TRADEMARKS & UPDATE MARCH 2004

KEYWORD ADVERTISING: CUTTING EDGE INTERNET TRADEMARK ISSUES

In response to a number of highly the online advertising industry, Significantly, the Playboy court also publicized lawsuits, businesses are paying representing 31 percent of the total online discussed what its holding did not renewed attention to the use of ad revenue for the second quarter of 2003. address: situations in which a banner trademarks as advertising keywords by What's the Legal Hubbub? advertisement clearly identifies its source Internet search engines. with its sponsor's name, or in which a Some Web marketers have recognized What is Keyword Advertising? clearly identifies a banner that -- given the power of keyword advertisement's source, or in which an Keyword ads are, quite simply, targeted advertising as a marketing tool -- they advertiser overtly compares its products Web advertisements -- often all-text ads could draw customers to their sites by with a competitor's. The Playboy court comprised only of a title and a brief buying third party trademarks as thus seemed to signal ways in which description -- generated when an keywords. A Ford truck dealer, for businesses potentially could use third- individual enters a specific query into a example, could generate web traffic by party trademarks as keywords without the search engine. Search engine companies, purchasing the term "Chevy trucks." In risk of liability. such as and Yahoo!, sell to that case, when a customer searched for In another keyword advertising case, in advertisers the opportunity to have their "Chevy trucks," the Ford dealer's ad would federal court in New York, our firm is ads triggered by designated keywords. appears, potentially leading the consumer defending Google from a challenge based The search engine companies serve their to the dealer's site to consider a Ford on the sale of advertising "keyed" to ads based on the highest bids. Google, for truck rather than a Chevy truck. search terms claimed by the plaintiff as its example, delivers its keyword ads Keyword advertising has been challenged exclusive trademark. adjacent to its regular Web search results. in multiple jurisdictions. The U.S. Court of Foreign courts are also hearing keyword Compared to the banner ads randomly Appeals for the Ninth Circuit recently held advertising challenges and, in several high served in the Internet's early days, that sale of third-party trademarks as profile cases, have held search engines keyword advertising is considered a highly keywords, under certain circumstances, liable for selling trademarks as keywords. effective form of marketing. For instance, may subject a search engine company to For example, a German court found Excite a dealer in antique books may drive traffic trademark liability. In Playboy Enter. Inc. v. liable for selling the keywords "Estee to her web site by having her ad served Netscape Comm. Corp., 354 F.3d 1020 Lauder," "Clinique" and "Origins" to a when an individual enters an online (9th Cir. 2004), the court found that the company that sold various beauty search for "first edition books." Marketers sale by search engines of the terms products, including Estee Lauder's. find keyword advertising particularly cost- "playboy" and "playmate" as advertising effective; with keyword advertising keywords in 1998 and 1999 may have What's a Brand Owner to Do? programs, marketers often pay only when caused consumers to initially (and Companies have developed a number of a user clicks through to their websites. incorrectly) believe that unlabeled banner approaches for dealing with use of their ads triggered by the keywords were The practice of selling keywords to the trademarks as advertising keywords. Playboy's. The search engines, because highest bidder has become big business. Recognizing the benefit of keyword of the "initial interest confusion" created by According to one industry report, keyword advertising, some companies simply have their serving of unlabeled banner ads, advertising is the leading growth area in opted to buy their own trademarks from could be liable for infringement and dilution.

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PALO ALTO AUSTIN KIRKLAND NEW YORK RESTON SALT LAKE CITY SAN FRANCISCO wsgr.com Keyword Advertising BEWARE OF RISKS IN COMPARATIVE ADVERTISING

Continued from Page 1... Aggressive advertising that compares your • Avoid comparing trivial or dissimilar product company's products or services to those of features, which might imply that there are search engines to prevent others from your competitors can be extremely effective. more significant differences between the doing so. Others are challenging the It's attention-grabbing and can have a real products than there actually are. impact on discriminating customers. advertisers directly, alleging trademark • Be particularly vigilant if you are in the Comparative advertising, though, poses infringement, dilution, or unfair medical or health field, or offer products or particular liability risks and often can trigger a competition. And others are requesting services for children. Government agencies challenge from an agitated competitor or the that the search engines cease selling and courts are especially concerned about government. We thus strongly encourage their trademarks. Google, for example, in these kinds of advertising claims. response to a trademark owner's clients to subject their comparative advertising • Make sure that advertisements that run reasonable request, will stop selling to to thorough pre-publication review. outside the are evaluated by third parties ads keyed to the owner's Best Practices For Comparative foreign counsel. Restrictions on comparative trademarks. See Advertising advertising are more severe in many foreign http://www.google.com/tm_complaint.html. Here are some general guidelines for jurisdictions, including most of Europe. The The law relating to keyword advertising is minimizing the risk and maximizing the power Internet, in particular, may create extra- still evolving. If your company needs of your company's comparative advertising: territorial concerns not present in other guidance in dealing with these legal advertising media. • Substantiate Your Factual Statements issues, please touch base with one of the - Make sure that all factual claims about your Challenges to Comparative attorneys in our Trademarks and Advertising Claims Advertising Practices Group. product and your competitor's product are truthful and not misleading. Competitors can file a challenge to your comparative advertising in state or federal - Make sure that you have substantiation for court, alleging violation of state and federal verifiable claims before the advertisement advertising, unfair competition and trademark runs. It may not be sufficient to produce law. Competitors may seek court orders to support for the claim at a later time, after block your comparative advertising, court the validity of the claim has been orders requiring your company to engage in challenged. Verifiable claims include claims corrective advertising, and monetary damages. that your product is "equivalent to," "superior to," or "compatible with" your Competitors may also make a challenge via competitor's; claims that your product the Council of Better Business Bureau's outsells a competitor's; and claims that National Advertising Division (NAD), which is your product is preferred by customers an advertising industry self-regulatory body. when compared to a competitor's. NAD provides an informal, relatively inexpensive process to adjudicate advertising - If possible, use a neutral or independent disputes. Decisions issued by the NAD are not source to substantiate your claims . binding and the NAD cannot enforce Maintain records of the results. injunctions or monetary awards. Parties • Do not use a competitor's name or brand in a generally abide by NAD rulings, though, way that suggests affiliation, sponsorship or because failure to do so can result in a referral Trademarks & Advertising Practices: approval. to the Federal Trade Commission (FTC) for Andrew Bridges John Slafsky - Avoid any suggestion of affiliation, investigation. Partner Partner 650•320•4861 650•320•4574 sponsorship or approval by a competitor. The FTC can initiate proceedings against a Consider identifying your competitor as the company it believes is engaging in improper © 2004 Wilson Sonsini Goodrich & Rosati, owner of its trademark and including a comparative advertising. Professional Corporation disclaimer of association. Our Trademarks and Advertising Practices This information is provided for your information only and is not intended to constitute professional advice - Do not use, modify or satirize your Group has considerable experience with as to any particular situation. competitor's tagline or logo. Such use may counseling and litigation related to comparative not be considered a fair use under 650 Page Mill Road Palo Alto, CA 94304-1050 advertising. Feel free to contact one of the Tel: 650-493-9300 Fax: 650-493-6811 trademark law. attorneys in the group if you would like to e-mail: [email protected] • Avoid comparisons that may be considered discuss your comparative advertising plans or www.wsgr.com All rights reserved. by a court as unfairly attacking or degrading a the campaigns of your competitors. competitor's product.

2 PALO ALTO AUSTIN KIRKLAND NEW YORK RESTON SALT LAKE CITY SAN FRANCISCO wsgr.com