November 22, 2009
Keyword Advertising Lawsuit Survives Motion to Dismiss--Morningware v. Hearthware
By Eric Goldman
Morningware, Inc. v. Hearthware Home Products, Inc., 2009 WL 3878251 (N.D. Ill. Nov. 16, 2009)
I keep getting calls from reporters operating under the misimpression that trademark owner-vs.-search engine keyword advertising lawsuits are more common than trademark owner-vs.-keyword advertiser lawsuits. While the lawsuits against search engines certainly get way more press coverage, in reality they are relatively rare. I don't have an exact count of pending lawsuits, but only 10 immediately come to my mind (9 against Google and the AA v. Yahoo case). In contrast, trademark owner-vs.-advertiser lawsuits are so numerous that I don't blog on every complaint I see, and most trademark owners are wise enough to leave the search engines out of their litigation.
This is a fairly run-of-the-mill trademark owner-vs.-advertiser case. The parties compete in the "counter-top electric oven" market. The advertiser purchased the plaintiff's "Morningware" trademark as a keyword and displayed the following ad copy: "The Real NuWave ® Oven Pro Why Buy an Imitation? 90 Day Gty." NuWave is the advertiser's brand name.
The "why buy an imitation?" language (plus, perhaps the "real" earlier in the copy) creates the real friction because Morningware argues that the ad copy implies that Morningware's products are an imitation of (presumably) NuWave. Notice that the defendant didn't reference the plaintiff's brand in the ad copy, but IMO that contributes to the overall crypticness of the ad copy. Without both trademarks being referenced in the ad copy, searchers who are not already familiar with the various brands in the countertop electric oven space (like me) may not immediately figure out the relative (lack of) relationship between NuWave and Morningware. Because I don't know any of the electric oven brands, the ad presentation did not immediately communicate to me that NuWave competed with Morningware. However, because the advertiser didn't reference the plaintiff's trademark in the ad copy, Google will not do anything more for the trademark owner, meaning that the trademark owner must go to court to attack this ad.
(Note to plaintiff's counsel: please don't subpoena me to testify to my impressions of the ad copy. I have never shopped for countertop electric ovens and I don't expect I ever will, so I know nothing about the knowledge or expectations of a reasonable purchaser. If you think I'm being a Nervous Nellie with this note, see this post).
Moving onto the opinion, the court reached an irresolute outcome on the "use in commerce" prong of plaintiff's claim, correctly noting that (1) the Seventh Circuit has not ruled on "use in commerce" in keyword advertising, (2) the Second Circuit Rescuecom case did not involve a trademark owner-vs.-advertiser claim, and (3) "a review of case law outside of the Seventh Circuit reveals that a majority of courts have found that actions such as those taken by Hearthware in purchasing Morningware's trademark as a search term constitute a Lanham Act 'use.'" Noting the parallels to the Vulcan Golf case (also an N.D. Ill. case), collectively this was enough to reject the 12(b)(6) motion to dismiss.
The advertiser also argued for a 12(b)(6) motion to dismiss on lack of consumer confusion grounds. While I understand the advertiser's hope, I think it's hard to convince a judge that the trademark owner failed to allege sufficient confusion in the complaint. This is especially true when plaintiffs invoke the stupid "initial interest confusion" doctrine, which has no doctrinal contours and therefore is simply impossible for defendants to refute at the motion-to-dismiss stage (obligatory cite to my anti-initial interest confusion rant from 2005). Citing to the abysmal 2002 Promatek case, the court says the plaintiff alleged enough initial interest confusion to survive the 12(b)(6).
There is a little more interesting discussion in the opinion about the trademark owner's disparagement claims. In the end, the court completely rejects the advertiser's motion to dismiss. This doesn't ensure the trademark owner's ultimate litigation success, but chances are we won't reach a definitive and final court ruling either. As almost all trademark owner-vs.-advertiser lawsuits do, this case will probably settle because both parties are probably incurring litigation costs vastly in excess of any profits gained/lost from "diverted" customers.
Meanwhile, advertisers buying competitive keyword advertising should take note of the risks of implicitly calling your competitor an "imitation" without explaining the relative product positioning--which isn't possible due to the limited character count of a Google AdWords ad. Because the character limits prevent fully clarifying disclosures, advertisers should consider striking the phrase "why buy an imitation?" from their keyword advertising copy toolkit.
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