Google AdWords: Facilitating advertising, or trademark infringement?

Google AdWords is Google’s advertising product which offers pay-per-click (PPC) advertising, as well as placement targeted advertising for both text and banner ads. AdWords was Google’s main source of revenue in 2008, bringing in approximately $21 billion dollars. With PPC advertisements, advertisers can purchase a specific word or term that will trigger their ad so when a user searches on Google, ads that are related to the search terms will show up on the right side of the screen as “sponsored links”. Placement targeted advertisements, on the other hand, will be placed on relevant sites within Google’s content network according to the keywords, domain names, topics and demographic targeting preferences specified by the advertiser. Since ads are usually allotted the whole advertising space, as opposed to splitting the advertising block with 1-4 other ads, the placement targeted advertisements often result in higher visibility. 

Google AdWords has come under fire for allowing advertisers to purchase keywords and terms that are registered or common law trademarks of other companies. In 2007 the company Rescuecom, a US company providing on-site computer service and sales, sued Google for trademark infringement and dilution under the Lanham Act.  Rescuecom had registered their trademark; however, through advertising with Google, Rescuecom’s competitors were able to purchase Rescuecom’s trademark, resulting in users trying to find Rescuecom’s website being directed to a search results page full of links and ads for the competitors’ sites. Rescuecom’s action was dismissed because Google did not “use” Rescuecom’s trademark “in commerce” within the meaning of section 45 of the Lanham Act as the competitor’s ads did not display Rescuecom’s trademark.

So far in 2009, several new lawsuits have been filed against Google, including two class action suits, the focus of which is to recover damages and punitive fees from Google for trademark infringement. Any damage award or settlement would be split between class members. In May 2009, Firepond commenced a class action lawsuit against Google, MySpace, YouTube and others.  The key legal question will be whether Google’s sponsored links are sufficient to cause confusion among Internet-users. Firepond claims that the practice of sponsored links confuses their customers and re-directs a portion of their business to the competitors with ads on Google. Firepond argues that Google is aware that this practice will cause problems for trademark owners. In support of their position, Firepond was able to find a financial prospectus in which Google acknowledged that their new policy of no longer disabling ads, even if they display registered trademarks of third-parties, would likely lead to more trademark infringement lawsuits. Some commentators think the class action suit could be risky; if court does not find Google to be liable, then the class members are bound by the decision and cannot sue Google in their own action.

In the past, Google has required advertisers either own the mark, or have a licence from the trademark owner, before being able to use it in their ads. Obviously undeterred by the trademark infringement lawsuits, Google has recently lifted this policy, allowing businesses to use trademarks in text advertisements without having permission from the owner. It will be interesting to learn the outcome of the class action suits and if this outcome, whether or not it is favourable for Google, will cause Google to change their policies in order to avoid future lawsuits.