The Internet has irrevocably changed the vista of trademark law, and has provided trademark owners with new challenges - and new remedies - unforeseen prior to the advent of the technology. Perhaps the most unsettled issue, however, is being played out today in the challenges to search engine provider adword programs, the most notable target being Google.

Google began its adword subscription service in 2000, and it has become its largest and main source of revenue. Under the service, a company or individual can purchase words, usually trademarks, that will trigger the placement of advertisements or website links on search results pages when those terms are searched. The issue occurs when competitors or parties unrelated to a certain company purchase an adword that is also a trademark of that company, resulting in the diversion of web traffic that may have been intended for the trademark holder’s website, thus raising infringement issues. The cases in the United States to date have yet to consistently resolve the issue as to whether the sale and/or purchase of trademarks as adwords constitutes use in commerce for purposes of establishing trademark use and infringement, or are actionable on some other basis, against either the purchaser or provider, and holdings in different jurisdictions contradict one another in many ways.

In Government Employees Insurance Company v. Google, Inc. (Civ. Action No. 1:04cv507 (E.D. Va. Dec. 15, 2004), the court held that Google’s practice of displaying third party advertisements as “sponsored links” was not actionable under the Lanham Act unless the links contained the searched-for trademark. Under this rationale, the mere sale of an adword, without a physical display of the underlying trademark, would not rise to the level of use in commerce, and would thus shield both the search engines and subscribers from liability. This holding was followed in Rescuecom Corp. v. Google, Inc., No. 5:04- CV-1055 (N.D.N.Y. Sept. 28, 2006), where the court dismissed the case “because there [was] no allegation that defendant places plaintiff’s trademarks on any goods, containers, displays, or advertisements, or that its internal use is visible to the public.” Here, “internal use” is distinguished from “use in commerce,” as there was no conspicuous and notorious public display of the plaintiff’s trademark to cause consumer confusion, regardless of whether there was economic harm because of a level of web traffic being diverted from the trademark owner’s site to the subscriber’s site as a result of the purchase of the adword. Similarly, in Merck & Co. v. Mediplan Health Consulting, 2006 WL 800756 (S.D.N.Y. March 30, 2006), in which the trademark holder/advertiser sued a competitor/advertiser who had purchased its trademark as an adword subscriber, the requisite “use in commerce” was not found because of the lack of overt display of the mark at issue. However, and muddying the waters even further, the court in Edina Realty, Inc. v. TheMLSonline.com, 2006 WL 737064 (D. Minn. March 20, 2006) found the requisite use in commerce by the mere transaction and operation of the adword subscription, succinctly pointing to the fact that “defendant purchases search terms that include [plaintiff’s] mark to generate its sponsored link advertisement.” By equating “commercial use” with the traditional trademark “use in commerce” standard, the court here seems to be expanding the definition of bona fide trademark use to reach a remedy under the Lanham Act.

The case that has received the most attention as of late is Google, Inc. v. American Blinds & Wallpaper Factory, Inc., in which the court denied Google’s motion to dismiss trademark infringement and dilution claims asserted by American Blind, who had sued Google for the sale of its trademarks in its adword program. Google, relying on the decisions in the Rescuecom and Merck cases, moved for summary judgment on the issue of use in commerce. In allowing the case to move forward, the court relied on its own notions of public interest, characterizing the outcome of the case as deeply important to many businesses in the United States that would be affected, one way or another, by a decision on the merits. However, the court did rule as a matter of law that the AMERICAN BLINDS trademark is descriptive, and outside a showing of acquired distinctiveness, a case of infringement could not be asserted.

It is unclear whether the American Blinds case will move forward, or whether the recent decision in that case will motivate a settlement, thus depriving us of another opportunity for resolution on the law. What seems to be emerging, however, are potential parameters in which an advertiser may be able to successfully assert a claim against either the search engine or its adword subscribers. In many ways, the decisions, albeit inconsistent, may be suggesting a trend toward a standard of actionable infringement combining traditional likelihood of confusion analysis with untraditional use in commerce analysis. Indeed, it would not be inconsistent to read from these cases an emerging theme that when the search engine provider provides a “sponsored link” that conspicuously contains the trademark of another, i.e., some sort of overt publication or display of a mark as opposed to the “internal” commercial transaction, especially involving a direct competitor of the particular subscriber, consumer confusion is likely to occur, thus rising to the level of trademark infringement by both the search engines and the subscribers. Strength of marks, as suggested in the American Blinds case, may also play a role in this determination. Since use in commerce is consistently the lynchpin on which these cases are decided, perhaps a definition closer to “commercial use” will be established, thus disposing a non-trademark use defense by the search engines, which are neither competitors of the trademark owners, nor are engaged in the sale of the underlying goods and services at issue. Indeed, a broad commercial use standard would certainly open the door for more potential litigation, and would perhaps serve to encourage search engines such as Google to amend their adword practices to better protect trademark owners. Time will only tell whether such standards of review will be developed, and whether such standards will be equally applied to the search engines and their adword subscribers.