Thursday, 27 October 2011

MISUSE OF SPONSORED LINKS UNDER THE BRAZILIAN LAW


Competition for clientele is no longer limited to street corners and avenues. The internet has been a stage to this business rivalry for a long time now and companies are more and more concerned about their websites’ functionality and design. They are also focusing on how to get their websites highlighted on internet searches in order to achieve a larger number of visitors.

From this modern ambition the sponsored link tool was born. Viewed by many as an internet marketing revolution, this tool enables a company’s website to appear directly at the top or on the side of the user’s search results. In order for that to happen, a company will pay a certain amount per access on its website to the companies responsible for search mechanisms. According to a Google executive, sponsored links represent 40% of all online media in the United States alone, the equivalent of US$4 billion.

In practical terms, a flower shop would hire a sponsored link for the word ‘’flower,’’ so that every time a user searches for flowers, their website would pop up right at the top of the search results. This is a common practice.

What happens is sometimes companies use this tool improperly, infringing upon international treaties related to Intellectual Property and even our local legislation, especially the contents of Brazilian Industrial Property Law. They hire sponsored links for brands and company names related to or resembling that of their competitors, who are usually well known companies in the same line of business.

For instance, company A would hire a sponsored link for the expression ‘’B’’, which already is a brand or company name that identifies a competitor. In this hypothetical situation, every time a user looks for company B they would be shown company A’s website first, many times accompanied by the phrase ‘’find it here’’, aggravating the situation. This would mislead users, making them believe they would find B on A’s website.

When users see this, they are also made to believe that company A owns B or even that company A is somehow related to company B, when in fact this is false. All this confusion benefits company A, however, which hired the sponsored link for the brand or company name of its competitor.

There is no doubt that this is wrongful conduct. Apart from the evident misuse of another’s brand or company name, what is happening here is an unfair trade competition, prohibited by the Brazilian Industrial Property Law, article 195, subsections III and V, and by article 10 from the Paris Convention for the Protection of Industrial Property, enacted by Decree 75.572, from April 8, 1975.

To solve this matter, one could resort to our judicial department, but before that happens, it’s recommended that the victimized company immediately requests minutes of a Notary. This public act will unquestionably depict the disloyal action.

Brazilian Courts have already examined cases similar to the one represented above and have ruled, on their vast majority, that the company who hired the sponsored link should stop using their competitor’s brand and company names. This act, which is considered an intentional fraud to deviate and confuse the other company’s clientele, can be rectified by awarding damages to the victimized company.

The court decision from the Honorable Judge Luiz Roberto Ayoub is worth mentioning. The decision is related to process number 2004.001.14955-4, handled at the 1st Business Tribunal of Rio de Janeiro and was ratified at the state of Rio de Janeiro’s Court of Appeals, through court decision number 2008.001.60797. The possibility that this decision will be taken to a superior court is still very viable. Appeals court Judge, Honorable Mário Assis Gonçalves, highlighted the mentioned decision stating that, “When intending to illustrate the Defendants’ actions, picture this analogous situation: the Plaintiff owns a store on a street parallel to one of the Defendants’ store in a certain city. The Defendant, then, decides to advertise his store by hiring people to stand on street corner placed on the surrounding streets and when asked about where the Plaintiff’s store is located, the Defendant’s employees would provide a route that would lead people to go through by the Defendant’s store.”

By EDUARDO RIBEIRO AUGUSTO (email: eaugusto@dvwcg.com.br), partner of De Vivo, Whitaker, Castro e Gonçalves law firm.

3 comments:

Francisco said...

I wonder if you could hiperlynk to same of the decissions mentioned in the article.

I don´t know what is the situation in Brazil but in Argentina "comparative advertising" is legal. By that I mean advertising using your competitor trademark. If the same is true in Brazil I wonder why the author finds that using the trademark of your competitor as a trigger for your advertisement is wrong, specially considering that your competitor's trademark is not shown.

Patricia Covarrubia said...

‘Comparative advertisement’ as such is allowed in most jurisdictions IF it does not diminish the competitor’s TM and of course is based in actual data (e.g. price, quality...). The case of Adwords is NOT comparative advertisement; you are just using someone else’s TM to direct him to your product, you are NOT comparing anything at all.
If you read an early post (repeating this article – yes, it was published wrongly twice) I mention two recent cases ruled by the European Court of Justice in this matter. It states as follows: “the proprietor of a trade mark is entitled to prevent a competitor from advertising – on the basis of a keyword which is identical with the trade mark and which has been selected in an internet referencing service by the competitor without the proprietor’s consent – goods or services identical with those for which that mark is registered, where that use is liable to have an adverse effect on one of the functions of the trade mark”.
Re. competitor's trade mark is not shown. When a person is looking for product ‘X’ and you are pointed to shop ‘Z’ to get the product, do you need to see the TM again? Here is the question that the Brazilian judiciary is focus on: ‘confusion’. The European courts focus on the effect that the use of such mark (even if invisible) may have.

Patricia Covarrubia said...

Case nº 2008.001.6079 can be found at:
http://srv85.tjrj.jus.br/ConsultaDocGedWeb/faces/ResourceLoader.jsp?idDocumento=000316893FFDD0C56D2E298A5660BAD6E18EC3C4021D162A