Ninth Circuit reins in trademark infringement liability for keyword bidding

By Dan Larsen
March 11, 2011

The Ninth Circuit this week cast doubt on whether an advertiser that uses the name of a competitor's product in keyword advertising is liable for trademark infringement.  In Network Automation, Inc. v. Advanced Systems Concept, Inc., the Ninth Circuit vacated a preliminary injunction preventing defendant from purchasing the name of plaintiff's product as a keyword to display sponsored ads. The court expressed skepticism about whether such trademark use creates consumer confusion, which is the essence of trademark infringement.   

Plaintiff Network Automation, Inc. (Network) and defendant Advanced Systems Concepts, Inc. (Systems) are competitors.  Systems markets software under the trademark ACTIVEBATCH.  Network purchased the keyword ACTIVEBATCH from Google AdWords in order to display a sponsored ad for Network's products when users searched the term ACTIVEBATCH.  The district court found that this use likely created initial interest confusion -- meaning that defendant used plaintiff's mark in a manner calculated to capture intial consumer attention even though no actual sale is made.  On that basis, the district court granted injunctive relief.   

The Ninth Circuit rejected that analysis, emphasizing that the owner of the mark must demonstrate "likely confusion, not mere diversion."  To determine the likelihood of confusion, the court applied the Sleekcraft factors, of which one is the degree of "consumer care."  According to the court, the degree of consumer care on the Internet is greater now than in years past, as the novelty of the Internet evaporates and online commerce becomes commonplace.  That makes confusion from a competitor's keyword advertising less likely. 

The court also added as a factor to the Sleekcraft test the labelling, appearance and context of the sponsored ads.  Network's ads did not clearly identify their source, and in certain cases that may cause initial confusion.  But the surrounding context of the ads may eliminate that confusion; Google and Bing segregate sponsored ads from search results to highlight that the ads are not the result of an objective search result.  Because the district court failed to properly consider the heightened care of consumers and the context of the ads, the Ninth Circuit ruled that the district court abused its discretion in granting injuctive relief.    



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