The Internet plays a big role in modern trademark litigation. One common legal issue involves so-called keyword metatags and ad keywords. Both enable a search engine to take a user's query and link it to relevant websites to produce the most meaningful results, known as hits
Keyword metatags are inserted into a website's source code by the maker of the website in order to inform search engines that the website contains information about those words. Ad keywords, on the other hand, are purchased by advertisers, who pay a search engine to have a specific advertisement appear on the results page when a query includes the purchased keyword(s).
But how should attorneys counsel a client that uses a competitor's trademarks as keywords or metatags in an effort to drive traffic to its own website? If this occurs, your client could face an unfair business practice claim or a cause of action for trademark infringement under the federal Lanham Act, which carries serious penalties.
To prevail on an infringement claim under the Lanham Act (15 U.S.C. §§ 1051-1127), a trademark owner must demonstrate that: (1) its ownership interest in the mark is protectable; and (2) the defendant's use of the mark is likely to confuse consumers. (See 15 U.S.C. § 1114; Dep't of Parks & Recreation v. Bazaar Del Mundo Inc.
, 448 F.3d 1118, 1124 (9th Cir. 2006).)
In an early case dealing with keyword metatag infringement, a decision by the Ninth Circuit focused on the diversion of potential customers, concluding that the use of a competitor's trademarks as keyword metatags can create "initial interest confusion," which is actionable under the Lanham Act even if the consumer ultimately discovers the true source of the goods. (Brookfield v. West Coast Entm't Corp.
, 174 F.3d 1036, 1062 (9th Cir. 1999).) The court relied on existing trademark law for this conclusion, creating no new law with respect to keyword metatags.
More recently, the Ninth Circuit came to a different conclusion with respect to ad keywords. The case involved Advanced Systems, which owned the trademark for its product ActiveBatch. Its competitor, Network Automation (Network), purchased ActiveBatch
as an ad keyword, so that customers who performed an Internet search for "ActiveBatch" would find an advertisement for the Network product at the top of their search results. (Network Automation, Inc. v. Advanced Sys. Concepts, Inc.
, 638 F.3d 1137, 1142-43 (9th Cir. 2011).)
Network argued that it used the Advanced Systems mark as an ad keyword to facilitate comparative advertising, which "presents sophisticated consumers with clear choices" between products. Advanced Systems, meanwhile, contended that Network's use of the ad keyword misled consumers, "hijacking their attention with intentionally unclear advertisements." (Network Automation
, 638 F.3d at 1145.)
In deciding the case in Network's favor, the court focused on the risk that a consumer "might be confused by a results page that shows a competitor's advertisement on the same screen, when that advertisement does not clearly identify the source or its product." (638 F.3d at 1148.) It found that the use of a trademark as an ad keyword does not amount to trademark infringement unless it is likely to cause confusion. The court called for flexibility in the context of Internet commerce, and clarified that "the owner of the mark must demonstrate likely confusion, not mere diversion." (638 F.3d at 1149.)
Reconciling the Rulings
The opinions in Network Automation
remain good law, although the results are confusing. Under Brookfield
, a defendant who uses a competitor's trademarks in keyword metatags could face huge penalties for trademark infringement, which carries damages of up to three times the defendant's profits or the plaintiff's damages, along with attorneys fees. (15 U.S.C. § 1117.) However, under the Network Automation
ruling the same defendant may face little or no liability for using the competitor's trademark as an ad keyword. The essential point, as noted above, is to avoid market confusion.
There is an irony here: Because irrelevant keyword metatags can skew search results, search engines give them little (or no) weight. Consequently, a company that uses a competitor's trademark as both
a keyword metatag and an ad keyword may derive little benefit, but if consumers are truly confused as to whose product they are purchasing, there could be significant liability.
Aaron N. Shechet and Leigh Chandler are partners at Chandler & Shechet, a Los Angeles-based firm that handles business disputes.