June 2, 2009

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High Noon On the Internet

The Death of Utah’s HB450

By Gretta Spendlove

June 2, 2009

The Internet is the Wild West of the legal system. It is a place that was discovered just 40 years ago, which is still being explored and mapped, and for which laws are uncertain, hotly contested or in flux. Today, one of the Internet’s most controversial issues, keyword advertising, has stirred up businesses throughout the world. What is Keyword Advertising? It is the most hotly contested legal issue involving the Internet. Web searchers, such as Google, direct users to various Websites, depend on the “keywords” that the users enter. It is a particularly controversial practice for Web searchers to offer companies their competitor’s trademarks as tools for directing traffic to their own site. For instance, Google might allow Smith’s Food and Drug Stores to use the keyword “Albertsons” to direct more grocery store traffic to Smith’s, and Google might also charge Smith’s for allowing it to use the Albertsons keyword. Courts around the country are split as to whether that use constitutes trademark infringement. Enter the Utah Legislature. In 2004, Utah enacted the Spyware Control Law, which regulated “adware,” a type of keyword advertising. That law was enjoined as unconstitutional in the summer of 2004. In 2007, the Utah Legislature tried again, passing a law that generally restricted keyword advertising. It prohibited keyword buyers and sellers from using registered marks as triggers for keyword advertising. The 2007 law would have regulated the use of keywords by search engines, such as Google, as well as by advertisers themselves. In 2008, the legislature repealed the 2007 law. Once again, in 2009, a law regulating keyword advertising was introduced—HB450. HB450 provided that, in limited situations, advertisers could not trigger ads based on competitors’ trademarks. HB450 was narrower than the 2007 law. It only applied to keyword buyers (advertisers) and not keyword sellers (search engines). It only applied if the advertiser used a search service with a geographic feature that could determine users were in Utah. It provided no monetary damages, but only attorney’s fees and an injunction to take down the offending ads. It was broader, however, than existing federal trademark laws, in that it did not require a showing of “actual confusion or likelihood of confusion,” as is required under the federal Lanham Act. HB450 passed the Utah House of Representatives by one vote, and then died when the Senate failed to act on it before the legislature adjourned for the year. During the bill’s short life, it faced a storm of opposition from not only Web searchers, but from such opponents as the Utah Technology Council, who opposed it because it was “detrimental to the technology industry and does not reflect well on Utah as a place to do business.” Curtis Bramble, HB450’s Senate sponsor, told Clickz News that he pulled the bill from further consideration because “This proposal needs to have some more dialogue.” Why so Controversial? Utah has been virtually alone, among states, in enacting legislation regulating keyword advertising. Reasons why HB450 was so controversial may include: • The law of keyword advertising is so new and the courts so conflicted that the state would almost certainly spend large sums defending the law. • Internet advertising so easily crosses state boundaries, that a uniform federal law may make more sense than a Web of conflicting state laws. • Federal trademark law already provides sufficient regulation. • HB450 was confusing to most readers. • HB450 was, arguably, special interest legislation, heavily pushed by Utah company 1-800 CONTACTS, which has filed a number of lawsuits relating to keyword advertising. Rescuecom v. Google Bramble plans to gather interested parties to reconsider HB450 and the issues it raises while the legislature is out of session, with, perhaps, a reprise in 2010. In the meantime, the courts continue to sort out keyword advertising issues. In April 2009, after the Utah legislative session ended, the federal Second Circuit court ruled that the sale by Google of Rescuecom’s trademark to Google’s advertising customers, via its AdWords program and Keyword Suggestion Tool, could constitute trademark infringement. The court remanded the case to the trial court for Rescuecom to try to prove that Google’s use of Rescuecom’s trademark in the AdWords program caused “likelihood of confusion” or “mistake,” the standards for trademark infringement. The Rescuecom v. Google decision was eagerly awaited and hotly debated, but what that case and others mean for Utah legislation is not clear. Questions Persist Does Rescuecom show that the federal trademark laws are adequate to regulate keyword advertising and reign in searchers like Google and Yahoo, without the need for state legislation? Or does Rescuecom show that the abuses of keyword advertising are at long last being recognized by society and the courts, and that even more legislation is needed? The controversy continues. Gretta Spendlove is a shareholder wih the law firm durham Jones & Pinegar. She can be reached at gspendlove@djplaw.com.
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