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Friday, April 06, 2007

Guest Blog: Utah Trademark Protection Act

By Matthew Prince
Adjunct Professor of Law
John Marshall Law School

There have been a number of questions surrounding the Utah Trademark Protection Act (SB236) and the new Electronic Registration Mark the act creates. In order to understand the new law, it is important to understand the problem it addresses.

If you ask people how Google makes money, the answer inevitably comes back either: 1) "I don't know" or 2) "They sell ads." The later is correct, however it misses the most interesting part of the story. Google, and other search engines, as well as popup advertisers, like WhenU.com, sell what is referred to as "keyword" advertising. Ads are triggered based on searches that are run or terms that appear on web pages. In other words, a dentist with a liberal attitude toward nitrous oxide could buy the term "pain free dentist, utah" and whenever someone searched for that term, or surfed to a page that contained it, the dentist's ad would appear.

The above example of the dentist is not controversial. What is controversial, on the other hand, is when the keyword being purchased is a trademark of another company. Companies spend millions of dollars to create brands and trademark law has existed for decades on the state, federal, and international levels in order to protect that investment. Contrary to the protection trademarks are supposed to afford, the current practices of search engines and pop-up advertisers allow competitors to inexpensively capitalize on the goodwill of a brand in order to promote themselves.

A recent example illustrates the point. You may have seen a televised advertising campaign to promote Pontiac brand cars. "Pontiac" is a trademark of the General Motors corporation. The ads encouraged viewers to go to Google and search for "Pontiac" in order to learn more. To General Motors' surprise, Mazda had purchased the keyword "Pontiac" and viewers were shown ads for the competitor's cars. A substantial portion of the attention Pontiac had spent millions of dollars generating for their own brand was diverted by Mazda. This diluted Pontiac's brand and was essentially a form of corporate identity theft. Imagine if the same thing happened to your company -- and without Utah's law there is nothing stopping it -- and you can understand why Pontiac was so upset.

It may seem Pontiac could have protected themselves by purchasing ads for their own trademark. Unfortunately for trademark holders, however, the systems search engines run typically works as an auction. Generally, the more money you bid, the more likely it is your ad will appear. If Pontiac had bid for their trademarked keyword, Mazda could have simply bid more. This creates an arms race that benefits no one other than the search engine or pop-up advertiser. Even if a company is able to buy up all the search terms around their brand -- as Pontiac has subsequently done -- why should they have to? Doing so is the equivalent of paying protection money to secure rights that should already be protected by law.

Several trademark holders have sued disputing the practice of search engines and popup advertisers. Unfortunately for the mark holders, courts evaluating the cases have said the Lanham Act, the federal trademark law, never contemplated this situation. That is not surprising since the Lanham Act was implemented before the Internet and the idea of a search engine was even a twinkle in Al Gore's eye. The lack of clarity in existing trademark law has meant courts have had to tell brand holders who need this protection that they must look to the legislatures and clear up the law. That, of course, is what SB236 was passed in order to do.

It is important to note that Utah's legislature, in enacting the Trademark Protection Act, was not making up wholly new rights. In fact, with the exceptions of the United States and Canada, in most countries the practice of using someone else's trademarked term to trigger an advertisement is considered a violation of trademark law. Google, and other search engines, respect international law and will not use registered trademarks in order to trigger ads that appear in overseas (see Page 13 of this PowerPoint presentation from Google's own attorneys where they explain the company's policy).

Try it yourself. As I write this, if you search for "BMW" at www.google.de -- the German version of Google's site -- you get only ads that are friendly to the car company. If you search for "BMW" on www.google.com -- the U.S. version of the site -- the first ad that appears in the right hand column is for Infiniti. The Trademark Protection Act merely extends the same rights already enjoyed by mark holders throughout the rest of the world to Utah.

While undoubtedly search engines, popup advertisers, and their supporters will rail against the Utah Trademark Protection Act, the vast majority of companies in the world, who rely on brands to sell their products, will see it as a benefit.

Utah has long prided itself as a business-friendly state. Utah's offering enhanced protections to trademark holders through the creation of the Electronic Registration Mark proudly continues this tradition.

16 Comments:

Anonymous Gus said...

NICK DOUGLAS -- Thailand will continue banning YouTube even though the user who posted a video mocking the king has taken it down. (There are still two pics on YouTube, says Thailand, that harm the king's sensitive sensibilities.) But Google says they'll work with Thailand to help censor YouTube.

So, let me get this straight, Google will go out of its way to protect the feelings of the king of Thailand, but says they won't take steps to protect the brands that companies in Utah spend millions of dollars to establish and protect with trademarks?

Hmmm....

4/06/2007 6:30 PM  
Anonymous Anonymous said...

"Contrary to the protection trademarks are supposed to afford, the current practices of search engines and pop-up advertisers allow competitors to inexpensively capitalize on the goodwill of a brand in order to promote themselves."

You offer no proof that it is "inexpensive". Having purchased keywords on AdWords before, it can get frightfully expensive. Or, as I illustrate below, it could cost Pontiac nothing.

"The ads encouraged viewers to go to Google and search for "Pontiac" in order to learn more."

There should be no legal protection afforded to firms who elect to delegate responsibility for advertising to third parties. Pontiac pointing people to Google is moronic, since Pontiac has no way of controlling what Google's top search results will be (let alone the ads). Last I checked, Pontiac has their own Web site, and their advertising should direct them to it.

"This diluted Pontiac's brand and was essentially a form of corporate identity theft. Imagine if the same thing happened to your company -- and without Utah's law there is nothing stopping it -- and you can understand why Pontiac was so upset."

And so there should be laws against Mazda ads appearing in newspapers on the same page as those bearing references to Pontiac? How about laws against Mazda billboards being within sight of a Pontiac dealership? Or perhaps laws against Mazdas being parked in a spot adjacent to Pontiacs? Or Mazda dealerships being located across the street from Pontiac dealerships? Or Mazda Yellow Pages ads appearing in "Automobile Sales-New", since Pontiac has an ad there? Or magazines doing competitive reviews of Mazdas and Pontiacs? Or bloggers using hyperlinking the word "Mazda" in the same paragraph as having the word "Pontiac"? In all these cases, information about Mazdas is being presented in close proximity to information about Pontiacs, just as is the case with the Google AdWords purchase.

"Doing so is the equivalent of paying protection money to secure rights that should already be protected by law."

Except that Google AdWords only cost money if people click on them. One can argue that Pontiac "buying up" keywords for searches on "Pontiac" costs them no money, because people will probably click on the search results rather than the ads.

"in most countries the practice of using someone else's trademarked term to trigger an advertisement is considered a violation of trademark law"

You're a law professor who seems incapable of providing citations for claims such as these. I pity your students.

4/09/2007 4:08 PM  
Anonymous Gus said...

Dude - this is a blogsite, not a legal brief. If the professor made this page any more text-heavy I would have hung myself.

Want citations? Go smack a cop.

4/09/2007 4:47 PM  
Blogger Mike said...

You seem confused about the purpose and intent of trademark law. It is not designed to give the mark holder full and total control over the mark, but simply as a tool for consumer protection. The idea is that the consumer should not be confused into thinking that he is buying a Pontiac when he is buying a Mazda.

However *advertising* against a well known trademark can and should be perfectly legal.

You cite the Pontiac ad, but you ignore the fact that Pontiac brought this on themselves by pointing people to Google. Why the Utah gov't needs to protect Pontiac from a bad advertisement strategy is not explained.

Based on your reasoning, super markets should not be allowed to put Coke and Pepsi on the same shelf. After all, if I'm looking for Coke, and I get to that shelf and see Pepsi is priced $0.20, isn't that unfair to Coke? By your reasoning it absolutely is. Now imagine some no frills cola. They'd TOTALLY be living off the brand goodwill associated with Coke and Pepsi.

Will the Utah gov't now pass a bill banning putting Coke, Pepsi and any other soda on the same shelf? By the reasoning behind this law, no competing products should ever be allowed to appear next to each other. After all: that would "allow competitors to inexpensively capitalize on the goodwill of a brand in order to promote themselves." And, according to your logic, that's as problem.

That's why this law is a burden and why it's a bad law for commerce in Utah and outside the state.

4/09/2007 11:40 PM  
Blogger Locke said...

Searching for "BMW" on google may bring up an infiniti ad, but it also brings up 5 ad links to BMW dealerships not to mention the pages of search results, www.bmw.com being the first. This is about competitive advertising, the consumer is given a choice as to which of these links he/she may follow, and there is no reason to believe that having a 3-line text ad for Infiniti show up on a BMW search in any way dilutes the brand.

4/10/2007 12:44 AM  
Blogger Simon Howard said...

I disagree that the situation you describe "was essentially a form of corporate identity theft". It was an oversight on the part of the Pontiac marketing department, and their own fault. If they were seriously directing people to search on Google, they should have done their homework and considered this possibility.

Adverts on Google are clearly shown separately from actual search results. This is analogous to a Pontiac salesroom complaining of identity theft because a billboard next to it is showing a Mazda advert. Or a Mazda advert being shown during an episode of "Top Gear" where Pontiac cars are being reviewed.

I'm worried that this sets a dangerous precedent in the powers companies may have over search engines. It's not too hard to imagine a situation in several years time where companies are given absolute control over use of their trademarks in search results, able to silence any criticism of their brand.

4/10/2007 9:00 AM  
Blogger Phillip Rhodes said...

Wow, this guy is totally clueless for a so-called "law professor." Remind me to drop whatever school he teaches at from consideration, if I ever decide to go get a law degree.

Simon Howard nailed it exactly in his response, so I can't really ad anything more than that. The ads *are* clearly distinct from the organic search results, and Pontiac's website is almost certainly still the top search result for "Pontiac" regardless of what ads Mazda may have purchased. If this example is meant to justify the Utah law, it fails miserably.

4/10/2007 9:17 AM  
Anonymous Hessian said...

Pontiac should have said their absolute URL instead of "Google Pontiac". That is a failer of their marketing deparment, that now has egg on their face.

4/10/2007 4:27 PM  
Anonymous Anonymous said...

About the only real argument in favor of this law that holds any water is that Google is profiting by someone searching for "Pontiac" on their site, in a manner that conceivably harms Pontiac. In that sense, they're "using" Pontiac's name, and shouldn't benefit from brand confusion.

But the argument about the billboard next to the car dealership makes a lot more sense. People will still find the search results they want, even with the ad there (and if they click "I'm Feeling Lucky," they'll never even see the Mazda ad). If you can find the Plymouth dealership, then it shouldn't matter if there's a huge Mazda billboard next door.

Take this law to the next logical step and things get scary. If you can get protection for a search term such as "Apple," for example, then that means nobody can advertise for search results on "Apple" except for Apple Computer, right? What about Apple Music (The Beatles)? What about Washington State apple growers? What about Fiona Apple? This gets very ridiculous very quickly.

4/10/2007 4:52 PM  
Blogger Kevin said...

You have failed the first step in defense of your argument: defining the problem.

There was no trademark violation. No one confused Mazda for Pontiac, save for perhaps some hillbilly who doesn't know which of The Internets he uses when he uses The Google to view his ranch in Texas. So what is the real motivation for the law? Your own words demonstrate that the "protection" the brand holders seek is protection from competition not from trademark infringement. Really. It's subtle, but it's there. Didn't know you did that, did you?

So, unless I'm mistaken, I'm pretty sure most Republicans and probably a good portion of Democrats have some theory about allowing free market forces to determine this kind of stuff. Nice try on naming the bill as you did. The true name is "Reducing Competitiveness in the Marketplace Act". This will tie in well with the excellent Patent and Copyright laws that big business have usurped for themselves.

Oh, and do you really think it's helpful to tell middle America that we should have laws similar to Germany? I don't think their nationalistic fervor would allow that.

BTW, if you decide to use any of my advise or comments to your benefit be advised that I own the copyright and trademark.

Update: I just searched for Pontiac on Google and the one sponsored ad at the top was for Pontiac.com. On the right hand side the first link was for Milwaukee Pontiac Dealers. I'm in California! So what were these guys saying about localized, targeted ads? Yeah, that's what I thought.
Did I mention I wanted the City of Pontiac? Why is this car company's ads hijacking the city's rightful place? Matthew?

4/11/2007 4:01 AM  
Blogger Misty said...

This is just plain silly! I cannot see any logic behind this. Especially when you get into the details.

This article is akin to fear-mongering. There isn't a problem, so one gets invented, so that a magic fix can be applied, which wouldn't fix the problem even if it did exist.

4/16/2007 7:14 PM  
Anonymous Jeff said...

“It’s one of those situations where a powerful constituent wanted redress for their grievances, and a legislator jumped to, put together a pretty ill-advised bill and got it through a lazy state legislature. Now it’s on its way to going down to defeat at the hands of Google’s high-powered attorneys.”

I found a gentleman who offered that up today. More on his perspectives as well as my own here.

http://xr.com/f93

4/18/2007 2:33 PM  
Blogger Lewcifer said...

The argument made by the author is completely bogus. Trademark law already provides a remedy for the trademark holder to pursue the infringer, which typically includes treble damages. In addition I argue that, depending on how the advertising is done, there may not necessarily be any infringement... If a Pontiac billboard ad appears in my area, there should be no prohibition against an adjacent billboard for Lexus comparing its offering against Pontiac. Plain and simple. When did people become so brain-dead simply because the medium by which the message is delivered changed, when the messages themselves haven't changed. It's a shame this country lacks more intuitive and insighful people such as myself.

4/28/2007 12:03 PM  
Anonymous Anonymous said...

what this "law professor" failed to mention is that he is the CEO of Unspam, the company that is bidding on the contract to run the registry for this law (and has a vested interest in seeing it be enacted)
This is the same company that is trying to extort money out of companies who engage is email marketing by charging an obscene amount money to check against a BS child Do not email registry.
it's a total scam and this guy is a fool

5/07/2007 10:40 AM  
Blogger DEANER said...

World class rock straight out of Wells, Nevada.
Check out my rough drafts at http://hdeanberry.com.
Thanks for your time.

6/10/2007 5:01 AM  
Blogger Mark said...

Thank you anonymous for pointing out how convenient it is that a trademark law was passed that directly effects the IT community without any weighing in by IT experts except for Unspam, the company who will be powering these tools to "save trademark law".

Utah politics stink.

People seem to be missing a major point though - TRADEMARK LAW IS FEDERAL JURISDICTION NOT UP TO THE STATES!!! This isn't a state issue but a federal issue. Do I file my patents with Utah? No, I file with federal, national governments.

9/19/2007 1:11 PM  

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