Do Keyword Search Terms Constitute 'Use' of a Trademark?

It has been judicially noted that '[t]he Court must avoid excessive rigidity when applying the law in the Internet context because emerging technologies require a flexible approach.' Edina Realty Inc. v. TheMLSonline.com, D. Minn., No. 04-4371, March 20, 2006, citing Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1054 (9th Cir. 1999) (4 ECLR 384, May 5, 1999). Recently, conflicts involving one of the emerging Internet technologies, namely sponsored online key word advertising, have yielded, not only judicial flexibility, but also a fair amount of ambiguity in applying the laws of trademark infringement in Internet advertising contexts. Two recent federal district court decisions on the issue ' Edina Realty v. TheMLSonline.com, D. Minn., No. 04-4371, March 20, 2006; and Merck & Co. Inc. v. Mediplan Health Consulting Inc. d/b/a RXNorth.com, S.D.N.Y., No. 05 Civ 36550, March 30, 2006 ' illustrate the current legal muddle in their diametrically opposite conclusions on the threshold question at the heart of each analysis: Does the purchase and use of key word search terms constitute 'use' of a trademark under the Lanham Act?

In both Edina and Merck, the defendants purchased from Internet search engines Google and Yahoo! the right to have their advertisements appear at the top or along the side of the search results page as 'Sponsored Ads' when a user types a competitor's name, which happens to contain a registered trademark. In the view of many trademark owners, these practices seem unfair because they electronically piggyback on the notoriety or goodwill of leading trademarks to generate and divert Internet traffic to a competitor's Web site. In any event, the practice is becoming more common in online advertising, a market that by all accounts is fast approaching and likely to surpass the advertising revenues of broadcast television and other more traditional media advertising venues.

'Use' of a Mark Defined

Before addressing whether the purchase and use of key word search terms constitutes trademark infringement under either '32 or '43(a) of the Lanham Act, a court must first decide whether such practice even constitutes 'use' of a mark under the Lanham Act definition:

The term 'use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this Chapter, a mark shall be deemed to be in use in commerce

(1) on goods when '

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale of advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services. 15 USC '1127.

Although this definition of 'use' appears more aptly suited to contexts of protectability or registrability of a plaintiff's or applicant's mark, it is expressly applicable to the infringement statutes, and courts generally apply it to determine whether an alleged infringer has made actionable 'use' of plaintiff's mark. See, e.g., Fieldturf, Inc. v. Triexe Mgmt. Group, Inc., 69 USPQ2d 1861 (N.D. Ill. 2003).

Edina Analysis: Sponsored Ads Equal Trademark Use

In Edina, the defendant argued that its purchase of search terms could not be a 'use in commerce' 'because there is no public promotion of the mark during the search transaction.' Edina at 3. Plaintiff countered that 'there is a visual element here because the Internet user types in the mark as a search term, which is displayed in the tool bar above the results.' Id. Acknowledging that such use is not a 'conventional 'use in commerce,” the court nonetheless held that, 'based on the plain meaning of the Lanham Act,' the defendant's purchase of search terms that include plaintiff's trademark to generate its sponsored link advertisement is a commercial use of the trademark. Id. The language of the opinion suggests that it is the very act of purchasing and using key word search terms that constitutes 'use' of the trademark, rather than any visual presence of the mark in the tool bar.

Edina cites in support of its opinion on this issue Brookfield Communi-cations, Inc. v. West Coast Entm't Corp., 174 F.3d 1036 (9th Cir. 1999), which it describes as 'finding Internet metatags to be a use in commerce.' Edina at 10. In Brookfield, however, this principle is more implied than stated. In the context of metatags or hidden Internet text, Brookfield stands more for the legal principle that, even though actual confusion as to source may be unlikely at the time of sale, using a competitor's trademark in a Web site's metatags is likely to cause 'initial interest confusion.' Initial interest confusion is said to occur when a consumer is deceptively lured or diverted from an intended seller to a competitor's place of business (physical or virtual) and, even though he or she is ultimately not confused between the respective products or services at the time of actual purchase, the act of diversion harms the originally intended seller. This principal is based on the following policy rationale:

[B]y using 'moviebuff.com' or 'MovieBuff' to divert people looking for 'MovieBuff' to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark. Brookfield, 174 F.3d at 1062.

Edina, like Brookfield, interprets the Lanham Act definition of 'use' broadly, as not requiring any public or visible display of a mark.

Merck Analysis: Sponsored Ads Do Not Equal Trademark Use

Applying the same definition of 'use' contained in 15 USC '1127 as the Edina court, the U.S. District Court for the Southern District of New York in Merck agreed with defendants that plaintiff's claim for infringement based on defendant's use of its trademark as a keyword to generate sponsored links should be dismissed as a matter of law, because this use does not constitute trademark 'use' and 'is not an independent basis for a trademark infringement claim.' Merck at 31, 34. Relying on the Second Circuit decision in 1-800 Contacts, Inc. v WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), 75 USPQ2d 1161, which similarly allowed defendant's use of plaintiff's trademarks in an unpublished software directory to trigger pop-up ads, Judge Denny Chin held that 'internal use of the mark 'Zocor' as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense.' Merck at 31. The court further noted that the plaintiff's mark was not 'placed' or used in any way that would indicate source or sponsorship, Merck at 31, 32, just as the 1-800 Contacts court noted that the defendant does not 'place ' reproduce or display plaintiff's trademark at all.' 1-800 Contacts, 414 F.3d at 408.

Quoting 1-800 Contacts, the opinion states: '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.' 1-800 Contacts, 414 F.3d at 409. Of course, such analogy ignores the fact that the 'private thoughts about a trademark,' unlike most mortal thoughts, produce a physical result: the appearance of defendant's sponsored ad link.

Interestingly, the facts of 1-800 Contacts, on which the Merck decision relies, differ from Merck in that they involve the specific use of plaintiff's trademark only in the form of a Web site address, a distinction the court uses to some degree in dicta to justify its decision:

[I]t is plain that WhenU is using the 1-800 Contacts website address precisely because it is a website address, rather than because it bears any resemblance to 1-800's trademark ' Thus the appearance of 1-800's website address in the directory does not create a possibility of visual confusion with 1-800's mark. More important, a WhenU pop-up ad cannot be triggered by a C-user's input of the 1-800 trademark or the appearance of that trademark on a web page accessed by the c-user. Rather, in order for WhenU to capitalize on the fame and recognition of 1-800's trademark ' the improper motivation both 1-800 and the district court ascribe to WhenU ' it would have needed to put the actual trademark on the list.

However, this sentiment is tempered by a footnote, stating: 'This observation, however, is not intended to suggest that inclusion of a trademark in the directory would necessarily be an infringing 'use.' We express no view on this distinct issue.' 1-800 Contacts, 414 F.3d at 409 n.11. In this respect, Merck goes further than 1-800 Contacts in blessing the use of a competitor's trademarks in internal Internet advertising mechanisms. Common to both decisions, however, is an emphasis on the fact that the trademarks at issue are only used internally and not shown to the public: '[s]uch conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services.' 1-800 Contacts, F.3d at 409. These practices should be carefully distinguished from placing and displaying another party's trademark in a banner ad visible to Internet users, which is far more likely to constitute trademark 'use.'

Two Views ' Two Analogies

Brookfield and 1-800 Contacts, the principal guiding authorities on which Edina and Merck rely, differ in two significant ways central to this discussion. The first is that Brookfield takes a broader view of the Lanham Act 'use' definition, ie, it construes it as covering more than the public display of a trademark leading to traditional source confusion, while 1-800 Contacts appears to view the public display of a mark to consumers as the sine qua non for establishing trademark use.

The second notable difference is the way the two sides view the potential harm involved in internal, nonpublic uses of trademarks, such as in metatags or key word search terms. The 'brick-and-mortar' analogies employed in both opinions are revealing of the courts' views on these points. In the Brookfield explanation of 'initial interest confusion,' the court describes a scenario where Company A erects a misleading highway billboard showing its competitor Company B's business name, but instead of noting the exit number for Company B, it notes Company A's exit number. When customers pull off the wrong exit and arrive at Company's A's store by mistake, they end up purchasing from Company A at the expense of Company B. Brookfield, 174 F.3d at 1064. By this analogy, the Brookfield court illustrates the view that, even when there is no source confusion at the time of purchase, the misleading use of another's trademark can lead to a high degree of harm to competitors and to competition in general.

1-800 Contacts employs a different but equally familiar store analogy, namely the purportedly 'routine' practice where vendors seek specific 'product placement' in retail stores next to popularly branded products in order to capitalize on a competitor's brand recognition and induce a customer who has specifically sought out the popular brand to consider the lesser-known alternative. 1-800 Contacts, 414 F.3d at 411. In this scenario, there is a more subtle association between one vendor's brand and its competitor's; however, the harms do not seem as dire, and in fact, the practice appears to be both pro-consumer and pro-competition.

While the weight of authority appears to be tilting in the direction of the 1-800 Contacts and Merck views, ie, that the purchase and use of key word search terms does not constitute 'use' of a trademark under the Lanham Act and is therefore not actionable, in the coming years, courts will need to decide which analogies are more appropriate and instructive in the context of Internet advertising and provide some clarity and certainty on this issue for all concerned.

Paul A. Lee is Counsel, Intellectual Property, for Time Warner Inc.

It has been judicially noted that '[t]he Court must avoid excessive rigidity when applying the law in the Internet context because emerging technologies require a flexible approach.' Edina Realty Inc. v. TheMLSonline.com , D. Minn., No. 04-4371, March 20, 2006, citing Brookfield Commc'ns, Inc. v. W. Coast Entm't Corp ., 174 F.3d 1036, 1054 (9th Cir. 1999) (4 ECLR 384, May 5, 1999). Recently, conflicts involving one of the emerging Internet technologies, namely sponsored online key word advertising, have yielded, not only judicial flexibility, but also a fair amount of ambiguity in applying the laws of trademark infringement in Internet advertising contexts. Two recent federal district court decisions on the issue ' Edina Realty v. TheMLSonline.com, D. Minn., No. 04-4371, March 20, 2006; and Merck & Co. Inc. v. Mediplan Health Consulting Inc. d/b/a RXNorth.com, S.D.N.Y., No. 05 Civ 36550, March 30, 2006 ' illustrate the current legal muddle in their diametrically opposite conclusions on the threshold question at the heart of each analysis: Does the purchase and use of key word search terms constitute 'use' of a trademark under the Lanham Act?

In both Edina and Merck, the defendants purchased from Internet search engines Google and Yahoo! the right to have their advertisements appear at the top or along the side of the search results page as 'Sponsored Ads' when a user types a competitor's name, which happens to contain a registered trademark. In the view of many trademark owners, these practices seem unfair because they electronically piggyback on the notoriety or goodwill of leading trademarks to generate and divert Internet traffic to a competitor's Web site. In any event, the practice is becoming more common in online advertising, a market that by all accounts is fast approaching and likely to surpass the advertising revenues of broadcast television and other more traditional media advertising venues.

'Use' of a Mark Defined

Before addressing whether the purchase and use of key word search terms constitutes trademark infringement under either '32 or '43(a) of the Lanham Act, a court must first decide whether such practice even constitutes 'use' of a mark under the Lanham Act definition:

The term 'use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. For purposes of this Chapter, a mark shall be deemed to be in use in commerce

(1) on goods when '

(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale of advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services. 15 USC '1127.

Although this definition of 'use' appears more aptly suited to contexts of protectability or registrability of a plaintiff's or applicant's mark, it is expressly applicable to the infringement statutes, and courts generally apply it to determine whether an alleged infringer has made actionable 'use' of plaintiff's mark. See, e.g., Fieldturf, Inc. v. Triexe Mgmt. Group, Inc., 69 USPQ2d 1861 (N.D. Ill. 2003).

Edina Analysis: Sponsored Ads Equal Trademark Use

In Edina, the defendant argued that its purchase of search terms could not be a 'use in commerce' 'because there is no public promotion of the mark during the search transaction.' Edina at 3. Plaintiff countered that 'there is a visual element here because the Internet user types in the mark as a search term, which is displayed in the tool bar above the results.' Id. Acknowledging that such use is not a 'conventional 'use in commerce,” the court nonetheless held that, 'based on the plain meaning of the Lanham Act,' the defendant's purchase of search terms that include plaintiff's trademark to generate its sponsored link advertisement is a commercial use of the trademark. Id. The language of the opinion suggests that it is the very act of purchasing and using key word search terms that constitutes 'use' of the trademark, rather than any visual presence of the mark in the tool bar.

Edina cites in support of its opinion on this issue Brookfield Communi-cations, Inc. v. West Coast Entm't Corp ., 174 F.3d 1036 (9th Cir. 1999), which it describes as 'finding Internet metatags to be a use in commerce.' Edina at 10. In Brookfield, however, this principle is more implied than stated. In the context of metatags or hidden Internet text, Brookfield stands more for the legal principle that, even though actual confusion as to source may be unlikely at the time of sale, using a competitor's trademark in a Web site's metatags is likely to cause 'initial interest confusion.' Initial interest confusion is said to occur when a consumer is deceptively lured or diverted from an intended seller to a competitor's place of business (physical or virtual) and, even though he or she is ultimately not confused between the respective products or services at the time of actual purchase, the act of diversion harms the originally intended seller. This principal is based on the following policy rationale:

[B]y using 'moviebuff.com' or 'MovieBuff' to divert people looking for 'MovieBuff' to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark. Brookfield, 174 F.3d at 1062.

Edina, like Brookfield, interprets the Lanham Act definition of 'use' broadly, as not requiring any public or visible display of a mark.

Merck Analysis: Sponsored Ads Do Not Equal Trademark Use

Applying the same definition of 'use' contained in 15 USC '1127 as the Edina court, the U.S. District Court for the Southern District of New York in Merck agreed with defendants that plaintiff's claim for infringement based on defendant's use of its trademark as a keyword to generate sponsored links should be dismissed as a matter of law, because this use does not constitute trademark 'use' and 'is not an independent basis for a trademark infringement claim.' Merck at 31, 34. Relying on the Second Circuit decision in 1-800 Contacts, Inc. v WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), 75 USPQ2d 1161, which similarly allowed defendant's use of plaintiff's trademarks in an unpublished software directory to trigger pop-up ads, Judge Denny Chin held that 'internal use of the mark 'Zocor' as a key word to trigger the display of sponsored links is not use of the mark in a trademark sense.' Merck at 31. The court further noted that the plaintiff's mark was not 'placed' or used in any way that would indicate source or sponsorship, Merck at 31, 32, just as the 1-800 Contacts court noted that the defendant does not 'place ' reproduce or display plaintiff's trademark at all.' 1-800 Contacts, 414 F.3d at 408.

Quoting 1-800 Contacts, the opinion states: '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.' 1-800 Contacts, 414 F.3d at 409. Of course, such analogy ignores the fact that the 'private thoughts about a trademark,' unlike most mortal thoughts, produce a physical result: the appearance of defendant's sponsored ad link.

Interestingly, the facts of 1-800 Contacts, on which the Merck decision relies, differ from Merck in that they involve the specific use of plaintiff's trademark only in the form of a Web site address, a distinction the court uses to some degree in dicta to justify its decision:

[I]t is plain that WhenU is using the 1-800 Contacts website address precisely because it is a website address, rather than because it bears any resemblance to 1-800's trademark ' Thus the appearance of 1-800's website address in the directory does not create a possibility of visual confusion with 1-800's mark. More important, a WhenU pop-up ad cannot be triggered by a C-user's input of the 1-800 trademark or the appearance of that trademark on a web page accessed by the c-user. Rather, in order for WhenU to capitalize on the fame and recognition of 1-800's trademark ' the improper motivation both 1-800 and the district court ascribe to WhenU ' it would have needed to put the actual trademark on the list.

However, this sentiment is tempered by a footnote, stating: 'This observation, however, is not intended to suggest that inclusion of a trademark in the directory would necessarily be an infringing 'use.' We express no view on this distinct issue.' 1-800 Contacts, 414 F.3d at 409 n.11. In this respect, Merck goes further than 1-800 Contacts in blessing the use of a competitor's trademarks in internal Internet advertising mechanisms. Common to both decisions, however, is an emphasis on the fact that the trademarks at issue are only used internally and not shown to the public: '[s]uch conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services.' 1-800 Contacts, F.3d at 409. These practices should be carefully distinguished from placing and displaying another party's trademark in a banner ad visible to Internet users, which is far more likely to constitute trademark 'use.'

Two Views ' Two Analogies

Brookfield and 1-800 Contacts, the principal guiding authorities on which Edina and Merck rely, differ in two significant ways central to this discussion. The first is that Brookfield takes a broader view of the Lanham Act 'use' definition, ie, it construes it as covering more than the public display of a trademark leading to traditional source confusion, while 1-800 Contacts appears to view the public display of a mark to consumers as the sine qua non for establishing trademark use.

The second notable difference is the way the two sides view the potential harm involved in internal, nonpublic uses of trademarks, such as in metatags or key word search terms. The 'brick-and-mortar' analogies employed in both opinions are revealing of the courts' views on these points. In the Brookfield explanation of 'initial interest confusion,' the court describes a scenario where Company A erects a misleading highway billboard showing its competitor Company B's business name, but instead of noting the exit number for Company B, it notes Company A's exit number. When customers pull off the wrong exit and arrive at Company's A's store by mistake, they end up purchasing from Company A at the expense of Company B. Brookfield, 174 F.3d at 1064. By this analogy, the Brookfield court illustrates the view that, even when there is no source confusion at the time of purchase, the misleading use of another's trademark can lead to a high degree of harm to competitors and to competition in general.

1-800 Contacts employs a different but equally familiar store analogy, namely the purportedly 'routine' practice where vendors seek specific 'product placement' in retail stores next to popularly branded products in order to capitalize on a competitor's brand recognition and induce a customer who has specifically sought out the popular brand to consider the lesser-known alternative. 1-800 Contacts, 414 F.3d at 411. In this scenario, there is a more subtle association between one vendor's brand and its competitor's; however, the harms do not seem as dire, and in fact, the practice appears to be both pro-consumer and pro-competition.

While the weight of authority appears to be tilting in the direction of the 1-800 Contacts and Merck views, ie, that the purchase and use of key word search terms does not constitute 'use' of a trademark under the Lanham Act and is therefore not actionable, in the coming years, courts will need to decide which analogies are more appropriate and instructive in the context of Internet advertising and provide some clarity and certainty on this issue for all concerned.

Paul A. Lee is Counsel, Intellectual Property, for Time Warner Inc.