• Google's AdWords Program Faces Major Court Challenge on Trademark Use

Google, that omniscient tour guide of the online universe, has fueled its growth - and enabled itself to offer a cornucopia of free services - with revenue derived from marketing services based on strategic use of its search engine. But an April 2009 ruling by the Federal Court of Appeals for the Second Circuit (Rescuecom Corp. v. Google Inc., Docket 06-4881-cv) (click here to see the decision) a class action suit filed in May against Google, lead by FPX, LLC (dba Firepond), and an impending ruling from the European Court of Justice may force Google to revise one of its most profitable offerings - the AdWords program.

As described in the Rescuecom opinion, the potentially troublesome aspect of Google's AdWords program is this: for a fee, Google will display advertisements (links to advertisers' Web sites) with the results of Google keyword searches for the advertisers' competitors' trademarks. Google even has a program called Keyword Suggestion Tool, which helps advertisers select the trademarks (and other words) to "buy" as keywords to trigger displays of their ads. To Rescuecom, this meant that when a potential customer Googled "Rescuecom" (which is the company name and a registered trademark) - presumably looking to purchase or learn about Rescuecom's services and/or sales - the search results include prominent displays of ads for Rescuecom‘s competitors. Dissatisfied by this, Rescuecom filed suit in federal district court, accusing Google of infringing its trademark rights. Google was, after all, using Rescuecom's trademark for Google's own commercial benefit, and to Rescuecom's potential loss. (Rescuecom alleged that Google earns 97% of its income through the AdWords program - a tidy sum - Google's gross revenue for the last quarter of 2008 was $5.7 billion).

 

Google had reason to be unconcerned about Rescuecom's claim in view of the Second Circuit's earlier ruling in 1-800-Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2^nd Cir. 2005)(click here). In that case, the defendant WhenU.com was offering advertising services in the form of computer pop-up ads that appear when a computer user navigates to a Web site whose URL is related to the advertiser's business. 1-800-Contacts sued WhenU for displaying ads of its competitors which appear to be part of 1-800's Web site. The trial court, satisfied that 1-800-Contacts was likely to succeed in prevailing on a trademark infringement claim, issued a preliminary injunction against WhenU.com from using 1-800's trademarks, and WhenU appealed. The pop-up ads included a border that identified WhenU as the source, and this was a determining factor in the Second Circuit's decision that such a scheme could not amount to trademark infringement. Accordingly, the Court reversed the entry of the preliminary injunction and instructed the trial court to dismiss the trademark infringement claim, saying "1-800's claim that computer-users will likely be confused into thinking that 1-800 has sponsored its competitor's pop-up ads is fairly incredulous given that [the computer users] ... receive numerous WhenU pop-up ads - each displaying the WhenU brand - in varying contexts and for a broad range of products."

In view of 1-800-Contacts, the federal district court (N.D. NY) thought that Google's AdWords program was on safe ground, and the court dismissed Rescuecom's complaint. However, Rescuecom was convinced that its situation was different from 1-800-Contacts and took an appeal to the Second Circuit, which agreed that Rescuecom was entitled to its day in court. In explaining its decision, the Second Circuit identified crucial differences between Rescuecom's allegations and those in 1-800. One of the differences is that Google expressly offered Rescuecom's registered trademark to advertisers as a keyword to trigger the advertiser's ads. In contrast, the triggers for WhenU's pop-ups were the URLs of Web sites that computer users went to, and WhenU kept the URL "triggers" in a database which was not shown to WhenU's advertisers. In addition, 1-800-Contacts had not trademarked its URL. Moreover, when Google displayed an ad (as a "sponsored link") it was not clear to the Second Circuit that the ad was sufficiently distinct from the link to Rescuecom to avoid any possibility that the computer user might confuse one link for the other, or assume that there was a sponsorship connection between the two. Accordingly, the Court ruled that Rescuecom should be entitled to an opportunity to be heard and to show that confusion was possible.

No doubt, Firepond and its co-plaintiffs in the Texas class action are heartened by the ruling in Rescuecom, because a principal allegation in the Firepond case is the alleged misuse of the plaintiffs' trademarks in Google's AdWords program, as in Rescuecom. A similar challenge was presented in German courts has been referred to the European Court of Justice.

A lesson for residents in cyberspace to draw from 1-800-Contacts is to register one's Web site URL as a trademark, to discourage advertising services from using the URL as a trigger for directing traffic away from your businesses' Web page. However, merely having a Web page does not entitle the webpage owner to register the URL as a trademark, since the law does not recognize the mere existence of a Web page at a URL as a "use in commerce" that gives rise, by itself, to trademark rights in the URL. Additional use of the URL, e.g., in copy in the body of the webpage, would be needed.

Rescuecom, having succeeded in winning at least a day in court, can feel justified in having sought registration for its mark, and has perhaps provided a new example of the value of federal trademark registration. Whether and how Google will change its AdWords program and/or the way it displays Sponsored Links, and what outcome Rescuecom and Firepond, will yield, are anxiously waited, as these will no doubt shape the basic rules of doing business in cyberspace.