Keyword Advertising Infringement: Recent Updates

Keyword advertising—particularly the practice of bidding on a competitor’s trademark as a search engine keyword—has generated significant trademark litigation over the past decade. The question of when competitive keyword advertising crosses from permissible competition into actionable trademark infringement has been the subject of evolving case law in the federal circuits, with courts reaching increasingly consistent conclusions that favor advertisers in many circumstances. Here is what businesses need to know about the current state of keyword advertising trademark law.

How Keyword Advertising Works

Search engines like Google sell advertising placements that are triggered when users search for specific terms. Advertisers bid on keywords—including competitors’ trademarked brand names—to have their ads appear when users search for those terms. A user who searches for “Brand X software” may see a paid advertisement for “Brand Y software” at the top of the results page. The advertiser is using Brand X’s trademark as a keyword trigger, but Brand X’s mark does not necessarily appear in the advertisement’s visible text.

This practice creates obvious competitive tension. Trademark owners argue that competitors who bid on their marks are free-riding on their brand equity, diverting customers who specifically sought their products. Advertisers counter that appearing alongside a competitor in search results is no different from placing an advertisement in the aisle adjacent to a competitor’s product in a physical store—fair competition, not infringement.

The Trademark Infringement Test Applied to Keywords

Trademark infringement under the Lanham Act requires use of a mark in commerce in connection with the sale of goods or services, plus a likelihood of confusion as to source, sponsorship, or affiliation. Both elements have been extensively litigated in the keyword advertising context.

Use in Commerce

Courts have generally found that purchasing a competitor’s trademark as a keyword constitutes use in commerce within the meaning of the Lanham Act, because the advertiser uses the mark as part of a commercial process to trigger the display of its advertisements. This issue was debated extensively in early keyword cases but is now largely settled in favor of the plaintiff’s position on this threshold element.

Likelihood of Confusion

The likelihood of confusion analysis is where most keyword cases are actually decided. Courts examine the familiar multi-factor test, with particular focus on the context of the advertisement and whether consumers would be confused about the source or affiliation of the advertised goods or services.

The Ninth Circuit’s decision in CollegeSource, Inc. v. AcademyOne, Inc. is instructive. In that case, two competing services for college transfer credit evaluation were in dispute, with CollegeSource alleging that AcademyOne’s keyword bidding on its trademark created consumer confusion. The Ninth Circuit found the confusion analysis highly fact-specific and required more detailed examination of the actual consumer experience—including the visual presentation of the advertisements and what a reasonable consumer would understand from them.

The Initial Interest Confusion Theory

Some plaintiffs have argued that keyword advertising creates “initial interest confusion”—a form of confusion that occurs not at the point of purchase but at the moment of initial consumer attention. Under this theory, even if a consumer ultimately recognizes that the advertiser is a competitor rather than the trademark owner, the advertiser has unfairly captured the consumer’s initial attention by trading on the trademark owner’s brand equity.

Courts have become increasingly skeptical of initial interest confusion claims in the keyword advertising context. The Ninth Circuit’s Network Automation, Inc. v. Advanced Systems Concepts, Inc. decision significantly limited the doctrine’s application online, holding that sophisticated Internet users understand the distinction between paid advertisements and organic search results and are unlikely to be confused by competitor ads appearing in response to a trademark search.

When Keyword Advertising Does Create Liability

Keyword advertising is most likely to create trademark liability when the advertisement itself—not just the keyword trigger—uses the competitor’s trademark in a confusing way. Specific risk factors include:

• The advertisement’s headline or body text includes the competitor’s trademark in a way that implies affiliation, sponsorship, or authorization
• The advertisement’s landing page makes misleading comparisons or implies a relationship with the trademark owner
• The advertiser uses the trademark in metatags or in ways that create confusion beyond the search results page
• The advertiser specifically targets consumers who are clearly looking for the trademark owner’s specific products (rather than a category of products)

Google’s own advertising policies have evolved to address some of these concerns. Google’s current policy generally permits competitors to bid on trademarked keywords but restricts the use of trademarked terms in ad text in ways that are likely to confuse consumers about the source or affiliation of the advertised products.

Nominative Fair Use as a Defense

Even when a competitor’s trademark appears in an advertisement’s text, the nominative fair use doctrine may provide a defense. Under nominative fair use, established in New Kids on the Block v. News America Publishing, Inc., 971 F.2d 302 (9th Cir. 1992), a defendant may use a plaintiff’s trademark to refer to the plaintiff’s own goods or services when (1) the product or service in question is not readily identifiable without use of the trademark, (2) only so much of the mark is used as reasonably necessary to identify the product or service, and (3) the defendant does nothing to suggest sponsorship or endorsement by the trademark owner.

Comparative advertising—”Our product costs 30% less than Brand X”—is a paradigm case of permissible nominative use. Keyword advertising that triggers a competitive ad without using the trademark in the ad text is also generally permissible.

Protecting Your Brand from Keyword Infringement

If competitors are bidding on your trademark as a keyword and using your mark in their ad text in ways that mislead consumers, you have potential remedies. The first step is monitoring: review search results for your trademark and document instances of confusing competitive advertising. If you identify problematic uses, consult a trademark attorney to assess whether the specific conduct crosses the line from permissible competition to actionable infringement.

Revision Legal’s trademark attorneys advise both brand owners seeking to protect their marks from competitive keyword misuse and businesses defending against keyword advertising trademark claims. Contact us for a consultation on your specific situation.