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Ruling Against Contextual Ads Helps to Codify Trademark Use in Commerce

By Lewis R. Clayton
May 28, 2009

Contextual advertising ' advertising placed where it will be seen by consumers looking for competitors' products ' is everywhere:

  • Supermarket coupons strategically placed near shelves stocking competitive products;
  • Yellow-pages ads published next to rivals' listings; and
  • One company's billboards appearing near a competitor's store.

Contextual advertising is particularly significant on the Internet because the ability to display advertisements or Web-site links when consumers search for particular terms gives advertisers a powerful tool for targeting consumers, and provides a critical source of revenue for Internet search engines.

While contextual advertising is well accepted in bricks-and-mortar businesses and in traditional publications, it is controversial on the Internet. Courts have not worked out whether (and if so, how) an advertiser may use a competitor's trademark to trigger banner ads or sponsored links displayed along with search results. A recent U.S. Court of Appeals for the Second Circuit decision, Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009), confirms a trend favoring trademark holders at the expense of maximally effective contextual advertising. Rescuecom held that Google's practice of selling trademarked terms as keywords to trigger advertising accompanying search results is a “use in commerce” of the trademarks ' a necessary element of a claim under the Lanham Act (“the Act”) ' even though the trademarks themselves do not appear in the advertising consumers see.

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