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May 13, 2009

Behavioral And Keyword-Triggered Ads — Legal Update For Hot-Button Internet Advertising Issues

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Safire’s New Political Dictionary defines “hot-button” as follows: word or issue that ignites anger, fear, enthusiasm, or other passionate response.

Safire’s definition fits two Internet advertising issues – behavioral and keyword ads – perfectly. Two developments in the first few months of 2009 show how these hot-button issues are developing, and how they may ultimately impact Internet advertising in a fundamental way.

Behavioral Advertising

Relevance is a key concept in any advertising. With it, advertisers’ messages hit home with purchasers, and conversions increase. Without it, advertisers’ messages are wasted on blind eyes and deaf ears.

Behavioral ads take Internet advertising to a new level of relevancy. Behavioral technology tracks a user’s behavior on the Web, including sites visited, length of visits, content read, and searches made. All of this data is then analyzed and a behavioral pattern is produced for a user which classifies that user by his or her online demographic. Behavioral ad networks then serve targeted ads that are relevant to that online demographic.

Recent announcements by Google (with its AdSense network) and Facebook that they will begin serving behavioral ads has triggered increased interest in related privacy issues. The concerns: the lack of transparency regarding collection practices and the risk of disclosure of the information collected, particularly sensitive information.

The Federal Trade Commission (FTC) has shown interest in privacy issues related to behavioral ads even before the announcements by Google and Facebook. In November 2007, the FTC conducted a town hall discussion to discuss privacy issues raised by online behavioral advertising. Afterward, the FTC developed proposed principles based on comments received at the town hall discussions.

In February 2009, the FTC issued a staff report entitled “Self-Regulatory Principles For Online Behavioral Advertising” (Principles). The Principles are designed to encourage industry self regulation for the protection of consumer privacy in online advertising activities.

The new development for behavioral ads is that – if three U.S. Congressmen have their way – behavioral ads will move from self-regulation to regulation by a federal statute.

It’s interesting to note that the legislative effort is bi-partisan. Rep. Cliff Stearns (R.-Fla.), Rep. Rick Boucher (D.-Va.) and Rep. Joe Barton (R.-Texas) are working to present a bill to Congress that would regulate behavioral ads. Boucher has stated that websites participating in behavioral ads should be required to obtain explicit permission from a user, plus the requirement to disclose how they collect and use data.

Keyword Advertising

In the last four years or so, cases involving keyword-triggered ads have been hotly litigated. The dispute is now a familiar one — whether a search engine such as Google should permit pay-per-click advertisers to use keywords that are also a competitor’s trademarks for purposes of triggering their ads on a search results page.

Legal issues arise when a competitor purchases a competitor’s trademark as a keyword. The Lanham Act (Federal Trademark Act) prohibits any:

  • “use in commerce”, and
  • “likelihood of confusion”.

In order to prevail, a plaintiff must satisfy two of the foregoing elements.

The legal battle has focused on the “use in commerce” issue, with courts being hopelessly divided on the issue. Courts finding that keyword-triggered ads are a “use in commerce” favor plaintiffs (the trademark owners). Conversely, courts finding that keyword-triggered ads are not a “use in commerce” favor the defendants (the advertisers – search engines and their advertiser customers).

Until April 3, 2009, the 2nd Circuit (Connecticut, New York, and Vermont) has held that use of a trademark in keyword-triggered ads, provided the trademark is internal and not visible, does not amount to “use in commerce” – thereby favoring defendant-advertisers.

On April 3, 2009, the 2nd Circuit reversed its position on the “use in commerce” issue. In the case of Rescuecom v. Google, the 2nd Circuit ruled on a Motion to Dismiss that Google’s recommendation and sale of Rescuecom’s trademark to competing advertisers amounted to a “use in commerce”. Although this decision went against Google, Google may still prevail in the case if the court finds later that there is no likelihood of confusion.

It’s interesting to note that the majority of Circuit Courts have previously held that similar uses of a trademark amount to a “use in commerce”. Does the reversal by the 2nd Circuit signal a trend that could significantly favor trademark owners against advertisers and close the split among the Circuits? Possibly — and that’s why this decision is so important.

Behavioral And Keyword-Triggered Ads — Legal Update For Hot-Button Internet Advertising Issues

With the foregoing update, this is where we stand on the two hot-button issues of Internet advertising:

  • behavioral advertising — although the status remains unchanged at present, there is federal regulation in the works that could impose significant privacy regulations in the near future; and
  • keyword-triggered ads — there’s still a significant split among the Circuits; however, the split has narrowed in favor of trademark owners due to the 2nd Circuit’s ruling in the Rescuecom v. Google case. The 2nd Circuit in its decision suggested that it would make sense for Congress to resolve this split with specific legislation in the future.

This article is provided for educational and informative purposes only. This information does not constitute legal advice, and should not be construed as such.


Leading Internet, IP and software attorney Chip Cooper helps small websites achieve website legal compliance with his MyLegalFirewall Website Document Drafting Service. Discover how quick, easy, and cost-effective it is to draft your own website legal documents online and claim your FREE Special Report, Determine Which Legal Documents Your Website Really Needs, at ==> http://digicontracts.com/

3 Responses to “Behavioral And Keyword-Triggered Ads — Legal Update For Hot-Button Internet Advertising Issues

    avatar jewellery says:

    Always such an interesting read, never a dull moment.

    avatar business coaching says:

    Great post, once again thanks.

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