Blog

Does Your Business Use Keyword Advertising? You Might be Infringing on Someone Else’s Trademarks

12.29.2021

By Purple Fox Legal

December 29, 2021

Keyword advertising is one of the most popular forms of online marketing available today. It’s fairly straightforward, extremely affordable, and quite effective in its purpose. Is your business familiar with keyword advertising? Do you use it in your marketing strategy?

What is Keyword Advertising?

Keyword advertising is the business practice of using a search engine to place your ads. Sometimes referred to as “paid search,” keyword advertising allows your business to be advertised higher on search engine results when certain words or phrases are included in a query. This can be used for the opposite purpose, too. The inverse practice takes advantage of “negative keywords” to prevent business ads from being displayed when certain keywords are searched.

Understanding Keyword Advertising and Trademark Infringement

Since keyword advertising is related to the advertisement of certain words and phrases, is there a concern for trademark infringement? It depends, but a real-life example might help clarify.

Between 2004 and 2013, 1-800 Contacts, Inc. entered into agreements with various competitors. These agreements surrounded certain keyword advertising terms and the businesses that were allowed to use them when they were auctioned by search engines. Many of the terms restricted by the agreement included each party’s own trademarks and URLs. Likewise, the agreements typically required each party to bid on the other’s trademarks as negative keywords. 

Eventually, these agreements were challenged by the FTC as a restraint on truthful advertising and as price competition in search advertising. Put simply, the Federal Trade Commission felt that the agreements between 1-800-Contacts and its competitors “harms competition in the United States.” The FTC had the burden of proving the agreements 1-800 Contacts had entered into were unfairly restrictive on its competitors. 

1-800 Contacts then rebutted this claim by offering evidence that the agreements promoted lawful economic competition. While FTC could have overcome 1-800 Contact’s justifications if it had proven that less restrictive alternatives to the agreements were available, the court noted that “the parties’ determination of the scope of needed protections is entitled to substantial weight.”

Ultimately, the Second Circuit held that agreements, like the ones between 1-800 Contacts, Inc. and its competitors, did promote the general policies of economic competition, and were supported by trademark law. Therefore, it was ruled, they deserved to be upheld and respected.

Be Careful with Competitive Keyword Advertising

Though it’s not against the law to keep the terms in your keyword advertising on the competitive side, it’s still possible to infringe on someone else’s rights. In another recent case, an attorney named Jim Adler sued a local competitor, McNeil Consultants, for trademark infringement. 

For his marketing efforts, Jim Adler purchased keyword ads for his law practice. These keywords were centered around certain advertising phrases for which his firm is known in Texas—the “Adler marks.” As a competitive marketing effort, McNeil Consultants, Inc., also purchased keyword ads for the Adler marks, paying more money to ensure that the McNeil ads appeared higher on the results list than the genuine Adler ads.

Adler sued McNeil under the Lanham Act, which required Adler to prove that he:

  • Possessed a legally identifiable trademark, and
  • McNeil’s use of the trademark created a likelihood of confusion as to the source.

The Fifth Circuit determines the likelihood of confusion on a case-by-case basis, with no single factor in the analysis being dispositive. The trial court relied on a Tenth Circuit case (in the absence of any Fifth Circuit precedent on the matter) in weighing the importance of whether a trademark is visible to consumers in a Lanham Act case. The Fifth Circuit determined the trial court misinterpreted the Tenth Circuit case and overturned the trial court, suggesting that Mr. Adler had a viable cause of action on remand.