On April 3, the U.S. Court of Appeals for the Second Circuit reversed a dismissal by the U.S. District Court for the Northern District of New York of a lawsuit filed by Rescuecom Corp. against Google Inc., thus forcing Google to defend itself and its AdWords and Keyword Suggestion Tool programs against Rescuecom’s allegations of trademark infringement. In Rescuecom Corp. v. Google Inc., the Second Circuit held that Google’s recommendation, display, offer and sale of Rescuecom’s trademark to advertisers for purposes of keyword advertising constituted “use in commerce” sufficient to support a claim for infringement, false designation of origin, and dilution of Rescuecom’s trademark. This decision is important for any trademark owner because, contrary to prior Second Circuit rulings, it stands for the proposition that the “use” of another’s mark in the context of internet keyword advertising is sufficient to support a trademark infringement claim in the Second Circuit.

Background

The Lanham Act, 15 U.S.C. §§ 1114 & 1125, inter alia, imposes liability for the unauthorized “use in commerce” of another’s mark which is “likely to cause confusion, or to cause mistake, or to deceive,” § 1114, “as to the affiliation . . . or as to the origin, sponsorship or approval of his or her goods [or] services . . . by another person.” § 1125(a)(1)(A). Under this test, a trademark infringement plaintiff must prove (i) “use in commerce,” and (ii) likelihood of confusion. Where a plaintiff cannot prove such “use in commerce,” all other issues, including likelihood of confusion, become moot and the defendant is entitled to summary judgment.

Prior to Rescuecom, the Second Circuit’s opinion in 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005) provided guidance for determining whether a plaintiff had adequately alleged that a defendant made “use in commerce” of the plaintiff’s trademark sufficient to support an infringement claim in the context of internet keyword advertising. In 1-800 Contacts, the Second Circuit held that, “as a matter of law, [the defendant] WhenU does not ‘use’ [plaintiff] 1-800’s trademarks within the meaning of the Lanham Act, 15 U.S.C. 1127, when it (1) includes 1-800’s website address, which is almost identical to 1-800’s trademark, in an unpublished directory of terms that trigger delivery of WhenU’s contextually relevant advertising to C-users; or (2) causes separate, branded pop-up ads to appear on a C-user’s computer screen either above, below, or along the bottom edge of the 1-800 website window.”

Drawing heavily upon the 1-800 Contacts decision, the district court in Rescuecom granted Google’s motion to dismiss Rescuecom’s claims. The district court determined that Google’s actions were not a “use in commerce” because “the competitor’s advertisements triggered by Google’s programs did not exhibit Rescuecom’s trademark.” The court also accepted Google’s argument that Google’s use of Rescuecom’s mark in recommending and selling it as a keyword to trigger a competitor’s advertisements or website link was merely an internal use and did not constitute “use in commerce” under the Lanham Act.

Discussion

On appeal, the Second Circuit distinguished the facts in Rescuecom from the holding in 1-800 Contacts. First, the court noted that, while in 1-800 Contacts the defendant made no use whatsoever of the plaintiff’s trademark, Google is in fact recommending and selling to its advertisers Rescuecom’s trademark. Second, the court pointed out that, while the defendant in 1-800 Contacts did not “use or display” or sell trademarks as search terms to advertisers (rather, it used categories to control which advertisements were displayed), Google displays, offers and sells Rescuecom’s mark to Google’s customers when selling its advertising services, going so far as to encourage the purchase of Rescuecom’s mark through its Keyword Suggestion Tool. The court rejected Google’s argument that such “uses” were purely internal or akin to benign product placement, noting that such product placement would only escape liability if it did not cause a likelihood of confusion.

Without deciding the issue of likelihood of confusion, the court held that Google’s use constituted “use in commerce” of Rescuecom’s mark under 15 U.S.C. § 1127. Accordingly, the court determined that Rescuecom adequately alleged an actionable claim for infringement, false designation of origin, and dilution of Rescuecom’s trademark. The court vacated the district court’s judgment and remanded the case for further proceedings to determine, inter alia, whether Google’s use of Rescuecom’s trademark was likely to cause confusion.

Conclusion

Prior to its decision in Rescuecom, the Second Circuit had been one of a minority of circuit courts that had declined to recognize that the use of another’s trademark in the context of keyword advertising is sufficient “use in commerce” under the Lanham Act. In Rescuecom, the Second Circuit clarified its position on keyword advertising and joined a majority of courts in holding that the “use” of another’s mark in the context of internet keyword advertising is sufficient to support a trademark infringement claim. Although a trademark plaintiff would also need to prove likelihood of confusion to prevail on the merits, the Rescuecom decision provides additional protection to trademark owners by preventing such infringement claims from being summarily dismissed for failure to state a claim. Conversely, Rescuecom may impose additional liabilities on parties who sell or purchase a third party’s trademark for use in internet keyword advertising.