant website links have optimized content that’s recognized by the search engine’s algorithm.

The search engine also provides ads, or sponsored links. When keywords that have been purchased by an advertiser are entered, its website appears as a sponsored link on the search result page. Bidders could buy trademarks that are protected, as well as broad, descriptive words that aren’t protected.

“Advertisers pay a certain amount per click or impression. Search engines could accept multiple bids and multiple prices for a single keyword,” says David Jaglowski, associate with Thompson Hine.

Sponsored links are set apart from organic results. They’re usually labeled and are found at the top, bottom and right hand side of the results page.

“People are so used to seeing ads like these pop up that they’re almost ignored,” Shumate says, “Even so, businesses don’t like it when a competitor uses their information to help themselves. It diminishes the trademark owner’s good will, investment and public awareness of its trademark.”

USE OF TRADEMARKS

A trademark distinguishes one manufacturer’s products or services from another. “It’s something that when you see or hear it, you recognize its origin,” says Brian Downey, of counsel at Barnes & Thornburg.

NBC trademarked its tri-tone musical sequence. Coca-Cola trademarked the shape of its bottle. Owens Corning trademarked its pink insulation.

Phrases and words are more difficult to trademark, because they must specifically relate to your business. “Apple trademarked the word ‘apple’ for computers only, otherwise the local apple orchard is out of luck,” Downey says.

“There’s not much value in trademarking generic phrases. Coined terms, or fanciful terms as they’re called, are different. They’re distinctive in describing what is being sold,” Jaglowski says.

Marketers like to trademark catch phrases, but they’re not usually an identifier of a particular business. Jaglowski cites the phrase “Boston Strong” after this year’s Boston Marathon bombing. “Putting ‘Boston Strong’ on a T-shirt doesn’t represent the identity of the manufacturer,” he says.

IN COMMERCE

Irritated clients often call their attorneys about others using their trademark. They often don’t like the answer. “Most courts have held there’s no infringement simply by purchasing a keyword,” Downey says.

“A few years ago, if a trademark appeared as a meta tag or in the text of a competitor’s ad, it was considered infringement. Now courts are recognizing there are reasonable uses of the trademark that should be allowed by third parties,” Jaglowski says.

Use “in commerce” is the legal threshold. A competitor is not using a trademark in commerce if it just comes up in an algorithm. “To be considered in commerce, the trademark must be in the ad text and lead to consumer confusion,” Downey says.

Trademark owners used to be able to claim such confusion simply by showing its trademark in the competitor’s ad and claiming they’re losing business as a result. More recently, courts are recognizing that online shoppers are savvy when sponsored links appear.

“Courts are shrinking the use of that argument by ruling the trademark owners don’t own the business relationship with the consumer. They’re looking at is it a nefarious use of the trademark or is it nominal?” Jaglowski says.

It’s nominal use, for example, if you’re selling a Ford on eBay. “The trademark name is necessary to accurately describe what you’re selling. But if you’re using logos then you begin to suggest that you have a relationship with the manufacturer,” Jaglowski says.

Additionally, keywords assist online shoppers in getting the best deal. “When people enter a trademark, they’re often using it as a proxy for a class of goods. They may not know exactly what keyword to start with, so they enter the known trademark to yield comparisons in the niche,” says professor Eric Goldman, director of the High Tech Law Institute at California’s Santa Clara University.

To find infringement a court must find consumer confusion, but most cases never get that far.

“The trademark owner, as plaintiff, has the burden of proof. Often they can’t bring enough objective evidence to show that confusion resulted. Courts also have looked at the apparent intent of the ad. Is the intention to draw people away from the official site to another site,” Jaglowski says.

RECOURSE

While trademark owners don’t like that competitors get a free rise on the value of their trademark, they can be proactive in maintaining their online presence.

Become familiar with search engines’ complaint procedures. From time-to-time, type in your trademark items into popular search engines and see what comes up.

“Do it different ways, too, and see what sponsored link advertising pops up. It may vary depending on what keywords you put in,” Shumate says. “Determine if the competitors are misleading by suggesting that they’re your company or an affiliate of your company. If so, then you could have an actionable trademark suit.”

Consider buying your own trademarks. “But even if you do that, it doesn’t guarantee that the competition won’t also buy the keywords. It’s not an exclusive purchase,” Downey says.

“When a trademark owner buys its own keywords and places its own sponsored links in the mix, it generates more clicks on the company’s organic links. It channels more business through the free clicks rather than paid clicks,” Goldman says.

Lawsuits are a last resort. “Look at the economic importance of that keyword to you and your business to see if it makes economic sense to litigate and if you have hard evidence of consumer confusion,” Jaglowski says.

“I’m seeing keyword advertising litigation dying down. People still call me, though, upset that someone else bought their keywords,” Downey says.

Goldman describes keyword infringement lawsuits as “financially irrational.” Statistics he’s tracked show that trademark owners have never won a jury trial and haven’t won a final ruling since 2011. “When you look at the number of click throughs to competitor sites and the amount of business trademark owners actually lost in these cases, it’s remarkably low. The courts just are not seeing consumer confusion,” Goldman says.

Trademark owners could benefit from taking a step back. “They’re emotionally tied to their product and hate that someone else is horning in on it. But as an economic decision, the cold, hard numbers show that it’s not worth losing sleep over and there’s a slim chance of winning an expensive infringement lawsuit,” he says.

Lisa Hooker is a freelance writer.