Brand owners just won’t lie down in the face of continuing sales of their registered trade marks for search engine marketing purposes.
Topic: Search Engine marketing – Latest US keyword sale litigation
Who: 800-JR Cigar, Inc., GoTo.com
Where: US District Court of New Jersey
When: July 2006
What happened:
A preliminary ruling by the US District Court of New Jersey in the case of 800-JR Cigar, Inc. v. GoTo.com, Inc has laid down a further marker for brand owners in the ongoing worldwide debate on whether the sale to advertisers of third party registered trade marks by search engine companies as keywords constitutes 'use' of the mark under the provisions of the Lanham Act and therefore infringement. The judgment also provides further warning to search engine providers in relation to their potential liability for 'contributory infringement' of a third party’s trademark rights.
800-JR Cigar, a retailer of discount cigars, brought an action against online search provider GoTo.com, claiming that GoTo.com had infringed 800-JR's registered trade marks by selling to its competitors the right to use marks such as "JR Cigar" and "J&R Cigar".
Previous conflicting judgments on "use" issue
There had been some confusion as to whether the sale of a mark as a keyword constitutes 'use' of that mark for the purposes of establishing infringement following conflicting decisions earlier this year. In the case of Edina Realty v theMLSonline.com (20 March 2006) a District of Minnesota Court held that whilst such transactions were not a "conventional use in commerce", "based upon the plain meaning of the Latham Act, the purchase of search terms is a use in commerce".
However, ten days later the Southern District of New York ruled in Merck & Co., Inc. v Mediplan Health Consulting, Inc. (30 March 2006) that there had been no use of the trade mark 'ZACOR' following its sale as a keyword to third parties by Google and Yahoo!, by applying a comparative analysis of product placement strategies employed in retail stores.
The JR Cigar judgment has therefore helped to clarify the situation with District Judge Lifland concluding that GoTo.com had indeed "used" various marks on three counts: (1) accepting bids from competitors in order to gain prominence in search results; (2) ranking its keyterm customers before 'natural' listings and thereby assisting in diverting customers; and (3) through GoTo.com's 'Search Term Suggestion Tool', which was used to market effective search terms to competitors. The case of GEICO v Google, Inc. was cited in support of this interpretation.
Contributory trademark infringement
District Judge Lifland also dealt with GoTo.com's potential liability for contributory trademark infringement by knowingly making gain from or otherwise inducing, the violation of JR Cigar's trademark rights.
In the Google case, the claimant argued that Google was liable for producing search results containing website links that were themselves infringements where that mark had been sold to the third party as a keyword. However, Google chose to settle this argument out of court, leaving the question of liability unanswered at that time.
The JR Cigar decision is consequently significant in providing further guidance on this point as the court held that JR Cigar were most likely to succeed in an action against ToGo.com under the legal theory of 'contributory infringement'.
Why this matters
While the UK has so far spawned just one case in this area and this was on facts unlikely to be replicated, with both parties trading under the trade mark in question, US keyword search case law is now well-developed and with this case leaning very much toward brand owners. An appeal may well be in prospect, but until that time, UK brand owners miffed at SEM's impact on their brand equity may well take heart and take a tilt at UK keyword sellers who are still engaged in this practice.
