Canada: Keyword Advertising Decision Reversed On Appeal

In August 2015 we reported on the decision of the British Columbia Supreme Court ("BCSC") in Vancouver Community College v Vancouver Career College (Burnaby) Inc, 2015 BCSC 1470. That decision was notable in Canadian jurisprudence because it addressed the use of keywords in online advertising, and whether that activity can constitute passing-off (i.e. infringement of a common law trademark).

In particular, the BCSC concluded that purchasing a competitor's trademark as a keyword for search engines such as Google was not itself sufficient to constitute passing-off. In addition, the BCSC held that when determining whether the defendant's activity was likely to cause consumer confusion – an essential element of passing-off – the time to make that assessment was not when the consumer reviews the initial results page generated by the search engine, but instead once the consumer had reached the defendant's actual website.

In a decision issued on January 26, 2017 (2017 BCCA 41), the British Columbia Court of Appeal ("BCCA") overturned the above decision of the BCSC, reversing both the ultimate outcome of the action and also some of the legal points set out by the lower court regarding keyword advertising.

Background

The plaintiff, Vancouver Community College, alleged that the defendant, Vancouver Career College, misrepresented its educational services as those of the plaintiff, in part via keyword advertising. The plaintiff asserted common law trademark rights in the term "VCC" as a short form of its name.

The defendant adopted the domain VCCollege.ca for its website and as part of an advertising campaign the defendant purchased VCC as a keyword for the search engines Google and Yahoo!. As a result, users searching for VCC would receive a sponsored link to the defendant's website displaying the domain VCCollege.ca. Once on the defendant's website, however, the term VCC was not displayed, and in general it was apparent that the website related to the defendant and not the plaintiff.

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.

Lower Court Ruling

The BCSC acknowledged that 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, it was clear that it was the defendant's website and not that of the plaintiff. The BCSC 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 the earlier stage of the search engine results page. Consequently, the BCSC held that no misrepresentation had taken place, and that the defendant was not liable for passing-off.

Decision on Appeal

On appeal, the BCCA held that the lower court erred in assessing confusion only once the consumer reached the defendant's website. Instead, the BCCA found that the confusion may be assessed at the earlier stage of the search engine results page which displayed the defendant's sponsored link. In particular, it is well-established that the test for trademark confusion in Canada is one of the consumer's "first impression". The BCCA held that the consumer's first impression should be assessed at the earlier stage of the search engine results page, rather than waiting until the consumer reaches the defendant's website. At para. 55 Saunders J.A. states:

In my view, while the judge correctly referred to the first impression test, he erred in delaying its application to the searcher's arrival at the landing page, a moment well past the moment of first impression; the conclusion that the first impression does not occur until the searcher has reached a website by clicking on a search result, cannot be sustained on the authorities before us.

Applying the above principle to the facts of the case, the BCCA concluded that a misrepresentation by the defendant had taken place, and that the defendant was therefore liable for passing-off. In particular, the defendant's sponsored link on the search engine results page displayed the domain VCCollege.ca with no other content that would distinguish the defendant's business from that of the plaintiff. At paragraphs 70-71, Saunders J.A. states:

[...] It is apparent that there is nothing about the domain name "VCCollege.ca" that distinguishes the owner of that name from Vancouver Community College. The letters "ollege" added to the acronym "VCC" are as equally reminiscent of the appellant as the respondent, and there are no words or letters that disclaim affiliation with the appellant.

I conclude the second component of passing off, confusion, is fully established by proof that the respondent's domain name is equally descriptive of the appellant and contains the acronym long associated to it. In my view, it was an error for the judge to discount the likelihood of confusion before the searcher arrives at the landing page of the website.

However, the BCCA did not go so far as to find that purchasing a competitor's trademark as a keyword alone constitutes passing-off. At paragraph 72, Saunders J.A. states:

More significantly, the critical factor in the confusion component is the message communicated by the defendant. Merely bidding on words, by itself, is not delivery of a message. What is key is how the defendant has presented itself, and in this the fact of bidding on a keyword is not sufficient to amount to a component of passing off, in my view.

Thus, the BCCA affirmed the lower court's finding that merely purchasing a competitor's trademark as a keyword is not alone sufficient to constitute passing-off. What will matter instead is the nature and content of the sponsored link which appears as a result of the keyword, and the message which that conveys to the consumer.

Conclusions

While the BCCA decision reinforces the principle that purchasing a competitor's trademark as a keyword will not alone be sufficient to constitute passing-off, the decision suggests that the appropriate time to consider confusion is when the consumer views the search engine results page, and not solely the later point when the consumer reaches the defendant's actual website.

As a consequence, parties that purchase competitors' keywords as part of their advertising and search engine optimization strategy will want to take care that the manner in which their sponsored links are displayed on search engine results pages are not confusing with the trademarks of their competitors.

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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