On April 3rd, 2008, the Second Circuit is scheduled to hear oral argument in Rescuecom v. Google (docket no. 06-4881-cv), which is another step in litigation over whether the sale of keywords is actionable under the Lanham Act. Last year, Google, Inc. and American Blind & Wallpaper Factory, Inc. settled Google's Northern District of California suit (docket no. 5:03-cv-05340-JF) in which Google sought a declaratory judgment that Google's sale of American Blind's trademarks as keywords was not trademark infringement. This commentary by Joseph N. Welch II examines the state of the law following the American Blind settlement and discusses the impact of the favorable settlement for Google. Mr. Welch writes:

Details of the document:


BACKGROUND

5 As this appeal follows the grant of a motion to dismiss, we must take as true the facts

6 alleged in the Complaint and draw all reasonable inferences in favor of Rescuecom. Lentell v.

7 Merrill Lynch & Co., Inc., 396 F.3d 161, 165 (2d Cir. 2005). Rescuecom is a national computer

8 service franchising company that offers on-site computer services and sales. Rescuecom

9 conducts a substantial amount of business over the Internet and receives between 17,000 to

10 30,000 visitors to its website each month. It also advertises over the Internet, using many web-


11 based services, including those offered by Google. Since 1998, "Rescuecom" has been a

12 registered federal trademark, and there is no dispute as to its validity.

13 Google operates a popular Internet search engine, which users access by visiting
www.google.com. Using Google's website, a person searching for the website of a particular 14

15 entity in trade (or simply for information about it) can enter that entity's name or trademark into

16 Google's search engine and launch a search. Google's proprietary system responds to such a

17 search request in two ways. First, Google provides a list of links to websites, ordered in what


18 Google deems to be of descending relevance to the user's search terms based on its proprietary

19 algorithms. Google's search engine assists the public not only in obtaining information about a

20 provider, but also in purchasing products and services. If a prospective purchaser, looking for

21 goods or services of a particular provider, enters the providers trademark as a search term on
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1 Google's website and clicks to activate a search, within seconds, the Google search engine will

2 provide on the searcher's computer screen a link to the webpage maintained by that provider (as

3 well as a host of other links to sites that Google's program determines to be relevant to the search

4 term entered). By clicking on the link of the provider, the searcher will be directed to the

5 provider's website, where the searcher can obtain information supplied by the provider about its

6 products and services and can perhaps also make purchases from the provider by placing orders.

7 The second way Google responds to a search request is by showing context-based

8 advertising. When a searcher uses Google's search engine by submitting a search term, Google

9 may place advertisements on the user's screen. Google will do so if an advertiser, having


10 determined that its ad is likely to be of interest to a searcher who enters the particular term, has

11 purchased from Google the placement of its ad on the screen of the searcher who entered that

12 search term. What Google places on the searcher's screen is more than simply an advertisement.

13 It is also a link to the advertiser's website, so that in response to such an ad, if the searcher clicks

14 on the link, he will open the advertiser's website, which offers not only additional information

15 about the advertiser, but also perhaps the option to purchase the goods and services of the

16 advertiser over the Internet. Google uses at least two programs to offer such context-based links:

17 AdWords and Keyword Suggestion Tool.

18 AdWords is Google's program through which advertisers purchase terms (or keywords).
19 When entered as a search term, the keyword triggers the appearance of the advertiser's ad and

20 link. An advertiser's purchase of a particular term causes the advertiser's ad and link to be

21 displayed on the user's screen whenever a searcher launches a Google search based on the
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Although we generally refer to a single advertiser, there is no limit on the number of 1
advertisers who can purchase a particular keyword to trigger the appearance of their ads.
5
1 purchased search term. Advertisers pay Google based on the number of times Internet users 1

2 "click" on the advertisement, so as to link to the advertiser's website. For example, using

3 Google's AdWords, Company Y, a company engaged in the business of furnace repair, can

4 cause Google to display its advertisement and link whenever a user of Google launches a search
5 based on the search term, "furnace repair." Company Y can also cause its ad and link to appear

6 whenever a user searches for the term "Company X," a competitor of Company Y in the furnace

7 repair business. Thus, whenever a searcher interested in purchasing furnace repair services from

8 Company X launches a search of the term X (Company Xs trademark), an ad and link would

9 appear on the searcher's screen, inviting the searcher to the furnace repair services of X's

10 competitor, Company Y. And if the searcher clicked on Company Y's link, Company Y's

11 website would open on the searcher's screen, and the searcher might be able to order or purchase

12 Company Y's furnace repair services.

13 In addition to Adwords, Google also employs Keyword Suggestion Tool, a program that
14 recommends keywords to advertisers to be purchased. The program is designed to improve the
15 effectiveness of advertising by helping advertisers identify keywords related to their area of
16 commerce, resulting in the placement of their ads before users who are likely to be responsive to
17 it. Thus, continuing the example given above, if Company Y employed Google's Keyword
18 Suggestion Tool, the Tool might suggest to Company Y that it purchase not only the term
19 "furnace repair" but also the term "X," its competitor's brand name and trademark, so that Y's ad
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1 would appear on the screen of a searcher who searched Company X's trademark, seeking
2 Company X's website.
3 Once an advertiser buys a particular keyword, Google links the keyword to that
4 advertiser's advertisement. The advertisements consist of a combination of content and a link to
5 the advertiser's webpage. Google displays these advertisements on the search result page either
6 in the right margin or in a horizontal band immediately above the column of relevance-based
7 search results. These advertisements are generally associated with a label, which says
8 "sponsored link." Rescuecom alleges, however, that a user might easily be misled to believe that
9 the advertisements which appear on the screen are in fact part of the relevance-based search
10 result and that the appearance of a competitor's ad and link in response to a searcher's search for
11 Rescuecom is likely to cause trademark confusion as to affiliation, origin, sponsorship, or
12 approval of service. This can occur, according to the Complaint, because Google fails to label
13 the ads in a manner which would clearly identify them as purchased ads rather than search
14 results. The Complaint alleges that when the sponsored links appear in a horizontal bar at the top
15 of the search results, they may appear to the searcher to be the first, and therefore the most
16 relevant, entries responding to the search, as opposed to paid advertisements.
17 Google's objective in its AdWords and Keyword Suggestion Tool programs is to sell
18 keywords to advertisers. Rescuecom alleges that Google makes 97% of its revenue from selling
19 advertisements through its AdWords program. Google therefore has an economic incentive to
20 increase the number of advertisements and links that appear for every term entered into its search
21 engine.
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1 Many of Rescuecom's competitors advertise on the Internet. Through its Keyword
2 Suggestion Tool, Google has recommended the Rescuecom trademark to Rescuecom's
3 competitors as a search term to be purchased. Rescuecom's competitors, some responding to
4 Google's recommendation, have purchased Rescuecom's trademark as a keyword in Google's
5 AdWords program, so that whenever a user launches a search for the term "Rescuecom," seeking
6 to be connected to Rescuecom's website, the competitors' advertisement and link will appear on
7 the searcher's screen. This practice allegedly allows Rescuecom's competitors to deceive and
8 divert users searching for Rescuecom's website. According to Rescuecom's allegations, when a
9 Google user launches a search for the term "Rescuecom" because the searcher wishes to purchase
10 Rescuecom's services, links to websites of its competitors will appear on the searcher's screen in
11 a manner likely to cause the searcher to believe mistakenly that a competitor's advertisement
12 (and website link) is sponsored by, endorsed by, approved by, or affiliated with Rescuecom.
13 The District Court granted Google's 12(b)(6) motion and dismissed Rescuecom's claims.
14 The court believed that our 1-800 decision compels the conclusion that Googles allegedly
15 infringing activity does not involve use of Rescuecom's mark in commerce, which is an essential
16 element of an action under the Lanham Act. The district court explained its decision saying that
17 even if Google employed Rescuecom's mark in a manner likely to cause confusion or deceive
18 searchers into believing that competitors are affiliated with Rescuecom and its mark, so that they
19 believe the services of Rescuecom's competitors are those of Rescuecom, Google's actions are
20 not a "use in commerce" under the Lanham Act because the competitor's advertisements
21 triggered by Google's programs did not exhibit Rescuecom's trademark. The court rejected the
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1 argument that Google "used" Rescuecom's mark in recommending and selling it as a keyword to
2 trigger competitor's advertisements because the court read 1-800 to compel the conclusion that
3 this was an internal use and therefore cannot be a "use in commerce" under the Lanham Act.

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