(This is a follow-up article to “What is the state of the law concerning
keyword advertising?” accessible at http://www.allenmlee.com/blogengine.net/post/2010/01/22/What-is-the-state-of-the-law-concerning-keyword-advertising.aspx).
In Network Automation, Inc. v.
Advanced Systems Concepts, Inc., 638 F.3d 1137, 2011 U.S. App. LEXIS 4488
(2011), the Ninth Circuit issued a significant decision that clarifies the test
for trademark infringement in Ninth Circuit cases involving the purchase of
keywords in search engine advertising.
At issue in this case was Network Automation’s purchase of the keyword ACTIVEBATCH
in various search engines like Google and Microsoft Bing. ACTIVEBATCH is the registered trademark of
Advanced Systems Concepts, a direct competitor.
When search engine users keyed in ACTIVEBACTCH, a results page showing www.NetworkAutomation.com was displayed
as a sponsored link.
The district court granted an injunction after applying the eight-factor
Sleekcraft test, AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), for
likelihood of confusion, emphasizing the three factors outlined in Brookfield Commc'ns, Inc. v. West Coast
Entm't Corp., 174 F.3d 1036, 1054 (9th Cir. 1999) – now often referred to
as the “Internet trinity” or “Internet troika” – as being determinative. On appeal, the Court of Appeals reversed and
remanded.
First, the Court held that the use of a trademark as a search engine
keyword that triggers the display of a competitor’s advertisement does indeed
constitute “use in commerce” under the Lanham Act. Network
Automation, Inc. at *10. This is
important because “use in commerce” is a required element for bringing a
trademark action.
The Court then rejected a rigid application of the “Internet troika”
analysis to internet cases, stating that "[w]e must be acutely aware of
excessive rigidity when applying the law in the Internet context; emerging technologies
require a flexible approach." Id. at *1. The Court identified the key issue as
follows: “The potential infringement in
this context arises from the risk that while using [Advanced Systems Concepts,
Inc.] mark to search for information about its product, a consumer might be
confused by a results page that shows a competitor's advertisement on the same
screen, when that advertisement does not clearly identify the source or its
product.”
Accordingly, in order to determine whether this infringement was
actionable, “[t]he sine qua non of
trademark infringement is consumer confusion,” Id. at *2-3, and “the eight factors established more than three
decades ago in Sleekcraft are the nonexhaustive
list of factors relevant to determining the likelihood of consumer confusion.” Id. at 3.
Of interest, in applying the Sleekcraft
factors to keyword advertising, the Court found the following:
- Proximity of the Goods. As a general rule, the more related the
goods, the greater the likelihood of confusion.
The District Court had found that this factor favored Advanced Systems
Concepts, Inc. since the parties were direct competitors. On appeal, the Court of Appeals found this
was reversible error since the lower court weighed this factor in isolation by
failing to consider whether the parties’ status as direct competitors would
actually lead to a likelihood of confusion.
Instead, this factor must be considered in conjunction with the labeling
and appearance of the advertisements and the degree of care exercised by the
consumers of Network Automation’s software.
Id. at *27. [Win for advertisers]
- Similarity of the Marks. The Court determined that a proper analysis
of this factor was not possible in this case since consumers do not actually confront
two distinct marks. Rather, upon entering one company’s mark as a search term,
a competitor’s sponsored link is displayed which shows neither company’s trademarks.
Thus, the lower court erred in treating
the search term ACTIVEBATCH as conceptually separate from the mark ACTIVEBATCH
and then comparing the same. Id.
at *28-29. [Win for advertisers]
- Marketing Channels. The Court determined that this factor merited
little weight. As a general rule,
convergent marketing channels increase the likelihood of confusion. However, the Court found that it is rare for
a retailer today not to advertise online, and thus the use of a ubiquitous
marketing channel like the internet sheds little light on the issue of
likelihood of confusion. Id. at *32. [Win
for advertisers]
- Type of Goods and Consumer Care. The District Court found that Internet users
on the whole exercise a low degree of care based on the Court’s decision in Brookfield and other early internet
cases. The Court determined that this was
reversible error since this was no longer a reasonable assumption. The factors that must be analyzed include the
nature and cost of the goods, the whether the products are being marketed primarily
to expert buyers. Id. at *32. [Win
for advertisers]
- Defendant’s Intent. Normally, when an alleged infringer knowingly
adopts a mark similar to another’s, courts may presume that the public will be
deceived. However, in the context of
search engine advertising, this factor must be determined in the context of
whether a party intended to compare its products to that of the trademark
proprietor as opposed to deceiving consumers. [Win
for advertisers]
- Other relevant factors. In the keyword advertising context the
"likelihood of confusion will ultimately turn on what the consumer saw on
the screen and reasonably believed, given the context.” Id. at *36 (citing
Hearts on Fire Co. v. Blue Nile, Inc.,
603 F. Supp. 2d 274, 289 (D. Mass. 2009).
The Court found that the labeling and appearance of the advertisements
and their surrounding context were important factors to consider. Of note, while the advertisement at issue did
not clearly identify their source, the sponsored links are clearly labeled as
such and segregated from the objective search results. [Win
for advertisers]
In summary, the Network
Automation, Inc. decision provides
additional guidelines for advertisers to follow in minimizing their liability
when structuring their keyword campaigns.
Allen M. Lee Mr. Lee’s practice
focuses on business, corporate and intellectual property matters, including the
creation, protection and exploitation of intellectual property assets. For more information contact: Allen M. Lee, a
Professional Law Corporation, Tel: (408) 249-2735, Email: info@allenmlee.com, Internet: www.allenmlee.com.
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