In a long-awaited opinion, the 2nd U.S. Circuit Court of Appeals ruled that Google must face a trademark infringement lawsuit for selling keywords that trigger ads.
The three-judge panel reversed a lower court's dismissal of Rescuecom v. Google, 06-4881, in which computer-repair company Rescuecom had claimed that users could be confused by links to competitors' ads that appear alongside Google search results for the company's trademarked name.
Google had persuaded the lower court to toss the case, arguing that its use of Rescuecom's trademark was internal and not a "use in commerce," which constitutes trademark infringement. The dismissal was hailed as a big victory for Google and other search engines, for which keyword advertising is a lucrative business.
The appeals court ruled Friday that "Google's recommendation and sale of Rescuecom's mark to its advertising customers are not internal uses," sending the case back to the trial court.
"We are all looking for definitive answers about the permissibility of keyword advertising -- it's a multibillion-dollar-a-year industry," said Eric Goldman, a professor at Santa Clara University School of Law.
"This says that Google may not be able to kick out trademark keyword cases on 12(b)6 motions based on the use of the commerce doctrine in the 2nd Circuit," Goldman added. "It takes away an early exit to some of the cases."
Michael Page, of Durie Tangri Page Lemley Roberts & Kent, represented Google and didn't return a phone call Friday afternoon seeking comment. Rescuecom was represented by in-house counsel Edmund Gegan, who also didn't return a call late in the day on Friday.
IP lawyers had been anticipating the decision because of mixed rulings on keyword cases.
"Every single district court outside of the 2nd Circuit found that the purchasing of a competitor's keyword to trigger ads at least met the threshold question of stating a claim," said Ian Ballon, an Internet lawyer at Greenberg Traurig. "This is a significant effort at harmonizing the law."
In dismissing the case, the lower court had relied on 2nd Circuit precedent in the watershed case of 1-800 Contacts v. WhenU.com., which found that 1-800-Contacts didn't have its trademark infringed by keyword advertising sales. In Friday's ruling, the 2nd Circuit expended considerable effort explaining how the Rescuecom case is different.
"In contrast to 1-800, where we emphasized that the defendant made no use whatsoever of the plaintiff's trademark, here what Google is recommending and selling to its advertisers is Rescuecom's trademark," the panel wrote, adding that "Google encourages the purchase of Rescuecom's mark through its Keyword Suggestion Tool."
The 2nd Circuit decision doesn't offer that many answers about the legality of keyword advertising. Rescuecom and others will still have to prove their trademarks were infringed in the end.
"Just because a trademark is used and just because a claim can be stated doesn't mean that there's confusion," said Ballon. "This harmonizes the threshold question, but there's still a whole case that has to be proven."
