The Court of Appeals for the First Circuit recently took on the issue of whether the unauthorized use of a trademark as a “meta tag” is use upon which a finding of trademark infringement liability can be based. Answering “yes”, and affirming the decision of the district court, the appeals court in Venture Tape Corporation v. McGills Glass Warehouse, et al., 540 F.3d 56 (1st Cir. 2008), went on to find the defendant liable for damages based on the use of the plaintiff’s trademarks as “meta tags” embedded in defendant McGills’ web site, as well as for the payment of plaintiff’s attorney’s fees.

Plaintiff Venture Tape manufactures and sells specialty adhesive tapes and foils for use in the stained glass industry. In connection with its business, Venture has used and obtained trademark registrations for the marks VENTURE TAPE and VENTURE FOIL, and over the years has expended many hundreds of thousands of dollars advertising and promoting its products and marks both in print and on the internet. As a result, the district court found and the appeals court agreed, that Venture has “gained considerable popularity, prestige, and good will in the world-wide stained glass market.”

Defendant McGills Glass Warehouse, through its internet web site, sells adhesive tapes and foils for use in the stained glass industry in direct competition with Venture. Beginning sometime in 2000, McGills began using the VENTURE TAPE and VENTURE FOILS trademarks in two unauthorized ways: McGills placed the VENTURE trademarks directly on certain of its website pages, but did so in a color that was the same as the background of the screen so the terms were not viewable by consumers (or by plaintiff Venture); McGills also inserted the VENTURE trademarks into the embedded computer language of its website. Terms comprising this embedded computer language are commonly referred to as “meta tags”, and although they are not typically viewed by visitors to the website that embeds them, they are recognized by internet search engines. In the instant case, the use by McGills of the VENTURE trademarks as meta tags and as part of the invisible background of its website, caused internet searchers to be directed to the McGills website. McGills did not have the permission or authorization of Venture to use the VENTURE trademarks in this manner. Indeed, McGills did not even sell Venture’s products on its web site.

Upon discovering the use by McGills, Venture brought an action for trademark infringement seeking injunction as well as damages and the recovery of its attorney’s fees. In ruling on a motion for summary judgment filed by Venture, the district court concluded that McGills had essentially admitted all of the factors that the court was required to examine in connection with its determination on liability. Specifically, the court concluded, based on the testimony of McGills’ owner, that the parties’ marks were the same; that the parties were direct competitors; and that both parties used websites to promote and market their products. Indeed, based on an admission by McGills’ owner, the district court found that McGills had acted intentionally in using the VENTURE trademarks “for the express purpose of attracting customers to McGills’ website.” Id. at 61.

On appeal, McGills argued that because it had no way of actually knowing whether any of its efforts had successfully lured customers to its site, it was impossible for Venture (and the court) to conclude that actual confusion had occurred, and thus that disposition of the case on summary judgment was improper. Defendant also argued that the district court has erred in concluding that Venture was entitled to approximately $426,000 in damages, attorney’s fees and costs.

Addressing the liability issue, the appeals court concluded that McGills was essentially arguing that because Venture had not proven actual confusion, summary judgment in Venture’s favor was inappropriate. The court pointed out however, that actual confusion is not required for a finding of trademark infringement liability. The court agreed with the district court that the likelihood of confusion factors, including the admission by McGills’ owner that his purpose for using the VENTURE trademarks was to lure customers, overwhelmingly supported the conclusion that confusion was likely to occur and thus that summary judgment was appropriate.

With respect to the monetary award, defendant raised three issues on appeal. First, McGills argued that the award did not correspond to the actual harm suffered by Venture – and, in fact, that Venture had not even attempted to show actual harm. The appeals court explained that “when a plaintiff cannot prove actual damages attributable to the infringer’s misconduct (e.g., specific instances of lost sales), its recovery of an equitable share of the infringer’s profits serves, inter alia, as a ‘rough measure’ of the likely harm that the mark owner incurred because of the infringement . . ..” In this case, the district court’s assessment was without fault in this regard.

The second issue raised on appeal with respect to the monetary award was that the amount awarded by the district court did not correspond to the amount of money defendant made on sales of tapes and foils, the only products sold by plaintiff Venture. Again, the court concluded that the district court had been correct and that McGills’ complaint about the basis for the award was misplaced. Under the Lanham Act, the burden with respect to proving a profit award first rests with the plaintiff: the plaintiff must show that there is direct competition. Upon such a showing, the burden shifts to the defendant infringer “to show the limits of the direct competition.” In this case, Venture met its burden by proving McGills’ sales; McGill failed to meet its burden of establishing that some of those sales were “unrelated to and unaided by McGills’ illicit use of Venture’s marks.”

Finally, defendant McGills also attempted, unsuccessfully, to argue that the attorney’s fee award was inappropriate. The appeals court confirmed that in view of the fact that McGills’ infringement was “willful”, it was within the discretion of the trial court to find the case “exceptional” and thus to award attorney’s fees to the prevailing plaintiff.