Leading-Edge Law: Can Competitors Agree Not to Target Each Other in Google Ads? | Business News

If you own a business, are Google Ads your best friend, worst enemy, or waxing frenemy? These are ads that appear in Google search results, usually at the top.

Businesses hate it when a competitor runs a Google ad that is triggered by a search for its name. For example, Spacely Sprockets hates it when Cogswell Cogs runs a Google ad that appears when someone searches for “Spacely Sprockets” on Google.

It can get worse. With Google Ads, you can have a search term appear in the body of your Google ad. This is called “keyword insertion”.

A problem arises if someone searches for your company name. This can make it look like an ad is coming from your company when it isn’t. If Cogswell Cogs runs a Google ad for people searching for “Spacely Sprockets” and uses keyword insertion, “Spacely Sprockets” will appear in the body of the ad. This might make people think the ad is by Spacely Sprockets. That’s pretty clear trademark infringement.

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Also, you can prevent your Google ad from running under certain circumstances by using negative keywords. Doing so will prevent your Google ads from appearing in searches for specific terms.

For example, if you sell reading glasses, you don’t want to pay to run your ad when someone searches for wine glasses. You would use “wine” as a negative keyword.

A recent case involving 1-800-Contacts raises the intriguing possibility of using a gin-up trademark dispute between competitors as a way to avoid incurring antitrust liability through Google ads to each other.

1-800-Contacts is a major online retailer of contact lenses but charges more than most of its competitors.

To try to stifle competition, it threatened trademark-infringement claims against other online contacts sellers who bought Google ads searching for “1-800-contacts.” That threat is weak because courts these days generally think it’s okay to have your Google ad stop searching for a competitor’s name.

1-800-Contacts used this threat to persuade competitors to enter into settlement agreements in which each party agreed not to run Google ads triggered by the other’s name and to use negative keywords to ensure that Google ads did not appear in searches. Include the contestant’s name.

The Federal Trade Commission claimed the settlements violated antitrust laws. About a year ago, the Second Circuit threw out the FTC charges. It placed settlement agreements on trademark-infringement claims that generally must be upheld by antitrust law, and any regulator (such as the FTC) or private plaintiff bore a heavy burden to attack such settlements on antitrust grounds.

The court primarily focused on whether it was OK for competitors to agree not to run Google ads under each other’s names. The court declined to address whether an agreement to use negative keywords could violate the antitrust laws because the FTC did not independently develop that part of its case. This involves coding your Google ads so that they don’t appear when specific competitors’ names are searched.

So, after the 1-800-contact case, can you safely agree with your competitors not to run Google ads for searches for each other’s names? And can you agree to use negative keywords so that your ads don’t appear when a search includes a competitor’s name?

You need a big legal budget and a big appetite for legal risk. Your competitors won’t shy away from buying Google ads triggered by your name unless you make a credible threat of a scary and expensive trademark infringement lawsuit.

Even if you scare your competitors into a “settlement” agreement if you mutually refrain from targeting each using Google ads, you still face significant antitrust risk.

1-800-Contacts has fared poorly in some antitrust cases brought by private plaintiffs, though it has backed off the FTC for now. And the FTC can’t be fought. While it now has a heavier burden of proof, it can still win. And if you lose an antitrust case to the FTC or a private plaintiff, you’ll likely be hit with huge damages.

Even if you’re not that aggressive, don’t be passive about Google ads that unfairly target your business. If someone uses your business, product or service name in the body of a Google ad, and if you register it as a trademark, you can probably get Google to remove the ad. A cease-and-desist letter to the competing advertiser will usually be appropriate.

John B. Farmer is an attorney at Leading-Edge Law Group PLC, specializing in intellectual property law. He can be reached at www.leadingedgelaw.com.

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