Utah Law Bans Competitor Keyword Bids

    April 4, 2007
    WebProNews Staff

The Utah State Legislature has passed a Trademark Protection Act that creates a new type of mark called an electronic registration mark; it probably will not survive a Constitutional test according to the state’s own general counsel.

Utah Law Bans Competitor Keyword Bids
Utah Law Bans Competitor Keyword Bids
Who Can Compete with Google?

Using a competitor keyword or phrase to trigger an advertisement online in Utah is against the law. The passage of the Trademark Protection Act in Utah would require search engines to check a database of registered trademarks to avoid displaying ads in this way.

The profitability angle for Utah can’t be ignored. An annual fee of no more than $250 would be charged for each registered electronic mark under the law. Utah would reap an enormous windfall from brand name advertisers who wish to circumvent Google’s lawful practice of not investigating keywords as trademarks used to trigger ads in the US.

If you are looking for people who think this law is a bad idea, you’ll be spoiled for choice at the selection. You can start with Utah’s own General Counsel; they appended a legislative review note to the proposed act in the weeks leading up to its passage.

In summary, the General Counsel found problems with the Act as written:

Because of the potential impact on interstate commerce from the state’s regulation of electronic registration mark use on Internet search engines, this legislation has a high probability of being held to be unconstitutional.

The Commerce Clause to the United States Constitution provides that Congress has the power to regulate interstate commerce. (U.S. Const. art. I, sec. 8). This provision also has a “dormant” aspect that “prohibits state . . . regulation that discriminates against or unduly burdens interstate commerce.”

Search engines would either have to check every ad request to see if a user in Utah was making it, then check the search terms against the database of electronic registration marks for possible trademark issues.

Utah’s General Counsel office also considered the possibility that search engines would have to check every user query against the Utah database to avoid the need to determine someone’s location. “Any benefit to the state from this legislation is likely substantially outweighed by the burden on every Internet search engine or similar system to re- engineer its systems and constantly check the search terms or the location of a user,” they noted.

That potential would trigger the dormant aspect of the Commerce Clause. The Electronic Frontier Foundation commented on issues with Utah’s passage of the bill:

Aside from its constitutional flaws, the law is just bad public policy. It undermines the fundamental purpose of trademarks: to improve consumer access to accurate information about goods and services. Trademarks are just shorthand terms that designate the origin of a product.

Banning such competitor trademark usage would undermine legally permitted comparative advertising, according to the EFF’s Corynne McSherry. “That’s why comparative trademark use is clearly protected under federal trademark law. If it weren’t, Pepsi wouldn’t be able to tell consumers that more people think Pepsi tastes better than Coke,” she wrote.

Danny Sullivan brought up a scenario suggesting one difficulty Utah’s trademark system would have with this law:

Can you imagine registering common words like “Orange” or “Egg” or, hmm, “Apple” for protection? Then someone wants to use these words in a non-competitive way. How can the system automatically know this?

It’s difficult to see Utah’s Trademark Protection Act as anything more than a blatant money grab. Let the Constitutional challenges begin.