Second Circuit Promotes Confusion Regarding Trademark
How much TM protection is too much?
When you use any "free" Google product (search, email, YouTube, etc.) Google displays some sponsored ads -- AdWords -- most notably on the right side of the screen. Other websites (most commonly blogs) also include these text-only ads on their websites.
AdWords is an incredibly successful program. Google's innovation has been to mine anonymous user data to narrowly target the ads, displaying only ads relevant to a user's search or the content of an email or blog post. Both Google and the site owner gain revenue from displaying the ads, the advertiser gains access to the narrow subset of consumers most likely interested in what the advertiser is promoting via the ad.
As an example if you email your friend about coaching little league baseball, and you happen to mention that you live in San Francisco, you'll likely see AdWord ads for the Giants, Major League Baseball, and maybe someone like Easton, a maker of baseball bats. Old news, right? This all makes sense. The baseball emailer isn't stuck skimming ads about perfume or a shoe sale at Neiman Marcus or low-cost flights to London -- those ads would feel irrelevant, and would be a waste of everyone's time and money.
More controversially, Google also made a practice of selling ad space based on the user's input of trademarked terms. So if I did a search for "SF Giants," the official trademark of a professional baseball team, an ad for the Giants' hated rival, the LA Dodgers, or for MLB fans against steroids might show up. Makes sense, right? Why always preach to the converted; sometimes it's most effective to spread a message to those who might be directly opposed.
More importantly, because Google was willing to sell the rights to any term to the highest bidder -- regardless of who owned the trademark -- to anyone who wanted to buy those rights, Google removed the need for them to make any decision about who should or should not be able to advertise to whom. As such, Google refrained from refusing to allow anyone to speak (so long as they were willing to pay for the ad). In so doing, they also refrained from infringing on any person's First Amendment right to speak and express themselves freely.
Problems arise because there is only a limited amount of real estate available for ads on any given web page. As such, company A's competitor, company B could, theoretically, buy up all access to A's available ad space in order to promote B's product. So while a search for A would show A's website as the first search result, all of the ad's next to that link would point to B's products... and there would be nothing that A could do to stop it.
When this started happening, a number of companies in A's situation felt that their opponents were playing dirty. Worse, they felt that Google, in selling their trademarked company or product name, was violating their right to control those words, which they owned. So, of course, they sued Google.
Trademark law, fundamentally, balances the need of a company to develop a brand and the need of consumers to know the source of a product (important when evaluating aspects such as quality or reliability) against constitutionally-protected free speech.
The first court to hear this challenge to Google's practice felt that Google was balancing free speech and trademark rights in an acceptable manner. The plaintiff appealed, and the Second Circuit this week overruled the lower court's decision. In seeking a middle-ground, however, the Second Circuit muddied the waters.
Today's ruling does not say that buying or selling a trademark as a search keyword necessarily infringes the trademark. The trademark owner still must prove that consumers are confused. The Second Circuit seemed to think that was shield enough for the likes of Google.
But this ignores the financial realities of litigation, and how those realities condition the business decisions of intermediaries. Google and advertisers who participate in the AdWords program have been targeted nationwide in a large number of lawsuits. The Second Circuit's ruling today makes it difficult for these defendants to get rid of these cases on purely legal grounds. Litigating a trademark case past this point, to summary judgement or trial, requires a substantial financial investment that most companies simply won’t want to make, even if they are confident they will win in the end. (Witness Blockshopper’s decision last month to settle with Jones Day after BlockShopper lost its motion to dismiss Jones Day’s trademark suit, even though the case was was widely ridiculed as preposterous.)