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Ads Click Off Rehab Center

When people use Google to search for Malibu’s famed Passages rehab center, they find ads that sometimes lead to competitors’ websites.

When the owners of Passages found out, they started a legal fight. And they’re using a new tactic.

In the past, companies with comparable complaints sued Google but lost. More recently, companies have sued the competitors, but courts generally haven’t held them liable for trademark infringement. Now, the rehab center, known for its celebrity clientele and luxury beachside facilities, is instead citing unfair competition.

Passages’ attorney Charles Harder said competitors have used Google’s AdWords program, which allows advertisers to buy ads linked to certain search words, to “create confusion in the marketplace.”

For example, a search for “Passages Malibu” turns up a link with a Web address that leads to competitor Renaissance Malibu.

“We have witnesses who say phone calls were coming into our competitors where the callers were thinking they were calling Passages Malibu,” Harder said. “And they weren’t telling the customer they were calling the competitor instead of us.”

The problem arose because of Passages’ prominent position in the marketplace. Competitors started paying Google to advertise links to their own websites when people do a search for “Passages” or variations.

Passages is “very well known, it’s very successful, and competitors want to trade off of that good will, success and notoriety,” Harder said.

But companies like Renaissance contend they have a right to advertise their product and to let customers compare side by side. They also charge that Passages does the same thing.

The financial stakes of losing just one customer are high in the world of luxury rehab. Passages can charge nearly $70,000 a month per patient.

Passages now finds itself in a legal battle with Renaissance and Georgia-based Accelerated Recovery Centers. Five other companies it’s sued since summer 2009 – Palm Partners, Central Recovery Treatment, G&G Holistic Addiction Treatment, Baldwin Research Institute and Gravee.com – either settled or had the suits dismissed when they stopped using AdWords.

In response to Passages’ suits, Renaissance Malibu and Accelerated Recovery claim that Passages doesn’t own a valid trademark.

Even if it did, it can’t stop companies from advertising their services, said James Doroshow, an attorney representing Renaissance and Accelerated.

“You can do comparative advertising,” Doroshow said. “Burger King says, ‘We have more meat in our hamburgers than McDonald’s does.’ They can use the name McDonald’s in that case. What we’re doing in using these marks is in part comparing our services to those of others, telling people why we’re a better choice.”

In addition to general attacks on Passages, the countercomplaint by Renaissance and Accelerated alleges that Passages also pays for sponsored ads that appear when customers search for competitors.

Renaissance and Accelerated don’t appear ready to settle, according to one attorney who is not involved in the case, but reviewed it for the Business Journal.

“It looks like they’re digging in their heels,” said Michael Heimbold, an intellectual property attorney at Century City-based Steptoe & Johnson LLP. “This one will be a fun one to watch.”

New legal tactic

There haven’t been many rulings on competitor-against-competitor cases over search engine advertising, because most lawsuits have targeted Google itself.

“The precedents are fewer,” Heimbold said. “There are not nearly as many as the Google cases.”

But there are a few rulings that indicate that simply setting up an advertisement to appear when a competitor’s name is searched doesn’t equal trademark infringement, as long as the trademark isn’t used in the actual ad copy, Heimbold said.

But it may constitute unfair competition, especially if it causes confusion among customers, he added.

In that light, Passages has amended its complaint against Accelerated to drop its trademark infringement charge and instead is trying to stop its competitors on grounds of unfair competition.

In either case, it’s essential to Passages that they show likelihood of confusion by these advertisements, said Jennifer Rothman, a professor at Loyola Law School.

“I don’t think the answer is 100 percent clear,” Rothman said. “They need to show something more than just the use of the name. They’d need to show that it was confusing to the customer.”

Until now, companies unhappy about competitors piggybacking on Google search queries have sued the Mountain View tech giant. But Google hasn’t lost a major AdWords case in the fives years it’s been fighting them. Most recently, Google in April won a dismissal of a trademark infringement lawsuit filed by language software company Rosetta Stone in federal court.

Doroshow, the attorney for Renaissance and Accelerated, said Passages is using the lawsuits in an effort to put competitors out of business.

“They’re suing a lot of people,” said Doroshow. “But we don’t think they have the right to prohibit what we’re doing.”

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