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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Government Employees Insurance Company v. Google, Inc., et al.

1:04cv507 (LMB/TCB) (E.D. Va. August 25, 2004)

Court denies motion to dismiss brought by search giants Google and Overture, and allows plaintiff GEICO to proceed with trademark infringement and unfair competition claims arising out of defendants' alleged practice of selling advertising triggered by the entry of plaintiff's trademarks as search terms, which advertisements are displayed in the search results generated by such searches.

Plaintiff Government Employees Insurance Company ("GEICO") is the owner of the federal trademarks "GEICO" and "GEICO Direct" which it uses to market its insurance products.

The Complaint alleges that defendants Google and Overture each operate Internet search engines on which they sell advertising linked to search terms.  When a consumer performs a search for such a term, she sees a search result page that not only contains information about web sites responsive to her request based on neutral criteria, but which also contains information about the web sites of the paid advertisers as well.  These latter listings are denoted "sponsored links."  On Google's site, they appear to the right of the main search results.  On Overture's site, they are the first results the user sees, and appear as part of the main search results.  As with all other search results, the consumer's 'searched for' term is contained, and highlighted, in the advertisers' "sponsored links."

Plaintiff alleged that defendants agreed, for a fee, to display such "sponsored links" when plaintiff's trademarks were entered as a search term.  By so doing, the Complaint alleged defendants were guilty of trademark infringement and dilution in violation of the Lanham Act.  Defendants' alleged involvement in the use by their advertisers of plaintiff's trademarks in "sponsored links" gave rise to contributory and vicarious trademark infringement claims.  The Complaint also asserted claims of unfair competition, tortuous interference with prospective economic advantage and statutory civil business conspiracy under Virginia common law.

Defendants moved to dismiss the Complaint, arguing that their acts as alleged did not, as a matter of law, violate the Lanham Act.  The Court rejected this argument, and denied defendants' motion as to the trademark and unfair competition claims.  The tortuous interference and civil business conspiracy claims were dismissed due to pleading deficiencies in the Complaint.

To establish a claim for trademark infringement, plaintiff must show "(1) that it possesses a mark; (2) that the defendant used the mark; 3) that the defendant's use of the mark occurred 'in commerce'; 4) that the defendant used the mark 'in connection with the sale, offering for sale, distribution, or advertising' of goods and services; and 5) that the defendant used the mark in a manner likely to confuse customers."

Defendants argued that their use of plaintiff's marks in an internal database to trigger the delivery of ads/search results did not constitute the requisite 'use in commerce' of those marks and hence was not an actionable infringement under the Lanham Act.  To be a 'use in commerce,' defendants argued, the defendants must use the mark as a trademark - i.e. in a way that identifies the user as the source of a product or indicates the endorsement of the mark owner.  Because defendants' use of these marks was limited to internal computer algorithms unseen by the consumer, defendants urged that their use did not qualify.

The Court rejected this argument. Relying on 1-800 Contacts, Inc. v., 309 F.Supp.2d 467 (S.D.N.Y. 2003), Playboy Enterprises, Inc. v. Netscape, 354 F.3d 1020 (9th Cir. 2004), and Bihari v. Gross, 119 F.Supp.2d 309 (S.D.N.Y. 2000)  the Court held that the sale of advertising linked to plaintiff's marks constituted a 'use in commerce' within the meaning of the Lanham Act, and that plaintiff had therefore stated a valid cause of action against defendants.  Said the Court:

[T]he Court finds that plaintiff has pled sufficient facts which, taken as true for purposes of this motion, allege "trademark use."  Contrary to defendants' argument, the complaint is addressed to more than the defendants' use of the trademarks in their internal computer coding.  The complaint clearly alleges that defendants use plaintiff's trademarks to sell advertising, and then link that advertising to results of searches.  Those links appear to the user as "sponsored links."  Thus, a fair reading of the complaint reveals that plaintiff alleges that defendants have unlawfully used its trademarks by allowing advertisers to bid on the trademarks and pay defendants to be linked to the trademarks. 

Under the analysis in PETA, defendants' offer of plaintiff's trademarks for use in advertising could falsely identify a business relationship or licensing agreement between defendants and the trademark holder.  In other words, when defendants sell the rights to link advertising to plaintiff's trademarks, defendants are using the trademarks in commerce in a way that may imply that defendants have permission from the trademark holder to do so.  (ftnt. omitted).

The Court also denied defendants' motion to dismiss the contributory and vicarious trademark infringement claims arising out of the inclusion of plaintiff's marks in the 'sponsored links' of their advertisers.  By alleging that Overture "encourages advertisers to bid on trademarked words, and monitors and controls the allegedly infringing third-party advertisements," the Court held that plaintiff had adequately plead a claim for vicarious trademark infringement.

Finally, the Court granted that branch of defendants' motion which sought dismissal of plaintiff's tortuous interference and civil business conspiracy claims because of pleading defects in plaintiff's complaint.  The former failed because plaintiff did not allege a specific prospective economic advantage with which defendants allegedly interfered, while the latter failed because an intent to injure plaintiff was not pled with the requisite particularity.

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