Keyword Advertising and Trademark Rights: Recent Developments

May 4, 2012, 3:06 PM

The question of whether the owner of a trademark can prevent its use as a "keyword" by Google and other Internet search engines has been in play ever since the search engine providers found effective ways to turn "sponsored links" and "sponsored ads" into major revenue streams. Court opinions dealing with this question delve into numerous legal theories invoked by trademark owners to try to stop search engine providers from selling their trademarks as keywords that, in effect, point consumers to advertisements by their competitors when the consumers enter the trademark as a term to be searched. The fundamental issue has always been, and remains, whether trademark law provides a remedy to these trademark owners in cases where their marks are used only as keywords and do not actually appear in the sponsored ads.

Over the years the legal pendulum has swung from side to side on this question, with some court decisions being more favorable to the search engines' position that keyword advertising does not violate trademark rights, and others being more favorable to the opposite position of the trademark owners. The most recent decision addressing the question was issued by the U.S. Court of Appeals for the Fourth Circuit on April 9, 2012, and moved the pendulum back in the direction of the trademark owners. In this case, the owner of the Rosetta Stone trademark was objecting to Google's sale of that and other trademarks as keywords leading to sponsored link advertisements by other parties. The lower court had ruled in favor of Google, but the Appeals Court reversed its ruling on the questions of whether Google's keyword advertising program might involve direct infringement, contributory infringement or dilution of Rosetta Stone's rights in its trademarks. The case has been sent back to the lower court for further consideration of these issues.

This decision by the Court of Appeals for the Fourth Circuit in favor of Rosetta Stone will likely give encouragement to other trademark owners who might want to challenge use of their trademarks in keyword advertising programs of Google and other search engine providers. However, it bears mentioning that other recent court decisions have been more favorable to the position of the search engine providers than the Fourth Circuit's decision in the Rosetta Stone case. Of particular note is a March 8, 2011 decision by the United States Court of Appeals for the Ninth Circuit, which emphasized the growing sophistication of Internet users, their consequent ability to recognize sponsored ads for what they are and, therefore, the decreasing likelihood that such ads will create customer confusion as to the source of the goods or services promoted by the ads.

The court decisions mentioned above are Rosetta Stone Ltd. v. Google, Inc. (Fourth Circuit, April 9, 2012), and Network Automation, Inc. v. Advanced Systems Concepts, Inc. (Ninth Circuit, March 8, 2011). They are not the first and will not be the last to give conflicting judicial guidance on the legality of Internet keyword advertising programs. --Robert E. Smartschan