For the past several years, keyword advertising has been a highly lucrative, multibillion-dollar industry – one that, not surprisingly, has triggered a significant amount of controversy. Does the use, purchase and sale of trademarks as keywords constitute trademark infringement?
Courts have not answered this question predictably. On April 3, 2009, in a long-awaited decision, the Second Circuit Court of Appeals rejected the district court’s dismissal of a trademark infringement action brought against a search engine by a national computer service franchising company. Rescuecom v. Google, 562 F.3d 123 (2d Cir. 2009). In Rescuecom v. Google, the Second Circuit has in effect reversed its prior position on the keyword issue by rejecting the lower court’s findings and holding that Google’s recommendation and sale of the RESCUECOM trademark as a keyword to plaintiff’s competitors constitutes use of the trademark “in commerce.” There is still a split in the circuits on this issue, but the Second Circuit now follows the majority view. The case is currently remanded to the district court. If ultimately decided on the merits, Rescuecom v. Google will likely have a profound impact on search engines and the keyword advertising industry.
Background and the district court
Rescuecom conducts a large amount of its business over the Internet, and many of its competitors advertise on the Internet using tools offered by various search engines, including Google’s AdWords program. Google, through its Keyword Suggestion Tool, recommends the RESCUECOM trademark and, through its AdWords program, offers this keyword for sale to Rescuecom’s competitors. When a Google user searches the term “Rescuecom,” links to competitive websites appear on the user’s screen.
Rescuecom brought claims against Google alleging trademark infringement, false designation of origin and trademark dilution. In its complaint, Rescuecom alleged that Google’s sale of the RESCUECOM trademark as a keyword causes confusion by diverting Internet users to competitors’ websites.
The United States District Court for the Northern District of New York granted Google’s motion to dismiss on the basis that its use of the RESCUECOM trademark is not a “use in commerce,” and therefore does not constitute trademark infringement. Rescuecom v. Google, 456 F. Supp. 2d 393 (N.D.N.Y. 2006). Relying on the Second Circuit’s decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., the court held that the sponsored links triggered by Google’s keyword tool did not actually reference the RESCUECOM trademark. See 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005). Thus, the court concluded that Google’s use of the RESCUECOM mark was not a “use in commerce” under 1-800 Contacts, which held a company’s private internalization of a trademark in its ad-triggering software is not a “use in commerce.” Rescuecom appealed the decision.
Second Circuit opinion
The Second Circuit reversed the dismissal, held Rescuecom’s complaint properly alleged a claim for relief and noted two significant distinctions from 1-800 Contacts. Specifically, in 1-800 Contacts, plaintiff’s website address, not its trademark, triggered the pop-up advertisement at issue. In fact, the case’s dictum suggests that use of plaintiff’s trademark to trigger the pop-up advertisement may have been actionable. Moreover, the advertisers in 1-800 Contacts could not purchase trademarks as keywords. In contrast, in Rescuecom, Google encouraged the purchase of the plaintiff’s trademark through its Keyword Suggestion Tool, displayed, offered and sold the mark through its AdWords program, and controlled advertisement placement through the keyword itself.
The Second Circuit also rejected Google’s contention that including a trademark in an internal computer directory in its ad-triggering software does not constitute trademark use. It found that Google’s recommendation and sale of the RESCUECOM trademark to its advertising customers was not an internal use and, even if it was, such a finding would not preclude a “use in commerce.” The court concluded that Rescuecom’s complaint properly alleged a claim for relief and remanded the case to the district court to decide the merits of the trademark infringement and related claims.
Potential impact of the Rescuecom decision
Prior to Rescuecom, several district courts in the Second Circuit followed 1-800 Contacts and held that neither the internal use of a trademark to trigger sponsored links, nor the purchase of a trademark as a keyword, constitute “use in commerce.” Rescuecom is essentially a reversal of the Second Circuit’s decision in 1-800-Contacts. A majority of the other circuits have already adopted the Rescuecom position on the “use in commerce” issue, but a few remain which take the opposite view. Since the district court in Rescuecom is now considering the merits of plaintiff’s trademark infringement and related claims, it will hopefully provide more clarity and uniformity regarding the liability associated with keyword advertising.
Because many search engines generate much of their revenue through keyword advertising, Rescuecom’s outcome is potentially significant. Before this case, the Second Circuit was one of the few jurisdictions in which search engines were essentially immunized from liability if their use of the trademark was “internal” to their ad-triggering software and not visible to users. Now, under Rescuecom, such trademark infringement claims are much more likely to be evaluated on the merits. Thus, defendants are less likely to engage in forum shopping tactics such as filing preemptive declaratory judgment actions in the Second Circuit, and plaintiffs are more likely to file suit there.
Given the high stakes, search engines will likely make significant investments in defending such cases. They also have incentive to explore new technologies that promise to reduce legal risks. Companies may also be more reluctant to promote their businesses through keyword advertising, advertisers and search engines.
Rescuecom is particularly helpful to trademark owners who seek relief against the unauthorized use of their trademarks in keyword advertising. Although it is unclear whether the district court will ultimately find Google liable for trademark infringement, Rescuecom has brought the Second Circuit in line with other courts throughout the country which have given plaintiffs the opportunity to have their day in court. This will likely shape the legal landscape for keyword advertising in a more straightforward, predictable way for all interested parties.
For more information about the impact of this decision on your business, please contact Christina L. Martini.