At present, it is quite common to contract in Google Ad advertisements for a web page. The contract must specify the words that will be used as keywords, that is, terms that when used by a user to conduct a search, will show said user, as privileged result and under the mention of the advertisement, web pages containing said terms as keywords.
Brand Bidding consist in using competitors’ trademarks as keywords for advertising a web page.
The purpose of this article is to determine if Brand Bidding, contracting advertisements for a web page using as keywords competitors’ trademarks, is licit in Peru.
2. Governing Law
The legality of the use of a third party’s trademark to advertise own products or services through Google Ad, must be analyzed under the perspective of the Trademark Law and of the Law on the Suppression of Unfair Competition.
Peru is member country of the Andean Community and, as such, its Trademark Legislation is Decision 486, Industrial Property Common Regimen. This rule establishes in Article 155, paragraphs d) and e), the following:
"Article 155. The owner of a registered trademark shall have the exclusive right to prevent all third parties not having the owner’s consent from engaging in the following acts:
d) using, in the course of trade, identical or similar signs to the trademark for goods or services, where such use would result in a likelihood of confusion or mistaken association with the registration owner. In the case of the use of an identical sign for identical goods or services, a likelihood of confusion shall be presumed;
e) using in the course of trade identical or similar signs to a well-known trademark with respect to any goods or services, where such use, by weakening the distinctive force or the value of that trademark for commercial or advertising purposes or by taking unfair advantage of the prestige of the trademark or of its owner, could unjustly damage the registration owner’s economic or commercial interests."
In Peru, trademark infringement cases are settled through administrative proceedings before the Trademark Office in first instance and before the Indecopi Court in the appellate instance. Indecopi Court’s decision can be appealed to the Judiciary.
The discipline of the suppression of unfair competition is regulated in Peru by Legislative Decree 1044. This rule establishes in Articles 6, 9 and 10 the following:
"Article 6. General clause.
6.1 Acts of unfair competition, whatever form they adopt and whatever the means used to carry them out, including advertising activity, shall be prohibited and sanctioned, irrespective of the sector of economic activity in which they arise.
6.2 An act of unfair competition shall be the act which results objectively, contrary to the requirements of entrepreneurial good faith, which must guide competition in a social market economy."
"Article 9. Acts of confusion.
9.1 They consists in the performance of acts, the real or potential effect of which is to mislead other agents in the market concerning the business origin of the activity, establishment, specific services or goods, such that these are considered to have a business origin different to that which they actually possess.
9.2 Acts of confusion may occur through the misuse of goods protected by intellectual property rules.
Article 10. Acts of undue exploitation of someone else’s reputation.
10.1 They consist in the performance of acts which, not being acts of confusion, may lead, in real or potential terms, to the undue exploitation of the image, credit, fame, prestige or entrepreneurial or professional reputation that corresponds to another economic agent, including acts capable of generating a risk of association with a third party.
10.2 Acts of undue exploitation of another’s person reputation may occur through the use of goods protected by intellectual property rules."
In Peru, unfair competition cases are settled through administrative proceedings before the Unfair Competition Control Office in first instance and before the Indecopi Court in the appellate instance. Indecopi Court’s decision can be appealed to the Judiciary.
In Peru, advertising a web page using as keyword another’s trademark is a subject that the Authority has become to know since 2018 and as a case of trademark infringement.
By means of Resolution No. 1994-2018/TPI-INDECOPI, the Indecopi Court has declared groundless the infringement action filed by Latam Airlines Perú S.A.C. against Atrápalo Perú S.A.C., which acquired for its web page as keywords in Google Ad the trademarks Lam y Latam owned by the plaintiff. The Indecopi Court considered that:
A) To be categorized as trademark infringement under Decision 486, Article 155 paragraph d), it is necessary “that use be made of a mark that can lead to risk of confusion or association with respect to a distinctive mark protected by the Industrial Property rules.”
B) Although the use of a mark as keyword could be considered as a use in commerce, only if said use leads to risk of confusion or association, it could constitute a trademark infringement as the one that comes under the abovementioned rule.
C) Atrápalo Perú S.A.C. did not use as trademarks the marks LAN and/or LATAM, as it did not identify its services with said marks and, on the contrary, it sold air tickets branded LAN and/or LATAM with the authorization of Latam Airlines Perú S.A.C.
There is not any pronouncement of the Commission of Unfair Competition regarding the matter that concerns us.
4. Trademark infringement
We believe that the Peruvian Trademark Office, like the Courts of other jurisdictions that have deal with this matter, such as the European Community Justice Court, will consider Brand Bidding as trademark infringement only in the following cases:
a) If the use of the competitor’s trademark causes risk of confusion or association with the supposedly infringed trademark, thus affecting the function of indicating the business origin of the latter. In other words, that the consumer considers that the advertiser is the owner of the infringed trademark or that the advertiser is linked to said owner.
b) In the case of a notorious trademark, if its use as keyword by a third party constitutes taking unfair advantage of its prestige.
If the competitor’s trademarks do not appear in the text of the web page which is subject matter of the advertisement, it is improbable that the Trademark Office considers that there is risk of confusion between the trademark which is object of the advertisement and the trademarks used as keywords.
If a company to promote its webpage uses keywords formed by trademarks that distinguish original products that it offers for sale in said webpage, it would not exist, in principle, trademark infringement in accordance with Decision 486, article 157 which states: “Trademark registration shall not confer on the owner the right to prevent a third party, when proceeding in good faith, from using the trademark to announce, … offer for sale or advertise the existence or availability of lawfully trademarked products or services, … provided that such use is confined to the purpose of informing the public and is unlikely to lead to confusion over the corporate origin or the products or services concerned”.
Particularly, we do not believe that the use of someone else’s trademark as keyword to obtain advertisement in a webpage can cause, in principle, risk of confusion since the advertiser’s intention is to spread its own offer when consumers search the competitor’s offer. The purpose of this type of advertisement is that consumers have access to both offers, and do not confuse the business origin of the products advertised with the third party’s trademark.
In the case of a notorious trademark, the use thereof as keyword by a competitor to advertise its web page constitutes a trademark infringement? To answer this question it must be taken into account that a notorious trademark is protected against risks of: i) confusion, ii) dilution of its distinctive force or of its market or advertising value and iii) undue exploitation of its reputation. Due to the abovementioned reasons, we clearly believe that the advertising we are dealing with, in principle, does not cause risk of confusion for the owner of the trademark used as keyword. For the same reasons, we consider that this advertising practice does not cause risk of dilution or loss of the distinctive force, or of the market or advertising value of the trademark used as keyword.
It is debatable if the use as keyword of a notorious trademark by a third party to promote its own webpage can constitute undue exploitation of said trademark’s reputation. The advertiser’s intention is that its services or products promoted with its own trademark are seen by consumers when they search in Google the services or products bearing the notorious trademark. In some way the advertiser is “resting” on the notorious trademark’s reputation to promote its products and services, of course bearing its own trademark. The case law will clarify this issue.
5. Act of Unfair Competition
We have seen in paragraph 2 above that the cases of brand bidding could be deemed as acts of unfair competition in the form of acts infringing the general clause, such as acts of confusion or acts of undue exploitation of someone else’s reputation.
We have also pointed out that the acts of unfair competition are analyzed administratively by the Unfair Competition Control Commission, which criteria do not necessarily coincide with the Trademark Office’s criteria; thus, in principle, the acts of unfair competition can be judged with a viewpoint different from that of the acts of trademark infringement. However, according to the national legislation, the acts of unfair competition in the form of acts of confusion and undue exploitation of someone else’s reputation, which in principle shall be examined by the Unfair Competition Control Commission, when performed using third party’s trademarks, are brought before the Trademark Office. Consequently, we consider applicable to the possible complaints for brand bidding for intended acts of confusion and/or undue exploitation of someone else’s reputation, all what we have set forth in paragraph 4 above, as it deals with trademark infringement for acts of confusion and undue exploitation of someone else’s reputation.
Likewise, we believe that the Unfair Competition Control Commission is unlikely to judge this advertising practice as an act that infringes the general clause subject matter of Article 6 of Legislative Decree 1044. All this because, although using a third party’s trademark as keywords on the webpage to be advertised in Google ads could be considered as contrary to the competition principle of own efficiency, as it is based on the use of a third party’s trademark, it is a practice that leads to:
- Greater competition as it allows consumers to be informed about other offers existing in the market.
- Greater information for consumers, which allows them to make a better choice.
Being brand bidding an advertising practice that provides benefits to the free competition system, it is unlikely to be prohibited as an act that infringes the general clause that prohibits unfair competition.
We believe that:
6.1. Brand bidding does not constitute, in principle, a trademark infringement in the event the keyword is formed by a third party’s trademark which does not enjoy the status of notoriously known.
6.2. It is debatable if brand bidding can constitute trademark infringement in the event the keyword is formed by a third party’s notoriously known trademark.
6.3. In the case of complaints for brand bidding as an unfair competition act, in the form of acts of confusion or undue exploitation of someone else’s reputation, such complaint would be prosecuted as trademark infringement being, consequently, applicable conclusions 6.1 and 6.2 above.
6.4. In the case of complaints for brand bidding as an unfair competition act pursuant to the general clause, it is unlikely that the Authority will deem this act as an unfair competition act.