Court Declines to Follow Other Circuits on Use of Trademarks in Metadata

Declining to follow similar cases in other circuits, a federal district court for the Eastern District of Pennsylvania ruled that a website’s attempt to increase its ranking in search engine listings through invisible use of a competitor’s trademarks, either through hidden meta tags or as a keyword to trigger its own paid advertisements, does not violate federal trademark law under the Lanham Act.

I. Factual Background

Plaintiff J.G. Wentworth, S.S.C., a finance company that provides consumers with immediate cash payments in exchange for the rights to future payments from structured settlements, alleged that defendant Peachtree Settlement Funding violated the Lanham Act by using plaintiff’s trademarks as a keyword in Google’s AdWords program and by inserting them into “meta tags” for defendant’s website. The AdWords program displays sponsored advertisements alongside search results when the search terms include a given keyword, so an advertisement for defendant’s company would appear whenever a user searched Google for plaintiff’s trademark. Meta tags are pieces of source code, invisible to the user, usually used to help search engines index and categorize web pages and to determine their relevance to a given search; search engines which use this data (many no longer do) would give defendant’s website a higher rank when a user searches for plaintiff’s trademark because of its use in defendant’s meta tags. Both of these uses are invisible to Internet users, and plaintiff’s trademark does not appear in any of defendant’s text or images that are visible to consumers.

Defendant responded to the complaint with a motion to dismiss for failure to state a claim, asserting (1) that plaintiff could not demonstrate that that defendant’s use of the trademark served to connect defendant’s goods or services with the trademark, and (2) that plaintiff could not demonstrate that defendant’s use of the trademark was likely to create confusion concerning the origin of the goods or services. The court rejected the first of these arguments, finding that defendant’s conduct qualifies as use in commerce under settled doctrine. On the second issue, however, the court diverged from most other jurisdictions that have considered the issue, ruling that the use of trademarks in metadata in order to influence search engine results does not create a likelihood of confusion, as required to find a violation of the Lanham Act.

II. Use in Commerce

The Lanham Act applies only to trademark use “in connection with any goods or services.” Defendant argued that its use of the trademarks involved only a “pure machine-link function” – a completely internal use of the trademark that never communicated the trademark to the public – and thus that it falls outside the type of behavior contemplated by the Lanham Act. But in light of language elsewhere in the Lanham Act, the court interpreted this provision not as limiting the scope of the Act to include only trademark use that identifies the product with the trademark, as the defendant argued, but rather as referring to the much broader category of all trademark use related to commerce. Under this reading, defendant’s conduct “has crossed the line from internal use to use in commerce under the Lanham Act.”

III. Likelihood of confusion

The court then, declining to follow rulings from several other jurisdictions, concluded that no reasonable factfinder could find that defendant’s use of the trademark could create confusion among consumers as to the provider of the services. As a preliminary matter, if the Lanham Act applied only to post-sale confusion, then defendant’s behavior would clearly fall outside the scope of the act, as once a user clicked the link to defendant’s website and reviewed its services, it would quickly become clear that the provider of these services is a company different from the plaintiff’s. However, numerous courts have found that the Lanham Act must apply to pre-sale confusion as, or else a company could exploit a sort of bait-and-switch scheme known as “initial interest confusion”: a company might initially use a competitor’s trademark to lure in customers who are looking for the competitor, then only later reveal the true source of the product, at which point some customers might find it easier to simply complete their purchase from the infringing company than to search again for the company they were initially interested in. The question before the court in this case, then, was whether defendant’s behavior was similar to this prohibited “initial interest confusion” scheme.

The court, after noting that “numerous cases from other jurisdictions . . . extend initial interest protection to keyword meta tags,” rejected those cases and concluded that the situation here does not create a risk of initial interest confusion. The difference between the court’s decision in this case and the decisions in those other cases turns on two different characterizations of what it is that consumers understand search engine results to represent. If a consumer who enters a trademark into a search engine understands the results to be a list of websites with information on that product, then if he follows a link to a competitor’s site he might initially be confused. However, if a consumer understands the results to be a list of websites with information related to the product, then he might anticipate that the results will include links to products that are similar to, but not the same as, the product he was searching for. A consumer of the latter type will not encounter initial interest confusion because he knows that each website appearing in the search results is just “one of many sites for the potential consumer to investigate” (emphasis added), and he does not form any beliefs about what a site represents until after investigating it, thus eliminating any risk of initial interest confusion.

The court in this case found that the second characterization is the one which more accurately describes the operation of Internet search engines and that consumers should expect this, leading the court to diverge from many courts which have considered consumers to be more like the first type. The court consequently found that the Lanham Act does not apply to defendant’s actions and granted the motion to dismiss. The ruling is consistent with a recent decision from the District of New Jersey, Buying for the Home, LLC v. Humble Abode, LLC, 2006 WL 3000459 (D.N.J. 2006), but results in a split with cases in several other circuits, most notably a 1999 ruling by the Ninth Circuit Court of Appeals, Brookfield Communications, Inc. v. West Coast Entertainment Corp., 17 F.3d 1036 (9th Cir. 1999).

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