Merck v. Mediplan Redux–Keyword Purchases Really Aren’t Trademark Use

By Eric Goldman

Merck & Co. v. Mediplan Health Consulting, Inc., 2006 WL 1418616 (SDNY motion for reconsideration denied May 24, 2006)

In late March, the legality of the search engine keyword advertising industry got very murky due to two inconsistent rulings within the span of 10 days. One case, Edina Realty v. TheMLSOnline.com from Minnesota, held that keyword purchases could constitute a “use in commerce” for trademark infringement purposes, while Merck v. Mediplan from the Southern District of New York held that such purchases were not a trademark use in commerce.

Worse, these opinions didn’t cross-reference each other, so the courts did not try to reconcile their positions. Further, the Edina Realty case recently settled, eliminating the possibility that the Edina Realty court (or an appellate court) would clarify the interaction between the two cases.

Fortunately, Merck sought reconsideration of its ruling, and this week the Southern District of New York issued a clarifying ruling that has turned into a big win for keyword advertisers. This is the first ruling explicitly confirming that the landmark 1-800 Contacts v. WhenU case from last summer, which dealt with adware and pop-ups, applies to search engine keywords. As such, I think this is an important ruling that may have greater precedential impact than either of the previous rulings from March.

Merck moved for reconsideration on two grounds: (1) the court should have considered the Edina Realty precedent (which had just come out 10 days earlier), and (2) the court failed to recognize meaningful differences between keyword-triggered pop-up ads and keyword-triggered search results.

The Edina Realty Precedent

The court said that the Edina Realty ruling (which was thinly reasoned on the specific point) did not persuade the judge to change his views. Instead, the judge felt bound by the 1-800 Contacts precedent, which said that not all commercial activities qualify as a “use in commerce.” The court says, “in the search engine context, defendants do not ‘place’ the ZOCOR marks on goods, containers, displays, or associated documents, nor do they use the marks to indicate source or sponsorship….This internal use of the keyword ‘Zocor’ is not use of the mark in the trademark sense.”

Differences Between Pop-Up Ads/Adware and Search Engines

In an even more significant clarification, the court confirms that the 1-800 Contacts reasoning extends beyond WhenU’s comparatively unique directory-matching process to cover search engine keywords. The court correctly understood that in both the adware and search engine context, the machines “use” keywords to trigger ad content, but that matching takes place outside the searcher’s view and thus does not indicate source or sponsorship. Thus, where the Second Circuit avoided opining on the standard search engine keyword context (see footnote 11 of the Second Circuit opinion), this court thinks the Second Circuit’s rationale cleanly covers the situation.

Conclusion

This is a great win for the defense. Not only did the initial ruling fully validate the defense-side arguments, but this ruling clarifies the ambiguity created by the Edina Realty case and further explicitly confirms that the Second Circuit 1-800 Contacts precedent extends to search engine keywords. And, from my (admittedly biased) perspective, this court got the analysis 100% right.

This will not be the last ruling on this topic, but perhaps the tide is turning against plaintiffs here. If, in fact, the Second Circuit has concluded that search engine keyword usage isn’t a trademark use in commerce, then an important and influential appellate court will have blessed the basic practices of search engines and their advertisers, making it more difficult for plaintiffs to find a friendly court. Thus, this ruling increases the likelihood that purchasing (or selling) keyword advertising doesn’t violate trademark law.

Of course, it remains to be seen if the Second Circuit will agree with the Merck court’s reading of the 1-800 Contacts precedent. It wouldn’t surprise me if Merck asks them to do so.

Meanwhile, if the Merck court is right about the reach of the 1-800 Contacts precedent, then I think future defendants have a very strong basis to claim that keyword metatag usage isn’t a trademark use in commerce either. If so, then perhaps this case will help put an end to the ridiculous cases treating keyword metatag usage as per se trademark infringement.

UPDATE: Rebecca Tushnet has some thoughtful remarks on the linguistics of the “use in commerce” defintion in the statute.

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