Is 'No Use' Always a 'Fair Use'?

In order to avoid liability for trademark infringement relating to the sale of keywords corresponding to trademarks, search engines, including Google, are attacking the concept that trademark owners should be able to protect the 'commercial magnetism' of their marks. Recently, in Rescue.com v. Google, Inc., No. 5:04-CV-1056 (N.D.N.Y.), Google argued that the trademark laws 'are not meant to protect consumer good will [sic] created through extensive, skillful, and costly advertising.' Google's Reply Brief at 4 n.4 (2005) (citing Smith v. Chanel, Inc., 402 F.2d 562, 566 (9th Cir. 1968)).

At issue in Rescue.com is the current business practice of allowing advertisers to purchase particular search terms to generate what are typically labeled as 'sponsored links.' Rescue.com alleged Google infringed its trademark by allowing and advising a rival computer service company to buy Rescue.com's trademark as a keyword. As a result, Rescue.com alleged, Google users contacted Rescue.com's competitor under the mistaken impression that the competitor was associated with Rescue.com. Google's position is that its conduct does not involve a 'trademark use' and therefore is beyond the reach of the Lanham Act.

This argument challenges the very core of trademark law's purpose and boldly contradicts Justice Felix Frankfurter's trademark law primer in Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205 (1942) concerning the place of trademark protection in the modern economy:

The protection of trade-marks is the law's recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trademark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same ' to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trademark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

Trademark practitioners have relied on those words for years to police their marks. Google and others now apparently want to erase them completely.

Justice Frankfurter's eloquent summary describes the underlying presumptions that have shaped trademark law for more than half a century. It encapsulates the judicial trend for many years to interpret the Lanham Act in a manner that provided trademark owners with expanded protection for their brands. Indeed, while at one time trademark law provided protection exclusively to 'technical trademarks' and limited infringing conduct to the sale of directly competing goods, see Trademark Act of 1905, ch. 592, '16, by the 1990s trademark law recognized post-sale confusion, see, e.g., Meridian Mutual Insurance Co. v. Meridian Insurance Group, Inc., 128 F.3d 111 (7th Cir. 1997) (court must consider confusion of purchaser of insurance policy while making a claim), and initial interest confusion, see, e.g., Mobil Oil Corp. v. Pegasus Petroleum, Corp., 818 F.2d 254 (2d Cir. 1987) (likelihood that oil trader might listen to cold call from Pegasus Petroleum is sufficient confusion for infringement). As part of this trend, in 1962 the Lanham Act was also amended to apply expressly to confusion not only as to source but also as to affiliation. See 1962 Pub. L. 87-772, 76 Stat. 769.

Significantly, in Mishawaka there was 'no evidence that particular purchasers were actually deceived into believing that the [defendant's products] were manufactured by [the trademark owner.]' Mishawaka, 316 U.S. at 204. Against this backdrop, it is clear that Justice Frankfurter was articulating a justification for infringement based not on evidence of confusion, but on the misappropriation of the trademark owner's goodwill (ie, the commercial magnetism of a mark) by the defendant in order to increase its own profit.

The Emerging 'Non-Trademark Use' Defense

Trademark owners should recognize that the judicial trend in favor of expanding trademark protection is waning. The emerging 'non-trademark use' defense permits a finding of non-infringement regardless of the existence of confusion. This complete unfettering of trademark law from confusion in the context of a defense to infringement is virtually unprecedented in trademark jurisprudence in the United States.

This new defense is closely related to a series of criticisms levied at how the Lanham Act has been applied and, in particular, with the Polaroid multi-factor test. Virtually every circuit uses this test, or some variation, to evaluate whether an allegedly infringing use is likely to cause confusion. Critics argue that the Polaroid test is too easily manipulated to justify any particular result that a court wants to reach. Further, critics argue, even in those cases where the multi-factor test simply will not support a finding of infringement, courts will apply a second test ' often sub silencio ' in order to 'protect' a sympathetic plaintiff: the 'misappropriation of goodwill' where 'goodwill misappropriation is a conclusion and not an analytic tool.' Goldman, Deregulating Rele-vance in Internet Trademark Law, 54 Emory L.J. 507 (2006). In other cases, courts have relied on the concept of initial interest confusion to bypass the Pola-roid factors. See, e.g., Brookfield Commu-nications v. West Coast Entertainment Group, 174 F.3d 1036, 1050 (9th Cir. 1999).

While Brookfield received rave reviews when it was first issued, see, e.g., McCarthy on Trademarks '25:76 (applauding decision) and Rossi, Protection for Trademark Owners, 42 Santa Clara L. Rev. 295, 327 (2002) (same), and was quickly adopted by almost every circuit, it is now under sharp attack. See, e.g., Widmaier, Use, Liability, and The Structure of Trademark Law, 33 Hofstra L. Rev. 603 (2005) and Goldman, supra. One Ninth Circuit judge has indicated the decision should be revisited. See Playboy Enterprises, Inc. v. Netscape Communi-cations Corporation, 354 F.3d 1020, 1034-36 (9th Cir. 2004) (Berzon, J. concurring).

These critics argue that the initial interest theory does not account for the fact that, in their opinion, when someone says 'FedEx that to me' they are merely saying they want the package the next day, not that they want the sender to use a particular carrier. By excluding the possibility that consumers do use trademarks in this 'pseudo-generic' fashion ' in fact by presuming that consumers only use trademarks as TRADEMARKS ' these critics argue trademark law generally, and the initial interest concept in particular, unfairly deprive consumers of information that will help them make educated choices.

In response, trademark owners point to the doctrine of trademark fair use as the safety valve allowing for unauthorized third party use. Certainly, in the last 10 years the concept of trademark fair use has become more prominent than ever before. The Supreme Court has held that the presence of actual confusion does not necessarily negate the defense. KP Permanent Make-Up, Inc. v. Lasting Impressions, Inc., 543 U.S. 111, 121 (2004) ('some possibility of consumer confusion must be compatible with fair use. … '). At the same time, however, the Court cautioned that its holding 'does not foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant's use is objectively fair.' Id. at 123. To the surprise of some, on remand the Ninth Circuit again found that the district court had improperly granted summary judgment to the defendant and returned the case to the district court with instructions that because there were material facts in dispute concerning the level of confusion, there were by necessity material facts in dispute on whether the use was fair. KP Permanent Make-Up, Inc. v. Lasting Impression, Inc., 408 F.3d 596 (9th Cir. 2005).

The fact that trademark owners managed to keep confusion 'alive' after Lasting Impression has led one commentator to find that these fair use defenses are insufficient to safeguard legitimate commerce because they remain tethered to the presence vel non of confusion. Moreover, because the multi-factor test includes the defendant's intent in using the mark, it unfairly favors the trademark owner. In this commentator's view, the 'issue of the defendant's intent or good faith is not relevant' in evaluating whether a particular use will 'facilitate the flow of useful, non-confusing information to consumers and to enhance marketplace efficiency.' Barrett, Internet Trademark Suits and the Demise of 'Trademark Use,' 39 U.C. Davis L. Law Rev. 371, 432 (2006).

For this reason, the non-trademark use defense is not just another variation of the fair use defense. The holding of the Second Circuit in 1-800-Contacts, Inc. v. WhenU.com, 414 F.3d 400 (2nd Cir. 2005), aptly illustrates both the power and danger of the defense. To summarize briefly, 1-800-Contacts concerned customized pop-up advertisements triggered by the consumer's decision to visit a particular Web site. The precise question was whether the use of a trademark to trigger this pop-up constituted an infringement.

At a preliminary injunction hearing, the plaintiff introduced survey evidence indicating that 59% of consumers believed that the Web site they were visiting was responsible for the pop-up they saw on top of the trademark owner's site. The district court issued the injunction. 1-800-Contacts, Inc. v. Whenu.com, 309 F. Supp. 2d 467, 500 (S.D.N.Y. 2003), rev'd, 414 F.3d 400 (2d Cir. 2005).

The Second Circuit reversed, and held that the defendant had not made a 'trademark use' of the plaintiff's mark. The use of the plaintiff's mark to trigger the pop-up was akin to 'an individual's private thoughts about a trademark,' which the Second Circuit stated was clearly non-infringing. 1-800-Contacts, 414 F.3d at 409. In response to the plaintiff's argument that the defendant had made a trademark use of its marks because the use had caused confusion, the Second Circuit explained:

Again, this rationale puts the cart before the horse. Not only are 'use,' 'in commerce,' and 'likelihood of confusion,' three distinct elements of a trademark infringement claim, but 'use' must be decided as a threshold matter because, while any number of activities may be 'in commerce' or create a likelihood of confusion, no such activity is actionable under the Lanham Act absent the 'use' of a trademark. Id. at 412.

The non-trademark use defense predates the 1-800-Contacts decision. However, it has only been the emergence of new marketing channels that has allowed the defense to gain any real traction. For instance, one of the first cases to address this issue involved the importation of gray market goods. See Sebastian v. Longs Drug, 29 U.S.P.Q.2d 1710 (C.D. Cal. 1993). The defendant argued that it had not used the plaintiff's marks in commerce because it did not affix them to the goods, but merely imported them. Since '45 of the Lanham Act defines 'use in commerce' of a trademark as affixing it to the goods or labels, the defendant moved to dismiss. The court clearly did not take the defense seriously, noting that 'the Ninth Circuit and others have entertained multitudes of infringement cases involving the resale of genuine goods bearing true marks. Notably, these courts never questioned whether the marks were used 'in commerce.” Id. at 1712.

Three years later, the Sixth Circuit became perhaps the first court to uphold the defense. Holiday Inns, Inc. v. 800 Reservations, Inc., 86 F.3d 619, 625 (6th Cir. 1996). The defendant acquired 1-800-H0[zero]LIDAY in order to capitalize on the consumers who misdialed when attempting to call 1-800-HOLIDAY, the plaintiff's reservation line. The defendant astutely recognized that it did not have to market the number for it to attract customers, and therefore, simply waited to fulfill the calls that inevitably came. The district court entered judgment for the plaintiff noting that '[if] not for Holiday Inn's spending millions of dollars on advertising each year, defendants would have no service whatsoever to provide to the consumer.' Id. at 624.

The Sixth Circuit reversed. It explained that the defendant in this case did not create the confusion; it merely took advantage of confusion already existing in the marketplace. Id. at 626. The Eighth Circuit reached a similar result in another case also involving toll free phone numbers. See DaimlerChrysler AG v. Bloom, 315 F.3d 932 (8th Cir. 2003).

The Holiday Inn application of non-trademark use makes sense because there truly was no use of the plaintiff's mark. 1-800-Contacts is not analogous to the Holiday Inn and DaimlerChyrlser cases. The defendant in 1-800-Contacts is not merely waiting for someone to visit its site to show a pop-up. The trigger to these pop-ups is not a consumer who mistypes the trademark owner's mark (which would be the equivalent to the misdialing of HOLIDAY on the phone pad), but is the use of a brand name by the consumer, reflecting its commercial magnetism.

Moreover, while the survey in 1-800-Contacts was problematic, its 59% confusion number, even if overstated, indicates at the very least that there may be a likelihood of confusion, which could be proved after the completion of all discovery and a trial on the merits. The Second Circuit holding denied the plaintiff the ability to develop this evidence by defining this question as a 'threshold' inquiry, thereby making it ripe for a motion to dismiss. In other words, confusion no longer matters. 1-800-Contacts, 414 F.3d at 412.

To accept this defense we must assume that Congress was not concerned about consumer confusion, unless it resulted from a use that satisfied the very technical requirements for registering a trademark at the Trademark Office. Consider if a discount clothing company produced a catalog that did not contain any ordering information and placed the mark of a premium-clothing designer on its cover, the non-trademark use defense would result in a finding of no infringement. See Land's End Inc. v. Manbect, 797 F. Supp. 511 (E.D. Va. 1992) (catalog without order form is not proper specimen because it does not show use of mark on or in connection with the sale of goods). Similarly, any use of a trademark for goods on the Internet is non-trademark use, unless the particular Web page on which it is used contains ordering information. See In re MediaShare Corp., 43 U.S.P.Q.2d 1304 (T.T.A.B. 1997).

Two recent cases illustrate the power of this new defense. In Merck & Co. v. Mediplan Health Consulting Inc. d/b/a/ RXNorth.com, 2006 LEXIS 14826 (S.D.N.Y. March 30, 2006), Merck filed claims against six online pharmacies in Canada that purchased Zocor as a key word from Google and Yahoo! creating 'sponsored' links to defendants' sites. The defendants moved to dismiss in lieu of filing answers. Relying on 1-800-Contacts, Judge Denny Chin granted the motion with respect to the trademark infringement claims. The presence or absence of confusion was irrelevant to the decision: '[a] company's internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual's private thoughts about a trademark.' Slip op. at 22.

In sharp contrast, however, 10 days prior to Judge Chin's decision, the District Court for Minnesota denied a motion for summary judgment after the conclusion of discovery in a case that shared many common elements with Mediplan Health Consulting. See Edina Realty, Inc. v. Themlsonline.com, 2006 LEXIS 13775 (D.Minn. March 20, 2006). This case involved the purchase of keywords corresponding to the plaintiff's marks, as well as the use of the plaintiff's marks in some of those sponsored links.

With respect to the question of whether there was 'trademark' use, Judge John R. Tunheim stated, '[w]hile not a conventional 'use in commerce,' defendant nevertheless uses the [plaintiff's] marks commercially ' Based on the plain meaning of the Lanham Act, the purchase of search terms is a use in commerce.' Id. at 5. The court also denied the plaintiff's motion for summary judgment on these same claims. Thus, the case has been scheduled for trial. Id. at 10.

Conclusion

For the moment, the non-trademark use defense appears limited to cases involving the Internet or toll-free phone numbers. However, that may soon change. It is anticipated that the president will sign an amendment to the Federal Trademark Dilution Act, recently passed by Congress, that will greatly increase the protection available to owners of marks with nationwide fame. These amendments statutorily overrule virtually every court-imposed limitation on the application of the dilution doctrine ranging from the requirement for a showing of actual dilution, to limiting eligible marks to those that are inherently distinctive. To the extent that the courts continue to look for a limiting factor to the dilution concept, the non-trademark use defense may be viewed as the solution. It would be highly ironic if an unintended consequence of the dilution amendments was a net diminishment in the protection available to trademark owners.

Whether the sale of keywords corresponding to trademarks creates a likelihood of confusion is a close question. But it is a question that deserves to be adjudicated on the merits. If in fact consumers are being confused ' at least a theoretical possibility ' those responsible should be accountable. Moreover, one must assume that the search engine industry has researched this issue, perhaps in depth. It seems odd that the best evidence concerning how consumers search the Internet and the role trademarks play in that process can be shielded from discovery by application of the non-trademark use defense as a threshold inquiry. To the extent that the non-trademark use defense allows defendants to escape liability for having created and profited from confusion in the marketplace, the defense is inconsistent with the fundamental purpose of trademark law: protecting the commercial magnetism of a mark against uses that are likely to deceive consumers.

Stephen Feingold is the head of Pitney Hardin LLP's Trademark, Copyright & Internet Group, and is resident in the firm's NY office. Marc A. Lieberstein is a partner and Cecelia Kehoe Dempsey is a counsel in the Group and are also resident in NY. The opinions expressed in this article are the authors' and do not represent the views of Pitney Harding or its clients.

In order to avoid liability for trademark infringement relating to the sale of keywords corresponding to trademarks, search engines, including Google, are attacking the concept that trademark owners should be able to protect the 'commercial magnetism' of their marks. Recently, in Rescue.com v. Google , Inc. , No. 5:04-CV-1056 (N.D.N.Y.), Google argued that the trademark laws 'are not meant to protect consumer good will [sic] created through extensive, skillful, and costly advertising.' Google's Reply Brief at 4 n.4 (2005) (citing Smith v. Chanel , Inc. , 402 F.2d 562, 566 (9th Cir. 1968)).

At issue in Rescue.com is the current business practice of allowing advertisers to purchase particular search terms to generate what are typically labeled as 'sponsored links.' Rescue.com alleged Google infringed its trademark by allowing and advising a rival computer service company to buy Rescue.com's trademark as a keyword. As a result, Rescue.com alleged, Google users contacted Rescue.com's competitor under the mistaken impression that the competitor was associated with Rescue.com. Google's position is that its conduct does not involve a 'trademark use' and therefore is beyond the reach of the Lanham Act.

This argument challenges the very core of trademark law's purpose and boldly contradicts Justice Felix Frankfurter's trademark law primer in Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co. , 316 U.S. 203, 205 (1942) concerning the place of trademark protection in the modern economy:

The protection of trade-marks is the law's recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trademark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same ' to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trademark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.

Trademark practitioners have relied on those words for years to police their marks. Google and others now apparently want to erase them completely.

Justice Frankfurter's eloquent summary describes the underlying presumptions that have shaped trademark law for more than half a century. It encapsulates the judicial trend for many years to interpret the Lanham Act in a manner that provided trademark owners with expanded protection for their brands. Indeed, while at one time trademark law provided protection exclusively to 'technical trademarks' and limited infringing conduct to the sale of directly competing goods, see Trademark Act of 1905, ch. 592, '16, by the 1990s trademark law recognized post-sale confusion, see, e.g., Meridian Mutual Insurance Co. v. Meridian Insurance Group, Inc. , 128 F.3d 111 (7th Cir. 1997) (court must consider confusion of purchaser of insurance policy while making a claim), and initial interest confusion, see, e.g., Mobil Oil Corp. v. Pegasus Petroleum, Corp., 818 F.2d 254 (2d Cir. 1987) (likelihood that oil trader might listen to cold call from Pegasus Petroleum is sufficient confusion for infringement). As part of this trend, in 1962 the Lanham Act was also amended to apply expressly to confusion not only as to source but also as to affiliation. See 1962 Pub. L. 87-772, 76 Stat. 769.

Significantly, in Mishawaka there was 'no evidence that particular purchasers were actually deceived into believing that the [defendant's products] were manufactured by [the trademark owner.]' Mishawaka, 316 U.S. at 204. Against this backdrop, it is clear that Justice Frankfurter was articulating a justification for infringement based not on evidence of confusion, but on the misappropriation of the trademark owner's goodwill (ie, the commercial magnetism of a mark) by the defendant in order to increase its own profit.

The Emerging 'Non-Trademark Use' Defense

Trademark owners should recognize that the judicial trend in favor of expanding trademark protection is waning. The emerging 'non-trademark use' defense permits a finding of non-infringement regardless of the existence of confusion. This complete unfettering of trademark law from confusion in the context of a defense to infringement is virtually unprecedented in trademark jurisprudence in the United States.

This new defense is closely related to a series of criticisms levied at how the Lanham Act has been applied and, in particular, with the Polaroid multi-factor test. Virtually every circuit uses this test, or some variation, to evaluate whether an allegedly infringing use is likely to cause confusion. Critics argue that the Polaroid test is too easily manipulated to justify any particular result that a court wants to reach. Further, critics argue, even in those cases where the multi-factor test simply will not support a finding of infringement, courts will apply a second test ' often sub silencio ' in order to 'protect' a sympathetic plaintiff: the 'misappropriation of goodwill' where 'goodwill misappropriation is a conclusion and not an analytic tool.' Goldman, Deregulating Rele-vance in Internet Trademark Law, 54 Emory L.J. 507 (2006). In other cases, courts have relied on the concept of initial interest confusion to bypass the Pola-roid factors. See, e.g., Brookfield Commu-nications v. West Coast Entertainment Group, 174 F.3d 1036, 1050 (9th Cir. 1999).

While Brookfield received rave reviews when it was first issued, see, e.g., McCarthy on Trademarks '25:76 (applauding decision) and Rossi, Protection for Trademark Owners, 42 Santa Clara L. Rev. 295, 327 (2002) (same), and was quickly adopted by almost every circuit, it is now under sharp attack. See, e.g., Widmaier, Use, Liability, and The Structure of Trademark Law, 33 Hofstra L. Rev. 603 (2005) and Goldman, supra. One Ninth Circuit judge has indicated the decision should be revisited. See Playboy Enterprises, Inc. v. Netscape Communi-cations Corporation , 354 F.3d 1020, 1034-36 (9th Cir. 2004) (Berzon, J. concurring).

These critics argue that the initial interest theory does not account for the fact that, in their opinion, when someone says 'FedEx that to me' they are merely saying they want the package the next day, not that they want the sender to use a particular carrier. By excluding the possibility that consumers do use trademarks in this 'pseudo-generic' fashion ' in fact by presuming that consumers only use trademarks as TRADEMARKS ' these critics argue trademark law generally, and the initial interest concept in particular, unfairly deprive consumers of information that will help them make educated choices.

In response, trademark owners point to the doctrine of trademark fair use as the safety valve allowing for unauthorized third party use. Certainly, in the last 10 years the concept of trademark fair use has become more prominent than ever before. The Supreme Court has held that the presence of actual confusion does not necessarily negate the defense. KP Permanent Make-Up, Inc. v. Lasting Impressions, Inc. , 543 U.S. 111, 121 (2004) ('some possibility of consumer confusion must be compatible with fair use. … '). At the same time, however, the Court cautioned that its holding 'does not foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant's use is objectively fair.' Id. at 123. To the surprise of some, on remand the Ninth Circuit again found that the district court had improperly granted summary judgment to the defendant and returned the case to the district court with instructions that because there were material facts in dispute concerning the level of confusion, there were by necessity material facts in dispute on whether the use was fair. KP Permanent Make-Up, Inc. v. Lasting Impression, Inc. , 408 F.3d 596 (9th Cir. 2005).

The fact that trademark owners managed to keep confusion 'alive' after Lasting Impression has led one commentator to find that these fair use defenses are insufficient to safeguard legitimate commerce because they remain tethered to the presence vel non of confusion. Moreover, because the multi-factor test includes the defendant's intent in using the mark, it unfairly favors the trademark owner. In this commentator's view, the 'issue of the defendant's intent or good faith is not relevant' in evaluating whether a particular use will 'facilitate the flow of useful, non-confusing information to consumers and to enhance marketplace efficiency.' Barrett, Internet Trademark Suits and the Demise of 'Trademark Use,' 39 U.C. Davis L. Law Rev. 371, 432 (2006).

For this reason, the non-trademark use defense is not just another variation of the fair use defense. The holding of the Second Circuit in 1-800-Contacts, Inc. v. WhenU.com , 414 F.3d 400 (2nd Cir. 2005), aptly illustrates both the power and danger of the defense. To summarize briefly, 1-800-Contacts concerned customized pop-up advertisements triggered by the consumer's decision to visit a particular Web site. The precise question was whether the use of a trademark to trigger this pop-up constituted an infringement.

At a preliminary injunction hearing, the plaintiff introduced survey evidence indicating that 59% of consumers believed that the Web site they were visiting was responsible for the pop-up they saw on top of the trademark owner's site. The district court issued the injunction. 1-800-Contacts, Inc. v. Whenu.com , 309 F. Supp. 2d 467, 500 (S.D.N.Y. 2003), rev'd, 414 F.3d 400 (2d Cir. 2005).

The Second Circuit reversed, and held that the defendant had not made a 'trademark use' of the plaintiff's mark. The use of the plaintiff's mark to trigger the pop-up was akin to 'an individual's private thoughts about a trademark,' which the Second Circuit stated was clearly non-infringing. 1-800-Contacts, 414 F.3d at 409. In response to the plaintiff's argument that the defendant had made a trademark use of its marks because the use had caused confusion, the Second Circuit explained:

Again, this rationale puts the cart before the horse. Not only are 'use,' 'in commerce,' and 'likelihood of confusion,' three distinct elements of a trademark infringement claim, but 'use' must be decided as a threshold matter because, while any number of activities may be 'in commerce' or create a likelihood of confusion, no such activity is actionable under the Lanham Act absent the 'use' of a trademark. Id. at 412.

The non-trademark use defense predates the 1-800-Contacts decision. However, it has only been the emergence of new marketing channels that has allowed the defense to gain any real traction. For instance, one of the first cases to address this issue involved the importation of gray market goods. See Sebastian v. Longs Drug, 29 U.S.P.Q.2d 1710 (C.D. Cal. 1993). The defendant argued that it had not used the plaintiff's marks in commerce because it did not affix them to the goods, but merely imported them. Since '45 of the Lanham Act defines 'use in commerce' of a trademark as affixing it to the goods or labels, the defendant moved to dismiss. The court clearly did not take the defense seriously, noting that 'the Ninth Circuit and others have entertained multitudes of infringement cases involving the resale of genuine goods bearing true marks. Notably, these courts never questioned whether the marks were used 'in commerce.” Id. at 1712.

Three years later, the Sixth Circuit became perhaps the first court to uphold the defense. Holiday Inns, Inc. v. 800 Reservations, Inc., 86 F.3d 619, 625 (6th Cir. 1996). The defendant acquired 1-800-H0[zero]LIDAY in order to capitalize on the consumers who misdialed when attempting to call 1-800-HOLIDAY, the plaintiff's reservation line. The defendant astutely recognized that it did not have to market the number for it to attract customers, and therefore, simply waited to fulfill the calls that inevitably came. The district court entered judgment for the plaintiff noting that '[if] not for Holiday Inn's spending millions of dollars on advertising each year, defendants would have no service whatsoever to provide to the consumer.' Id. at 624.

The Sixth Circuit reversed. It explained that the defendant in this case did not create the confusion; it merely took advantage of confusion already existing in the marketplace. Id. at 626. The Eighth Circuit reached a similar result in another case also involving toll free phone numbers. See DaimlerChrysler AG v. Bloom , 315 F.3d 932 (8th Cir. 2003).

The Holiday Inn application of non-trademark use makes sense because there truly was no use of the plaintiff's mark. 1-800-Contacts is not analogous to the Holiday Inn and DaimlerChyrlser cases. The defendant in 1-800-Contacts is not merely waiting for someone to visit its site to show a pop-up. The trigger to these pop-ups is not a consumer who mistypes the trademark owner's mark (which would be the equivalent to the misdialing of HOLIDAY on the phone pad), but is the use of a brand name by the consumer, reflecting its commercial magnetism.

Moreover, while the survey in 1-800-Contacts was problematic, its 59% confusion number, even if overstated, indicates at the very least that there may be a likelihood of confusion, which could be proved after the completion of all discovery and a trial on the merits. The Second Circuit holding denied the plaintiff the ability to develop this evidence by defining this question as a 'threshold' inquiry, thereby making it ripe for a motion to dismiss. In other words, confusion no longer matters. 1-800-Contacts, 414 F.3d at 412.

To accept this defense we must assume that Congress was not concerned about consumer confusion, unless it resulted from a use that satisfied the very technical requirements for registering a trademark at the Trademark Office. Consider if a discount clothing company produced a catalog that did not contain any ordering information and placed the mark of a premium-clothing designer on its cover, the non-trademark use defense would result in a finding of no infringement. See Land's End Inc. v. Manbect, 797 F. Supp. 511 (E.D. Va. 1992) (catalog without order form is not proper specimen because it does not show use of mark on or in connection with the sale of goods) . Similarly, any use of a trademark for goods on the Internet is non-trademark use, unless the particular Web page on which it is used contains ordering information. See In re MediaShare Corp., 43 U.S.P.Q.2d 1304 (T.T.A.B. 1997).

Two recent cases illustrate the power of this new defense. In Merck & Co. v. Mediplan Health Consulting Inc. d/b/a/ RXNorth.com, 2006 LEXIS 14826 (S.D.N.Y. March 30, 2006), Merck filed claims against six online pharmacies in Canada that purchased Zocor as a key word from Google and Yahoo! creating 'sponsored' links to defendants' sites. The defendants moved to dismiss in lieu of filing answers. Relying on 1-800-Contacts, Judge Denny Chin granted the motion with respect to the trademark infringement claims. The presence or absence of confusion was irrelevant to the decision: '[a] company's internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual's private thoughts about a trademark.' Slip op. at 22.

In sharp contrast, however, 10 days prior to Judge Chin's decision, the District Court for Minnesota denied a motion for summary judgment after the conclusion of discovery in a case that shared many common elements with Mediplan Health Consulting. See Edina Realty, Inc. v. Themlsonline.com, 2006 LEXIS 13775 (D.Minn. March 20, 2006). This case involved the purchase of keywords corresponding to the plaintiff's marks, as well as the use of the plaintiff's marks in some of those sponsored links.

With respect to the question of whether there was 'trademark' use, Judge John R. Tunheim stated, '[w]hile not a conventional 'use in commerce,' defendant nevertheless uses the [plaintiff's] marks commercially ' Based on the plain meaning of the Lanham Act, the purchase of search terms is a use in commerce.' Id. at 5. The court also denied the plaintiff's motion for summary judgment on these same claims. Thus, the case has been scheduled for trial. Id. at 10.

Conclusion

For the moment, the non-trademark use defense appears limited to cases involving the Internet or toll-free phone numbers. However, that may soon change. It is anticipated that the president will sign an amendment to the Federal Trademark Dilution Act, recently passed by Congress, that will greatly increase the protection available to owners of marks with nationwide fame. These amendments statutorily overrule virtually every court-imposed limitation on the application of the dilution doctrine ranging from the requirement for a showing of actual dilution, to limiting eligible marks to those that are inherently distinctive. To the extent that the courts continue to look for a limiting factor to the dilution concept, the non-trademark use defense may be viewed as the solution. It would be highly ironic if an unintended consequence of the dilution amendments was a net diminishment in the protection available to trademark owners.

Whether the sale of keywords corresponding to trademarks creates a likelihood of confusion is a close question. But it is a question that deserves to be adjudicated on the merits. If in fact consumers are being confused ' at least a theoretical possibility ' those responsible should be accountable. Moreover, one must assume that the search engine industry has researched this issue, perhaps in depth. It seems odd that the best evidence concerning how consumers search the Internet and the role trademarks play in that process can be shielded from discovery by application of the non-trademark use defense as a threshold inquiry. To the extent that the non-trademark use defense allows defendants to escape liability for having created and profited from confusion in the marketplace, the defense is inconsistent with the fundamental purpose of trademark law: protecting the commercial magnetism of a mark against uses that are likely to deceive consumers.

Stephen Feingold is the head of Pitney Hardin LLP's Trademark, Copyright & Internet Group, and is resident in the firm's NY office. Marc A. Lieberstein is a partner and Cecelia Kehoe Dempsey is a counsel in the Group and are also resident in NY. The opinions expressed in this article are the authors' and do not represent the views of Pitney Harding or its clients.