Another Court in 2d Cir. Says Buying Keyword Ads Isn’t TM Use in Commerce–FragranceNet.com v. FragranceX.com

By Eric Goldman

FragranceNet.com, Inc. v. FragranceX.com, Inc., 2007 WL 1821153 (E.D.N.Y. June 12, 2007)

This case shows the deepening split between the Second Circuit and other circuits on keyword triggering as TM use in commerce. This is now the fourth court in a Second Circuit jurisdiction voting that buying keyword ads isn’t a trademark use in commerce (the others: Merck, Hamzik wrt keyword triggering only and Site Pro-1). (As an added bonus, this case, like the Site Pro-1 case, says that keyword metatags aren’t a trademark use in commerce either). In contrast, the courts outside the Second Circuit opining on keyword ad buying (Edina Realty, Buying for the Home and JG Wentworth) have all gone the other way; along with the non-2d Circuit courts opining on search engine sales of keywords (GEICO, American Blinds, 800-JR-Cigar). (This court takes a nasty swipe at several of these cases, correctly pointing out that many of them conflate their “use in commerce” analysis with a “likelihood of confusion” analysis). Unless the 2nd Circuit reverses the Rescuecom case, it looks like plaintiffs are wasting their time bringing keyword lawsuits in a Second Circuit-controlled court.

Knowing that it faced an uphill battle, the plaintiff tried a few tricks to get around the precedent. First, it argues that NY state trademark law doesn’t have a “use in commerce” requirement. This is an interesting area because so many courts glibly treat federal and state trademark law as equivalent without any analysis–even though many state statutes are worded differently from the federal statute. This court doesn’t do deep analysis either (the matter gets handled in a long footnote–FN4), but the court explains why NY state trademark law requires a use in commerce even though those words don’t appear in the NY statute.

Second, the plaintiff argues that its complaint is about “passing off” instead of standard trademark infringement. The court correctly thumps this argument, saying “Plaintiff does not allege that defendant is selling its product under plaintiff’s name, nor does plaintiff allege that defendant is substituting its website in response to a request for plaintiff’s website.”

In support of its conclusion, the court discusses two of the typical analogies use to dissect keyword triggering. First, the court analogizes search results to a restaurant menu:

the allegations in the instant case are comparable to a situation where an individual requests Coca-Cola and, rather than being handed a Coca-Cola (or a Pepsi, as would occur in a situation of “passing off”), the individual is presented with a menu of choices that includes not just Coca-Cola as requested, but also soft drinks made by Coca-Cola’s competitors. Contrary to plaintiff’s assertion, such a scenario does not constitute “passing-off.” The competing products are not being sold under Coca-Cola’s name, nor is the individual being handed a non-Coca-Cola product under the guise that it is Coca-Cola; rather, the individual is simply being shown alternatives. Thus, no goods are being sold under “false pretenses.”

Then, the court analogizes search results to store clustering where competitors locate their businesses next to each other to benefit from traffic overflow:

Though, as the Second Circuit noted, “there are many people who use a search engine before typing in a company plus.com,” Sporty’s Farm LLC, 202 F.3d at 493 n. 4, this does not mean that companies must be prohibited from internally using trademarks so that a search of a trademark in a search engine only produces a single result. In the world outside the Internet, individuals in search of a company or product are not blinded to competitive products. In other words, it is not unlawful to strategically place billboards or even store locations next to billboards or store locations of competitors. For example, an individual in search of a McDonald’s restaurant will often be confronted with a Burger King restaurant. As long as Burger King did not mislead the consumer under false pretenses to its location, the mere fact that it decided to place itself in close proximity to a McDonald’s, in an effort to potentially draw customers in search of fast food, is not “passing off.” When these same marketing strategies are performed on the Internet, such strategies are not transformed into a “passing off” situation simply because the strategy is electronic.

Finally, the plaintiff tries to argue that the defendant should have negative matched its trademark. (See my discussion on this point in the Rhino Court case). I don’t really understand the court’s point in response (see FN9), but the court isn’t impressed by this argument either.

All told, this is a terrific defense-side ruling! I don’t know if it will help other courts recognize the errors in the existing pro-plaintiff precedent, but it’s a persuasive and thoughtful opinion that future courts need to consider.

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