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Adwords Create Potential Liability

Dec. 01, 2014|By Gregory B. Collins


A recent consumer survey concluded that internet marketing now has a greater impact on consumer spending than conventional television and radio advertising.  But, as recent court decisions demonstrate, internet marketing should be undertaken—just as television and radio advertising was in the past—with one eye focused on creating sales and the other eye focused on avoiding legal exposure.

The goal of most internet marketing campaigns is to drive traffic to your website.   Google and Yahoo! now offer a service that helps accomplish this goal.  Google calls its pay service “AdWords.”   AdWords allows advertisers to choose words and phrases that, when searched by users through Google, result in the advertiser’s website being displayed alongside the search results.  Yahoo!’s service, Sponsored Search, works in much the same way.  These services have become an invaluable tool for businesses that rely on internet traffic and sales.

But problems can arise when a company selects AdWords that are the same or similar to its competitor’s trademarks.   Unfair competition laws such as the Lanham Act create liability for deceptive and misleading practices that are likely to confuse the public as to the source, affiliation, and sponsorship of goods.   Arizona and California federal courts have concluded that even if consumers are not actually confused, advertisements can still violate the Lanham Act.  A business may be held liable simply for using its competitor’s trademarks in a manner calculated to capture initial consumer attention.  As an Arizona Federal District Court recently found inSoilworks, LLC v. Midwest Ind. Supply, Inc., 575 F.Supp.2d 1118 (D. Ariz. 2008), this type of “initial interest confusion” is exactly what a business seeks to create by selecting AdWords that are the same or substantially similar to its competitor’s trademarks.

Because of recent court rulings, like this one, the safe course for any business is to refrain from using its competitors’ trademarks in Google AdWords or Yahoo! Sponsored Search campaigns.  To do otherwise, risks being sued and potentially being forced by a Court to pay a competitor every penny of revenue earned using a competitor’s trademarks as AdWords—a double whammy that not only hurts a business but also aids the business’ competitor.

In addition to reevaluating the use of AdWords, businesses should also consider whether their competitors are misusing this tool.  Every business should Google search and Yahoo! search itself.  If you discover that your competitor’s name appears on ads in response to your Google search, you may want to consider filing a complaint with Google and Yahoo!.  Both Google and Yahoo! have complaint procedures for companies that believe their trademarks are being misused on the internet.  If these procedures are unsuccessful, and your competitors continue to benefit from your name, you should consult an attorney.

If used properly, internet marketing—including Google AdWords and Yahoo! Sponsored Search—is very effective.  But use of Google AdWords and Yahoo! Sponsored Search can be illegal.  A successful company needs to navigate carefully when using these valuable marketing tools.

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