AdWord sales are big business for internet search engines.
In many cases, brand owners will purchase their brand name as an AdWord to increase visits to their site.
However, it is also common practice for businesses to purchase third-party brand names as AdWords in order to either take business from competitors or ride on the coattails of a famous brand. The legality of this practice has been widely discussed in European and US cases.
This article looks at cases in the Asia Pacific region, namely Australia and China. Similar to cases in the US and Europe, much has relied on whether use of an AdWord was likely to confuse consumers.
While the issue is yet to be resolved by the highest court in either Australia or China, the cases below provide a good indication on how the law may eventually develop.
In Australian Competition and Consumer Commission v Trading Post Australia Pty Limited and Google Inc.  FCA 1086, the Australian Competition and Consumer Commission (ACCC) brought an action against Trading Post Australia (Trading Post) and Google Inc. (Google) for engaging in misleading and deceptive conduct under section 52 of the Trade Practices Act 1974 (Cth) (which is now the Competition and Consumer Act 2010) (Consumer Law).The ACCC is the statutory body responsible for enforcing the Consumer Law. With the exception of certification marks, trade mark enforcement is not part of the ACCC's statutory duties. For this reason, this case did not consider trade mark infringement.
The Trading Post allows individuals and businesses to buy and sell goods (including cars) through its classified ads. In 2005, it bought a number of AdWords from Google, including "Kloster Ford" and "Charlestown Toyota", both of which are names of local car dealerships.
When users entered the AdWords into the Google search engine, the Trading Post's advertisements and URL links to the Trading Post website would appear under the headline "Charlestown Toyota" or "Kloster Ford", depending on the AdWord entered. These advertisements appeared above the organic search results, and they were distinguished by the caption "Sponsored Links" and highlighted in blue shading.
The ACCC claimed that Google engaged in misleading and deceptive conduct by misrepresenting that the advertisements were organic search results.
The ACCC also claimed that the Trading Post engaged in misleading and deceptive conduct by using the AdWords to advertise its classified services.
The Federal Court found that:
- Google had not engaged in misleading or deceptive conduct because the disputed advertisements were clearly marked as such on the search results page. Users would know that the Trading Post's advertisements were not organic search results.
- The Trading Post engaged in misleading and deceptive conduct in relation to the Kloster Ford AdWord because use of that AdWord suggested that:
- There was an association between the Trading Post and Kloster Ford
- Information regarding Kloster Ford could be found on the Trading Post website
- Information regarding Kloster Ford car sales could be found on the Trading Post website.
None of the above was true.
Interestingly, the Federal Court did not find that the Trading Post's use of the "Charleston Toyota" AdWord was misleading and deceptive. This is because there was some evidence that, when the internet searches were undertaken, Charleston Toyota had advertised with the Trading Post, and therefore the above representations may have been true in relation to "Charleston Toyota".
In Australia, businesses that purchase third-party brand names as AdWords (and display the brand names in the advertised link) should ensure that the AdWords relate to the content of their advertised link. Otherwise they may be engaging in misleading and deceptive conduct.
WHAT IS AN ADWORD?
AdWords are words that advertisers can purchase from a search engine.
Whenever a user searches for a term that matches the AdWord, then the advertiser's advertisement appears as a link on the same page as the links of the organic search results.
In China, consumer confusion is a factor in deciding whether AdWords infringe trade mark rights. A court may also consider the harm suffered by the trade mark owner, including trade mark dilution.
What is the difference between advertising links and organic search results?
Organic search results are the results that most closely match the user's search request based on mathematical algorithms.
In almost all cases, the advertising links triggered by AdWords are distinguished from the organic search results by appearing under the heading "advertisement" or "sponsored link".
The advertising links also appear in designated places on the search results page, for example on the top or sides and often in different shading than the organic search results.
Like organic search results, advertising links triggered by AdWords are ranked in accordance with relevance; however, unlike organic search results, they are also ranked according to the amount of money paid by the advertiser.
In April 2010, the Beijing No. 1 Intermediate People's Court heard a trade mark infringement appeal by Babaike Software Technology Company (Babaike). Babaike claimed that the lower court erred in holding that Babaike's advertised links infringed the trade mark rights of its competitor, Beijing Wolisen Technology Ltd (Wolisen).
Babaike and Wolisen are both technology companies that specialise in Customer Relationship Management (CRM) software services. Wolisen registered the "XTOOLS" trade mark, which became relatively well recognised within the Chinese CRM software industry.
Babaike purchased "XTOOLS" as an AdWord from a popular Chinese search engine called Baidu.
Babaike then used the XTOOLS AdWord to link to its website under the headline "Babaike - the nation's most specialised xtools". The URL link to Babaike's website was www.800app.com
Babaike's website did not otherwise use the XTOOLS trade mark.
In the first instance, Wolisen claimed that Babaike infringed its XTOOLS trade mark.
Babaike asked that the Chinese search engine, Baidu, be joined in the proceedings as a co-defendant.
Wolisen, however, did not bring any claims against Baidu because Wolisen believed that Baidu had taken reasonable measures to protect brand owners against trade mark infringement, including:
- Requiring any business purchasing an AdWord to warrant that use of the AdWord would not infringe any third party trade mark
- Refusing to allow third parties to purchase well-known marks without authorisation from the trade mark owner.
- Removing any advertised link that infringed third party trade mark rights.
The lower court agreed with Wolisen in relation to both matters.
Babaike appealed on several grounds, including that use of XTOOLS in the advertised link did not amount to "trade mark use" within the meaning of the PRC Trade Mark Law and therefore there was no infringement.
The Beijing No. 1 Intermediate People's Court held that Babaike infringed the XTOOLS trade mark on the following grounds.
- Babaike used the XTOOLS trade mark for the purpose of promoting similar services.
- Under the Implementing Regulations to the PRC Trademark Law, "trade mark use" includes use of a trade mark in advertising and promotion.
- The court considered that the headline to Babaike's advertised link "Babaike the nation's most specialised xtools" was a type of promotion that would confuse consumers.
- Although consumers may know that the products or services offered on Babaike's linked website were sourced from Babaike, they may believe that Babaike and Wolisen were the same entity or had a certain association.
- Also, by using the XTOOLS mark, Babaike committed the following harms: it rode on the fame of Wolisen's XTOOLS mark; and it diluted the association between the XTOOLS mark and the trade mark owner, Wolisen.
The Appeal Court did not have to consider Baidu's liability as Babaike did not appeal this part of the lower court's decision.
Australian and Chinese courts have found that, in some cases, using third- party names or trade marks as AdWords can confuse consumers and could lead to breaches of the Consumer Law in Australia or infringement of trade mark rights in China.
This is particularly the case when an AdWord is featured in a headline to an advertised link, but the linked website is unrelated to the AdWord.
For example, a headline may feature an eye-grabbing brand name, but the branded products are nowhere to be found on the linked website. The precise boundaries on when it might be acceptable to use a third-party name or trade mark as an AdWord has yet to be settled by the highest courts in either Australia or China. In the meantime and based on current cases, businesses can reduce risk by not using third-party AdWords in their headlines or advertised links, and, if they do, businesses should ensure that the AdWord is directly related to the content of the linked website.
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