Internet advertising is one of the hottest topics in trademark law these days. A variety of different Internet search engines, Google and Yahoo in particular, have developed a tailored sales strategy called “keyword advertising”. Keyword advertising involves a variety of techniques that associate advertisements with particular terms on websites. The most common forms are “Google Ad Words” and “Yahoo! Sponsored Search” which display ads alongside search engine results. Most ads are composed entirely of text while some may include graphics. This advertising method has been extremely effective because web searching has become one of the primary ways people find information, products and services.

Search engines that offer keyword advertising services typically sell or auction off search terms to advertisers, and the advertiser selects key words with which it wants its advertising to be associated when a search is conducted using that search engine. The advertiser selects the maximum amount it is willing to pay when a user clicks on its ad once that ad has been triggered by a search. Thus, whenever an individual uses the search engine to conduct a search and types in the selected purchased keywords, the advertiser’s ads appear on the search results screen, typically as a text ad on the side, but also potentially as a banner or even as a highly ranked search result. Keyword advertising enables advertisers to attempt to target specific groups with their marketing messages.

The main issue that has developed with respect to keyword advertising hinges on its trademark law implications. Specifically, when providers of keyword advertising sell or auction off the keywords with which advertisers want their products and ads to be associated, very often they are selling keywords that are identical to the trademarks of other businesses not associated with the advertiser. Thus, an advertiser may purchase or bid on a keyword that is actually the trademark of another business so that when internet searchers type in that keyword trademark, they are presented with the advertiser’s ads in addition to any other search results that are returned. Predictably, many trademark owners have protested that this type of advertising has the effect of permitting the advertiser, potentially a direct competitor, to trade on and profit from the owner’s trademarks and the goodwill of those marks without authorization.

Canadian courts have yet to opine on the issue of whether targeted keyword advertising infringes Canadian trademark laws, but the issue has been dealt with in the U.S. and Europe. Until just recently, the leading case in the U.S. on this issue was GEICO v. Google, Inc., decided in 2005 by the U.S. District Court for the Eastern District of Virginia. In that case, GEICO alleged that the sale by Google of GEICO’s trademarks to GEICO’s competitors amounted to, among other things, trademark infringement. The court found that the use of GEICO’s trademarks by Google as search terms or keywords was not trademark infringement. The court also found that there was no infringement in respect of ads that did not reference GEICO’s trademarks in their text or headings but which nevertheless appeared when a search was conducted using a GEICO trademark. The court did conclude, however, that the use of GEICO’s trademarks in the headings or text of advertisements that appeared when a user searched using a GEICO trademark created “a likelihood of confusion, and therefore a violation” of U.S. law dealing with trademark infringement. The court left the issue of damages and liability to be decided at a further hearing, but the parties settled out of court prior to that hearing. Thus, no judicial decision was rendered as to liability for the trademark infringement as between Google and the advertisers purchasing the keywords or as to the damages flowing from such liability.

Despite no findings as to liability or damages, the GEICO case was hailed as a victory for both sides. The next major case to be decided on this topic has been said to be a victory for search engines. In 2006, the U.S. District Court for the Southern District of New York decided the Rescuecom Corp. v. Google, Inc. case in which Rescuecom, a U.S. computer repair company, sued Google, arguing that Google had violated Rescuecom’s trademark through the sale of keyword advertising to Rescuecom’s competitors. As with most keyword advertising, when a searcher typed Rescuecom’s trademark into the Google search engine, competitors’ ads would appear next to the search results as “Sponsored Links”. The court rejected Rescuecom’s arguments that Google had infringed Rescuecom’s trademark. The court found that, as a matter of U.S. law, the facts did not establish the threshold issue of trademark “use”. The court followed and applied (among other cases) the 2005 decision of the U.S. Court of Appeals for the Second Circuit in the case of 1-800-Contracts Inc. v. WhenU.com. In that case, the court had found that “pop-up ads”, also a form of paid search advertising, did not constitute a “use” of the trademark. The court in Rescuecom also criticized the court in GEICO for having confused the issue of “use” and for not having treated it as a threshold issue to be met prior to any considerations regarding likelihood of confusion.

Because so many of these cases have settled out of court, Rescuecom is the first case to expressly find that search engines are not liable for selling keyword advertising. However, the distinction noted in GEICO was left open – citing GEICO, the court acknowledged that in Rescuecom, there was “no allegation that the plaintiff’s trademark is displayed in any of the sponsored links about which the plaintiff is concerned”. Presumably, if the sponsored links had displayed the plaintiff’s trademark, this may have led to a different result based on GEICO.

In recent developments, a U.S. Federal Court judge in the U.S. District Court of New York has ruled (week of April, 2007) that ad text generated by a keyword search that references a trademark may violate trademark rights. As well, a U.S. District Court judge in California (week of April 16, 2007) refused to dismiss a keyword advertising lawsuit filed by American Blind & Wallpaper Factory against Google.

Google has had mixed luck in Europe, losing similar keyword advertising trademark infringement cases to Louis Vuitton and Le Meridien Hotels but winning two other cases in Germany. In Canada, as noted above, our courts have yet to pronounce on the issue of whether targeted keyword advertising infringes Canadian trademark laws.

The Canadian Trade-marks Act permits the owner of a registered trademark to prevent another party from using a trademark that is confusing with the registered owner’s trademark or trade name. Trademark infringement occurs when a person not entitled to the use of a given trademark sells, distributes or advertises wares or services in association with a trademark that is confusing. A trademark is deemed to be “used” in association with wares if it is displayed on the wares or their packages at the time of transfer of the wares in the normal course of trade and is deemed to be “used” in association with services if it is used or displayed in the performance or advertising of those services. Thus, it is likely that in Canada, internet keyword advertising would not be considered to be a “use” of a trademark unless the trademark actually appears in the ad that is triggered by the internet search and unless that ad is for services.

In a situation where a keyword internet search does trigger an ad that includes a trademark that is registered for use in association with services, the owner of the registered trademark may enforce his right to prevent use of that mark that may depreciate any goodwill attached to it.

Once the threshold issue of “use” has been considered, the question of whether such use causes or is likely to cause confusion must be addressed. Generally, confusion occurs when the use of the trademark by the infringing party is likely to lead to the inference that the wares or services being distributed or advertised are manufactured, sold, leased, hired or performed by the trademark owner. The factors to be considered by the courts in determining the likelihood of confusion include:

• the inherent distinctiveness of the trademarks, and the extent to which they’ve become known;
• the length of time the trademarks have been in use;
• the nature of the wares, services or business;
• the nature of the trade; and
• the degree of resemblance between the trademarks in appearance or sound or in the ideas suggested by them.

If the issue of trademark infringement through keyword advertising reaches the Canadian courts, a similar result to that in the U.S. may occur. That is, Canadian trademark owners will likely face difficulty in proving a likelihood of confusion in respect of keyword advertising in general where no trademarks appear in the ads in question. However, where the ad that is triggered by the keyword advertising of a competitor does include the owner’s trademark and that mark is registered, the trademark owner may be able to argue that such use of its trademark is infringement and potentially depreciates any goodwill attaching to the mark.

“Replica watches, bags, pens”,“Effective Weight Loss”, “Need S0ftware?, Windows, Office”, “We help you to save on the Med$!”, “Bachelors, {}Masters, MBA and/or Doctorat e(PhD)”, “Please update your details”, “Become immune to the passage of time!”, “ Re: Your Pharm4cy order #8245821”…

Introduction

Do any of the above phrases look familiar? These are just a sampling of some of the more prevalent promotional slogans that infiltrate our email inboxes daily thanks to the zealous work of spammers all over the world. Most people would agree that spam email is a problem, and there is increasing domestic and international pressure on Canada to enact targeted anti-spam legislation. However, even in countries that have adopted such legislation, it seems clear that a statutory regime is not a complete answer to stem the growing flow of spam.

What is spam and why is it an issue?

“Spam” is the Internet slang term used to define the practice of sending massive amounts of unsolicited emails for commercial or fraudulent purposes. Industry experts have reported that in 2006, spam accounted for 86.2 percent of the total number of emails sent globally, with 63.4 percent of all spam coming from new and unknown sources.

In a world increasingly reliant upon electronic networks and instantaneous communications, email is a convenient and cost-effective form of personal and professional communication. However, the growing volume of spam is now clogging email inboxes and, in a few short years, spam has gone from being a mild irritant to becoming a significant business issue. It undermines the reliability of email networks for business users and threatens consumer confidence in the e-commerce marketplace. As a result, internet and e-commerce businesses are finding it difficult to attract investment, create jobs and enhance business productivity. These problems have also had an impact on other businesses, as computer networks strain and employee productivity falters.

How does Canada deal with spam?

Canada’s Privacy Commissioner recently reported that Canada has the dubious distinction of being the only G-8 country without anti-spam legislation and has been cited internationally as the sixth-largest world source of spam.

But Canada has not ignored this problem altogether. In 2004, the federal government established the Task Force on Spam in an attempt to determine how best to curtail unsolicited commercial email. Yet, despite the recommendations in the Task Force’s Final Report, entitled Stopping Spam: Creating a Stronger, Safer Internet, there has been no substantive legislative change to combat the spam problem (indeed, the federal government has not implemented any of the recommendations contained in the Report).

Without targeted anti-spam legislation, Canadians must rely on an often ineffective patchwork of legislative provisions to address the spam problem, including the following federal statutes:

• the Personal Information Protection and Electronic Documents Act, which deals generally with privacy and personal information, and contains many provisions relevant to email marketing. The Federal Privacy Commissioner issued a decision in 2004 regarding spam, in which a business email address was held to be personal information;
• the Competition Act, which prohibits deceptive and misleading representations; and
• the Criminal Code, which covers fraudulent or false content and prevents unauthorized use of computer services.

Reliance on these federal statutes as the only weapon to combat spam is problematic for two reasons. First, while most of the products and services promoted in electronic commercial solicitations might be unwanted and are often offensive to many internet users, they do not usually involve the offering of illegal products or services, or the making of what might be considered, in law, misleading claims. Thus, unless it falls within the ambit of the three statutes noted above, spam that is simply offensive or annoying cannot be challenged. Second, where these laws do offer protections or methods of indirectly addressing the spam issue, there is a general reluctance to enforce them.

Spam Outside of Canada

The spam problem is not unique to Canada. Other countries have taken up the fight, but interestingly even jurisdictions with anti-spam legislation in force continue to top the list of the worst countries for the origin of spam. For example, the spam tracking website Spamhaus.org reports that on March 21, 2007, the top five Worst Spam Origin Countries were the United States, China, Russia, the United Kingdom and Japan. Of these five, Russia is the only country without anti-spam legislation.

In 2003, the United States enacted the Controlling the Assault of Non-Solicited Pornography and Marketing Act of2003, more commonly known as the “CAN-SPAM Act of 2003”, in an attempt to control the proliferation of spam in that country. Although questions have been raised about the effectiveness of this law at reducing spam, there seems to be a consensus that it is an essential component in a larger anti-spam strategy.

Conclusion

Given that the amount of spam plaguing our inboxes shows no sign of abating and experts are predicting that spam will increase in both volume and maliciousness in the coming years, Canada needs to act to ensure that email and the internet remain viable tools for legitimate business and personal communications. Although by no means the silver bullet, one key step in this process is for the federal government to enact anti-spam legislation that contains effective enforcement mechanisms. At a minimum, such legislation would send a signal internationally that Canada will not idly sit back and tolerate the abuses perpetrated by spammers.

However, given the multilayered nature of the spam problem, legislation alone will not curtail the flow of spam originating within our borders. Both government and industry stakeholders, including internet service providers, businesses and legitimate marketers, must work to develop a comprehensive range of measures and commitments, including a focus on consumer education and the continuing development of effective anti-spam technology.

The Internet Corporation for Assigned Names and Numbers (“ICANN”) gave preliminary approval in December 2005 for the .asia domain name.

DotAsia Organization Ltd., the registry operator for .asia domain names, recently announced that it would begin accepting applications for .asia domain names in June 2007.

Registration will be a staged process, beginning with a phased Sunrise Period: first, governments in the region; secondly, trademark owners; and lastly, companies or organizations. After the Sunrise Period, the Landrush Period will commence.

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