Ninth Circuit Vacates Injunction In Advertising Keywords Case

Remember U.S. Supreme Court justice Potter Stewart's famous line about hardcore pornography? Stewart said it was tough to define, “but I know it when I see it.” The quip came to mind after a ruling last month by the U.S Court of Appeals for the Ninth Circuit in a trademark infringement case involving Internet advertising keywords. In essence, the Ninth Circuit concluded that there's no strict standard for determining infringement in the Internet age, so judges have to know it when they see it.

In a 35-page ruling, a three-judge Ninth Circuit panel vacated an injunction blocking a software company called Network Automation from using the keyword ActiveBatch to direct search-engine users to its products, even though ActiveBatch is the trademarked name of software sold by Network Automation's direct rival, Advanced Systems Concepts. The panel (appellate judges Stephen Trott and Kim McLane Wardlaw and Oregon federal district court judge Michael Mosman, sitting by designation) concluded that two long-established Ninth Circuit tests for trademark infringement couldn't be applied with “excessive rigidity” in evaluating online violations. Network Animation, Inc. v. Advanced Systems Concepts, Inc., D.C. No. 2:10-cv-00484-CBM-CW (9th Cir., March 8, 2011). (The opinion can be found at http://amlawdaily.typepad.com/networkautovadvancedsystems.pdf.)

The panel pointed back to the eight-prong standard for infringement it established in a 1979 case, AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir., 1979), and said Los Angeles federal district court senior judge Consuelo Marshall erred in limiting her analysis of Network Automation's alleged infringement to the three Sleekcraft factors the Ninth Circuit highlighted in a landmark 1999 case involving Internet advertising keywords, Brookfield Communications v. West Coast Entertainment, No. 98-56918 (9th Cir., 1999). Those three factors ' the similarity of the trademarks, the relatedness of the goods or services, and the simultaneous use of the Web as a marketing channel ' have become known as the “Internet troika” test for online infringement.

But in the Network opinion, written by Judge Wardlaw, the court pulled back from the troika, advising judges also to consider other Sleekcraft factors to determine the overall question of whether consumers are confused by use of the trademark. “Depending on the facts of each specific case arising on the Internet, other factors may emerge as more illuminating on the question of consumer confusion,” the panel concluded. “Given the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology ' it makes no sense to prioritize the same three factors for every type of potential online commercial activity.”

Although several Sleekcraft factors weighed in favor of Advanced Systems, the Ninth Circuit concluded that Judge Marshall “did not weigh the Sleekcraft factors flexibly to match the specific factors of this case.”

Network Automation counsel Brent Blakely, of the Blakely Law Group, says that the ruling sets important precedent in an emerging area of the law. “It clearly establishes that you can't use a rote Sleekcraft analysis,” he says, noting that his client pursued the Ninth Circuit appeal because it wanted guidance on the use of trademarks in keyword advertising. “What we got is a ruling that clearly says you can use someone's trademark in triggering ad buys as long as you're not creating confusion.”

James Doroshow, of Fox Rothschild, who argued at the Ninth Circuit for Advanced Systems Concepts, says his client is “obviously disappointed” that the injunction has been vacated. “We don't think the ruling is right, but we respect the Ninth Circuit's decision,” he says. The appellate panel remanded the case to the district court for further proceedings, but Doroshow says Advanced System hasn't determined its next step.

Remember U.S. Supreme Court justice Potter Stewart's famous line about hardcore pornography? Stewart said it was tough to define, “but I know it when I see it.” The quip came to mind after a ruling last month by the U.S Court of Appeals for the Ninth Circuit in a trademark infringement case involving Internet advertising keywords. In essence, the Ninth Circuit concluded that there's no strict standard for determining infringement in the Internet age, so judges have to know it when they see it.

In a 35-page ruling, a three-judge Ninth Circuit panel vacated an injunction blocking a software company called Network Automation from using the keyword ActiveBatch to direct search-engine users to its products, even though ActiveBatch is the trademarked name of software sold by Network Automation's direct rival, Advanced Systems Concepts. The panel (appellate judges Stephen Trott and Kim McLane Wardlaw and Oregon federal district court judge Michael Mosman, sitting by designation) concluded that two long-established Ninth Circuit tests for trademark infringement couldn't be applied with “excessive rigidity” in evaluating online violations. Network Animation, Inc. v. Advanced Systems Concepts, Inc., D.C. No. 2:10-cv-00484-CBM-CW (9th Cir., March 8, 2011). (The opinion can be found at http://amlawdaily.typepad.com/networkautovadvancedsystems.pdf.)

The panel pointed back to the eight-prong standard for infringement it established in a 1979 case, AMF Inc. v. Sleekcraft Boats , 599 F.2d 341 (9th Cir., 1979), and said Los Angeles federal district court senior judge Consuelo Marshall erred in limiting her analysis of Network Automation's alleged infringement to the three Sleekcraft factors the Ninth Circuit highlighted in a landmark 1999 case involving Internet advertising keywords, Brookfield Communications v. West Coast Entertainment, No. 98-56918 (9th Cir., 1999). Those three factors ' the similarity of the trademarks, the relatedness of the goods or services, and the simultaneous use of the Web as a marketing channel ' have become known as the “Internet troika” test for online infringement.

But in the Network opinion, written by Judge Wardlaw, the court pulled back from the troika, advising judges also to consider other Sleekcraft factors to determine the overall question of whether consumers are confused by use of the trademark. “Depending on the facts of each specific case arising on the Internet, other factors may emerge as more illuminating on the question of consumer confusion,” the panel concluded. “Given the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology ' it makes no sense to prioritize the same three factors for every type of potential online commercial activity.”

Although several Sleekcraft factors weighed in favor of Advanced Systems, the Ninth Circuit concluded that Judge Marshall “did not weigh the Sleekcraft factors flexibly to match the specific factors of this case.”

Network Automation counsel Brent Blakely, of the Blakely Law Group, says that the ruling sets important precedent in an emerging area of the law. “It clearly establishes that you can't use a rote Sleekcraft analysis,” he says, noting that his client pursued the Ninth Circuit appeal because it wanted guidance on the use of trademarks in keyword advertising. “What we got is a ruling that clearly says you can use someone's trademark in triggering ad buys as long as you're not creating confusion.”

James Doroshow, of Fox Rothschild, who argued at the Ninth Circuit for Advanced Systems Concepts, says his client is “obviously disappointed” that the injunction has been vacated. “We don't think the ruling is right, but we respect the Ninth Circuit's decision,” he says. The appellate panel remanded the case to the district court for further proceedings, but Doroshow says Advanced System hasn't determined its next step.