Google Adwords And The Use Of Competitors' Trade Marks On The Internet

Mark Vincent is the lead Intellectual Property Partner at Truman

Hoyle Lawyers in Sydney. Mark advises clients on media and

intellectual property disputes, transactions and strategy. Megan

Edwards has recently joined the IP and Media Group at Truman Hoyle

from the in-house team at the Australian Broadcasting Corporation

and brings a wealth of experience in dealing with the application

of legal principles to new media and technology.

This paper will examine the interesting and complex legal

questions involved in assessing and applying legal principles to

online interaction and competition. The focus is on AdWords and the

use of a competitor's trade marks on the internet. We examine

the position in Australia with a focus on the competition

regulator's challenge to Google's AdWord practices,

together with a survey of some interesting and contrasting

approaches in the USA and the UK.

Google AdWords are a highly successful form of advertising and

account for most of Google's revenue1.

"Keyword" advertisements currently represent the leading

area for growth in online advertisements. Prior to the rise in

success of keyword advertising the focus was on "banner"

ads and before that "popup" ads and "meta tag"

use. As technology changes, the possibility of legal challenge to

each new practice is very real. The challenge of applying existing

legal principle to new situations provides some inconsistent

results making it difficult for those at the cutting edge to get

complete certainty of their legal position. Added to this

uncertainty are the problems faced by companies such as Google when

operating a single global platform across all of the jurisdictions

of the world whilst accommodating all of the varied social,

political and legal policies.

An "AdWord" may be auctioned by Google to any trader.

When those keywords appear in a search request, the purchaser of

the "AdWord" is able to advertise its business on a

screen alongside the search results on a "pay per click"

basis. The author typed in "Ricoh" as a search term in

Google on 4 April 2008 and the second ranking result on the

"sponsored links" side of the page was for "Sharp

Copiers Newcastle". On the Sharp website the author clicked

through to, the author could see no sign of Ricoh copiers or other

Ricoh equipment on sale. Thus a competitor can purchase its

rival's trade mark as an AdWord and attempt to divert a

percentage of its rival's internet traffic towards its own

website. In this way, it is entirely possible that a trader with no

reputation at all can get its goods brought to the attention of a

consumer through association with another well known brand. Like

the positioning of products on a supermarket shelf with

"no-name" brands alongside other better known brands to

encourage sales, Google and its competitors will increasingly play

roles as the intermediaries in sales and they will be able to sell

the rights to place products and services in front of a consumer,

alongside other better known products and services. Is this fair

competition or an attempt to divert customers by misleading or

deceptive conduct?

Recent Australian Developments

The Australian Competition and Consumer Commission

("ACCC"), a statutory body charged with examining

competitive practices in Australia, has filed an action in the

Australian Federal Court against Trading Post Australia and Google

in relation to advertising practices. The case against Google

alleges misleading and deceptive conduct under section 52 of the

Trade Practices Act (1974) (Cth) ("TPA"). The

Trading Post purchased names of car dealerships which it was not

affiliated with on a price per click basis to divert traffic to the

car trading section of its website. On 4 October 2007 Google's

Notice of Motion to strike out the claim was dismissed. Orders made

by the Court on 27 August 2008 require Google to attend to the

filing of amended defences by 1 October 2008 with lay evidence to

be filed by 27 February 2009. The next directions hearing is listed

for 12 December 2008, with no hearing date confirmed as yet. The

ACCC alleges that2:

there is inadequate distinction made between search results and

"sponsored links" on advertising;

the term "sponsored links" is itself misleading;

the appearance of "sponsored links" on the left hand

side of the page, rather than on the right hand side with other

advertising, confuses consumers;

on occasion, Google is said to highlight the keyword selected

by a user within an advertisement unconnected to the keyword;

and

where results relate to common subject matter such as cars,

they are more likely to deceive.

The ACCC's lawyers have stated:

"It is not to the point that users may, over time,

learn to discern advertisements from search results, to disregard

the title of an advertisement and to have sole regard to web-site

addresses. Indeed the difference between those who are misled and

those who are not may simply be the number of times such users have

clicked on an unhelpful result unrelated to their query."

3

Google has defended its sponsored link advertising practices,

claiming the ACCC's allegations are an attack on all search

engines and Australian businesses that use Google to connect with

customers.4 The Trading Post has settled with the ACCC

and was excused from taking any further steps in the proceedings by

orders of Allsop J on 8 April 2008.

Of interest is that the ACCC action against Google in Australia

is not based upon trade mark infringement. Assuming that Google

allowed purchase of a registered trade mark by a competitor,

section 120 of the Australian Trade Marks Act (1995) (Cth)

dictates that an alleged infringer must use the trade mark "as

a trade mark". Use "as a trade mark" requires a

connection between the appropriator's goods or services and the

trade mark use.5 Particularly with the purchase of

AdWords, there is no visible use of the requisite AdWord made by

either Google or the "appropriator". Generally, the only

person using the AdWord is the searcher for goods and services.

Such use by the searcher cannot easily be deemed to be use by or on

behalf of the "appropriator" or Google. Thus there are

real problems in identifying any relevant use of a trade mark in

the Google AdWord practices. The difficulties of using trade mark

law to attack the AdWords service are discussed in several US and

UK decisions referred to below.

The ACCC in the Australian Trading Post matter seems to

base its case upon an inability of consumers to distinguish

advertising from genuine search results. Such confusion seems

over-stated, particularly where the advertisements identify the

businesses which they are advertising. Any momentary confusion is

ultimately resolved when the consumer fails to find the goods or

services in question after a click through. The ACCC also alleges

additional instances where competitor names appear re-produced in

advertising content. This comes much closer to misleading conduct

although each case would depend on its facts as to whether the

precise wording could confuse consumers as to the origin of the

advertisement and the goods or services on the advertiser's

website.

Survey of Australian Law

Appropriation of consumer interest does not necessarily involve

any trade mark infringement or misleading conduct under Australian

law. A good example is the defence available to an action for trade

mark infringement in Australia for comparative

advertising6. There is a deliberate "gap" in

Australian law which could be described as "misappropriation

without misrepresentation". Such misappropriation

generally lacks a remedy in Australia. As the Australian High

Court's Justice Dean said in a famous passage in the

Moorgate7 case where he rejected the existence

of a tort of "unfair competition" or "unfair

trading":

"The rejection of a general action for 'unfair

trading' does not involve a denial of the desirability of

adopting a flexible approach to traditional forms of action when

such an approach is necessary to adapt them to meet new situations

and circumstances. [However]... [n]either legal principle nor

social utility requires or warrants the obliteration of that

boundary by the importation of a cause of action whose main

characteristic is the scope it allows, under high-sounding

generalisations, for judicial indulgence of idiosyncratic notions

of what is fair in the market place." 8

Nevertheless, this lacuna in Australian law

("misappropriation without misrepresentation") has often

been filled by the significant area for discretion allowed to

Australian judges when implementing Part 5 of the TPA. In

particular, actions for misleading and deceptive conduct and

wrongful claims of affiliation or endorsement under sections 52 and

53 respectively of the TPA (which now largely encompass the common

law tort of passing off) have allowed judges to come up with a

series of interesting decisions which seem to reflect the moral or

ethical judgment reached by the court rather than a rigorous

insistence on true misrepresentation. There remains room for doubt

and unpredictability as to precisely how AdWord cases and other

novel approaches to diversion of consumers' attention on the

internet will play out in Australia. The need for care by Google

and others in these new practices surrounds the importance of

ensuring that in no sense should consumers be misled or confused as

to origin, affiliation or endorsement of the goods or services that

are presented to them.

Some of the cases which in the author's opinion have led to

liability travelling beyond a true connection to misrepresentation

include Red Bull Australia Pty Ltd v Sydneywide Distributors

Pty Ltd9 and Pacific Dunlop Ltd v

Hogan10. To quote a well known passage from the

Hogan case in the judgment of Burchett, J who said, while

considering this case on appeal:

"In my opinion, the vagueness of the suggestion

conveyed in this case is not sufficient to save it. That vagueness

is not incompatible with great effectiveness...