Questions, Ire Rise from Utah’s “Do Not Bid” Trademark Law

Apr 19, 2007 7:04 PM  By

(Searchline) A little-noticed bill passed by the Utah legislature will let businesses based in that state enter their trademarks into a state registry and police their use as triggers for search marketing to Utah residents.

The new law, sponsored by Republican state senator and majority whip Dan Eastman, passed without opposition and was signed into law in mid-March by Gov. Jon Huntsman. But the legislation is now beginning to attract angry opposition from both free-speech watchdog groups and Google, which took in $10.6 billion last year largely from keyword-based search marketing.

In an e-mail Thursday to the “Salt Lake Tribune,” Google spokesperson Adam Kovacevich said the law is unconstitutional. “This law hurts consumers, violates free speech, and is inconsistent with both established U.S. trademark law and our capitalist system,” he said, adding that Google will work with other affected companies to “educate officials in Utah about the numerous consequences” that could arise if the bill goes into effect on June 30 as planned.

Some search engines, notably Yahoo!, don’t permit keyword bids on trademarks. Google allows advertisers to bid on rivals’ trademark terms as keywords for pay-per-click ads but does not allow those trademarks to be used in either the ad headline or body copy.

Eastman defended the law in a post on The Senate Site, an unofficial blog site operated by the Republican majority of the Utah state senate, as a corporate version of protection against identity theft. “People who own a trademark or hope to own one will love this new law,” he wrote. “People who want to carjack someone else’s trademark will hate it. Trademark violations on the internet are rampant. In some cases people invest millions on their trademark, only to have their customers’ on-line word searches shanghaied by a pirate who bought off the search engines.”

Google said in press reports last weekend that it will delay deciding whether or not to bring a suit against the law until after speaking with Gov. Huntsman.

Eastman told the “Tribune” that setting up a registry to house and monitor “electronic trademarks” would give Utah “a neat little cottage industry.” Under the terms of the law, the state would be permitted to charge up to $250 in fees for each enrolled mark.

Matthew Prince, CEO of Unspam Technologies, told the “Tribune” that the law could make Utah “the Delaware of trademark law,” since companies would have to hire Utah lawyers to oversee the registrations and to sue over alleged abuses. Park City, UT-based Unspam manages the “do not e-mail” registry that arose from a 2004 Utah law to protect children from adult-themed e-mail. Prince told the press his company might bid to manage the trademark registry too, if the state opts to outsource that function.

Prince, who is also an adjunct professor at John Marshall Law School in Chicago, had a hand in drafting both the 2004 e-mail registry bill and this year’s trademark legislation. He defended the trademark law against criticism in two guest blogs last week on the same Website that ran Eastman’s post. “I make no apologies,” Eastman said of the law in his blog post. “Utah is a highly tech-savvy, super business-friendly state.”

“I can’t argue with his business-friendly characterization,” responded Eric Goldman, assistant professor of law at the Santa Clara University School of Law, in his blog on technology and law. “This law amply confirms that Utah happily sells out consumers to help businesses seeking to limit fair and legitimate competition.”

Goldman, who is also director of the school’s High Tech Law Institute, noted that the current law had its roots in two failed attempts–in 2004 and again in 2005–to protect some Utah trademark owners such as Overstock.com and 1-800-Contacts from seeing ads for competitors served up by adware. Those legal tactics were abandoned when a federal judge maintained that trademarks were not infringed when used as keywords.

“This law is terrible policy created by a legislature out of control,” Goldman wrote. “I’m reasonably confident that the law will be struck down on some basis when challenged, although plenty of resources will be needlessly spent in the process.”

Terming the law creating the registry as a “WTF Internet law,” Goldman wrote that “Utah has an unrivaled track record of enacting dumb, regressive, unproductive Internet laws.”

Jeffrey Rohrs, president of Cleveland-based search marketing firm Optiem and a self-described “recovering attorney,” says the law is likely to be defeated in a court challenge. “The Utah law seems fatally flawed in that it seems to prevent marketers from doing legitimate comparative advertising–the famous Coke vs. Pepsi challenge,” he says. “The Federal Trade Commission has carved out a pretty clear exception for comparative advertising.” The law also oversteps the jurisdictional boundary between state and federal trademark law, he says.

“In the long term, this may be much ado about nothing,” Rohrs says. “It’s one of those situations where a powerful constituent wanted redress for their grievances, and a legislator jumped to, put together a pretty ill-advised bill, and got it through a lazy state legislature. Now it’s on its way to going down to defeat at the hands of Google’s high-powered attorneys.”

Google has indeed successfully defended its trademark bidding policy in U.S. courts, most recently in October 2006, when a federal court threw out a lawsuit brought against the company by computer-repair company Rescuecom. The court dismissed the case after finding that selling keywords to trigger ads does not constitute using trademarks in commerce.

But some European courts have held differently. In 2005 a French judge ruled that Google could not let rival advertisers bid on trademarks owned by LMVH Moet Hennessy Louis Vuitton. The decision, which was upheld on appeal last year, bars Google from selling those trademarked keywords on any Website accessible in France.