The first judicial pronouncements on keyword advertising that use the names or trademarks of competitors have come down in favour of the advertiser.
In the Vancouver case dated May 28, the Private Career Training Institutions Agency, a Crown body that regulates private training schools, sought a permanent injunction restraining the Vancouver college from using competitors’ business names in its keyword advertising strategy.
The case gives a description of how Internet search engines collect and store data about web sites. When a user enters a term, the search engine produces a list of web sites ranked according to relevance.
However, it’s possible for advertisers to purchase keywords grouped around themes aimed at specific marketing goals. They effectively place a bid on words with a connection to their business, including their competitors’ names.
When the user enters a triggering keyword, the search engine finds the ad that has the highest bid on it and displays it as a sponsored link in a prominent location. If the user selects it, the advertiser must pay according to its bid.
The Crown agency’s argument against this practice centred on a consumer-protection perspective that noted the strategy is clearly aiming to lead students seeking information about one institution away from it towards the advertiser.
It gave two real-life examples of students who had in fact found themselves led astray. But the college argued the practice is the modern-day technological version of the generally accepted marketing practice in which a company places its ads close to a competitor’s in a trade magazine or the Yellow Pages.
B.C. Supreme Court Justice Geoffrey Gaul accepted that argument but noted it’s important that the sponsored link doesn’t replace or displace the organic search results for relevance that appear free of charge.
He also emphasized that a user who looks at a sponsored link should be able click a back button to return to the organic search results, where the rightful owner’s name will appear.
On the question of confusion, Gaul said: “We ought to give the average consumer a certain amount of credit. Consumers are not generally completely devoid of intelligence or normal powers of recollection, nor are they totally unaware or uninformed about what goes on around them.”
He noted the overriding consideration was “all the surrounding circumstances” and said he believes potential students are making a serious commitment that requires a high degree of care.
He also suggested there may be a benefit in giving potential students the opportunity to investigate or consider other institutions.
Brian Isaac, a partner at Smart & Biggar/Fetherstonhaugh, says the matter is the first Canadian case to tackle the issue. “It doesn’t shed as much light as we would hope,” he says.
“The point that makes it less interesting is that it deals with the rules of advertising that the colleges are subject to, not the interpretation of trademark legislation.
It considers whether it is misleading or deceiving behaviour rather than the question, does it constitute use? The judge rejected that people were being misled by an exercise of pragmatism. He didn’t think students looking for a college would be misled.”
Sheldon Burshtein of Blake Cassels & Graydon LLP agrees it’s hard to extrapolate the Vancouver case to other trademark matters. “There are two issues to the problem, and the cases have been all over the map on both issues.
Firstly, for there to be liability, there typically has to be a trademark use. Use is defined very specifically and typically requires visual use. In keyword advertising, the user never sees how the system works in the search engine.
Use is not discussed in this case. The second issue is, is there confusion? The discussion on confusion is not an analysis. It basically says that these courses are $4,000 a piece. It is not a spur-of-the-moment purchase, end of story.”
The Quebec case, which followed in July, involved companies that were selling chocolate bars for school fundraising. The advertiser said its product was an alternative to its competitor.
“It was clear to the user that it was positioned as an alternative,” says Burshtein. “Once again, there was no real discussion of use, and the judge said there was no real confusion. We now have two cases that say there is no confusion, but does it go to the heart of it?”
The outcomes are consistent with pronouncements in the European Court of Justice and some cases in the United States that have said that as long as there’s no misrepresentation, keyword advertising with a competitor’s mark is allowable.
The Vancouver case was highly selective of the American cases it cited. It referred to some U.S. matters that allow the practice but not to another group that don’t. “It didn’t even select all the ones that favoured the practice,” says Burshtein.
“In fact, they’re all trial decisions. There has been an appellate decision on the U.S. Second Circuit in Rescuecom Corp. v. Google Inc. The court said that the practice did constitute a use and that it wouldn’t preclude the possibility that there could be a problem. It’s all an open game.”
For his part, Isaac says he continues to look at U.S. decisions because there’s still no definitive Canadian case. “The Canadian case is not a depreciation-of-goodwill case. We are still concluding what would be reasonable for a searcher to do on the Internet.
How do consumers perceive these searches? There have been some surveys filed in court cases in the U.S. and there is some ongoing independent work by academics on what the perception is of search results.
Surprisingly, they are finding that a significant percentage of respondents who answered questions really didn’t understand the distinction between sponsored links and organic results.”
Burshtein, too, says the issue continues to develop.
“What at the end of the day will turn this? Ten years ago, users of the net didn’t know how it worked. These days, we all use the net on a daily basis. Users are lot more sophisticated and less likely to be confused. In some cases they will be when there is misrepresentation.
Courts will probably fold misrepresentation and confusion together at some point. That’s the key test.”