In March 2011, the U.S. Court of Appeals for the Ninth Circuit issued an important decision addressing the circumstances in which the use of keywords for Internet searches can constitute trademark infringement. The court's opinion in Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011), provides crucial guidance for anyone using the Internet as a marketing channel. In particular, the court emphasized that the likelihood of confusion analysis must reflect the increasing sophistication of Internet users.
The case involved two direct competitors selling job scheduling and management software via the Internet. The trademark owner, Advanced Systems Concepts, Inc., sells its software under the registered trademark “ActiveBatch.” The plaintiff, Network Automation, Inc., purchased the keyword “ActiveBatch” from the Google and Bing search engines. As a result, Internet searches using the word “ActiveBatch” returned results that included Network Automation's Web site. When Advanced Systems sent Network Automation cease and desist letters, Network Automation filed a declaratory judgment action seeking a ruling that its use of ActiveBatch as a keyword did not constitute trademark infringement. Advanced Systems responded by moving for a preliminary injunction.
The legal dispute centered on whether Network Automation's use of the ActiveBatch keyword caused initial interest confusion, a form of trademark infringement commonly alleged in the Internet context. The Ninth Circuit described initial interest confusion as occurring “when the defendant uses the plaintiff's trademark in a manner calculated to capture initial consumer attention, even though no actual sale is completed as a result of the confusion.”
The district court held that there was a likelihood of initial interest confusion, reasoning that the following three factors weighed in the trademark owner's favor: 1) the similarity of the marks; 2) the relatedness of the goods; and 3) the marketing channels used. Those three factors were emphasized by the Ninth Circuit in Brookfield Communications v. West Coast Entertainment, 174 F.3d 1036 (9th Cir. 1999), a seminal case regarding Internet trademark infringement, and have come to be known as the “Internet troika.” The district court also found that confusion was likely because, in its view, “there is generally a low degree of care exercised by Internet consumers.”
The Ninth Circuit reversed the district court's ruling and went out of its way to emphasize that courts must avoid rigid formulas and assumptions “when applying the law in the Internet context.” “Emerging technologies,” said the court, “require a flexible approach.” The Ninth Circuit reminded courts that “the sine qua non of trademark infringement is consumer confusion,” and the factors relevant to assessing the likelihood of confusion may vary with the context. The court also emphasized that just because a consumer is diverted to a competing Web site does not mean that consumer is confused.
The Ninth Circuit reaffirmed that the starting point for trademark infringement analysis in that jurisdiction is the eight factors it identified in AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979): 1) strength of the mark; 2) proximity of the goods; 3) similarity of the marks; 4) evidence of actual confusion; 5) marketing channels used; 6) types of goods and the degree of care likely to be exercised by the purchaser; 7) defendant's intent in selecting the mark; and 8) likelihood of expansion of the product lines. Those factors, however, are not exclusive and the weight given to each may vary with the context.
In particular, the court deemphasized the importance of the “marketing channels used” factor in the Internet context because “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 court instead placed emphasis on two considerations: the growing sophistication of Internet users and whether allegedly infringing Internet search results were labeled in a manner that might reduce the likelihood of confusion. The court noted “that the default degree of consumer care is becoming more heightened as the novelty of the Internet evaporates and online commerce becomes commonplace.” Experienced Internet users, said the court, “fully expect to find some sites that aren't what they imagine based on a glance at the domain name or search engine summary.”
The court's emphasis on the sophistication of Internet consumers and labeling of Internet search results colored its analysis of the eight Sleekcraft factors. For example, the court explained that when consumers use a mark as a keyword, the “strength of the mark” analysis must consider whether the consumers are so knowledgeable about the source associated with the mark that they are unlikely to be confused by competing Internet search results. Similarly, the court stated that the “proximity of the goods” factor “must be considered in conjunction with the labeling and appearance of the advertisements and the degree of care exercised by the consumers.”
In the Ninth Circuit's view, how Internet search results are labeled or otherwise depicted onscreen is particularly important in the keyword advertising context, because the “likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context.” For example, results that are confusingly labeled or not labeled at all may be likely to cause confusion. On the other hand, in this case, the Ninth Circuit suggested that the district court should have considered that the keyword search results appeared in a separate section of the screen labeled “sponsored links,” which may have reduced the likelihood of confusion.
The Ninth Circuit's decision in Network Automation should help refocus trademark infringement analysis in light of the quickly evolving nature of Internet marketing and consumers. The decision reminds everyone that the core issue in trademark cases is the likelihood of confusion and that the factors for analyzing that issue must vary with the context of the alleged infringement. In Internet cases, courts cannot overlook the sophistication of Internet users and the labeling of search results. Network Automation will likely be a leading case in this area of the law.