Keyword Trademark Suit Heads to Trial

A lawsuit involving rival Minnesota real estate groups is headed to trial in what could be the first substantial case to decide the legality of competitive keyword bidding on search engines.

Edina Realty, a subsidiary of HomeServices of America, filed suit against TheMLSonline.com in U.S. District Court of Minnesota in October 2004, alleging trademark infringement, dilution of its trademark, and false advertising. Edina claims that TheMLSonline.com bought paid search keywords on Google and Yahoo Search Marketing, including “Edina Realty” and “EdinaRealty.com,” and ran ads with “Edina Realty” in the title or description.

Last week, Judge John Tunheim ruled that there was sufficient reason to send the case on to trial. The requirements for trademark infringement include determining whether the defendant used the trademark in commerce, and whether the use presents a likelihood of consumer confusion.

The judge decided last week that there was not enough evidence presented by Edina to support its trademark dilution claims, but said there is enough dispute about the “likelihood of confusion” elements to send the case to trial.

The case is one of the first significant lawsuits brought against a keyword buyer, rather than against a search engine, on grounds of trademark infringement. While any single case would not become the final word on the matter, a decision in this one could have some long-term implications, according to Eric Goldman, a professor at Marquette University Law School who teaches courses on cyberlaw and trademark law.

“This ruling puts increased pressure on Google’s policy not to block competitor keyword ad purchases,” Goldman wrote on his Technology & Marketing Law blog. “More importantly, Google’s position has just become legally riskier. To the extent that competitors’ ad purchases constitute direct trademark infringement, Google may face an elevated risk of being deemed a contributory infringer.”

The judge can still find that there is no likelihood of consumer confusion, or the two could settle before a verdict is reached, which would be a result similar to the one in a case filed by Geico Insurance against Google.

In addition, the judge’s initial decisions are incomplete, Goldman said, noting that the court seems to have ignored some relevant cases that might affect its decisions in evaluating the “use in commerce” and “likelihood of confusion” thresholds, and does not fully explore issues of fair use based on TheMLSonline’s non-competitive database service.

Using another company’s trademarked term in the text of an ad is not allowed by either Google or Yahoo, and so TheMLSonline.com was required to change the ad copy eventually. Since changing its policy in April 2004, Google has allowed advertisers to bid on trademarked terms of competitors, as long as the terms do not appear in the text of the ad. In February, Yahoo changed its trademark policy to prevent advertisers from bidding or using trademarked terms in ad copy.

Both Google and Yahoo have been named in lawsuits filed by advertisers alleging trademark infringement, but most of those cases have been settled out of court, so there has not been much legal precedent established. Some limited decisions were reached in the Geico case, and a two year old case against Google by American Blind and Wallpaper Factory is still pending.

Edina has been shifting its ad spend online lately to reach a growing online audience of home buyers. The company does not buy paid search keywords, although some of Edina’s 3,400 agents buy keywords to promote their Web sites, hosted by Edina, which enable property searches.