426,487 Reasons Why Metatags Still Matter (In Court)–Venture Tape v. McGills

By Eric Goldman

Venture Tape Corp. v. McGills Glass Warehouse, 2008 WL 3959997 (1st Cir. Aug. 28, 2008). For more on the case, see the initial 2003 ruling denying a motion to dismiss for lack of jurisdiction and a 2006 district court ruling on damages.

Regular blog readers know that metatags don’t matter from a technological standpoint and haven’t mattered for years. But because they once might have mattered, courts are still treating them as the uber-SEO technique. In this ruling, the First Circuit joins the 11th Circuit as the latest appellate courts this year to experience a judicial freakout about metatags. The price tag to the defendant for using ineffectual metatags: $426,487 in damages, costs and attorney’s fees.

The story is all too familiar. McGills sells competitive products to Venture Tape and in 2000 put Venture Tape’s trademarks (“Venture Tape” and “Venture Foil”) into its metatags and in white-on-white text with the hope of getting some search engine traffic. (As usual, the judge doesn’t know or seem to care that there are multiple flavors of metatags, but the opinion treats them as keyword metatags). In 2003, Venture Tape realized this and sued. The district court found for the plaintiff and awarded $230k in damages for the period 2000-2003, $188k in attorney’s fees and over $7k in costs. McGills appealed to the First Circuit.

With respect to trademark infringement, the First Circuit’s test omits any requirement of trademark use in commerce (a seeming doctrinal problem in its own right), so the only issue was likelihood of consumer confusion. On that front, because the parties are direct competitors and the defense admitted that they referenced the trademarks to generate search engine traffic, the court says “By the conduct of its case below, McGills effectively admitted seven of the eight elements of” the likelihood of consumer confusion test.

The only disputed point is evidence of actual confusion, and the defendant points out that there’s no evidence that any consumers were lured to its site due to the trademark references. The court says it doesn’t care about this evidence one way or another because this is only 1 of 8 factors, so the 7 other factors are damning enough. In other words, this court says it doesn’t matter if any consumers actually changed their behavior because the other proxies to measure the efficacy of the defendant’s actions (i.e., the other elements of the likelihood of consumer confusion test) should matter more. Hmm.

The court has no problem declaring the defendant’s conduct “willful” (the white-on-white text is really tough to defend, even if it’s not efficacious), opening the path to an award of damages. The calculation starts with the defendant’s entire revenues during the period of time the plaintiff’s trademark was on the website (2000-2003), or $1.9M. The defendant is able to show that its gross profits during that time were only $230k, but it further argued that the competitive products were only 1% of its business. The district court wasn’t satisfied with the evidence to bolster that argument, so the court awards 100% of the gross profits (instead of 1%). The consequence is that the defendant’s entire business ran at zero profit for over three years solely because of its competitive metatagging–even if the metatagging didn’t divert a single consumer. To make it worse, the court awards $188k of attorney’s fees for the willful infringement plus $7k of costs. And, of course, the defendant paid for its own attorney for 5 years of litigation. All told, ouch.

I won’t now belabor the point that both the district court and the appellate court are wrong in their analysis of metatagging. See here for my previous belaboring of that point. Instead, let me reinforce two practice pointers that I’ve made before:

1) Don’t put third party trademarks in keyword metatags. It’s just not worth it. The marketing payoff is trivial at best, and too many courts are overreacting to the presence of metatags. Here, it cost the defendant 3+ years of profits for their entire business plus another nearly $200k for some SEO tactics that had little chance of helping anyway. That’s a bad business call.

2) If you are defending a lawsuit involving metatags or other technology-mediated uses of trademarks like keyword advertising, you MUST hire an attorney who already understands search engine technologies. As a good acid test, ask your attorney if they know how search engines index keyword metatags. If they don’t know that keyword metatags are irrelevant technologically, drop them immediately. The point is that your attorney will need to explain to the judge why keyword metatags don’t matter from a technological standpoint (like the attorneys apparently did in this case), and if your attorney doesn’t understand the technology, the judge won’t either.