Amazon Defeats Lawsuit Over Its Keyword Ad Purchases–Lasoff v. Amazon

February 2, 2017 · by Eric Goldman · in Derivative Liability, E-Commerce, Marketing, Search Engines, Trademark

Lasoff owns Ingrass, which makes artificial turf. He claims he’s losing business to “cheaper, counterfeit” versions of Ingrass. (The opinion uses the term “counterfeit,” though it probably means knockoffs). He objects to the fact that Amazon runs keyword ads for “Ingrass” at the search engines and in promotional emails that are algorithmically programmed for remarketing (i.e., promoting products the email recipient viewed on Amazon but didn’t buy). The promotional email ad copy comes from third party sources. Prospective customers who saw these ads for “Ingrass” were directed to the Amazon product pages containing listings from the alleged counterfeiters.

Section 230

Citing the Ninth Circuit’s ccBill v. Perfect 10 ruling, the court cleans out all of the state law claims (unfair competition, state trademark infringement, tortious interference, negligence and unjust enrichment) due to Section 230. The court says:

The content to which Plaintiff objects (the “Ingrass” keyword and the misrepresentations by copycat competitors that their products are “Ingrass” products) is provided by third parties and the claims which Plaintiff prosecutes attempt to cast Amazon as the “publisher or speaker” of that content….The fact that Defendant created the automated system which identifies the desirable keywords and then propagated advertisements based on those keywords is not what Lasoff seeks to hold it liable for; it is that the information generated by that system is improperly damaging to his legitimate and protected business interest in the brand “Ingrass.”

Though the court reaches a logical result, it’s weird, or perhaps nonsensical, to say that the word “Ingrass” is third party content for Section 230 purposes.

Federal Trademark

Secton 230 doesn’t preempt federal trademark claims, so we move to the prima facie case there. Ingrass isn’t a registered mark, but the court concludes that it’s suggestive. Amazon argued that it hadn’t “used” the mark because its algorithms did all the work, but the court rejects the argument per Network Automation and Rescuecom.

Still, the court is troubled by the prospect of holding Amazon directly liable for trademark infringement because it doesn’t compete with Ingrass. In a footnote, the court explains:

Trademark infringement law is primarily concerned with stopping one person or entity from gaining an unfair competitive advantage over a business rival by misusing a protected mark. No one who offers their product for sale on amazon.com is a “competitor” of Amazon, and attempting to shoehorn the company into a direct trademark infringement framework creates a “square peg-round hole” situation for which traditional trademark law seems ill-suited.

I totally agree, though these analytical problems haven’t always stopped judges before. The court bolsters this intuition with the directly relevant Tiffany v. eBay precedent. The court says:

The Court finds Amazon’s position directly analogous to that of eBay, and further finds that the holding of Tiffany (NJ) – that there are “uses in commerce” which do not subject the user to liability for direct trademark infringement – applicable to this case.

Lasoff argued contributory trademark infringement but didn’t plead it initially, so the court disregards those arguments.

Lanham Act False Advertising

Frustratingly, the court doesn’t address whether Section 230 applies to Lanham Act false advertising cases. I believe it should because those are not “intellectual property” cases; but courts sometimes have nevertheless excluded Section 230 because the Lanham Act false advertising provisions are in the same section as the Lanham Act trademark provisions.

Nevertheless, the court says this claim suffers problems “similar to” the Section 230 analysis–“that the misrepresentations of which he complains originate with third-party vendors, not with Defendant.” Citing the Baldino’s Lock & Key v. Google case, the court says:

Plaintiff attempts to distinguish the case on the basis that the Google advertisements were published directly by the unlicensed locksmiths, but this argument strengthens Defendant’s position: just as Google could not be held liable for reproducing material which it did not know was false, neither can Amazon. Plaintiff fails to draw a meaningful distinction between two interactive computer service providers who created a platform for advertising which contained misrepresentative material generated by third parties. In both instances, liability lies with the vendors who created the misleading content, not the service providers who transmit that content.

Sherman Act Monopoly

Lasoff argued that Amazon dominates keyword ad buys, which the court says would be more accurately framed as a monopsony rather than a monopoly. The court rejects the argument because of the substitutability between search engine keyword ads and other forms of online marketing (cite to Person v. Google) and the presence of many other keyword ad buyers.

Implications

This wasn’t the most well-constructed case from the plaintiff’s side, so Amazon probably welcomed the opportunity to use the case to set some favorable precedent. The net consequence is that Amazon once again sidesteps exposure for the possible presence of knockoffs/”counterfeits” on its site, following cases like the Tre Milano and Milo & Gabby cases. I’m sure the knockoff/coutnerfeit issue isn’t going away for Amazon, even though Amazon says it is taking more aggressive steps to fight illegitimate offerings on the site, but plaintiffs are running out of legal theories that might support a successful case.

Like the eBay case, or perhaps the Jurin v. Google case from a while ago, this case raises the interesting thought-exercise of what messages Amazon itself communicates to prospective consumers when its ads indicate that something related to Ingrass is available on its site. Fundamentally, Tiffany and Ingrass argued that their brand name as the “lure” and that acted as a type of brand-authenticity warranty to consumers. Fortunately, both courts recognized that consumers can assume that the offerings relate in some manner to the trademark without the follow-on assumption that they are only going to see authentic goods from the manufacturer. I’m not sure Section 230 really gets at the conceptual dilemma in that thought-exercise. However, as we saw with some of the infringing-app-name cases, Section 230 does a great job of screening out the para-IP claims so that the court can devote more energy to resolving the underlying IP questions.

The opinion doesn’t mention the Multi-Time Machine v. Amazon case, but that ruling defended Amazon’s use of keywords on its internal search pages. Combined with this ruling, it seems to give online marketplaces a lot of freedom to use third party brands to make matches between consumers and vendors who aren’t the trademark owner.

Case citation: Lasoff v. Amazon.com, 2017 WL 372948 (W.D. Wash. Jan. 26, 2017)

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