No infringement for use of competitor's trademarks in metatags

In Standard Process Inc v Banks (Case 06-C-843, May 18 2008), the US District Court for the Eastern District of Wisconsin has ruled that absent some direct competition, trademark use in metatags will not substantiate a finding of initial interest confusion.
Standard Process Inc, a company which manufactures and sells dietary supplements to healthcare providers and retailers approved by the company, commenced an action against Scott J Banks, one of its former customers, for trademark infringement and false designation of origin in violation of 15 USC §§1114(1) and 1125(a).
Banks was an authorized seller of products manufactured by Standard Process. He sold such products in his health clinic and through his website. However, in order to have the right to sell Standard Process products, sellers must agree, among other things, to refrain from selling Standard Process products over the Internet. Thus, by selling Standard Process products through his website, Banks violated Standard Process’s policy. Standard Process accordingly terminated his account.
Banks nevertheless continued to sell unaltered Standard Process products on his website, purchasing such products from other sellers authorized to distribute them. Banks also continued to use Standard Process’s trademarks and photographs of Standard Process products on his website.
In response to objections by Standard Process, Banks removed pictures of the Standard Process products and all Standard Process logos from his website. He continued to sell Standard Process products, but placed a disclaimer on his website (accessible on all pages from which customers could purchase Standard Process products) notifying customers that he was not an authorized seller of Standard Process products and was not affiliated with Standard Process.
In order for Standard Process to establish trademark infringement, it had to show that:
  • it had a protectable trademark; and
  • there was a likelihood of consumer confusion as to the source of the goods.
The court held that there was no dispute with respect to the fact that Standard Process had a protectable trademark. Thus, the main issue was whether Banks was likely to confuse customers into believing that he was an authorized retailer of Standard Process products.
As a general rule (known as the ‘first sale doctrine’), trademark law does not apply to the sale of genuine goods bearing a true mark, even if the sale is not authorized by the trademark owner. However, the first sale doctrine will not protect unauthorized resellers which use other entities' trademarks if such use gives a reasonable impression that the resellers are authorized dealers of a product.
The court ruled that Banks's website did not create the impression that he was an authorized dealer of Standard Process products. Banks had removed all pictures of Standard Process products from his website and a disclaimer was prominently displayed in the first paragraph of the page where customers could buy Standard Process products. The court held that a disclaimer expressly declaring that the seller is not affiliated with the owner or is not an authorized distributor of the trademark owner's products is an effective means of preventing confusion in the minds of consumers.
Standard Process also argued that the products sold through Banks’s website were materially different from genuine Standard Process products, and the presence of these other products created confusion in the minds of customers. Standard Process sells its products primarily to healthcare professionals, who give the dietary supplements to patients only after a one-on-one consultation. However, a customer who purchased Standard Process products through Banks's website did not require such a consultation. Standard Process argued that this lack of consultation materially altered its products.
In order to demonstrate that Banks violated Standard Process's quality control standards to the point of compromising the genuineness of the products themselves, Standard Process had to demonstrate that:
  • it has established "legitimate, substantial, and non-pretextual quality control measures";
  • it abides by those procedures; and
  • the non-conforming sales will diminish the value of its trademark.
While the court held that Standard Process generally abides by its quality control measure of selling products only to healthcare professionals, the fact that Standard Process products were also sold by Banks did not diminish the value of the Standard Process trademarks. The Standard Process products sold through Banks’s website were unaltered, and the absence of one-on-one consultations did not amount to a latent defect in the product which a customer could not detect. According to the court, when a customer makes a purchase through the Internet, he or she does not expect to receive an individualized consultation. The court thus rejected Standard Process's argument and held that there was no risk of customer confusion.
Lastly, Standard Process alleged that Banks was liable for trademark infringement because of initial interest confusion. Standard Process argued that by using its trademarks in the metatags of his website, Banks confused customers into believing that he was affiliated with Standard Process and was an authorized retailer of Standard Process products. The court rejected this argument, stating that keyword metatags do not create initial interest confusion, in part because they are no longer used by modern search engines and, consequently, do not influence search results. In any event, the court ruled that even if search engines still made significant use of metatags and consumers were diverted to Banks’s website, they were actually given an opportunity to purchase unaltered Standard Process products. Thus, Banks was not a direct competitor of Standard Process and the likelihood of consumer confusion was not present in this case.
This case stands in contrast to several other decisions, in which the court held that trademark use in metatags will generally lead to trademark infringement. Therefore, future decisions will help paint a clearer picture as to whether metatags suits will have continued vitality.
Daisy Yu, Heydary Hamilton PC, Toronto

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