Google v. American Blind: Staying in Line with Online Advertising?

One of the hot intellectual property topics for 2005 ' and perhaps beyond ' is whether the sale and use of trademarks as keywords constitutes trademark infringement, and, if so, who is liable for that infringement. How the courts ultimately resolve this issue will affect the billion-dollar Internet advertising industry, those who participate in online advertising and those seeking to prevent the unauthorized use of their trademarks on the Internet. This article discusses Google v. American Blind & Wallpaper Factory, Inc., 2005 U.S. Dist. LEXIS 6228 (N.D. Cal. Mar. 30, 2005), the most recent case to address the emerging issue of “markmatching” in Internet contextual advertising, and its relationship to trademark infringement.

In American Blind, the Federal District Court for the Northern District of California denied Google's motion to dismiss a trademark infringement case involving Google's sale of American Blind's trademarks as keywords for Internet advertising. Google had filed an action seeking declaratory relief, claiming that use of its AdWords advertising program to sell American Blind trademarks and close variations thereof does not infringe American Blind's trademarks. American Blind counterclaimed, alleging trademark infringement, dilution, false representation, injury to business reputation, unfair competition, tortious interference with prospective business advantage, and in the alternative, contributory trademark infringement and dilution.

Through Google's AdWords program, advertisers may purchase or bid on certain keywords or phrases that also are trademarks. Essentially, AdWords matches contextual advertising with the end user (ie, the consumer) based on pre-selected terms, which can be a trademark. “Markmatching” is the process of linking competitors' trademarks with contextual advertising. The advertisers' links then will appear prominently when an Internet user enters those keywords into a search engine, which was precisely the case in American Blind.

According to American Blind, Google “actively and deliberately encourages American Blind's competitors to purchase … virtually every conceivable, though indistinguishable, iteration of [its] marks.” As a result of Google's AdWords program, American Blind claimed that when users entered search terms identical or nearly identical to American Blind's trademarks, links to competitors' Web sites were displayed more prominently than links to American Blind's Web site, which caused consumer confusion.

In its motion to dismiss all of American Blind's counterclaims, Google contended that under the Google AdWords program, American Blind could not allege actionable trademark “use” as defined by the Lanham Act (the Trademark Act). To support its position, Google relied on U-Haul International, Inc. v. WhenUcom, Inc., 279 F. Supp. 2d 723, 728 (E.D. Va. 2003) and Wells Fargo & Co. v. WhenU.com, Inc., 293 F. Supp. 2d 734, 757 (E.D. Mich. 2003), both of which involved trademark disputes arising from pop-advertisements.

In U-Haul International v. WhenU.com, Inc., the court granted defendant's motion for summary judgment holding that the inclusion of U-Haul's trademark and URL in a fixed keyword list to generate contextual pop-up advertisements did not constitute “use” of a mark in commerce within the meaning of the Lanham Act. In U-Haul, the court concluded that such use constituted a “pure machine-linking function” that did not interfere with U-Haul's Web site and did not interact with U-Haul's server or systems. In Wells Fargo & Co. v. WhenU.com, Inc., the court followed the U-Haul line of reasoning and denied Wells Fargo's motion for a preliminary injunction based on similar allegations. In short, the respective courts found no trademark “use” because the plaintiffs had not proven that the defendants used the trademark at issue to identify defendants' services.

“Use in commerce” in these cases apparently hinged on three factors: 1) that WhenU.com did not explicitly market or sell the specific trademarks as keywords to advertisers, but instead included them in a fixed and proprietary keyword database; 2) the resulting “markmatching” was an automated function that was not evident to the end user, irrespective of the appearance of branded competitive pop-up ads over the plaintiffs' Web sites; and 3) the pop-up ads did not include the plaintiffs' trademarks.

Expressly relying on the Ninth Circuit's decision in Playboy Enterprises, Inc. v. Netscape Communications Corp. et. al., 354 F. 3d 1020 (9th Cir. 2004), the only circuit court to date to address this issue, the American Blind court rejected Google's claim that, at this point in the proceedings, it could rule that Google's use of American Blind's trademarks as “keywords” did not constitute a trademark “use.” In the Playboy case, Playboy successfully appealed the district court's grant of summary judgment in favor of defendants based upon their use of Playboy's “PLAYBOY” and “PLAYMATE” marks as part of defendants' proprietary databases of keywords for its contextual advertising purposes. Essentially, the defendants in Playboy keyed banner ads for adult-oriented products to Playboy's trademarks (“markmatching”). The Ninth Circuit found a likelihood of initial interest confusion existed and remanded the case for further consideration, but the parties settled shortly thereafter on confidential terms. The American Blind court, acknowledging the consequences of deciding such a critical issue on a motion to dismiss, ruled that the parties should fully present their arguments at trial.

In rejecting Google's motion to dismiss, the court also referenced Judge Leonie Brinkema's oral ruling in Government Employees Insurance Company v. Google et al., 330 F. Supp. 2d 700 (E.D. Va. 2004), in which she held that permitting advertisers to bid on trademarks and to pay search engines to be associated with those trademarks constituted “use in commerce” of the third-party trademark. Judge Brinkema, however, also ruled that “the mere use of [a] trademark by Google as a search word or keyword … standing alone” did not violate the Lanham Act. The court has allowed the plaintiff to proceed on the issue of whether Google is liable for violation of the Lanham Act based on the appearance of sponsor listings resulting from “markmatching” where GEICO's mark appeared as part of the result's title or text. A written opinion is expected to be issued.

The decision in American Blind thus leaves the law in the United States where it has been since the Playboy decision, namely that claims of infringement will be evaluated on the merits of each case. For the most part, no “safe harbor” has emerged providing clear shelter to search engines selling trademarks as keywords, and, likewise, there has been no absolute ruling that such an activity amounts to trademark infringement. Currently, there are at least two other pending federal district court cases involving this practice, Rescuecom v. Google 04 Civ. No. 1055 (N.D.N.Y.) and JR Cigar v. Goto.com. 00 Civ. No. 3179 (D.N.J.), which, if decided, may shed further light on the practice of contextual advertising as it relates to this developing area of trademark law.

One of the hot intellectual property topics for 2005 ' and perhaps beyond ' is whether the sale and use of trademarks as keywords constitutes trademark infringement, and, if so, who is liable for that infringement. How the courts ultimately resolve this issue will affect the billion-dollar Internet advertising industry, those who participate in online advertising and those seeking to prevent the unauthorized use of their trademarks on the Internet. This article discusses Google v. American Blind & Wallpaper Factory, Inc., 2005 U.S. Dist. LEXIS 6228 (N.D. Cal. Mar. 30, 2005), the most recent case to address the emerging issue of “markmatching” in Internet contextual advertising, and its relationship to trademark infringement.

In American Blind, the Federal District Court for the Northern District of California denied Google's motion to dismiss a trademark infringement case involving Google's sale of American Blind's trademarks as keywords for Internet advertising. Google had filed an action seeking declaratory relief, claiming that use of its AdWords advertising program to sell American Blind trademarks and close variations thereof does not infringe American Blind's trademarks. American Blind counterclaimed, alleging trademark infringement, dilution, false representation, injury to business reputation, unfair competition, tortious interference with prospective business advantage, and in the alternative, contributory trademark infringement and dilution.

Through Google's AdWords program, advertisers may purchase or bid on certain keywords or phrases that also are trademarks. Essentially, AdWords matches contextual advertising with the end user (ie, the consumer) based on pre-selected terms, which can be a trademark. “Markmatching” is the process of linking competitors' trademarks with contextual advertising. The advertisers' links then will appear prominently when an Internet user enters those keywords into a search engine, which was precisely the case in American Blind.

According to American Blind, Google “actively and deliberately encourages American Blind's competitors to purchase … virtually every conceivable, though indistinguishable, iteration of [its] marks.” As a result of Google's AdWords program, American Blind claimed that when users entered search terms identical or nearly identical to American Blind's trademarks, links to competitors' Web sites were displayed more prominently than links to American Blind's Web site, which caused consumer confusion.

In its motion to dismiss all of American Blind's counterclaims, Google contended that under the Google AdWords program, American Blind could not allege actionable trademark “use” as defined by the Lanham Act (the Trademark Act). To support its position, Google relied on U-Haul International, Inc. v. WhenUcom, Inc., 279 F. Supp. 2d 723, 728 (E.D. Va. 2003) and Wells Fargo & Co. v. WhenU.com, Inc ., 293 F. Supp. 2d 734, 757 (E.D. Mich. 2003), both of which involved trademark disputes arising from pop-advertisements.

In U-Haul International v. WhenU.com, Inc., the court granted defendant's motion for summary judgment holding that the inclusion of U-Haul's trademark and URL in a fixed keyword list to generate contextual pop-up advertisements did not constitute “use” of a mark in commerce within the meaning of the Lanham Act. In U-Haul, the court concluded that such use constituted a “pure machine-linking function” that did not interfere with U-Haul's Web site and did not interact with U-Haul's server or systems. In Wells Fargo & Co. v. WhenU.com, Inc., the court followed the U-Haul line of reasoning and denied Wells Fargo's motion for a preliminary injunction based on similar allegations. In short, the respective courts found no trademark “use” because the plaintiffs had not proven that the defendants used the trademark at issue to identify defendants' services.

“Use in commerce” in these cases apparently hinged on three factors: 1) that WhenU.com did not explicitly market or sell the specific trademarks as keywords to advertisers, but instead included them in a fixed and proprietary keyword database; 2) the resulting “markmatching” was an automated function that was not evident to the end user, irrespective of the appearance of branded competitive pop-up ads over the plaintiffs' Web sites; and 3) the pop-up ads did not include the plaintiffs' trademarks.

Expressly relying on the Ninth Circuit's decision in Playboy Enterprises, Inc. v. Netscape Communications Corp. et. al., 354 F. 3d 1020 (9th Cir. 2004), the only circuit court to date to address this issue, the American Blind court rejected Google's claim that, at this point in the proceedings, it could rule that Google's use of American Blind's trademarks as “keywords” did not constitute a trademark “use.” In the Playboy case, Playboy successfully appealed the district court's grant of summary judgment in favor of defendants based upon their use of Playboy's “PLAYBOY” and “PLAYMATE” marks as part of defendants' proprietary databases of keywords for its contextual advertising purposes. Essentially, the defendants in Playboy keyed banner ads for adult-oriented products to Playboy's trademarks (“markmatching”). The Ninth Circuit found a likelihood of initial interest confusion existed and remanded the case for further consideration, but the parties settled shortly thereafter on confidential terms. The American Blind court, acknowledging the consequences of deciding such a critical issue on a motion to dismiss, ruled that the parties should fully present their arguments at trial.

In rejecting Google's motion to dismiss, the court also referenced Judge Leonie Brinkema's oral ruling in Government Employees Insurance Company v. Google et al., 330 F. Supp. 2d 700 (E.D. Va. 2004), in which she held that permitting advertisers to bid on trademarks and to pay search engines to be associated with those trademarks constituted “use in commerce” of the third-party trademark. Judge Brinkema, however, also ruled that “the mere use of [a] trademark by Google as a search word or keyword … standing alone” did not violate the Lanham Act. The court has allowed the plaintiff to proceed on the issue of whether Google is liable for violation of the Lanham Act based on the appearance of sponsor listings resulting from “markmatching” where GEICO's mark appeared as part of the result's title or text. A written opinion is expected to be issued.

The decision in American Blind thus leaves the law in the United States where it has been since the Playboy decision, namely that claims of infringement will be evaluated on the merits of each case. For the most part, no “safe harbor” has emerged providing clear shelter to search engines selling trademarks as keywords, and, likewise, there has been no absolute ruling that such an activity amounts to trademark infringement. Currently, there are at least two other pending federal district court cases involving this practice, Rescuecom v. Google 04 Civ. No. 1055 (N.D.N.Y.) and JR Cigar v. Goto.com. 00 Civ. No. 3179 (D.N.J.), which, if decided, may shed further light on the practice of contextual advertising as it relates to this developing area of trademark law.