“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.”

So says Optiem’s Jeff Rohrs.  As a former attorney who is well-versed and deeply active in search marketing, he should know!

One must first have a grip on fundamental concepts relating to both trademark law and existing Web advertising economics if one is going to pass a law that can withstand challenges—ultimately enact lasting change.  In this case, Utah (via it’s new Trademark Protection Act) suggests it wants to protect trademark owners from having competitors leverage their good will and brand integrity.  That’s an interesting idea but the logic being used to support this legislation argues, successfully, that the aim is to protect the original mark holders from advertising competition (in search engines)—NOT trademark infringement. 

Somehow those who helped craft this legislation, including blogger and John Marshall Law school professor, Matthew Prince, have managed to look past (or set aside?) fundamental aspects of not only existing trademark law but more critically how Web advertising actually works. 

Via ClickZ’s Kate Kaye (who does a great job piecing together the tight knit group of lawyers, lobbyists and legislators who stand to gain from the law…

The new law could help local law firms score new clients for trademark-related cases, according to (Utah’s Senator Dan) Eastman.

“It may be a marketing tool to increase the client base (legal firms) so they could help individuals who have had trademark violations committed against them,” he explained.

He also said the state of Utah “would have no direct responsibility for enforcement,” of the registry. “It would have to be done by an attorney, a law firm,” he said.

I fear that Senator Eastman places development of new revenue streams for Utah before understanding fundamental concepts relating to both trademark law and advertising practices, all be they new ones.  This legislation fails on numerous points which Mr. Prince, while commenting in his support of it, inadvertently points out.  I’m quite sure this was not his intent and find that most of this legislation appears to be based on misguided information.

Specifically, Mr. Prince claims that it’s possible for one advertiser to engage in a “form of corporate identity theft” by purchasing the other’s trademark as an advertisement trigger on a search engine like Google.  This he says “dilutes” the original advertiser’s brand.  He paints the trademark holder as a victim based solely on the notion that other rival advertisers should not be able to capitalize on the goodwill of established brands (to promote themselves).  This is not only illogical but irrelevant to the issue of infringing on an advertiser’s trademark.  Infringement is created when intentional confusion (of a consumer) is created.

Here’s the real issue for marketers, advertisers.

Many in our industry have long criticized third party use of trademarks designed to enrich them… all while leveraging a trademark holder’s good will and brand integrity.  Search engines, syndication partners of search engines, affiliates of advertisers, desktop ad networks, adware networks… all of these are examples of legal entities that engage in the very profitable business of brokering trademark usage to other parties (publishers of various sorts).  These companies power a large part of our Internet advertising economy.  They facilitate, and profit from, engaging in this business with the explicit consent of advertisers and those who act on their behalf (agencies).  Networks engage in this every day, routinely.

Many of us in the consulting realm have criticized ad networks and their willing accomplices—advertisers themselves!  I will continue to do so and while I appreciate the spirit in which this legislation is offered it is seriously misguided.

These practices are not limited to the U.S.  Such as in the case of overseas brand, Tesco who suddenly decided that a practice that they were not only aware of but endorsed was worth suing a third party affiliate over.  They literally signed a contract with the affiliate (via a network), willfully and knowingly participated in a financially incentivized, typo-squatting arrangement with the affiliate only to wake up one day and smell the coffee.  This is the same asleep-at-the-wheel dynamic that created Nick Robertson’s (CEO of U.K. based fashion clothier, ASOS) inflammatory “grubby little affiliates” comment.  Robertson’s comments were indicative of how embarrassed he was of his OWN company’s past advertising strategies.

The practice of advertisers engaging in cost-per-action affiliate and cost-per-click search marketing networks without really understanding what’s going on inside them is a sign of changing times.  These routine practices are inherent to the Internet and much of what I call the “Ignorance Economy” that powers it. 

Simply stated, there’s a lot advertisers, agencies and, yes, legislators and legal professionals don’t know about how online advertising actually works.

Coming back to the Utah law… in defining the problem, those who have crafted it have literally demonstrated that it’s not a problem at all.  The phenomenon of a competing advertisement appearing when a user enters another advertiser’s trademark is no more problematic or illegal than, as one commenter on Mr. Prince’s blog put it, “... a Pontiac salesroom complaining of identity theft because a billboard next to it is showing a Mazda advert.”

It is my opinion that Mr. Prince’s own words in support of this legislation bring into question the intent behind it.  Does this law seek to protect the original mark holders from competition rather than from trademark infringement?  This legislation, fail to focus on the true, definitive issues when it comes to fair use of trademarks: consumer confusion and intent. 

Optiem’s Jeff Rohrs, via Direct Magazine, agrees. 

The self-described “recovering attorney”, says the law is likely to go down to defeat 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 v. 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.”