Google dealt blow in keyword case

In Rescuecom Corp v Google Inc (Case 06-4881-CV, April 3 2009), the US Court of Appeals for the Second Circuit has held that Google Inc’s sale of registered trademarks under its AdWords system was a use in commerce sufficient to subject it to, among other things, trademark infringement liability. The decision, which was essentially procedural in nature, held that Rescuecom Corp had alleged sufficient facts to withstand Google’s motion to dismiss for failure to state a claim upon which relief could be granted. Importantly, in reaching its decision and remanding the case to the district court for further proceedings, the Second Circuit was careful to point out that it had “no idea whether Rescuecom [could] prove that Google’s use of Rescuecom’s trademark in its AdWords program causes likelihood of confusion or mistake”.

Rescuecom alleged that Google’s offering for sale and sale of the RESCUECOM mark to third parties, including Rescuecom’s competitors, was a use of the trademark sufficient to give rise to a likelihood of consumer confusion in the marketplace, thus subjecting Google to liability for trademark infringement, false designation of origin and dilution under 15 USC §1114 and §1125. Google moved to dismiss on the basis that under relevant case law, it had not technically “used” the RESCUECOM mark. Google argued that, at most, its system suggested and sold appropriate keywords to advertisers, thereby permitting certain search results to appear when a user typed the keyword into the Google search engine. 

Google did not (and could not) contest the fact that the keywords could - and often did - consist of third-party trademarks. Nonetheless, according to Google (and the district court), such use was no more than an “internal” use because the terms were not displayed in the search results viewed by the computer user. Rather, the terms were used to trigger the appearance of ads placed by Google’s advertisers. As such, Google argued that to the extent it had made any use, it was not a “use in commerce” sufficient to give rise to liability. 

In a situation where a complaint has been dismissed for failure to state a claim, the appellate court must assume the truth of the facts alleged in the underlying complaint. In this light, the Second Circuit reviewed the case law upon which the district court had dismissed the complaint (namely, the Second Circuit decision in 1-800 Contacts Inc v WhenU.com Inc - for further details on this decision please see "Second Circuit finds no trademark 'use' in WhenU pop-up ads") and concluded that the facts in the present case were sufficiently distinguishable from 1-800 so as to warrant a different conclusion. 

The Second Circuit distinguished 1-800 in two ways. First, it pointed out that a key element of the decision in 1-800 was the fact that the complaint had not alleged that the defendant used, produced or displayed the plaintiff’s trademark. In 1-800, the defendant’s alleged infringing activities consisted of using the plaintiff’s website address (ie, not its trademark) to trigger pop-up advertising. However, the Second Circuit was quick to point out that it did not suggest in 1-800 that a website address could not function as a trademark. In fact, according to the court, “the opposite is true”. However, in 1-800 the question of whether the website address was used as a trademark was not before the court and was thus not considered.

Second, the Second Circuit held that 1-800 was distinguishable because in that case there was no “use” - the defendant’s system for triggering pop-up ads did not permit participating advertisers to tie their pop-ups to a particular website address. Rather, the pop-up ad that appeared was determined on a category level, and thus the defendant did not enable advertisers to identify specific keywords to trigger their ads. 

In contrast, in Rescuecom the Second Circuit found that Google had, in fact, recommended and sold Rescuecom's trademark and, therefore, had made use of the mark. Moreover, the court found that Google “displays, offers and sells Rescuecom’s mark to [its] advertising customers”. Accordingly, the court was able to fit Google’s use of the RESCUECOM mark to sell advertising (by way of its AdWords system and its keyword suggestion tool) squarely into the types of actions covered by the trademark statute - namely, the use and sale of another’s mark in connection with the sale of services rendered in commerce (15 USC §1127). 

Google, in defending its position, relied heavily on case law that followed 1-800 and, specifically, on the perceived distinction between an internal or hidden use of a trademark and a more overt use. Google argued that 1-800 and its progeny stood for the proposition that internal use could not give rise to trademark infringement liability because such use was not communicated to the public. 

The Second Circuit was not persuaded. First, the court clarified that its decision in 1-800 did not go so far as to imply that an internal use could not give rise to liability from a trademark perspective (merely that it did not in that case). More importantly, the court could not accept that “Google’s recommendation and sale of Rescuecom’s mark to its advertising customers” was merely an internal use that was not communicated to the public. According to the court, Google’s AdWords system and its keyword suggestion tool were without question public, and Google’s suggestion of the RESCUECOM mark to Google’s advertisers was a use of that mark in commerce. 

However, the fact that Google’s activities were found to have amounted to “use” did not answer the ultimate question in the Rescuecom Case. What needs to be determined is whether such use gives rise to a likelihood of consumer confusion or dilution. The answer to that question can come only after a review of all of the appropriate facts. Accordingly, to try to reach the ultimate conclusion, the Second Circuit remanded the case to the district court for further proceedings.

The decision also included an appendix that discussed the meaning of the phrase 'use in commerce' in the context of trademark infringement, unfair competition and dilution claims. The court concluded that the phrase, when used in connection with infringement and dilution claims, has a different meaning than when used in connection with the prosecution of a trademark application or the maintenance of a trademark registration.