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Advertisers Are Free to Buy Search Ads With Rival's Trademark

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By Stephanie Rabiner, Esq. on March 14, 2011 6:46 AM

The 9th Circuit recently determined that it is not de facto trademark infringement when a company purchases a competitor's trademark as a keyword. That way, the company's product will show up under a search engine's sponsored links when a user searches for the competitor's product.

Network Automation owns AutoBase, while Advanced Systems Concepts owns ActiveBatch. Both products are scheduling and management software and are direct competitors.

In order to advertise its product, Network Automation purchased the keyword "ActiveBatch" on Google Adwords and Microsoft Bing. The result is when a user searches for ActiveBatch, an advertisement and link for Network Automation appears in the sidebar or above the objective search results. These links are clearly marked as sponsored.

Advanced Systems Concepts sued, alleging trademark infringement.

The purpose of trademark infringement law is to prevent consumer confusion. Courts balance a multitude of factors when assessing confusion, including similarity of marks and products, technology, context and consumer knowledge. Advanced Systems Concepts believes that the use of its mark is misleading customers, whereas Network Automation feels that it is providing "sophisticated consumers with clear choices."

The 9th Circuit did not explicitly decide whether or not Network Automation infringed upon its competitor's trademark. Instead, it took to task the District Court for being too rigid in its assessment of the facts.

The Internet changes the game of trademark infringement, according to the court. Context and user sophistication play an important part in the assessment. A plaintiff simply can't presume, because the marks match, that a consumer is confused.

The court acknowledges that the advertisements did not identify their source. But, it also believes that Internet users are savvy, and in the context, they very well could have recognized the links as from a competitor. After all, they were labeled as sponsored.

In the end, the 9th Circuit sent Network Automation and Advanced Systems Concepts back to the District Court. If they continue to litigate, expect a lot of testimony about whether their customer base can read search engine results.

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