Last week, Mark Nutritionals filed what is believed to be the first suit claiming that sites charging for placement in their search results violate trademarks. Mark Nutritionals, which makes a popular diet product, alleges that pay-for-play sites including Overture Services, AltaVista, Kanoodle and FindWhat.com are tricking consumers by presenting a list of competing products when people enter the term "body solutions" into a search bar.
In fact, several companies are trying to crack down on the pay-for-play method by wielding their trademarks. Some have written letters. Others are planning suits, say lawyers familiar with the cases.
"I think there are more cases that are more egregious than Body Solutions," said Marc Gorelnik, a trademark lawyer at Townsend and Townsend and Crew, who said he's representing several major trademark holders that are considering filing complaints against services that sell search listings.
For such services, the stakes are high. Paid search listings have belatedly been recognized as a killer advertising category on the Net, with Overture in particular drawing positive attention on Wall Street for rosy growth prospects amid an otherwise gloomy outlook for Web companies.
Overture's success has set off a footrace among rivals hoping to get a piece of the action, roiling the sector. The company's stock this week plunged as much as 41 percent on the news that it had lost client EarthLink to search darling Google. Overture later regained some ground, trading late Friday at $21.84 a share.
As search companies adopt more creative business models and site-ranking strategies, however, the issue of whether it's legal to use trademarks in search terms is becoming increasingly complex.
In recent years, trademark owners and their rivals have embarked on a game of one-upmanship, with smaller companies creating new ways to attract Web surfers that tread close to, if not over, the infringement line, legal experts said.
"There are always new ways that people will come up with to try to take advantage of other people's trademarks," said Allen Baden, a partner with Kenyon & Kenyon, who is representing Mark Nutritionals.
Pay-to-play marks just the latest legal wrinkle for search engines seeking to incorporate trademarked terms in their results--a practice that for now stands squarely within a legal gray area.
In the late '90s, a slew of trademark and search cases revolved around metatags, those key words 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.
In some cases that were litigated, the defendant has triumphed.
Just last week, former Playboy Playmate Terri Welles won the right to use the terms "playboy" and "playmate" in 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."
Courts also have protected trademark use in the context of advertising. For example, Playboy Enterprises lost a case it filed against Excite.com and Netscape Communications, after a judge ruled that the search services could use the terms "playboy" and "playmate" to trigger banner ads for adult sites.
Playboy could not be immediately reached for comment.
But the adult entertainment publisher and other companies have also won metatag disputes, especially when rival sites used their trademarks in an attempt to leapfrog to the top of search results. Playboy, for example, triumphed over an adult site that embedded the word "playboy" in its search terms. And in one of the first cases, Brookfield Communications won an injunction preventing West Coast Entertainment from using its MovieBuff trademark in its metatag after a federal appellate court ruled that using a rival trademark is "much like posting a sign with another's trademark in front of one's store."
Bringing money into play
However, metatags are less of an issue now that popular search sites such as Google use different criteria to ranks sites--including examining the actual content of a Web page and the number of other sites that link to it.
Trademark attorneys said they believe the pay-for-play issue is more problematic than the metatag matter, partly because trademarked terms are exclusive in those cases. That is, anyone can use metatags on a site, but only one site can turn up first in a paid search listing.
"Pay for play raises a different kind of concern," said Townsend's Gorelnik. "You have to pay to be first. Only one person can be first on the list."
He said pay-for-play sites eventually might have to stop offering trademarks to customers. "I think they're going to have to be limited to generic terms," he said.
For now, many companies say their use of a trademark is merely comparative advertising, a notion that's protected under copyright law.
For example, in the Body Solutions case, someone typing "body solutions" into the search bar sees several results at the top of the page urging people to compare Body Solutions to a rival product.
Although the defendants in that case didn't respond to requests for comment, some, such as Overture, have sent letters to other companies concerned about the pay-for-placement method, saying they're merely providing a place for people to trade goods.
In a letter to one company that has threatened legal action if the use of its trademarks doesn't stop, Overture says it's just an "online marketplace and provider of Internet services" and shouldn't be targeted.
Still, Electronic Frontier Foundation attorney Fred von Lohmann said it's important to remember that trademark law is designed to protect consumers, not corporations.
He said that in many of these cases the situation is similar to a supermarket shelf, where generic product makers pay to have their products placed alongside their brand-name rivals.
"The big issue is how much control over the shelf space trademark owners deserve," von Lohmann said. "I'm always troubled when a trademark owner tries to use trademark law to reduce consumer choice and competition."