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.