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Using Competitor’s Trademark as Advertising Keyword Deemed Infringement

Insight February 26, 2011

The U.S. District Court for the Central District of California recently ruled that the purchase of a competitor's registered trademark through Google Inc.'s AdWords program for sponsored keyword advertising on the search engine website constituted "use in commerce" under the Latham Act. 

          Trademark owners scored a recent victory in the ongoing battle over the use of trademarks as keywords for online searching.  On January 25, 2011, the U.S. District Court for the Central District of California ruled that the purchase of a competitor's registered trademark through Google Inc.'s AdWords program for sponsored keyword advertising on the search engine website constituted "use in commerce" under the Latham Act. 

             Plaintiff, Binder & Binder, is a law firm specializing in assisting clients in claiming benefits from the federal government's Social Security Disability Insurance and Supplemental Income programs.  The firm owns three federal trademark registrations for the terms "Binder & Binder," "Binder and Binder," and for a logo showing the terms in a design.  Defendant, Disability Group of Santa Monica, California, serves similar clientele.  In 2006, it began an advertising campaign which included purchasing ads on Google's search engine keyed to the term "Binder and Binder."  Plaintiff sued, alleging trademark infringement and false representation under federal law as well as unfair competition under California state law.

             The Court first found that Defendant's violated the federal Latham Act which requires a plaintiff to prove 1) that it is the rightful owner of a registered trademark; 2) that the defendant used in any reproduction, counterfeit, copy or colorable imitation of a mark without the plaintiff’s consent, in commerce, in connection with the sale, offering for sale, distribution or advertising of any services; and 3) where such use is likely to cause confusion, or to cause a mistake or to deceive.

             Recognizing that Plaintiff owned a valid trademark, the Court found that Defendant's purchase of "Binder and Binder" as an AdWord and the resulting Google advertising keyed to the mark constituted a "use in commerce."  The Court went on to find that the similarity of the trademark and AdWord, the similarity of the services offered, Defendant's intent and the overlap in the parties' marketing channels all weighed in favor of finding a likelihood of causing confusion of potential clients.  The Court also found actual confusion of potential clients based on evidence that included a survey and witness testimony.

             The Court went on to find liability under the federal statute for false advertising as Defendant used Plaintiff's mark to market its own business in a manner that was "likely to confuse" potential clients and that deceived potential clients into thinking they were being led to Plaintiff's website.

             Also noteworthy is the Court's lost profits calculation.  The Court considered the average revenue per California case for Plaintiff during a one year period, the number of clicks, the number of clicks that turn into submissions, and the number of submissions that turn into cases.  Click-to-submission rations were used to determine the redirected traffic results and $146,117.60 was the total lost profits.

             While the court acknowledged lasting negativity in the marketplace, the lack of specific, quantifiable evidence as well as the limited time frame mitigated against any corrective advertising damage award.  However, finding that Defendant's infringement was willful, the Court increased the award to $292,000 and allowed for recovery of attorneys' fees and costs.

             There are several important takeaways from this case.  First, relief was only possible because Plaintiff's registered the mark used by Defendant.  Second, companies should  consider the Court's award of lost profits, enhanced damages, and the possible recovery of attorney fees and costs when assessing which advertising keywords to purchase.  For more information, please contact a member of the firm's Trademarks & Copyrights law group at http://www.rimonlaw.com/practice/trademarks-copyrights.