On March 8, 2011, in Network Automation v. Advanced Systems Concepts, No. 10-55840 (Network Automation), the Ninth Circuit issued an important decision that may affect trademark owners seeking to prevent use of their marks in keyword advertising. By rejecting the so-called “Internet trinity” test for proving infringement, the court reversed a preliminary injunction permitting a trademark owner to block its competitor's purchase of keyword ads tied to its mark for a software product, where the ads appeared as separate “Sponsored Links” on the Google and Bing search results pages, but did not include the plaintiff's trademark within the sponsored links themselves. The Ninth Circuit is one of the most active jurisdictions for litigating such keyword advertising cases, and this decision may reflect a more accommodating view of keyword advertising depending on the factors of a particular case.

In reversing the lower court's preliminary injunction, the court criticized the district court's reliance on a unique, Internet only, test of infringement that focused only on three factors rather than the traditionally broader test of infringement. Those three factors — similarity of the marks, relatedness of the goods or services, and the simultaneity of use on the Internet — all but guaranteed that keyword ads would be found infringing (as keyword ads are typically based on the identical mark used by a competitor for Internet-based advertising), and the special test has been used repeatedly to benefit trademark owners challenging such advertising. See, e.g., Storus Corp. v. Aroa Marketing, Inc., 2008 WL 449835 (N.D. Cal. Feb 15, 2008); Binder v. Disability Group Inc., 97 USPQ2d 1629 (C.D. Cal. 2011). By requiring a more complete analysis, Network Automation arguably raises the bar for trademark owners to prove a likelihood of confusion.

Rejecting this limited so-called “Internet trinity” or “controlling troika”, the court relied in part on an article by Foley Partner Jonathan E. Moskin, "Virtual Trademark Use: The Parallel World of Keyword Advertising," 98 Trademark Rptr. 873, 880 (May/June 2008), which called into question the logic of assuming for purposes of assessing infringing conduct online that only three factors need be considered. The so-called troika emerged from a footnote in Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1054 n. 16 (9th Cir. 1999), which, without analysis, cited in turn a short-form order in Comp Examiner Agency, Inc. v. Juris, 1996 WL 376600 (C.D. Cal. 1996). The test since took on a life of its own. Network Automation agreed that “[g]iven the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology, however, it makes no sense to prioritize the same three factors for every type of potential online commercial activity.” As observed by the court: “we did not intend Brookfield to be read so expansively as to forever enshrine these three factors — now often referred to as the 'Internet trinity' or 'Internet troika' — as the test for trademark infringement on the Internet.”

The court also emphasized that the broader eight-part test of infringement (in the Ninth Circuit derived from AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979)) — which it again endorsed and applied in full — is neither exhaustive nor meant to be applied as a “rote checklist.” Instead, the court announced a new focus on four factors deemed most significant: “(1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.” In adding this fourth factor, the court sought to recognize the real-world context in which such advertising appears, noting that “Google and Bing have partitioned their search results pages so that the advertisements appear in separately labeled sections for ‘sponsored' links.”

Among the issues called out by the court (and not among the troika factors) was the sophistication of the users of the parties' competing job scheduling and management software, licenses for which were priced from $995 to $10,995. The market consisted primarily of business professionals, who would not be easily confused. Contrary to the troika analysis, the court downplayed the significance of convergent marketing on the Internet, since “[t]oday, it would be the rare commercial retailer that did not advertise online.”

In more than a decade since the first keyword ad decision in Playboy Ent., Inc.v. Netscape Commun's Corp., 55 F. Supp. 2d 1070, 1086-88 (C.D. Cal. 1999), rev'd, 354 F. 3d Cir. 1020 (9th Cir. 2004), there have been only a small handful of final decisions giving meaningful guidance as to when or if keyword ads are permitted or precluded. Playboy itself simply reversed and remanded a grant of summary judgment dismissing an infringement claim. The cases continue to show little predictability, as recent decisions have included Binder v. Disability Group Inc., 97 U.S.P.Q.2d 1629 (C.D. Cal. 2011), upholding liability, including an award of enhanced damages for willful infringement, and emphasizing the troika factors; Rosetta Stone Ltd. v. Google, Inc., 2010 WL 3063152 (E.D. Va. Aug. 3, 2010), finding no liability and establishing a bright-line test under which the “indexing function” of generating keyword ads was deemed essentially no different from permitted natural search results; as well as Hearts on Fire Co. v. Blue Nile, Inc., 603 F. Supp. 2d 274 (D. Mass. 2009), establishing a new multi-part contextual analysis and explaining that “[t]he choice enhancing properties of internet advertising should not be stifled on account of fleeting confusion among competing products.” Accord, Mary Kay, Inc. v. Weber, 601 F. Supp. 2d 839 (N.D. Tex. 2009).

Rejecting any bright-line rules, and insisting on reassessing the sophistication of Internet users a decade after early cases assumed little savvy, Network Automation appears to strike a balance that appears more accommodating to keyword advertising than had previously been true in the Ninth Circuit and other jurisdictions.