Keywords in Digital Ads – To Be Consumer Confusion or Not To Be Consumer Confusion

Over the last decade, the federal courts of appeals have shifted their positions on keyword bidding of a registered trademark in digital advertisements from holding keyword can form the basis of trademark infringement finding a likelihood of consumer confusion to as of late that the use of keywords are unlikely to cause consumer confusion. The cases involve, typically, competing businesses vying for the coveted top search result from a general internet search. Search engines such as Google, offer competitive keyword advertising which permits an advertiser to “bid” on specific keywords they want to target. The advertiser sets a maximum amount they are willing to pay, such that when a user performs a search the ad that is to display at the top of the search results is the highest paying advertiser. 

Savvy businesses have developed strategies that target specific keywords related to a competitors brand or product, i.e. a competitors registered trademark, in an attempt to direct traffic away from those competitors and to their own goods or services. This act is commonly referred to as “conquesting.”

Keyword bidding in the context of trademark infringement revolves around the idea of digital commercial conduct. Said conduct can directly impact consumer decision-making, exploit the value of a trademark, and could lead to confusion in the marketplace. Treating keyword bidding as a form of “use in commerce” aligns with broader trademark protection goals: preventing consumer confusion, protecting brand identity, and ensuring fair competition.

However, a growing trend amongst the circuits has emerged in the last year finding against trademark infringement in relation to keywords. Beginning earlier this year from a recent 2nd Circuit decision (which was covered in a previous SoCal IP Institute session by Partner Marina Lang, see post here) in 1-800 Contacts, Inc. v. JAND, Inc., No. 22-1634 (2nd Cir. Oct. 8, 2024) where the court held that merely purchasing a competitor’s trademark as a keyword does not constitute trademark infringement under the Lanham Act unless there is additional behavior that confuses consumers. The court emphasized the importance of the labeling and appearance of advertisements on the search results page. This was a shift in position amongst the circuits that had previously held differently under similar circumstances involving keyword bidding.

Such as in Jim S. Adler, P.C. v. McNeil Consultants, L.L.C., No. 20-10936 (5th Cir. Aug. 10, 2021) – where the court found that the use of trademarks as keywords, combined with generic, unlabeled advertisements and misleading call-center practices, could cause initial interest confusion, thus supporting a claim of trademark infringement; Rosetta Stone Ltd. v. Google, Inc., No. 10-2007 (4th Cir. Apr. 9, 2012) – where the court held that a reasonable trier of fact could find that Google’s use of the plaintiff’s trademarks as keywords intended to cause confusion, and the district court erred in dismissing evidence of actual confusion; and lastly, Network Automation, Inc. v. Advanced Sys. Concepts, No. 10-55840 (9th Cir. Mar. 8, 2011) – where the court determined that the use of a competitor’s trademark as a keyword constituted “use in commerce” under the Lanham Act but found that the district court abused its discretion in issuing an injunction without properly weighing the relevant factors for likelihood of confusion.

It is apparent that keywords play an important role in the competitive advertising environment. Although the growing trend amongst the circuits is finding against trademark infringement the balance between protecting trademark rights and fostering a competitive advertising environment will remain an essential and nuanced legal issue.

Please join us Monday, November 18, 2024, at noon where we will discuss a recent decisions made by the U.S. Court of Appeals for the 9th Circuit in Lerner & Rowe, PC v. Brown Engstrand & Shely LLC, No. 20-16060 (9th Cir. Oct. 22, 2024) where the court granted summary judgment in favor of the appellee Brown Engstrand & Shely LLC dba Accident Law Group, finding that the sophisticated nature of online shoppers and the clarity of Google’s search results pages indicated that the use of the mark was not likely to cause consumer confusion and the growing trend amongst the circuits for finding no consumer confusion where a competitor purchases keyword ads using a registered trademark.

Jonathan Gutierrez, law clerk at SoCal IP, will lead the discussion.