B.C. Supreme Court Rules on Keyword Dispute

As online advertising changes the marketing landscape, the use of sponsored links and keyword advertising is testing the scope of trademark rights. The sometimes controversial practice of "keyword advertising" (such as Google AdWords) was at issue in a recent passing off action from the British Columbia Supreme Court. The Court held that the defendant Vancouver Career College did not pass off its services as those of the plaintiff Vancouver Community College through its use of the keyword "VCC".¹

What You Need To Know

• What is Keyword Advertising? A website operator can place bids with search engines like Google for specific keywords to be associated with their website. When a keyword is searched, the search engine will display the highest bidder’s ad or website as a "sponsored link" (clearly distinguished from organic results). When that link is clicked, the website operator will be charged the amount of its bid.
• B.C. Ruling. This decision, which is currently under appeal, is of particular interest to online businesses and those who rely on online advertising.
• The Court held that keyword advertising is not passing off, and that using a competitor’s business name(s) or marks as keywords is an established part of online advertising. To restrain the defendant’s use of this service would be to put them at a competitive disadvantage.
• The Court focused on the advertiser not having control over the process employed by search engines in generating search results. A searcher chooses which sites to investigate and should he/she be led to a competitor’s site through keyword advertising, no harm is done as the searcher can retreat from that website upon identifying it as the competitor’s and return to the original search.

Background and Analysis

Vancouver Community College, the plaintiff, claimed common law trademark rights in "VCC" as an abbreviation of its name and as a term it had used in public marketing. The plaintiff alleged Vancouver Career College misrepresented its educational services as those of the plaintiff  through keyword advertising.

Subsection 7(b) of the Trade-marks Act prohibits selling goods or services in such a way as to cause confusion between the goods and services of another. To succeed in an action for passing off, the plaintiff needed to satisfy the court that it enjoys goodwill in the trademark, and that the trademark has acquired distinctiveness (i.e., a "secondary meaning") in the marketplace.  The plaintiff also needed to establish that the defendant had misrepresented its services as those of the plaintiff and this caused confusion that harmed the plaintiff as a result. 

The Court found the plaintiff had established goodwill in the name Vancouver Community College, but failed to establish that there was acquired distinctiveness or a "secondary meaning."  In determining if the defendant had misrepresented its educational services as those of the plaintiff, the Court analyzed the issue from two different perspectives: competition and control. 

The Court interpreted the strategic use of keyword advertising as fair competition and not passing off. Keyword advertising is an established practice in online advertising. Granting damages to the plaintiff or preventing the defendant from using this strategy would be to disadvantage the defendant in a way that other online advertisers are not.

The Court held that engaging in keyword advertising, even when the keywords are related to the name or marks of a competitor, is not an act of causing confusion or misrepresentation because the element of control is absent. The advertiser may have control over what keywords it chooses to bid on and by what amount, but it does not control the bidding process. A bid on a keyword is not guaranteed to send a searcher to the bidder’s landing page, nor is the process of the search controlled by the bidder. The searcher is the one who must decide the course of their search. They may click on the bidder’s page or return to the search and move in a different direction entirely. As a result, a business using online keyword advertising cannot be said to control the search process.

Furthermore, the Court also borrowed reasoning from similar cases in the United States in regards to "initial interest confusion," a term of art that has not been formally adopted in Canada. The underlying premise is that when a user, deliberately searching for the plaintiff’s product or  service, is led to the defendant’s site instead, this may cause initial confusion. However, this initial confusion may be fleeting and insufficient to demonstrate the confusion necessary to be reasonably actionable.

Based on its reading of the authorities on the law of passing off, the Court states that it is the "first impression" of the searcher at which the potential for confusion arises that would lead to liability. In the Court’s opinion, the point during a search when the first impression is made cannot arise when the sponsored link appears. Instead, confusion arises when the searcher reaches and views a website. In this case, when a searcher reached the website of the defendant, it was clear that the website was not that of the plaintiff’s. It was within the searcher’s own volition to continue on the site in spite of this—or to return to the original inquiry. The plaintiff failed to demonstrate that mere application of keyword advertising by the defendant led to confusion that resulted in damage to the plaintiff.

What's Next?

This decision is of particular interest to online businesses and those who rely on online advertising. While trademark owners may argue that they are losing control of their marks, the courts, as suggested by the decision in this case, do not necessarily believe that advertisers are gaining it. This is the second decision to describe keyword advertising as fair use: the previous Canadian decision on keyword advertising went so far as to agree that the practice was no different than the long-accepted practice in traditional media of locating an advertisement close to that of a competitor.²

In a way, this ruling raises the threshold required to establish confusion caused by online advertising services. The Court did not assume the searcher was a relatively inexperienced Internet user. As online activity becomes more universal, the test person for confusion is more likely to be one who has a working familiarity with search engines and is capable of sifting through search results.³ The issue, however, remains unsettled as Vancouver Community College has appealed the decision. It remains to be seen how the courts will balance the rights of trademark owners against the fair use of strategic online advertising.

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* With assistance from Manpreet Singh, articling student.

¹ Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2015 BCSC 1470.

² Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc., 2010 BCSC 765.

³ Teresa Scassa, Canadian Trademark Law, 1st ed (Markham: LexisNexis Canada, 2010) at 408.