Keyword Purchases Not a Trademark Use–Merck v. Mediplan Health Consulting

By Eric Goldman

Merck & Co. v. Mediplan Health Consulting, 2006 WL 800756 (SDNY Mar. 30, 2006)

About a week after Edina Realty v. TheMLSonline allowed a keyword purchase of a competitor’s trademark to go to trial, we got another ruling about trademark liability for purchasing keywords at the search engines. But this case reached a different result–the court dismissed the trademark infringement claim for the keyword purchases because the purchases do not constitute a trademark “use in commerce.” This sets up a direct conflict with the Edina Realty case that will require future cases to clarify the law.

This lawsuit involves various Canadian Internet pharmacies targeting US customers. Most of these pharmacies sell Merck’s Zocor (a cholesterol-reducing drug) as well as a generic version. Merck sued for patent infringement, trademark infringement and dilution, and false advertising. In this post, I’m focusing just on the discussion about the pharmacies’ purchase of the keyword Zocor at the search engines. The defendants moved to dismiss the trademark infringement claim for these purchases because they did not constitute trademark use in commerce.

Recall that in the Edina Realty case, the court said “Based on the plain meaning of the Lanham Act, the purchase of search terms is a use in commerce.” In my previous post, I explained why the court cut corners to make this statement.

Fortunately, the Merck court correctly identifies the applicable statutory definition of trademark use in commerce (15 USC 1127(1)-(2)). This section effectively requires that consumers “see” the trademark usage for it to qualify. The Merck court, citing to the Second Circuit 1-800 Contacts ruling from last summer (as well as the other 2 district court cases involving WhenU), says that keyword purchases are invisible to consumers and therefore do not constitute a trademark use in commerce.

As a result, the defendants are able to dispose of the claims over the keyword purchases on a motion to dismiss. This is a big win for defendants generally (not necessarily for these defendants, who face other legal problems) because knocking out the case on a motion to dismiss is comparatively quick and cheap.

So this case is good news for search engine advertisers (and, as a result, search engines). However, because this ruling directly conflicts with the Edina Realty ruling, we’re in legal limbo. We need more courts to weigh in before this issue becomes predictable.

Thanks to Rebecca Tushnet for spotting the case. Her commentary.