The Ninth and Second Circuit Courts of Appeal recently issued decisions confirming that competitive keyword advertising does not create a likelihood of confusion where the plaintiff’s trademark does not appear in the resulting advertising copy or otherwise cause meaningful consumer confusion. The decisions validate the long-standing practice of competitive keyword advertising and demonstrate a growing consensus that the mere act of purchasing a competitor’s trademarks does not constitute trademark infringement. Trademark owners will have to find alternate ways of addressing competitive keyword advertising, as courts are increasingly skeptical of trademark infringement claims.

The facts in each case were similar. In Lerner & Rowe v. Brown[1], a law firm purchased its rival’s trademarks as Google AdWords and used them to trigger sponsored advertisements in responses to user searches for those trademarks. In 1-800 Contacts v. Warby Parker[2], an optician did much the same.

In Lerner, the Ninth Circuit applied an expedited 4-factor test for keyword advertising articulated in the Network Automation case and concluded that although the plaintiff’s mark was strong, the generally sophisticated nature of online shoppers, the absence of appreciable consumer confusion and the clarity of search results pages all weighed heavily against a likelihood of confusion and justified dismissal of the infringement claims on summary judgment. The Second Circuit reached the same result in Warby Parker, finding that because the defendant did not display any of the plaintiff’s trademarks in their advertising copy, the dissimilarity of the marks was dispositive, despite several traditional trademark analysis factors favoring the plaintiff.

What This Means for Trademark Owners

These cases provide several important takeaways for businesses seeking to protect their trademarks against competitive keyword advertising:

• If the disputed trademarks do not appear in the advertising copy or the defendant’s website or URL, the case is dead in the water. The Warby Parker court described the practice of competitive keyword advertising as “a permissible and standard industry practice.”
• Initial interest confusion is not a substitute for traditional likelihood of confusion analysis. Search engine labeling is sufficient to overcome initial interest confusion and the prominent placement of the defendant’s advertisements in the search results does not increase the likelihood of confusion.
• Consumers are sufficiently sophisticated and discerning to avoid any misleading effect of sponsored advertising. This is a very different landscape than 20 years ago, when courts considered consumers easily diverted by initial interest confusion.
• Actual confusion is an important factor, but the evidence of confusion must be more than minimal – and weak evidence of confusion may contradict the likelihood of confusion claim. Courts are increasingly willing to use empirical analysis to conclude that incidents of actual confusion are de minimis and do not establish a likelihood of confusion.
• Other indicia of brand identity that do not translate to keywords (e.g., logos, stylization and color schemes) can be used to overcome initial interest confusion.

Courts have clearly signaled that competitive keyword advertising should be addressed by a business strategy, not by trademark infringement claims. Trademark owners seeking to protect their brands online should assess their competitor’s advertising for compliance with Google’s AdWords policy, which allows keyword advertising so long as the sponsored advertisements and URLs do not contain competitor trademarks and do not otherwise mislead users about a product’s origin. They should also look to alternate strategies, focusing on keyword management, counter-bidding and other digital marketing tools.

[1] Lerner & Rowe PC v. Brown Engstrand & Shelt LLC, 119 F.4th 711 (9th Cir. October 22, 2024).

[1] 1-800 Contacts v. JAND, Inc., dba Warby Parker, 119 F.4th 234 (2d Cir. October 8, 2024).