Suing Over Keyword Advertising Is A Bad Business Decision For Trademark Owners–General Steel v. Chumley (Forbes Cross-Post)

By Eric Goldman

General Steel Domestic Sales, LLC v. Chumley, 2013 WL 1900562 (D. Colo. May 7, 2013)

shutterstock_72091621.jpgTrademark owners rarely win keyword advertising lawsuits in court. Reinforcing this conclusion, another trademark owner lost a trial over competitive keyword advertising despite a number of key facts in its favor.  Given how often trademark owners lose keyword advertising lawsuits, why do they keep wasting their time and money?

The Lawsuit

General Steel Corporation and Armstrong Steel Corporation compete in the “prefabricated steel building business.” Chumley, a former employee of General Steel, launched Armstrong Steel and ran Google ($GOOG) AdWords ads on the keyword “General Steel” with ad copy such as:

General Steel Buildings www.ArmstrongSteelBuildings.com Price Your Building Online Or Let Us Do It. Guaranteed Lowest Prices!

and

General Steel Buildings Price an Armstrong Steel Building Online in Minutes Or Let Us Do It. www.ArmstrongSteelBuildings.com.

(As usual, the court doesn’t discuss whether Armstrong Steel broad-matched the word “steel”).

Eventually, Armstrong Steel made its ad campaign more clearly comparative, buying the keyword “General steel buildings” to display ad copy such as:

Don’t Buy General Steel Without Pricing Armstrong First. Price a Steel Building in Minutes! www.ArmstrongSteelBuildings.com

In addition to the keyword advertising campaign, Chumley (or an employee of his) issued press releases that contained false claims and were attributed to a fictitious employee, and the defendant’s website made additional false claims.  Chumley further falsely published Internet postings in the name of General Steel’s CEO.  Rebecca Tushnet discusses the false advertising angles of the case.

General Steel sued Armstrong Steel and Chumley for false advertising and trademark infringement.  After a bench trial, the judge ruled for General Steel on the false advertising claims and for the defendants on the trademark claims.

Regarding keyword advertising, General Steel’s trademark claims failed because it couldn’t show actionable consumer confusion.  The court says it “suspects” that some searchers clicked on Armstrong Steel’s ads believing it would take them to General Steel’s website.  However, that wasn’t enough to win the case (especially after a key Ninth Circuit 2011 ruling on keyword advertising) because  “[o]ther than its suspicions, plaintiff offered no evidence at trial of actual confusion,”  and because steel buildings are complex purchases that buyers will research carefully.  The court concludes:

While Armstrong was using the term to refer to plaintiff’s company, the Court does not find the record supports the finding that such use was likely to cause confusion among consumers in light of all of the surrounding information that identified Armstrong Steel as the source of the website and distinguished Armstrong Steel from General Steel.

The court also rejects a common argument by trademark owners that “potential customers entering the term ‘general steel’ into a search engine are searching exclusively for that company, as opposed to executing a broader search for all companies selling similar products.”   (See the uncited study by Franklyn and Hyman supporting this analysis).  The court instead says “the connection between the search term entered and the appearance of an advertisement is too attenuated to suggest an actual affiliation between the two.”

Implications

This is really a devastating loss for the plaintiff–and for trademark owners generally.  On its face, this case looked like a sure win for the trademark owner.  After all, the ad copy referenced the trademark in a non-comparative way–usually thought to be a “no-no”–plus the advertiser engaged in false advertising elsewhere.   If a trademark owner can’t win a case with those attributes, when can it win a competitive keyword advertising case?

As it turns out, the answer is “rarely.”  Though not a lot of cases have reached the final merits of trademark claims over keyword advertising, the rulings (summarized below) demonstrate why trademark owners should think carefully before suing over competitive keyword advertising:

* plaintiff got injunctionCJ Products v. Snuggly Plushez (2011); InternetShops v. Six C (2011) (note: defendant admitted trademark liability, so the opinion only deals with remedies).

* plaintiff won summary judgmentStorus v. Aroa (2008).

* plaintiff won at trialBinder v. Disability Group (2011).  This case was decided before the Ninth Circuit ruling in Network Automation, and I believe it’s no longer good law.

* defendant won summary judgmentJ.G. Wentworth v. Settlement Funding (2007); Designer Skin v. S&L Vitamins (2008); 1-800 Contacts v. Lens.com (2010); Montana Camo v. Cabela’s (2011); Jurin v. Google (2012) (note: unlike the other cases, in Jurin the defendant was Google, not the advertiser); CollegeSource v. AcademyOne (2012).

* defendant won at trialFair Isaac v. Experian (2009) (technically, the final win came in a post-trial ruling after a jury trial); College Network v. Moore (jury ruling in 2009; affirmed on appeal in 2010); Consumerinfo v. One Techs. (2011) (jury trial); General Steel v. Chumley (bench trial).

For more on this topic, see my recent blog posts on trademark infringement and keyword advertising:

* Suing Over Keyword Advertising Is A Bad Business Decision For Trademark Owners

Florida Proposes to Ban Competitive Keyword Advertising by Lawyers

More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide

Google’s Search Suggestions Don’t Violate Wisconsin Publicity Rights Law

Amazon’s Merchandising of Its Search Results Doesn’t Violate Trademark Law

Buying Keyword Ads on People’s Names Doesn’t Violate Their Publicity Rights

With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally

Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid–Louisiana Pacific v. James Hardie

Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit

With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue

Google Defeats Trademark Challenge to Its AdWords Service

Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

[Photo Credit: Closed Road // ShutterStock]

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