Canada: Utah Legislation For ‘Electronic Registration Marks’ Delayed

In February 2007, the Utah legislature approved legislation establishing a new type of ‘electronic registration mark.’ The legislation amends the state’s Trademark Protection Act and is intended to target the practice of advertisers bidding on or buying keywords that reflect competitors’ trade-marks, in order to trigger the display of their advertisements when the competitor’s trade-mark is searched using a search engine.

The legislation passed without a dissenting vote, and despite a statement from the Utah State General Counsel that it offered a high probability of being challenged in court and found unconstitutional. It had initially been set to take effect on April 30, 2007. It was subsequently reported in the press that implementation would occur on June 30, 2007. However, following a late-April meeting between legislators and objecting search engine representatives (including Google, AOL, Yahoo, Microsoft and others), the Utah governor has reportedly delayed implementation of the legislation for at least several months. Changes to the legislation are currently being considered.

News reports alleged that Google had been considering filing a lawsuit in opposition to the legislation. Google’s position was that US law does not forbid advertisers from attempting to gain their competitors’ customers, and that it does prohibit use of a rival’s trade-mark in content of advertising text. However, it allows advertisers to bid on the right to use a competitor’s brand as a search keyword to trigger display of advertising. Google had also reportedly offered to target advertising to a city level, based on a consumer’s Internet Protocol address. However, it did not address concerns that such technology is imperfect and would not address the issue that other third-party advertising platforms may not operate with Google’s level of technology or sophistication.

Meanwhile, at the time the legislation was passed, a legislative review note had also been released by the Utah State Legislature (Office of Legislative Research and General Counsel). The note stated that because the amended Act is aimed at the use of user-entered search terms to trigger advertisements, a state’s regulation of keywords on an Internet search engine may potentially impact interstate commerce. The legislation may therefore have a high probability of being found to be unconstitutional.

In its current form, the legislation’s general description states that it establishes a "new type of mark, called an electronic registration mark, that may not be used to trigger advertising for a competitor and creates a database for use in administering marks."

It aims to make illegal the use of a competitor’s keyword or phrase to trigger an advertisement online. Practically, the legislation may result in the requirement that search engines check a database of electronic registration marks to avoid displaying offending ads, in addition to checking every advertisement request to see if the advertiser or seller was based in Utah, in case of electronic registration conflicts. Some key points to consider include the following:

• The goal is to prohibit the use of an electronic registration mark to trigger advertising for a business, goods or services of the same class as those represented by the electronic registration mark.

• ‘Electronic registration mark’ is defined as "a word, term or name that represents a business, goods or a service."

• An application for an electronic registration mark can be filed using similar information as a trade-mark application (including goods/services, date of first use anywhere and in commerce), and two specimens and a fee (to be determined, up to a maximum of US$250 annually for one class, with additional classes at a maximum of US$25 each annually). The registration division may request that the applicant provide a statement confirming whether an application for the mark or portions thereof has been filed with the United States Patent and Trademark Office (USPTO) and any related information, including reasons for refusal or lack of registration.

• The legislation does not appear to provide for substantive prosecution objections, or challenge or oppose applications.

• The legislation does not appear to provide for cancellation procedures other than expiry due to failure to renew. (Note: A statement of use must be submitted in order to renew an electronic registration mark.)

• An electronic registration mark typically has a five-year term (renewable for additional five-year terms).

• No sunrise period is provided for owners of trade-mark registrations with the USPTO to file corresponding applications for electronic registration marks.

• The legislation allows for civil action for acts involving the use of the electronic registration mark to "cause the delivery or display of an advertisement" (with similar classes of goods or services or in a way likely to cause confusion), if display of the advertisement is in the state or the advertiser or seller is located in the state. No specified criteria exists for establishing likelihood of confusion.

• The legislation provides that no damages are recoverable unless there is intent to cause "confusion or mistake" or to "deceive."

• The legislation provides for the creation and maintenance of a searchable database of marks by the Division of Corporations and Commercial Code (within the Department of Commerce).

Theoretically, the legislation addresses a serious concern of trade-mark owners for whom courts have not definitively settled the issue of use of their marks by competitors as keyword advertising. Court actions in recent years have yielded inconsistent rulings, some of which are overturned on appeal.

Practically, the legislation raises many questions for both advertisers and trade-mark owners in Utah and elsewhere. Would the display of a website viewable in Utah that advertises goods or services be considered the display of an advertisement in Utah? How well will electronic registration marks and the system for applications and registrations in the USPTO coexist? How could a trade-mark owner (particularly a common law mark owner) challenge or oppose an electronic registration mark? Will electronic registration mark applications be prosecuted substantively, or will they be granted as long as formal filing requirements are met? Would the legislation prevent reasonable comparative advertising, and/or availability to consumers of comparative information? Would the legislation survive a legal challenge? Will other jurisdictions follow suit?

In the end, it may be prudent at least for those whose businesses have a connection with Utah to preserve their rights by applying for electronic registration marks reflecting their trade-marks once the legislation comes into force, and to monitor the evolution of this legislation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.