United States: Protecting Your Brand in The Cyber Marketplace: Trends in Trademark Enforcement

Perhaps this has happened to you—you open up your morning newspaper to a half-page advertisement with your company’s product name in bold letters, in copy reading: "If You Like VIKING You Need NORSE." You think this is outrageous and a misuse of your company’s trademark. Take comfort in the fact that at least the open nature of traditional advertising, whether in print media or on broadcast or cable television, has revealed your competitor’s trademark misuse to you. Moreover, your legal counsel can rely on a well-settled body of legal precedent to analyze the strength of your company’s claim for trademark infringement, and your counsel can tell you there is precedent that will support your belief that this type of advertising is likely to confuse potential purchasers of VIKING products.

However, it is likely that both you and your competitors are relying less on traditional advertising media and more on the internet to market your products. You may know that currently the most popular form of internet advertising is to tie a company’s website into consumer’s use of a search engine. Companies often purchase keywords or engage other technical means to improve the ranking of their website in search listings.¹ While this may be a popular marketing tool, it can lead to a virtually invisible use of your company’s trademarks by your competitors to divert trade to their websites, which you may perceive as misuse. However, courts in the United States are becoming more reluctant to deem this hidden use of trademarks to divert trade as trademark infringement.

In the 10 years between October 1994 (when the first web advertisements were introduced on HotWired for brands including Zima, Club Med and AT&T) and the end of 2004, advertisers in the U.S. market as a whole increased their internet advertising spending from almost zero dollars to $9.6 billion. The internet advertising industry is now larger than the whole outdoor advertising industry, about 80 percent of the size of the magazine ad industry and half the size of the radio advertising sector.² Internet advertising revenues continue to grow, and the Interactive Advertising Bureau (IAB) recently confirmed that such revenues totaled $12.5 billion in 2005, a new annual record exceeding 2004 by 30 percent.³

Why has advertising tied to search engine usage become such a hot marketing tool? A study conducted by DoubleClick Inc. concluded that "roughly half of the people examined in the study who made an online purchase first conducted a search related to the product sometime in the 12 weeks prior" to making that purchase.⁴ The consumer using a search site such as Google or Yahoo! enters a search term into the search bar and a list of websites appear, which theoretically provide information related to the search term. As a result of the development of search advertising, the user is likely also to get another group of listings, "sponsored links," which typically appears in proximity to the basic results.⁵ These "sponsored links" are the visible evidence that the owners of the linked websites have paid for the right to be associated with the keyword typed by the consumer into the search bar. Why sponsored links? It seems that very few searchers go beyond the first page of results to find a website featuring the objective product, and internet advertisers have therefore been advised that "[s]earch engine visibility is the most important way of promoting Web sites…".⁶

There are different ways to improve a company’s "search engine visibility." One way is to modify its site to make it easier for search engines to automatically index it, for example, by incorporating metatags in the site’s source code.⁷ However, almost as soon as a search engine appears on the internet, its proprietors begin to offer advertisers a way to pay for the right to get their companies’ websites in front of internet searchers.⁸ The practice initially met with some resistance, but today Google and Yahoo! have become industry giants because they sell targeted ad space tied to specific search words or phrases known as "keywords."

It did not take long for savvy internet advertisers to realize that one way to attract purchasers to their sites would be to purchase their competitors’ trademarks as keywords. If you are selling VIKING widgets, your competitor could purchase VIKING as a keyword from a search vendor, causing your competitor’s ad and a link to its website to appear in the search results whenever a potential purchaser types VIKING into the search bar.⁹ Your website will also appear, but it may be your competitor’s advertisement that will catch the purchaser’s eye, leading him to bypass your website and go to your competitor. What can you do about this? Is it trademark infringement?

The permissibility of using trademarks as a means of diverting consumers to a website offering competing products remains uncertain. On the one hand, the use of a competitor’s trademark to divert consumers does constitute the exploitation of the goodwill in the mark in a way that benefits the user and harms the owner. On the other hand, trademark infringement and unfair competition under federal law require both use of a mark in connection with goods or services and proof that a likelihood of confusion in the marketplace will result. Some courts have found one or both of these elements lacking when the alleged infringement consists only of the purchase of a competitor’s trademark as a sponsored search term or use of a competitor’s mark as a metatag in the source code of its own website.

A number of courts have found the use of metatags to be perfectly legitimate under the doctrine of fair use. For example, a seller of replacement parts was found to be entitled to use the trademark of the original manufacturer as a metatag to inform its customers that it sells parts for the trademarked product (see Bijur Lubricating Corp. v. Devco Corp.).¹⁰ Similarly, in Playboy Enterprises, Inc. v. Welles,¹¹ the U.S. Court of Appeals for the Ninth Circuit held that the defendant, who had appeared in the plaintiff’s magazine as a PLAYMATE OF THE YEAR, was entitled to use that term to accurately describe the title that had been bestowed upon her by Playboy magazine.

The more difficult cases arise when a website operator does not offer the original products associated with a trademark or engage in any meaningful discussion, commentary or comparison with respect to the trademarked products. In those instances, the operator simply seeks to increase the traffic to its website either to generate advertising revenue or to offer products that compete with those sold under the trademark.

The cases considering whether use of a trademark as a metatag gives rise to infringement liability assume that the potential for confusion exists if the internet user is diverted from the bona fide website associated with the mark to a competing site. For example, in Brookfield Communications, Inc. v. West Coast Entertainment¹² the Ninth Circuit upheld a district court ruling that the defendant’s use of the mark MOVIEBUFF in the hidden code of its website would infringe the plaintiff’s MOVIEBUFF trademark. The court reasoned the initial interest confusion generated as a result of the manipulation of the search engine results constituted trademark infringement. However, as search engines have become less reliant on metatags to compile search results, litigation in this area has slowed considerably. In light of more recent cases testing other uses of "hidden" trademarks to divert traffic to a competitor’s website, it is not clear the Ninth Circuit’s Brookfield holding will continue to be followed.

In recent years search engine companies such as Google have altered their search algorithms to place less weight on metatags or other self-devised, unpaid devices for improving search visibility and more importance on algorithms that rank websites by the number of other sites that link to it. These changes have rendered more reliable results and hampered website operators’ manipulative tactics to achieve prominent placement. However, the prevalence of purchased and sponsored search terms complicate the search environment; a search engine operator will sell high placement on a list of results to the highest bidder. The sale of trademarked terms to sites offering competitive services has raised significant issues for trademark owners.

For example, Playboy Enterprises, Inc. challenged the practice of Excite, which sold to advertisers a list of hundreds of keywords, including the trademarks PLAYBOY and PLAYMATE.¹³ In remanding the case for trial, the Ninth Circuit held that Playboy could have a claim for infringement if it could prove users were likely to be confused as to the sponsorship of the banner ads that were triggered by searches for its trademarks. However, the court emphasized that if the advertisements clearly identified their source or engaged in a bona fide comparison with Playboy’s products, then no infringement would result because there would be no confusion (Playboy Enterprises, Inc. v. Netscape Communiations, Corp.).¹⁴ What distinguishes this case from the earlier metatag cases is the court’s increased emphasis on likelihood of confusion. The early cases generally assumed infringement as a consequence of misuse, but the more recent cases considering these issues have not made the same assumption.

A lawsuit brought against Google by Geico reflects the trend toward greater scrutiny of a plaintiffs’ "likelihood of confusion" claim in the context of sponsored links; courts will not readily agree with the plaintiff who argues the defendant’s actions caused confusion in the marketplace. In Government Employees Ins. Co. v. Google, Inc.,¹⁵ the court acknowledged that under certain circumstances a trademark owner could successfully sue a search engine provider for selling sponsored links corresponding to a trademark. However, because Geico failed to provide adequate evidence of a likelihood of confusion, its suit was dismissed.¹⁶

Adware is a program installed on a user’s computer that causes pop-up ads to appear, which are ostensibly matched to the user’s online activity. Adware can cause a pop-up ad to appear for a competitor of the company whose website the user seeks to visit. Because many consumers view pop-up advertising and the "spyware" that supports it as intrusive and annoying, internet advertising is moving away from such tools.¹⁷

Consistent with that trend, trademark owners have challenged the use of hidden trademarks to generate pop-up ads. In 2003 several companies sued WhenU.com, Inc., an adware publisher. The trademark owners and objected to the use of their

trademarks to trigger advertisements. Among the trademark owners who brought federal trademark complaints in different jurisdictions were U-Haul International, Inc.; Wells Fargo; and 1-800 Contacts, Inc. To date, WhenU.com has prevailed in all of these cases.

In both U-Haul Int’l, Inc. v. WhenU.com, Inc.¹⁸ and Wells Fargo & Co. v. WhenU.com, Inc.,¹⁹ the district courts found in favor of WhenU.com on the basis that the defendant had not "used" either plaintiff’s trademark in a manner implicated by the Lanham Act. The court in U-Haul ruled that because the pop-up ad triggered by the plaintiff’s trademark was separate and distinct from the underlying website, it did not display the plaintiff’s mark and did not impede users from visiting the plaintiff’s website; therefore, there was no infringement. The court in Wells Fargo found that not only did the defendant not "use" the plaintiff’s trademark, but also that the plaintiff had failed to prove that consumers were confused.

The U.S. Court of Appeals for the Second Circuit, in 1-800 Contacts, Inc. v. WhenU.com, Inc.,²⁰ reversed a preliminary injunction for 1-800 Contacts and dismissed the claims against WhenU.com. Its analysis was largely consistent with that of the early decisions by the federal courts in Virginia and Michigan. Specifically, it found that the absence of any visible display of the plaintiff’s mark by the defendant precluded any finding of actionable trademark "use" under the Lanham Act. Because the plaintiff’s mark only appeared inside inaccessible computer code, this "use" was unobservable and private and did not result in liability because it could not result in consumer confusion.

The Second Circuit’s analysis in 1-800 Contacts casts doubt on whether prior cases finding infringement based on the use of trademarks as metatags remain good law, particularly in the Second Circuit. A trademark embedded in HTML code as a metatag is no more visible to a viewer than the trademarks at issue in the WhenU.com cases. Therefore, it is difficult to see how a court could find that employing a competitor’s mark as a metatag to manipulate search engine results is trademark "use" but including a competitor’s mark in computer code to trigger pop-up advertisements is not.

The suspicion, apparent in recent decisions, on whether the use of a trademark in non-visible computer code is actual "use" in commerce is misplaced. When a company includes the trademark of a competitor as a metatag or purchases the word as a sponsored search term, the intent is clear: it seeks to exploit the goodwill in its competitor’s trademark by channeling users searching for the term to its own website. The "use" is a classic bait-and-switch. The consumer seeking to purchase or locate information about one product is presented with a different competing one instead. That the consumer will usually realize the products are not from the same source prior to making a purchase does not obviate the existence of the initial deception.

The ever increasing level of consumers’ sophistication seems to mitigate against successful infringement claims by trademark owners with respect to uses of their trademarks in the context of purchased search results, pop-up ads or metatags. Perhaps 10 years ago an internet consumer may have reasonably believed that a sponsored search result or pop-up ad corresponding to a particular mark indicated some connection or affiliation with the trademark owner. Today, internet consumers are more sophisticated, as well as numbed, with respect to the pervasiveness and ubiquity of pop-up ads and purchased search results. As a result, there is probably little, if any, genuine confusion caused in these circumstances anymore.

Therefore, unless the U.S. Congress amends the Lanham Act to make the use of trademarks to trigger pop-up ads and manipulate search engine results an express violation (as it did with respect to the use of trademarks as domain names in the Anticybersquatting Consumer Protection Act (ACPA)), it is likely trademark owners will have an increasingly difficult time prevailing on claims for federal trademark infringement arising from keyword purchasing, metatags, or pop-up advertising triggered by trademark-based searches based solely on alleged confusion in cyberspace.

Nonetheless, if you suspect your competitor has paid to get its website to appear whenever your customers type your trademark into the search bar, or you discover that your trademark is hidden in your competitor’s website source code, and you have venue in a circuit where the issue has not yet been decided, you may still bring a claim for federal trademark infringement, but pay close attention to the likelihood of confusion element. You may also consider filing in a jurisdiction where governed by state law, which often construes unfair competition more broadly than the Lanham Act. In such jurisdiction, the case may be focused on the "free ride" your competitor takes using your trademark. In addition, trademark owners should vigilantly police their marks on the internet, as elsewhere, for indicia of more traditional forms of trademark infringement, unfair competition, false advertising, commercial disparagement and cybersquatting, which still persists.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.