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Dynamic Ads: Beware of the IP Risks

Alison Rees | June 20th, 2017

Your business is ticking along well. It’s been operating for a few years (or decades) now, and thanks to your Google AdWord campaign, there is a steady stream of customers.

You then receive a letter from a competitor. They are alleging that the keywords you have bid on and are using via your Google AdWords campaign are infringing their trade mark. They are threatening to take you to court.

Is this true? Do you need to stop or is this a ‘scare’ tactic? And what exactly is a Google AdWord?!

What are Google AdWords?

The Google AdWord service relates to keywords that people enter into the Google search bar, in an attempt to research their ailments so as to avoid going to the doctor (and for searching other things, or so I am told).

The search results at the very top of the page are paid advertisements of businesses who are using the Google AdWords service. The way it works is that businesses bid on keywords, so that their ads appear to relevant consumers. The subsequent results are ‘organic’ results. The organic results are websites ranked according to relevance, usefulness and popularity.

Google used to have a Google AdWords policy, whereby a business (or person) was not entitled to bid on a competitor’s trade mark. A little while ago, Google removed this policy. Just because Google no longer has this policy, however, does not mean that you are safe from the risk of a trade mark infringement claim when you use Google AdWords.

Will I be sued if I use my competitor’s names in a Google AdWords campaign?

It depends on how you are using your competitor’s trade mark.

You can only use a competitor’s trade mark if you do so in a way that does not indicate that your goods or services originate from or are connected to that trade mark. Whether this is the case depends on the circumstances. In particular, it depends on how visible or perceptible your use is to consumers.

A basic example (and not one based on real life*) would be a sports drink company who sells the drink “SportyQuench”, and bids on their competitor’s trade mark “PowerThirst” as a keyword.

If, in this example, a consumer entered “PowerThirst” into Google and an advertisement appeared with the headline “PowerThirst – the best sports drink” with a hyperlink to the SportyQuench homepage, it is likely that trade mark infringement would be established.

However, if an advertisement appeared with the headline, “SportyQuench: a great an alternative to the PowerThirst sports drink” with a hyperlink to SportyQuench’s homepage, SportyQuench would be better placed to argue that they are using the trade mark “PowerThirst” in a way that does not indicate a connection with that trade mark, or that “SportyQuench” originates from or is connected with the “PowerThirst” trade mark.

So…where do dynamic ads come into this?

Dynamic ads – a lack of control that can lead to a lot of liability

Dynamic ads are where Google AdWords uses a searcher’s search terms that were entered into the Google search engine to create more targeted advertising.

An algorithm automatically generates a heading for the advertisement, which includes the keywords that the customer has searched. The heading comprises of a phrase which is, according to the algorithm, most likely to result in the searcher clicking on the advertisement. The ad then includes a link to the landing page (your website).

Here is where things get risky, from a trade mark infringement perspective. The algorithm decides what the phrase will be, where the keyword will be inserted and which words will most likely lead to a ‘click’ on the advertisement.

You lose control of how the keyword is used in the title for your business’ advertisement. If the keyword is a competitor’s trade mark, there is a risk of trade mark infringement.

For example, SportyQuench used dynamic advertisements in relation to the trade mark “PowerThirst” which SportyQuench has bid on to use as a keyword.

The dynamic ad algorithm has calculated that the best possible chance that a consumer will click on the resulting advertisement hyperlink is if it says, “PowerThirst: the best way to keep sporting**!” When the ad is teamed with a hyperlink to SportyQuench’s site, there is a strong suggestion that SportyQuench is using “PowerThirst” as a trade mark, in relation to SportyQuench’s goods and/or services.

SportyQuench is then in very murky territory as far as trade mark infringement goes.

Our example is based on the case of Veda Advantage Limited v Malouf Group Enterprises Pty Limited [2016] FCA 255. It is a recent decision, and some commentators are of the view that even using trade marks in the way which the court said was permissible, is in fact still trade mark infringement. We are all waiting on the edge of our seats for a higher court to address this uncertainty. For the moment, Veda is the leading authority on the matter.

Does this really happen?

Yes. Unfortunately, we have seen recent cases of businesses being caught in this way. Typically their marketer suggests that they upgrade to dynamic ads. If the business already uses their competitor’s trade marks as keywords, then there is a much higher risk that resulting dynamic ad searches will create advertisements that can infringe a competitor’s trade mark.

We recommend that you conduct a review of what keywords you are using in your AdWords campaign. Check if they are trade marks of competitors. If they are, you should get advice as to whether your use of them does or does not constitute trade mark infringement. To err on the side of absolute caution, avoid bidding on competitor’s trade marks in your Google AdWord campaign.

*which is a good thing, given that the imaginary names are terrible. We stick to practising law and leave the marketing to others for good reason.

**slogans are also not our strong point.

Written by Alison Rees

Alison is experienced in sales and purchases of businesses, including transactions for medical practices and pharmacies, and sales of businesses which span a number of states. Her business transactions matters have involved both large and small businesses, and Alison has received recognition for handling these matters in a way that is most efficient and cost effective for the particular client.