Using your competitor’s trademarks as keywords? Proceed at your own risk

The Court of Appeal for British Columbia has issued an injunction restraining a party from using its competitor’s trademarks in its keyword advertising. While the court stopped short of finding that bidding on keywords in and of itself is contrary to the Trademarks Act, it did find that  the defendant’s use of the plaintiff’s trademarks as keywords in the visible text of its sponsored link was a misrepresentation likely to cause confusion to the public. The court found the defendant liable for passing off.

The plaintiff, Vancouver Community College, is a public college which has been operating in the Vancouver area since 1965. It has used the Vancouver Community College name and the acronym ‘VCC’ for decades. The defendant, Vancouver Career College (Burnaby) Inc, is a private career college which has been operating in the Vancouver area since 1995.

With a view to attracting traffic to the defendant’s website at the domain ‘vccollege.ca’, Vancouver Career College (Burnaby) Inc bid on numerous keywords and competitor names including ‘VCC’ and ‘Vancouver Community College’. VCC was the keyword that attracted the most traffic to the defendant’s website. In the results page of a search for ‘VCC’, the defendant’s text advertisement always displayed the defendant’s domain name in the web address line of the advertisement, with VCC appearing in bold capitalised letters: VCCollege.ca.

Vancouver Community College brought an action for passing off which required it to establish:

• the existence of goodwill in the VCC and Vancouver Community College trademarks;
• confusion of the public due to a misrepresentation made by the defendant; and
• damage to the plaintiff as a result of its misrepresentation.

Overturning the trial judge’s decision on this point, the court found that the plaintiff had goodwill in the VCC trademark. The court held that a plaintiff need not prove that a trademark has acquired secondary meaning in order to establish goodwill. Ubiquity is not required. Rather, a plaintiff must simply establish that a sufficient portion of the relevant market knows that the trademark at issue indicates the plaintiff. Noting a number of factors, including the history of use of VCC by the plaintiff, the court found that the plaintiff had goodwill in the VCC acronym.

The court also overturned the trial judge on the issue of whether the defendant’s use of VCC constituted a misrepresentation. The court examined the temporal issue of when confusion by misrepresentation should be assessed: either when the search results appear or when the searcher clicks through the advertisement and arrives at the defendant’s webpage. Noting that confusion must be assessed as a matter of first impression in the mind of the consumer, the court held that confusion should be assessed at the time when the search results appear, as this is the point at which consumers receive a first impression of a trademark. In this case, the defendant’s text advertisements always displayed VCCollege.ca in the web address line of the advertisement. Moreover, the defendant included no additional material in the domain name or in the advertisement that would make it clear to consumers that Vancouver Career College (Burnaby) Inc was not affiliated with or endorsed by Vancouver Community College. On this basis, the court found that the defendant had made a misrepresentation which was likely to cause confusion.

On the issue of damage, the court found that damage was not limited to provable loss of sales. The loss of the power to control the use of a trademark to which goodwill attaches can be a form of damage. In this case, the court of Appeal found that the interference with the plaintiff’s goodwill in its VCC trademark by the defendant was sufficient to establish damage.

Notably, this case clarifies that in cases where a plaintiff asserts infringement of its trademark rights through the use of keyword advertising, confusion will be assessed at the time when the search results appear. Courts will carefully consider what messages are being given to consumers from the use of a trademark. In cases where the advertisement does not clearly establish that the advertiser is not the trademark owner, there is more likely to be a finding of passing off or infringement.