According to a recent decision, the answer to that question may very well be « it depends how you do it ».
The Court of Appeal of British Columbia has clarified the principles applicable to purchasing and using a third party mark as a keyword for driving traffic to a website. The case was decided in 2017 and involved two competing educational institutions: the Vancouver Community College ("Community") and the Vancouver Career College ("Career"). Career had purchased the acronym "VCC" and the names of other educational institutions as keywords through Google AdWords services. Users who searched "VCC" in Google's search engine would therefore see Career's ad or sponsored link in the search results and if they clicked on it, they would be directed to Career's website.
As is apparent, both parties had "VCC" as their initials. It so happens that VCC was an official mark and an unregistered trademark of Community. Community alleged passing off of its trademark by Career. Three elements are required for a finding of passing off - goodwill, a misrepresentation to the public causing confusion and damages. Community was able to establish goodwill in the initials "VCC" and unregistered trademark rights. The crux of the matter was therefore whether there was confusion. On the one hand, Community claimed that confusion was to be assessed when the search results appear after typing the keyword "VCC". On the other hand, Career claimed that confusion had to be assessed when the searcher arrives at the landing page (as was decided by the lower court).
The Court concluded that the time for assessing confusion was upon the moment when search results appear, not when the searcher arrived on Career's website (when the confusion might dissipate after seeing the website). There was nothing about the Career's sponsored link that distinguished Career from Community or disclaimed some form of affiliation between the two institutions. Accordingly, there was a misrepresentation to consumers that resulted in confusion. The Court granted the injunction enjoining Career from using VCC as a keyword.
The fact of bidding on a keyword is not sufficient in and of itself to amount to a component of passing off. However, because confusion is assessed at the moment when the search results appear, the message communicated to the consumer is critical. Accordingly, if buying a competitor's trademark as a keyword is not necessarily beyond the bounds of appropriate commercial behaviour in Canada, one should be very careful how it proceeds.