Canada: Canadian Court Finds That Keyword Advertising Does Not Constitute Passing Off

The recent decision of the Supreme Court of British Columbia in Vancouver Community College v Vancouver Career College (Burnaby) Inc, 2015 BCSC 1470, addresses an interesting trademark issue in the context of online advertising. In particular, the law in Canada regarding keyword advertising and whether it constitutes trademark infringement or passing off, has been relatively undeveloped. This decision addresses the issue of keyword advertising in greater detail than other Canadian decisions to date. 

Introduction

In this case, the plaintiff, Vancouver Community College alleged that the defendant, Vancouver Career College, misrepresented its educational services as those of the plaintiff, primarily via keyword advertising but also by other means. The plaintiff asserted common law trademark rights in the term "VCC" as a short form of its name. The evidence indicated that both parties for some time had used the short form VCC internally to refer to their respective institutions, but only the plaintiff had actively marketed itself publically using the term. 

Background on keyword advertising

Keyword advertising services such as Google AdWords allow an advertiser to pay to have its advertisement associated with specific keywords, so that when those keywords are searched using a search engine, the advertisement is displayed as a "sponsored link" along with the "organic" links generated by the search engine. Advertisers can place bids for certain keywords with the search engine, and the value of the bid will be a factor in determining the rank in the list of sponsored links when that keyword is searched. These "sponsored links" are different from the organic search results produced by the search engine algorithm, and are typically clearly distinguished from organic search results, often by placement or font colour.

It is a well recognized strategy for advertisers to purchase keywords relating to a competitor (e.g. the competitor's business name or trademark), such that the advertiser's sponsored link is displayed when a consumer searches for the competitor. This is precisely the strategy that was at issue in this case. 

Facts

The evidence indicated that the plaintiff had marketed and referred to itself in the short form as VCC from 1965 to at least until 1990. Use of the term VCC in the plaintiff's marketing materials appears to have ceased after 1990, but recommenced in 2013.

As part of an extensive advertising campaign beginning in 2009 to promote the defendant's institution, the defendant purchased VCC as a keyword for the search engines Google and Yahoo! Users searching for VCC would receive a sponsored link to the defendant's website. At the same time, the defendant adopted the domain VCCollege.ca for its website, though it did not otherwise use the term or refer to itself as "VCCollege". The defendant also purchased a series of other domains which included the term VCC, including my-VCC.com, VCC-bc.com and VCC-canada.com but did not operate websites at these domains.

The plaintiff filed evidence from numerous students and prospective students who used online search engines to search for the term VCC, and who were ultimately directed to the defendant, mistakenly thinking it was the same institution as the plaintiff. However, the defendant's website itself did not use the term VCC or any other mark in which the plaintiff asserted rights and it was apparent that the website related to the defendant and not the plaintiff. In addition, before enrolling with the defendant, prospective students were required to attend an on-campus interview where signage clearly referring to the defendant was displayed, and sign forms which also clearly referred to the defendant.

Analysis

In order for a plaintiff to succeed in an action for passing-off, it must establish the following:

  1. goodwill in the mark being asserted and that the mark has acquired secondary meaning among consumers (i.e. that consumers see the mark as distinctive of the plaintiff);
  2. the defendant has misrepresented its goods/services as those of the plaintiff leading to a likelihood of confusion amongst the relevant consumers; and
  3. the plaintiff has been damaged as a result.

While ultimately the plaintiff failed to satisfy the first factor in this case - being unable to demonstrate the requisite distinctiveness in the mark VCC - it is the Court's analysis of the second factor, misrepresentation, which is of particular interest. Specifically, as a result of having searched for the plaintiff's institution by entering the term VCC into a search engine, consumers might have been initially led to the defendant's website by virtue of the defendant's sponsored link. However, once on that website, the Court held that it was clear that it was the defendant's website and not that of the plaintiff. The Court held that the relevant timeframe for assessing whether confusion had taken place was when the consumer had reached and viewed the defendant's website, and not before. 

This finding is notable because it suggests that the appropriate time for assessing confusion is only once the consumer reaches the defendant's website, not when the search results page is displayed. 

More generally with respect to keyword advertising, the Court stated as follows:

A bid on a keyword may send a searcher to the bidder's landing page, but the process of the search is controlled by the searcher and the search engine, not by the advertiser. Google and other providers of search engines generate revenue by offering an efficient bidding process. I cannot conclude that the defendant causes confusion by taking advantage of this service offered by Google.

As a consequence, the Court held that no misrepresentation had taken place, and that the defendant was not liable for passing off.

If you have any questions regarding the above decision or the use of keyword advertising under Canadian law, please do not hesitate to contact a member of our Domain Names & Internet Law group.    

The preceding is intended as a timely update on Canadian intellectual property and technology law. The content is informational only and does not constitute legal or professional advice. To obtain such advice, please communicate with our offices directly.

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