Use Of Trademarks In Keyword-Triggered Search Engine Advertising: A Hot Topic In Internet Law - Part II

Wednesday, June 1, 2005 - 01:00

Part I of this article appears in the May 2005 issue of The Metropolitan Corporate Counsel.

E. Active U.S. Litigation

There are currently a number of pending federal cases in which trademark owners have alleged that the sale of trademarks as search engine keywords, as well as allowing third party paid results ads that display others' trademarks, violates U.S. trademark and unfair competition laws and other laws. The most advanced cases involve Geico and American Blind and Wallpaper Factory.

1. Geico v. Google

The lawsuit that has received the most attention recently is Government Employees Ins. Co. v. Google, Inc., Civ. No. 1:04-cv-507 (E.D. Va. May 4, 2004). In that case, plaintiff Geico alleges that Google and Overture's sale of the marks GEICO and GEICO DIRECT as keywords constitutes trademark infringement, unfair competition, and dilution, among other claims. Notably, the complaint was filed only weeks after Google announced its change in policy in April 2004 to allow trademarks to be sold as keywords. Geico argued that the policy change constituted a deliberate decision to use the registered trademarks of other companies, including Geico, for the financial benefit of Google and to the detriment of trademark owners. Geico sought damages and an injunction against Google's and Overture's use of Geico's marks in their advertising programs.

a. Court Initially Sides with Geico

In August 2004, the district court denied Google's and Overture's motion to dismiss the essential counts of the complaint. The court held that Geico had alleged facts sufficient to support its claims that advertisers make trademark use of Geico's marks and that Google and Overture may be liable for direct, contributory, and/or vicarious trademark infringement, as well as unfair competition and dilution under the Lanham Act, and unfair competition under Virginia state law.

The court noted that the relevant inquiry is whether the defendants' actions, as alleged, constituted "trademark use," i.e., use of a mark in commerce in connection with the sale, offering for sale, distribution, or advertising of goods or services, sufficient to satisfy a threshold requirement for Lanham Act liability, as interpreted by the U.S. Court of Appeals for the Fourth Circuit. In dealing with this issue, the defendants found support from recent cases that involved pop-up Internet advertising and web page addresses. Ultimately, however, the court held that the search engines' activities, as alleged in the complaint, do constitute trademark use.

Not surprisingly, Google later filed a motion for summary judgment, arguing that Geico had produced no evidence to prove that the use of Geico's marks as keywords caused a likelihood of confusion. Google also argued that Geico had presented no evidence that Google induced trademark infringement, or that it continued to do business with an advertiser that Google knew was particularly likely to infringe Geico's marks. The district court denied this motion on November 19, 2004, without issuing a written opinion.

b. Geico Settles with Overture

Shortly after the court denied Google's motion for summary judgment, Geico and Overture reached a settlement. While the terms of the settlement agreement are confidential, a spokesman for Overture has reportedly said that Overture is not expected to change its business practices.

c. Court Halts Trial and Directs a Partial Verdict in Favor of Google

Geico's case against Google went to trial on December 13, 2004. After Geico rested its case on December 15, 2004, Judge Leonie M. Brinkema ruled from the bench that, as a matter of law, Geico had not presented sufficient evidence that Google's sale of Geico's trademarks to others as keywords, triggering ads for competitors and others on the Google search results page, constituted trademark infringement because there was "no evidence that that activity standing alone causes confusion." The ruling is limited to situations where the ads themselves do not include the trademarks, but rather, where the marks only serve as mechanisms to trigger the ads. The judge also handed Geico a victory (not widely reported in the press), stating that where the competitors' ads do display the GEICO trademarks in a manner that is likely to cause confusion that constitutes trademark infringement, at least by the advertiser.

Judge Brinkema adjourned the trial, stating that she would issue an opinion and then resume the trial on Geico's outstanding claim that when the ads do display the trademarks, Google should be held liable for contributory trademark infringement, unfair competition, and trademark dilution. The judge urged the parties to use the recess to try to settle the case. This is where the case stands as of this writing.

d. Significance of Ruling

Judge Brinkema's partial directed verdict is an important victory for Google and a blow to trademark owners, though it is not binding on other trial courts that are considering similar claims by other trademark owners against Google. Nevertheless, other courts may take this ruling into account (and Google will certainly urge them to do so). An appeal is also possible if the case is not settled.

2. Google v. American Blind and Wallpaper Factory

Google initiated this litigation. After receiving threatening letters from American Blind, Google filed a declaratory judgment action, seeking a ruling that its keyword-triggered advertising policy does not infringe the trademarks AMERICAN BLIND & WALLPAPER FACTORY, AMERICAN BLIND FACTORY, and DECORATETODAY. See Google, Inc. v. American Blind and Wallpaper Factory, Inc., Civ. No. 03-cv-05340 (N.D. Cal. Nov. 26, 2003). American Blind filed a counterclaim against Google and joined several of Google's licensees, including AOL, Netscape, CompuServe, Ask Jeeves and Earthlink, alleging trademark infringement, unfair competition, contributory infringement, dilution, and several state law causes of action.

In moving to dismiss American Blind's infringement and dilution claims, Google and its licensees argued that American Blind had not satisfied the requirement to plead actionable trademark "use," because it could not be alleged that Google or the other parties use the American Blind marks to identify the source of their own goods or services.

In rejecting this argument, the court highlighted and followed Playboy Enterprises Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir. 2004), in which the Ninth Circuit found adequate evidence of initial interest confusion in the appearance of unlabeled banner ads and reversed the district court's summary judgment in favor of two search engines. Despite Google's arguments to the contrary, the court did not find Playboy distinguishable, even though Playboy did not specifically discuss the issue of trademark use. The court also noted that its ruling was consistent with the preliminary ruling in Government Employees Insurance Co. v. Google Inc., 330 F.Supp.2d 700 (E.D. Va. 2004), on the question of use, and concluded that a resolution of the core infringement issues should await the development of a full factual record.

It is worth noting that the court did grant the defendants' motion to dismiss as to the tortuous interference with prospective business claim. It found that American Blind's expectation of "future and prospective sales" to "repeat customers," with which defendants are alleged to have interfered, was too speculative to support the claim, because the tort applies to interference with existing noncontractual relations.

F. Other U.S. Litigation

Several cases which were filed against search engines for their keyword advertising practices have been settled or dismissed before judgment. The most significant is Playboy Enterprises Inc. v. Netscape Comm. Corp., 354 F.3d 1020 (9th Cir. 2004), where defendants Netscape and Excite, both search engines, allowed adult advertisers to link their targeted banner ads to search results for the trademarks PLAYBOY and PLAYMATE. Defendants had created numerous lists of terms to which they keyed their customers' banner ads. Each list was relevant to a particular subject matter. The list for adult-oriented content, which contained over 400 terms, included PLAYBOY and PLAYMATE. Defendants actually required the adult-oriented advertisers to link their ads to this list of words, and even refused to remove these terms from its keyword list when asked to do so by advertisers. The banner ads themselves ran along the top or side of the search results page. The ads were often sexually explicit, stated "click here," and did not identify their source in any manner by specifying, for example, the advertiser's name.

Playboy asserted that consumers who saw unclearly labeled ads were likely to be confused as to whether Playboy sponsored the ads and argued that these actions caused "initial interest confusion," or "temporary" confusion that is eradicated before any sale is made. The Ninth Circuit reversed the lower court's grant of summary judgment in favor of Netscape and Excite, ruling that there was a genuine issue of fact as to whether these actions constituted trademark infringement and dilution. In its opinion, the Ninth Circuit relied heavily on the initial interest confusion analysis in Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999), and noted that if the banner ad clearly identified its source with the sponsor's name, this "might eliminate the likelihood of initial interest confusion that exists in this case." After the Ninth Circuit's decision in January 2004, Netscape and Excite settled under undisclosed terms.

One case filed on April 4, 2005 takes a simple, narrow approach, perhaps utilizing "lessons learned" from the Geico litigation. In JTH Tax, Inc. d/b/a Liberty Tax Service v. Google, Civ. No. 2:05-cv-200 (E.D. Va. April 4, 2005), the single, Lanham Act count of the complaint alleges that the use of the plaintiff's registered trademark LIBERTY TAX SERVICE in the title of a keyword-triggered ad that links to a competitor's site constitutes trademark infringement.

G. Conclusion - What Should Trademark Owners Do?

The recent Geico ruling for a partial directed verdict in favor of Google seems to run counter to the trend of the preliminary court ruling in Playboy and other cases, as well as the Geico case itself (with Judge Brinkema's refusal to grant the search engines' motions to dismiss and for summary judgment). For the present, the Geico case stands for the view that the practice of facilitating the use of another's trademark to direct consumers to a competitor's web site may not constitute direct or contributory trademark infringement, although allowing use of the mark in the resulting ad may generate liability. But, especially considering the recent order entered in American Blind denying Google's motion to dismiss the central trademark infringement claims, the issue is by no means settled.

In order to preserve the distinctiveness and value of a company's trademarks, trademark owners should continue to lodge objections with search engines and advertisers who use their marks improperly in search-related advertising. Given the recent rulings in the Ninth Circuit, trademark owners could fare better by litigating in that circuit. Direct action against the advertisers may be the best option in many cases. However, owners should not expect Google to prevent third parties from bidding on trademarks per se. At the same time, trademark owners should seriously consider utilizing keyword advertising tied to their own marks or to generic words, in view of the apparent effectiveness of this marketing tool.

Sheldon H. Klein is a Partner in the Intellectual Property Group of Arent Fox PLLC, Washington, DC. Jason J. Mazur and David S. Modzeleski are Associates in the Intellectual Property Group.

Please email the authors at klein.sheldon@arentfox.com, mazur.jason@arentfox.com or modzeleski.david@arentfox.com with questions about this article.