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Second Circuit limits 1-800 Contacts; keyword advertising can be use in commerce
April 14, 2009
In a recent decision, the Second Circuit reversed a district court's grant of a motion to dismiss in a trademark infringement case. The district court, relying on the Second Circuit's 2005 decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., held Google's use of its Adwords and Keyword Suggestion Tool to cause advertising to appear when certain trademarked words and phrases are searched did not constitute a "use in commerce" as defined in § 1127 and required for a claim of trademark infringement under § 1114.

On appeal, the Second Circuit reversed, holding this practice did constitute a use in commerce. The court distinguished the 1-800 Contacts case, observing in that case, the advertisements were in response to visiting a website, not the entry of a trademark. Further, in that case, advertisers could not "purchase" a competitors keyword, so even if an advertiser wanted its ads to appear when a user visited a competitor's site, the defendant did not offer such a service.

In contrast, here Google not only keys the advertisements to the trademark itself (rather than as a result of visiting a website), but also permits anyone to pay to have its advertisements shown when a trademark is searched. The Keyword Suggestion Tool will also suggest that advertisers key their advertisments to trademarked terms. Based on these allegations (taken as true in the context of Google's motion to dismiss), the Second Circuit held there was a use in commerce, and reversed the district court's dismissal of the case.

More detail of Rescuecom Corp. v. Google Inc. after the jump.

Google's main source of income is the sale of advertisements that appear, among other places, along with a user's search results. Adwords is a utility that lets advertisers select specific keywords that, when entered into Google's search engine by users, displays an advertisement associated with the advertiser's product. This advertisement is separated from the search terms by a border and accompanied by the heading "Sponsored Link(s)." The advertiser then pays Google for each user that clicks on a sponsored link. Adwords accounts for over 90% of Google's revenue. Google also offers a Keyword Suggestion Tool, which suggests additional keywords that may be appropriate for an advertiser to associate with its advertisements.

Rescuecom is in the compouter service and sales business, and is the owner of the trademark RESCUECOM. Rescuecom sued Google after it began sale of the RESCUECOM trademark to competitors through the Adwords and Keyword Suggestion Tool programs, asserting the keyword advertising created confusion in the minds of customers. Specifically, Rescuecom asserted customers searching for "Rescuecom" would mistakenly believe that a competitor's website, particularly when identified at the top of the search results, was affiliated with Rescuecom. Such a customer, while intending to purchase services from Rescuecom, would purchase services from another vendor.

The district court, relying on the Second Circuit's 2005 decision in 1-800 Contacts, Inc. v. WhenU.com, Inc., held Google's use of its Adwords and Keyword Suggestion Tool to cause advertising to appear when certain trademarked words and phrases are searched did not constitute a "use in commerce" as defined in § 1127 and required for a claim of trademark infringement under § 1114. Rescuecom appealed.

The Second Circuit reversed. The adware program at issue in the 1-800 Contacts case did not associate its advertisements with a keyword; instead it displayed advertisements in popup windows in response to a user visiting a certain website. Thus, according to the court, the trademark is not what triggered the advertisment, but instead it was the URL. Further, in 1-800 Contacts advertisers could not pay to have their advertisements shown in the context of certain pages. In other words, advertisers simply paid a fee and WhenU showed the advertisements when it thought it would be most contextually appropriate. The court distinguished this case from the 1-800 Contacts case in two ways:

First, in contrast to 1-800, where we emphasized that the defendant made no use whatsoever of the plaintiffs trademark, here what Google is recommending and selling to its advertisers is Rescuecom's trademark. Second, in contrast with the facts of 1-800 where the defendant did not "use or display," much less sell, trademarks as search terms to its advertisers, here Google displays, offers, and sells Rescuecom's mark to Google's advertising customers when selling its advertising services.

As a result, the court held there was a sufficient "use in commerce" alleged in Rescuecom's complaint. Accordingly, the Second Circuit reversed the district court's dismissal of the case.

To read the full decision in Rescuecom Corp. v. Google Inc., click here.

Other coverage of the decision:

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