Motion to dismiss denied in keyword advertising case

In TDI International Inc v Golf Preservations Inc (Case 6:07-313, January 31 2008), the Kentucky Eastern District Court has denied a motion to dismiss infringement and unfair competition claims under the Lanham Act.

TDI International Inc and XGD Systems install subsurface drainage systems for golf courses. Samson Bailey was an employee of TDI and XGD during 2004 and 2005. TDI and XGD claimed that during that time, they taught Bailey various trade secrets, including their methods for surveying golf course putting greens, laying out and installing drainage lines, and removing and replacing sod from putting greens. In late 2005 Bailey left TDI and XGD and started Golf Preservations Inc, a business that is also involved in the installation of subsurface drainage systems. In advertising his business, Bailey purchased search engine advertisements keyed to the mark XGD.

TDI and XGD sued Golf Preservations and Bailey, alleging infringement and unfair competition in violation of the Lanham Act based on the defendants' purchase of XGD as a keyword for search engine advertising. TDI and XGD also alleged violations of the Kentucky Uniform Trade Secrets Act, breach of contract, breach of fiduciary duty, conversion and tortious interference with business relationships. The defendants moved to dismiss the complaint.

With respect to the Lanham Act claims, the defendants argued that:

  • the purchase of keywords including the XGD mark does not constitute trademark use as contemplated by the Lanham Act; and

  • there was no need to consider whether there was a likelihood of confusion.

The defendants relied on 1-800 Contacts Inc v Inc, a Second Circuit decision involving pop-up advertisements. 1-800 Contacts is the basis for keyword decisions by several district courts in the Second Circuit that have found no trademark use. The defendants also relied on a Sixth Circuit decision, Interactive Products Corp v a2z Mobile Office Solutions Inc, in which the court concluded that the presence of a trademark in the post-domain path of a uniform resource locator does not normally signify the source of a website.

In the case at hand, although the decision does not state whether the XGD mark appeared in the text of search engine advertisements, the defendants' memorandum supporting their motion to dismiss stated that "the consumer never sees the plaintiffs' marks associated in any fashion with the defendants' service". Thus, it appears that, as was true in the district court keyword decisions in the Second Circuit, this case involved only keying advertisements to the XGD mark and not presentation of the mark in the ad text.

The court denied the motion to dismiss the Lanham Act claims, finding that the 1-800 Contacts and Interactive Products decisions were distinguishable and did not reach the specific facts of this case. The court held as follows:

"In light of the uncertain state of the law on the specific issue presented in this case, the court does not find the defendants' arguments sufficient to warrant dismissal... at this stage in the proceedings."

David S Fleming, Brinks Hofer Gilson & Lione, Chicago

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