In a much anticipated decision, the United States Court of Appeals, Second Circuit recently held that sale of a trademark as a search term for online advertising constitutes a use in commerce for the purposes of trademark infringement. Rescuecom Corp. v. Google, Inc., 562 F.3d 123 (2nd Cir. 2009).

The Rescuecom case centered around Google’s sale of keywords as triggers for the display of online advertising. Through its AdWords program, Google sells keywords to advertisers, allowing them to control which searches will result in the display of their advertisements. In addition to allowing advertisers to craft their own keywords, Google provides a Keyword Suggestion Tool that allows a user to input a potential keyword and have the program give a number of related keyword suggestions. Rescuecom, a provider of computer repairs, support, and sales, filed suit against Google alleging trademark infringement and related causes of action over Google’s sale and recommendation of the Rescuecom trademark as a keyword. Rescuecom Corp. v. Google, Inc., 456 F. Supp 2d 393 (N.D.N.Y. 2006). However, Google was successful in having Rescuecom’s complaint dismissed for failing to properly allege trademark use, benefiting from the Second Circuit’s earlier decision in the 1-800 Contacts, Inc., v. WhenU.com, Inc., 414 F.3d 400 (2nd Cir. 2005) case. In 1-800 Contacts, the defendants distributed a program that displayed pop-up ads based on the commercial categorization of search terms used or websites visited. If a user were to search for “eye care” or visit the 1-800 Contacts website, then an ad for an eye care competitor might popup. However, because the use of the trademark was internal, and the trademark was never displayed to any consumers, the Second Circuit ruled that the use of the trademark did not constitute trademark use for the purposes of trademark infringement.

On appeal, the Second Circuit took up the issue of trademark use and rejected the district court’s analysis and reliance upon 1-800 Contacts, finding the facts alleged by Rescuecom to be distinguishable from the facts in the 1-800 Contacts case. First, the court noted that the defendants in 1-800 Contacts had not actually sold a trademark as an ad trigger. Rather, the trigger was plaintiff’s non-trademarked website address. Second, the advertisements at issue in 1-800 Contacts were triggered based on the commercial category of the website or the search term used. It was not actually possible to purchase a specific trademark as an ad trigger. Rather, if a user were to visit the 1-800 Contacts website, pop-up ads for a competitor might appear based on the categorization of the 1-800 Contacts website as an eye care provider, not because a competitor specifically purchased the 1-800 Contacts website as an ad trigger. The court further focused on the fact that Google, through its Keyword Suggestion Tool, was alleged to have actually encouraged the purchase of Rescuecom’s trademark as a keyword. For the Second Circuit, this all added up to Google’s use in commerce of the Rescuecom trademark.

Ultimately, this represents a significant narrowing of the Second Circuit’s 1-800 Contacts decision. Absent a clearly analogous fact pattern, it is not clear that search engine providers or advertisers can rely on that decision as a basis to obtain an early dismissal of claims of infringement on the grounds of trademark use. What remains to be seen, however, is how courts will deal with the merits in cases of this type. The Second Circuit made it clear in the Rescuecom case that it was not ruling on the merits and that it was not assessing whether Google’s AdWords program caused a likelihood of confusion. Given that a consumer may never actually see the allegedly infringed trademark in cases of this type, a crucial point of development will be how courts deal with assessing the likelihood of confusion. Open questions remain as to whether courts will apply a traditional, multifactor likelihood of confusion test, or whether courts will develop different approaches for these unique circumstances. How the district court in Rescuecom deals with these issues on remand may provide further insight into these issues.