• by Ross Fadner , June 21, 2004

Protecting brands is increasingly complicated by the emergence of adware and keyword bidding, according to trademark experts.

Adware programs are usually downloaded by consumers in exchange for access to free software or premium content. The tradeoff is advertising: Adware companies can serve their users targeted pop-up ads wherever they travel on the Web because the program they downloaded tracks their surfing behavior. This presents trademark problems because adware programs often serve competitors' ads over the pages of brand retailers or travel services, sometimes with customized offers based on user's past surfing behavior.

Keyword bidding, another issue for companies looking to protect their brand, is the process by which advertisers bid against each other on various search terms for the right to have their relevant text ads placed prominently in the sponsored links section of major search engines like Google, MSN, and Yahoo! None of these providers has a policy that prohibits competitors from bidding on trademark terms. As a result, many brands lose out to higher bids on their trademark, which can ostensibly send traffic to competitors' web sites even though a consumer might have originally had a certain brand name in mind.

Brian Murray, vice president for brand protection agency Cyveillance, and Martin Schwimmer, a private practice attorney specializing in trademarks, who is also founder of Trademarkblog.com, agree that there are "analytical" similarities between the threats adware and keyword bidding pose to brands.

According to Murray, adware is one of the fastest growing examples of brand abuse on the Web. "Many companies don't realize how many Internet users have adware." He says that Claria and WhenU are the most notorious examples, but there are "dozens" that are "far worse." He also notes that some of the most sought after keywords on the Web are trademarks.

Schwimmer, whose past client list includes Microsoft, Amazon.com and Miramax, says that both adware and keyword bidding present possible impediments to fair competition through "initial interest confusion."

Initial interest confusion occurs when a consumer who is searching for a specific product is offered a similar, yet different product for a lower price or better offer. The fraud occurs in the message that leads a consumer to believe that he or she has actually found what they were originally searching for. Schwimmer calls this the "bedrock" of the issue, but notes that initial interest confusion is more applicable to keyword search. The question then becomes: To what extent should competitors "get a free ride" when a trademark generates the traffic?

Matt Naeger, VP operations and general counsel for search marketing and solutions firm IMPAQT, notes that his company doesn't normally bid on other company's trademarks nor do they recommend it unless there is a direct one- to-one comparison between products.

As yet, Schwimmer notes there is no definitive legal answer, and search engines like Google have stated that it's not their place to regulate and control trademark disputes. There is also confusion among consumers who don't understand the difference between organic and sponsored listings, and as Schwimmer points out, this currently includes most Americans. Still, he says, "I don't believe that in and of itself the practice of bidding on trademarks is actionable."

However, Cyveillance's Murray notes that cease and desist letters are 85-90 percent effective for trademark disputes. Naeger says that IMPAQT has had to write cease and desist letters to their competitors before and in most instances they have been complied with. Schwimmer points out that many times media agencies use WhenU or Claria without telling their clients. When national advertisers hear that they are being sued for trademark violations, many quickly tell their agencies to stop using adware providers.

In some instances the most persistent trademark offenders are affiliates. IMPAQT's Naeger notes that affiliate trademark bidding is rampant in the travel, retail, and automotive sectors of search. Naeger says the problem of affiliates trying to outbid trademark owners to generate lead revenue is a more pronounced problem than competitors. "From a trademark owner's perspective, this needs to be changed," Naeger says. He adds that to protect themselves, IMPAQT factors prohibited keyword search terms into its affiliate contract. "When we do affiliate contracts, we always give them a list of about 50 terms they can't bid on."

Right now, Schwimmer says that because of all the lawsuits, adware currently poses the bigger problem to brands. He notes that from a legal standpoint, federal legislation would be the preferred means of settling the confusion between adware and spyware because several contradicting state laws would make it "impossible to give advice on the matter." Some in the online industry believe last week's unanimous approval by a House subcommittee of the SPY Act, a proposed federal law against spyware, could be a step in the right direction.

Schwimmer states that he is not opposed to legitimizing adware, as long as a licensing agreement fully discloses what the program will do. Schwimmer likens adware disclosure to fine print: "There's a reason we have small print [in contractual agreements]. There's disclosure, and then there's disclosure," he says, adding that adware is actually a good thing for advertising. "It makes advertising more efficient," he says.