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Warner Norcross + Judd LLP is a corporate law firm with over 230 attorneys serving clients in nine offices throughout Michigan. Among the largest law firms in Michigan, Warner works in virtually all areas of business law.

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Augmented reality advertising is already upon us, and I believe that it will soon open up a new and heated round of litigation over where the lines are between fair and unfair advertising and use of competitors' trademarks.

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The Confusion Over Keywords and Sponsored Ads

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The growth of commercial internet over the past 20 years has been funded predominately by advertising revenue.&nbsp; We as consumers get to browse free content on millions of web pages and on various search engines in large part because advertisers have paid good money to insert their ad next to whatever we're reading.&nbsp; Odds are good that this funding model will continue well into the future.

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Moreover, the primary purpose of all commercial advertising is to draw potential customers to the advertised business or product, and away from its competitors.&nbsp; "Comparative advertising"--ads that compare a product to its competition--have been around forever, and courts have drawn some reasonably clear lines between what is okay to say in such ads, and what is "deceptive" advertising.&nbsp; In a nutshell, it's permissible to describe your competitor's goods and compare one product to another.&nbsp; But you can't say things that are likely to confuse customers into believing that you are your competitor. You can't say something materially false or misleading about your competitor or your own product.&nbsp; And you can't do anything to confuse reasonable consumers into mistakenly believing there's some sort of connection, sponsorship, affiliation, or endorsement between your companies or products.

So you'd think that the court system would have sorted out by now exactly where the lines are in digital advertising between fair and unfair use of competitor's marks.&nbsp; But you'd be wrong.&nbsp; The battle overusing trademarks in "keyword advertising"--i.e., using an algorithm to display Company A's sponsored ad whenever a user types Company B's trademark into a search engine--is still being fought, more than a decade after the practice began.&nbsp; Rosetta Stone is one of several companies to sue Google for allowing competitors to use its marks in keyword ads.&nbsp; Like several other courts had done in similar cases, the trial court dismissed suit as a matter of law, finding that Rosetta Stone could not prove that Google was liable.

But on April 9, 2012, the U.S. Court of Appeals for the Fourth Circuit <a href="http://scholar.google.com/scholar_case?case=11203645518793090722&amp;q=rosetta+stone+v.+google&amp;hl=en&amp;as_sdt=2,23" target="_blank" rel="noreferrer noopener">overturned</a> that holding, finding it possible that Google's policy on the use of keywords in sponsored ads could amount to direct infringement, contributory infringement, or trademark dilution.&nbsp; Other cases have likewise gone either way on liability depending on how the particular trademark at issue appeared in the header or text of a sponsored ad.

&nbsp;Will the Confusion Continue in Augmented Space?

I and other commentators have long foreseen the use of augmented reality to overlay advertisements in the physical world with digital ads from another--perhaps a competing--company.&nbsp; We already see this technology in various forms.&nbsp; For example, in TV broadcasts of baseball games, we might see "<a href="http://www.arcticstartup.com/2008/09/02/supponor-gets-eur-6m-in-series-a-funding" target="_blank" rel="noreferrer noopener">digital billboard replacement</a>" technology at work, which superimposes digital ads on top of the ones that are physically present in the stadium.&nbsp; As I've discussed <a href="http://www.wassom.com/interview-bc-heavy-biermann-taking-back-public-spaces-with-ar.html" target="_blank" rel="noreferrer noopener">before</a>, the Public Ad Project and the Heavy Projects have sponsored campaigns that replace physical billboards with artistic images when viewed through a mobile device.

But what happens when AR eyewear becomes ubiquitous, and digital ad replacement becomes commonplace?&nbsp; Will advertisers pay AR service providers for the ability to superimpose their ads on top of what consumers see?&nbsp; If the past 20 years of e-commerce is any indication, then the answer is "absolutely"--and in a number of creative ways.&nbsp; So, for example, a business may pay to superimpose its logo on top of signs advertising a competitor's products, completely blocking the physical ad from view.&nbsp; Or merely looking at Company A's ad through your AR eyewear may trigger a virtual ad for Company B to pop up somewhere else in your field of vision.&nbsp; Similarly, your decision to look at something may prompt suggestions for goods and services relating to the thing you're looking at.&nbsp; Self-described "pop culture hacker" Jonathan McIntosh captures all of these ideas in "<a href="http://www.rebelliouspixels.com/2012/admented-reality-google-glasses-remixed-with-google-ads" target="_blank" rel="noreferrer noopener">ADmented Reality</a>," his video parody of the <a href="http://www.youtube.com/watch?v=9c6W4CCU9M4" target="_blank" rel="noreferrer noopener">Project Glass</a> teaser.

Others have also seen augmented ads coming.&nbsp; John C. Havens discussed them and some of the legal issues they raise in his insightful <a href="http://mashable.com/2011/06/06/virtual-air-rights-augmented-reality/" target="_blank" rel="noreferrer noopener">piece</a>, "Who Owns the Advertising Space in an Augmented Reality?"--a discussion that John has <a href="http://www.wassom.com/brian-mullins-of-daqri-the-man-who-would-democratize-ar.html#comment-88" target="_blank" rel="noreferrer noopener">continued</a> on this blog.&nbsp; Personally, however, I think the question in the title of John's article should be rephrased.&nbsp; It's not a matter of "ownership" per se, because there is no "property" at issue--at least, not in the physically exclusive real property sense that the question implies.&nbsp; The beauty of virtual space is that an infinite amount of content can "occupy" (or, more accurately, "be displayed in a manner that gives the illusion of occupying") the same physical space. So, my ownership of a physical building, billboard or poster, as such, can't stop someone else's AR app from creating the illusion of virtual content on top of my physical property--because the app isn't invading the rights that come with my physical ownership.

But that isn't necessarily the end of the conversation, because the laws governing trademarks and unfair competition aren't about ownership.&nbsp; They're about protecting commercial goodwill and avoiding a confusion among consumers about the relationships between different products and businesses.&nbsp; Sponsored ads on search engines, for example, don't do anything to obscure websites or even search results; they just show up next to those things.&nbsp; Yet the courts have spent years wrestling over whether and how such ads cause a likelihood of customer confusion over who sponsored the ad.&nbsp; There is every reason to think that we'll have the same types of arguments about sponsored virtual ads.

It's also plausible, perhaps even probable, that courts deciding AR advertising cases will use the same reasoning as the search engine keyword cases that today's courts are wrestling with.&nbsp; Just like search engine algorithms use particular search terms as keywords that prompt an ad to appear, so too can the physical objects that prompt similar virtual ads in AR devices be thought of as "keywords."&nbsp; Whether it's a billboard, logo, or even a person's face, any object that prompts an algorithm to display an ad is performing the same function that keywords do today.

All of this is not to say that there is anything wrong or unfair about augmented sponsored ads, or that the courts will necessarily treat them in the same way they do today's internet ads.&nbsp; Just as today's disputes are often decided on very case-specific, factual grounds, so too will tomorrow's cases be.&nbsp; It also doesn't address advertising substitution that is clearly non-commercial, such as the ones sponsored by the Public Ad Project and Heavy Projects.&nbsp; And perhaps today's cases will yet result in some form of clear direction, either from the courts or the legislatures, on what is and isn't a permissible use of keywords in advertising.

Meanwhile, though, the rules of fair and unfair competition in the AR space will remain as speculative as the technology itself currently is.

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Brian D. Wassom

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Augmented Reality, Keyword Advertising, and Trademarks

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Augmented Reality, Keyword Advertising, and Trademarks

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