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By: Kun Zhao, Esq.

With emerging and evolving technologies widely available on the internet, advertising using keyword-triggered online ad programs is becoming increasingly effective. For example, Google Adwords is a very powerful tool in online advertising because it manipulates search results to artificially prioritize an advertiser’s website over other possible results. A simple text ad consists of a hyperlink headline to the advertiser’s website, one or several short lines of descriptive text and the URL of the advertiser’s website. An advertiser purchases the keywords with which it wants its website and the ad to be associated. When someone uses a Google search and the “keyword,” the ad will appear alongside other search results. Similar programs may be used on some most electronic devices and networks, such as smart phones and iPads.

While advertising on the internet, companies may wish to take advantage of their competitors’ widely-known trademarks in the industry. One of the very limited legitimate ways to exploit a competitor’s goodwill is to purchase trademarked terms in search engine keyword advertising on the internet, such as Google Adwords or Microsoft Bing.

The discussion of whether an advertiser can legitimately use a trademarked term as keyword in internet advertising started in Brookfield Commc’ns, Inc. v. West Coast Entm’t Corp., 174 F.3d 1036 (9th Cir. 1999)), where the Ninth Circuit relied on “initial interest confusion doctrine,” holding that non-confusing search results that were listed when a trademarked term was used as a search term infringed upon the plaintiff’s trademark.

After 12 years of evolving case law on trademark infringement involving the internet in the federal courts since Brookfield, the most recent decision in Ninth Circuit has clarified the test in analyzing and determining whether such use implicates trademark infringement. In a recent decision styled Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011), the defendant purchased the plaintiff’s trademark “ActiveBatch” in search engine keyword advertising, which when keyed into many search engines, like Google and Microsoft Bing, produces a results page showing “” as a sponsored link.

In reaching its conclusion, the Ninth Circuit agreed with the Second Circuit in finding that such use is a “use in commerce” under the Lanham Act. However, the Ninth Circuit refused to rigidly apply the “trokia” factors in Brookfield. Instead, it adhered to two long-stated principles as the proper inquiry of trademark infringement in the context of search engine keyword advertising: “the Sleekcraft factors (1) are non-exhaustive, and (2) should be applied flexibly, particularly in the context of Internet commerce.” The Court also emphasized that “because the sine qua non of trademark infringement is consumer confusion, when we examine initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.”

When analyzing and weighing eight Sleekcraft factors, the Court identified the four most relevant factors to the analysis of the likelihood of confusion in keyword advertising: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the consumer; and (4) the labeling and appearance of the advertisements and the surrounding context on the search results page. Noticeably, the Ninth Circuit gave little weight on the factors of “convergent marketing channels” and “degree of care exercised by consumers” as online advertising are so common toady and online commerce becomes commonplace. Finally, because the lower court failed to apply Sleekcraft factors flexibly and wrongly relied on the “Internet troika” instead of these factors, the Ninth Circuit reversed and vacated the preliminary injunction.

This decision is significant because it implies that the purchase and use of trademarked term in search engine keyword advertising does not inherently constitute trademark infringement. It clarifies the test for trademark infringement in cases involving the internet. As to all future internet cases, it indicates that the Court will apply the traditional long stand eight Sleekcraft factors in a flexible manner and in a case specific context.