Buying competitor’s trademark as AdWords not fair use; infringement case to head to trial

[Thanks to Professor Eric Goldman for notifying me of this case.]

The U.S. District Court for the District of Minnesota has denied summary judgment motions filed by both parties in a trademark infringement case concerning the purchase of sponsored listings on Google and Yahoo!. The court held that the defendant’s practice of purchasing search terms incorporating its competitor’s registered trademark is not protected by the doctrine of fair use. The court also held that the plaintiff had presented enough facts to show that a triable issue existed as to trademark infringement. The case is called Edina Realty, Inc. v. TheMLSonline.com.

Defendant TheMLSonline.com, a real estate brokerage firm, contracted with Google and Yahoo! to purchase several search terms incorporating variations of plaintiff’s registered trademark EDINA REALTY. Accordingly, when Google and Yahoo! users did a search for “Edina Realty,” a link to the defendant’s website appeared as a sponsored link above the link to plaintiff’s website, which appeared in the “natural” search results.

Plaintiff filed a federal lawsuit alleging, among other things, that defendant’s conduct was trademark infringement. Both parties moved for summary judgment on the question of infringement.

In denying both motions, the court considered the following three issues:

(1) Whether defendant’s purchase of key words was “use in commerce” as contemplated by the Lanham Act,

(2) Whether plaintiff presented sufficient evidence of likelihood of confusion to survive summary judgment, and

(3) Whether defendant’s purchase of the search terms was permissible under the doctrine of “nominative fair use.”

On these issues, the court answered, yes, yes, and no.

PURCHASE OF SEARCH TERMS AS “USE IN COMMERCE”

Without lengthy analysis, the court held that the defendant’s purchase of search terms did constitute use of the plaintiff’s mark in commerce. The court noted that although defendant’s use was not “conventional,” the purchase of terms comprising the marks, in order to generate sponsored link advertisements, satisfied the definition of use in commerce as provided in 15 U.S.C. §1127.

The court also relied on the case of Brookfield Communs., Inc. v. W. Coast Entm’t Corp., 174 F.3d 1036 (9th Cir.1999) (finding metatags to constitute use in commerce), to hold that defendant had “used” plaintiff’s mark.

EVIDENCE OF LIKELIHOOD OF CONFUSION

To assess plaintiff’s evidence of likelihood of confusion, the court analyzed six factors as instructed by the case of 3M v. Rauh Rubber, Inc., 130 F.3d 1305 (8th Cir.1997).

Strength of the owner’s mark. In this case there was no dispute that the plaintiff’s mark was descriptive, thus the court considered it “relatively weak” in assessing the evidence of likelihood of confusion.

Similarity between the owner’s mark and the alleged infringer’s mark. There was no dispute that defendant had used words identical to plaintiff’s mark in purchasing the search terms. Accordingly, this factor weighed in favor of the plaintiff.

Degree to which the products compete with each other. The evidence was undisputed that the plaintiff and defendant were in direct competition with one another. This factor also weighed in favor of the plaintiff.

Alleged infringer’s intent to pass off its goods as those of the trademark owner. On this factor, the court held that there was a genuine dispute as to material facts showing that the defendant intended to trade off the plaintiff’s goodwill. The defendant claimed that it had no bad intent, demonstrated by the fact that it had, on various occasions, directed confused customers back to the plaintiff. On the other hand, the plaintiff argued that defendant’s persistence in using the terms EDINA REALTY to generate sponsored links after being warned of potential infringement showed the defendant’s unlawful intent.

Incidents of actual confusion. On this factor as well, the court held that there was a genuine dispute of fact. Plaintiff had brought forth evidence that potential customers had called and e-mailed the defendant, inquiring about plaintiff’s properties. Defendant, in turn, offered what it believed to be legitimate explanations for these calls. Without deciding whether there was enough evidence to show actual confusion, the court concluded that there was enough evidence to raise a triable issue as to the likelihood of confusion.

Degree of purchaser care. The court concluded that there was a genuine issue of fact on the degree of care that the parties’ customers would exercise. Defendant argued that consumers exercise a great deal of care in selecting a broker, because real estate is a long term investment. On the contrary, plaintiff argued that because surfing the web is so easy, consumers do not put a lot of effort into the selection of a broker. Furthermore, plaintiff pointed to a study showing that nearly two thirds of Internet users cannot distinguish between sponsored and “natural” search results. Because of these conflicting views taken by the parties, the court concluded that a triable issue as to the degree of purchaser care remained.

Accordingly, the court denied plaintiff’s motion for summary judgment on the question of infringement, and the case will proceed toward trial.

NOMINATIVE FAIR USE

The court wasted no time in shooting down defendant’s argument that its purchase of plaintiff’s mark as search terms was protected as a nominative fair use. The court applied the test set forth in the recent case of Century 21 Real Estate Corp. v. Lendingtree, Inc., 425 F.3d 211, 222 (3rd Cir. 2005).

The court held that the defendant could have easily described the contents of its website for purposes of generating search results without using the plaintiff’s name. Additionally, the defendant’s use of the plaintiff’s mark in the sponsored results did not reflect the true competitive relationship between the parties. The court believed that the defendant could have done more to prevent an improper inference regarding the relationship.

Edina Realty, Inc. v. TheMLSonline.com, (Slip Op.) 2006 WL 737064 (D. Minn. March 20, 2006).