CT lawsuit tests Google's keyword search ad treatment

Illustration | c!; Tribaliumvs, vectorstock.com

Eric Goldman, Professor, Santa Clara University School of Law

Michelle Ciotola, Partner, Cantor Colburn

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By Matt Pilon

On Valentine's Day, perhaps you sent a loved one a fruit bouquet or chocolate-dipped berries made by Edible Arrangements.

Such gifts are meant to show affection, but there's no love lost between the Wallingford-based franchisor and its biggest competitors.

Earlier this month, Edible filed a federal lawsuit against Google, accusing the internet giant of deceiving consumers who searched for “Edible Arrangements” into clicking on links to competitors' websites like 1-800-Flowers and Shari's Berries, costing the company revenue and diluting its brand.

The lawsuit, which demands $209 million in damages and other penalties from the alleged practices, accuses Google of trademark infringement and unfair competition and trade practices.

Neither company responded to a request for comment on the lawsuit, which was filed Feb. 5 in New Haven.

But two intellectual property experts who reviewed the complaint say it fits into a long line of trademark lawsuits involving internet search advertising, and that defendants have often succeeded in fending them off.

Paid search and 'piggybacking'

A company can pay Google for a better shot at a more prominent ad placement when certain terms, or “keywords,” are queried.

Advertisers regularly bid on a variety of keywords they think consumers will search for when looking to buy certain products or services. Companies then agree to pay Google the bid price each time their ad gets clicked.

Keyword prices can range widely, based on their popularity, competition and other factors.

“It can get up there,” said Bill Notartomaso, vice president of digital services at Glastonbury advertising and communications firm Cashman + Katz. “I've seen keywords go up to $10 and change. I've seen them bid for 47 cents.”

Google says its algorithm decides which ads get the best placement based on a variety of factors including the bid amount and its assessment of an ad's relevance to the search terms.

It's big business, according to accounting and consulting firm PwC, which said search advertising made up 47 percent, or nearly $10 billion, of all total internet ad revenue in the second quarter of last year (Edible's suit cites the report).

Legal fights have arisen since Google started about 10 years ago allowing advertisers to bid on their competitor's names or brands as a search keyword. The practice is sometimes referred to as “brand-bidding” or “piggybacking.”

Edible Arrangements sued 1-800-Flowers in 2014 for bidding on phrases that Edible had trademarked. The complaint, which was met with a countersuit, settled in 2016.

Indeed, many such trademark lawsuits reach a similar result, but courts have largely held that using trademarked search keywords does not by itself constitute infringement, according to Eric Goldman, a professor at Santa Clara University School of Law in California, who covers the topic on his Technology & Marketing Law Blog and often for Forbes.

“Many suits against Google have evaporated,” Goldman said. “I thought we might never see another case.”

In Goldman's view, such lawsuits are “almost always economically irrational for both sides.”

That might be especially true when the defendant is Google.

“Google has more money than Edible Arrangements, and Edible Arrangements is going after one of Google's core businesses, so right away you have to start asking the question, 'what's it going to take to win, financially?' ” he said.

While Goldman says Edible will run into plenty of precedent by resurfacing the issue of trademark infringement and search keywords, he said the suit appears to raise an issue that could be more novel to the court: The way Google displays competitors' paid ads adjacent to search results.

A screenshot filed as an exhibit with the Edible suit shows a Google search of “edible arrangements” displaying an adjacent box containing paid ads from both Edible and its competitors. Above the box, a header reads “Shop for edible arrangements on Google” with a “Sponsored” disclaimer in gray font further to the right.

“The net result of this display is that consumers are deceived into thinking competitive products come from or are associated with Edible Arrangements, Edible Arrangements' valuable trademark is placed in jeopardy, and Google profits handsomely,” the complaint alleges.

It's unclear when the screenshot was taken, but earlier this month, a reporter's search of the same phrase turned up an abbreviated header over the box, reading “Shop for edible arr … on Google.” And as of a Feb. 13 search, the header had changed again, reading simply “Shop on Google.”

Confusion is key

For Edible Arrangement's suit to succeed in a trial, it would have to prove that consumers were confused by the appearance and format of competitors' ads next to its Google search results, which would require expert testimony and survey evidence, said Michelle Ciotola, a partner in the Hartford office of intellectual property law firm Cantor Colburn.

“To succeed, a plaintiff is going to need to overcome the prevailing view of the courts that consumers are adept at distinguishing between sponsored links and organic search results,” Ciotola said. “Courts have tended to view consumers using search engines as sophisticated enough to recognize a sponsored link, generated from putting a trademark into a search browser, as originating from either the trademark owner or a competitor.”

The strength of the Edible Arrangements trademark may also come into play, she said. If someone searches for Edible Arrangements, are they looking for fruit arrangements from the company specifically, or are they using the phrase in a more descriptive sense?

What's it mean for advertisers?

Advertisers are certainly bidding on competitors' names as search keywords, but it's tough to gauge exactly how common it is.

A 2010 study determined that somewhere between 2.7 percent and 6.4 percent of ads searched were triggered by trademarked keywords on major search engines.

Goldman said habits differ by industry, but when one participant starts doing it, others typically follow.

Cashman + Katz's Notartomaso said he doesn't often advise his clients to piggyback on competitors' names.

He's not so much worried about eliciting a lawsuit or creating a perception of dirty play. It's more about what's best for the client.

“There's a time and a place for everything,” he said. “We try to stay away from it because it does not necessarily bring the best return on investment.”

Getting sued is always a possibility in business, but as the law appears to be on the side of keyword piggybackers, there's another, perhaps counterintuitive, legal liability to think about, said Goldman.

He pointed to the Federal Trade Commission's ongoing 2016 administrative lawsuit against 1-800 Contacts, alleging it had orchestrated a series of anti-competitive agreements with its rivals, who agreed not to bid on each other's trademarked terms.

The FTC, which is still hearing the case, alleged that the deals between rivals “suppress competition in certain online search advertising auctions” and “restrict truthful and non-misleading internet advertising to consumers.”

In other words, the FTC sees piggybacking as a legal business practice that companies shouldn't be allowed to manipulate behind the scenes to mislead consumers.

“Now, trademark owners must be thoughtful about whether keyword enforcement actions are anti-competitive,” Goldman said.