In a past blog post, we reported an earlier decision regarding trademark infringement, M&S and Interflora. Here we discuss last week’s Court of Appeal decision to retry the dispute between M&S and Interflora, which means further uncertainty about whether you should bid on competitors’ trademarks when using Adwords.
In May 2013, the High Court ruled that M&S had infringed Interflora’s trademark by bidding on the word “Interflora” to trigger results for its own flower delivery service. M&S appealed the decision. Last week the Court of Appeal sent the case back to the High Court for retrial.
In making its decision in the case (Interflora v Marks and Spencer), the Court of Appeal said they doubted a significant proportion of consumers would mistakenly believe that M&S was part of Interflora’s network. However, as the court had not analysed all the relevant documents or seen the witnesses give evidence, rather than overrule the original verdict they said the case had to be reheard by the High Court.
Does using a competitors’ name in Adwords mean there’s trademark infringement?
Bidding on a competitor’s trademark does not in itself constitute a trademark infringement. The issue is whether the ad as a whole suggests a connection with a trademark owner. Would the so-called “reasonably well-informed and reasonably attentive Internet user” be confused into believing that the ad emanates from the trademark proprietor?
In the High Court decision in the M&S case in May 2013, the court thought that a significant proportion of consumers who searched for ‘Interflora’, and then clicked on M&S’s ads, believed that M&S’s flower delivery service was part of the Interflora network.
The decision of the Court of Appeal underlines the difficulty of determining whether or not bidding on a competitor’s keyword infringes their trademark. The answer depends on the facts of each case. Relevant factors are what the ad says, what page it leads to and the relationship between the parties.
Also crucial in practical terms is whether the trademark owner whose keywords you are bidding on has the resources to sue you.
The key message is that it is not risk free. Litigation is possible and may deter some people from bidding on competitors’ keywords.
Google’s policy on trademarks as keywords
Google’s policy is to allow bidding on trademark names, which means more revenue for Google. This is helped by the fact that the standard advice of online marketing experts is to bid on your own name in case someone else does.
Bidding on a competitor’s name, even without featuring their name in your ad, means your name will appear every time your competitor’s name is searched. (Note that stating your competitor’s name in an ad is disallowed by Google due to trademark infringement implications). What M&S did was to pay Google so they could use ‘Interflora’ as a keyword. M&S’s advertisements for its own flower delivery service then appeared on the search engine results page when consumers searched for Interflora’s services using the word ‘Interflora’.
But bidding on competitors’ terms is expensive because such ads don’t perform well under Google’s Adwords criteria. Unless you have your competitor’s name on your landing page (which M&S did not, and which is generally unwise due to the risk of trademark infringement), Google will penalise you for irrelevancy. So your cost per click will be high, and it could have a negative account-wide impact on your Adwords campaigns too.
Nevertheless, the risk if a competitor gets there first is that their ads may have built up credibility with Google. As Adwords specialists Periscopix puts it in their blog post Should You Bid On Your Competitors’ Brand Terms?: ‘If they’ve had a clear run without any competition they’ll probably have racked up a good Click Through Rate and your bids will need to be higher to beat them’.
This seems to be saying that even if you subsequently bid on your own name, and even though your competitor’s website may not be as relevant as yours for your own brand name, the competitor’s ad may appear above yours.
Although possibly a theoretical point, the issue has practical relevance for companies in industries such as the hospitality sector, as their hotel rooms or restaurant tables are sold through other sites as well as their own.
Industries that should definitely bid on their own names
For businesses in the hospitality sector, or similar, an additional reason to bid on their names is to reduce the risk of others’ ads performing better than their own.
Say you are a hotel or restaurant that has arrangements with sites such as booking.com and toptable.com. These sites will be bidding on your name. While it is generally unacceptable to include in the ad text someone else’s trademark, these sites will be within Google’s acceptable use policy to do so because they are your resellers.
So, a sizeable number of customers who are likely to book your venue will book through these sites, rather than coming directly to you. That means less profit for you, as you will have to pay referral fees to get those same customers who might otherwise have booked directly through your site.
As a general rule, bidding on your own name should ensure you appear at the top of Google above these other sites, because your website will be all about your company. It will carry more weight with Google than a third party site with a name like booking.com. This leads to an important point about the name you call your business.
Disadvantage of using keyword rich names
A word of warning about using keyword rich domain names or descriptive names: in trademark law it is difficult to stop competitors using similar names. There may be some limited search engine visibility benefits of using keyword rich descriptive names, as we explained in our blog post, choosing names that say what your business does on the tin. However, this is no longer a good approach for your online business. It has disadvantages on many levels. Our advice is that no business starting out now should opt for a descriptive name, regardless of any search engine advantages. There are other ways to increase your visibility on search engines. So, talk to a trademark lawyer before settling on a name for your business. You will be glad you did.
As stated above, bidding on a competitor’s keyword may or may not infringe on its trademark depending on the specific facts. It certainly makes sense discussing any proposed competitor keyword bidding with your Adwords account manager before authorising them to do so. Also, you should ask trademark lawyers who understand the case law surrounding Adwords to consider your proposed ads before you go ahead with them.