Can a company use its competitor’s trademark as a “keyword” in advertising it purchases on popular search engines like “Google” and “Bing”? The answer is evolving with consumers’ – and the courts’ – sophistication in Internet use and practices and, according to at least one recent appellate decision, depends on the context in which the advertising is portrayed.

So held the Ninth Circuit Court of Appeals earlier this year in Network Automation, Inc. v. Advanced Systems Concepts, Inc. 638 F.3d 1137 (9th Cir. 2011). The case involved two competitors in the job scheduling and management software business. One competitor, Network Automation, purchased the Google AdWords service, in which advertisers pay Google to have their advertisements appear as “Sponsored Links” or “Sponsored Advertisements” in a column next to the search results when Internet users search for particular “keywords.” Network Automation chose its competitor’s trademark as one of its keywords. The competitor, Advanced Systems Concepts, Inc., objected, and litigation followed.

Arguably breaking from its own precedent, the Ninth Circuit reversed the entry of a preliminary injunction that had required Network Automation to stop using Advanced System’s mark as a keyword and permitted Network Automation to continue that use in its “Google” advertising. The court did so even though the advertisement did not clearly identify Network Automation as source of the advertisement, which had doomed similar advertisements in some earlier cases. The Court stressed how Google’s partitioned search results pages that clearly delineate the sponsored listings from the actual search engine results reduced the possibility of confusion.

Perhaps equally important to the Court’s decision was its own evolving perception of consumers’ growing sophistication in Internet use. A 1999 Ninth Circuit case had concluded that Internet users exercise a “low degree of care” in shopping of the Internet. By 2011, the Ninth Circuit concluded, consumers have become accustomed to seeing “Sponsored Links” appear when they use search engines and understand those links may not be affiliated with the company for which they were searching. The Ninth Circuit’s Network Automation case reflects the courts’ ongoing efforts to make the law reflect the ever-changing realities “on the ground” – or rather, in cyberspace. Use of another’s trademark in advertising will continue to be subject to scrutiny but through an ever more sophisticated lens.