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Ninth Circuit Clarifies Position on Keyword Advertising Liability

Posted in Trademark Law

By Scott Hervey           

Early this year, the Ninth Circuit issued its opinion in Network Automation v. Advanced Systems Concepts and clarified that the use of another’s trademark as a search engine keyword to trigger one’s own product advertisement is “use in commerce” and may violate the Lanham Act. Prior to its decision in this case, the Ninth Circuit assumed without expressly deciding that the use of a trademark as a search engine keyword that triggers the display of a competitor’s advertisement is a “use in commerce.” For a time, it wasn’t always so clear that such use was an improper attempt to profit from the good will of another’s trademarks; certain jurisdictions held that such use was not commercial (trademark) “use” and therefore no infringement.

In order for a defendant to be engaging in infringing use of a mark it must use that mark “in commerce.” The Lanham Act provides that a mark is “used in commerce” when it is used…

… on goods when … it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and … the goods are sold or transported in commerce, and … on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce…”

Prior to 2009, in the Second Circuit the purchase and use of another’s trademark as a keyword to trigger competitive advertising where the allegedly infringed mark was not visible to the user did not constitute “use in commerce.”   In Rescuecom Corp v. Google, Inc., the Second Circuit appeared to change course when it held that Rescuecom’s complaint stated a claim for trademark infringement against Google stemming from Google’s sale of the Rescue.com mark as a keyword to a competitor.

Earlier Ninth Circuit cases dealt with a search engine’s sale of keywords to trigger banner ads (Playboy Enterprises v. Netscape Communications, Inc.) and the use of a trademark in metatags and domain names (Brookfield Communications, Inc. v. West Coast Entertainment Corp.). Here, the Ninth Circuit stated that it is in agreement with just the Second Circuit’s holding in Rescuecom that the use of another’s trademark as a search engine keyword to trigger one’s own product advertisement is “use in commerce.” (Although the Rescucom case dealt with the sale of keywords, the Ninth Circuit’s position is clear – it will no longer consider the “no use in commerce” defense in keyword advertising cases.)

The Ninth Circuit then analyzed whether Network’s use of Advanced Systems’ trademark was likely to cause consumer confusion. Previous cases rigidly applied the three Sleekcraft factors the court in Brookfield found to be the most relevant for any case addressing trademark infringement on the Internet – (i) the similarity of the marks; (ii) the relatedness of the goods/services; and (iii) the simultaneous use of the Internet as a marketing channel. Here, the Ninth Circuit stated that it did not intend for Brookfield to be read so expansively as to forever enshrine its three-part analysis as the test for all trademark infringement on the Internet, and further stated that these factors are a particularly poor fit for the questions presented by search engine keyword advertising. The court then went on to apply all eight of the Sleekcraft factors – i) Strength of the mark; ii) proximity of the goods/services; iii) similarity of the marks; iv) evidence of actual confusion; v) marketing channels; vi) type of good and degree of care; vii) the defendant’s intent; and viii) likelihood of expansion of the product lines.

The court found Advanced System’s mark to be strong and found the goods to be virtually interchangeable, however the court noted that proximity of goods must be “considered in conjunction with the labeling and appearance of the advertisements and the degree of care exercised by the relevant consumers.” In looking at the similarity of the marks, the court stated that this element must also be considered in connection with what consumers encounter in the marketplace and the degree of care the relevant consumers exercise. 

There was no evidence of actual confusion to consider so the court made quick work of this factor. Similarly, the court treated the fact that the parties share the Internet as a marketing channel almost as a non-factor. (“Today, it would be the rare commercial retailer that did not advertise online, and the shared use of a ubiquitous marketing channel does not shed much light on the likelihood of consumer confusion.”) The Ninth Circuit rejected the district court’s statement that Internet consumers exercise a low degree of care and states that “the default degree of consumer care is becoming more heightened as the novelty of the Internet evaporates and online commerce becomes commonplace.” 

After applying all eight Sleekcraft factors, the Ninth Circuit noted that, given the nature of the alleged infringement the most relevant factors are; i) mark strength; ii) evidence of actual confusion; iii) the type of goods and degree of purchaser care; iv) and the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.    The Ninth Circuit reversed the district court’s injunctions, finding that the district court did not weigh the Sleekcraft factors flexibly to match the specifics facts of this case and instead rigidly applied the Brookfield test.

The importance of this case in the context of keyword advertising matters is two fold. First, it’s now clear that defendants in keyword advertising cases should not raise the “no use in commerce” defense. Second, the three factor Internet “troika” of Brookfield is out and a new four factor test is born.