• by Laurie Sullivan , Staff Writer @lauriesullivan, April 14, 2010

Allowing marketers to bid on trademarked keywords they don't own has been a bit of a gray issue for search engines. For starters, some marketers turned it into a strategy, bidding up competitor's keywords to gain the upper hand. But as the traditional business model for paid search transitions from Google into other platforms, such as Twitter, trademark infringement may become an issue for many companies.

Still, multibillion dollar Internet companies have been built by thriving in a gray area while the law works itself out. Many entrepreneurial companies like Twitter and Bill Gross's Overture, the first pay-per-click engine, began that way, according to an entrepreneur who asked for anonymity.

Making a business fly right out of the gate often requires socializing the concept of a new ad media platform, gaining adoption, and then allowing industry standards and legalities to work themselves out. If entrepreneurs worry too much about legal issues upfront then they might not have a business to begin with. This is apparently not a bad business decision for Twitter and TweetUp, which both launched Twitter ad platforms this week, to get their respective business model and technology out there.

Legally, every U.S. jurisdiction differs, but eventually the court system will determine where to draw the line, according to Joseph Rosenbaum, partner at Reed Smith, New York. Initially, the courts may have a difficult time finding liability because companies do not have an obligation to police what companies bid on specific keywords if they "simply provide a forum without intervention or suggestions," he says.

Rosenbaum, who chairs the firm's global Advertising Technology & Media Law practice, says there is a fine line between First Amendment rights to host content and to act as a distributor, compared with being a publisher, content creator and editor.

Google has struggled for years with whether to allow companies to bid on trademarked keywords. In the U.S., the search engine doesn't monitor the use of trademarked terms as keywords. There are some instances where the use of trademarked terms in the ad itself will not violate Google's trademark policy.

If Google finds an advertiser is using the trademark in ad text that's competitive, critical, or negative, the search engine will require the advertiser to remove the trademark, and prevent the company from using it in similar ad text in the future.

Steve Chadima, TweetUp chief marketing officer, tells me there are many obvious situations where you would want to allow people to bid on terms they didn't own. "Think, for example, of Walt Mossberg or David Pogue or another journalist wanting to boost his tweet link to his iPad review above the general chatter about the new tablet," Chadima says. "Even though Apple owns the trademark, there's no reason others shouldn't be able to bid on it if it makes business sense to do so."

TweetUp plans to incorporate a provision to disallow bids deemed inappropriate, such as Rolex counterfeiter bidding on the term Rolex. For the people who qualified for the $100 credit, TweetUp requires a minimum keyword bid of 1 cent. However, for everyone else there are no minimum bids, Chadima explains. You can associate keywords with your Twitter bio or tweets with a zero bid, which in some cases may be enough, when combined with the algorithm, to move you to the top of some search results.