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Using your competitor’s trademarks as keywords? Proceed at your own risk

The Court of Appeal for British Columbia has issued an injunction restraining a party from using its competitor’s trademarks in its keyword advertising. While the Court of Appeal stopped short of finding that bidding on keywords in and of itself is contrary to the Trade-marks Act, it did find that in this case, the Defendant’s use of the Plaintiff’s trademarks as keywords in the visible text of its sponsored link was a misrepresentation likely to cause confusion to the public. The Court of Appeal found the Defendant liable for passing off.

keywords

The Plaintiff in the case, Vancouver Community College, is a public college which has been operating in the Vancouver area since 1965. It has been using the Vancouver Community College name and the acronym VCC for decades. The Defendant, Vancouver Career College (Burnaby) Inc. is a private career college which has been operating in the Vancouver area since 1995.

With a view to attracting traffic to the Defendant’s website at the domain vccollege.ca, Vancouver Career College (Burnaby) Inc. bid on numerous keywords and competitor names including “VCC” and “Vancouver Community College.” VCC was the keyword that attracted the most traffic to the Defendant’s website. In the search results page for a search for VCC, the Defendant’s text advertisement always displayed the Defendant’s domain name in the web address line of the advertisement with VCC appearing in bold capitalized letters: VCCollege.ca.

Vancouver Community College brought an action for passing off which requires it to establish (1) the existence of goodwill in the VCC and Vancouver Community College trademarks; (2) confusion of the public due to a misrepresentation made by the Defendant; and (3) damage to the Plaintiff as a result of its misrepresentation.

The Court of Appeal, overturning the trial judge’s decision on this point, found that the Plaintiff did indeed have goodwill in the VCC trademark. The Court of Appeal held that it is not necessary that a plaintiff prove that a trademark has acquired secondary meaning in order to establish goodwill. Ubiquity is not required. Rather, a plaintiff must simply establish that a sufficient portion of the relevant market knows that the trademark at issue indicates the plaintiff.  Noting a number of factors, including the history of use by the Plaintiff of VCC, the Court of Appeal found that the Plaintiff had goodwill in the VCC acronym.

The Court of Appeal also overturned the trial judge on the issue of whether the Defendant’s use of VCC constituted a misrepresentation. The Court of Appeal examined the temporal issue of when should confusion by misrepresentation be assessed: when the search results appear or when the searcher clicks through the advertisement and arrives at the Defendant’s webpage? Noting that confusion is to be assessed as a matter of first impression in the mind of the consumer, the Court of Appeal held that confusion should be assessed at the time the search results appear. This is the point in time when consumers have a first impression of the trademark at issue. In this particular case, the Defendant’s text advertisements always displayed VCCollege.ca in the web address line of the advertisement. In addition, the Defendant did not include any additional material in the domain name or in the advertisement that would make it clear to consumers that the Defendant college is not affiliated with or endorsed by the Plaintiff. On this basis, the Court of Appeal found that the Defendant had made a misrepresentation which was likely to cause confusion.

On the issue of damage, the Court of Appeal found that damage is not limited to provable loss of sales. The loss of the power to control the use of a trademark to which goodwill attaches can be a form of damage. In this case, the Court of Appeal found that the interference with the Plaintiff’s goodwill in its VCC trademark by the Defendant was sufficient to establish damage.

This case is notable in that it makes it clear that in cases where a plaintiff asserts infringement of its trademark rights through the use of keyword advertising, confusion will be assessed at the time when the search results appear, and the Court will carefully consider what message is being given to consumers from the use of the trademark. In cases where the advertisement does not make it clear that the advertiser is not the trademark owner, there is more likely to be a finding of passing off or infringement.

By Martha J. Savoy, Partner, Gowling WLG International Limited

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In addition to our regular guest bloggers, Inside Internal Controls blog published by First Reference, provides occasional guest post opportunities from various subject matter experts on the topics of risk management and best practices in finance and accounting, information technology, environmental issues, corporate governance, sales/marketing and operations, not-for-profits and business related issues in Canada. If you are a subject matter expert and would like to become an occasional blogger, please contact Yosie Saint-Cyr at editor@firstreference.com. If you liked this post and would like to subscribe to Inside Internal Controls blog click here.
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