Choose and use your (ad)words with care

Article  \  2 Jul 2014

In the recent case ofInterCity Group (NZ) Ltd v Nakedbus NZ Ltd, a key lesson emerged: a competitor can effectively use your trade mark as a Google keyword without being liable for trade mark infringement. However, use of someone else's trade mark as a keywordin conjunctionwith other visible forms of use - in the text of an online ad for example - does constitute trade mark infringement. Let's explain.


InterCity and Nakedbus are direct competitors in the long-distance bus business. InterCity originated in the mid-1980s as the name for the long-haul passenger coach service of the New Zealand Railways Corporation. It enjoyed a dominant position in the market until Nakedbus arrived on the scene in 2006.

From its launch, Nakedbus has referred to 'inter city' (and variants) bus travel in its marketing and, from the get-go, InterCity has taken issue with this. The situation revved up when InterCity realised that a Google search for 'inter city' generated Nakedbus online advertisements featuring the words 'inter city' in the heading and description, which then linked to the Nakedbus website.

The Google AdWords service provides online advertisers with the ability to have their ads appear next to search results based on the 'keywords' that are entered in the search.  Smart advertisers research the keywords or search terms used by their target customers, and tailor their ads accordingly to drive traffic to their website. This typically means using the keywords in the text of the ad itself, but not always. Nakedbus' online advertising campaign involved the use of both 'inter city' as keywords and in the text of their ads.

InterCity sued Nakedbus for trade mark infringement, also arguing that Nakedbus' use of 'inter city' was likely to deceive or confuse consumers. They went to court and the court ruled.

The judgement

The High Court of New Zealand found that Nakedbus' use of 'intercity' and 'inter city' as keywords in its Google AdWords campaign did not infringe InterCity's trade mark registrations, breach the Fair Trading Act, or amount to passing off.  However, Nakedbus' use of 'intercity' and 'inter city' as keywordsin conjunctionwith use of those terms in the text of ads or on its website, did infringe InterCity's trade mark registrations, amount to passing off, and breach the Fair Trading Act.  In effect, blatant and visible use of InterCity's trade mark in Nakedbus' online ads was against the rules whereas purchasing the keywords 'inter city' did not in itself constitute an infringement.  Key to this decision was the judge's acceptance of the argument that if the consumer could not 'see' the trade mark in use, then it could not be 'taken as being used as a trade mark'.

What does this mean?

Business and brand owners need to be aware that a keyword which would normally direct traffic to their website can be purchased by a competitor. Although a trade mark owner may still have a legal remedy if this happens (passing off or misleading conduct under the Fair Trading Act 1986), if the keyword does not appear in the AdWord text then a claim for trade mark infringement cannot be made. 

And on the flipside, advertisers that plan on purchasing keywords that are identical to trade marks owned by others need to be aware that visible use of those words in the text of their ads is against the rules!

However, that may not be the last word on this case.  We understand Nakedbus has appealed the decision to the Court of Appeal so the position may change in future.  Watch this space!

An edited version of this article appeared in the April 2014 issue of NZ Entrepreneur magazine