In a prior post on this topic, we dis­cussed how ho­tel com­pa­nies could ne­go­ti­ate to pre­serve the ben­e­fit of their trade names when deal­ing with on­line travel com­pa­nies. In that post, we stated that “while the le­gal­ity of key­word bid­ding on trade­mark terms may not have been fully set­tled in the courts, the search en­gines ap­pear con­fi­dent that the prac­tice does not run afoul of trade­mark laws.”

Looks like Google and Mi­crosoft had rea­son to be con­fi­dent. The Ninth Cir­cuit’s re­cent de­ci­sion in Net­work Au­toma­tion Inc. v. Ad­vanced Sys­tems Corp. was the first to squarely con­front the is­sue of whether trade­mark key­word ad­ver­tis­ing on Google and Bing is likely to con­fuse or­di­nary pur­chasers.

Har­vard-pub­lished Jolt Di­gest gives a good overview of the case. In sum, Net­work Au­toma­tion ar­gued that its use of Ad­vanced Sys­tems’ mark was le­git­i­mate “com­par­a­tive, con­tex­tual ad­ver­tis­ing” which pre­sented so­phis­ti­cated con­sumers with clear choices. Ad­vanced Sys­tems re­futed this, ar­gu­ing that Net­work Au­toma­tion was in­ten­tion­ally mis­lead­ing con­sumers by hi­jack­ing their at­ten­tion with un­clear ad­ver­tise­ments. Af­ter con­sid­er­ing the rel­a­tive mer­its of each ar­gu­ment, the court held that Ad­vanced Sys­tems failed to show that the pur­chase of its trade­mark as a key­word by Net­work Au­toma­tion was likely to cause con­fu­sion, even though Net­work Au­toma­tion pur­chased the trade­marked key­word with the spe­cific in­tent of di­vert­ing con­sumers from Ad­vanced Sys­tems’ mar­ket­ing chan­nel.

For hote­liers, the most crit­i­cal step in the court’s analy­sis may have been the as­sump­tion that In­ter­net users are be­com­ing more savvy. From there, the court rea­soned that “the de­fault de­gree of con­sumer care is be­com­ing more height­ened.” This logic al­lowed the court to make two im­por­tant fol­low-on con­clu­sions:

  • There must be proof of con­fu­sion, not just di­ver­sion. By way of ex­pla­na­tion, the court com­pared con­sumers be­ing di­verted to a com­peti­tor's web­site to shop­pers in a de­part­ment store en route to the Calvin Klein sec­tion be­ing di­verted by Macy's Char­ter Club col­lec­tion.  
  • The con­text in which ads ap­pear should be given par­tic­u­lar con­sid­er­a­tion, es­pe­cially as con­sumers are likely to dif­fer­en­ti­ate be­tween or­ganic search re­sults and paid search re­sults:

[H]ere, even if [Net­work Au­toma­tion] has not clearly iden­ti­fied it­self in the text of its ads, Google and Bing have par­ti­tioned their search re­sults pages so that the ad­ver­tise­ments ap­pear in sep­a­rately la­beled sec­tions for "spon­sored" links. The la­bel­ing and ap­pear­ance of the ad­ver­tise­ments as they ap­pear on the re­sults page in­cludes more than the text of the ad­ver­tise­ment, and must be con­sid­ered as a whole.