In an eagerly awaited decision, the Second Circuit Court of Appeals in Rescuecom Corp. v. Google, Inc., 562 F.3d 123 (2nd Cir. 2009) recently determined that Google’s sale of trademarks under its “Adwords” program was a use in commerce sufficient to subject Google to, inter alia, trademark infringement liability. The decision, which was essentially procedural in nature, held that Plaintiff Rescuecom had alleged sufficient facts in its complaint to withstand Google’s motion to dismiss for failure to state a claim upon which relief could be granted. Importantly, however, in reaching its decision and remanding the case back to the district court for further proceedings, the Court of Appeals was careful to point out that it had “no idea whether Rescuecom [could] prove that Google’s use of Rescuecom’s trademark in its Adwords program causes likelihood of confusion or mistake.”

By way of background, in its complaint Rescuecom alleged that Google’s offering for sale and sale of the RESCUECOM trademark to third parties, including Rescuecom’s competitors, was a use of the trademark by Google sufficient to give rise to a likelihood of consumer confusion in the marketplace, thus subjecting Google to liability for trademark infringement, false designation of origin, and dilution under 15 U.S.C. §§1114 and 1125. Google moved to dismiss on the basis that under relevant case law it had not technically “used” the RESCUECOM trademark; at most, Google argued, its programs suggested and sold appropriate “keywords” to advertisers, thereby permitting certain search results to appear when a computer user typed the keyword into the Google search engine. Of course, Google did not (and could not) contest the fact that the keywords could and often did consist of third party trademarks. Nonetheless, according to Google (and, indeed, the district court), such use could be considered no more than an “internal” use because the terms were not displayed in the search results viewed by the computer user. Rather, they were used to trigger the appearance of ads placed by Google’s advertisers. As such, Google argued that to the extent it had made any use, it was not a “use in commerce” by Google sufficient to give rise to liability under the Trademark Act.

In a situation where a complaint has been dismissed for failure to state a claim, the appeals court must assume the truth of the facts alleged in the underlying complaint. In this light the Rescuecom court reviewed the case law upon which the district court judge had dismissed the complaint (namely, 1-800 Contacts, Inc. v., Inc., 414 F.3d 400 (2nd Cir. 2005)), and concluded that the facts in the present case were sufficiently distinguishable from 1-800 so as to warrant a different conclusion. The Court of Appeals distinguished 1-800 in two ways. First, it pointed out that a key element of the decision in 1-800 was the fact that the complaint had not alleged that the defendant used, produced or displayed the plaintiff’s trademark. In 1-800, the defendant’s alleged infringing activities consisted of using the plaintiff’s website address (not its trademark) to trigger pop-up advertising.1 Second, the Court held that 1-800 was distinguishable because in that case there was no “use” -- the defendant’s computer program for triggering pop-up ads did not permit participating advertisers to tie their pop-ups to a particular website address; rather, the pop-up ad that appeared was determined on a category level, and thus defendant was not enabling advertisers to identify specific keywords to trigger their ads. In contrast, the Court of Appeals in Rescuecom found that Google had, in fact, recommended and sold the plaintiff’s trademark and therefore had made use of the mark. Moreover, the court found that Google “displays, offers, and sells Rescuecom’s mark to [its] advertising customers.” Accordingly, the court was able to fit Google’s use of the RESCUCOM mark to sell advertising (by way of its Adwords program and its “Keyword Suggestion Tool”), squarely into the types of actions covered by the trademark statute – namely, the use and sale of another’s mark in connection with the sale of services rendered in commerce. 15 U.S.C. § 1127.

Google, in defending its position, relied heavily on case law that followed 1-800 and specifically on the perceived distinction between an internal or hidden use of a trademark and a more overt use. Google argued that 1-800 and its progeny stood for the proposition that internal use could not give rise to trademark infringement liability because the use was not communicated to the public. The Court of Appeals was not persuaded. First, the court clarified that its decision in 1-800 did not go so far as to imply that an internal use could not give rise to liability from a trademark perspective (merely that it did not in that case). More importantly, though, the court could not accept that “Google’s recommendation and sale of Rescuecom’s mark to its advertising customers” was merely an internal use that was not communicated to the public. According to the court, Google’s Adwords program and its associated Keyword Suggestion Tool were without question public, and Google’s suggestion of the RESCUECOM trademark to Google’s advertisers was a use of that mark in commerce. The fact that Google’s activities were found to have amounted to “use” however, does not answer the ultimate question in the Rescucom case. Ultimately what needs to be determined is whether such use gives rise to a likelihood of consumer confusion or dilution. The answer to that can only come after a review of all of the appropriate facts. Accordingly, in order to try to reach the ultimate conclusion, the Court of Appeals remanded the case to the district court for further proceedings.2

[A version of this article will appear in World Trademark News Daily]