Circuit to Mull When Keywords Infringe Marks

On April 3, the U.S. Court of Appeals for the Second Circuit will hear oral argument in the closely watched case of Rescuecom Corp. v. Google Inc. It will be the circuit's first opportunity to address squarely the question of whether the sale of trademarked company names as advertising keywords constitutes trademark infringement.

Stephen M. Kramarsky

New York Law Journal

2008-03-18 12:00:00 AM

On April 3, the U.S. Court of Appeals for the Second Circuit will hear oral argument in the closely watched case of Rescuecom Corp. v. Google Inc. It will be the circuit's first opportunity to address squarely the question of whether the sale of trademarked company names as advertising keywords constitutes trademark infringement.

The court below found that Google's sale of the trademarked term "Rescuecom" to Rescuecom's competitors as an AdWord was not an infringement of Rescuecom's trademark.¹

That decision was in keeping with every other decision from courts in the Second Circuit on this issue (of which there have been several), and directly contrary to the decisions of essentially every other federal court on virtually identical facts. The split turns on the question of whether the sale of search-engine keywords constitutes a "use in commerce," which is a requirement for infringement under the Lanham Act.²

New York courts have been guided on this issue by the Second Circuit's decision in 1-800 Contacts Inc. v. WhenU.Com Inc.³

In that case the circuit held that a company's use of a database of trademarked names to generate relevant popup ads from its ad-supported downloadable software suite was not a "use in commerce" sufficient to support a claim of trademark infringement.

Commentators on the decision (myself included) suggested that other jurisdictions might be guided by the Second Circuit's thoughtful and well-reasoned analysis, but that did not happen and the split has continued.

In addition, the Second Circuit in 1-800 Contacts explicitly limited its findings to the facts of the case; it found it important that the defendant did not sell keywords to individual advertisers or manipulate which ads pop up in connection with a particular keyword - precisely Google's business model.

The district courts have interpreted 1-800 Contacts as applicable to Google's keyword sales, but Rescuecom is the Second Circuit's first opportunity actually to address the issue, and perhaps the current circuit split.

The split between the courts on "use in commerce" essentially comes down to two different views of what the phrase means. Under the Lanham Act, a mark is deemed to be in "use in commerce" on goods when "(A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce."⁴

Google certainly uses the trademarked names in commerce in one sense: It offers them for sale as keywords to its customers, the advertisers who purchase space on its site. That alone makes the issue a large one - the sale of advertising keywords is essentially Google's sole source of revenue and amounts to billions of dollars a year industrywide.

But the courts in this circuit have held that that kind of use does not satisfy the statutory definition of "use in commerce," primarily because the trademarked term is never directly revealed to the consumer by the seller (that is, the person doing the search does not see Google's keyword list). Because search engines do not present the trademarked keyword to consumers, the courts in the Second Circuit have uniformly held that they have not "placed them on goods" in a manner likely to confuse customers and therefore that their conduct does not constitute use.

Rescuecom's allegation that Google actually suggests keywords its customers may be interested in buying, some of which are trademarked terms, may add a wrinkle to this, as that is arguably a more direct use. Numerous industry and academic parties have submitted amicus briefs in the case.

In the midst of this debate, the Second Circuit has decided a much less-noticed case that may shed some light on the issues in Rescuecom.

Decided last month, American Express, Co. v. Goetz⁵ concerned rights in the phrase "My Life. My Card." It is, in some ways, the flip side of Rescuecom.

In American Express, Goetz, a consultant to a marketing firm, developed the idea of enabling credit card customers to personalize their cards by printing a photograph on the face of the card. He developed proprietary software with this capability and sought to license or sell the software to credit card companies. He also created a slogan for his new idea, which he featured prominently on his marketing materials to his potential clients: "My Life, My Card."

He sent his marketing materials, featuring the slogan, to various credit card companies, including American Express. American Express was not interested in the concept, though other card companies were; but by a truly remarkable coincidence American Express had recently tasked its advertising agency with developing a new campaign and the slogan they had developed was "My Life. My Card."

As far as can be determined from the opinion, this truly was a coincidence. Goetz sent his materials out to American Express on July 30, 2004, and applied for a trademark in the "My Life, My Card." slogan on Sept. 7, 2004.

American Express's agency apparently came up with the slogan, independently, on July 22, 2004, did its first trademark search on July 31 (literally one day before receiving the exact same slogan from Goetz) and filed an intent to use the mark with the U.S. Patent and Trademark Office on Sept. 15, 2004.

When Goetz asserted his prior use, American Express sued for declaratory judgment that Goetz had no protectable rights in the slogan.

Slogan 'as Trademark'

Leaving aside these somewhat bizarre facts, the Second Circuit focused on whether Goetz had acquired any trademark rights in the slogan superior to those of American Express, given his apparent earlier use of the slogan and his earlier trademark application.

On review, the court found that he had not and upheld the lower court's grant of summary judgment to American Express. The opinion focused on whether Goetz had used the slogan "as a trademark," which the circuit found he had not.

The Lanham Act defines a trademark as a word, name, symbol or device, or any combination of them, used by a person "to identify and distinguish his or her goods, including a unique product, from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown."⁶ The issue in American Express was whether Goetz had used the "My Life. My Card." slogan to identify his own goods or merely as a suggested slogan to identify the goods of others.

Goetz had included the slogan on the Web site he designed to showcase his software and in his letters and marketing materials pitching his idea to credit card companies, but in all of these cases the court found that the slogan was a part of the product being pitched, not an independent marker of the source of Goetz's product.

The Court contrasted Goetz's use of his own company logo (he was an independent contractor for a company called Mez Design) with his use of the slogan. The former had appeared on letterhead and other documents independently identifying Goetz and Mez Design as the source of the customized card idea and providing information about the company and its other services; the latter appeared only in descriptions of how a client might market the customized cards.

As the Second Circuit pointed out, the patent office has generally taken the position that an advertising agency cannot get a trademark on a slogan - the slogan must first be purchased by a client who can then file an "Intent To Use" application. The reason is that the slogan itself does not identify the goods of the agency; it is the product, it is not an identifier of the source of the product.

As such the slogan is a creative work more appropriately protected by copyright, and the Second Circuit noted this important distinction, as it has in the past: "While copyright law protects the content of a creative work itself, it is trademark law that protects those symbols, elements or devices which identify the work in the marketplace and prevent confusion as to its source."⁷

This is an important distinction, particularly because copyright and trademark protection may exist in the same work depending on how it is used at a particular time. But here, the court's mention of it is something of a red herring: copyright protection is not available for short phrases and slogans. Thus the "My Life. My Card." slogan was not protectable at all (at least under federal intellectual property laws) until American Express decided to use it in its marketing campaign, regardless of when Goetz invented it.

Mirror Images

Rescuecom and American Express are not related cases; they involve totally different aspects of the Lanham Act. But in some ways, they are mirror images of each other and American Express may be analytically helpful in thinking about Rescuecom.

Cutting through the legal analysis (of which there is often very little), the primary driver for those courts that have found infringement in Google's sale of trademarked terms as AdWords is that Google appears to be making money from the trademarks of others. This appears to strike some courts (particularly courts in the jurisdictions where the mark-holders reside) as unfair, or at least unseemly.

But as American Express makes clear, this sort of use is not the subject of trademark protection. As a matter of law, the standards for infringement ("use in commerce") and protection (used "to identify and distinguish" goods) are markedly different, but analytically and as a matter of policy they are very similar.

The Lanham Act is designed, at root, to protect against consumer confusion, not to reward trademark owners for their inventiveness in coming up with marks in the abstract; protecting creativity is the province of copyright, not trademark. So the fact that Google makes money from a trademark that another party created and registered should not, in itself, be relevant to the analysis of whether it has used that mark in commerce.

Thus the question in Rescuecom should be whether Google is using Rescuecom's mark in a manner that confuses consumers as to the origin of its own goods - here the advertisements (or perhaps the search results) it serves.

On the search engine business model, it is hard to see how that is the case. Not every use of a mark is an infringement, and it may be that the Second Circuit can shift the tide in this area (assuming it supports the position its lower courts have taken up until now).

If history is any guide, however, higher authority may be necessary to repair what is, for now, a multi-billion dollar split.

Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex intellectual property litigation.

Endnotes:

1. Rescuecom Corp. v. Google Inc., 456 F.Supp.2d 393 (NDNY, 2006). An "AdWord" is a keyword that triggers the buyer's advertisements to appear alongside search results for searches that include the purchased term. The sale of "Rescuecom" as an AdWord to Rescuecom's competitors thus causes competing advertisements to appear each time a user searches on Google for Rescuecom.

2. 15 U.S.C. §§1114(1)(a), 1125(a).

3. 414 F.3d 400 (2d Cir. 2005).

4. 15 U.S.C. §1127(1). The definition for "use in commerce" in connection with services is similar.

5. Docket No. 06-2184-CV, F.3d, 2008 WL 281823 (2d Cir. Feb. 4, 2008).

6. 15 U.S.C. §1127.

7. American Express, 2008 WL 281823, at *3 citing EMI Catalogue P'ship v. Hill, Holliday, Connors, Cosmopulos Inc., 228 F.3d 56, 63 (2d Cir. 2000).