Legal issues in Internet selling

Written on 01 June, 2006 by Netregistry
Categories E-commerceTags adwordsgooglekeywords

Despite its borderless nature, the internet is not a lawless zone, and businesses need to consider some emerging legal issues when conducting sales and marketing activities in cyberspace.

KEYWORD ADVERTISING, an increasingly popular marketing tool, involves the purchase of a particular search term from a search engine (such as Google or Yahoo!), so that entering that term as part of a search string triggers the appearance of the keyword purchaser’s advertisement on the search results page. Google’s signature keyword advertising system, Google AdWords, is an example of such a system.

In order to increase its search engine advertising exposure, a business will usually purchase commonly-searched keywords. However, these keywords are often trade marks owned by third parties. The practice of ‘buying’ someone's registered trade mark as a search term has caused consternation among trade mark owners, both in Australia and overseas.

Does keyword advertising (using another’s trade mark) breach the Trade Marks Act?

If the purchased keyword is identical to a registered trade mark, or is substantially identical or deceptively similar to a registered trade mark, and it triggers an advert for a product similar to the product to which the trade mark relates, the trade mark owner may bring an action for infringement under the Trade Marks Act 1958.

However, in Australia at least, it is not clear whether the trade mark owner would succeed in such an action. This is because there is some uncertainty as to whether, in such circumstances, the keyword purchaser is actually using the mark ‘as a trade mark’, that is, as a badge of origin (which is one of the requirements under the Act).

Further, even if the trade mark owner can establish that use in this context is use ‘as a trade mark’, in certain circumstances, there may be a further defence under the Act that such use is unlikely to confuse or deceive the user into associating the advertised product with the trade marked word.

The argument here is that web users are accustomed to seeing advertising on search engines, and will not necessarily associate the triggered advert with the keyword used in the search. This may be especially so if the advert is clearly labelled as distinct from the results themselves, such as in Google AdWords, where adverts appear in a sidebar under the heading ‘Sponsored Links’.

What other actions could a keyword purchaser face? Even if a keyword purchaser can avoid liability under the Trade Marks Act, it may still need to contend with actions brought under the Trade Practices Act 1974. In particular, a trade mark owner may attempt to rely on section 52 (which prohibits misleading or deceptive conduct) and section 53 (which provides that a company must not represent that it has a sponsorship, approval or affiliation that it does not have).

Indeed, the ACCC recently wrote to the Trading Post, expressing concern that the Trading Post’s purchase of a competitor’s name, ‘Stickybeek’, as a keyword, was “potentially misleading, as internet users might mistakenly believe that [the Trading Post’s] autotrader website was affiliated with Stickybeek’s business”. Although the Trading Post did not admit that its conduct breached the Trade Practices Act, it has since agreed to stop using competitors’ names and trade marks in sponsored links on the internet.