Second Circuit Expands Trademark Rights, Restricts Consumer Search Options (EFF)

[DrewWilson]

In a what could be a potentially serious blow to Google's AdWords business, and to consumers’ ability to find information about competing offerings on the Internet, the Second Circuit Court of Appeals ruled today that a trademark owner can sue Google for trademark infringement for selling its mark as a keyword as part of the AdWords program. This is likely to have a chilling effect on Internet intermediaries generally, as they will likely fear the costs of trademark litigation if they use marks to help speakers find their audiences.

In 2006, a district court ruled that Google's AdWords program, which allows advertisers to buy search terms (including trademarks) that trigger their ads, did not violate trademark law. Following Second Circuit precedent (EFF participated as amicus in that case), and in line with other decisions around the U.S., the lower court held that this type of sale did not involve a “use” of the trademark within the meaning of trademark law, any more than strategically placing a generic brand of cough syrup next to Robittussin might. In essence, so long as the prospective customer never sees the trademark, neither Google nor the AdWords participant has "used" the trademark "in commerce."

Today, the Second Circuit reversed the lower court ruling and held that recommending and “selling” a mark to an advertiser to trigger a sponsored link could violate trademark law. Indeed, the Court went further, observing that even product placements could be subject to trademark law if the mark holder could show that consumers were confused.

The holding has obvious implications for Google, which could now face an avalanche of similar lawsuits with no easy way to shut them down (instead, they’ll have to go through the expense of discovery and arguing the always difficult question of consumer confusion). But the real losers will be consumers.

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Though something tells me that this isn't the end of this legal fight.