April 24, 2008
Court Says Keyword Metatags Don't Matter--Standard Process v. Banks
By Eric Goldman
Standard Process, Inc. v. Banks, 2008 WL 1805374 (E.D. Wis. April 18, 2008)
SEOs and SEMs have known for years that most search engines ignore or give minimal acknowledgement to keyword metatags. Lawyers, on the other hand, have been living in a parallel fantasy universe where keyword metatags single-handedly divert unwaveringly brand-loyal customers to piratical competitors. Even today, many courts still rely on the 1999 Brookfield case and its dreadful keyword metatags-as-a-false-billboard analogy as an accurate and definitive statement of how search engines operate today. Prime offender #1: the recent 11th Circuit hairball in National American Medical v. Axiom, where the court may not have even understood the difference between keyword metatags and description metatags.
Despite this, defendants have occasionally defeated trademark claims over their inclusion of third party trademarks in the keyword metatags based on a variety of theories, including a lack of a use in commerce (ex: Site Pro-1, S&L Vitamins), insufficient likelihood of consumer confusion (ex: JG Wentworth), nominative use (ex: Welles) and others. But as far as I can recall, no court had rejected a keyword metatag for the right reason, which is that they are technologically ineffective.
That's why this new opinion appears to break important new ground. The court, citing this paper and Prof. McCarthy's treatise, rejects the argument that keyword metatags create initial interest confusion, in part because keyword metatags are immaterial. Hooray! Hey all of you lawyers still citing to Brookfield for its description of search engine operations, I think you need to acknowledge this case now too.
The rest of the case is really interesting too, with facts highly similar to the Australian Gold cases (see S&L Vitamins v. Australian Gold; Australian Gold v. Hatfield). The plaintiff makes dietary supplements. Through its distribution agreements, it tightly controls its channels to limit retailing to healthcare providers and, not incidentally, preserve high margins; thus, all authorized distributors are prohibited from making Internet sales. The defendant once was an authorized distributor but was kicked out of the chain for selling over the Internet. In response, the defendant bought supplies from other authorized distributors (who were contractually barred from reselling to distributors selling via the Internet) and continued offering the products via his website. The manufacturer is now suing the website for selling these legitimate goods that leaked out of the authorized channel.
As I've mentioned before, efforts to preserve high margins through anti-Internet channel control are doomed. Some of the lawsuits might succeed in controlling the channel in the short run, but Internet competition will prevail, like it or not, and supra-competitive margins will be a relic of the past.
In any case, under the trademark exhaustion/first sale doctrine, the defendant may resell the legitimate goods so long as consumers are not confused about a sponsorship relationship between the manufacturer and distributor.
(That's not to say that the defendant has the right to buy the goods. If the plaintiff really cares about the channel conflict, the plaintiff can clamp down on the authorized distributors who are leaking the goods to the defendant and therefore dry up the defendant's supply. But it may have to do so without the aid of trademark infringement claims.)
So, the main issue in this case is whether consumers will be confused about a sponsorship relationship between the manufacturer and the website. The court says no with respect to website sales where the defendant didn't show any product shots and included a prominent disclaimer. In contrast, consumers may be confused by the defendant's emails touting the products when the emails included product shots but didn't have a prominent disclaimer. On that basis, the defendant accepted, and the court ordered, an injunction against further promotion of the product without the disclaimer.
This relatively narrow injunction makes some sense, but I'm still confused why the court discussed the product shots. (The plaintiff is also confused why the defendant wasn't enjoined from using product shots, and yesterday it filed a motion to amend the injunction to include a restriction on product shots). I don't see how the inclusion of product shots can communicate some actual/implied sponsorship between manufacturer and retailer. If the takeaway from this case is that a retailer of legitimate goods that leak out of the channel can't display product shots, it seems like this would hurt consumer decision-making, not help it.
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