Keying has potential to infringe and dilute marks, rules Ninth Circuit

In Playboy Enterprises Inc v Netscape Communications Corporation, the US Court of Appeals for the Ninth Circuit has reversed a district court's grant of summary judgment made in favour of the defendants - Netscape Communications and Excite Inc.

The case involved the internet practice called keying, which allows advertisers to target internet users by tying the placement of advertisements on web pages to specific pre-identified search terms. Thus, instead of advertisements randomly being generated when an internet user does a search, the advertisements and banners, which appear on the search screen, are automatically generated by the search terms entered by the user. This makes advertisements more effective because, in theory, they reach users who are more inclined to be interested in them.

The defendants operate a search engine website. They had made a number of search terms, including Playboy Enterprises Inc's (PEI) trademarks PLAYBOY and PLAYMATE, available to advertisers to key to advertising dealing with sex and adult-oriented entertainment. Thus, when an internet user entered the search term PLAYBOY or PLAYMATE, advertisements or banners for sex or adult-oriented websites that were unrelated to PEI appeared on the screen with the search results. Many of the adult-oriented banner ads that appeared on the defendants' search results pages were either unlabelled or were labelled in a confusing manner. The advertisements contained a button that said 'click here', and when the user complied, the search results page disappeared and the user was transported to the advertiser's website.

PEI filed suit for trademark infringement and dilution based on the defendants' sale of its trademarks as key words to advertisers who had no relationship or affiliation with PEI. The US District Court for the Central District of California granted summary judgment to the defendants on both claims.

On appeal, the Ninth Circuit reversed. It held that the defendants were potentially liable, either directly or contributively, without deciding which theory applied, for infringement of PEI's marks.

The appellate court then found that there was a genuine issue of material fact as to whether the defendants' activities were likely to cause initial interest confusion. It held that initial interest confusion could exist because when an internet user does a search for the marks PLAYBOY or PLAYMATE, he or she would see a banner that says 'click here', and after clicking on the banner, he or she would find themselves on a third party's website. Citing Brookfield Communications Inc v West Coast Entertainment Corp, 174 F3d 1036, the court reasoned that even if the internet user then realized that he or she is not on a PEI site, the user may be "perfectly content" with the site that was accessed through the ad or banner and choose to stay at that site. This is the first time a court has held that initial interest confusion is actionable in the context of key words and click-through advertisements.

The court also reversed the grant of summary judgment in favour of the defendants on the issue of dilution and remanded the case to the lower court to apply the standard set forth in Moseley v Secret Catalogue Inc (see Federal Trademark Dilution Act requires proof of actual harm).

In an interesting concurring opinion, Judge Berzon considered the possibility that under both this case and Brookfield, a finding of trademark infringement could be made even in cases where advertisements or banners are clearly labelled on a search page. Berzon was concerned that the findings in both of these cases imply that a search engine operator can be liable for trademark infringement even if the internet user is not confused by the ad or banner that appears on the search engine web page.

It should be noted that the case has now been settled for undisclosed terms.

For a discussion of other decisions involving the controversial practice of keying, see Google seeks declaration on AdWords program, Google responsible for infringing sponsored link, court rules and Google's sponsored links infringe trademarks.

Susan Progoff, Fish & Neave, New York