Monday, April 6, 2009 - The Progress & Freedom Foundation Blog

Trademarks and Search-Engine Ads: What's Permissible?

If I search for "Proflowers" on Google, can Google lawfully sell FTD Florists the right to have an advertisement that appears alongside my search results?  There has been no authoritative answer to this seemingly simple question.  The Second Circuit's recent decision in Rescuecom v. Google brings us a step closer to resolving the issue.  The court's decision, while failing to give Google everything it wanted, strikes a good balance between consumer protection and Internet commerce.

Rescuecom is a company that offers certain on-site computer services; the name Rescuecom is a registered trademark that the company uses to provide those services.  Google sold the term "Rescuecom" to Rescuecom's competitors so that a search for "rescuecom" would bring up Google's text ads for those competitors.  Google's software actually suggested that competitors place ads when users search for Rescuecom.  Rescuecom argued that this constituted unfair competition under the federal Lanham Act, and sued Google.

The federal district court dismissed the case, holding that the search ads never displayed the word "Rescuecom," and therefore that the trademark was not "use[d] in commerce," as required by the Lanham Act.  By way of example, if I search for Proflowers on Google, nothing in the FTD ad that appears actually mentions Proflowers.  The district court was one of several that took the position that such use of a trademark in an entirely behind-the-scenes manner is not a "use in commerce."  That seemed to be the way the law was coalescing in other courts as well, but the Second Circuit halted that.  This is a big deal because the Second Circuit is the most prominent federal appellate court on trademark issues, and the author of the opinion, Pierre Leval, is one of the most prominent intellectual-property jurists on that court.

The question going forward -- and the question for the district court in the remand of this case -- is going to be whether there is any confusion caused by the appearance of the search ads.  Rescuecom argues that the search ad that appears directly above the search results -- as opposed to those that appear on the right -- is particularly likely to confuse Google users as to whether it is affiliated with Rescuecom or someone else.  (See opinion at 14.)  Given that the ads themselves say "Sponsored Links," it's hard to believe that a court would find Google's conduct actionable.  To the extent that there is confusion among Luddites, Google could easily call the "Sponsored Links" what they are -- "Advertisements" -- and be done with any potential liability.

Why does this matter?  In Google's case it really doesn't:  There isn't likely any confusion, and therefore Google will likely win, albeit not as easily as if the district court decision had been upheld.  And once Google gets one or two decisions in its favor that consumers are not confused by ad placement among search results, the issue will be over for Google.

The decision, however, does protect against potential bad-faith uses of trademarks by companies other than Google.  For example, "sellers of products or services could pay to have the operators of search engines automatically divert users to their website when the users enter a competitor's trademark as a search term."  (opinion at 13 n.4.)  Under Google's reading of the Lanham Act, this would have been permissible.  While there are other statutes, such as the Federal Trade Commission Act, that might come into play to prevent such behavior, there's no reason why the Lanham Act shouldn't also guard against such use of trademarks.

The upshot of all this?  Companies are going to have to be a little careful to ensure that users know when someone other than the trademark owner is using that owner's trademark.  That doesn't appear to be onerous for Internet commerce generally, or for Google specifically.

posted by Sidney Rosenzweig @ 3:19 PM | IP