Most effective marketing plans in the digital age include a strategy around search engine optimization, including the use of Google AdWords and other keyword advertising tools. As part of these strategies, many companies consider purchasing keywords including a competitor’s trademarks. For example, Pepsi may wish to have an advertisement for its products appear anytime a consumer searches for Coca-Cola. This article explores the legal landscape for using a competitor’s trademark in a keyword advertising campaign, outlines the permissible legal bounds, and provides practical guidelines for marketers to minimize risk.
Trademark Infringement and the Likelihood of Confusion
The rules around using third-party trademarks as keywords are continuing to evolve, but the general question in any trademark infringement suit is whether use of a mark is likely to confuse consumers as to the source of the goods or services. This fact-specific “likelihood of confusion” analysis includes numerous factors, such as the relative sophistication of consumers, examples of actual confusion, and content of the advertisement. Courts generally require more than the mere purchase of trademark as a keyword in connection with a sponsored ad to find a “likelihood of confusion” sufficient to hold the advertiser liable for infringement.
When a company purchases a competitor’s trademark as a keyword, courts engage in a secondary analysis of the labeling and appearance of the advertisements and the surrounding context of the screen displaying the results page. Again, this analysis seeks to answer whether consumers are likely to be confused as to the source of the goods or services. There is a lower risk that a court will find the ad infringes if the sponsored ad refers only to the advertiser’s goods or services, does not include the competitor’s trademark, and/or does not otherwise create a likelihood of confusion.
If, however, the resulting sponsored ad includes the competitor’s trademark or contains other features which may confuse consumers as to the source of the goods or services, the advertiser may be liable for trademark infringement either under a traditional likelihood of confusion analysis or under an “initial interest confusion” theory. Initial interest confusion is defined as confusion that creates initial consumer interest, even though no actual sale is completed as a result of the confusion. In other words, the theory is concerned with a third party getting a “free ride” on the trademark owner’s goodwill, even if confusion is dispelled by the time of the purchase.
Federal courts across the country are split on initial interest confusion in keyword advertising cases. Some cases suggest that initial confusion leading a consumer toward a good or service offered by someone other than the trademark owner might be actionable, even if the confusion is dispelled pre-purchase; however, others suggest that confusion must continue through the purchasing decision for the seller to be liable for infringement. Either way, using a competitor’s trademark in a sponsored ad or including other features that may suggest a connection with the competitor or its products can significantly increase an advertiser’s risk, especially in jurisdictions that also look to initial interest confusion.
Any circumstances indicating an intent to confuse as to the source of the keyword-generated ad also weighs heavily in the likelihood of confusion analysis. For example, one court allowed an infringement claim to proceed where, even though the sponsored ad did not feature the plaintiff’s trademark, it also did not feature the advertiser’s name and the advertiser’s customer service representatives failed to identify themselves as advertiser’s employees.
The relative sophistication of potential consumers is also significant in the likelihood of confusion analysis. As a general matter, the more sophisticated the target consumers, the less likely a court is to find confusion. Indeed, some courts have flatly refused to apply the “initial interest” inquiry where the target consumers were deemed to be sophisticated and highly discerning.
Strategies to Limit Risk
Although the legal landscape is continuing to develop, advertisers can follow these three guidelines to minimize risk when purchasing another company’s trademark as part of a keyword advertising program:
First, advertisers generally may purchase a competitor’s trademark as a keyword for sponsored advertisements. When doing so, advertisers can greatly reduce risk through proactive steps to clarify that the keyword-triggered ad is associated solely with the advertiser’s business. For example, the most risk-averse advertiser should avoid using the trademark-owner’s name in the ad, or, at minimum, clearly include its own brand’s name in the ad or resulting landing page. Businesses who use a “click-to-call” model rather than linking to a website may also want to clearly identify their business name in the automated greeting and instruct customer representatives to do the same.
Second, advertisers should consider the level of sophistication of their potential consumers. The less sophisticated the consumers, or where products are typically “added to the cart” absent additional research, the more proactively the advertiser should address potential confusion. For more expensive products that require thorough research and are typically bought through savvy and discerning purchasing agents, consumers are less likely to be confused.
Third, businesses should understand the specific trademark principles that apply in the jurisdictions where they advertise. Courts in different jurisdictions apply some theories differently, such as “initial interest confusion.” Nationwide advertisers likely should follow the most conservative approach, under which it is acceptable to purchase a competitor’s trademark as a keyword for a sponsored ad, but the resulting advertisements and websites should not include the competitor’s mark. Regional advertisers may be able to take slightly more aggressive advertising strategies, but they should first learn the specific rules for their region.
Use or purchase of a third-party trademark can be an effective aspect of a digital marketing campaign. While the uncertain and evolving legal landscape creates potential pitfalls, taking proactive steps to mitigate confusion can reduce the risk of costly and time-consuming litigation, or worse, liability for trademark infringement. Digital advertisers should understand the keyword advertising rules in their jurisdictions, develop a proactive risk-mitigation strategy consistent with their risk tolerance, and monitor that strategy in light of relevant legal changes.
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