Practical Ecommerce

Legal: Comparative Advertising, Competitors’ Trademarks, and Infringement

Comparative advertising can be beneficial to the marketplace. It tells consumers the differences in products and allows competitors to highlight why the consumer should select its product over another product. The Federal Trade Commission’s policy in the area of comparative advertising encourages the naming of, or reference to, competitors. But it requires clarity and, if necessary, disclosure to avoid deception of the consumer.

The FTC’s Policy

The FTC’s policy states, “Comparative advertising, when truthful and non-deceptive, is a source of important information to consumers and assists them in making rational purchase decisions. Comparative advertising encourages product improvement and innovation, and can lead to lower prices in the marketplace. For these reasons, the Commission will continue to scrutinize carefully restraints upon its use.” Positive policies about comparative advertising are contrasted by trademark owners concerns that competitors are using their names and logos to promote the competitor’s goods or services.

‘Visible’ Versus ‘Invisible’

Courts have been mixed on how they treat these cases because of the treatment of “invisible” verses “visible” trademark use on the Internet. Visible use of another company’s trademark is when a competitor, say Competitor A, uses (1) a direct link to Competitor A’s website using another company’s trademark that is visible to the consumer, or (2) an internal webpage on Competitor A’s website that displays another company’s trademark. These uses are typically high-risk and the determination of whether the use rises to the level of trademark infringement depends wholly on the particular context in which the trademark is used.

Invisible trademark use is when trademarks are used in keyword metatags, hidden text, sponsored links, and banner and pop-up advertisements. Consumers do not actually see the use of the trademark. The consumers only see the result of their searches, an advertisement based on the content the potential consumer is viewing, or an advertisement based on their history of keyword use.

Comparisons Must Be Honest and Accurate

The use of visual comparative advertising is valid so long as it does not contain misrepresentations or contain missing information intended to mislead the consumer. In addition, the use of another’s trademark cannot suggest endorsement or some sort of affiliation with the competitor. Careful use is necessary because any inaccuracies will be exposed by the competitor in a claim that use of its trademark is an attempt to cause confusion, and it could result in claims of false advertising and trademark infringement.

When a company is making comparisons to competitors, the company needs to be sure that it is not assuming too much and that the comparisons are very comparable. Relevant facts such as weight or size should be stated if they are material terms in determining the comparison. Such additional information can be at the bottom of the page with an indicator that would guide a consumer’s attention to those additional facts. However, these items should not be difficult for the viewing consumer to find. Again, being specific and full disclosure is the key.

The U.S. Ninth Circuit has declared its review of invisible trademark infringement to be “initial interest confusion,” and applies a three part test as a prerequisite that looks at the similarity of the marks, the relatedness of the goods or services, and each party’s use of simultaneous Internet marketing channels. If these factors suggest a likelihood of confusion, then all the other factors must weigh heavily against confusion to avoid a finding of trademark infringement. The U.S. Fifth Circuit has stated that invisible strategies cannot exceed reasonable necessity and cannot suggest affiliation, sponsorship, or endorsement by the trademark owner.

Pay-per-click advertising using comparisons needs to be carefully crafted to avoid initial-interest confusion. If a company uses the trademark of a competitor in its advertisement, it needs to clearly point out what the source is of the advertisement, and clearly show that it is comparative advertising. A company cannot have misleading advertisements that try to get a potential consumer to click advertisements. Particularly, an advertisement that displays a competitor’s trademark cannot contain misleading language that causes the consumer to think the advertisement is associated with the competitor’s trademark.

Summary

If a company makes truthful factual claims in a comparison of its goods or services to its competitors, the company can use comparative advertising and will have arguments against any claims of trademark infringement or unfair competition. However, each comparative advertisement should be carefully reviewed from a competitor’s point of view and should be reviewed often to make sure all facts are still relevant.

Jeff Jacobson, Jd, Llm
Jeff Jacobson, Jd, Llm
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