Google Wins Keyword Lawsuit–Rescuecom v. Google

By Eric Goldman

Rescuecom Corp. v. Google, Inc., No. 5:04-CV-1055 (N.D.N.Y. Sept. 28, 2006). You can find the ruling here (WARNING: 1.7MB file)

Introduction and the 1-800 Contacts Precedent

Last year, the Second Circuit issued a major ruling in the 1-800 Contacts v. WhenU case saying that an adware vendor didn’t make a trademark use in commerce by selling keyword-triggered ads. However, the Second Circuit expressly left open whether its ruling would apply to search engines as well.

In Spring, search engines got a boost when a district court within the Second Circuit extended the 1-800 Contacts reasoning to apply to search engines. See Merck v. Mediplan (initial ruling and motion for reconsideration). However, this ruling was made in the context of a lawsuit between advertisers, so it didn’t directly apply to the search engines’ own liability.

Yesterday, search engines got the ruling they wanted, with a decisive victory in a trademark lawsuit over keyword advertising. For the second time, a court in the Second Circuit felt bound by the 1-800 Contacts precedent to find that selling keyword advertising isn’t a trademark use in commerce.

How good of a win is this for the search engines? It’s the first ruling expressly saying that search engines aren’t liable for selling keyword advertising. It goes against all four precedent rulings that specifically opined on whether search engines make a “use in commerce” (Playboy v. Netscape–although the court sidestepped this topic, GEICO, American Blinds and 800-JR Cigar), plus another group of cases that held advertisers made a trademark use in commerce when they bought keyword advertising (e.g., Edina Realty), And best of all, the court granted Google’s 12b6 motion to dismiss–meaning that the case got knocked out at the earliest possible stage, without discovery or a trial on the facts. This is perhaps the best possible outcome that Google could have hoped for from this case.

The Court’s Analysis

The court’s analysis is relatively straightforward. The court cites the statutory definition of “use in commerce” from 1127, implicitly rejecting a variety of other interpretations of “use in commerce” that have sprung up over the years. Then, the court systematically rejects the plaintiff’s arguments, in each case citing to the 1-800 Contacts precedent:

* that Google is free-riding by reselling the keyword to Rescuecom’s competitors.

* that Google is preventing people from reaching Rescuecom’s website.

* Google’s sale of keywords alters the search results delivered to searchers, and this alteration diverts consumers.

Instead, the court says: “Defendant’s internal use of plaintiff’s trademark trigger sponsored links is not a use of a trademark…because there is no allegation that defendant places plaintiff’s trademarks on any goods, containers, displays, or advertisements, or that its internal use is visible to the public.” (Cite to 1-800 Contacts and Merck; implicit cite to the 1127 definition of “use in commerce.”) As a result, the court dismissed the trademark infringement claims.

As an added bonus, the court dismissed Rescuecom’s dilution claim, arguing that it lacked the requisite “commercial use in commerce.”

The court dismissed Rescuecom’s state law claims as lacking supplemental jurisdiction. In theory, Rescuecom could refile those in state court.

Conclusion

As I said in my writeup of the 800-JR Cigar case, it has become impossible to predict the outcome in the next search engine trademark case, and this case reinforces that statement–here, based on the four on-point precedents that all went against search engines, I would have predicted a Google loss. So the remaining question is: will other courts follow this case? It’s simply a district court ruling, so no one is precedentially bound to the ruling.

However, this case could be a watershed case that will turn the tide. Subsequent courts, after seeing the clean and elegant analysis of this case, may be persuaded by its reasoning. Further, for reasons that I argue in my Deregulating Relevancy article, this court got the outcome exactly right from both a legal analysis perspective and from a policy analysis, so there are good legal and policy reasons for future courts to follow this precedent.

But there’s no way to be sure what the next court will do, so only time will tell. However, I’m pretty certain that Google is hoping any plaintiffs will bring future lawsuit in a court located in the Second Circuit!

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