Trademark Law | Expert Legal Commentary
July 16, 2009
Rescuecom v. Google: Keyword Ad Sales May Constitute “Use in Commerce”
Rescuecom Corp. v. Google, Inc.
Jeff Zuber of Zuber Lawler & Del Duca and Laura Castner of Kinsella Weitzman Iser Kump & Aldisert LLP
The Second Circuit held that Google’s practice of recommending and selling plaintiff’s exact trademark to Google’s advertisers (including plaintiff’s competitors) in order to trigger ads forms a basis for an actionable claim under sections 32 and 43 of the Lanham Act, 15 U.S.C. sections 1114 and 1125. Reversing the District Court’s dismissal of Rescuecom’s complaint under Rule 12(b)(6), the Second Circuit found that the use alleged was a “use in commerce” likely to cause confusion within the meaning of the Lanham Act. The opinion, Rescuecom Corp. v. Google, Inc. 562 F.3d 123 (2nd Cir. 2009), clarified and distinguished the 2nd Circuit’s previous ruling in 1-800 Contacts v. WhenU.com – an opinion that the court below and other district courts had relied on to find that the sale or purchase of trademarks as keyword triggers did not violate the Lanham Act.
Rescuecom operated a computer-services franchising business under the registered trademark RESCUECOM.
Google operates an internet search engine which responds to user inquiries by (1) providing a list of website links determined from the user’s search terms, and (2) showing context-based advertising. Google “AdWords” program allows advertisers to bid and purchase keywords, including trademarks; the advertiser’s ad and website are displayed on the screen of a user who enters those search terms. Under the program, if one of Rescuecom’s competitors, for example, purchased the keyword “RESCUECOM,” Google users performing a search for “Rescuecom” would trigger two types of results – “natural” search results based on the relevance of the search word used (this would likely include Rescuecom’s actual site), and “Sponsored Links.” Sponsored Links are paid, contextual advertising appearing either above or next to the natural search results; Sponsored Links appearing immediately above the natural search results may appear to users as the first, most relevant natural search results instead of paid ads.
Google also offers its advertisers a “Keyword Suggestion Tool,” which recommends the most profitable keywords related to an advertiser’s business. The Keyword Suggestion Tool recommended the keyword “rescuecom” to Rescuecom’s competitors to increase the success of their sponsored advertising.
Rescuecom sued Google for trademark infringement, false designation of origin, and dilution, among other claims. Specifically, Rescuecom claimed that Google’s sale and use of its trademarks would confuse customers who might believe that Sponsored Links, owned by Rescuecom’s competitors and Google advertisers, were sponsored, endorsed, approved, or affiliated with Rescuecom.
Google filed a motion to dismiss all claims for failure to state a claim upon which relief could be granted. Relying on the Second Circuit’s previous ruling in 1-800 Contacts v. WhenU.com (“1-800”), discussed below, the Northern District of New York granted Google’s motion to dismiss, finding that Rescuecome had not alleged a “use in commerce” of its trademark by Google. Rescuecom appealed.
Overview of the 1-800 precedent
The Second Circuit reversed the Northern District’s ruling and remanded the case, stating that the district court “misunderstood the holding of 1-800.” Rescuecom, 562 F.3d at 124. Before explaining how the Second Circuit differentiated Rescuecom from 1-800, it’s important to understand the basis and impact of the 1-800 decision.
To state a claim of trademark infringement, as set forth in 15 U.S.C., sections 1114 (trademark infringement for registered marks), and 1125(a)(1) (false designation of origin for unregistered marks), a plaintiff must allege that: (1) it owns a valid and protectable trademark, (2) the defendant used the mark, (3) in commerce, (4) in connection with the sale or advertising of goods or services, (5) without plaintiff’s consent, and (6) the use is likely to cause consumer confusion. Both the Rescuecom and 1-800 cases focus on the second and third elements – whether the defendant “used” the mark in commerce.
In 1-800, defendant WhenU.com designed and sold a software program called “SaveNow,” which generated pop-up ads when users accessed Web sites that were relevant to certain, relatively broadly defined “SaveNow” search categories. WhenU did not sell keywords; instead, it sold advertising based on the broadly defined categories of keywords. 1-800 Contacts sought an injunction against WhenU for trademark infringement – when consumers accessed the 1-800 Contacts Web site, pop-up ads for 1-800’s competitors appeared on the screen through the use of SaveNow. The district court granted 1-800’s request for a preliminary injunction on its trademark claims.
But the Second Circuit reversed the lower court’s decision in 1-800, ultimately dismissing the plaintiff’s lawsuit for failure to state a trademark infringement claim. The Second Court determined that the internal use of trademarks by search companies to create general categories that launch pop-up ads is not a “trademark use” within the meaning of the Lanham Act because “a company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual’s private thoughts about a trademark,” which are not actionable. 1-800 Contacts, Inc. v. WhenU.Com, 414 F.3d 400 (2nd Cir. 2005). The Court also likened the pop-up appearance of contextual advertising to paid product placement in traditional stores, which is also not actionable.
The 1-800 court specifically commented on decisions by some district courts in other circuits which had found trademark “use” in keyword advertising, saying that those district courts based their finding of “use” on the likelihood of consumer confusion, which is a totally separate element of the analysis. The 1-800 court admonished district courts for blending the elements, and for failing to recognize that the “use” element is a separate and independent element.
When the district court in the Rescuecom case granted Google’s motion to dismiss, it relied primarily on the 1-800 holding, as well as the decisions of other districts that followed 1-800, such as Merck & Co. v. Mediplan Health Consulting, Inc., 425 F. Supp.2d 402 (S.D.N.Y. 2006) (relying on the 1-800 decision to find that the purchase of keywords to generate Sponsored Links did not constitute a “trademark use.”).
The Second Circuit narrows 1-800, finds that keywords may be use in commerce
The Second Circuit court adjudged the Rescuecom case to be “materially different” from 1-800 in a couple of ways. First, the defendant in 1-800 used the plaintiff’s website address, not trademark, to trigger the pop-up ads. By contrast, Google specifically sold to its advertisers Rescuecom’s exact trademark in order to trigger ads.
Second, the 1-800 defendant relied on a general category of goods or services associated with the user’s keyword or website choices to trigger pop-up ads. The -1-800 defendant did not enable its advertisers to specify or target certain trademarks or keywords, nor did it disclose to its advertisers the proprietary content of its internal directory – advertisers did not know the specific triggers for their pop-ups. By contrast, Google advertisers could purchase Rescuecom’s exact trademark and trigger their Sponsored Links specifically to that trademark. The court determined that this “utilization of Rescuecom’s mark fits literally within the terms specified by [the Lanham Act],” in that Google specifically “displays, offers, and sells” Rescuecom’s mark as part of selling its advertising services. 562 F.3d at 129.
The Second Circuit briefly commented on the several district court rulings within the Second Circuit that had relied upon 1-800 to rule similarly to the Rescuecom district court, saying that those district courts “over-read  the 1-800 decision” because 1-800 “did not imply that… an alleged infringer’s use of a trademark in an internal software program insulates the alleged infringer from a charge of infringement, no matter how likely the use is to cause confusion in the marketplace.” Id. at 130. If the court adopted that theory, “the operators of search engines would be free to use trademarks in ways designed to deceive and cause consumer confusion,” the opposite of the purpose of the Lanham Act. Id.
The Court rejected Google’s argument that keyword purchases were similar to retailers who use “product placement” to allow one vendor to benefit from its competitor’s name recognition by adjacent placement, etc., stating that Google “misses the point.” Id. The Court noted that product placement “is a benign practice which does not cause a likelihood of consumer confusion” despite its use in commerce. Id. In other words, proper product placement practices avoid liability because they are not deceptive. Google’s acts, as alleged, may in fact be deceptive and cause consumer confusion, so the analogy fails.
Notably, the Court attached a lengthy, scholarly appendix to its opinion in which the Court engaged in an in-depth statutory analysis regarding the definition and scope of the phrase “use in commerce” in the contexts of trademark registration versus trademark infringement under the Lanham Act. Id. at 131 – 141. The Court expressly labeled the discussion as non-binding dicta, and called upon Congress to clear up the ambiguity created by the statutory language and its many possible applications. While it is identified as dicta, future courts will likely follow and defer to the analysis in this appendix when discussing and deciding issues of “use in commerce.”
While the Rescuecom case clarifies the “use” element of the test for trademark infringement as applied to the keyword question, many others remain – and nearly 12 keyword lawsuits have been filed nationwide that will ponder the issues. In addition, the Second Circuit’s opinion may not be its last word on the Rescuecom case, as its remand now leaves the District Court to determine whether Google’s “use” of Rescuecom’s mark “in commerce” created a likelihood of consumer confusion.
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