Last week, the Ninth Circuit Court of Appeals stated outright for the first time that the use of a trademark as a search engine keyword that triggers the display of a competitor's advertisement is a "use in commerce" under the Lanham Act. In Network Automation, Inc. v. Advanced System Concepts, Inc., 2011 WL 815806 (9th Cir. March 8, 2011), both parties developed software targeted at businesses for job scheduling and management. Network decided to advertise its products on Google AdWords and Bing and purchased Advanced System's trademarks as keywords for comparative advertising. When a user entered Advanced System's trademark ACTIVEBATCH® into the Google or Bing search engine, Network's website, www.NetworkAutomation.com, would appear as a sponsored link. Network filed a lawsuit seeking a declaratory judgment of non-infringement after receiving a cease and desist letter from Advanced System for using its trademark ACTIVEBATCH® as a keyword. In the district court, Advanced System argued that the comparative, competitive advertisements created initial interest confusion - that is, an Internet user's confusion when entering a trademark as a keyword in a search engine, only to receive an ad for a direct competitor's product in an advertisement on the results page. Advanced System further argued that this could lead to a consumer confusing Advanced System's product with Network's product. The district court, applying the "Internet Troika" analysis of the eight-factor test in AMF Inc. v. Sleekcraft, 599 F.2d 341 (9th Cir. 1979), agreed with Advanced System and issued a preliminary injunction.
The Ninth Circuit overturned the district court's ruling and held that buying keyword ads constitutes a use in commerce, a position similarly held by the Second Circuit. The court rejected the Internet Troika variation of the Sleekcraft test that was detailed in the 1999 Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036 (9th Cir. 1999) case, which the lower courts had been relying upon until now. In the Internet Troika variation, the Ninth Circuit placed precedence on only three of the eight Sleekcraft factors when reviewing Internet trademark cases, namely
- similarity of the marks,
- relatedness of the goods and services, and
- simultaneous use of the Internet as a marketing channel.
In rejecting the Internet Troika variation, the court rationalized that due to the ever-expanding ways in which users use technology, there is no longer a need to prioritize the same three factors for every type of potential online commercial activity resulting in an improper legal analysis to the issue at bar. Instead, the court stated that the mark owner is required to show likelihood of confusion and not mere diversion when presented with an initial interest confusion question. The Ninth Circuit further analyzed the question based upon the standard eight-part Sleekcraft test rather than the three-part version, which the lower court applied, and found the most relevant factors of the likelihood of confusion analysis to be
- the strength of the mark,
- the evidence of actual confusion,
- the type of goods and degree of care likely to be exercised by the purchaser, and
- the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.
The Ninth Circuit found no reason that consumers would be deceived by keyword ads on search result pages for a variety of reasons, including that the advertisements appear in a separate section of the Google and Bing search result pages under the title "sponsored links" or "sponsored sites." The court remanded the case back to the district court and reversed the preliminary injunction.
It will now be more difficult for plaintiffs to assert claims for infringement based on keyword advertising. While the court in the 1999 Brookfield case took into account the relative ignorance of Internet users because it was a new medium at the time, most users today are highly sophisticated and familiar with search techniques and search engine results. Specifically, the court stated that:
[H]ere, even if Network has not clearly identified itself in the text of its ads, Google and Bing have partitioned their search results pages so that the advertisements appear in separately labeled sections for "sponsored" links. The labeling and appearance of the advertisements as they appear on the results page includes more than the text of the advertisement, and must be considered as a whole.
Of course, other recent studies suggest that Internet users are not as sophisticated as we may presume. In this instance, the court recognized that Internet users are not easily confused by sponsored links on search result pages that are separated from the organic search results and clearly labeled as such. While the foregoing does not give companies an unconditional green light to purchase a competitor's trademark as a keyword when advertising with search engines, it does raise the bar for future plaintiffs to prove a likelihood of confusion in keyword cases.