Yahoo’s Sale of Competitive Keyword Ads Isn’t False Designation of Origin–Heartbrand Beef v. Lobel’s

By Eric Goldman

Heartbrand Beef, Inc. v. Lobel’s of New York, LLC, 2009 WL 311087 (S.D.Tex. Feb. 5, 2009). The Justia page.

Heartbrand sells Akaushi beef, a special and very expensive Japanese variety of beef. Heartbrand brought an enforcement action against several defendants, including Yahoo for selling a retailer, Lobel’s, the first ad position for the keyword “Akaushi.” Lobel’s sells very expensive beef but not Akaushi beef. Heartbrand alleged that Yahoo’s display of the ad constituted Lanham Act false designation of origin and common law unfair competition. I suspect that other plaintiffs have alleged that the search engine makes a false designation of origin by presenting keyword ads, but I can’t recall an actual ruling on this issue before.

From my perspective, the natural analytical approach would be to assume the advertiser makes the false designation of origin and then consider Yahoo’s liability under some kind of “contributory” or “derivative” false designation claim (if such a thing exists). However, stated this way, the claim then should be preempted by 47 USC 230; other cases have concluded that 47 USC 230 preempts non-trademark portions of the Lanham Act. See, e.g., Kruska v. Perverted Justice Foundation Inc. But see Doe v. Friendfinder.

The court sidesteps this direct-v.-contributory issue entirely, even though it acknowledges that Heartbrand’s claim doesn’t make sense because “Yahoo! obviously does not fit into these classic models [of false designation of origin] because Yahoo! is not in the business of selling beef.” Instead, the court rejects the false designation claim because (1) Yahoo doesn’t make any “statement” (the advertiser does), and (2) even if Yahoo does make a statement, it’s not designating the origin of Yahoo’s offerings.

This case reminded me of the Overstock v. SmartBargains opinion from last August, where the Utah Supreme Court said that trademark-triggered competitive pop-up ads do not constitute common law unfair competition or tortious interference. (Note that in that case, the defendant was the ad buyer, not the ad seller, so there is a significant factual difference). In both the Overstock case and this one, the courts rejected plaintiffs’ efforts to fit their claims in doctrines that are ancillary to the more traditional trademark infringement claim. In that respect, this case helps channel the lawsuits back to trademark infringement and might help curb claim sprawl.

Ryan Gile has also blogged on the case.

UPDATE: Rebecca weighs in.