Network Automation, Inc. v. Advanced Systems Concepts, Inc.
97 U.S.P.Q. 2d (BNA) 2036, 638 F.3d 1137, 2011 U.S. App. LEXIS 4488 (2011)
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Rule of Law:
The use of a competitor's trademark as a keyword to trigger search engine advertising does not create a likelihood of initial interest confusion if the advertisement is clearly labeled and the context of the search results page makes confusion unlikely, especially when the relevant consumers are sophisticated and exercising a high degree of care.
Facts:
- Advanced Systems Concepts (“Systems”) sells job scheduling software under its federally registered trademark, “ActiveBatch”.
- Network Automation (“Network”) sells a directly competing software product called “AutoMate”.
- Network purchased the keyword “ActiveBatch” from search engines, including Google and Microsoft Bing, through their advertising programs.
- When a user searched for “ActiveBatch,” a sponsored link for Network's website, www.NetworkAutomation.com, appeared in a separate, labeled “Sponsored Links” section of the results page.
- The text of Network's sponsored link did not contain the “ActiveBatch” mark, but rather generic phrases like “Job Scheduler” and its own website address.
Procedural Posture:
- Systems sent a cease-and-desist letter to Network demanding it stop using the “ActiveBatch” mark in its keyword advertising.
- In response, Network filed a suit in federal district court seeking a declaratory judgment that its advertising practices did not constitute trademark infringement.
- Systems filed a counterclaim against Network, alleging trademark infringement under the Lanham Act.
- Systems then moved for a preliminary injunction to prevent Network from using the “ActiveBatch” keyword pending trial.
- The district court granted the preliminary injunction in favor of Systems, finding a strong likelihood of success on the merits based on initial interest confusion.
- Network, as the appellant, appealed the district court's grant of the preliminary injunction to the U.S. Court of Appeals for the Ninth Circuit.
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Issue:
Does a competitor's purchase of a registered trademark as a keyword to trigger its own sponsored search engine advertisement create a likelihood of initial interest confusion sufficient to constitute trademark infringement under the Lanham Act?
Opinions:
Majority - Wardlaw, Circuit Judge
No, a competitor's purchase of a registered trademark as a keyword to trigger its own sponsored search engine advertisement does not create a likelihood of initial interest confusion in this case. The court held that the district court erred by rigidly applying the three “Internet troika” factors (similarity of marks, relatedness of goods, marketing channels), which are a poor fit for analyzing keyword advertising. Instead, a flexible application of the multi-factor Sleekcraft test is required, focusing on the factors most relevant to the specific context. Here, the court found that the sophistication of the consumers—businesses purchasing expensive software—and the clear segregation and labeling of sponsored links on the search results page made a likelihood of confusion insufficient to support a preliminary injunction. The court reasoned that mere diversion of a consumer to a competitor's clearly marked advertisement is not the same as actionable consumer confusion.
Analysis:
This decision significantly refines the legal analysis for trademark infringement in the context of search engine keyword advertising. It moves the Ninth Circuit away from a rigid application of the “Internet troika” test, which was developed for domain name disputes, and towards a more flexible, context-specific inquiry. The court's emphasis on consumer sophistication and the overall presentation of the search results page makes it more difficult for trademark holders to succeed on infringement claims based solely on a competitor's purchase of their mark as a keyword. This ruling protects clearly labeled comparative advertising in the digital marketplace and acknowledges the evolving savviness of internet users.
