April 3, 2009 | By corynne mcsherry

Second Circuit Expands Trademark Rights, Restricts Consumer Search Options

In a what could be a potentially serious blow to Google's AdWords business, and to consumers’ ability to find information about competing offerings on the Internet, the Second Circuit Court of Appeals ruled today that a trademark owner can sue Google for trademark infringement for selling its mark as a keyword as part of the AdWords program. This is likely to have a chilling effect on Internet intermediaries generally, as they will likely fear the costs of trademark litigation if they use marks to help speakers find their audiences.

In 2006, a district court ruled that Google's AdWords program, which allows advertisers to buy search terms (including trademarks) that trigger their ads, did not violate trademark law. Following Second Circuit precedent (EFF participated as amicus in that case), and in line with other decisions around the U.S., the lower court held that this type of sale did not involve a “use” of the trademark within the meaning of trademark law, any more than strategically placing a generic brand of cough syrup next to Robittussin might. In essence, so long as the prospective customer never sees the trademark, neither Google nor the AdWords participant has "used" the trademark "in commerce."

Today, the Second Circuit reversed the lower court ruling and held that recommending and “selling” a mark to an advertiser to trigger a sponsored link could violate trademark law. Indeed, the Court went further, observing that even product placements could be subject to trademark law if the mark holder could show that consumers were confused.

The holding has obvious implications for Google, which could now face an avalanche of similar lawsuits with no easy way to shut them down (instead, they’ll have to go through the expense of discovery and arguing the always difficult question of consumer confusion). But the real losers will be consumers.

As EFF explained in the amicus brief we filed in this case, on the Internet, our free speech rights are inextricably tied up with the intermediaries (like Google) on whom we rely to find, publish, and host our speech. After today's ruling, will those intermediaries declare trademarks to be "off limits," just too much of a litigation magnet? If so, we all are likely to be worse off for it.

Consider an example. If you used Google to search on the term “McDonald’s” in 2007, among the “sponsored links” that may have appeared in response was a link for “The Coalition of Immokalee Farm workers,” a community-based organization that supports the rights of low-wage workers in Florida. The Coalition deliberately chose the trademark to trigger its ad because it is highly critical of the practices of McDonald's and thought you might like to learn more about why before you buy that next burger. Or consider a consumer seeking comparative information on hybrid vehicles, searching on the (trademarked) term “Prius.” That consumer might like to know about GM's hybrid offerings (did you even know GM sold hybrids?), but after today, the threat of litigation may make Google hesitant to let GM buy a "sponsored link" triggered by the term "Prius."

Today's ruling does not say that buying or selling a trademark as a search keyword necessarily infringes the trademark. The trademark owner still must prove that consumers are confused. The Second Circuit seemed to think that was shield enough for the likes of Google.

But this ignores the financial realities of litigation, and how those realities condition the business decisions of intermediaries. Google and advertisers who participate in the AdWords program have been targeted nationwide in a large number of lawsuits. The Second Circuit's ruling today makes it difficult for these defendants to get rid of these cases on purely legal grounds. Litigating a trademark case past this point, to summary judgement or trial, requires a substantial financial investment that most companies simply won’t want to make, even if they are confident they will win in the end. (Witness Blockshopper’s decision last month to settle with Jones Day after BlockShopper lost its motion to dismiss Jones Day’s trademark suit, even though the case was was widely ridiculed as preposterous.)

It's doubtless a happy day for trademark lawyers looking for new cases to bring. But it's a sad day for consumers looking for simple access to good information.

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