At the Search Engine Strategies conference here Tuesday, Netflix senior marketing manager Robert Hatta asked a panel of search engine marketing experts how to deal with the issue. The question: Should Netflix move to block third-party marketers from using its trademarks in advertisements on Google and Overture Services? Or should it allow affiliates to use its trademark freely to promote its service and bring in new customers?
"Do we let the affiliates run it, or ban it like eBay did?" Hatta asked, referring to a recent move by the auction giant to request that Google.
At the heart of Netflix's quandary is control of an increasingly influential and lucrative means of advertising products and services within related search results--an industry expected to be worth $2 billion this year.
Like a growing number of companies, Netflix has become acutely aware of how simple text links atop search results for related business terms can drive traffic and new customers to its service. The strategy is efficient: Marketers bid for placement related to keywords such as on "online movie rentals" or "Netflix," and pay only when Web surfers click.
But more and more trademark owners are examining how paid listings affect their intellectual property, in part because rivals often bid for competitive terms, poaching traffic from their sites. In Netflix's case, marketing affiliates are doing work in paid search that it could do itself, without paying affiliate fees of between $9 and $30 for new subscribers. Many companies are grappling with the same problem.
"This is a big issue," said Lisa Riolo, vice president of client development for Commission Junction, an affiliate network. "Marketers either have to restrict the use of trademark altogether or work with affiliates" on their advertising language in search engines.
eBay in recent weeks requested that Google ban advertisers from bidding on keywords or related phrases that encroached on its trademark. Google respected eBay's wishes based on its stated policy that grants companies "reasonable" rights to their trademarks.
A Google representative could not immediately be reached for comment. In the past, Google has said it does not comment on legal matters.
Jeffrey Rohrs, an attorney and digital marketing strategist for Optiem, said that Google opened a can of worms with its decision to block eBay terms and phrases because numerous companies may follow and kick off a broader trend of blocked terms that could stifle the industry.
Both Overture and Google allow marketers to bid for keywords that may be trademarks or linked to trademarks. For example, a marketer whose products are linked to the keyword "shoes" may appear in search terms related to "Nike shoes," as part of their programs. The question then becomes one of determining the obligation that search engines have to police those listings with their technology, Rohrs said.
"We're on the precipice of interesting trademark law," he said. "Don't expect it to be decided within six months. Expect this to drag out over years."
Courts mixed on issue
In the late '90s, a slew of trademark and search cases revolved around metatags, keywords used to describe sites for search purposes. Dozens, if not hundreds, of companies sued Web sites they believed were illegally using their trademarks in their search terms.
So far, the courts have issued mixed rulings on whether trademarks can legally be used in search terms. Many of the cases are settled before they ever reach the court, with smaller sites often removing the trademarked terms to avoid a costly legal battle.
Last year, former Playboy Playmate Terri Wellesin her metatags. The 9th U.S. Circuit Court of Appeals ruled that people can use trademarks as descriptions if they only use as much of the word as necessary. In its ruling, the court said Welles couldn't be expected to describe herself as "the nude model selected by Mr. (Hugh) Hefner's organization," in place of the word "playmate."
The search engines themselves have long had murky policies on trademark-related advertising, refusing to actively police infringements. Instead, they opt for a hands-off approach, acting only if there is a complaint from a trademark owner. Overture only recently posted a trademark notice on its site that informed advertisers that it is their responsibility to respect the trademark rights of others.
"In cases in which an advertiser has bid on a term that may be the trademark of another, Overture allows the bids only if the advertiser presents content on its Web site that refers to the trademark...or uses the term in a generic or merely descriptive manner," according to its policy.
Catherine Seda, an Internet marketer and panelist, said that Google and Overture are not eager to police trademarks because they risk losing thousands or tens of thousands of dollars a month on lost cost-per-click revenue.
So far, the issue of using trademarked terms in keyword-search advertising has not been tested in court. Danny Sullivan, moderator of the panel and editor of industry newsletter Search Engine Watch, said that the most closely related case to date involved Playboy, which sued Excite and Netscape Communications over the practice of selling banner ads to third parties keyed to its trademark. The court said that companies sellingcould buy the term.
An earlier case decided in 1997 went the opposite way, with the judgefrom inserting the words "playboy" and "playmate" into a section of its site that is seen only by search engines.
Sullivan said Google is setting a dangerous precedent by granting eBay exclusive use of terms related to its trademarks because "anything can be a trademark."
Highlighting the uncertainty around the issue, Sullivan said he wasn't able to get anyone from Google or Overture to participate in Tuesday's trademark panel. "A court likely has to resolve whether it is or isn't legitimate," he said.
Questions also remain about a search providers' responsibility to give trademark holders visibility in search results based on keywords related to their trademarked terms, regardless of payment. Last year, fitness company Mark Nutritionals filedfor alleged trademark infringement and unfair competition, suits that could help define laws in this area. Mark Nutritionals charges that the search companies used keywords related to its trademarked name Body Solutions, but buried links to the company's own site. It is seeking $440 million in damages.
Trademark owners may feel obligated to defend their rights in keyword ads because their trademarks could languish if they do not take steps to prove that they are willing to fight for them. Companies risk losing their trademarks if the terms become a part of common usage, and they can't show they've tried to contest it. In one high-profile case in Austria, Sony lost the right to its Walkman trademark in 1994, after it failed to seek a retraction from a dictionary publisher that defined the term generically as a portable cassette player.
Still, the question of when and where to fight remains very much up in the air, trademark experts said.
Panelists on Tuesday acknowledged that Netflix is in a Catch-22 because it risks alienating a group of small-time marketers that helped build its business as it graduates into a larger brand that aims to protect its intellectual property.
"Netflix is saying to itself, 'Why would I pay you for what I can do myself?'" Rohrs said.