Utah District Court Rejects 1-800 Contacts Google Adword Lawsuit Against Lens.com

While this decision is a little old by blogging standards, since it did not receive much publicity and yet deals directly with the hot trademark issue of purchasing a competitor’s trademarks as part of Google’s Adwords program, I thought it worthwhile to give it some coverage.

Plaintiff 1-800 Contacts, Inc. (“Plaintiff”), an online seller of contact lenses, had filed suit against Defendant Lens.com, Inc. (“Defendant”), also an online seller of contact lenses, for trademark infringement arising from the purchase by Defendant (or marketing affiliates of Defendant) of Plaintiff’s trademarks as keywords to generate sponsored links to Defendant’s website.

Both parties filed motions for summary judgment and on December 14, 2010, the U.S. District Court for the District of Utah, in a lengthy but detailed decision (including providing great detailed background information regarding Google’s Adword program), granted Plaintiff’s motion for summary judgment on Defendant’s defense that purchase of a keyword is not a use in commerce, but also found that Defendant was entitled to summary judgment on all of Plaintiff’s claims. See 1-800 Contacts, Inc. v. Lens.com, Inc., Case No. 2:07-cv-591, 2010 U.S. Dist. LEXIS 132389 (D. Utah December 14, 2010). A copy of the decision can be found here (Justia.com).

After setting forth the respective trademark rights of the parties and providing a detailed discussion of Google’s Adword program (recommended reading for any trademark attorneys with clients out there upset about competitors purchasing their trademarks as keywords for sponsored links), the court noted that while Defendant had purchased numerous keywords that consisted of variations and misspellings of Plaintiff’s service mark, none were Plaintiff’s actual service mark and Plaintiff had failed to present any evidence showing that Defendant ever purchased Plaintiff’s exact service mark as a keyword.

The court noted, however, that some of Defendant’s marketing affiliates had purchased Plaintiff’s exact service mark as a keyword (the court’s decision also provides a detailed discussion regarding the use by online sellers of marketing affiliates). Defendant has a relationship with the affiliate network Commission Junction, which included the marketing of Defendant’s website JustLenses.com.

Plaintiff presented evidence showing two of Defendant’s affiliates as having purchased Plaintiff’s service mark as a keyword. The first affiliate purchased variations of Plaintiff’s trademark as keywords which resulted in the following “impressions” (i.e., the appearance of an advertiser’s link after a user conducts an internet search), the language of which were drafted by the affiliates’ own employees:
1. Buy Contacts Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
2. 1-800 Contacts
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
3. 1800 Contacts: Buy Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/

The second affiliate’s keyword purchases resulted in the following impressions
LensWorld.com 75% Off
Up to 75% off Retail Price!
Free Shipping on Orders Over $89
http://www.lensworld.com/
JustLenses.com Savings
Up to 70% off Retail Price. Name
Brand Contacts & Low Prices.
http://www.justlenses.com/

In 2005, Plaintiff, having done some routine searches to see what competitor impressions appear when doing a internet search for Plaintiff’s trademarks, contacted Defendant about sponsored advertisements for Defendant’s website being triggered by searches of Plaintiff’s trademarks. After Defendant discovered that the ads were coming from Defendant’s marketing affiliates, Defendant agreed to work with Plaintiff’s counsel, who provided Defendant with a list of twenty terms that Plaintiff asked Defendant and its affiliates to implement “negative matching” for such terms (i.e., to ensure that no ad is generated when a particular term is searched). Plaintiff again contacted Defendant in April 2007 about impressions being generated from searches of Plaintiff’s trademarks. After receiving no satisfaction, Plaintiff filed suit in August 2007. In October 2007, Commission Junction put Defendant in touch with one of the affiliates, who was informed by Defendant to implement certain negative keywords such as “1-800-Contacts.” Defendant ultimately was able to get Commission Junction to identify and communicate to the affiliates who were generating the offending impressions (the two mentioned above) to cease bidding on certain keywords, which they did immediately.

The court first analyzed the “use in commerce” issue – and quickly sided with those courts who have concluded that use of another’s mark to trigger internet advertisements for itself is a use in commerce:

The Lanham Act does not require use and display of another’s mark for it to constitute “use in commerce.” Rather, “use in commerce” occurs when a mark is “used or displayed in the sale or advertising of services and the services are rendered in commerce.”120 Here, Plaintiff’s service mark was used to trigger a sponsored link for purposes of advertising and selling the services of Defendant. In other words, Plaintiff’s mark was used to promote Defendant’s services and to provide a consumer with a link to a website where it could make a purchase from Defendant. The court concludes such actions constitute a “use in commerce” under the Lanham Act.

The court then turned to the issue of likelihood of confusion. Plaintiff attempted to argue that the appearance of Defendant’s advertisements whenever a user does a search for “1800Contacts,” amounts to a “bait and switch that “spawns confusion,” – “akin to a consumer asking a pharmacist for Advil and the pharmacist handing the consumer Tylenol.” However, the court quickly shot down Plaintiff’s faulty analogy:

This analogy mischaracterizes how search engines function. A more correct analogy is that when a consumer asks a pharmacist for Advil, the pharmacist directs the consumer to an aisle where the consumer is presented with any number of different pain relievers, including Tylenol. If a consumer truly wants Advil, he or she will not be confused by the fact that a bottle of Tylenol is on a shelf next to Advil because of their different appearances.

This analogy is supported by case law. In J.G. Wentworth, a court questioned the Brookfield decision because of its “material mischaracterization of the operation of internet search engines.” “At no point are potential consumers ‘taken by a search engine’ to defendant’s website due to defendant’s use of plaintiff’s marks in meta tages.” Instead, “a link to defendant’s website appears on the search results page as one of many choices for the potential consumer to investigate.” When the link does not incorporate a competitor’s mark “in any way discernable to internet users and potential customers,” there is “no opportunity to confuse defendant’s services, goods, advertisements, links or websites for those of” its competitor.

The court then goes on to explain the problem with companies like Plaintiff who focus too much on the “use” of their marks alone rather than focusing on use that is likely to cause consumer confusion:

Plaintiff monitors use of its mark by others on the Internet. It does so by entering its mark or a variation of it as a search term. If a competitor’s advertisement appears on the search-results page, it sends a cease and desist letter to the competitor to preclude the competitor’s advertisement from appearing on the same page as Plaintiff.

Notably, however, ninety-five percent of the impressions for Plaintiff are triggered by non-trademarked keywords such as contacts, contacts lenses, or by brand names such as Acuvue or Focus. When a company incorporates broad matching for terms such as “contacts or contact lenses,” its sponsored link will appear even if the search term is “1800Contacts.” In other words, simply because the search term is “1800Contacts,” does not mean the keyword generating the sponsored link also was 1800Contacts or a similar variation thereof. One cannot tell from a screen shot alone what keyword generated the sponsored link.

The end result, though, is that when a consumer enters “1800Contacts” as a search term, it will see a competitor’s advertisement anytime the competitor bids on “1800Contacts” “contacts” or “contact lenses” as a broad match. If the advertisement remains the same regardless of which search term triggers it, there is no more likelihood of confusion for the advertisement triggered by the trademark versus the advertisement triggered by the generic phrases. Nor is there any greater impact on the goodwill or reputation of the trademark holder. It is beyond dispute that a competitor cannot be held liable for purchasing a generic keyword to trigger an advertisement that does not incorporate a holder’s mark in any way, even if that competitor’s advertisement appeared when a consumer entered a trademarked search term. Given that fact, it would be anomalous to hold a competitor liable simply because it purchased a trademarked keyword when the advertisement generated by the keyword is the exact same from a consumer’s perspective as one generated by a generic keyword. Imposing liability under such circumstances would elevate “use” over consumer confusion.

As stated above, Plaintiff sends cease and desist letters anytime a competitor’s advertisement appears when Plaintiff’s mark is entered as a search term. Were Plaintiff actually able to preclude competitor advertisements from appearing on a search-results page anytime its mark is entered as a search term, it would result in an anti-competitive, monopolistic protection, to which it is not entitled. Because a consumer cannot see a keyword, nor tell what keyword generated an advertisement, the court concludes that the mere purchase of a trademark as a keyword cannot alone result in consumer confusion. Accordingly, the relevant inquiry here regarding consumer confusion is not just what keyword was purchased, but what was the language of the advertisement generated by that keyword.

(emphasis added).

With that, the court turned to the two types of impressions at issue – ones that did use Plaintiff’s mark and ones that did not. Regarding the ones that did not use Plaintiff’s mark or a similar variation in the advertisement, the court noted that the closest case was one ad that generated “1-800 -Discount Contacts” in the title. But the court found that the composite view of the advertisements were overwhelmingly dissimilar in both sight and sound. The only similarity was the use of “contact” or “contacts” which is unlikely to create consumer confusion because of the numerous sellers of contact lenses. This strongly weighed in favor of no confusion. Regarding the advertisements that did use Plaintiff’s mark, the court focused on the advertisements generated by Defendant’s affiliates (noted above) that expressly used “1800 Contacts” in the title. The court found this was use of Plaintiff’s mark and weighed in favor of a finding of likelihood of confusion.

Regarding the “intent to copy” factor, while the court acknowledged that Defendant’s own purchase of variant keywords could lead one to conclude that it was done to derive benefit from Plaintiff’s reputation or goodwill by generating an advertisement for Defendant, the court accepted Defendant’s evidence that any such benefit was a de minimus part of its business:

Defendant purchased over 8,000 keywords, of which only nine are complained about by Plaintiff. Those nine keywords generated about 1,600 impressions out of more than 112 million impressions that have been linked to Defendant between the years 2004 and 2008. This, too, demonstrates that Defendant was not targeting its marketing efforts to ride on Plaintiff’s reputation or goodwill. While all doubts must be construed against Defendant, there is insufficient evidence to create a doubt about Defendant’s actions. The court therefore concludes this factor is, at most, neutral with respect to Defendant.

But the factor favored Plaintiff with respect to the ads by the marketing affiliates who had directly used Plaintiff’s mark in their ads.

Plaintiff had presented no evidence of actual confusion, so this factor favored Defendant. As for similar marketing channels, the court made the observation that, focusing just on internet, both parties advertise through sponsored links and the fact that both links appear on the same search page would dispel rather than cause confusion because the websites are separate and distinct, suggesting two completely unrelated business entities [ed.—interesting way of looking at it]. Nonetheless, the court found sufficient similarity to have this factor weigh somewhat in favor of Plaintiff. The court also found that it was unlikely that consumers exercise a high degree of care in selecting contact lens providers, so this factor favored Plaintiff.

Finally, in analyzing the strength of Plaintiff’s mark, the court found the mark to be conceptually weak – putting together the two generic terms “Contacts” (“The strength of Plaintiff’s mark on the Internet is weakened by the very nature of how third parties use generic and descriptive words on search engines.”) and “1-800” (“others necessarily must use similar generic and descriptive phrases to market their product on-line or through a toll free number”). As for the commercial strength of Plaintiff’s mark, the court found several flaws in the survey evidence provided by Plaintiff to demonstrate the commercial strength of its mark (including not focusing just on Internet, the fact that it was not a double-blind survey, and the fact that the results were somewhat marginal). The court noted that while Plaintiff had shown about 2.5 million impressions were generated on the Internet specifically matching the keyword “1800Contacts” or a close variation over a six year period, it still only represented about 2.5% of the Plaintiff’s total internet impressions. The court concluded that the conceptual and commercial strength combined indicated that Plaintiff’s mark was only moderately strong. And because Defendant’s own sponsored ads did not include Plaintiff’s mark or a similar variation of it, then, given the moderate strength of Plaintiff’s mark, the court found there was little possibility that a consumer would confuse Defendant with Plaintiff. However, with respect to the advertisement by the marketing affiliates with did use Plaintiff’s mark in the advertisement, the court found that such use, given the moderate strength of Plaintiff’s mark, would likely confuse a consumer about the source of the affiliate’s advertisement.

Taking all of the factors together, the court concluded that there was insufficient evidence for a jury to conclude that Defendant infringed on Plaintiff’s mark for all advertisements that did not use Plaintiff’s mark in them, and accordingly, granted summary judgment in favor of Defendant on that issue. In contrast, the court found there was a likelihood of confusion for the marketing affiliate advertisements that did use Plaintiff’s mark. However, because the affiliates were not named as parties to the lawsuit, the court then turned to the issues of whether the affiliate’s action could be imputed to Defendant under a theory of contributory infringement or vicarious infringement.

The court rejected any vicarious liability on the basis of any lack of an agency relationship between Defendant and the affiliates with the infringing impressions. Plaintiff attempted to impute liability for its very participation in the affiliate marketing program whereby affiliates could purchase keywords. However, because it was the language of the impressions, and not the purchase of keywords themselves, that created a likelihood of confusion, it is only as to those impressions that Defendant could be vicariously liable. In this case, Defendant had little direct contact with affiliates (and had to work through Commission Junction). Defendant had no authority to monitor or supervise affiliate operations except with respect to the use by such affiliates of Defendant’s own marks. Defendant also was not in a position to exercise any degree of control over an affiliate’s website.

As for a theory of contributory infringement, the court found that Plaintiff had not presented any evidence that Defendant intentionally induced the affiliates to infringe on Plaintiff’s mark: “At most, Plaintiff has presented evidence that Defendant did not institute negative keywords and that it knew of some of the keywords that a few affiliates were using in their advertising efforts. As discussed above, however, trademark liability cannot attach from the mere use of a trademark as a keyword. Thus, none of the evidence presented by Plaintiff demonstrates that Defendant intentionally induced its affiliates to infringe on Plaintiff’s mark.”

Moreover, Plaintiff failed to show that Defendant knew about the specific impressions noted above generated by Defendant’s marketing affiliates and failed to take action or was willfully blind to such infringement. Specifically, in the screenshots that were attached to Plaintiff’s April 2007 correspondence, none of them demonstrated the impressions found by the court to be infringing – and instead, were of the non-infringing advertisements that the two marketing affiliates had generated. “Thus, in April 2007, Plaintiff did nothing more than provide general information to Defendant that a non-infringing advertisement was appearing upon entry of certain search terms. Defendant therefore cannot be charged with knowledge or willful blindness based on that information. Nor did the information impose a burden on Defendant to go search out all of its affiliates’ actions to make sure none of them were using Plaintiff’s mark.”

The court also noted that when Plaintiff included one of the infringing impressions it is August 2007 complaint, the screenshot by itself did not provide Defendant with sufficient information for it to determine immediately who the affiliate was (among Defendant’s 10,000 affiliates). “Because contributory trademark infringement does not require a defendant ‘to refuse to provide a product or service to those who merely might infringe the trademark,’ Lens.com had no obligation to cease licensing its name to all of its affiliates while it took steps to identify the one who generated this particular impression.”

The court found that “there is insufficient evidence to show that Defendant failed to take appropriate action to stop McCoy from publishing the advertisements. There is no indication that Defendant intended to benefit from the Infringing Impressions, nor is there evidence of how many Infringing Impressions and clicks occurred during the relevant time period. Accordingly, the court concludes that Defendant cannot be held liable for contributory infringement.”

The remainder of the court’s decision involves Plaintiff’s claim for breach of contract (for which the court found no enforceable agreement on the part of Defendant to not purchase Plaintiff’s mark or variations thereof as a keyword), Plaintiff’s claim for unfair practices under state law (claims not supported by Plaintiff in its opposition), Plaintiff’s claim for common law trademark infringement and unfair competition (rejected for the same reasons as Plaintiff’s Lanham claims), and Plaintiff’s claim for unjust enrichment (since Plaintiff has not shown that use of its service mark as a keyword constituted infringement, then it is not entitled to any payment for such use – “Stated differently, while the law protects one’s property right in a trademark, the scope of that protection is not without its limits. Use outside of the scope of that property protection is not a use that is unjust to retain without payment. Indeed, if Plaintiff were able to obtain payment under unjust enrichment, common law would effectively expand the scope of Plaintiff’s statutory protection. Because one generally cannot extend legal rights beyond one’s property rights, the court grants summary judgment in Defendant’s favor on this claim.”).

In the end, the court gave the Plaintiff one small victory in granting summary judgment on Defendant’s defense that the purchase of keywords did not constitute a “use” in commerce; however, it was certainly overshadowed by the overwhelming victory given to Defendant by the court granting summary judgment in favor of Defendant and dismissing all of Plaintiff’s claims against Defendant.

District Court Dismisses Rosetta Stone’s Adwords Lawsuit Against Google

I previously blogged (link here) about the Google Adwords trademark infringement lawsuit brought by language software company Rosetta Stone against Google. See Rosetta Stone LTD v. Google Inc., Case No. 09-cv-00736 (E.D. Va.).

On April 28, 2010, the U.S. District Court for the Eastern District of Virginia granted Google’s Motion to Dismiss. A sampling of the new coverage on the decision from Reuters, Marketwatch, Cnet, and Washington Post.

The order granting Google's Motion to Dismiss (link here) indicates that a memorandum explaining the basis for the decision will be forthcoming. We can’t wait. To be continued. . . .

[Update: Eric Goldman's Technology & Marketing Law Blog provides an excellent summary of the court's decision filed on August 3, 2010.]

American Airlines and Google Reach Quiet Settlement in Adword Trademark Infringement Case

I've written before on lawsuits filed by such trademark owners as Rosetta Stone (link here) and Hearts on Fire (link here) against competiting companies that purchased their trademarks as a Google AdWords so that Sponsored Links would appear whenever an internet user would perform a search for those trademarks.

While Rosetta Stone and Hearts on Fire went after the purchasers of the keywords, American Airlines (“AA”) last year filed a similar type of trademark infringement lawsuit only AA went straight to the source of the Adwords and sued Google for the sale of AA’s trademarks as “AdWords.” See prior blogs posts here and here.

The lawsuit had been closely watch by trademark practitioners because many expected that it might go all the way to trial because of AA’s resources to fight the all-mighty Google.

Well, the news came down today that American Airlines and Google have reached a confidential settlement in the case (articles here and here). Thus depriving the trademark world of some additional case law the could have clarified the otherwise confusing jurisprudence (see blog post here) surrounding whether or not the use of another company’s trademark as keywords (either to trigger “sponsored links" or otherwise) constitutes trademark infringement.

Given AA’s reliance upon claims for contributory trademark infringement and vicarious trademark infringement, one wonders if the recent decision in Tiffany v. eBay (blogged here) had anything to do with AA’s sudden decision to settle. Or perhaps AA decided to drop the costly litigation as another cost cutting measure (see news article today about AA's decision to cut 1500 maintenance jobs).

District Court finds money clip seller liable for Trademark Infringement based on Google AdWord Initial Interest Confusion

What is a blogger to do when there is nothing interesting to blog about? Simple -- link to somebody's else blog posting.

The E-Commerce and Tech Law Blog had a post today (link here) about a California district court decision last week finding trademark infringement based on "initial interest confusion" -- a topic of interest to many in trademark circles. The case is Storus Corporation v. Aroa Marketing Inc. et al, Case No. 06-cv-07376 (N.D. Cal. February 15, 2008). A copy of the decision can be downloaded here.

In this case, Storus Corporation, a money clip manufacturer and owner of the registered mark SMART MONEY CLIP, sued Aroa Marketing Inc., a company which sells money clips and which participated in Google's AdWord program so that a Google search for "smart money clip" would generate an advertisement for Aroa's website (http://www.steinhausenonline.com/) which prominently displayed the mark SMART MONEY CLIP.

While the court decided on summary judgment that Aroa was liable for trademark infringement, the court denied summary judgment with respect to the other defendant, Skymall, Inc., because Storus apparently had not shown sufficient evidence that Skymall's search results would be any different in response to a consumer search using the phrase "smart money clip" compared to the phrase "money clip."

Court Denies Google's Motion to Dismiss American Airlines Adwords Lawsuit

On October 24, 2007, Judge John McBryde, in a one-page order (download here), denied without comment Google, Inc.'s motion to dismiss (Vegas™Esq Blogged here) the trademark infrignement lawsuit filed by American Airlines, Inc. over Google's Adwords program (Vegas™Esq Blogged here). See American Airlines, Inc. v. Google, Inc., Case No. 4:07-cv-487 (N.D. Tex.).

So the court determined, at least at this stage, that American Airlines' complaint does state a claim upon which relief can be granted.

I wonder if Eric Goldman over at the Technology and Marketing Law Blog will have any comments. (His comments on the American Airlines complaint be found here).

Google files motion to dismiss American Airlines trademark infringement lawsuit

Last Wednesday, September 17, 2007, Google filed a motion to dismiss the American Airlines (“AA”) Adwords trademark infringement lawsuit (previously blogged here) under Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim upon which relief can be granted. A copy of the motion to dismiss filed with the U.S. District Court for Northern District of Texas can be found here (courtesy of resourceshelf.com)

Trademark Use
As expected, Google’s primary argument is that Google and its advertisers are not using the marks as trademarks when used to trigger advertisements (i.e., Google’s Adwords programs) and are using the marks in permissible ways (accurately describing products or providing information) when the trademarks are used in ad text. Motion at 5-6.

Regarding the use of trademarks to trigger advertisements, Google argues that trademark law provides trademark holders with the ability to prevent others from using a mark (or confusingly similar mark) to identify the source or origin of the product. Motion at 6. In the case of Google and its “Sponsored Link” advertisers, however, neither are using AA’s trademarks to identify the source of the advertisers’ products or services. Google cites to Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1083 (5th Cir. 1997) in asserting that the use of a trademark or trade name occurs only when the label is used as an indicator of origin and/or quality of particular goods or services. Motion at 7. Google maintains that the use of the terms by Google and its advertisers is tantamount to contextual advertising – referencing or using a trademark as part of a consumer marketing strategy rather than as an indicator of the source or origin of goods and services.

Google also cites to the 1-800 Contacts case to support its position that the triggering of Internet ads is not trademark use under the Lanham Act. See Motion at 8: “The only federal appellate court that has considered the propriety of triggering Internet advertisements with terms similar to trademarks concluded that this activity is not trademark use under the Lanham Act. 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F. 3d 400, 407 (2d Cir. 2005).” Google goes on to discuss the Second Circuit’s conclusion that the defendant in that case was not using the trademark as trademarks (i.e. using them to pass its products off as emanating from or authorized by 1-800 Contacts), but rather in the same way that a store uses rival trademarks when it is placing its own generic brand products next to trademarked brand products in order to induce customers looking for the brand name to try a similar, but cheaper alternative product. Google then cites to the numerous federal district court decisions that have held there is no trademark use when a “Sponsored Link” on Google’s search engine is triggered by a search of a trademarked term. Motion at 8-9. Google also cites to the numerous federal district court decisions that have held just the opposite. Google notes that none of the “Sponsored Link” ads contain AA’s trademarks in either its title or text – nothing indicates or implies that AA is the source of the ad (citing to a search hit for U.S. Airways Official Site, which was one of the ads submitted by AA as evidence of infringement).

Regarding the use of trademarks in the text of advertisements appearing from a regular Google search, Google argues that the two types of such ads that AA complains about – advertisements from independent sellers of AA’s services or merchandise and advertisements from websites that provide news and information about AA – both fit within the fair use of a trademark. Independent sellers are allowed to accurately describe what they sell, such as the case of Funjet.com, one of the advertisers complained about by AA, which sells American Airlines tickets. “Funjet is permitted to accurately promote the availability of American Airlines tickets on its website even if it also sells tickets on other carriers.” Motion at 11 (citing Scott Fetzer Co. v. House of Vacuums, Inc., 381 F. 3d 477 (5th Cir. 2004)). Furthermore, websites that provide news and information about AA are not prohibited by trademark law from using the trademarked names of the companies about which such websites are reporting and such use of a trademark is fair use. Motion at 11 (citing WCVB-TV v. Boston Atheletic Ass’n., 926 F.2d 42, 47 (1st Cir. 1991). In the case of one of the websites cited by AA, “AA.com-Promotion.info” provides information on AA as well as links to other articles about AA.

Direct Trademark Infringement
Google argues that AA cannot state a claim for direct infringement because Google has not labeled its search engine or advertising services using AA’s trademarks. Motion at 12-13.

Contributory Trademark Infringement
Google asserts the following test for contributory trademark infringement: “a plaintiff must show that the defendant either intentionally induced another to infringe a mark or continue to produce or distribute a product knowing or having reasons to know the recipient is engaging in trademark infringement.” Motion at 13 (citing Inwood Labs., Inc. v. Ives Labs., Inc. 456 U.S. 844, 860 (1982)).

With respect to the first part, Google argues that AA has not plead any facts showing that Google has intentionally induced any advertisers to do anything, much less infringe AA’s trademarks (noting that AA’s pleadings of legal conclusions without pleadings facts cannot sustain a complaint, citing Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1964-65 (May 21, 2007)). AA’s complaint references the use of loopholes by Google’s advertisers, which only supports the argument that Google does not control its advertisers or the text they write any more than a newspaper publisher or billboard owner can control their advertisers (such as when one car company places an ad next to a competitor’s ad or a fast food restaurant places its billboard near a competing fast food chain). As for whether Google makes suggestions to advertisers regarding the use of brand name keywords, AA has not specifically alleged that Google made such suggestions to any advertiser that used AA’s trademarks as a keyword.

With respect to the second part, liability arises only if a service provider has actual knowledge of infringement using a service under its direct control. Motion at 16 (citing Lockheed Martin v. Network Solutions, Inc., 194 F.3d 980 (9th Cir. 1999)). Google argues that the rationale which led the Ninth Circuit to conclude that Network Solutions had no affirmative duty to police the internet in search of potentially infringing domain name registrations applies equally to its situation regarding its advertisers.

Vicarious Trademark Infringement
Google asserts that vicarious liability can be based only on a special relationship (principal-agent, employer-employee) such that the defendant and infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties, or exercise joint ownership or control over the infringing product. Motion at 15-16. Google argues that AA has not alleged facts demonstrating any partnership between Google and any merchant using AA’s trademarks (including authority to bind), nor any joint control or ownership of any product or service which AA claims infringes on AA’s trademarks.

Remaining Causes of Action
The remainder of Google’s motion focuses on AA’s state law claims and AA’s claim for false representation under the Lanham Act. Google argues that the Communications Decency Act of 1996 (“CDA”), 47 U.S.C. §230, immunizes a website such as Google (“interactive computer services”) from state law claims and non-intellectual property federal claims regarding content on the website that is provided by third parties. 47 U.S.C. §230(c)(1) states: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” One exception is for intellectual property causes of action (47 U.S.C. §230(e)(2)), which has been construed by at least one federal appellate court as meaning federal intellectual property causes of action, and not state law intellectual property claims. Motion at 21-22 (citing Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1118-19 (9th Cir. 2007). Furthermore, Google argues that the Lanham Act false representation claim is not an intellectual property claim by virtue of the fact that the U.S. Supreme Court, in considering whether a bank’s lawsuit for false misrepresentation against the State of Florida was barred by sovereign immunity, held that a false misrepresentation did not implicate a property right to exclude others. Motion at 23 (citing College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999)). Because Google is an “interactive computer service” and the content is “provided by another information content provider” (and AA does not allege otherwise in its complaint), the CDA immunity applies to Google. Therefore, AA’s state causes of action (including intellectual property causes of action) and the Lanham Act false misrepresentation claim must be dismissed.

Regarding AA’s claim for money had and receive, Google argues that such a claim must be based on AA receiving money intended for Google’s use and that recovery cannot be had where AA has not alleged any facts showing its ownership over such money or any privity between the parties in relation to the money sought to be recovered. Motion at 23-24.

Regarding AA’s claim for misappropriation under Texas law, Google also argues that AA has not alleged any facts showing that Google and AA are competitors in order to show that Google has misappropriated AA’s name for the commercial purposes of running an airline. Motion at 24-25.
Finally, with respect to AA’s claim for unfair competition under Texas law, Google also argues that AA has not alleged that Google makes any products or sells any service which Google is passing off as a product or service of AA. Motion at 25.


[Comment: As with the other federal district court cases, this case will all come down to whether the sale of trademark terms constitutes “use in commerce” for the purposes of the Lanham Act. Will this District Court judge follow the line of federal cases holding that such use is not “use in commerce” -- Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 408 (S.D.N.Y.2006); 1-800 Contacts v. When U.com, Inc., 414 F.3d 400 (2d Cir. 2005); Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393 (N.D.N.Y.2006)? Or will this Court reject those Second Circuit based decisions and follow the decisions from other Circuits finding such use to be “use in commerce” -- 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D.N.J.2006); Buying for the Home, LLC v. Humble Abode, LLC, 459 F.Supp.2d 310 (D.N.J.2006); Edina Realty, Inc. v. TheMLSOnline.Com, 2006 WL 737064 (D.Minn.2006)? It is anybody’s guess at this point.]

Google Wins Its “AdWord” Battle with American Blinds, but Still Faces A War With American Airlines

On Friday, August 31, 2007, the internet was buzzing with the news that Google had reached a settlement agreement with American Blinds.

For those of you who have not followed the case, on November 26, 2003, Google filed a declaratory relief action against American Blinds & Wallpaper Factory seeking a judicial determination that Google’s "AdWords" advertising program did not infringe American Blinds’s trademarks. Google’s "AdWords" advertising program involved Google’s practice of selling at auction certain trademarked terms as “keywords” to various sponsors, often competitors of the trademark owners. When a person performs a Google search using the trademarked terms, sponsored links on Google’s search results would appear.

Under the settlement agreement, the lawsuit, which was scheduled to go to trial in November 13th, is dismissed with prejudice. Google did not pay anything to American Blinds under the settlement. The agreement was also specific to state that Google would not change its policy of allowing sponsors to place ads when a competitor’s trademark is searched.

Google is proclaiming this settlement as a victory, and some commentators maintain that this outcome will deter others from filing similar lawsuits against Google’s “AdWords” practice However, a closer look at how the case was progressing for American Blinds reveals that American Blinds settled because it did not have a strong trademark case – not because Google’s practice did not violate American Blind’s trademark rights.

The court, in its April 18, 2007, order granting in part and denying in part Google’s motion for summary judgment, made several rulings that hurt American Blinds’ case. See Google, Inc., v. American Blinds, 2007 WL 1159950 (N.D. Cal. 2007) (unpublished) – slip opinion here and Westlaw version here. Most notably, the “American Blind” and “American Blinds” trademarks were declared unenforceable. American Blinds did not register the “American Blinds” trademark until after the date the lawsuit was filed and did not provide sufficient evidence of secondary meaning to establish an enforceable descriptive common-law trademark.

However, some of the court’s ruling are encouraging to future trademark owners. Most notably, the court concluded that the sale of trademarked terms in Google’s AdWords program did constitute “use in commerce” for the purposes of the Lanham Act, following those cases that have reached a similar conclusion (Government Employees Insurance Co. v. Google, Inc., 300 F.Supp.2d 700 (E.D.Va.2004); 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D.N.J.2006); Buying for the Home, LLC v. Humble Abode, LLC, 459 F.Supp.2d 310 (D.N.J.2006); Edina Realty, Inc. v. TheMLSOnline.Com, 2006 WL 737064 (D.Minn.2006)) and rejecting court decisions in the Second Circuit that concluded that the sale of trademarks as keywords for sponsored links does not constitute use for the purpose of the Lanham Act (Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 408 (S.D.N.Y.2006); 1-800 Contacts v. When U.com, Inc., 414 F.3d 400 (2d Cir. 2005); Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393 (N.D.N.Y.2006)). The court further stated that American Blinds had produced sufficient evidence of a likelihood of confusion to withstand summary judgment for the marks that were found to be enforceable.

The decision to settle with Google may have been more about not spending any more money on a losing lawsuit – and face the possibility of having to pay Google’s courts costs and attorneys fees (a point that was specifically addressed in the settlement agreement, whereby both parties agreed to pay their own costs).

But Google’s war over its AdWords program is not yet finished . . . and now faces a much more formidable opponent.

On August 16, 2007, American Airlines filed suit against Google in the U.S. District Court in Northern District of Texas. A copy of the complaint can be found here. American Airlines has a much stronger trademark portfolio and more financial resources to take Google all the way.

[NOTE: Interesting to note that if you do the same “Google” search as that shown in the complaint, the sponsored links are different.]