Ninth Circuit Rejects the "Internet Troika" as the Universally Controlling Test for Trademark Infringement on the Internet in Keyword Advertising Case

In a much welcomed if not perfect opinion, the Ninth Circuit rejected the so-called "Internet trinity" or "Internet troika" employed in the court's earlier opinion in Brookfield Communications, Inc. v. West Coast Entm't Corp., 174 F.3d 1036 (9th Cir. 1999) as the controlling test for every case of trademark infringement in the Internet context.

Network Automation and Advance Systems Concepts both sell job scheduling and management software and both advertise on the Internet.  Network sells its software under the AUTOMATE mark; Systems sells its software under the ACTIVEBATCH mark.

Network purchased "Activebatch" as a keyword in connection with Google's AdWords program as well as with a comparable program for Microsoft's Bing search engine.  As a result, according to the court, when users searched the term "Activebatch," an advertisement for Network would appear as a "Sponsored Link" or "Sponsored Site" alongside or above the organic search results.

Systems sent Network a cease and desist letter threatening litigation if Network did not immediately cease use of the term "Activebatch" in its search engine advertising.  Network filed a declaratory judgment action and Systems counterclaimed for trademark infringement, moving for a preliminary injunction.

The District Court granted injunctive relief to Systems concluding that Systems was likely to succeed on its Lanham Act trademark infringement claim, emphasizing three of the Sleekcraft likelihood of confusion factors as the significant factors in "cases involving the Internet."

The Ninth Circuit reversed the grant of injunctive relief starting off its opinion with a quote from Brookfield that seems to often be ignored in cases that rely on the "Internet troika":  "We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach."

The Ninth Circuit first answered the question (without discussion) that it had previously assumed but not expressly decided, namely, "that the use of a trademark as a search engine keyword that triggers the display of a competitor's advertisement is a 'use in commerce' under the Lanham Act," agreeing with the Second Circuit in Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. 2009).

Because Network did not contest Systems' ownership of the ACTIVEBATCH mark or Network's use of the mark, the sole issue was whether the use of the mark was likely to cause consumer confusion.

The Ninth Circuit started off its likelihood of confusion discussion with the oft-stated admonishment (in one form or another) that the Sleekcraft factors "are intended as an adaptable proxy for consumer confusion, not a rote checklist."  Turning to the Brookfield case--cited as the birthplace of the so-called "Internet trinity"--the Ninth Circuit emphasized that the Brookfield opinion heeded the warning that the Sleekcraft factors were flexible and was not intended to create a rule that the "Internet troika" would always be the most important factors in every trademark infringement case in the Internet context:

we did not intend Brookfield to be read so expansively as to forever enshrine these three factors--now often referred to as the "Internet trinity" or "Internet troika"--as the test for trademark infringement on the Internet.  Brookfield was the first to present a claim of initial interest confusion on the Internet; we recognized at the time it would not be the last, and so emphasized flexibility over rigidity.  Depending on the facts of each specific case arising on the Internet, other factors may emerge as more illuminating on the question of consumer confusion.

The Ninth Circuit then summarized the facts and conclusions in its 2004 opinion in Playboy Enters., Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir. 2004), which involved the practice of "keying."  Of particular note, the Ninth Circuit specifically cited to and agreed with Judge Berzon's concurring opinion in Playboy, which expressed legitimate concern about the potential broad reading of Brookfield that could result in a finding of initial interest confusion when the consumer is never confused as to source or affiliation.  The Ninth Circuit noted that "it would be wrong to expand the initial interest confusion theory of infringement beyond the realm of the misleading and deceptive to the context of legitimate comparative and contextual advertising."

While one can certainly argue, with considerable force, that Brookfield is not such a clear example of a flexible use of the Sleekcraft factors as the Ninth Circuit now tries to portray, the court does usefully reiterate the need for flexibility, hopefully putting to rest the practice of imposing the "Internet trinity" as the controlling analysis for trademark infringement in the Internet context without any thought given to whether those factors are appropriate in a given case:

Given the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology, however, it makes no sense to prioritize the same three factors for every type of potential online commercial activity.  The "troika" is a particularly poor fit for the question presented here. . . .  The potential infringement in this context arises from the risk that while using Systems' mark to search for information about its product, a consumer might be confused by a results page that shows a competitor's advertisement on the same screen, when that advertisement does not clearly identify the source or its product.

In determining the proper inquiry for this particular trademark infringement claim, we adhere to two long stated principles:  the Sleekcraft factors (1) are non-exhaustive, and (2) should be applied flexibly, particularly in the context of Internet commerce.  Finally, because the sine qua non of trademark infringement is consumer confusion, when we examine initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.

(emphasis added).

In the case before the court, the Ninth Circuit concluded that the most relevant likelihood of confusion factors were:

(1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.

Considering those factors, the Ninth Circuit concluded that the District Court had abused its discretion in issuing the injunction because it did not weigh the Sleekcraft factors flexibly but instead relied on the "Internet troika."  Stating that "the linchpin of trademark infringement is consumer confusion," the Ninth Circuit reversed the District Court and vacated the preliminary injunction.

As to the Ninth Circuit's treatment of the specific Sleekcraft factors, there were both high and low points.

For example, as to high points, with respect to the parties' marketing channels, the Ninth Circuit recognized that both parties' use of the Internet did not say much about the likelihood of confusion:  "Today, it would be the rare commercial retailer that did not advertise online, and the shared use of a ubiquitous marketing channel does not shed much light on the likelihood of consumer confusion."

As to the type of goods and degree of care exercised by consumers, the Ninth Circuit rejected the unthinking conclusion that Internet consumers generally exercise a low degree of care because "the degree of care analysis cannot begin and end at the marketing channel."  The court also cited to its more recent decision in Toyota Motor Sales v. Tabari, 610 F.3d 1171 (9th Cir. 2010) (previously blogged here) for the proposition that "the default degree of consumer care is becoming more heightened as the novelty of the Internet evaporates and online commerce becomes commonplace."

The Ninth Circuit also concluded that the District Court had improperly considered the defendant's intent in using the mark in isolation, noting that intent is relevant "only insofar as it bolsters a finding that the use of the trademark serves to mislead consumers rather than truthfully inform them of their choice of products."

Also on the positive side, the Ninth Circuit held that "[i]n the keyword advertising context the 'likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context,'" thus the advertisements' appearance and the surrounding context are important.  In support of this conclusion, the court cited Hearts on Fire Co. v. Blue Nile, Inc., 603 F. Supp. 2d 274 (D. Mass. 2009), in which the District Court identified seven factors that it thought relevant to determining likelihood of confusion in this type of case.  Notably, the Ninth Circuit stated that the District Court's reasoning in Hearts on Fire was "useful" although it declined to specifically adopt the court's factors.

The Ninth Circuit's opinion also had some low points.  For example, the court's attempt to "explain" the Brookfield decision without acknowledging the problems it created, while understandable, is disappointing.

Also, in discussing the strength of the mark factor, the Ninth Circuit appeared to accept the proposition--without any proof--that users searching for a particular product name are "presumably" looking for that specific product, not a category of goods.

This factor [strength of the mark] is probative of confusion here because a consumer searching for a generic term is more likely to be searching for a product category. . . .  That consumer is more likely to expect to encounter links and advertisements from a variety of sources.  By contrast, a user searching for a distinctive term is more likely to be looking for a particular product, and therefore could be more susceptible to confusion when sponsored links appear that advertise a similar product from a different source.

Specific to the case, the Ninth Circuit concluded that "[b]ecause the mark is both Systems' product name and a suggestive federally registered trademark, consumers searching for the term are presumably looking for its specific product, and not a category of goods."  But this may or may not be true and certainly shouldn't be assumed in the absence of proof as to how consumers use search engines and what they understand about search results, particularly when the courts' understanding of the Internet often appears to lag behind that of the relevant consumers.  But the court did note that the sophistication of the consumers of the particular product may also play a role with respect to this factor.

All in all, far from an entirely satisfactory opinion but a positive baby step in the right direction with respect to initial interest confusion in the Internet context.

The case cite is Network Automation, Inc. v. Advanced Systems Concepts, Inc., No. 10-55840 (9th Cir. March 8, 2011).

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