Intellectual Property LAW JOURNAL ® NEWSLETTERS Strategist

The Intellectual Property LAW JOURNAL ® NEWSLETTERS Strategist

Volume 10, Number 6 • March 2004

The Keys to Keyword Advertising

By Mark D. Robins

ntil recently, courts have had which are identical in spelling to advertisement appearing over the relatively little to say about PEI’s trademarks. According to the Web site of the trademark owner was the practice of keyword ad- appellate decision, Netscape and likely to be competitive with the U Excite did not merely give such adult trademark owner. One decision noted vertising — ie, triggering Internet advertisements to appear when users advertisers the option of linking their that WhenU.com did not actually sell search for a keyword identical to a advertisements to these keywords, but the right to have advertisements competitor’s trademark. Practitioners required them to do so. These adver- appear in conjunction with searches could look only to a single decision tisements were found to be graphic in for particular trademarked terms, but denying Playboy Enterprises, Inc.’s nature and either confusingly labeled only sold the right to have one’s (“PEI”) motion for a preliminary or not labeled at all. advertisements triggered by cate- injunction against Netscape Communi- The other cases all involve a pro- gories of interest, which, in turn, are cations Corp. (“Netscape”) and Excite, gram distributed by WhenU.com, triggered by the algorithms. Inc. (“Excite”). Now, four courts have Inc. (“WhenU.com”) called SaveNow. In the WhenU.com cases, one recently issued decisions reaching SaveNow was distributed to computer decision focused on an earlier starkly different results on keyword users in conjunction with free screen version of the SaveNow program, advertising practices, including a savers and other software appli- whereby advertisements were brand- Ninth Circuit decision reversing sum- cations. SaveNow caused pop-up ed with a green “$” mark and the text mary judgment that had been entered advertisements to appear over a Web “SaveNow!” at the top of the pop-up against PEI in its litigation with site being viewed. SaveNow targeted window, as well as with a link at the Netscape and Excite. While much advertisements toward particular cate- bottom right of the window with the remains to be resolved, certain factors gories that the program determined to text “A WhenU offer — click? for have been particularly influential. be of interest to the computer user. info.” Other decisions emphasized PRACTICES AT ISSUE The program would determine that a disclaimer that later versions of In PEI’s litigation, PEI sued Netscape the user was interested in a particular the program placed in the advertise- and Excite for selling to online adult- category, based on algorithms that ments, which included the following oriented Web sites the right to have took into account, among other text with a link: “This is a WhenU banner advertisements displayed near things, particular keyword search offer and is not sponsored or search results when users of those terms and Internet addresses. Thus, if displayed by the websites you are search engines searched for the a user searched for the Web site of visiting. ...” One decision highlighted keywords “playboy” and “playmate,” Wells Fargo or typed in the domain a license agreement whereby users name www.wellsfargo.com, upon must assent to a service described Mark D. Robins is a partner in the arriving at Wells Fargo’s Web site, as one that would generate contex- technology and intellectual property the user would be presented with tually relevant advertisements and group of Nixon Peabody LLP, in Boston. a pop-up advertisement of one coupons through pop-up advertising The views expressed in this article of WhenU.com’s clients from the and other formats. should not be attributed to Nixon category of “finance.mortgage” in USE IN COMMERCE AND FAIR USE Peabody or any of its clients. WhenU.com’s directory. Thus, the One point of conflict in these deci- LJN’s The Intellectual Property Strategist March 2004

sions is the question of whether the 14, 2004). relevant categories did not use the defendants’ practices constituted a In the WhenU.com cases, two trademarks in commerce, because “use” of the plaintiffs’ trademarks in courts each concluded that there the marks were not used to identify commerce. In the first decision in was no use in commerce. These the source of WhenU.com’s goods or PEI’s litigation, a federal district court courts agreed that merely positioning services. See Wells Fargo & Co. v. held that Netscape and Excite did not advertisements near the plaintiffs’ WhenU.com, Inc., 2003 U.S. Dist. use PEI’s trademarks in displaying trademarks on the plaintiffs’ Web LEXIS 20756, *65-*84 (E.D. Mich. banner advertisements of competing sites did not constitute use in com- Nov. 19, 2003); U-Haul Int’l, Inc. v. adult entertainment products and merce. These courts distinguished WhenU.com, Inc., 279 F. Supp. 2d services in response to searches for cases involving the “framing” of a 723, 727-29 (E.D. Va. 2003). By con- the terms “playboy” and “playmate.” Web site inside branding supplied trast, a third court disagreed and held Although the court did not elaborate from a different source on the In- that WhenU.com was using a plain- on the reason for this holding, other ternet than the source of the Web site tiff’s trademark by causing ads to parts of the court’s decision empha- being framed, where the boundaries appear when users attempt to access sized that these terms are generic between framing and framed sites are the plaintiff’s Web site and by includ- words that are used by others and that ing a domain name containing that PEI did not have the right to all com- In the WhenU.com cases, trademark in the directory of terms mercial utility associated with these triggering such ads, which allowed terms. Alternatively, the court deemed two courts each concluded the advertiser to profit from the good Netscape’s and Excite’s use of PEI’s that there was no use in will and reputation that led users to marks to be a fair use on the grounds access the plaintiff’s Web site. See 1- that these words were used as words commerce. These courts agreed 800 Contacts, Inc. v. WhenU.com, in the English language rather than 2003 U.S. Dist. LEXIS 22932, *53-*58 as trademarks. Playboy Enters., Inc. v. that merely positioning (S.D.N.Y. Dec. 22, 2003). Netscape Communications Corp., 55 F. advertisements near the LIKELIHOOD OF CONFUSION Supp. 2d 1070, 1073, 1079, 1080-82, In PEI’s litigation with Netscape 1086-87 (C.D. Cal. 1999), aff’d, 202 plaintiffs’ trademarks on the and Excite, the lower court found F.3d 278 (9th Cir. 1999). no likelihood of confusion and, in More recently, however, the Ninth plaintiffs’ Web sites doing so, emphasized that there was Circuit reversed a subsequent sum- did not constitute use no evidence of actual confusion and mary judgment in favor of Netscape no survey evidence, despite the time and Excite. The court found that the in commerce. and PEI’s ability to obtain survey use of the marks was not functional evidence. In addition, the court because nothing about the marks had blurred. By contrast, these courts found most of the likelihood of con- any impact on the functionality of found that a clearly branded adver- fusion factors inapplicable, because the products with which they were tisement in a window over part of a Netscape and Excite were not using used. The court found that the fair Web site is distinguishable from the PEI’s trademarks to identify goods use defense for comparative adver- site over which the ad appears. These and were not competing with PEI. tising was not available where a courts also found that WhenU.com’s The court found no evidence of likelihood of confusion is established. practices constituted legitimate com- intent to confuse consumers. See Finally, the court found that the use parative advertising. They further Playboy Enters., 55 F. Supp. 2d at was not defensible as a “nominative” held that WhenU.com’s practices 1079, 1083-84, 1085-86. fair use, because the defendants did were distinguishable from practices By contrast, in finding sufficient not limit themselves to using no more such as using a trademark in a do- evidence for PEI to go to trial on of the marks than necessary to iden- main name, which may hinder access likelihood of confusion, the Ninth tify products that could not otherwise to the trademark owner’s Web site. Circuit found that the defendants were be identified without such marks. Finally, these courts concluded that using terms identical to PEI’s strong Playboy Enters., Inc. v. Netscape using the plaintiffs’ domain names marks to provide goods of advertisers Communications Corp., 2004 U.S. containing the plaintiffs’ trademarks that are directly competitive with PEI App. LEXIS 442, *22-*27 (9th Cir. Jan. in WhenU.com’s directory to identify through the overlapping Internet LJN’s The Intellectual Property Strategist March 2004

marketing channel. The court also was no evidence of actual confusion plaintiff’s good will. As to sophistica- emphasized that consumers were like- and noted that confusion was unlike- tion of the customers, the court found ly to exercise little care because of ly given that users of the SaveNow that customers expected to complete price and to be easily diverted by the program are accustomed to the ads, their Internet transactions quickly graphic nature of the ads. The court the ads bear a prominent disclaimer, and with little effort. Finally, unlike gave particular emphasis to a con- and they appear in a distinct window. the Wells Fargo decision, which sumer survey finding that Internet Wells Fargo, 2003 U.S. Dist. LEXIS emphasized the disclaimer in the ads users searching for the terms at issue 20756, at *40-41, *88-*99. and license provisions, this court would think that PEI or an affiliate By contrast, the 1-800 Contacts based its ruling on an earlier version sponsored the banner ads appearing court found initial interest confusion of the program that lacked the dis- on Netscape’s and Excite’s search to be likely and actionable. Like the claimer, and held that disclaimers results pages. Other factors may have Ninth Circuit, this court found that buried in a legal agreement would had a more subtle but persuasive the strength of the mark, use of a not dispel confusion. See 1-800 effect on the court. For example, keyword identical to the mark, and Contacts, 2003 U.S. Dist. LEXIS although the court found that the 22932, at *71-*103. intent factor favored PEI slightly, the [T]he 1-800 Contacts court FACTORS THAT MADE A court emphasized evidence that DIFFERENCE found initial interest Netscape and Excite required adult The issues in these cases turn large- advertisers to link to the “playboy” confusion to be likely and ly on the commercial impressions and “playmate” search terms. The created by the particular keyword court also emphasized that many of actionable. Like the advertising practices. The following the ads are confusingly labeled or not Ninth Circuit, this court found factors appear to have been particu- labeled at all. See Playboy Enters., larly influential: 1) whether the juris- 2004 U.S. App. LEXIS 442, at *2-*3, that the strength of diction in question recognizes initial *13-*22. interest confusion; 2) whether there the mark, use of a keyword In the WhenU.com cases, courts is evidence of actual confusion or reached opposite conclusions on the identical to the mark, and survey evidence to help the court likelihood of confusion. The Wells understand consumer perceptions the competitive nature Fargo court concluded that the plain- in this new medium; 3) whether tiff had failed to establish a likelihood of the advertiser’s products Internet consumers are likely to be of confusion based largely on the easily diverted and frustrated; 4) fact that initial interest confusion all weighed in favor of whether the practices are meant to was not accepted in that jurisdiction. likely confusion. appropriate the trademark owner’s Otherwise, that court limited its good will or draw consumer attention analysis to the plaintiff’s survey evi- the competitive nature of the adver- to a legitimate comparison; and 5) dence, which the court found to tiser’s products all weighed in favor the degree to which branding and be flawed. Some of the many flaws of likely confusion. With respect to disclaimers make it easy for consu- found by the court were that the sur- actual confusion, this court relied on mers to distinguish ads from the Web veys were taken from other cases and the very survey rejected in the Wells sites or search results that surround not tailored to the relevant facts or Fargo decision — a survey that had them. Given the wide array of key- population, that people were asked been designed for the 1-800 Contacts word advertising practices, litigation merely to imagine pop-advertise- litigation. Although the court noted is likely to continue in this area. ments rather than view them, and that survey’s flaws and found that the that the questions did not accommo- factor favored neither party, the court —❖— date the possibility that users might noted that the survey at least sug- perceive only some but not all pop- gested the likelihood of initial interest This article is reprinted with permission from the March 2004 edition of the LAW JOURNAL up advertisements to originate from confusion. The court also stressed NEWSLETTERS - THE CORPORATE COUNSELOR. the same source as the Web site over bad faith, based on inclusion of the © 2004 ALM Properties, Inc. All rights reserved. which they appear. The court’s factu- plaintiff’s trademark in WhenU.com’s Further duplication without permission is prohib- al findings also emphasized that there directory to take advantage of the ited. #055/081-04-04-0006