On March 8, 2011, the US Court of Appeals for the Ninth Circuit decided Network Automation, Inc. v. Advanced Systems Concepts, Inc., Case No. 10-55840. The ruling is significant because it limits trademark holders’ ability to challenge competitors and, by extension, search engines, who use the trademark holders’ marks as “keywords” in search engine advertising programs. The court found insufficient evidence of a likelihood of confusion to support a preliminary injunction in the case. More importantly, the court provided a significant boost to keyword advertising by strongly implying that the use of others’ trademarks in programs such as Google AdWords and Microsoft Bing search ads is not inherently deceptive or likely to cause consumer confusion.

Network Automation, Inc. (Network) and Advanced Systems Concepts, Inc. (Systems) sell competing job scheduling and management software, which they both advertise on the Internet. Network brought a declaratory judgment action against Systems, seeking a holding that Network’s purchase of Systems’ federally registered trademark, ACTIVEBATCH (and similar terms), as a keyword that triggered ads on search engine results pages from Google and Bing did not amount to trademark infringement. The ads did not display the mark in their text; rather, they contained phrases such as “Job Scheduler,” “Intuitive Job Scheduler,” and “Batch Job Scheduler,” and included a link to Network’s website.

Systems counterclaimed for trademark infringement, and the district court granted a preliminary injunction halting the ads, finding a likelihood of “initial interest confusion” on the part of consumers. The Ninth Circuit now vacates the injunction, reverses the lower court, and remands for further proceedings.

The larger significance of this decision lies in four areas: (1) a pronouncement that using a mark to trigger keyword advertising qualifies as “use” of a mark under the Lanham Act; (2) the demise of the so-called “Internet troika” of likelihood of confusion factors, at least as applied to cases that do not involve domain name-based trademark infringement, and its replacement, in keyword advertising cases, with a “keyword quartet” of factors; (3) the narrowing of the initial interest confusion doctrine, especially as applied in the Internet context; and (4) the implicit holding that trademark-triggered keyword advertising is not, by its nature, a deceptive or infringing activity, and that it can be accomplished in a manner that is not likely to confuse consumers if the advertiser follows certain guidelines.