Competitive Keyword Advertising Permitted As Nominative Use–ElitePay Global v. CardPaymentOptions

June 17, 2015 · by Eric Goldman · in Marketing, Search Engines, Trademark

I know, it’s getting repetitive blogging about competitive keyword advertising cases failing in court. But trademark owners keep bringing them, so I’ll keep blogging them.

The Ruling

Screenshot taken June 15, 2015

The trademark owner does business as ElitePay Global. It provides “merchant payment solutions equipment, services and training business in the credit card processing industry.” The defendant runs a review website called CardPaymentOptions.com. It created a web page called “ElitePay Global Review” and included the trademark owner’s logo on the page and the trademark in the post-domain URL path. The website’s CEO wrote a review of the trademark owner and “rated Plaintiff’s service with a “C-” grade or 1.875 out of 5 stars.” (In response to this lawsuit, the defendant downgraded the trademark owner’s grade to an “F”). The page has over 40 other negative reviews and comments about trademark owner plus links to competitors’ websites. The defendant also bought keyword ads triggered by the phrase “ElitePay Global.”

On summary judgment, the court bypasses the standard prima facie trademark infringement elements and, relying heavily on the Toyota v. Tabari case, immediately jumps into a discussion about nominative use. The court runs through the standard Ninth Circuit three factors of nominative use:

Not Readily Identifiable Otherwise. The court says the defendant made a “referential use” to the trademarks to review and criticize the trademark owner (I talk more about referential uses here). The court further says there was no substitute for using the trademark as a keyword trigger. I agree, but I’d have loved to see more discussion beyond a cryptic citation to Playboy v. Netscape.

Not Taking More Than Necessary. The trademark owner pointed out that its trademark appeared on the page more than 50 times. The court says that volume of references is to be expected when a defendant makes referential uses.

The competitive keyword advertising meant that the defendant’s ads may have appeared above the trademark owner’s search results on search results pages. I’ve long criticized the relevance of evaluating relative search result positioning in trademark analyses (see, e.g., my 2011 rant), but the court feels bound by the 2004 Playboy v. Netscape case suggesting that relative SERP placement might matter. Still, the court sidesteps the issue by saying it might be relevant only if the defendant “regularly” appears higher than the trademark owner, and the trademark owner in this case didn’t introduce persuasive evidence of this.

The court doesn’t discuss the necessity of including the trademark owner’s logo on the review page, which has sometimes tripped up other courts (the BidZirk case comes to mind) even though it shouldn’t matter.

No Implied Sponsorship/Endorsement. Because the review of the trademark owner was critical, the lack of sponsorship/endorsement was clear to consumers. Including the trademark in the post-domain name path wasn’t material because the trademark owner failed to show any evidence that this signaled sponsorship/endorsement to consumers. The court doesn’t separately address the possible sponsorship/endorsement of the competitive keyword advertising.

Overall, the court finds the nominative use defense succeeds. On this basis, it dismisses all of the trademark claims as well as some related claims dependent on a trademark injury. The court declines supplemental jurisdiction over the standard trifecta of California consumer protection claims, but refiling those in state court might be a fast track to an anti-SLAPP motion.

Implications

I’ve regularly expressed skepticism about the efficacy of the nominative use defense in the online trademark context, and we’ve seen many rulings over the years where nominative use should have helped but didn’t (see, e.g., 1, 2, 3, 4, 5, 6). In contrast, in this procedural posture (summary judgment by a review website), the defense worked perfectly. I only wish nominative use would resolve lawsuits more often. See generally my article on Deregulating Relevancy in Internet Trademark Law and this outtake from an amicus brief I helped file in the Rescuecom case.

Still, I’m surprised the court was able to resolve the second and third factors of the nominative use defense so confidently. Did the review website absolutely NEED to make every reference it made to ElitePay Global (such as including the trademark in the URL path), did it NEED to include the logo, and did it NEED to bid on the trademark for its keyword advertising? It could successfully function as a review website without doing any of the above. Similarly, does competitive keyword advertising create an implied sponsorship with the trademark owner? I think the answer is clearly no, but the court didn’t cite to any of the precedent or literature on point.

Perhaps the court expedited its analysis because it’s ludicrous to hold a review website liable for trademark infringement for reviewing the trademark owner–especially when it’s a critical review, which increases our suspicion that the trademark owner is really seeking to suppress negative commentary, not redress a trademark injury. See the uncited Ascentive v. Opinion Corp. decision.

Whatever analytical corner cutting might be in this opinion, I’m chalking this case up as yet another win for keyword advertising defendants–extending the streak of successful defenses that’s been going for several years.

Case citation: International Payment Services, LLC v. CardPaymentOptions.com, 2:14-cv-02604-CBM-JC (C.D. Cal. June 5, 2015)

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