Want to provoke a competitor’s CEO? Try using his company’s trademarks in your marketing materials for your competitive product. But wait, you can’t do that…that is infringement and unfair competition, right?

Not necessarily. A company can legally use a competitor’s mark or brand as necessary to fairly and accurately describe its products, or to fairly and accurately compare its products and services to those of the competitor. What it cannot do is market in a way that leads to a likelihood of consumer confusion about the source or affiliation of its products or its competitor’s products.

For example, if I am selling my old Nissan Maxima, I can state in advertising that I am selling a Nissan Maxima. If I sell a case designed to specifically fit iPhones, I can state that in my advertising. I cannot, however, lawfully suggest or imply that I am Nissan or Apple, or one of those companies’ authorized dealers.

What about the practice of buying a competitor’s brand name as a keyword from Google or other search engines? That can allow your company’s site to pop up first when someone searches your competitor’s brand. Is that infringement?

Sometimes the answer is easy. If the keyword advertisement mentions the competitor’s brand and is worded such that consumers click on it thinking they will reach the brand they searched, that is trademark infringement. Even if the confusion ends once the consumer reaches the wrong website and figures out their mistake, the advertisement may have caused actionable initial interest confusion.

The real difficulty comes when the keyword ad never mentions the competitor’s trademark or, if it does, it is perfectly straightforward and not at all confusing. Can the mere act of buying your competitor’s brand name as a keyword result in liability for trademark infringement or unfair competition?

Initially, courts wrestled with the threshold jurisdictional issue of whether buying a competitor’s trademark as a keyword is a use of that mark “in commerce” that could give rise to federal trademark infringement liability. Some early decisions found that keyword transactions are not a “use in commerce” because they are invisible to consumers.

More recently, a clear trend has emerged that a purchase or sale of a competitor’s trademark does qualify as a “use in commerce.” Earlier this year, the 9th Circuit made clear in Network Automation, Inc. v. Advance System Concepts, Inc. that it agrees with the 2nd Circuit’s leading 2009 decision Rescuecom, Corp. v. Google, Inc. that keyword transactions constitute a “use in commerce.”

Whether or not a keyword purchase infringes a trademark will still depend on whether the use creates a likelihood of consumer confusion under all the relevant circumstances. So the real analysis again turns on whether the resulting ad is ambiguous or confusing as to source or affiliation.

According to the Network Automation court, all infringement factors should be considered, not just the abbreviated factors used for domain name disputes. In reversing a preliminary injunction imposed by the lower court, it strongly suggested that these infringement factors must be applied flexibly with a keen focus on whether consumer confusion is likely in the context and circumstances of the case.

The courts are still split on whether the way in which Google (or other search engines) presents the keyword ads can, by itself, create a likelihood of confusion, even if the resulting ads are not confusing. Some courts say that the mere purchase of a keyword cannot alone result in consumer confusion. These courts reason that a blanket prohibition on such transactions would be anticompetitive, and would deprive consumers of ready access to lawful comparative advertising. As a result, the focus should be on the language of the advertisement generated by the keyword.

Other courts, including the 2nd Circuit in Rescuecom, have found that allegations challenging the manner of placement and display of sponsored links will support a likelihood of consumer confusion claim, regardless of the content of the keyword advertisements.

Use of a competitor’s mark in marketing certainly can help consumers understand the competitive advantages of your product and can provide an effective sales tool. But if that marketing strategy creates a potential for consumer confusion, the company opens itself up to possible liability for trademark infringement and unfair competition.

Be careful and get good advice because you can fairly assume that your competitor’s CEO will hear about your comparative ads sooner rather than later, and will look for any plausible grounds to challenge them.