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Purchasing Competitors’ Trademarks as Keywords to Generate Sponsored Links: Trademark “Use in Commerce”?

March 5, 2010

Newsletters

Purchasing Competitors’ Trademarks as Keywords to Generate Sponsored Links: Trademark “Use in Commerce”?

March 5, 2010

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Trademark Thoughts Spring 2009

Note: Significant portions of this essay were published online as a guest column in IP LAW 360 on January 27, 2009. This is an expansion and update of that piece.

Lawyers are trained in subtlety and complication. Consequently, they have a tendency to over- think, which is why some of the better ones try to remember, and occasionally apply, the acronym KISS.1 The recent quagmire addressing the question posed above (and related questions) could have been avoided by deft application of KISS, or even RTSF (meaning to be disclosed later).

It began with the 1-800 Contacts case in the Second Circuit.2 At issue there was software offered free to Internet users which, among other (presumably more desirable) applications, monitored the use of the computer in which it was embedded and, in response to certain stimuli, generated “pop-up advertising windows” presumably relevant to the computer user’s immediate interest. One such stimulus was the address of plaintiff’s website, so certain users who typed in (or linked to) “1800contacts.com” received pop-up advertising intended to be “of interest” to typical visitors to plaintiff’s website. In fact, what popped up was advertising for competitive websites. 1-800 Contacts sued for trademark infringement and obtained a preliminary injunction, which was appealed and reversed.

The Appellate Court began its analysis as follows:
In order to prevail on a trademark infringement claim for registered trademarks, pursuant to 15 U.S.C. § 1114, or unregistered trademarks, pursuant to 15 U.S.C. § 1125(a)(1), a plaintiff must establish that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark, (3) in commerce, (4) “in connection with the sale…or advertising of goods or services” 15 U.S.C. § 1114(1)(a), (5) without the plaintiff’s consent. In addition, the plaintiff must show that defendant’s use of that mark “is likely to cause confusion []”3

From there, the Court proceeded to the Trademark Act definitions of trademark and service mark “use in commerce” and an analysis of defendants’ use that concluded, for reasons unique to the software, that neither defendant was using the plaintiff’s trademark in commerce.4

For nearly four years, this was the controlling law in the Second Circuit, and it was broadened to cover keyword search engine advertising and metatags. Every other Circuit that has considered the issue has refused to follow the Second Circuit’s approach, although their rationales are varied. Prior to 1-800 Contacts, the Eastern District of Virginia Court concluded that Google’s use of the GEICO trademark to sell advertising on its search engine was trademark use because Google sold and profited from the GEICO trademark.5 Post-1-800 Contacts, the District of New Jersey Court concluded that defendant’s use of plaintiff’s marks was trademark use because defendant marketed plaintiff’s marks as keywords and sold them to advertisers.6 In December 2007, a District Court opinion in Massachusetts noted that “the emerging view outside of the Second Circuit is in accord with the plain language of the statute.” 7

Last year, another Circuit Court of Appeals recognized that part of what is wrong with the Second Circuit’s 1-800 Contacts analysis is its focus on the statutory definition of trademark “use in commerce.” In addressing one competitor’s use of another’s trademarks in its own website metatags, which caused the metatagger’s website to show up in search results for the owner’s trademark, the Court concluded that defendant “made an infringing use” of plaintiff’s marks, and emphasized the “plain language” of Section 1114(1)(a) of the Trademark Act, which requires a “use in commerce…of a registered mark in connection with the sale…or advertising of any goods.” Since defendant used plaintiff’s marks as metatags “as part of its effort to promote and advertise its products on the Internet,” defendant used plaintiff’s marks “in commerce” for purposes of trademark infringement.8 In August, a Minnesota District Court took the next step when it concluded that “use in commerce” for trademark infringement purposes is not limited to “use in commerce” for trademark registration purposes. Defendant’s use of plaintiff’s trademark to generate advertising was a “use in commerce” because the “plain meaning” of “use in commerce” is not limited to affixing another’s mark to one’s own goods, but also encompasses any use of another’s mark to advertise or sell one’s own goods and services.9 That observation is correct as far as it goes – and is a convincing rejoinder to the Second Circuit’s view that “infringing use” is limited to “trademark use” – because “advertising” can infringe under Section 1114(1)(a), but is not use of a trademark under Section 1127.

Putting together the pieces, what is wrong with 1-800 Contacts is this: what Section 32(1) of the Trademark Act condemns is “use in commerce [of] any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive…” 15 U.S.C. § 1114(1)(a) [emphasis added]. What is prohibited is not use of a trademark, but use of a “reproduction, counterfeit, copy, or colorable imitation” of a registered mark. Actual trademark “use” as defined in the statute is irrelevant. Trademark owners use trademarks; infringers use reproductions, counterfeits, copies, and/or colorable imitations of trademarks. The statutory definitions of trade- and service mark use in commerce are addressed to registration, not infringement.

Confirmation of this conclusion (if any is needed) is found in Section 43(a), which forbids “[a]ny person…, on or in connection with any goods or services, or any container for goods, [from using] in commerce any word, term, name, symbol or device, or any combination thereof…which…is likely to cause confusion, or to cause mistake, or to deceive as to affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person…” 15 U.S.C. § 1125(a)(1)(a) [emphasis added]. Section 43(a) is a federal statute that reflects the common law of unfair competition related to trademarks. On its face, it captures more infringing conduct than is embraced by the statutory definition of trademark use. If the Second Circuit were correct in 1-800 Contacts, that would mean that common law rights of protection are broader than those granted to marks registered under the Trademark Act, which expressly seeks “to regulate commerce within the control of Congress by making actionable the deceptive and misleading use of marks in such commerce;…to protect persons engaged in such commerce against unfair competition; [and] to prevent fraud and deception in such commerce by the use of reproductions, copies, counterfeits, or colorable imitations of registered marks….”10 That broad language is consistent with the idea that infringement of registered trademarks is not confined to what is defined as trademark use, but encompasses “use in commerce [of] any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.” If that is so, common law trademark protection is not broader than federal, which is what one would expect.

The right questions in search-word and metatag cases should be (1) is the accused doing something “in commerce” (which Section 45 of the Trademark Act, 15 U.S.C. § 1127, defines as “all commerce which may lawfully be regulated by Congress,” and which Internet search-word advertising plainly appears to be); (2) is that likely to cause confusion in any of its statutory formulations; and (3) is that use fair, nominative, generic, or descriptive use?

A few weeks after the undersigned authors published (online) the conclusion above, it received a measure of independent judicial validation from Judge Nancy Gertner in the District of Massachusetts:
In particular, the civil remedies provision penalizes the “use in commerce” of “any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services. 15 U.S.C. § 1114 [emphasis added]. The purchase of a competitor’s trademark to trigger search-engine advertising is precisely such a use in commerce, even if the trademark is never affixed to the goods themselves. In effect, one company has relied on its competitor’s trademark to place advertisements for its own product in front of consumers searching for that exact mark….

* * * *
In light of the Lanham Act’s language and the broader purposes of the trademark statute, there is little question that the purchase of a trademarked keyword to trigger sponsored links constitutes a “use” within the meaning of the Lanham Act.11

On April 3, 2009, another panel of the Second Circuit Court of Appeals revisited 1-800 Contacts.12 It did so in an Appendix to an opinion remanding a dismissal of the action based on 1-800 Contacts. In deciding 1-800 Contacts, the Court states that it relied on two earlier precedents, U-Haul and Wells-Fargo.13 “To determine the meaning of the phrase ‘use in commerce,’ which appears in both [§ 1114 and § 1125(a)],” the Court explains, “the U-Haul and Wells-Fargo courts quite understandably looked to the definition of the term ‘use in commerce’ set forth among the Act’s definitions in [§ 1127].”14 Reluctantly, or at least wordily, the opinion works its way to the conclusion that, “[i]n quoting the § 1127 definition, however, those district courts [which the appeals court had earlier relied upon] overlooked and omitted two portions of the statutory text which we believe make clear that the definition provided in § 1127 is not intended to apply to § 1114 and § 1125(a).”15 After pausing again to note that the error in the decisions it had followed was based on a “no doubt reasonably” made assumption, the Court embarks on five pages of excruciating statutory analysis and legislative history before announcing:
It therefore appears that the history of the development of the Lanham Act confirms what is also indicated by a common-sense understanding of the provisions [emphasis added]. The definition of the term “use in commerce” provided by § 1127 was intended to continue to apply, as it did when the definition was conceived in the 1941 bill, to the sections governing qualification for registration and for the benefits of the Act.16

Another page or two of cogitation leads to the conclusion that what “use in commerce” for purpose of infringing use means is subject to two possible interpretations, neither of which is “altogether satisfactory.”17 The opinion then notes that the judges of the 1-800 Contacts panel have read the Appendix and agree with it.

Conclusions
1. The fundamental flaw of 1-800 Contacts is now buried in the Second Circuit (no other Circuit followed it, anyway). The issues should move from “use in commerce” to likelihood of confusion, and, perhaps, the viability of “initial interest” confusion as a basis for relief.
2. The Second Circuit Court’s 1-800 Contacts opinion was premised on a mistake the Rescuecom opinion bends over backwards to excuse, while conceding that the earlier decision lacked a “common-sense understanding of the [relevant statutory] provisions.” It appears that the true reason for 1-800 Contacts is that the Court failed to RTSF.18

By Anthony L. Fletcher

 

____________________________________

 

1    “Keep it simple, stupid.”
2    1-800 Contacts, Inc. v. Whenu.com, Inc., 414 F.3d 400, 75 U.S.P.Q.2d 1161 (2d Cir. 2005).
   Id. at 406-407, internal footnotes and citations omitted without indication.
4    In so doing, the Court, among other things, distinguished between use of plaintiff’s trademark 1-800 CONTACTS and its website address “1800contacts.com.”
5    Gov’t Employees Ins. Co. (“GEICO”) v. Google, Inc., 330 F.Supp.2d 700, 703 (E.D. Va. 2004).
6    800-JR Cigar, Inc. v. GoTo.Com, Inc., 437 F.Supp.2d 273, 284-85 (D. N.J. 2006).
7    Boston Duck Tours, LP v. Super Duck Tours, LLC, 527 F.Supp.2d 205 (D. Mass. 2007).
   N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211, 1218-19 (11th Cir. 2008).
   Hysitron, Inc. v. MTS Sys. Corp., No. 07-01533, 2008 WL 3161969 (D. Minn. Aug. 1, 2008).
10    15 U.S.C. § 1127.
11    Hearts on Fire Co., LLC v. Blue Nile, Inc., No. 08-11053, 2009 WL 794482, at *5 (Mar. 27, 2009 D. Mass.).
12    Rescuecom Corp. v. Google Inc., 2009 WL 875447 (C.A.2 (N.Y.)).
13    U-Haul Int’l., Inc. v. WhenU.com, Inc., 279 F.Supp.2d 723 (E.D. Va. 2003) and Wells Fargo & Co. v. WhenU.com, Inc., 293 F. Supp.2d 734 (E.D. Mich. 2003).
14    Rescuecom Corp., 2009 WL 875447, at *8.
15    Id.
16    Id. at *14.
17    Id. at *15.
18    “Read the statute first.”

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