9th Circuit: Consumer Sophistication is an important determinant for AdWord bidding cases

by Jason Fischer

For some time now, it has been a legal gray area whether bidding on a competitor’s trademarks as Google AdWords constituted infringement.  Google has taken a neutral stance on the matter, only removing ads that actually make use of the mark in ad copy and directing unhappy trademark owners to take their dispute to a court of law for resolution.  Finally, some of these cases are bubbling up through the federal court system and providing some precedent and guidance.

The latest such decision comes out of the 9th Circuit and involves two software developers who sell licenses to high-end task management applications for businesses.  Software Company A decided that it would be a good marketing strategy to bid on Software Company B’s trademark as an AdWord with Google and Bing, providing a “Sponsored Link” to Company A’s product for users who entered the trademark as a search term.  Obviously, Company B was none too happy about the practice and sued Company A claiming trademark infringement and successfully obtained a preliminary injunction.

On appeal, Company A argued that presenting a “Sponsored Link” for its product to potential purchasers who searched for Company B’s product name would not cause any consumer confusion.  As you can imagine, a link to Company B’s product would appear in the very same search results, alongside the link to Company A’s product, but Company A contended that potential purchasers were savvy enough that no one would be confused or tricked into thinking that Company A’s product was sold by Company B, or vice versa.

In agreeing with Company A’s position, the appeals court noted that licenses for the software at issue were sold for up to $10,000 and more — indicating that the searching parties were more likely to be careful in their purchasing decision, doing research which would eliminate or significantly reduce the likelihood of confusion.  The court also noted that the type of purchasers for these software products are more likely to be expert users of the Internet, who understand how keyword marketing works with search engines, which would also reduce the likelihood of confusion.

You can read the Judge Wardlaw’s full opinion here, if you’re interested in a more thorough discussion.

This decision, in IMHO, serves as a helpful reminder that there are more than a few factors that attorneys either ignore or tend to dismiss in determining likelihood of confusion, and as a result end up trying to enforce their clients’ marks beyond the rights actually afforded.  Comparative advertising is not only legal in the U.S., but preferred, and use of your competitors trademark is not always an actionable event.

2 Responses to 9th Circuit: Consumer Sophistication is an important determinant for AdWord bidding cases

  1. J DeVoy says:

    This is really interesting because a lot of other courts have taken a point-and-shoot view of AdWords and Metadata with respect to infringement. As you point out, I think the fact that this is a $10,000 piece of software speaks to the consumer audience being targeted, but as you slide down the scale, it seems like the analysis becomes a lot less nuanced:

    Fagnelli Plumbing Co., Inc. v. Gillece Plumbing & Heating, Inc., No. 2:10-cv-00679, 2010 U.S. Dist. LEXIS 75360 at *19-20 (July 27, 2010 W.D. Pa.)

    J.G. Wentworth, S.S.C. L.P. v. Settlement Funding LLC, 85 U.S.P.Q. (BNA) 1780 (E.D. Pa. 2007)

    Australian Gold, Inc. v. Hatfield, 436 F.3d 1228, 1239 (10th Cir. 2006)

    Buying for the Home, LLC v. Humble Abode, LLC, 459 F. Supp. 2d 310 (D.N.J. 2006)

    JR Cigar, Inc. v. GoTo.com, Inc., 437 F. Supp. 2d 273 (D.N.J. 2006)

    Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 812-13 (7th Cir. 2002)

    Brookfield Comms. Inc. v. W. Coast Ent. Corp., 174 F.3d 1062 (9th Cir. 1999)

    • jfischer1975 says:

      Brookfield Comms. was heavily cited in the opinion, with a quote from that decision appearing at the very start: “We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach.”

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