Background
Judgment
What does this mean?


In the recent case of InterCity Group (NZ) Ltd v Nakedbus NZ Ltd a key lesson emerged: a competitor can effectively use a trademark as a Google keyword without being liable for trademark infringement. However, use of another party's trademark as a keyword in conjunction with other visible forms of use – for example, in the text of an online advertisement – does constitute trademark infringement.

Background

InterCity and Nakedbus are direct competitors in the long-distance bus business. InterCity originated in the mid-1980s as the name for the long-haul passenger coach service of the New Zealand Railways Corporation. It enjoyed a dominant position in the market until Nakedbus arrived on the scene in 2006.

Since its launch, Nakedbus has referred to 'inter city' (and variants) bus travel in its marketing and InterCity has taken issue with this from the onset. The situation escalated when InterCity realised that a Google search for 'inter city' generated Nakedbus online advertisements featuring the words 'inter city' in the heading and description, which then linked to the Nakedbus website.

The Google AdWords service allows online advertisers to have their advertisements appear next to search results based on the keywords that are entered into the search. Smart advertisers research the keywords or search terms used by their target customers and tailor their advertisements accordingly to drive traffic to their website. This typically means using the keywords in the text of the advertisement itself, but not always. Nakedbus's online advertising campaign involved the use of both 'inter city' as keywords and in the text of their advertisements.

InterCity sued Nakedbus for trademark infringement, arguing that Nakedbus's use of 'inter city' was likely to deceive or confuse consumers.

Judgment

The High Court of New Zealand found that Nakedbus's use of 'intercity' and 'inter city' as keywords in its Google AdWords campaign did not infringe InterCity's trademark registrations, breach the Fair Trading Act 1986 or amount to passing off. However, Nakedbus's use of 'intercity' and 'inter city' as keywords in conjunction with use of those terms in the text of advertisements and on its website did infringe InterCity's trademark registrations, amount to passing off and breach the Fair Trading Act. In effect, the blatant and visible use of InterCity's trademark in Nakedbus's online advertisements breached the rules, whereas purchasing the keywords 'inter city' did not in itself constitute infringement. Key to this decision was the judge's acceptance of the argument that if the consumer could not see the trademark in use, it could not be taken as being used as a trademark.

What does this mean?

Business and brand owners should be aware that a keyword which would normally direct traffic to their website can be purchased by a competitor. Although trademark owners may still have a legal remedy if this happens (eg, passing off or misleading conduct under the Fair Trading Act), if the keyword does not appear in the AdWord text, a claim for trademark infringement cannot be made.

Meanwhile, advertisers that plan on purchasing keywords that are identical to trademarks owned by other parties should be aware that visible use of those words in the text of their advertisements constitutes a breach of the rules.

However, this may not be the last word on this case. Nakedbus has appealed the decision to the Court of Appeal, so the position may change in future.

For further information on this topic please contact Kim McLeod or Jessica Miles at AJ Park by telephone (+64 9 356 6996), fax (+64 9 356 6990) or email (kim.mcleod@ajpark.com or jessica.miles@ajpark.com). The AJ Park website can be accessed at www.ajpark.com.