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Should trademarks apply to paid search advertising?

In the rough-and-tumble world of paid search advertising where winning literally means coming out on top, competitors routinely purchase search ads using competitors trademarked names or products as search terms. Say you are selling an MP3 player and the iPod is your direct competitor. So you go to Google AdWords and bid a high price on the search term “iPod.” Voila! When users search Google for iPod, you’re near the top of the paid search listings. In fact, if you bid high enough, you might even beat out Apple in the listings. And, as an added bonus, your paid search listings may push you into the top ten results in the organic search listings.

Doesn’t seem right fair, does it? A trademark, after all, is a trademark. If someone buys paid search listings based on your trademarked business or product name, then they’re drawing away customers who specifically use your name to find your business or product, right? And to make it doubly unfair, the paid search service (like Google or Yahoo!) is making money off of your trademarked name, right? Google, you could argue, shouldn’t be able to make money off of the word “iPod” because, well, they don’t own it.

Well, a small software company in Texas called Firepond has filed suit against Google for doing just that. By allowing people to bid for paid search results using “Firepond” as a keyword, the folks down there think that Google is impinging on their trademark. But is that true? Should businesses be allowed to own their name for paid search listings? And why should this matter to you?

Now, Google allowing anyone and everyone to bid on search terms that are trademarked names has been a thorn in the side of business from the very beginning. A couple big corporate bruisers have gone after Google, including American Blinds and American Airlines, but only American Airlines made it to a settlement (which only protects American Airlines — competitors are no longer allowed to bid on that name).

The issue, though, is much more complex. If you’re an entrepreneur seeking to make your product known, bidding on a well-known competitor’s name is a legitimate way to get your unknown product out in front of consumers. It’s no different, in this sense, than buying an ad in the Yellow Pages right next to a well-known competitor’s ad. Or paying a retailer to place your product on the shelf next to one or more well-known brands — to have some of the lustre rub off on yours. Safeway, for instance, puts its custom-branded, low cost cereals right next to the high-priced versions with well-known brands. Right next to Cheerios you’ll find boxes of Wheat-O’s at half the price. Have you ever noticed that SmartStart is always right next to Grape-Nuts, a competitor? The manufacturer wants it that way and pays grocery chains good money to get that placement. How is paid search advertising any different?

Well, for starters, Google and other paid search services are making money off of the trademarked name, not just the brand. When Google allows you to bid on “iPod,” they are renting the word “iPod” to you.

However, if you manufacture iPods, you would like people who sell iPods to buy paid search advertising using the term. That’s how you make sales. You just don’t want your competitors to eat into your sales by bidding on the term.

And to add to the confusion, users who search on a trademarked name may be genuinely interested in finding out alternatives. I may search do a search on “iPod” because it’s the only electronic music player I know of. I may be pleasantly surprised to find out I have other purchase alternatives at a lower cost.

However, bidding up the cost of a trademarked name may be a perfect way for big companies to squeeze out small ones. If I develop a new and better electronic music player, Apple doesn’t want you to know about it. They may bid on my trademarked names and kill two birds with one stone: they will lure away customers interested in my product and, as a side benefit, make it too costly for me to use my trademark as a paid search term.

So, here’s the compromise the paid search behemoths should adopt:

  • Recognizing that trademarks are trademarks, the paid search services should develop specific guidelines for bringing a complaint against competitors using as search terms the trademarks belonging to someone else.
  • If rivals are using another company’s trademarked name, then primacy of placement should be given to the trademark owner for free. In other words, if competitors start using “iPod” as a paid search term, Google, Yahoo!, Ask, etc., should guarantee the top placement in paid search results on every page to Apple without charging them. Second, third, fourth, fifth, and so on, would have to be bid on. This allows rivals to use paid search to place their products near a rival product (like the shelving example) and protect trademark owners from having their own trademarked names bid up to unsustainable or unreasonable prices.
  • Search services should never allow competitors to bid on trademarked names they don’t own for contextual placement. In other words, a rival should never have their ad placed on an article about “iPods” by bidding on the search term “iPod.” (Though they can have their ad placed by bidding on “MP3,” or “electronic music player,” or whatever.) It would be up to the trademark owner to monitor compliance and notify the paid search service.

    People who own trademarks are the bread and butter of paid search placement accounting for something close to 100% of paid search revenues. So maybe Google and all the other networks might want to start getting along with them.

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    1. [...] « Should trademarks apply to paid search advertising? [...]

    2. [...] Sues Google For Infringement,” Associated Press, July 10) Those who regularly read this blog know exactly what I think of Google’s profiting from trademark infringement. This is a whole field full of thorns that is going to take decades to sort out. But just a few [...]


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