Adwords Advantage - commercially and legally sound or not?

04 May 2016

#Intellectual Property

Adwords Advantage - commercially and legally sound or not?

It is common for business owners with a strong on-line product offering (“Advertiser”) to purchase an Adword advertising campaign through Google Inc to maximise their exposure on the internet. Through a method of search engine optimisation, the Advertiser can elevate the position of their website link when a potential consumer undertakes a keyword Google search. The keyword search is the Advertiser’s link to the consumer and by causing the consumer to open their link first or at least, for their advertisement/website link to appear on the first opening page, the Advertiser hopes to secure a sale from that consumer.

In some cases, the Advertiser has attempted to obtain a business advantage over a competitor by using the competitor’s trade mark as their key word in the AdWords campaign. Google Inc will not query ownership of the keyword nor whether the action is legal. The Advertiser signs an agreement with Google Inc which will ensure the Advertiser’s compliance with the law but more importantly, provide an indemnity to Google Inc for implementing the campaign. The business risk resides with the Advertiser.

Once the campaign is implemented, a consumer will type in the keyword in their Google search to find suppliers of the products or even the product itself (often the same name) and as well as the competitor’s website link appearing, the Advertiser’s link will also appear.

The issues that arise at law are:

  • Is the use of the keyword by the Advertiser in its Adwords campaign infringement of the competitor’s registered or unregistered trade mark(s);
  • Should an advertiser be able to obtain an unfair commercial advantage by manipulating the search engine processes and “trade off” the competitor’s brand name; or
  • Does the consumer think or is likely to be confused into thinking that the Advertiser and the competitor are related, associated with one another or the Advertiser is sponsored by the competitor.

These issues were examined recently in a judgement of the Federal Court Case of Australia handed down on 21 March 2016, Veda Advantage Limited v. Malouf Group Enterprises Pty Ltd [2016] FCA 255. The Veda Group operates a consumer credit business and keeps credit information files on individual members of the public. It has registered trade marks for the word only trade mark “Veda” or other trade marks containing that word. The Malouf Group operates a business called “Credit Repair Australia” among other similar businesses in the financial industry (CRA).

CRA’s business involved providing persons with bad credit histories who were finding it difficult to obtain a loan with “credit repair” services by making submissions to Veda to improve their credit rating. As a means of securing customers, CRA developed an Adwords compaign using 86 different Adwords each containing the word “Veda” as a sponsored link. It was discovered by CRA that at least 20 to 40 percent of people searching the word “Veda” were requiring credit repair services. 

When a person undertook a search using the word “Veda”, Veda’s website link would appear but also, CRA’s credit repair business website link would appear on the same opening page. Except in one case, CRA’s link did not contain the word “Veda” in the text of the advertisement that was visible by the consumer.

The Court held that there had been infringement of Veda’s registered trade marks in the one case where the “Veda” trade mark was visible to the consumer in the content of CRA’s advertisement but in the other cases, the Veda Group had not made out their case and there was held to be no infringement. It was also held that there was no confusion about the sponsorship or association between the two entities. Kratzmann J found that use of a registered trade mark in an Adwords compaign was not per se use of another person’s trade mark.

It was pointed out by the Judge that in New Zealand and Europe, the relevant Trade Marks Acts provide that where a person attempts to obtain a commercial and economic advantage by use of another person’s trade mark, there will be infringement. At the moment, the infringement provisions of the Australian Trade Marks Act 1995 do not go beyond the general principles of unlawful “use” of another person’s trade mark.

The case is not authority for the proposition that the “use” of a competitor’s trade mark as part of an Adwords campaign is not infringement of that trade mark but it is authority that in all cases, the position of the campaign itself, the use of the trade marked word and the manner in which it appears to the consumer has to be closely examined. This case does highlight that there is a fine line between when the “use” of a competitor’s trade mark in an Adword advertisement will or will not be infringement. 

The Adwords campaigns are expensive and the likely increase in business benefits need to be measured against the cost of the campaign and the possible costs of infringement of trade mark proceedings to see whether your campaign is providing you with any real Adword advantage. 

Contact Details

Dan Pearce, Partner
T: +61 3 9321 9840
E: dan.pearce@holdingredlich.com

Lyn Nicholson, General Counsel
T: +61 2 8083 0463
E: lyn.nicholson@holdingredlich.com

Trent Taylor, Partner
T: +61 7 3135 0668

The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this newsletter is accurate at the date it is received or that it will continue to be accurate in the future.

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