Adler v. McNeil Consultants
10 F.4th 422 (5th Cir. 2021) (2021)
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Rule of Law:
Trademark infringement under the Lanham Act may be plausibly alleged in the context of search-engine advertising where a defendant purchases a plaintiff's trademarks as keywords, displays generic and unlabeled advertisements, and employs deceptive post-click practices that cause initial interest confusion among consumers, even if the trademark is not visible in the advertisement itself.
Facts:
- Jim S. Adler P.C. and Jim Adler (collectively, "Adler") operate a large personal injury law firm in Texas, extensively marketing their services using various trademarks, including JIM ADLER, THE HAMMER, TEXAS HAMMER, and EL MARTILLO TEJANO.
- Adler purchases Google 'keyword ads' using these trademarks as search terms, ensuring Adler's advertisements appear when consumers search for the Adler marks.
- McNeil Consultants, L.L.C., Quintessa Marketing, L.L.C., and Lauren Von McNeil (collectively, "McNeil") operate a lawyer-referral website and call center that solicits and refers personal injury cases to attorneys for compensation.
- McNeil also purchases Google keyword ads for the Adler marks, causing McNeil's advertisements to appear alongside or before Adler's ads in search results.
- McNeil's advertisements are designed to display generic terms that do not identify a particular lawyer or law firm and are not clearly labeled as belonging to McNeil.
- McNeil utilizes 'click-to-call' advertisements, which, when clicked on a mobile phone, directly initiates a call to McNeil's call center rather than directing the user to a website.
- McNeil's call center representatives answer with generic greetings and allegedly attempt to build rapport and convince callers, who initially searched for Adler, to engage lawyers referred by McNeil before disclosing McNeil's identity.
Procedural Posture:
- Jim S. Adler P.C. and Jim Adler (Adler) sued McNeil Consultants, L.L.C., Quintessa Marketing, L.L.C., and Lauren Von McNeil (McNeil) in the United States District Court for the Northern District of Texas, alleging trademark infringement under the Lanham Act and claims under Texas law.
- McNeil filed a motion to dismiss Adler's complaint for failure to state a claim.
- A magistrate judge recommended granting McNeil’s motion, construing Adler’s claims as based solely on keyword purchases, finding 'bait-and-switch' allegations conclusory, and concluding that a likelihood of confusion could not be pleaded as a matter of law because McNeil's advertisements were generic and did not visibly incorporate the Adler marks.
- Adler objected to the magistrate judge’s findings and recommendation, and also filed a motion for leave to amend the complaint, including a proposed second amended complaint with new survey evidence.
- The district court adopted the magistrate judge’s findings, conclusions, and recommendation, dismissed Adler’s complaint, and denied Adler's motion for leave to amend on grounds of futility, ruling that the proposed amended claims would also fail as a matter of law.
- Adler appealed the dismissal and the denial of leave to amend to the United States Court of Appeals for the Fifth Circuit.
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Issue:
Does a complaint plausibly allege trademark infringement under the Lanham Act, specifically initial interest confusion, when it claims a defendant purchased the plaintiff's trademarks as keywords for search-engine advertising, displayed generic and unlabeled advertisements, and engaged in a 'bait-and-switch' scheme through call-center practices, notwithstanding that the trademark was not visible in the advertisement?
Opinions:
Majority - Leslie H. Southwick
Yes, a complaint plausibly alleges trademark infringement under the Lanham Act when it describes a defendant's purchase of a plaintiff's trademarks as keywords for search-engine advertising, combined with generic, unlabeled advertisements and misleading call-center practices that cause initial interest confusion, even if the trademark is not visible in the advertisement. The court reasoned that to survive a motion to dismiss, a complaint must "contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face," and Adler's complaint met this standard by providing specific allegations beyond the mere purchase of keywords. The court affirmed that initial interest confusion, which occurs when confusion creates initial consumer interest even if no actual sale results from it, is actionable under the Lanham Act, citing Elvis Presley Enters., Inc. v. Capece. Reviewing the district court's decision de novo, the Fifth Circuit found the district court erred by dismissing the claim as based "solely on the purchase of Plaintiffs’ trademarks as keywords," overlooking the detailed allegations of a "bait-and-switch" scheme. The court further held that the generic nature of McNeil’s advertisements actually enhances, rather than dispels, the likelihood of initial interest confusion. Finally, the court rejected the district court’s conclusion that a trademark must be visible to the consumer to constitute infringement, clarifying that visibility is a relevant but not dispositive factor in determining a likelihood of confusion in search-engine advertising cases, citing the Southwest Recreational and Ninth Circuit cases.
Analysis:
This case clarifies the pleading standard for trademark infringement, particularly initial interest confusion, in the evolving landscape of internet advertising. It reinforces that the 'likelihood of confusion' is a fact-intensive inquiry that cannot typically be decided at the motion to dismiss stage when specific allegations of misleading conduct exist. The ruling prevents a bright-line rule requiring visible trademark use in advertisements, acknowledging that modern digital marketing can create confusion through a combination of subtle factors, including keyword bidding, generic ad copy, and post-click deceptive practices. This broadens the scope for plaintiffs to bring Lanham Act claims in the digital realm and serves as a warning to advertisers against practices designed to intercept consumer interest based on a competitor's brand name through multi-stage deception.
