The legal tangle of competitive keyword advertising

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Earlier this month, 1-800Con­tacts filed a trademark infringement complaint against its competitor, Lens-World, for allegedly purchasing the keywords “1-800Contacts,” “1800Con­tacts” and “1 800 Contacts” for its online advertising.

The advertiser vs. advertiser keyword lawsuit is one of many battling it out in the courts over the past couple of years, according to Eric Goldman, an assistant professor at the Santa Clara University School of Law. Since 2006, there has been a slew of  these cases, he said.

However, the rulings in these cases have not reached any sort of consensus and have instead reflected a deep divide in opinions, Goldman said. “It's hard to predict what's going to happen because the courts are just split,” he said.

Matt Naeger, VP and general coun­sel for search agency Impaqt, said that the 1-800 Contacts suit was moving in the right direction, as past lawsuits have been against the search engines.

Google, Yahoo and MSNall have policies in place that prohibit putting the name of a competitor's trademark in the text of an advertisement, according to Naeger. “But,” he said, “you can buy the keyword.”

Lack of federal legislation and search engine policing leaves search marketers the task of establishing their own poli­cies. People should not be bidding on key terms that they don't own the trade­mark for, said Erica Forrette, director of marketing for Adapt.

“If you own a trademark, you spent the resources and time to establish that name and brand,” she said. When a busi­ness bids on its competitor's trademark, she added, this clutters and dilutes that company's message. Unfortunately, the burden of proof falls upon the trade­mark owner.

John Tawadros, chief operating officer at iProspect, agreed. There's no reason why a company should be bidding on the trademark of its direct competitor, he said. It's a “misrepresentation” and misdirects users, he added.

There tends to be more competition for brand terms rather than for generic keywords, which increases the cost of purchasing these terms, he said. The problem is that it costs the brand owner a lot of money to purchase their own trademark as a keyword. And it falls upon the trademark owner to protect their brands, he said.

Tawadros said he didn't see a change is search engine policy addressing the is­sues. Either the courts or legislation will solve the problem, he said.

However, Forrette was in favor of a policy change from the search engines themselves. “The engines should really be the ones who protect advertisers,” she said.

To date, some state laws have been enacted to restrict certain types of keyword advertising. For example, Utah passed a law banning trademark-triggered keyword advertising. How­ever, the law has yet to be enforced, according to Goldman.

However, the purchase and sale of trademark keywords is a big business, Goldman concluded. And how it will play out is anyone's guess.

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