Google Calls New Utah Law Unconstitutional

Lawyers around the nation will likely Google "Utah SB236" and "Trademark Protection Act" in anticipation of legal challenges that may end up in the U.S. Supreme Court. Utah's Trademark Protection Act is designed to protect companies from trademark infringement by banning the use of keyword-triggered advertising generated by Internet search engines and pop-up advertisers. Prior to the law being passed, lawyers for the Utah legislature warned lawmakers that the law will likely be challenged and had a "high probability of being found unconstitutional." In a report by The Salt Lake Tribune, a Google spokesperson said the law hurts consumers and violates free speech, adding that this law is not consistent with U.S. trademark law and our capitalist system. Consumers benefit from competition which generally helps lower prices, and the U.S. federal courts have consistently upheld the right to use trademarked terms in comparative advertising.

The new law generated the electronic registration mark. An annual fee of no more than $250 would be charged for each registered electronic mark under the law. Search engine companies and Internet advertisers will have to check every ad request to see if a user in Utah is making the request, then check the search terms against the database of electronic registration marks for possible trademark issues. Legal experts point out that this new law undermines comparative trademark use which is protected under federal trademark law. We have seen legal use of comparative advertising before from companies like Pepsi and Coca-Cola, or Microsoft and Apple.

According to the creator of the bill, Matthew Prince, in order to understand the new law, it is important to understand the problem it addresses. Google, and other search engines, as well as popup advertisers, like WhenU.com, sell what is referred to as "keyword" advertising. Ads are triggered based on searches that are run or terms that appear on web pages. What is controversial is when the keyword being purchased is a trademark of another company. Companies spend millions of dollars to create brands and trademark law has existed for decades on the state, federal, and international levels in order to protect that investment. Contrary to the protection trademarks are supposed to afford, the current practices of search engines and pop-up advertisers allow competitors to inexpensively capitalize on the goodwill of a brand in order to promote themselves.

Prince uses a recent example to illustrate his point. You may have seen a televised advertising campaign to promote Pontiac brand cars. "Pontiac" is a trademark of the General Motors corporation. The ads encouraged viewers to go to Google and search for "Pontiac" in order to learn more. To General Motors' surprise, Mazda had purchased the keyword "Pontiac" and viewers were shown ads for the competitor's cars. A substantial portion of the attention Pontiac had spent millions of dollars generating for their own brand was diverted by Mazda. This diluted Pontiac's brand and was essentially a form of corporate identity theft. Imagine if the same thing happened to your company -- and without Utah's law there is nothing stopping it -- and you can understand why Pontiac was so upset. Prince says, maybe Pontiac could have protected themselves by purchasing ads for their own trademark. However, the system typically works like an auction. Generally, the more money you bid, the more likely it is your ad will appear. If Pontiac had bid for their trademarked keyword, Mazda could have simply bid more. Even if a company is able to buy up all the search terms around their brand -- as Pontiac has subsequently done -- why should they have to? Doing so is the equivalent of paying protection money to secure rights that should already be protected by law.

Several trademark holders have previously filed lawsuits disputing the practice of search engines and popup advertisers. Unfortunately for the mark holders, courts evaluating the cases have said the Lanham Act, the federal trademark law, never contemplated this situation. That is not surprising since the Lanham Act was implemented before the Internet. The lack of clarity in existing trademark law meant courts had to tell brand holders that they must look to the legislatures and clear up the law. That is why Utah SB236 was passed. It is important to note that Utah's legislature, in enacting the Trademark Protection Act, was not making up wholly new rights. In fact, with the exceptions of the United States and Canada, in most countries the practice of using someone else's trademarked term to trigger an advertisement is considered a violation of trademark law. Google, and other search engines, respect international law.