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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...

Google Inc. v. American Blind & Wallpaper Factory, Inc.

Case No. C03-05340-F (N.D. Cal., March 30, 2005)

Court Allows Trademark Infringement Action Arising Out Of Alleged Use Of Defendant's Marks To Trigger Display Of Third Party Sponsored Links In Search Engine Results To Proceed

Court denies Google's motion to dismiss trademark infringement and dilution claims asserted by American Blind, which claims arose out of Google's alleged use of American Blind's trademarks to trigger the display of third party advertisements in search engine results for those marks.  The Court declined, on this motion, to hold that use of American Blind's trademarks in this fashion was insufficient to give rise to trademark infringement or dilution claims because it did not constitute a use of the marks to identify the source of goods or services supplied by Google.  The Court did dismiss the tortious interference with prospective business advantage claim asserted by American Blind, holding that American Blind had failed to allege the interference with sufficiently certain economic relationships necessary to proceed with such a claim.

Google's 'Ad Words' Program Uses Third Party Trademarks To Trigger Display Of Advertisers' Sponsored Links 

American Blind is a retailer of window treatments and wall coverings.  A large percentage of its sales are made at its web site, operated at the URL Decorate  American Blind is the owner of several trademarks which it uses in connection with these business activities, including "American Blind & Wallpaper Factory," "American Blind Factory" and "Decorate Today."

Google Inc. ("Google") operates one of the web's leading search engines.  Individuals can use Google to locate web sites of interest.  They accomplish this by entering search terms (known as key words) that describe the site they seek in Google's search engine.  Using a proprietary algorithm, Google responds with a search results pages that lists web sites it believes are responsive to the user's query, in order of decreasing relevance. 

In the counterclaim and third party claims it filed in this action, American Blind alleged that Google also operates a key word triggered advertising program known as 'Ad Words.' Advertisers who participate in this program purchase the right to have a description of their website displayed on Google's search results pages when a user inputs a designated search term.  As alleged by American Blind, these listings are known as 'Sponsored Links' and appear, denominated as such, on the same web page that carries the search results produced by application of Google's search algorithm.  'Sponsored Links' appear to the right, or above, such search results.

American Blind alleged that Google included its marks within the 'Ad Words' program.  By so doing, users seeking American Blind were diverted to the web sites of American Blind's competitors, which appeared as 'Sponsored Links' as a result of their participation in Google's 'Ad Words' program.

American Blind further alleged that Google offers an 'Adwords Keyword Optimization' service which suggests to advertisers who participate in the 'Ad Words' program additional key words they may wish to purchase based on their initial key word selections.  According to American Blind, via this program, Google encouraged those advertisers who opted to advertise on search results pages for "American Blind" to also elect to have their advertisements appear on the results pages for such closely related terms as "American Blinds" and "American"

American Blind alleged that, by these actions, Google had infringed and diluted its trademarks in violation of both the Lanham Act and applicable California statutes.  American Blind also asserted claims of unfair competition, injury to business reputation and tortious interference with prospective business advantage.  Named as third party defendants were Ask Jeeves, Earthlink, AOL, Netscape and Compuserve because they operate branded search engines on which they allegedly display, by contractual arrangement with Google, search results similar, if not identical, to those produced by Google's own branded search engine.

Motion To Dismiss Denied

Google and the third party defendants moved to dismiss the trademark infringement and dilution claims asserted by American Blind, as well as the unfair competition and injury to business reputation claims it advanced.  Google argued that to assert such claims, American Blind must allege that Google has used American Blind's marks as a trademark to identify the source of goods or services in fact offered by Google.  Because American Blind's marks were not used in this fashion, Google contended there was no actionable trademark use sufficient to support the claims at issue.  Google relied, inter alia, on decisions in U Haul v., 279 F. Supp. 2d 723 (E.D. Va. 2003) and Wells Fargo v., 293 F. Supp. 2d 734 (E.D. Mich. 2003) to support this argument.  In each case, the Court held, in part, that the use by WhenU of a trademarked term to trigger the display of third party ads was not an actionable infringing use, because the mark was not used to identify the source of any goods or services.

At this early stage in the proceedings, before any factual record been developed, the Court was unwilling to accept this contention, and accordingly denied Google's motion.  In so doing, the Court pointed both to Playboy v. Netscape, 354 F.3d 1020 (9th Cir. 2004) and Brookfield Communications v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999)  each of which arguably found that the trademark use before the Court was actionable.  In the former case, the mark was used in a search engine to key the display of banner ads.  In the latter, the mark was used in metatags to key the display, in search results, of a competitor's web site.  In the face of these and other authorities, the Court refused to resolve the question at this stage in the proceedings, and accordingly denied Google's motion.  Said the Court:

This result finds support in Brookfield Communications, where the Ninth Circuit concluded that the defendant's use of its competitor's trademark in the metatags of its Web site was likely to cause initial interest confusion. See Brookfield Communications, 174 F.3d at 1066.  As in Playboy, the court's analysis of likelihood of confusion seems to have presumed a preliminary, if implicit, determination of actionable trademark "use" in the sense discussed by Defendants. …  The purchase of trademarks as keywords for a Web site and the insertion of trademarks as metatags in the code of a Web site, both of which are employed as means of having links to that Web site appear on a search-results page, are sufficiently analogous that it cannot be said that American Blind has failed to allege actionable trademark "use" by Defendants' advertisers.

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[I]n light of the uncertain state of the law, the Court does not find Defendants' arguments sufficient to warrant dismissal of American Blind's counterclaims and third-party claims at the pleading stage.  In particular, given the most relevant Ninth Circuit decision - Playboy Enterprises, Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir. 2004) - it does not appear "beyond doubt" that American blind "can prove no set of facts in support of [its] claim[s] that would entitle [it] to relief," Clegg, 18 F.3d at 754.

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This Order should be understood only as allowing American Blind's counterclaims and third-party claims to proceed beyond the motion-to-dismiss stage, which will enable the Court to consider both the relevant facts and the applicable law in the context of a fuller record.

Court Dismisses Tortious Interference Claim

The Court did grant so much of Google's motion which sought to dismiss American Blind's tortious interference with prospective business advantage claim.  To assert such a claim, the injured party must allege an interference with an economic relationship sufficiently certain to produce economic benefits but for the claimed interference.  Here, the claimed interference was the diversion of visitors from American Blind's web site to those of a competitor.  However, the possibility that these consumers, if not so diverted, may have purchased products on American Blind's web site, was "too speculative" as alleged to sustain such a claim.

It should be noted that the Court designated its 22 page decision on one "not for citation."

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