The Eastern District of Pennsylvania recently adopted the Ninth Circuit’s landmark Network Automation decision, which makes it far more difficult for plaintiffs to prevail on trademark infringement or unfair competition claims stemming from the purchase of a competitor’s trademarks for keyword advertising. While the case, CollegeSource, Inc. v. AcademyOne, Inc., also discussed false advertising, the US Computer Fraud and Abuse Act, and breach of contract and unfair competition claims, the court’s keyword advertising holding was by far the most notable part of the opinion.

Keyword advertising is the practice of purchasing terms (often a competitor’s trademarks) so that when a consumer types that term into a search engine, the buyer’s advertisement appears in a separate “sponsored advertisements” section of the search results. Here, the defendant purchased the plaintiff’s COLLEGESOURCE and CAREER GUIDANCE FOUNDATION trademarks as keywords, even though the defendant did not use the plaintiff’s trademarks in the text of its advertisements, which proved to be a crucial point.

In dismissing the plaintiff’s trademark infringement and unfair competition claims on summary judgment, the court held that the plaintiff failed to demonstrate that the defendant’s use of its trademarks was likely to result in consumer confusion. While the court applied the Third Circuit’s standard likelihood of confusion factors, it focused on the Ninth Circuit’s landmark Network Automation decision and stated that the four factors highlighted in Network Automation deserved special emphasis when deciding a keyword advertising case, namely, (1) the strength of the mark, (2) evidence of actual confusion, (3) the types of goods and degree of care likely to be exercised by the typical purchaser, and (4) the labeling and appearance of the advertisement(s).

First, the court found the plaintiffs COLLEGESOURCE and CAREER GUIDANCE FOUNDATION marks were suggestive and commercially strong. Next, the court found there was “little evidence” of actual confusion. Specifically, it noted that 65 visitors typed the plaintiff’s trademark into a search engine, but when they saw the defendant’s keyword advertisement, they went to the defendant’s website instead. Rather than finding this was evidence of confusion, however, the court said such instances could show that consumers were persuaded by the advertisements, rather than confused by them. The court also noted that the events all occurred in a one-month period.

Next, the court considered the labeling and appearance of the advertisements themselves. Quoting Network Automation, the court stated, “in the AdWords context, the likelihood of confusion ‘will ultimately turn’ on what the consumer saw on the screen, including labeling and overall appearance.’” Such language emphasizes the crucial role that this factor played in both the Ninth Circuit’s decision and the present case. In deciding this particular factor, the district court focused on two main points. First, the defendant’s ads appeared in separate “sponsored” search results, which were labeled as sponsored advertisements, and which often were set apart from the other results by a shaded text box. Interestingly, the manner in which sponsored advertisements are separated from the native search results is controlled by the search engine, not the party purchasing the keywords. Thus, this factor was out of the defendant’s control. Next, the court noted that the defendant did not use the plaintiff’s business name or trademarks in the text of the advertisements themselves. This point was also crucial in Network Automation. Based on the above, the court found the labeling and appearance of the advertisements was not likely to result in consumer confusion.

Finally, in analyzing the expected degree of care by consumers purchasing the relevant services, the court accepted the debatable proposition that Internet users are becoming more discerning in their searching, and with time are becoming less likely to be confused by keyword advertisements. The court also found that because the transfer of college credits is very important to students, they are likely to use a high degree of care when purchasing the relevant services. Notably, the court stated that “modern Internet users, particularly ones who are interested in credit distribution in higher education institutions, are not likely to be confused by Internet advertising.” This language, and the court’s decision in general, is indicative of a nationwide trend making it far more difficult to prevail on trademark infringement or unfair competition claims based on keyword advertising than in years past. The court went on to briefly consider the other traditional likelihood of confusion factors before dismissing the trademark infringement and unfair competition claims based on summary judgment.

While this case included other interesting issues, it is most relevant for the keyword advertising analysis, and the adoption of the Network Automation factors. It is becoming increasingly clear that courts across the country are finding the use of a competitor’s trademarks in keyword advertising to be non-infringing as long as the text of the advertisements is not confusing. Thus, companies should pay particular attention to the language they use in such advertisements, and should consider refraining from using competitors’ trademarks in the text of the advertisements, as a way to reduce potential liability.