With more and more consumers using
the Internet to book hotel rooms, and with search engines playing a
crucial role in how people get information and make decisions, its
important that hotels understand the risks and rewards involved in
For example, if a
competitors paid ad appears when someone runs a search on Google using a hotels
trademark, is this an unethical and deceptive business tactic or
simply smart marketing?
Is it trademark
infringement or fair competition?
The answers to
these questions are not academic -- they have a direct and
immediate impact on a hotels bottom line.
Consider a person
that wants to stay at a Best Western in Miami and runs a search on
Google by typing in the words Best Western Miami. A search results
page appears with bold, highlighted listings at the top of the page
and a separate column of listings on the right side labeled
If the person
clicks on one of the sponsored links, he will be routed not to the
Western Web site but to an online company that also offers
other Miami hotels.
If he clicks on one
of the competitors listings and decides to book a room at one of
these other hotels, Best Western loses a customer.
Even if he books a
room with Best Western, the hotels profit margin will be reduced by
about 18% to 30% because it will be required to pay a commission to
the online agency.
illustrates the threat that online travel companies such as Expedia and Travelocity
pose to a hotels online business.
Many consumers are
unaware that the sponsored links highlighted at the top and
right-hand side of the search engines results page are simply paid
ads sold by the search engine to the highest bidder.
In our example, the
reason the online travel companys Web site appears as a sponsored
link when someone types in the search term Best Western is that the
online travel company was a high bidder on the keywords Best
As a result, Google
sold the online agency the right to have its paid listing appear
whenever someone enters Best Western as a search term -- despite
the fact that the agency has no rights to the trademark.
went out of its way to accommodate trademark owners who requested
that Google stop selling ads keyed to trademarked
But Google changed
its policy in April 2004, announcing that henceforth it would allow
third-party ads to be triggered by a companys trademark.
A few weeks later,
Google was sued by insurance company Geico in Virginia.
Google scored a
major legal victory last December when the court held that Googles
display of sponsored-link advertising, which was triggered by the
entry of Geicos trademark as a search term, did not constitute
trademark infringement so long as the text of the advertisement did
not contain Geicos trademark.
Although this was a
big victory for Google, the effect of the decision has been limited
because it was based on the judges rejection of the particular
survey evidence presented in that case by Geico.
In fact, the judge
subsequently issued a written decision in which she specifically
stated that the ruling should only be applied to the specific facts
in that case. Since there are a number of other pending lawsuits
involving keyword bidding, it remains to be seen whether other
courts will reach the same conclusion.
In view of the
legal uncertainties, what action, if any, should hoteliers take to
protect their brands online?
The first step is
to recognize that while online travel companies are among the
biggest offenders when it comes to keyword advertising, theyre also
contractual partners of the hotels.
improvement of fortunes in the hotel industry, hotels no longer
find themselves saddled with a large excess room inventory and are
not as dependent upon online travel companies to sell their rooms
as they used to be.
Hotels should take
advantage of their improved bargaining position by insisting that
online travel companies respect their trademarks and prohibit
keyword bidding in their contracts.
increasing numbers of consumers booking their hotel rooms online,
effective Internet marketing is no longer a luxury but a
Since the law in
this area is changing almost as rapidly as the technology, its
essential that hoteliers obtain sound legal advice so they can act
now to protect their brands online.
Peter M. Ripin,
a partner in the law firm of Davidoff Malito & Hutcher in New
York, has represented numerous hospitality industry clients
regarding Web site domain name piracy and the Anti-Cybersquatting
Piracy Act. He can be reached at [email protected].