Court clarifies passing off on the 'Net

BCCA’s ruling on trademark in keyword advertising brings Canadian law closer to other jurisdictions

Bidding on a competitor's trademark in keyword advertising does not in and of itself amount to infringement, but doing so in combination with a confusing advertising message can amount to passing off, says the British Columbia Court of Appeal.

Keyword advertising occurs when businesses bid for specific keywords to be associated with their website in response to searches conducted on Google or other search engines. The highest bidder’s advertisement appears as a “sponsored link” on the webpage displaying the search engine’s results. If a user clicks on the sponsored link, the search engine charges the bidder the amount it bid.

The BCCA’s February decision in Vancouver Community College v. Vancouver Career College reverses a lower court’s decision that the “first impression” test for assessing confusion occurs when a searcher lands on the webpage of the keyword ad purchaser by way of a link from search engine results. According to the BCCA, that confusion can occur when the search results are displayed.

“The bottom line is that businesses can use a competitor’s keywords in their keyword bidding strategy so long as they don’t couple that strategy with resulting advertising that prevents the consumer from being able to distinguish between the two,” says Chris Wilson of Norton Rose Fulbright Canada LLP in Vancouver, who successfully represented Vancouver Community College on the appeal.

The dispute between Vancouver Community College, the plaintiff, and Vancouver Career College, the defendant, arose over the acronym “VCC.” Vancouver Career College had used it internally for some time, but only Vancouver Community College had marketed itself publicly using the acronym.

In 2009, however, Vancouver Career College began an extensive advertising campaign. The college purchased VCC as a keyword for the Google and Yahoo! search engines. At the same time, it bought the domain “VCCollege.ca” for its website. It also purchased a series of other domain names that included the term VCC. The website itself did not use the term, however, nor was there anything on the website that related to the plaintiff.

Numerous students and prospective students who used VCC as a search term testified that they were directed to Vancouver Career College, mistakenly believing that it was the same institution as Vancouver Community College.

The court found that VCC had become identified in the public mind with Vancouver Community College. Vancouver Career College’s purchase of the VCC trademark, considered in the context of the search results page, produced confusion for the consumer and therefore interfered with Vancouver Community College’s goodwill in the mark.

Timothy Stevenson of Smart & Biggar/Fetherstonhaugh in Ottawa says the decision indicates the need for caution in designing the sponsored link.

“Businesses will have to be careful about the way in which their sponsored link appears on the search engine’s results page,” he says.

“Bidders using competitor’s marks will have to ensure that that pop-up is not confusing on first impression.”

One advantage of the BCCA’s decision is that it brings internet keyword advertising law into sync with the law relating to meta tags and with the Federal Court of Appeal’s decision in Red Label Vacations.

The decision suggests that the use of trademarks in meta tags (themselves a form of keywords) could indeed give rise to liability for trademark infringement.

The court ruled that the extent to which a trademark may be used without infringing the mark is fact-specific.

“In some situations, inserting a registered trademark (or a trademark that is confusing with a registered trademark) in a meta tag may constitute advertising of services that would give rise to a claim for infringement,” the court stated.

The BCCA ruling has brought Canadian law closer to that of the UK, US and continental Europe. But just how close it comes depends on the judicial interpretation going forward. “The Court of Appeal didn’t explain how far the successful keyword bidder can go in designing its advertisement on the search page,” Wilson notes.