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Yesterday, Google announced that it was changing its ad policies to allow advertisers to use other people's trademarks in the text of their ads. This makes sense—there's a number of different contexts in which one company might refer to another in an ad: Home Depot wants to tell you it has great deals on Toro lawnmowers; AT&T wants to hammer home the point that they're the only US home of the iPhone; Pepsi wants to tell you that people like its taste more than Coke. However, the new policy still restricts how those trademarks can be used beyond what the law allows.
Google has said, both here and in a meeting we had with them earlier this week, that an advertiser can use someone else's trademark only if they are reselling the trademarked goods, selling compatible or replacement parts for the goods, or reviewing the goods. So a search for "Ford Mustang" might turn up ads for used car dealers, aftermarket auto parts suppliers, and car review sites, in addition to the websites for Ford, authorized Ford car and parts dealers, and so on. Some of these decisions might be more or less welcome to a trademark holder—while Lexmark probably has no problem with an ad for Amazon that advertises its sales of Lexmark products; it might be less happy (though without a strong legal case) about an ad for third-party cartridges that work in Lexmark printers.
But one of the first uses of others' trademarks in advertising that comes to my mind is comparative uses: Chevrolet calling into question Ford's machismo; Microsoft calling Macs overpriced; and Apple accusing Microsoft of spending more money on marketing instead of fixing Vista's bugs.
Despite this, the New York Times reports that trademark owners may be more upset. However, most of the complaints (both legal and non) from trademark owners are centered around the use of their trademarks as triggers for others ads, not when their marks are used in the text of an ad itself. So long as an ad isn't deceptive, there's no question under the law that one company can name another. As the Times article notes, both Yahoo and Microsoft already allow trademarks to be used in the text of other companies' ads.
The more significant legal complaints about Google's ad policies are in areas where Google's existing policy differed from the other two companies: its willingness to use trademarked search terms to trigger other ads. For instance, Burger King might buy "McDonalds" as a keyword, so that a search for "McDonalds" will also turn up ads for the competitor. Lawsuits on that subject tend to focus on the question of whether or not using those trademarks on the back end of the process is an infringement—either through the selling of the triggers themselves, or by deceiving users by showing them a competitor's ads when they have searched for a company's trademark. The merits of those arguments center on whether or not Google is using the marks "in commerce," or whether or not the competitors' ads cause consumer confusion.
That controversy will remain for the immediate future, but the change in Google's ad policy doesn't affect the contours of that battle. The new policy neither expands nor contracts the use of trademarked keywords, and its expanded use of trademarks in text still falls far short of what the law allows advertisers to say. Google touts the fact that its change in policy allows for more informative ads; even more informative would be a policy that grants advertisers the full ability to compare themselves with their competitors.