Second Circuit Resolves Split Between the Circuits Regarding Sale of Keywords to Trigger Sponsored Links and "Use in Commerce" Under the Lanham Act
On April 3, 2009, the Second Circuit Court of Appeals handed down its decision in the matter of Rescuecom Corp. v. Google, Inc., reversing the United States District Court for the Northern District of New York’s dismissal of Rescuecom’s complaint on the grounds that it failed to state a valid claim for relief. The Court held that Google’s "sale" of Rescuecom’s trademark as a keyword in Google's Adwords and Keyword Suggestion Tool Programs, which sends online search engine users targeted advertisements based on their formulation of search terms, constitutes the "use in commerce” for purposes of the Lanham Act, which governs federal trademark law. Under the Lanham Act, subject matter jurisdiction arises for enforcement of trademark rights against infringement when one party “uses” the trademark of another “in commerce” in a way that “is likely to cause confusion, or to cause mistake, or to deceive," "as to the affiliation, . . . or as to the origin, sponsorship, or approval of . . . goods [or] services.” 15 U.S.C. §§ 1114; 1125(a). By rendering this holding, the Court resolved a significant split between the Second Circuit and federal courts in the Third, Fourth, Fifth, Seventh, Eighth, Ninth, Tenth and Eleventh Circuits over the “use in commerce” issue.
Prior to Rescuecom, the Second Circuit in 1-800-Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), held that the “use in commerce” requirement of the Lanham Act was not satisfied in the context of keyword-triggered search engine popup ads. The Court noted that the WhenU.com opinion involved the construction of "use in commerce" in 15 U.S.C. § 1127. Federal district courts in the Second Circuit applying WhenU.com dismissed claims against Google and other parties alleging trademark infringement as the result of keyword triggered search engine advertising. In Rescuecom, the Second Circuit distinguished and narrowly construed WhenU.com, stating that the holding should be limited to its facts, i.e., keyword triggered pop-up advertising, which did not feature the trademark but the website address, did not give rise to a claim for trademark infringement, and was not intended as an absolute ban on Lanham Act claims based upon the use of keywords to trigger sponsored links.
Central to the Rescuecom decision is the fact that, unlike the software program in WhenU.com, Google's AdWords and Keyword Suggestion Tool Programs actually feature the use of a competitor's trademarks. Google sells advertising through two primary mechanisms, AdWords and Keyword Suggestion Tool. These programs allow an advertiser to select words related to its business and “purchase” those words from Google. Once purchased, whenever a Google user selects that word in a search, the advertiser’s sponsored advertisement and link will appear along with (and sometimes over the top of) what would otherwise be a normal, regular Google search result. The Keyword Suggestion Tool works in concert with AdWords, and features additional words that the advertiser might want to purchase to increase exposure. Frequently, the suggested words are trademarks and trade names of the advertiser’s direct competitors. The Second Circuit noted, in contrast to WhenU.com, that "Google displays, offers, and sells Rescuecom's mark to Google's advertising customers when selling its advertising services."
In Rescuecom, the Second Circuit held that Google's sale of trademarks as part of keyword-triggered search engine advertising constitutes a “use in commerce” under the Lanham Act. As such, trademark owners whose marks have been sold in this way may maintain actions under the Lanham Act in the Second Circuit. The Second Circuit attached to the opinion, as dictum, an Appendix entitled "On the Meaning of "Use in Commerce" in Sections 32 and 43 of the Lanham Act" which traced the history of the phrase "Use in Commerce" in the Lanham Act, including the 1988 Amendment to the Lanham Act. The Rescuecom case has been remanded to the Northern District Court for further consideration and determination of the other elements of infringement, specifically whether Google’s use of Rescuecom’s trademark is likely to cause consumer confusion that rises to the level of infringement.