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Keyword Advertising: When “Sponsored Links” Can Get You in Hot Water

February 28, 2017

With catchphrases such as “search engine optimization”, “AdWords”, and “pay-per-click” dominating the online marketing vernacular, it is helpful for commercial entities and marketing professionals to be cognizant of potential trademark law issues that may arise when engaging in promotional activities. A recent decision of the British Columbia Court of Appeal in Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2017 BCCA 41 sheds some light on the question of trademark infringement in the area of keyword advertising.

Background on Keyword Advertising

Online advertising platforms such as Google Adwords allow website operators to pay search engines for links to their websites to appear as “sponsored links” next to the search engine’s regular (“organic”) search results. A website operator will create an advertisement, specifying certain keywords or cookies to describe their website, and may place bids on the keywords to increase the likelihood that the advertisement will be displayed with priority (i.e. higher placement of the advertisement) when a search is performed using the keywords. The keywords thus act as a trigger to cause the advertisement and the associated website link to be displayed. If a user selected a sponsored link to a website, that website is charged according to its bid.

Which Vancouver College?

In 2009, the defendant, Vancouver Career College, adopted “VCCollege” as a new trademark and placed bids on “VCC” as a keyword for the Google and Yahoo search engines. The plaintiff, Vancouver Community College, alleged passing off (or common law trademark infringement) by the defendant through use of the plaintiff’s trademark “VCC” in its Internet advertising. In its 2015 decision, the Supreme Court of British Columbia (“BCSC”) held that the requirements for a claim of passing off were not established in the case. Of particular note in the lower court’s decision was the ruling that the relevant timeframe for assessing the potential for confusion is when a searcher arrives at the landing page of the defendant’s website after clicking on a search result. That is, in the view of the lower court, the question of whether there is likely to be confusion in the minds of the public regarding which college is associated with the “VCC” trademark should be determined at the moment when a person arrives at and views the defendant’s website. The plaintiff appealed from the decision of the BCSC.

Court of Appeal’s Decision

The Court of Appeal held that the trial judge had erred in law with respect to the issue of passing off. First, the Court accepted that, as of 2009, the plaintiff had goodwill in the acronym “VCC”, which was recognized in the relevant marketplace as a public educational institution in British Columbia. In this regard, the Court overturned the BCSC’s ruling that proof of goodwill required a showing that the acronym “VCC” had acquired a secondary meaning or distinctiveness, instead holding that the plaintiff was merely required to establish that a sufficient portion of the marketplace knew, at the relevant time, that “VCC” indicates the plaintiff’s name. Second, and perhaps more notably, the Court held that the likelihood of confusion should be assessed before the searcher arrives at the defendant’s website and, more specifically, the moment for assessing confusion is at the earlier stage of the search engine results page. Applying this principle, the Court concluded that the second component of passing off, confusion, was established. In particular, the Court held that, since the defendant’s sponsored link displayed the domain name “VCCollege.ca” with no other content that would distinguish the owner of that name from the plaintiff, Vancouver Community College, a person visiting “VCCollege.ca” would be led to believe that they were being directed to the plaintiff’s website or one that was affiliated with the plaintiff. With respect to the third prong of a passing off claim, damages, the Court cited with approval the decision of Edward Chapman Ladies’ Shop Limited, 2006 BCSC 14, which held that damage may be inferred from the unauthorized use of or loss of control over one’s goodwill and that proof of actual financial loss is not a requirement. In this case, the Court ruled that the inference with the plaintiff’s goodwill was sufficient to establish damage. Accordingly, the plaintiff’s appeal was allowed and a permanent injunction in favour of the plaintiff was ordered, prohibiting the defendant’s use of “VCC” and “VCCollege” in respect of its Internet presence.

Conclusion

While the Court appears to confirm that the moment of assessing confusion, at least in the context of keyword advertising, is upon the first encounter of the search results, the Court did not go so far as to conclude that the bidding on a competitor’s trademarks as keywords in and of itself is sufficient to satisfy the “confusion” component of a passing off claim. Rather, the key consideration is the actual message that is communicated by the defendant; in other words, courts will look to whether the online presentation of the defendant, such as its sponsored links, constitutes a misrepresentation that is likely to cause confusion.