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BusinessWeek
By Michael Orey
Internet April 15, 2009:Google's Trademark TussleGoogle suffered a setback in a legal battle over how it auctions search terms. How would eventual defeat affect the Web search market?It's vexing for a company to see its brand name disparaged. It can be downright infuriating when that brand is used to drum up business for a rival.
So some companies are up in arms over a practice by Google that lets advertisers use a competing brand name in efforts to attract customers. Google's opponents won a legal victory recently that could presage limits on how Internet companies use brand names to sell search-related ads.
On Apr. 3, the U.S. Circuit Court of Appeals for the Second Circuit reinstated a suit filed by computer repair firm Rescuecom, which alleges that Google's practice of letting competitors bid for each others' names as search keywords infringes its trademark. Consumers who searched the term "Rescuecom" have been shown ads of rival computer repair companies.
The setback for Google (GOOG) highlights simmering questions about the rules of the road for advertisements linked to Internet search. At issue is the practice of letting marketers bid on and purchase the right to use trademarked nameseven when those brands belong to a competitoras part of online ad campaigns. Yahoo! (YHOO) is embroiled in similar litigation.
litigation spans the AtlanticWhile businesses have flocked to place paid ads on Internet search pages, some have challenged Google's policy on trademarks. Around the globe, Google will block the use of trademarked terms in the actual text of a display ad if the trademark owner complains. In most of the world, even Google will also bar use of someone else's trademark as an unseen keyword to trigger an ad's display. But in the U.S.as well as in Canada, Britain, and IrelandGoogle's stated policy is to allow rivals to vie for each other's trademarked names or terms.
The approaches differ, explains Rose Hagan, Google's senior trademark attorney, because the law in many jurisdictions outside the U.S. is friendlier toward trademark owners. Still, the issue has spawned litigation on both sides of the Atlantic and the law remains unsettled.
The Rescuecom ruling merely allows the company's case against Google to go forward in U.S. District Court for the Northern District of New York. To prevail, Rescuecom must still prove at trial that consumers will be confused if they are drawn to the Web sites of rivals. In an e-mail, Google spokesman Andrew Pederson said that Rescuecom's claims are "without merit." Adds Hagan: "We think consumers are smart and are not confused when they see ads running in response to a query."
Risk of "Scam Ads"?As Internet search has become the arbiter of much of what consumers know and where they shop, concern has increased over how search engines choose what to present in both paid and unpaid listings. Advertising Age noted in March that big media companies are upset that in free searches for information on a topic, their expensively produced content often ends up buried under Wikipedia entries and Twitter tweets. The Associated Press has threatened to take legal action against sites that it says unlawfully reproduce large sections of its news stories. Frustrated by what it considers Google's tendency to point readers toward nonauthoritative information sources, the AP also plans its own news aggregation pages.
Like Rescuecom, a number of companies are unhappy that their own brands can be bought by others for the purpose of placing an ad on Google. Under Google's Adwords program, bidders agree to pay Google a certain amount each time a user clicks on an ad. A high bidder has a better chance of having its ads displayed more prominently than those that pay less, though Google does also consider how relevant the ad is to the search query. For instance, search "1800 Contacts," the name of an online retailer of contact lenses, and "sponsored links" that appear typically include many competitors that have outbid 1800 for its own name. That's particularly troublesome to a company whose online name is essentially its storefront. Says 1800's general counsel Joe Zeidner: "It's the same as if someone came and just plastered their sign over our store."
The lens retailer is a member of an organization called Alliance Against Bait
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