by Paul Alan Levy
We have often discussed on this blog the misuse of trademark law to suppress online speech that protects and benefits consumers, including both consumer commentary and comparative advertising. A Ninth Circuit decision yesterday should make it harder to pursue such claims.
Yesterday’s decision, Network Automation v. Advanced Systems Concepts, will be of particular interest in litigation over keyword advertising using trademarks, which we have defended as an important means for comparative advertising that provides useful information to consumers. The decision strongly implies that neither the purchase nor the sale of keyword ads using trademarks is inherently infringing. But the ruling also walks the Ninth Circuit away from several past rulings that are often cited by trademark holders to attack consumer criticism as well (although, to be fair, the Ninth Circuit itself has never applied its precedents that way). The opinion holds out hope for a more sensitive treatment of claims about online trademark infringement.
The decision arose out of an action for declaratory judgment of non-infringement brought by Network Automation against Advanced Systems, a competitor in the market for scheduling and management software. Advanced System counterclaimed and obtained a preliminary injunction forbidding Network Automation from buying keyword advertising to be displayed when Internet users enter the term “Active Batch”— the trademark for Advanced Systems’ software. Network Automation used the keyword advertising to call consumers’ attention to its competing product.
The court of appeals found no reason to believe on the “sparse record” before it that consumers would be deceived by the presence of keyword ads, while leaving open the possibility that trademark owners in other cases might be able to prove a likelihood of confusion. Some of the reasons given by the court for finding a lack of likely confusion would apply across the board to all keyword advertising cases, such as the very fact that the ads appear in a separate section of the Google and Bing search results pages as “sponsored links” or “sponsored sites.” Other aspects of the decision may not apply in other keyword advertising cases; for example, the court cites the fact that the rival companies target their sales pitches at fairly sophisticated consumers. And oddly unmentioned is a factor that one might consider highly significant – the wording of the keyword ads themselves. The text of the ads appears in the statement of facts, and the court notes the parties' disagreement about whether the ads were confusing; but it does not return to that controversy in ruling on the likelihood of confusion.
It should be clear, at the least, that in the Ninth Circuit the mere practice of buying — or selling – keyword advertising based on a trademark is not inherently an infringement of that trademark. The opinion should therefore be good news for those who support Google’s defense of keyword advertising against trademark claims in such cases as Rosetta Stone v. Google, now pending in the Fourth Circuit.
The ruling is equally important because it will further undermine the significance of the pioneering and oh so wrongheaded decision in Brookfield Communications v. West Coast Entertainment. In Brookfield, the court had reversed the denial of a preliminary injunction in a case where the parties had not even briefed the technological significance and consumer impact of domain names or keyword meta tags, not to speak of developing an evidentiary record on those issues. The lack of evidence did not dissuade the Ninth Circuit from opining at length about both issues, not to speak of developing the doctrine of “initial interest confusion.” It has always seemed to me that the decision was more reflective of judges' alarm about technologies they did not understand than about real dangers of consumer confusion.
Yesterday, however, the Ninth Circuit used a line from Brookfield itself to consign Brookfield to the dustbin of history: “We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach.” The court explains that unlike its perception of the situation in 1999, it is no longer true — if it ever was true — “that Internet users on the whole exercise a low degree of care.” Moreover, the court says, even when the trademark owner relies on a claim of initial internet confusion, “the owner of the mark must demonstrate likely confusion, not mere diversion.” The court also indicates its intent to limit the doctrine of initial interest confusion in the course of a ringing endorsement of Judge Berzon’s much-admired concurring opinion in Playboy Enterprises v. Netscape Communications — “it would be wrong to expand the initial interest confusion theory of infringement beyond the realm of the misleading and deceptive to the context of legitimate comparative and contextual advertising.”
Two other previous aspects of trademark law that find their origins in Brookfield are similarly cast aside. In a number of cases, the Ninth Circuit and other courts had suggested that, in applying the likelihood of confusion factor based on similarity of marketing channels, the fact that both parties advertised online would make this factor favor a finding of likelihood of confusion. In Network Automation the Ninth Circuit recognized the obvious — “it would be the rare commercial retailer that did not advertise online, and the shared use of a ubiquitous marketing channel does not shed much light on the likelihood of consumer confusion.” Similarly, the Ninth Circuit had said for some time that the most important factors in adjudicating claims of trademark infringement online were the so-called “Internet trinity” “(1) the similarity of the marks, (2) the relatedness of the goods or services, and (3) the simultaneous use of the Web as a marketing channel.” In Network Automation, the "Internet trinity" is relabeled the "Internet troika" (Christian reference good, Soviet reference bad), and the court says that the concept applies only to the use of trademarks in domain names, not to their use in Google search results.
I have some qualms even about the application of the analysis to domain names, because as we have argued elsewhere, the use of trademarks in domain names for Internet commentary sites about the trademark holder can be consistent with trademark law.
Trademark scholars and litigators will be discussing Network Automation for years to come. The court's determination to march through the standard "likelihood of confusion factors," while admitting that many of them are really not relevant, certainly makes one wonder why courts are so wedded to discussing these factors in every infringement case. Network Automation is not perfect, but it signals a welcome development in the trademark law to the Internet.
Eric Goldman has posted a thorough analysis of the decision as well as several recent district court rulings on the same issue.