Hotels must protect their brands online

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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 Internet marketing. 

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 Sponsored Links.

If the person clicks on one of the sponsored links, he will be routed not to the official Best 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.

This example 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 Western.

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.

Google initially went out of its way to accommodate trademark owners who requested that Google stop selling ads keyed to trademarked keywords.

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.

With the 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.

With rapidly increasing numbers of consumers booking their hotel rooms online, effective Internet marketing is no longer a luxury but a necessity.

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].

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