Monday a French court, the Tribunal de Grande Instance de Nanterre, 2ème chambre ruled in Sté Viaticum et Sté Luteciel c/ Sté Google France that Google France violated the trademark rights of a complainant when it displayed a competitor's sponsored links (via its Adword program) in response to a search for the plaintiff's trademark. The decision is subject to appeal.
Google's Adword Trademark policy offers limited review; it's mostly 'let's you and him fight'.
There is one US case that I know of which discusses the issue in the context of serving banner ads, Playboy Enterprises, Inc. v. Netscape Communications Corp., 55 F.Supp.2d 1070 (C.D.Cal., 1999), but it's only a district court, and fairly fact-specific. The court just wasn't persuaded that the use of the terms “playboy” and “playmate”—which it thought generic—was infringement. Even if they weren't generic, it said the banner ads were not infringing or dilution since they clearly advertised something other than the plaintiff's magazine or in any way interfered with the association between the plaintiff's mark and the product. (There may be more cases (there certainly are on meta-tags!), I haven't done a search on this recently.)
The very reliable Trademark Blog has in the past suggested that the US law in this surprisingly complex area is unstable, which seems fair enough as a descriptive matter. But I hope the French rule isn't adopted here.
The most recent article I know of on the subject of keyword advertising, Gregory Shea, Trademarks and Keyword Banner Advertising, 75 S. Cal. L. Rev. 529 (2002), doesn't seem to be online. It begins by suggesting the practice is bad,
With the rapidly expanding use of the Internet, new methods are being developed to infringe the vital asset of commercial goodwill: the trademark. As companies vigorously compete for consumer attention and money, they have discovered new techniques to exploit their competitors' goodwill to attract new consumers to their websites and products. Balanced against this manipulative behavior is the fact that the Internet has offered consumers new choices like never before. Consumers can quickly get information about new products, compare prices, and make purchases faster than ever.
One of the new techniques to reach consumers on the Internet is the use of trademarks as keywords to trigger competitor advertising when the trademark is entered as a search term in a search engine. While consumers can obviously benefit from this practice—as it allows them to see more choices related to their query and learn about new products—many companies feel this practice violates trademark law because it allows competitors to benefit from their goodwill.
Yet, it concludes by saying that it should not be banned,
Courts should resist their judgments that this behavior is morally reprehensible, as it will distort their application of the law. Keyword banner advertising does not confuse consumers because consumers expect that the ads are not connected to the trademark. Nor are claims of dilution likely to be successful. Keyword banner advertising is not trademark infringement, and describing the practice as devious or deceitful mischaracterizes the true situation.
Trademark owners frustrated by these decisions can pay to advertise with their trademarks, thus preventing competitors from doing so. Alternatively, they can pressure search engines to refrain from selling their trademarks to others. Courts, however, should not be overly sympathetic and unduly extend the protection of trademark rights. Trademark law focuses on protecting consumers. Consumers are helped—not harmed—by keyword banner advertising. Proper application of the law and considerations of policy should lead courts to allow the practice to continue, fostering competition and benefiting consumers.
Sounds about right to me, although I'm not even sure I believe it's morally dubious if it doesn't displace the trademark holder's listings and is clearly identifiable as a paid ad.