IT’S NOT THE CLICK, BUT THE SHTICK

22.03.2017

By Lawrence Hoffman

Introduction:

You would be hard-pressed to find anyone who would disagree that the Internet drastically changed the world. Could even the most astute observer have predicted the advent of social media or its use to recruit terrorists?

Needless to say, changes in society create new legal issues and those related to the Internet are no exception. Consider, for example targeted marketing. Techopedia explains that this is:

…the process of identifying customers and promoting products and services via mediums that are likely to reach those potential customers. Targeted marketing classifies potential customers, discovers their preferred content delivery mode and digital hangouts and then builds a marketing strategy aimed at that specific group. Targeted marketing is generally limited in scope but is often more productive than broader types of marketing because it is designed around specific customer preferences.

There is nothing new here; American Express and others have been doing this for years by sending ads with monthly bills. In comparison to what we can do now, given the vast amount of information available at the click of a mouse and the ability to collect and process information, the old way is utterly primitive.  For better or worse, companies like Google saw a way to exploit the Internet to take targeted marketing to levels that were not possible or even imaginable 60 years ago.

Search Advertising:

The game changer, of course, was search advertising. Say I am the seller of a product X and I want to advertize on the Internet. However, I will have to pay to do so and I want to spend my advertising budget as efficiently as possible by sending my ads as much as possible only to people likely to be interested in my product.

To help me reach my desired audience, Google provides a service called AdWords®. This allows me to buy the right to have my ads appear prominently as part of a user’s search result when a search includes specific ‘keywords’ – terms I think will be included in searches by people who might be interested in my product. This, I hope, will make my advertising budget more cost efficient because I will only have to pay when someone clicks on my add. If it appears in someone’s search result but the reader doesn’t click on the add, I don’t pay anything. Absolutely brilliant, these people at Google.

Ok. So what keywords should I buy? Obviously, I can select words that describe my product. But say I have several online competitors, I can also buy their trademarks as keywords! That way, if someone uses the trademark of a competitor as part of a search, my ad will appear in the search result. It will be identified as an advertisement, but it will be there. And it’s perfectly legal.

Your initial reaction may be “that’s not fair” but that’s something of an overreaction. For one thing, my ad is identified as such. Secondly, the law recognizes the possibility for abuse and ways have been developed to protect my rights, and those of my competitors, but more importantly, those of the public. Let’s look at some of these ways, and other issues related to use of the internet for advertising as it relates to intellectual property.

The Statutory Framework:

To begin with, we might consider what IP has to do with Internet search advertizing. The answer is that the laws with which we are concerned relate to unfair competition and trademarks In the U.S., aspects of both are governed by the Lanham Act, which is part of Title 15 of the U.S. Code (“Commerce and Trade”). In fact, the Lanham Act includes provisions concerning both trademark infringement (§  32) and unfair competition (§ 43).

In a broader sense, it can be said that advertising is a manifestation of the creative process; i.e., the expression or embodiment of an idea, and is therefore itself a form of intellectual property.  And like all other IP, it should be and is protectable. For example, a 2006 study published by the World Intellectual Property Organization (WIPO) identifies trademarks, domain names, company names, art, photographs, graphic designs, audiovisual materials, proprietary technology, trade secrets, proprietary training programs, procedure manuals, and research results of various kinds as possible IP[1].

If Advertiser A plans to use Competitor’s B’s trademark as a keyword, the rights of the parties will obviously be governed by trademark law. To the extent that Advertiser A uses other aspects of Competitor B‘s online presence such as text from a Website, copyright law and unfair competition law will also be involved.

In addition to the Lanham Act, The Federal Trade Commission Act governs certain aspects of unfair competition law as well. There are also similar state trademark and unfair competition laws. Copyrights exist for unpublished and published works in the common law, but today, efforts to protect copyrights are largely under the federal Copyright Act.

Laws protecting trademarks and copyrights and dealing with unfair competition also exist throughout the world.

Prohibited Conduct Under the Lanham Act:

Subsections 32(1)(a) and 32(1)(b) prohibit use in commerce of another’s registered trademark or a reproduction, counterfeit, copy, or colorable imitation of another’s mark  in a matter that is likely to cause confusion, or to cause mistake, or to deceive.

Subsection 32(2)(B) addresses the scope of the rights of a trademark owner under Section 43against the publisher or distributor of electronic communication shall be limited to an injunction against future presentation of such advertising matter in future electronic communications. The limitations of this subparagraph shall apply only to innocent infringers and innocent violators.

  • 43 addresses various forms of unfair competition:

on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities, or geographic origin of his or her or another person’s goods, services, or commercial activities…

A Good Example of How to Get in Trouble:

The Edible Arrangements story begins with a small flower shop opened by a 17 year old Pakistani immigrant, Tariq Farid, in the late 1980s. About 10 years later, Farid opened the first Edible Arrangements retail outlet selling artistically designed fresh fruit arrangements as gifts. The company has since expanded its product lines to include chocolate-covered fruits, fruit salads, and fruit-based beverages. According to the company, it now has over 1200 franchisees in the United States and abroad and provides training, business support, and marketing and other consulting services for its franchisees. Its products are marketed on the internet as well as through its franchising network. It owns several trademarks featuring the word ‘edible’, and claims that its brand has become well-known.

Success inevitably attracts knock-off artists, in this case, a company called Provide Commerce, Inc. Provide engaged what was clearly a predatory program of online competitive keyword search advertizing using Edible’s trademarks as keywords. We wrote in some detail about what these guys did and the law suit it provoked in our  September 2016 Newsletter. We noted that Provide had unsuccessfully sought to have the case dismissed, and that it was scheduled to go to trial in January 2017. However, the case evidently settled because it was dismissed with prejudice several months ago.

To sum this all up, it’s not the use of your competitors trademarks and Website material that’s illegal (the click) but how you use them, e.g., violation of the Lanham Act to mislead searchers into  think that you are who they were searching for or that you are associated with the object of their search (the shtick) that will get you in trouble. The Newsletter article referenced in the previous paragraph provides a good description of some things you should avoid doing.

[1] Managing Intellectual Property in the Advertising Industry, Creative Industries – Booklet No.5, WIPO, 2006.

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