Dangerous Appeals Court Ruling Opens Up Google To Trademark Liability In AdWords

from the common-sense-is-missing dept

One of our big complaints with the various lawsuits filed over companies buying ads in search engines based on trademarks of their competitors was the idea that somehow the search engines themselves were liable as infringers. That made little sense. The purpose of trademark law is to avoid consumer confusion, not give the mark holder total control over the mark. If the ad itself is confusing, then you could see a reason to sue the company that created the ad — but it’s ridiculous to blame Google or Yahoo, who had no part in actually creating the ad. A variety of lawsuits had agreed — and, in fact, most of the recent lawsuits on this topic that we’d seen involved companies suing whoever took out the actual ad.

Unfortunately, it looks like that’s about to change.

Eric Goldman has an analysis of a new Second Circuit ruling that found that Google is potentially liable for ads bought on trademarked terms, overturning a lower court ruling that made sense. Goldman points to some factual errors made by the court in making this decision, but the oddest bit of reasoning is that the court actually took on a point that we often raise here in discussing these types of cases: no one thinks there’s any trademark infringement because a supermarket places multiple brands of soda in the same spot. The supermarket knows that people may be looking for Coca-Cola, but may be tempted to buy the off-brand cola that’s on sale. That’s not trademark infringement against Coca-Cola and certainly not the store’s liability…. or is it. In this ruling, the court noted:

It is not by reason of absence of a use of a mark in commerce that benign product placement escapes liability; it escapes liability because it is a benign practice which does not cause a likelihood of consumer confusion. In contrast, if a retail seller were to be paid by an off-brand purveyor to arrange product display and delivery in such a way that customers seeking to purchase a famous brand would receive the off-brand, believing they had gotten the brand they were seeking, we see no reason to believe the practice would escape liability merely because it could claim the mantle of “product placement.”

That implies that Google’s placement of search ads somehow tricks users into believing when they click on, say, an ad for Avis, they’re actually going to the Hertz website. Yet, there doesn’t seem to be any evidence presented that users are regularly fooled by such ads. Most users recognize that ads are ads.

The ruling pins liability on Google because Google “suggests” terms that may be relevant, and since it suggests trademarked terms at times, that dumps the liability onto Google. But, again, that makes little sense. Nothing that Google does is specifically causing confusion. Simply suggesting a trademark isn’t confusing anyone. Unfortunately, though, as the EFF points out in its analysis of the ruling, this is likely to lead to a lot of new bogus lawsuits against Google, and (most likely) Google scaling back some of its AdWords tools and programs, giving consumers less ability to find out about competitive offers when we search.

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Companies: google, rescuecom

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Comments on “Dangerous Appeals Court Ruling Opens Up Google To Trademark Liability In AdWords”

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Anonymous Coward says:

The ruling pins liability on Google…

It does no such thing. This is a ruling on a procedural ground, and says nothing about the merits or demerits of the positions asserted by either party.

As for the EFF “analysis”, I place the word in quotes simply because many of its comments are just plain silly. It should stick with the law and stay away from irrelevant musings that have no factual predicate.

Mike (profile) says:

Re: Re:

It does no such thing. This is a ruling on a procedural ground, and says nothing about the merits or demerits of the positions asserted by either party.

Uh… not quite. You’re grossly misportraying the impact of this. Yes, the court was ruling on a procedural issue, but in doing so, opened up Google to tremendous liability by saying that the way it handles AdWords is use of the trademark in commerce.

Mark says:

Re: Re: Re: Re:

Mike, as always I love the concerns you raise, but I have to agree with AC, even though — like most people on here — I’m not a fan of the direction of IP law in this country.

Having volunteered with EFF during law school, I still think their analysis (at least in the article link) is flawed….

1st off, EFF argues that the 2nd Circuit’s decision is really costly…. that isn’t something that the courts should consider here… pretty much every category of lawsuit is expensive…. Lessig suing over public domain copyrights is very expense to the copyright holders, workers suing over dangerous conditions is expensive to manufacturers… doesn’t mean such suits aren’t worthwhile (or just). Does anyone really want courts dismissing cases (on the bare pleadings alone) just because the cases might cost big business lots of money? Pretty much any worthwhile case is going to cost the looser money.

Yes, at this point in time, the 2nd Circuit is assuming people don’t know how to use their browsers…. they have to assume it because it was pled by the plaintiff and isn’t obviously false… The 2nd Cir. is ruling on a motion to dismiss…. at this phase, they have to consider all well pled allegations as true…. at a motion for summary judgment (the very next phase), Google can bring in its own facts and the Plaintiff will have to support its allegations with actual testimony. It would be silly for the 2nd Cir. to say that the facts are so overwhelming clear that — as a matter of law — there is no possibility of confusion.

Additionally, EFF’s point about the worthwhile nature of buying a competitor’s mark for advertising is a little sophomoric…. Google can still do what Amazon does… people searching for prius can still find the Chevy volt… that’s a simple question of programing relevance into the algorithms (“people searching for this also looked for this”), which is very different than selling GM the search term “prius”. Google also digs itself a little deeper with the Court because in the prius example… Google didn’t just sell GM the term prius… Google recommended that GM buy the term prius. Under the 2nd Cir’s standard, the volt may still show up in a search for prius, but Google isn’t going to win as a matter of law if its actively marketing the mark to a competitor.

Admittedly, Google seems to be better now than search engines used to be… Ten years ago the issue was that a search for “playboy” would call up just about every porn site but Playboy’s. Obviously, Playboy was very upset about this, especially as many of these sites were using Playboy’s copyrighted material in addition to its trademarks. That’s an example that shows how the conduct alleged here can cause actual confusion (thus making dismissal on a motion to dismiss inappropriate vs. dismissal at summary judgment) Now, I don’t know…. are the terms Hertz, Playboy and Prius showing up because Google/Yahoo have gotten better? Or have Google/Yahoo essentially blackmailed companies to buy up priority on searches for their own trademarks?… thus Playboy, Hertz and Prius are the top results only because they paid the most money to be the top results.

I imagine Google is going to win this on summary judgment. If not, there are a few simple steps (that even the 2nd Cir. points to) that Google can do to make sure consumers aren’t confused, which will ensure that it wins future cases before trial (even if it still can win them on a motion to dismiss). A couple similar cases dismissed on summary judgment and plaintiffs will stop bringing them.

some random guy says:

Re: Re: Re:

>I don’t see any ads cause I use adblock, but if i remember >properly they appear on the right side of the screen and >don’t appear to be search results

another well-informed poster!

actually, some sponsored links appear at the top of the screen too (ahead of the non-sponsored ones). I think that is what everyone is upset about.

Vince says:

This author doesn't make sense

I’ve used Google adwords for one of my companies. In my adword account I tried to use the word “chili”. Google didn’t allow me to use that word, rather they tried to forced me to use “chile”. That led me to canceling my account. The point is this: If Google wants to take such strict control over words and ads, then they are in fact becoming an editor of my work and co-author of the ad. They do not allow you to use Google autonomously. They control the ads and make money on the ads. Someone who chooses to use a trademarked name for the purpose of pulling a bait and switch, leads to Google making a profit as a co-conspirator!

Your comparison to the soda and supermarket is flawed. A more accurate comparison would be this: The supermarket runs an ad in the supermarket’s weekly mailer claiming it’s offering a deal on “Pepsi” and when you show up and look at the soda isle, you see the a shelf with “Pepsi” advertising, but when you actually grab the soda, the real name is “Coke”. You may be able to see the real name on the bottle, but all the ads that led you to that bottle were using a competitors name.

Now assume that Coke knew Pepsi had a better reputation in this particular part of town, so running Pepsi ads to lure in customers, then pull a “bait and switch” on them, is deceptive advertising and both the supermarket and coke would/should be liable, just as Google and the competitor should be.

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