Playboy v. Netscape: A Wrinkle in the Paid Search Model

This news came more than a day ago, and I decided to hold off on discussing it, as it felt like a nuisance suit. But the more I think about it, the more I sense this could be something of a big deal. Way back in 1999, Playboy sued Netscape, which was at that time still a major player in the web advertising wars, for misuse of its trademarks. At issue was Netscape’s advertising model, known then as keying – the practice of selling specific advertising that would appear when users typed in certain search terms (basically paid search, but an earlier form). Netscape, and later Excite, were selling keywords to companies capitalizing on Playboy’s trademarks. The suit was dismissed, then appealed, and yesterday we learned that the Ninth Circuit has upheld Playboy’s right to sue.

Now, the defending parties are either gone (Excite) or mere shadows of their former selves (Netscape), but Playboy intends to pursue the suit anyway. This case is not an anomaly, as Stephanie Olsen points out in her piece covering it. Google, among others, has been the target of several suits, and has recently asked the courts to clarify this issue, one clearly central to its business model. Late last summer, Google acquiesced to portions of an eBay request that Google not allow its advertisers to bid or buy on keyphrases that included the eBay brand.

The question here is of balance. Where and how do you draw the line as to what is a misuse of a trademark, and what is not? If we have to depend on the courts every time someone wants to use a word that also happens to be trademarked, the chilling effect on paid search could be significant.