Contextual advertising litigation heats up

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Marketers who participate in contextual advertising programs benefit from a greater ability to target the right customers at the right time with a significant impact on online earnings.

These programs serve ads to Web sites based on the content of the Web site. For example, a contextual advertising program may serve ads about diet and fitness products to a Web site featuring news and information about health issues. The ads may be served as text or graphics in the form of a "pop-up" or "pop-under," or appear on Web page space specifically reserved for such ads. Search engines also use contextual advertising to display targeted ads on search results pages.

Previous cases

Previous litigation against contextual advertising involved adware companies that delivered pop-up advertisements promoting competitors' Web sites when Internet users visited sites such as Overstock.com and 1-800 Contacts.com.

Those cases had mixed results, with some courts finding that such business practices constituted legitimate comparative advertising no different than displaying low-cost generic brands next to name brands on grocery store shelves. The most recent iteration in this line of cases comes from American Airlines, which sued Google in August for selling advertisements on search results pages for "American Airlines" to Web sites promoting cheap airfare.

Domain name parking trends

Domain name "parking" services have added a new dimension to contextual advertising. Parking services offer commissions to domain name registrants who allow contextual advertising to be served to their unused domain names. Owners of parked domains earn money on a pay-per-click basis each time someone clicks on an ad.

While the pay-per-click model is often a harmless revenue generating mechanism, it also allows domain name registrants a means of generating profit through the registration of domain names that infringe on another's trademark - also known as "cybersquatting" or "typosquatting."

WIPO investigates cybersquatting

In April, the World Intellectual Property Organization (WIPO) reported that the number of Internet domain name cybersquatting suits filed with WIPO's Arbitration and Mediation Center increased by 25 percent in 2006. WIPO attributed this increase to several factors, including the rapid growth of domain name parking services and pay-per-click revenue sharing. According to WIPO, a significant share of the more than 100 million domain names that are registered belong to "domainers" that park large portfolios of domain names.

A class action lawsuit filed in June 2007 by Vulcan Golf, LLC names four leading domainers and Google as defendants participating in an "illegal infringement scheme" carried out through Google's AdSense for Domains service, which provides contextual ads to parked domains.

Aside from legal questions about trademark use and class certification that the court must resolve, the case raises the issue of whether an advertising provider like Google has an obligation to police the domain names to which it serves ads.

This task could prove to be impossible given the volume of participants in contextual advertising programs. If a court determines that the program provider is contributorily liable for serving ads to infringing Web sites, it would likely follow that the domain name registrar responsible for registering the infringing domain would also be liable.

The technology changes, but marketers need to be, as always, vigilant in protecting their trademarks and careful that they do not infringe upon the rights of others.

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