Advertiser OKd to Buy Search Ads With Rival's Trademarks

PASADENA, Calif. — In a ruling of significant interest to online companies, a federal appeals court has decided that a company can continue to advertise on search engines using keywords that include the name of a competitor's product.

The 9th U.S. Circuit Court of Appeals vacated on Tuesday a preliminary injunction that blocked Network Automation from using a competitor's trademarked keyword, which a lower court found was likely to infringe on Advanced Systems Concepts copyright and cause consumer confusion.

The case got its start after Network Automation purchased “ActiveBatch” as a keyword from Google AdWords and a comparable program offered by Microsoft’s Bing search engine.

Advanced Systems, which sells scheduling and management software under the brand name AutoMate, demanded that Network Automation cease and desist from using its name as an advertising keyword, claiming that the use infringed on its copyright.

After Network Automation refused, Advanced Systems sued the company at U.S. District Court in Los Angeles.

The lower court was confronted with the question whether Network Automation’s use of ActiveBatch to advertise its products was a clever and legitimate use of readily available technology, such as Google’s AdWords, or a likely violation of the Lanham Act.

A federal judge in Los Angeles ruled in April that consumers would likely be confused because the marks were so similar and the products nearly identical. The court issued a preliminary injunction against Network Automation's use of the ActiveBatch keyword.

But on Tuesday a three-judge appeals panel disagreed, finding that Advanced Systems had failed to show that "sophisticated" Internet consumers would be confused by the advertising strategy.

"A sophisticated consumer of business software exercising a high degree of care is more likely to understand the mechanics of Internet search engines and the nature of sponsored links, whereas an un-savvy consumer exercising less care is more likely to be confused," the 9th Circuit ruling said.

9th Circuit Judge Kim Wardlaw, who wrote for the majority, prefaced the ruling with a passage from a 12-year-old case decided by the appeals court in Brookfield Communications vs. West Coast Entertainment Corp.: “We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach.”

The case is Network Automation Inc. vs. Advanced Systems Concepts Inc., No. 10-55840.