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Protect Your Good Name... Keyword Advertising and Trademark Licenses

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March 01, 2013
Legal Corner
Ruth Walters

The Internet can be a hard, hard place for brand owners. Yet failing to engage potential guests online across a variety of platforms is no longer a viable option for the majority of hospitality industry participants. It is crucial that brand owners exercise control over their marks whenever possible. This article focuses on the legal use of keyword advertising, and provides some tips about how to negotiate trademark licenses in online distribution and marketing agreements.

Keyword Advertising: Can That Be Legal?
Brand owners with an active Internet presence must come to terms that search engines can sell their brands’ trademarks as keywords, and their competitors can bid on and purchase those keywords without a license. Despite the ubiquity of keyword advertising, its legality is not, in fact, settled. The legal test for trademark infringement is whether a certain party’s use of a trademark in commerce is likely to create consumer confusion as to the source, origin or affiliation of the goods and services of that party and its goods or services with another’s. Herein lies the difficulty—the average keyword purchaser is trying to direct Internet traffic to its own site and goods or services, not pass itself off as the trademark owner or create confusion about the affiliation or origin of those services.

Despite many trademark owners’ suits against Google (most notably by Rosetta Stone, Ltd., the language software company), there is no clear statement from a majority of courts finding a search engine’s role in keyword advertising unlawful. Several trademark owners have also sued their competitors for purchasing trademark keywords, again with mixed results. Many of these cases settle without a full hearing or judgment on the facts of the case because, of course, lawsuits are expensive and the value of having one’s own trademark back as a keyword may be dramatically exceeded by the costs of suing to get it, even taking into account a certain number of clicks on those sponsored advertisements.

To further complicate matters, many hotels and restaurants find that the entities bidding on their trademarks are not, strictly speaking, competitors. Rather, they are the typical online travel agent (OTA), online meal reservation platform, travel and tourism aggregator or meta-search sites and the various and sundry related channels that seem to crop up daily. These third-party distributors may be able to use brand owners’ trademarks and legitimately defend allegations of infringement by reference to a legal theory called nominative fair use. If one company uses another’s trademarks only to refer to the second company’s marks and only to the extent necessary to call to mind the trademark owner, that is considered fair use at law. It seems trademark law is poorly equipped to deal with the nuances of the online distributor-brand owner/supplier relationship.

The Search Engines Respond
As far as Google is concerned, there is nothing wrong with keyword advertising. Google’s AdWords Program Trademark Policy states bluntly that Google will not restrict the use of trademarked terms as AdWords even if a trademark owner complains. They will investigate complaints from trademark owners when the trademark itself appears in the ad text of a sponsored ad; however, there is a reseller or informational page exception, meaning brand owners may have a hard time convincing Google to take down these ads when they appear as the result of keywords purchased by OTAs or other distributors.

Microsoft’s policy for Bing and Yahoo! is identical, except that Microsoft will investigate keyword complaints from trademark owners in France, the Republic of Ireland, Italy, Singapore and the United Kingdom, presumably to reflect laws more favorable to trademark owners in those countries than in the United States.
Google has gone a step further, with its 2012 launch of Promoted Hotels functionality, available only to certain suppliers to its Hotel Finder product. Promoted Hotels is part of Google’s larger hotel advertising and distribution program called Hotel Price Ads, currently in beta.  To many brand owners’ unpleasant surprise, as of December 2012, the Hotel Price Ads functionality was only available to global distribution systems (GDSs), online travel agents (OTAs), certain central reservation system (CRS) providers and large hotel chains. Most brand owners can only access the Hotel Prices Ads functionality by selecting a CRS or GDS package that includes it.

In other words, it’s not just another keyword advertising bidding war—most hotels don’t even have the ability to fight.
Practically Speaking
In this environment of many potential legal uses of trademarks brand owners may not anticipate and can control only with difficulty and a lot of money, they must make the most they can of those times when a license can be negotiated. It is essential to read the fine print and think carefully about the scope of any licenses to trademarks being granted under several common types of agreements. For example, many distributors’ form agreements lump brands in with other intellectual property (images, room descriptions, meal prices and so forth) into a broad category called hotel information or owner content, and then proceed to give themselves the rights to do virtually anything they want with it. Trademarks should be treated separately from all other types of intellectual property; unlike copyrighted material, failure to control and police the use of trademarks may put the brand owner’s rights at risk. A so-called naked license, one that permits the licensee to do whatever it wants without control from the licensor, may result in abandonment of a trademark and all rights associated with it.

Even if trademarks are treated separately, broad trademark licenses are common: “[the right to use the owner’s trademarks for] any and all marketing purposes in connection with this Agreement” or “as determined by the Licensee to market, promote and sell Licensor’s inventory” mean all uses across all platforms. Unless specifically excluded, this covers the right to do things like:
  • Bid on keywords (or AdWords or any other synonym) which implies the right to create sponsored advertisements directing users to the distributors’ sites instead that of the trademark owners’;
  • Use the brand owner’s trademarks in the sponsored ads themselves;
  • Use the brand owner’s trademarks in domain names; and
  • Use the brand owners’ trademarks as part of Facebook or Twitter user names.
Depending on the individual brand owner’s revenue and marketing strategies, it may want to severely restrict a third-party distributor’s ability to bid on or purchase keywords and should list as many forbidden uses as possible: keywords, AdWords, Promoted Hotel/Hotel Price Ads words and so forth. Wily distributors will be perfectly capable of making extremely fine distinctions among these functionalities, so a broad no-keyword bidding provision may not provide the protection the owner wants. 

Then again, none of the above may cause any concern at all to a trademark owner who is now thinking, “Well, obviously, that’s why we enter into of these types of arrangements,” which is also a legitimate response. The point is that trademark owners must be aware of their rights and the implications associated with each and every trademark license they are in a position to negotiate to make sure the licenses support, rather than subvert, the owners’ overall revenue management, marketing and brand protection strategies.

Ruth Walters is of counsel for Garvey Schubert Barer. Her practice focuses on intellectual property and technology transactions in the hospitality industry, including social media issues, global brand partner agreements and online inventory distribution. She also practices in the area of general hotel operations, including the negotiation of group sales and vendor/supplier agreements.

©2013 Hospitality Upgrade
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