Keyword Advertising - Trademark Infringement or Not?

I've been getting inquiries about keyword advertising. This is where a company buys a keyword from a search engine and when someone searches that word, the company's ad is displayed. These ads are also links to the advertiser's website. Google uses their trademark "Adwords" for this service. All in all, this can be an effective way of driving web traffic to your site.

The problem arises when a company buys a keyword which is also a competitor's trademark. Is that trademark infringement or is it good old fair competition? At the 2007 International Trademark Association Annual Meeting presentation on this issue in Chicago, the audience seemed to have as many different opinions as the courts do.

At a high level, courts in the 9th circuit (which includes California) have tended to hold that it is (or at least can be) trademark infringement. On the opposite side of the country (and the spectrum), New York courts have held that keyword advertising using a competitor's trademark doesn't even constitute "use" of the trademark (let alone infringement). To make matters even more confusing, we in the 3d circuit (NJ, PA & DE) have a split among the district court decisions on this issue. In Pennsylvania, this kind of keyword advertising is not trademark infringement, but in New Jersey it is. Go figure.

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