= is using a mark, in a way that does identify the source of a product, then trademark infringement and false designation of origin laws do not apply.
Article cited from
Kenyon & Kenyon LLP, Rescuecom Corp. v. Google Inc. Trademarks as Keywords and the “Use in Commerce” Doctrine (2009), http://www.kenyon.com/files/tbl_s47Details%5CFileUpload265%5C1010%5CRescuecom.pdf.
In an April 3, 2009 decision that has the potential to significantly impact the multibillion-dollar keyword advertising business, the U.S. Court of Appeals for the Second Circuit vacated the dismissal of a trademark infringement lawsuit brought by a national computer service franchising company against Google.
In Rescuecom Corp. v. Google Inc. the court distinguished previous Second Circuit precedent, and held that search engines selling advertisements keyed to a registered trademark are using the mark “in commerce.” As a result, the court held that Rescuecom’s complaint properly alleged a claim for relief, and therefore remanded the case back to the United States District Court for the Northern District of New York, which, absent a settlement, will decide whether Google’s AdWords program renders it liable for trademark infringement. If it is liable, this would have a huge impact on the entire search engine industry.
Background
Rescuecom Corp. of Syracuse, NY fi led an action against Google for trademark infringement, false designation of origin, and dilution under § 45 of the Lanham Act in the Northern District of New York. It claimed that Google engaged in a coordinated practice of recommending and selling the keyword ‘Rescuecom’ (plaintiff’s registered trademark) to its competitors, so that when users type “Rescuecom” into Google’s search box, the results include paid advertisements from competitors. It alleged that these advertisements diverted users from its site. As a national franchising company that receives between 17,000 and 30,000 visitors to its website per month, Rescuecom’s online presence is very important to its success.
Google uses two popular programs to offer contextbased links that serve advertisements (typically a few lines of text and a link to a website) for products and services that are related to a search a user is making: AdWords and Keyword Suggestion Tool. Through AdWords, an advertiser can purchase selected keywords and its ad will run in a rotation when a search is executed for that keyword. Google is paid each time a user clicks on the ad. With Keyword Suggestion Tool, Google will actually help a customer identify keywords that are likely to drive more traffi c to its website. Those suggested keywords could include the trademarks of competitors, e.g., “Rescuecom.” Rescuecom alleged that this practice of selling and recommending its registered trademark as a keyword for advertisements is likely to confuse consumers and, therefore, constitutes an infringement of its trademark rights.
Specifically, the company claimed that a Google user who types in “Rescuecom” and receives search results is likely to believe that the surrounding website links and advertisements are affiliated, licensed, or approved by Rescuecom, when in fact they are paid placements by competitors. According to Rescuecom, this occurs, in part because of an alleged failure by Google to label the list of links appropriately. Further, occasionally sponsored links appear in a horizontal bar at the top of the search results, in which case the user may believe the advertisements to be the first, and therefore the most relevant, responses to the search query.
District Court Analysis
On September 28, 2006, the district court granted Google Inc.’s motion to dismiss all causes of action. The court held that based on the Second Circuit’s 2005 decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), Rescuecom had not stated a claim for relief because it had not alleged a “use in commerce” by Google of its trademark. It concluded that even if Google’s practices cause confusion or possibly deceive those accessing the search engine, its use of the plaintiff’s trademark is not visible to the public and the advertisements by its competitors do not use Rescuecom’s trademark. Accordingly, there is no “use in commerce” and therefore, no infringement.
Second Circuit Analysis
The Second Circuit began its analysis by distinguishing 1-800 Contacts from Rescuecom. In 1-800 Contacts, the defendant had incorporated the plaintiff’s trademark into software that was used to deliver pop-up advertisements to individuals based on the website they visited or search term they used. The advertisements appeared in different windows and were associated with the defendant’s brand. There was no confusion that the pop-up was an advertisement associated with the defendant, rather than the plaintiff’s trademark. The 1-800 Contacts court held that since “use in commerce” requires use or display of the mark in the sale or advertising of services, the internal use of the mark by the 1-800 Contacts defendant did not constitute such a use.
The Second Circuit highlighted two main distinctions between 1-800-Contacts and Rescuecom’s claims. First, the plaintiff’s software in 1-800 Contacts did not respond to trademarks entered into the search boxes. Rather, it responded to website addresses. Second, the advertisers in 1-800-Contacts could not purchase trademarks as keywords directly, and the defendant did not even disclose its proprietary directory of keywords to its customers. Instead, the system was based on specifi c categories for which advertisers could purchase ad space. The system then delivered ads according to the keywords that were connected – through an internal database not revealed to customers – with each category.
Unlike the defendant in 1-800 Contacts, the court noted that Google is: (1) recommending and selling Rescuecom’s trademark; (2) displaying, offering and selling Rescuecom’s trademark to customers when creating ads; and, (3) encouraging clients to buy the trademark in its Keyword Suggestion Tool. The court held that those are not internal uses.
Finally, the court stated that the mere use of a trademark in internal software does not grant immunity to a potential infringer. It stated that such a rule would allow search engines to use trademarks that are likely to deceive consumers and cause confusion.
Thus, the Second Circuit held that the Northern District erred in dismissing the case based on 1-800-Contacts, and remanded the case back to the Northern District for further proceedings.
Evaluation & Planning
This ruling could impact both the manner and frequency in which keyword-related trademark infringement cases are brought in the Second Circuit, as well as other circuits around the country. While most decisions outside of the Second Circuit that had considered the issue had held that utilizing a competitor’s keyword to trigger ads states a claim for infringement, this was the fi rst time that the Second Circuit had reached such a conclusion. Based on the 1-800 Contacts case, the Second Circuit had been perceived by many as being hostile to such claims, on the grounds that this was not a use of a plaintiff’s mark in commerce. The Rescuecom decision will likely bring more uniformity to the manner in which federal courts approach these cases.
Despite the court’s extensive discussion of the history and evolution of the term “use in commerce,” Rescuecom still has a ways to go before it can succeed on its causes of action. It will have to prove the merits of its allegations of trademark infringement, false designation of origin, and dilution. The Second Circuit’s holding did not touch on any of those issues.
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