Tuesday, June 10, 2008

Major litigation on search engine results and ads based on "trademark" names as arguments

Search engine companies and advertising revenue strategies might be affected by ongoing litigation involving the company Rescuecom, which is a computer repair firm.

The basic problem seems to be that when one enters the company name in an Internet search, not only the company comes up but so do ads of competitors or distractors who may be trying to use the trademarked name to draw business to their websites by taking advantage of supposed customer “confusion.” Sometimes, after some search engine results, ads from “competitors” may come up as well as or even instead of the ads for the trademark holder. There is some question as to the validity of the analogy with a drug store or supermarket where strongly branded products are placed in physical proximity to “generics” often branded by the retailers themselves. There is also some question about the way non-profits and political advocacy organizations may use “trademarks”, where searches will naturally result in pulling up results (including those from my blogs and sites) that may be critical of these organizations, or at least of the political positions that they take on particular issues.

Rescuecom entered into litigation against Google, making complicated and (to the layman at least) obscure arguments about possible confusion and misuse of branding. A federal judge dismissed the case in 2006, without having a full trial, apparently believing that this case did not fall within the legal definition of trademark infringement. CNET and AOL Mobile have a story on the dismissal here. Rescuecom appealed and the case was heard before a three-judge panel in the Second Circuit in the early Spring of 2008.

There is an account of the oral arguments (by James Grimmelmann) at a site called Laboratorium, here. I didn’t see any mention of the expansion of trademark law with the passage of the “Trademark Dilution Revision Act” in October 2006 (and the federal dismissal had occurred in September). But it sounds to me as if the concept of prospective dilution could be legally relevant.

Timothy B. Lee has an analysis of the case on Arstechnica, from April 2008, here. Eric Goldman has a brief discussion on the “Technology & Marketing Law” blog here. Were Rescuecom to win, the case would probably have a trial on merits first (based on the Second Circuit's statement on the applicability of trademark law, including dilution as it is now), and the litigation would last a long time.

Theoretically, arguments like these might apply to automated ad algorithms on websites and blogs. A writer might mention a trademark in the context of criticism, and ads of competitors might results, or the ads from the mentioned company might result in a situation that places it in an unfavorable light. This sounds like a novel problem to raise in the concept of traditional trademark law, maybe applicable with the concept of “prospective” dilution. The circuit judge would probably have rejected such an idea but the Second Circuit could comment on it soon. What seems apparent is the apparently widening “business culture” gap between older companies (driven by older paradigms of customer loyalty and marketing and properly concerned about fiduciary responsibility to stakeholders) and never start-ups that expect more freedom in a global economy. Even from a libertarian perspective, it’s not clear how the rules of “market fundamentalism” would apply.

Electronic Frontier Foundation discusses a brief of an important legal precedent, "1-800 Contacts v. WhenU.com and Vision Direct", here . It would be well to examine the amicus brief and Second Circuit opinion links (PDF files) from 2004, provided on that page.

Rescuecom has indeed attracted some negative comments in cyberspace, such as a Tech Republic message board posting about their franchise contract and policies as being unreasonable, here.

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