U.S. cases are widely split on whether trademark-triggered banner ads or sponsored links constitute "use" under the federal trademark statute, whether this sort of usage creates likelihood of customer confusion, and whether the fair-use doctrine is applicable. Courts have struggled to apply traditional trademark principles to purchase of trademark-triggered ads, as well as use of trademarks in metatags or hidden text.

On March 30, 2006, a federal district court in New York held that the purchase of key word advertising triggered by a competitor's trademark does not constitute "use in commerce" sufficient to support a federal trademark infringement claim. See Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F Supp 2d 402, 2006 WL 800756, 79 USPQ 2d 1744 (SDNY Mar. 30, 2006). The case involved ads triggered by Merck's "ZOCOR" trademark, used for its popular cholesterol medication. The defendants, Canadian online pharmacies, sold generic versions of the cholesterol medication. The court held that "the ZOCOR mark is 'used' only in the sense that a computer user's search of the key word 'Zocor' will trigger the display of sponsored links to defendants' websites. This internal use of the mark ‘Zocor' as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense."

Ten days earlier, a federal district court in Minnesota reached the opposite conclusion on similar facts. See Edina Realty, Inc. v. TheMLSonline.com, 2006 WL 737064, 80 USPQ 2d 1039 (D Minn Mar. 20, 2006). In this case, the defendant, a real estate brokerage firm, used the plaintiff's "EDINA REALTY" trademark to trigger sponsored ads on Yahoo! and Google. The trademark was also used in hidden text and hidden links on the defendant's Web site. The court found that this constituted "use in commerce" under the federal trademark statute. It also rejected a "fair-use" defense, finding that even though the defendant was entitled to advertise the existence of the plaintiff's listings on the defendant's Web site, the defendant's use went beyond the minimal use sufficient to communicate that point, one of the requirements of the fair-use doctrine.

The most recent case on this topic is Rescuecom Corporation v. Google, Inc., decided September 28, 2006 by the U.S. District Court for the Northern District of New York. In dismissing a keyword ad case against Google and in finding that trademark-triggered advertising does not constitute "use" under the federal trademark statute, the court summarized the case law to date as follows:

"Although the Second Circuit has not considered whether the purchase or sale of a trademark as a keyword that triggers the appearance of an advertisement is a trademark infringement * * *, several district courts have reached different conclusions on this issue. Compare GEICO v. Google, Inc., 330 F Supp 2d 700 (ED Va 2004) (denying the defendant Internet search engines' motion to dismiss finding that the plaintiff adequately alleged that the defendants' use of plaintiff's trademark, GEICO, as a keyword to advertisers was a ‘use in commerce' and likely to cause confusion), claim dism'd, Order, Dec. 15, 2004, (dismissing Lanham Act claim following bench trial on finding no likelihood of confusion), Edina Realty, Inc. v. The MLSOnline.com, Civ. 04-4371, 2006 WL 737064 (D.Minn. Mar. 20, 2006) (denying the defendant's motion for summary judgment finding that the defendant's purchase of the plaintiff's trademark as a keyword to prompt the appearance of defendant's sponsored link advertisements was a ‘use in commerce'), Edina Realty, Inc. v. The MLSOnline.com, Civ. 04-4371, 2006 WL 1314303 (D.Minn. May 11, 2006) (Edina II) (denying motion for reconsideration), Rescuecom Corp. v. Computer Troubleshooters USA, Inc., 1:04-CV-03499 (N.D.Ga. Sept. 16, 2005) (declining to dismiss the complaint which alleged that the defendant's purchase of the plaintiff's trademark from an Internet search engine as a keyword that would generate the appearance of the defendant's sponsored link was a ‘use in commerce' concluding that in view of the novel legal question presented, and the unsettled state of the law, resolution should await a factually developed record), `Google v. American Blind & Wallpaper Factory, Inc., C 03-05340, 2005 WL 832398 (N.D.Cal. Mar. 30, 2005) (denying Google's motion to dismiss in view of the unsettled state of the law and in order to await factual development of the record), and 800-JR Cigar, Inc. v. Goto.com, Inc., Civil Action No. 00-3179, 2006 WL 197659, *8 (D.N.J. July 13, 2006) (denying summary judgment finding a question of fact as to whether the defendant "pay-for-priority" Internet search engine used the plaintiff's trademark within the meaning of the Lanham Act because there was evidence that the defendant accepted bids on the plaintiff's trademark from the plaintiff's competitors, ranked paid advertisers before ‘natural' listings among the search results, and suggests the plaintiff's trademarks to the plaintiff's competitors), with Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 415 (S.D.N.Y. 2006) (Merck I) (granting the defendants' motion to dismiss claims regarding the defendants' purchase of the plaintiff's trademark ‘ZOCOR' as a keyword from Internet search engines, holding that the defendants' purchase of the trademark was an ‘internal use' and did not constitute a ‘trademark use' because the defendants did not place the plaintiff's marks ‘on any goods or containers or displays or associated documents, or use them in any way to indicate source or sponsorship'), and Merck & Co., Inc. v. Mediplan Health Consulting, Inc., NO. 05 CIV 3650, 2006 WL 1418616 (S.D.N.Y. May 24, 2006) (Merck II) (denying motion for reconsideration)."

Until the U.S. Supreme Court speaks on these issues, or further case law discloses the predictable outcome, these activities will continue to be hazardous.