Amazon Wins Keyword Advertising Suit–Video Professor v. Amazon

By Eric Goldman

Video Professor, Inc. v ., Inc., 1:09-cv-00636-REB-KLM (D. Colo. April 21, 2010)

Video Professor has been involved in a few interesting legal scrapes. For example, you may recall that in 2007 they launched a major crackdown against the publishers of negative product reviews. See this recap.

In this lawsuit, Video Professor sued Amazon for bidding on the keyword “video professor” and then displaying competitive options on the linked landing page. This type of fact pattern–online retailers advertising on third party trademarks to promote competitive alternatives–has created significant confusion for trademark law. See the irresolute rulings in BabyAge v. Leachco (involving the alleged misuse of product reviews to redirect a retailer’s consumers to a house product) and Hearts on Fire v. Blue Nile (a retailer buying keywords for a manufacturer’s product it didn’t sell).

In Amazon’s case, this should be a laughably easy case. So long as Amazon has any legitimate Video Professor products in inventory–even if it or third party vendors are reselling used Video Professor goods via the First Sale doctrine–it should have the right to accurately advertise that fact. See Tiffany v. eBay. The fact that consumers might redirect to other offerings once they get into the retailer’s premise is completely irrelevant. As I explain in gory detail in my Brand Spillovers paper, using third party trademarks to generate consumer interest and redirect them to other products is an essential part of offline retailing and virtually unchallenged by anyone. Yet, when the same behavior happens online, people freak out. My paper concludes that these freakouts are due to cyberspace exceptionalism, not any rational or doctrine-based concerns.

Amazon doesn’t win this case on First Sale grounds (although it should have). Instead, Video Professor was an Amazon vendor for a while, and Amazon makes vendors enter into a “Vendor Manual” that contains a perpetual trademark license. Therefore, Amazon successfully defended its keyword purchases as being authorized by this perpetual trademark license. Summary judgment for Amazon. This is a neat legal trick by Amazon and almost assuredly a boilerplate “gotcha” for most Amazon vendors, who probably didn’t fully understand the implications of the boilerplate language. Then again, I just argued that Amazon should have this right as a matter of default trademark law, so I don’t think vendors agreeing to Amazon’s Vendor Manual are giving up any legal rights they actually had.

This case illustrates the increasing importance of contracts in governing keyword advertising purchases, a point I mention in my latest keyword advertising legal recap slides. Here, Amazon was able to slip in a perpetual right to buy its vendors’ trademarks as keywords into its vendor contract. In theory, if Video Professor objected, it should have rejected the Vendor Manual clause AND promulgated its own more restrictive contractual restrictions on Amazon’s keyword purchases.

For those of you who rely on buying third party trademarks as keywords, this case might spur you to redouble efforts to get contractual permission (one way or another) from the third parties. That contractual consent may be highly effective at fending off future cyberspace exceptionalist freakouts by trademark owners.