Rulings allow use of competitor’s name in ads

For the London Free Press - December 6, 2010 Read this on Canoe

When advertising your product on the Internet, using the name of a competitor can sometimes increase awareness of your own product. It's even legal.

Recent decisions from British Columbia and Quebec have held that "keyword advertising" using the trademark or name of a competitor is a legal advertising practice. These decisions follow a similar trend in other jurisdictions.

Keyword advertising is a form of online advertising linked to specific words or phrases. Advertisers pay search engines, such as Google, for links to their websites to appear as "sponsored links" alongside the search engine's normal search results.

The advertiser creates an ad which specifies certain keywords, then sets a maximum price they are willing to pay to use them. When a user searches using one of the keywords, the search engine checks to see which ad is most relevant and has placed the highest bid for the keyword.

These ads are then displayed as "sponsored links" on the search results.

If the user clicks on a sponsored link, the advertiser is charged according to its bid.

Advertisers sometimes specify trademarks or names of competitors as keywords. Such ads can sometimes outrank the ad of the competitor.

In Private Career Training Institutions Agency versus Vancouver Career College (Burnaby) Inc., the Agency sought an injunction against VCC to stop it from using competitors' business names in its keyword advertising.

The Agency got complaints from member institutions. Students searching for other institutions clicked on sponsored ads for VCC, thinking the ads were for the college for which they were searching. Some even enrolled at VCC before realizing it was not the institution they had intended on attending.

The agency alleged that VCC's use of keyword advertising was false, deceptive or misleading advertising designed to lead students seeking information about another institution towards its own.

The court refused to grant an injunction, finding that using keyword advertising was no different than the traditional marketing practice of locating an advertisement close to a competitor's.

VCC's actions were not found to have deceived consumers. Rather, the actions of individual consumers who clicked on the sponsored ads, or even enrolled at the schools, resulted from their own imprudence. VCC did not hold itself out to be anything other than it was.

The Quebec Superior Court dealt with a similar situation involving a chocolate company, Humeur Groupe, which purchased keywords of competitors for advertising on Google. In this case, Humeur specifically stated in its ads that it was an alternative to its competitor, Chocolate Lamontagne.

Despite the fact that Chocolate Lamontagne attributed a loss in sales of $112,000 to Humeur's ad campaign, the court refused to grant an injunction. Information providing an alternative to a particular business cannot be prohibited. Rather, competition must take into account new ways of interfacing with consumers. The court referred again to the fact that individual consumers are freely choosing to access the alternative site.

It remains to be seen whether keyword advertising is contrary to the Trademarks Act, as the issue was not argued in either case.