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The illegal hiring of a competitor's trademark as a keyword and the lawful return of a sponsored link in a search made by a weak trademark

It is certain that the internet is an extremely important business tool and a battleground between competitors. It is advantageous for a particular company that its products or services are displayed prominently in advertising banners and, especially, as search results on Google Ads.

The illegal hiring of a competitor's trademark as a keyword and the lawful return of a sponsored link in a search made by a weak trademark

Online sales have grown dramatically and have generated approximately R$450 billion in the last 3 years.

By Carlos Gruenbaum Lemos and Pedro Bastos Motta Matheus, Gruenbaum, Possinhas & Teixeira

Introduction

Google Ads operates by "boosting" sponsored links, i.e., paid by the advertiser, to be prioritized and prominently displayed as search results on the Google search engine (Google Search).

To do so, the advertiser must contract Google to inform which parameters, especially which keywords searched by the internet user, should be associated with the links and advertisements of the advertiser. Additionally, the advertiser can also "negate" certain keywords so that a search containing them does not return sponsored results from the advertiser.

Recently, especially during and after the COVID-19 pandemic, online sales have grown dramatically and, according to data from the Brazilian Ministry of Development, Industry, Trade, and Services, have generated approximately R$450 billion in the last 3 years.

Therefore, it is certain that the internet is an extremely important business tool and a battleground between competitors. It is advantageous for a particular company that its products or services are displayed prominently in advertising banners and, especially, as search results on Google Ads – the most widely used tool of its kind worldwide.

Hence, for clothing retailers, for example, it is interesting – and important – that their products are prominently displayed when a target consumer searches on Google for the word "t-shirt."

The rules of fair competition must be applied to search and sponsored link boosting tools. It is not acceptable for a company to use signs and trademarks of others to boost its own products or services, taking advantage of searches for a competitor's trademark to "get ahead" and display its own products prominently to the consumer, to the detriment of those of the searched trademark's owner, as this conduct tends to divert other's clientele for one's own benefit and is therefore illicit.

Illegality Established

In the sponsored link system, the company that pays for the service has its website address and its ads prominently displayed in search results whenever a consumer searches for certain keywords on the internet.

If this company uses a third-party trademark as a keyword, when typing the trademark into the Google search engine, the sponsored links of the company that hired Google Ads will be prominently displayed, possibly even above the link of the company owning the searched trademark. In such circumstances, competition does not appear ethical and fair.

As is well known, the use of a third-party trademark is an unlawful act, since "ownership of the trademark is acquired through a validly issued registration, according to the provisions of this Law, with the owner being assured exclusive use throughout the national territory," (1) "with the owner having the right to ensure such exclusivity and the integrity of its trademark." (2)

The practice of using a third party's trademark to attract consumers to one's establishment is characterized as a crime of unfair competition because "commits a crime of unfair competition [one who] employs fraudulent means to divert, for one's own or another's benefit, the clientele of another" or "uses expressions or signs of others' advertising, or imitates them, in a way that creates confusion among products or establishments." (3)

Therefore, competition, which is desirable and healthy in principle, becomes unlawful and unfair from the moment a merchant uses third-party trademarks to boost its sales, diverting clientele, thus characterizing unfair competition, according to articles 129, 130, and 195, III and V of the Brazilian Industrial Property Law.

Thus, unfair competition is very well characterized, as the consumer, when searching for a specific trademark on the search engine, ends up being led to the sponsored link of its competitor, therefore diverting from its natural path, which would be to access the website of the searched trademark's owner. And obviously, it is not a search for a generic term, such as the name of a product, but rather for a specific competitor's trademark, clearly indicating that the intent of the one who hires it as a keyword in the Google Ads platform is precisely to attract the consumer seeking information from its competitor (owner of the searched trademark), thus configuring effective clientele diversion.

Specialized doctrine on the subject had already signaled, many years ago, the illegality of using third-party trademarks as criteria for triggering sponsored ads:

"Obviously, the competitor, by using the business name and/or trademark of other companies in the segment in which it operates, has no other intention than to take advantage of the prominence its opponent holds for promoting its products or services, being certain that this type of conduct, in addition to illicit enrichment, also reveals itself as parasitic competition." (4)

"In summary, a consumer searches for a company's page and receives a link that redirects him to another company's page. Such practice allows advertisers to ride on the prestige and attractive force of third-party trademarks, without having to pay for the use of others' intellectual property." (5)

There is no doubt that the conduct of those who hire a third party's trademark as a keyword for boosting links and ads on the Google Ads platform or similar ones violates the rules of fair competition, and therefore, such conduct must be curbed, in accordance with the law and doctrine, which has been recognized by the Judiciary, as we see, for example, in the Statement of the Group of Reserved Chambers of Business Law of the São Paulo State Court of Justice, updated on 12/12/2023:

"Statement XXIII - The use of a nominative element of a trademark, business name, or establishment title as a keyword on the Google Ads advertising platform constitutes parasitic use, as it facilitates the practice of unfair competition (Art. 195, III, of Law No. 9,279/1996), implying joint liability of the provider, due to the risk of the activity (Art. 927, sole paragraph, of the Civil Code). Inapplicability of Art. 19 of the MCI, because the choice of a keyword for targeted advertising service does not equate to content production by third parties."

Corroborating the conclusions of the São Paulo Court, we can also cite the following judgment from the Superior Court of Justice:

"SPECIAL APPEAL. INDUSTRIAL PROPERTY. OBLIGATION NOT TO DO. TRADE NAME. UNAUTHORIZED USE. KEYWORD. SEARCH TOOL. CUSTOMER BASE. DIVERSION. UNFAIR COMPETITION. CHARACTERIZATION. INJUNCTIVE RELIEF. NECESSITY. INTERNET CIVIL FRAMEWORK. NON-APPLICATION. SUPREME COURT SUMMAR Nº 284. 1. The controversy at issue is to verify whether: (i) the use of the Google AdWords tool by inserting a trade name as a keyword implies unauthorized use and unfair competition; (ii) in the hypothesis, Article 19 of the Internet Civil Framework applies and, if so, whether the requirements for liability provided therein are present, and (iii) the requirements for condemnation in the payment of lost profits are present. 2. The protection granted to trade names, as well as to trademarks, aims to protect the consumer, preventing them from making mistakes regarding the origin of the product or service offered, and preserving the investment of the holder, by preventing usurpation, parasitic economic benefit, and diversion of clientele. Precedents. 3. The distinction between fair and unfair competition lies in how the conquest of customers is achieved. If competition arises from acts of its own efficiency or others' inefficiency, this act tends to be fair. On the other hand, if competition is established from unfair acts, closely resembling the logic of abuse of rights, unfair competition is spoken of. 4. The consumer, when using a trade name or trademark as a keyword, indicates that they have a preference for it or, at least, have that reference in memory, which results from the investments made by the holder in the quality of the product and/or service and in the disclosure and establishment of the name. 5. The contracting of sponsored links, as a rule, characterizes unfair competition when: (i) the Google Ads tool is used to purchase a keyword corresponding to the registered trademark or trade name; (ii) the holder of the trademark or name and the acquirer of the keyword act in the same line of business (competitors), offering services and products considered similar, and (iii) the use of the keyword is likely to violate the identifying and investment functions of the trademark and trade name acquired as a keyword. 6. In this case, Article 19 of Law No. 12,965/2014 does not apply, since it does not involve the liability of the application provider for third-party content, but the undoing of the hyperlink resulting from the hiring of the Google Ads tool, which attracts the disapproval of Supreme Court Summar No. 284. 7. In the case of unfair competition, considering the diversion of clientele, material damages are presumed, and they can be assessed in the liquidation of the judgment. Precedents. 8. Special appeal partially known and, in this part, not provided for. SPECIAL APPEAL No. 2032932 - SP (2022/0325561-9). Rapporteur MINISTER RICARDO VILLAS BÔAS CUEVA THIRD CHAMBER, unanimously, August 8, 2023."

However, it is worth mentioning that there will not always be illegality arising from the mere display of sponsored results from a competitor when searching for a third-party trademark, due to the way tools like Google Ads function.

Broad Search and Lawful Return of Third-Party Trademarks

The mere fact that typing third-party trademarks into the Google search engine results in a sponsored link from another merchant who is not the owner of the searched trademark does not necessarily mean that the third-party trademark has been used as a keyword, as the Google Ads service allows for three different types of "keyword matching": exact match, phrase match, and broad match. Only in the first case (exact match) does the search return results exclusively with the same meaning or intention as the keyword.

As can be seen, phrase and broad matches broaden the range of results, including among the search results those that are in some way related to the contracted keywords, even if the specific words entered by the internet user in Google Search have not been contracted. Specifically regarding broad matching, the Google AdWords help page defines it as follows:

"Broad Match: Ads may appear in searches related to your keyword, including searches that do not contain its terms. This way, you attract more visitors to the site, spend less time creating keyword lists, and focus your spending on terms that perform well. Broad match is the most comprehensive and, therefore, is assigned by default to all keywords. It is not necessary to specify another type of match (such as exact, negative, or phrase).

[...]

To show relevant results, this type of match can also consider the following:

-Recent user search activities

-Landing page content

-Other keywords in an ad group to better understand intent"

Thus, the fact that typing in the search engine the name of a third-party trademark results in a sponsored link does not necessarily lead to the conclusion that the company that hired the Google Ads platform specifically contracted the third-party trademark as a keyword to boost its ads, as there is no pattern of results, and 

therefore, the search tool is based on the comprehensive correlation of the searched terms, the services, and fields of activity, as well as various other parameters such as the user's browsing history and geolocation, in order to generate its results.

Especially in the case of weak trademarks (those descriptive or evocative of the products or services offered), there is a high chance that searching for such an expression will return sponsored ads from various competitors, without the trademark having been used as a keyword, and therefore, this fact should not be seen as illegality, as the trademark, being somewhat arbitrary, descriptive, or evocative, tends precisely to have a connection with the line of business of both the advertiser and the trademark holder, as both will be competitors.

Now, as broad matching seeks results that are related to - and not necessarily contain - the keyword, it is evident that a search for a trademark containing expressions of low distinctiveness and evocative or descriptive terms, even if registerable and registered, may return sponsored links from a competitor using broad matching in Google Ads, since the trademark in question will be intrinsically linked to the products and services of both competitors and will therefore likely be interpreted by the Google algorithm as related and relevant to the consumer's search.

The São Paulo State Court has already had the opportunity to rule on this issue through a decision that affirmed that, when hiring the broad matching service and due to the use of common and evocative terms, the search result is generic and diverse, and therefore, the company contracting Google Ads would be exempt from any liability regarding the alleged unfair competition and diversion of clientele. See:

"INDUSTRIAL PROPERTY - Mixed trademark - Lawsuit seeking to inhibit the use of the trademark and domain 'decoradornet' as search keywords by the Defendant - Google's letter stating that the defendant hired a broad matching search service - Trademark and domain composed of common words, describing the service provided - Evocative trademark - Possibility that the internet user finds any cyber interior decoration company when typing the expressions 'decorator' and 'internet' (or 'net') - Unfair competition not configured Injunction and compensation claims dismissed - Appeal denied." (6)

From the leading opinion, drafted by Judge Ricardo Negrão, the following grounds can be extracted:

"Since the Defendant did not acquire keywords by exact match, it is certain that she did not intend to be associated with the Plaintiffs' trademark and domain.

The Defendant preferred broad matching, using keywords associated with the service provided by her.

And, as explained in the Google Adwords platform Support, it was not necessary to include the keywords 'decorator' and 'net' in broad matching, but only to include any words related to this term.

 

Now, the words that compose the mixed trademark and the Plaintiffs' domain 'decorarnet' (decorate and net), on the other hand, are common, evocative of the service provided by the co-author (internet interior decoration planning).

(...)

Thus, when searching on the 'Google' platform with the expressions 'decorate' and 'net,' the internet user can be directed to any site that provides the same type of service, without there being unfair competition."

Therefore, it is clear that, even though there is a return of sponsored links, there is no talk of unfair competition when there has been no hiring of the trademark as an exact match keyword, but only the hiring of words and terms associated with the service or product of the contracting party.

Conclusion

As observed, it is not the mere fact of sponsored links returning in the search for a third-party trademark that characterizes unfair competition, but rather the effective hiring and use of a third-party trademark as a keyword for triggering sponsored link ads on the Google Ads platform that characterizes unfair competition.

In this way, in conclusion, the use of a competitor's trademark as a keyword constitutes unfair competition; however, the finding of this unfair competition cannot be based on the mere return of sponsored links in searches conducted with third-party trademarks, especially descriptive trademarks, since it is necessary, in this case, to verify whether there was hiring of the Google Ads platform in broad matching mode, without the competitor's trademark being specifically hired as a keyword.

(1) LAW No. 9,279/96 Article 129. Ownership of the trademark is acquired by validly issued registration, according to the provisions of this Law, ensuring the holder its exclusive use throughout the national territory, observing, regarding collective and certification marks, the provisions of Articles 147 and 148.

(2) LAW No. 9,279/96 Article 130. The trademark holder or applicant is also guaranteed the right to: (...) III - safeguard its material integrity or reputation.

(3) LAW No. 9,279/96 Article 195 Whoever commits unfair competition crime: III - employs fraudulent means to divert, for their own or others' benefit, the clientele of another; IV - uses another's advertising expression or sign, or imitates them, in a way that creates confusion between products or establishments;

(4) DE ARAÚJO, Rubia Maria Ferrão and BRAGUIM, Guilherme Cunha. New forms of unfair competition in the face of technological advances. Business Law Review, vol. 11, year 3, pp. 407-415, São Paulo: Revista dos Tribunais, Sep-Oct.

(5) RODRIGUES JR., Edson Beas. Suppressing unfair competition in electronic commerce: sponsored links, unfair marketing strategies, Internet search engines, and trademark infringement. Revista dos Tribunais. vol. 961, year 104, pp. 35-93, São Paulo: RT, Nov 2015.

(6) Appeal No. 1081401-97.2020.8.26.0100. 2nd Business Law Chamber of the São Paulo Court of Justice. Reporter Des. Ricardo Negrão. Judged on 27/06/2023. DJe 03/07/2023.

References

BRAZIL. Law No. 9,279 of May 14, 1996. Industrial Property Law. Available at: < http://www.planalto.gov.br/ccivil_03/leis/l9279.htm >. Accessed on: February 15, 2024.

DE ARAÚJO, Rubia Maria Ferrão and BRAGUIM, Guilherme Cunha. New forms of unfair competition in the face of technological advances. Business Law Review, v. 11, year 3, p. 407-415, São Paulo: Revista dos Tribunais, Sep.-Oct.

RODRIGUES JR., Edson Beas. Repressing unfair competition in e-commerce: sponsored links, unfair marketing strategies, Internet search engines, and trademark infringement. Revista dos Tribunais. vol. 961, year 104, pp. 35-93, São Paulo: RT, Nov. 2015.

Carlos Gruenbaum Lemos is an attorney and partner at the law firm Gruenbaum, Possinhas & Teixeira, Carlos holds a degree from Pontifical Catholic University of Rio de Janeiro and a postgraduate degree in Intellectual Property from the same university. Email: carlos@gruenbaum.com.br

Pedro Bastos Motta Matheus is a lawyer and member of the law firm Gruenbaum, Possinhas & Teixeira, Pedro graduated from the Federal University of Rio de Janeiro. Email: pmatheus@gruenbaum.com.br

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