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LEGAL UPDATE

Many savvy Internet users are no longer content to be surfers, riding the waves of the Internet, drifting where the tides of hyperlinks may take them. Instead, users who value efficiency and time head straight to a search engine, where they enter keywords for the specific topic or company they are interested in finding. Businesses expect that if these users enter their name as a keyword, the search engines will provide a list of relevant web sites, including a direct link to their business. What many businesses do not realize, however, is that a banner advertisement for a competitor may also appear above the list generated by such a search.

In making the millions of pages that compose the World Wide Web accessible to consumers, search engines, such as Yahoo!, Alta Vista, and Infoseek, provide an essential service. Since they do not charge the consumer for these services, search engines seek to profit by selling advertising space on their web pages, mainly in the form of eye-catching banners at the top of the screen. Advertisers may target specific consumers by purchasing the rights to keywords from the search engines, which then place the banner advertisement on the web pages generated by a search using the purchased keywords. For example, if you are craving an Italian repast and enter “pizza” into a search engine, not only will a list of pizza-related links appear, but also a banner ad for whichever company purchased the keyword “pizza.”

While the practice of keyword advertising may at first seem innocuous, businesses may be dismayed to discover that keyword rights to their trademarked words are available for purchase as well. Not only can a business purchase “pizza,” but it could also purchase keyword rights to “Pizza Hut” or “Domino’s.” Then, when a user enters “Pizza Hut,” a large and attractive ad for the competitor would appear above the search results listing Pizza Hut’s official web site. Not having a strong preference for a particular pizza brand, the hungry user might be seduced into clicking on the banner, which provides a direct link to the competitor’s site. Thus the competitor has diverted interest away from the company holding the trademark for the keyword. In some cases, the consumer might be initially confused by the appearance of the ad, thinking that it was somehow endorsed or connected to the trademarked name entered in the keyword search. While some feel the businesses purchasing these ads are “cyberparasites,” whose actions amount to trademark infringement, trademark dilution, and unfair competition, recent developments in the law suggest this practice may be legal in some circumstances.

Keyword advertising is yet another example of how the Internet is posing complex and interesting problems for intellectual property law. This issue is only just beginning to be addressed in the courts, with judges and lawyers alike adapting traditional trademark law to solve this issue. The federal Lanham Act protects trademarks against infringement and unfair competition if someone uses another’s valid trademark in a way that would cause confusion among consumers as to the nature or affiliation of the goods or services. This law also protects famous trademarks from dilution, without requiring proof of a likelihood of confusion among consumers.

In a recent case, Playboy Enterprises, Inc. (“Playboy”) sought a preliminary injunction against Netscape Communications Corp. (“Netscape”) for trademark infringement, dilution, and unfair competition for selling “playboy” and “playmate” as keywords for banner advertisements. The U.S. District Court for the Central District of California denied Playboy a preliminary injunction, holding that Netscape’s activities were a fair use because it was using the terms as common English words, and not as trademarks. The court also concluded that Netscape’s actions were not likely to confuse the consumer and that Playboy had failed to show any harm to its trademarks.

If the court’s reasoning in the Playboy case is accepted by other courts, a business may have a difficult time prevailing against someone who purchases their trademark as a keyword if the trademark has an equivalent common English meaning. However, a case has yet to be decided where a trademarked keyword has no common English definition. This issue was addressed indirectly in a case filed in the Ninth Circuit by Brookfield Communications, Inc. against West Coast Entertainment, Corp., where the court held that the use of the trademark “MovieBuff” in a metatag constituted infringement. Metatags are keywords or phrases embedded in a website’s HyperText Markup Language (HTML) code that are invisible to the user, but detectable by search engines. Nevertheless, in the Brookfield case, the court permitted the defendant to keep the term “movie buff” in its metatag because it was a commonly-used term that an English-speaking person might fairly use.

The Ninth Circuit also recognized that the use of a trademark in a metatag may constitute actionable “initial interest confusion” when the user’s search with the trademarked term produces competitors’ websites using this metatag. By analogy, it could be argued that the use of a trademarked keyword, having no English definition, as a means of triggering a competitor’s flashy banner advertisement, could cause similar initial interest confusion, diverting business away from the trademark holder. Some argue, however, that this promotes healthy comparative shopping that is beneficial to consumers.

Persons concerned with the practice of keyword advertising can visit the website BannerStake (www.bannerstake.com) to see which businesses have purchased specific keywords. This site displays all the banner advertisements that appear on the various search engines based on the keyword entered. Companies who discover that someone has purchased their trademark may wish to seek legal guidance while this issue is being resolved in the courts. Failure to take proper steps to protect a trademark may place the strength of the trademark at risk. Latham & Watkins is an international law firm with approximately 1,000 attorneys and offices in Chicago, Los Angeles, New Jersey, New York, Orange County, San Diego, San Francisco, Silicon Valley, Washington, D.C., Hong Kong, London, Moscow, Singapore and Tokyo. Perry J. Viscounty is a partner in the Orange County office of Latham & Watkins and is chair of the firm’s Litigation Department. His practice focuses on intellectual property litigation, prosecution of trademarks and copyrights worldwide, and counseling. Mr. Viscounty can be reached at (714) 755-8288 or email: perry.viscounty@lw.com. Ashley A. Johnson is a summer associate in the Orange County office of Latham & Watkins. The authors wish to thank Morris Thurston, a partner in the Orange County office of Latham & Watkins, for his contribution to this article. Latham & Watkins paid for this space and is solely responsible for its contents.

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