One of the most effective methods of advertising on the Internet is known as Pay Per Click (PPC). Google Adwords is the largest and most used PPC ad network but there are many others (Yahoo Search Marketing and MSN) that are based on the same concept.

PPC networks allow you to bid on specific keywords that when searched in a search engine will trigger advertisements that link to the advertiser’s websites.

One question that has arisen lately is whether it is legally permissible to bid on your competitor’s trademarks and trade names as keywords or whether such use in in violation of the trademark laws?

Interestingly, courts have come down on both sides when it comes to this issue.  The matter comes down to whether this practice results in a sufficient “use in commerce” of the trademark to constitute an illegal trademark use.

There is a 2004 federal case (Eastern District, Virginia) that concluded that simply purchasing these keywords as part of a PPC network does not rise to the necessary use in commerce.  On the other hand, there is a 2006 case in Minnesota that went the other way because the court found that the advertiser was commercially benefiting.

In the law, the law of your jurisdiction (or the jurisdiction where a case is heard) governs your situation.  So for now, the issue is open.  What does this mean?

Well, if you are an advertiser there is a reasonable basis for using this practice and if you are a trademark owner and want to stop competitors from using your trademark in PPC programs, there is a reasonable basis for sending cease and desist letters.

Now, if you get a cease and desist letter, you should cease using another’s marks in your PPC or consult an attorney to better understand your risks in your specific jurisdiction if you want to continue the use of another’s marks and names in your PPC campaign.

PS- This post goes to show that there are a lot of legal uncertainties in the business world.  If you are not operating your business through an asset protection vehicle such as a limited liablity company (LLC), you should be!  If you look at any of the more successful online businesses, you will see they are operated through an LLC or corporation.  Learn about LLC Formation so you can protect yourself and your assets.