Friday, April 3, 2009

Second Circuit Overturns Google’s District Court Victory on Trademark Keyword Sales

Yesterday I posted (link here) about a Massachusetts district court decision finding that a party’s purchase of a trademarked keyword to trigger sponsored links constitutes a "use" within the meaning of the Lanham Act. That court’s decision noted that the “the Second Circuit stands alone in holding that the purchase of a competitor's trademark to trigger internet advertising does not constitute a use for the purposes of the Lanham Act.” (emphasis in original).

Today, the Second Circuit appears to have decided to join the other Circuits which have held that the purchase of trademarks to trigger sponsored links on a search results page is a "use" under the Lanham Act (while at the same time distinguishing, and drastically limiting its prior decision in 1-800 Contacts, Inc. v. WhenU.Com, Inc., 414 F.3d 400 (2nd Cir. 2005) which heretofore had been relied upon by many trademark attorneys and Second Circuit district courts as the basis for dismissing trademark infringement lawsuits involving keywords).

In Rescuecom Corp. v. Google Inc., No. 06-4881-cv (2nd Cir. April 3, 2009), the Second Circuit reversed a lower court’s decision to dismiss Rescuecom’s trademark infringement action against Google Inc. under Rule 12(b)(6) for failure to state a claim on the grounds that Google did not use Rescuecom’s trademark in commerce within the meaning of the Lanham Act. The decision received a plethora of media coverage (NY Times, WSJ,, ZDnet, PC World, Techcrunch).

The Second Circuit held that Rescuecom’s allegations that Google’s recommendation and sale of Rescuecom’s trademark to Google Adword advertisers in order to trigger sponsored links in a manner that could likely cause consumer confusion from Google search engine user searching Rescuecom’s trademark were sufficient to allege a claim under the Lanham Act (i.e., such allegations were sufficient to allege that Google’s use of Rescuecom’s trademark was a “use in commerce” within the meaning of § 45 of the Lanham Act).

Eric Goldman provides his excellent overview of the impact of the court’s decision. Meanwhile, the Electronic Frontier Foundation paints its own dire picture of the implications of the decision on e-commerce.

In short, the Second Circuit appears to have brought to an end the debate about whether trademark keyword purchases and sales constitute “use in commerce” under the Lanham Act. With the Second Circuit now on board, all Circuits that have not previously addressed the issue will likely follow suit. The Second Circuit’s opinion even includes an Appendix discussing the phrase “use in commerce” in the Lanham Act (which while much more detailed and scholarly, nonetheless reaches the same conclusion as the Massachusetts district court did in the Hearts on Fire case yesterday).

And now the battle turns to where most trademark battles end up – addressing the issue of likelihood of confusion. The biggest defeat here is that purchasers and sellers of trademark keyword advertising can no longer get a trademark infringement lawsuit dismissed at an early state for failure to state a claim – and will instead have to endure some discovery and fight through to summary judgment or maybe even trial. The end result is that more parites will probably reach settlements earlier, and more online retailers will avoid purchasing another party’s trademarks as an advertising keyword which is the result that trademark owners ultimately wanted anyway.

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