2nd Circuit Finds Selling Key Words Used for Advertisements on a Search Engine a “Use in Commerce” under the Lanham Act.

In Rescuecom Corp.  v. Google, Inc., 562 F.3d 123; 90 USPQ2D 1287 (2nd Circ. 2009), Rescuecom is a national computer service franchising company that offers on-site computer services and sales.  Rescuecom receives 17,000 to 30,000 visitors to its website each month and advertises over the Internet, using many web-based services, including those of Google.  Since 1998, Rescuecom has been a registered federal trademark.  The validity of Rescuecom’s trademark is not in dispute in this case.

Google operates a popular search engine, and earns 97% of its revenue through advertising on that search engine.  In response to a user search, Google provides a list of links to websites, ordered by descending relevance to the user’s search terms, according to Google’s proprietary algorithms.  If a user enters a trademark as a search term, the Google search engine is able to provide a link to the website maintained by the trademark owner (if such exists).  Google also responds to a user search by providing context-based advertising in the form of links to the advertiser’s website.  Google uses at least two programs to offer context-based advertising links: AdWords and Keyword Suggestion Tool (KST).

Through AdWords, advertisers purchase terms or keywords that will trigger the appearance of the advertiser’s content and website link.  Thus, whenever a user enters a purchased term or keyword in their search query, advertisers who have purchased that term or keyword will have their ads and websites links displayed in response to the user search.  Google recommends keywords to advertisers to be purchased through KST.  KST improves the effectiveness of advertising by helping advertisers identify keywords related to their area of commerce.  These keywords can include trademarks of other companies, such as Rescuecom’s mark. Those keywords purchased by advertisers through KST would operate in a similar fashion to the terms or keywords purchased through AdWords.

On Google’s search results page, advertising results (content and link to the advertiser’s website) appear on the right margin and/or in a horizontal band immediately above the column of relevance-based search results.  Rescuecom asserts that these advertisements (which appear in response to a user-entered trademark) could cause trademark confusion as to affiliation, origin, sponsorship or approval of service because Google fails to clearly label the ad results as purchased advertisements instead of relevant search results.

Through KST, Google has recommended Rescuecom’s trademark to its competitors who purchase advertising through Google.  Because the entry of Rescuecom’s trademark results in the display of advertisements of Rescuecom’s competitors, Rescuecom argues that the user who entered the trademark as a search term will mistakenly believe that a competitor’s advertisement and website link is sponsored by, endorsed by, approved by, or affiliated with Rescuecom’s mark.

The plaintiff brought suit for trademark infringement, alleging that Google’s recommendation and sale of plaintiff’s mark to Google’s advertisers, to trigger the appearance of advertisements and links in a manner likely to cause consumer confusion when a Google user launches a search of plaintiff’s trademark, properly alleges a claim under the Lanham Act. The District Court granted Google’s motion to dismiss under Federal Rules of Civil Procedure 12(b)(6) for failure to state a claim.  Specifically, the District Court dismissed Rescuecom’s complaint because it held that Rescuecom failed to allege that Google’s use of its trademark was a “use in commerce” within the meaning of § 45 the Lanham Act.  The 2nd Circuit reversed and remanded the case.

The District Court based its ruling on a 2nd Circuit decision, 1-800-Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2nd Cir. 2005) (“1-800”), asserting that Google’s use of Rescuecom’s trademark was an internal use and thus not a “use in commerce.”

The 2nd Circuit ruled in 1-800  that a complaint fails to state a claim under the Lanham Act unless it alleges that the defendant had made “use in commerce” of the plaintiff’s trademark, with the term “use in commerce” defined in 15 U.S.C. § 1127.  In contrasting this decision, the 2nd Circuit asserted that Rescuecom’s complaint adequately plead a “use in commerce,” rejecting the District Court’s belief that this case and 1-800 were factually similar, and instead asserting that this case is materially different.  Specifically, the 2nd Circuit noted that the Lanham act provides for liability, under Sections 32 and 43 (15 U.S.C. §§ 1114 and 1125), for unpermitted “use in commerce” of another’s mark which is “likely to cause confusion, or to cause mistake, or to deceive” “as to the affiliation… or as to the origin, sponsorship or approval of his or her goods [or] services… by another person.” 15 U.S.C. §§ 1114, 1125(a)(1)(A). 

The term “use in commerce” was defined in Section 45 (15 U.S.C. § 1127) of the Lanham Act, providing in part that “a mark shall be deemed to be in use in commerce… (2) on services when is it used or displayed in the sale or advertising of services and the services are rendered in commerce.” 15 U.S.C. § 1127. 

In 1-800, the defendant freely distributed software to users who would download and install the software on their computer.  This software provided contextually relevant advertising to a user by generating pop-up ads to that user, depending on the website or search term the user entered in the browser.  The advertisement appeared in a new browser, making it clear the pop-up was an advertisement and not a direct response to the user’s entry.  First, the defendant did not use, reproduce or display the plaintiff’s mark.  The search term that triggered the pop-up ad was the plaintiff’s website address.  Thus, the infringing transactions did not involve use of the plaintiff’s trademark.  Second, plaintiff’s mark was never “used or displayed in the sale or advertising of services,” because advertisers could not request or purchase triggering keywords.  Defendant’s program did not offer the plaintiff’s trademark as a search term by which advertisements could be triggered. 

According to the 2nd Circuit, the present case is in stark contrast to 1-800.  Google not only explicitly sells trademarks to advertisers to trigger their ads, but also recommends trademarks to advertisers who would not have otherwise opted to utilize the trademark as a search term.  Thus, Google displays, offers and sells trademarks, including Rescuecom’s trademark, to its advertising customers when selling its advertising services.  Further, it encourages the purchase of trademarks, including Rescuecom’s trademark, through KST.  Thus, Google’s utilization of Rescuecom’s trademark fits clearly within the definition of a “use in commerce” as specified by 15 U.S.C. § 1127.

Google argued that the inclusion of a trademark in an internal computer directory cannot constitute trademark use.  However, the 2nd Circuit rejected this argument on several bases.  First, it held that such a contention over-reads the 1-800 decision.  1-800 did not imply that the use of a trademark by software in an internal directory precluded a finding of trademark use.  Rather, the fact that defendant did not use plaintiff’s trademark at all influenced the Court to decide that defendant’s use did not constitute a “use in commerce.”  Second, it noted that Google’s recommendation and sale of Rescuecom’s mark to advertising customers would not qualify as an internal use by Google’s own definition. 

Google argued that its use of the Rescuecom mark is no different from a retail vendor who uses product placement to allow a lesser known vendor to benefit from a competitor’s name recognition. The 2nd Circuit noted that labeling a practice “product placement” does not shield it against liability under the Lanham Act.  Rescuecom has alleged in its complaint that Google’s practices are significantly different from benign product placement, because its practices cause confusion as to which result of a user search on a trademark is an advertisement and which result is actually associated with the trademark.  Thus, Google’s use of Rescuecom’s mark would be a “use in commerce.”

In conclusion, the 2nd Circuit found that Google’s use of Rescuecom’s trademark was a “use in commerce” because its recommendation and sale of Rescuecom’s mark to advertising customers as keywords triggered the appearance of the ads and website links in a manner that was likely to cause consumer confusion as to Rescuecom’s trademark.  Thus, the grant of Google’s motion to dismiss under 12(b)(6) was reversed, and the case was remanded.

Significance for trademark owners

Rescuecom Corp. is significant in resolving what has been a problem for trademark owners: Google’s sale of keywords matching marks to competitors to allow competitors to advertise whenever the keyword is searched.  In finding that there is a possibility that such sale of keywords can cause confusion as to the source of an advertisement, the ruling provides hope for trademark owners that a remedy may be available due to this sale.  That being said, the impact of the ruling may not be sweeping since Rescuecom Corp. is currently limited only to the 2nd Circuit, and importantly, the ruling will likely only apply where the displayed advertising is of a type which confuses the consumer as to whether it is from the mark owner or a competitor.  It is also unclear as to whether Google will change its advertisement policies to prevent such confusion.  Thus, while at least allowing while the suits to proceed, the holding in Rescuecom Corp. will still require all the normal evidence required for a showing of trademark infringement based upon confusion as to the source or sponsorship.

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