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In order to avoid liability for trademark infringement relating to the sale of keywords corresponding to trademarks, search engines, including Google Inc., are attacking the concept that trademark owners should be able to protect the “commercial magnetism” of their marks. Recently, in Rescue.com v. Google, 5:04-CV-1056 (N.D.N.Y.), Google argued that trademark laws “are not meant to protect consumer good will created through extensive, skillful, and costly advertising.” At issue in Rescue.com is the current business practice of allowing advertisers to purchase particular search terms to generate what are typically labeled as “sponsored links.” Rescue.com alleged Google infringed its trademark by allowing and advising a competitor to buy Rescue.com’s trademark as a keyword, thereby causing confusion as to whether Rescue.com’s competitor was affiliated with it. Google asserts that its conduct does not involve “trademark use” and is therefore beyond the reach of the Lanham Act. Google’s argument appears to challenge the very essence of trademark law and contradict Justice Felix Frankfurter’s primer in Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205 (1942), concerning the role of trademark protection in the modern economy: “The protection of trademarks is the law’s recognition of the psychological function of symbols. If it is true that we live by symbols, it is no less true that we purchase goods by them. A trademark is a merchandising short-cut which induces a purchaser to select what he wants, or what he has been led to believe he wants. The owner of a mark exploits this human propensity by making every effort to impregnate the atmosphere of the market with the drawing power of a congenial symbol. Whatever the means employed, the aim is the same � to convey through the mark, in the minds of potential customers, the desirability of the commodity upon which it appears. Once this is attained, the trademark owner has something of value. If another poaches upon the commercial magnetism of the symbol he has created, the owner can obtain legal redress.” Significantly, in Mishawaka, there was “no evidence that particular purchasers were actually deceived into believing that the [defendant's products] were manufactured by [the trademark owner.]” Against this backdrop, it is clear that Frankfurter was articulating a justification for finding infringement based on the defendant’s misappropriation of the trademark owner’s goodwill (i.e., the mark’s commercial magnetism). A GROWING TREND The emerging “nontrademark use” defense permits a finding of noninfringement regardless of the existence of confusion. This complete unfettering of trademark law from confusion in the context of infringement reflects a growing trend in the courts to curtail trademark rights. This new defense is related to a series of criticisms levied at how the Lanham Act has been applied and, in particular, at the Polaroid multifactor test. See Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961). Virtually every circuit uses this test, or some variation, to evaluate whether an allegedly infringing use is likely to cause confusion. Critics argue that the Polaroid test is too easily manipulated to justify a particular court’s desired result. In fact, critics argue, even in those cases where the multifactor test simply will not support a finding of infringement, courts will apply � often sub silentio � a “misappropriation of goodwill” test to “protect” a sympathetic plaintiff. As applied, however, “goodwill misappropriation is a conclusion and not an analytic tool.” (See Eric Goldman, “Deregulating Relevance in Internet Trademark Law,” 54 Emory L.J. 507 (2006)). In other cases, courts have relied on the concept of initial interest confusion to bypass the Polaroid factors. See, e.g., Brookfield Communications v. West Coast Entertainment Group, 174 F.3d 1036, 1050 (9th Cir. 1999). While Brookfield initially received rave reviews and was quickly adopted by almost every circuit, it is now under sharp attack. One Ninth Circuit U.S. Court of Appeals judge has indicated the decision should be revisited. See Playboy Enterprises v. Netscape Communications, 354 F.3d 1020, 1034-36 (9th Cir. 2004) (Berzon, J. concurring). These critics argue that the initial interest theory does not account for the fact that, in their opinion, when someone says “FedEx that to me” she is merely saying she wants the package the next day and is not giving a directive to use a particular carrier. By excluding the possibility that consumers use trademarks in this “pseudo-generic” fashion, these critics argue, the initial interest theory deprives consumers of information that will help them make educated choices. Conceptually, the doctrine of trademark fair use is the safety valve allowing for unauthorized third-party use. Indeed, the Supreme Court has held that the presence of actual confusion does not necessarily negate the defense. See KP Permanent Make-Up v. Lasting Impressions, 543 U.S. 111, 121 (2004) (“some possibility of consumer confusion must be compatible with fair use.”). However, the court also cautioned that its holding “does not foreclose the relevance of the extent of any likely consumer confusion in assessing whether a defendant’s use is objectively fair.” On remand, the Ninth Circuit returned the case to the district court with instructions that, because there were material facts in dispute concerning the level of confusion, there were, by necessity, material facts in dispute on whether the use was fair. See Lasting Impressions, 408 F.3d 596 (9th Cir. 2005). The fact that trademark owners managed to keep confusion “alive” after Lasting Impressions led one commentator to find that the fair use defense is insufficient to safeguard legitimate commerce because it remains tethered to the presence vel non of confusion. See Margreth Barrett, “Internet Trademark Suits,” 39 U.C. Davis L. Rev. 371, 432 (2006). KEY RULING ON POP-UP ADS For this reason the nontrademark use defense is not simply a variation of the fair use defense. The Second Circuit’s holding in 1-800-Contacts v. WhenU.com, 414 F.3d 400 (2d Cir. 2005), aptly illustrates the power of the defense. In 1-800-Contacts, the precise question was whether the defendant’s use of the plaintiff’s trademark to trigger a pop-up advertisement constituted an infringement. At a preliminary injunction hearing, the plaintiff introduced a survey evidencing that 59 percent of consumers believed that the Web site they were visiting was responsible for the pop-up. The district court issued the injunction in 1-800-Contacts, 309 F. Supp. 2d 467, 500 (S.D.N.Y. 2003), rev’d, 414 F.3d 400 (2d Cir. 2005). The Second Circuit reversed and held that the defendant had not made a trademark “use in commerce” of the plaintiff’s mark based on the definition of “trademark use” in � 45 of the Lanham Act. That section provides: “The term ‘use in commerce’ means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark.” In response to the plaintiff’s argument that the defendant had made a trademark use of its marks because the use had caused confusion, the Second Circuit explained: “Again, this rationale puts the cart before the horse. Not only are ‘use,’ ‘in commerce,’ and ‘likelihood of confusion,’ three distinct elements of a trademark infringement claim, but ‘use’ must be decided as a threshold matter because, while any number of activities may be ‘in commerce’ or create a likelihood of confusion, no such activity is actionable under the Lanham Act absent the ‘use’ of a trademark.” The nontrademark use defense predates the 1-800-Contacts decision. However, it has only been the emergence of new marketing channels that has allowed the defense to gain any traction. For instance, one of the first cases to address this issue, decided in 1993, involved the importation of gray-market goods. See Sebastian v. Longs Drug, 29 U.S.P.Q.2d 1710 (C.D. Calif. 1993). The defendant argued that it had not used the plaintiff’s mark in commerce because it did not affix the mark to the goods but merely imported them. Since � 45 of the Lanham Act defines “use in commerce” of a trademark as affixing it to the goods or labels, the defendant moved to dismiss. The court did not take the defense seriously, noting that “the Ninth Circuit and others have entertained multitudes of infringement cases involving the resale of genuine goods bearing true marks. Notably, these courts never questioned whether the marks were used ‘in commerce.’” Three years later, the Sixth Circuit became perhaps the first court to uphold the defense in Holiday Inns v. 800 Reservations, 86 F.3d 619 (6th Cir. 1996). The defendant acquired the number 1-800-H[zero]LIDAY to capitalize on consumers who misdialed when attempting to call 1-800-HOLIDAY, the plaintiff’s reservation line. The defendant astutely recognized that it did not have to market the number to attract customers, and simply waited for the calls that inevitably came. The district court entered judgment for the plaintiff, noting “[if] not for Holiday Inn’s spending millions of dollars on advertising each year, defendants would have no service whatsoever to provide to the consumer.” The Sixth Circuit reversed. It explained that the defendant did not create the confusion; it merely took advantage of confusion already existing in the marketplace. The Eighth Circuit reached a similar result in another case involving phone numbers. See DaimlerChrysler v. Bloom, 315 F.3d 932 (8th Cir. 2003). One could argue that the Holiday Inns application of the nontrademark use defense makes sense because there truly was no use of the plaintiff’s mark. That is not the case in 1-800-Contacts, where the defendant is not merely waiting for someone to visit its site to show a pop-up. The pop-ups are triggered not because the consumer mistyped the trademark owner’s mark (which would be the equivalent to misdialing HOLIDAY on the phone pad), but precisely because the consumer correctly typed the trademark. Moreover, while the survey in 1-800-Contacts was problematic, its 59 percent confusion number indicates at the very least that there may be a likelihood of confusion that could be proved after the completion of discovery and trial on the merits. The Second Circuit holding denied the plaintiff the ability to develop this evidence by labeling this issue a “threshold” inquiry, thereby making it ripe for a motion to dismiss. In other words, confusion no longer matters. The power of the nontrademark use defense is the opportunity it affords a defendant to avoid discovery. One must assume that the search-engine industry has researched this issue, perhaps in depth. If so, it seems odd that the best evidence concerning how consumers search the Internet and the role trademarks play in that process may never come to light. FOCUS ON ORDERING INFORMATION To accept this defense, one must assume Congress was not concerned about consumer confusion unless it resulted from a use that satisfied the technical requirements for registering a trademark. Consider, if a discount clothing company produced a catalog that did not contain any ordering information and placed the mark of a premium clothing designer on its cover, the application of this defense would result in a finding of no trademark use and hence no infringement. See Land’s End v. Manbect, 797 F. Supp 511 (E.D. Va. 1992). Similarly, any use of a trademark for goods on the Internet is nontrademark use and hence noninfringing unless the particular Web page on which it is used contains ordering information. See In re MediaShare, 43 U.S.P.Q.2d 1304 (T.T.A.B. 1997). Whether the sale of keywords is likely to cause confusion is a close question, but critics of the nontrademark use defense argue that it is a question that ought to be adjudicated on the merits. Compare Merck v. Mediplan Health Consulting, 2006 Lexis 14826 (S.D.N.Y. March 30, 2006) (granting motion to dismiss because purchase of keywords not a “trademark use”) with Edina Realty v. TheMLSonline.com, 2006 Lexis 13775 (D. Minn. March 20, 2006) (“Based on the plain meaning of the Lanham Act, the purchase of search terms is a use in commerce.”). If in fact consumers are being confused � at least a theoretical possibility � that confusion, critics argue, should not lie outside the strictures of trademark law. To the extent that the nontrademark use defense allows defendants to escape liability, notwithstanding the likelihood of confusion they have created, critics of the defense assert that it is inconsistent with the fundamental purposes of trademark law. Stephen Feingold is a partner in the New York office of Pitney Hardin and the head of its trademark copyright Internet group. Marc A. Lieberstein is a partner, and Cecelia Kehoe Dempsey a counsel, in the group. This article was originally published in The National Law Journal, a Recorder affiliate based in New York City. � Practice Center articles inform readers on developments in substantive law, practice issues or law firm management. Contact Sheela Kamath with submissions or questions at [email protected].

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