Two Pending Cases Outline Dilemma

By Stephen W. Feingold

The enactment of the Federal Trademark Dilution Act (Act) (please see endnote 1) in 1996 has highlighted the underlying tension between trademark law as a property right and a method of consumer protection.

Simply stated, if trademarks are property, then their owners are entitled, as are all property owners, to ensure that the value of their property is not unfairly diminished. If, however, trademark rights are a means to ensure that consumers get what they expect (i.e. are not confused), then trademark owners are merely guardians of the public interest.

In the recent decision of Ringling Bros.- Barnum & Bailey Combined Shows Inc. v. Utah Div. Of Travel Dept., (please see endnote 2) the Fourth Circuit held that the Act is far more limited than presumed by most trademark practitioners. The clear motivation underlying Ringling was the desire to ensure that trademark rights do not become rights in gross.

The National Football League has noted that after it announced the formation of the Carolina Panthers, the number of uses of the word PANTHERS in the Charlotte, N.C. area dramatically increased. Clearly this increase was not coincidental. It is highly unlikely that any consumer will think that PANTHERS DRY CLEANERS or PANTHERS AUTO REPAIR is related to, sponsored by or affiliated with the football team. Nevertheless, if trademark owners have a property right, the law should prevent this trespass to their property. If, however, the team is merely the guardian of the public interest, then it is much harder to find actionable harm.

The future of the federal dilution law will depend on how this tension is resolved. Two cases pending in New York and California against Excite, the Internet search engine, outline this dilemma more sharply. Indeed, the new technologies on the Internet may very well force the question. Unless courts are willing to take more of a property right approach, or Congress enacts new statutes to regulate the use of trademarks on the Internet, trademark owners will have an extremely difficult time addressing many of the emerging Internet business practices.

In January 1999, cosmetic giant Estee Lauder initiated an action in the Southern District of New York against The Fragrance Counter Inc., an Internet retailer, and Excite. (please see endnote 3) To appreciate what is at stake in this case, it is first necessary to understand several terms.

As most everyone knows by now, locating information on the Web can be both very easy and very hard. If the site you want has a "logical" domain name, it is often easy to locate. For instance, if you are looking for Marchon Eyewear, you might check marchon.com. If you did, you would discover Marchon Eyewear's home page. However, if you are looking for Steve Spielberg's company Dream-Works and typed in "dreamworks.com," you would not be so lucky.

Search engines allow searching for particular terms (as well as domain names) and use different methods of gathering and prioritizing results. Most rely on metatags to some degree. Metatags are, typically, invisible words or phrases inserted in Web pages by developers to help people locate pages that are useful to them.

For instance, metatags on Microsoft's home page include the following words: products, headlines, downloads, Web site, software, contests, corporate news. Searching for a particular term will generate a list of results ordered according to that engine's logic.

Search engines can draw a tremendous number of results, often referred to as "hits." To raise revenue, search engines sell banner advertisements, which usually appear above the hit list. Over the last few years, companies such as Alta Vista, Excite and Lycos have begun to sell key words to advertisers. For instance, Avis may think it worthwhile to pay a fee so that anyone searching the term "rental cars" sees a banner advertisement for Avis.

Estee Lauder Case

Turning to Estee Lauder's case, the cosmetic giant complained that Excite stopped selling the key word CLINIQUE to Estee Lauder because it allegedly had entered into an exclusive agreement with The Fragrance Counter for the on-line sale of cosmetics. A search for CLINIQUE using the Excite search engine now generated a banner ad leading to The Fragrance Counter.

Similarly, a search for ESTEE LAUDER triggered a banner ad indicating that Estee Lauder products were available from The Fragrance Counter. Significantly, the ESTEE LAUDER trademark appeared much more prominently than the name The Fragrance Counter. Finally, Estee Lauder claimed that some of the banner ads linked to its trademarks were for sites that deceptively indicated that they offered those brands for sale.

While Estee Lauder's complaint included claims against Excite for trademark infringement, false designation of origin, dilution and the like, its target for purposes of a preliminary injunction application was The Fragrance Counter. Apparently Judge Robert W. Sweet made his leanings known, and The Fragrance Counter represented that it would stop certain activities, essentially giving the plaintiff the preliminary injunctive relief it sought.

The focus of Estee Lauder's case to this point had been The Fragrance Counter's conduct that, although occurring on the Internet, fit nicely within established case law. On March 8, 1999, however, an amended complaint was filed, which, while maintaining the claims against The Fragrance Counter, focused more closely on Excite. Recent filings in this case make clear that what is at issue is not just the conduct of The Fragrance Counter, but also Excite's sale of trademarks as key words.

Shortly after Estee Lauder filed suit, Playboy initiated its suit in the Central District of California against Excite, also relating to banner ads. (please see endnote 4) Playboy was upset that Excite was selling its trademarks PLAYBOY and PLAYMATE as key words. Adding insult to injury, these banner ads were for hard-core pornography, with which Playboy does not wish to be associated. Playboy also protested Excite's placement of the words "Try These First" next to links to some non-Playboy Web pages, which had been generated by searching for "playboy" and "playmate."

Unlike Estee Lauder, who named the beneficiary of this key-word practice (The Fragrance Counter) as a defendant, Playboy did not do so, probably because of the difficulty of tracking down sellers of hard-core pornography. This difference, however, made Playboy's application for a preliminary injunction more of a frontal attack on Excite than was the injunction application by Estee Lauder.

On June 24, 1999, the California court issued a 54-page decision denying Playboy any injunctive relief. (please see endnote 5) A review of this opinion highlights the tension between trademarks as property rights and as limited symbols of good will. The court pointed out that users could not perform a search of the words as trademarks, but only of the words themselves. In this case, the court emphasized that the marks at issue (PLAYBOY and PLAYMATE) are not fanciful, but generic (please see endnote 6)

The court also rejected the claim of infringement by initial-interest confusion, analogizing a search-result page of competitors' links to a highway exit that leads to several similar restaurants. Visitors are free to explore the restaurants, as they are free to explore the links on the Web page, which appear along with those of Playboy (please see endnote 7).

The court found no dilution by blurring or tarnishment. Excite does not compete with Playboy, and was not using Playboy's marks to identify its own products. Nor did Playboy show entitlement to "near-monopoly" placement of its marks on the Internet, as it does not enjoy such placement in traditional marketing channels (please see endnote 8).

It was also highly significant to the court that Playboy had retained a survey expert five months before the preliminary injunction hearing, but did not introduce any surveys documenting confusion (please see endnote 9). Based on Playboy’s financial resources, the court drew a negative inference from the absence of this survey (please see endnote 10).

Repeated throughout the decision was the theme that trademark owners "may not remove a word from the English language merely by acquiring trademark rights in it." (please see endnote 11) Indeed, in discussing Playboy's dilution claim, the court relied extensively on the Fourth Circuit's decision in Ringling Brothers.

It is very interesting to note that Playboy did not initially seek a preliminary injunction when it filed its complaint in February 1999. In April, however, the month in which it filed its application for an injunction, the Ninth Circuit issued a major decision on Internet technology and trademarks entitled Brookfield Communications, Inc. v. West Coast Entertainment Corp (please see endnote 12).

Ninth Circuit Ruling

In May 1999, at the Annual Meeting of the International Trademark Association, Brookfield was the subject of numerous Internet discussions, and hailed by some in the trademark bar as a strong foothold for trademark owners in the battle to define the parameters of acceptable business practices on the Web. Unless Playboy v. Excite is reversed, however, the foothold of Brookfield may prove illusory at best.

Brookfield involved a dispute over the domain name moviebuff.com. The plaintiff's application for a preliminary injunction was denied by the trial court because it found that the defendant had prior rights in the mark and there was no likelihood of confusion. On appeal, the Ninth Circuit granted an emergency request for a preliminary injunction and heard the case on an expedited basis.

The panel clearly intends Brookfield to stand as a pillar of wisdom on the question of Internet rights. The opinion begins with a definitional section for the Internet. Trademark lawyers have their own biases about the Internet, and these biases permeate the court's description of it. While trademark lawyers might agree that "[g]uessing domain names ... is not a risk-free activity," thus sometimes misleading a Web surfer, (please see endnote 13) many outside the trademark bar would take a very different view.

On the whole, Brookfield reads very sympathetically to the concerns of trademark owners. The Ninth Circuit expressly cautioned against "excessive rigidity" when applying the standard test for likelihood of confusion in the Internet context: "emerging technologies require a flexible approach." (please see endnote 14) The circuit court also implied that confusion is more easily created on the Web than off-line:

In the Internet context, in particular, entering a website takes little effort -- usually one click from a linked site or a search engine's list; thus web surfers are more likely to be confused as to the ownership of a website than traditional patrons of a brick-and-mortar store would be of a store's ownership (please see endnote 15).

Against this backdrop, the Ninth Circuit held that the plaintiff's trademark in MOVIEBUFF was infringed by the defendant's domain name moviebuff.com. While the decision contains an excellent summary of the law of tacking and use sufficient to establish priority, it is the court's decision about metatags that is most interesting.

The panel acknowledged that the use of MOVIEBUFF as a metatag does not create traditional confusion. While its discussion was somewhat conclusory and perhaps technically inaccurate, it is fair to assume that the court was referencing the fact that metatags are usually hidden from the user and merely trigger a hit list. Since both the plaintiff's and defendant's sites will presumably be on the hit list, the panel believed that "it is difficult to say that a consumer is likely to be confused about whose site he has reached or to think [that plaintiff] sponsors [defendant's] website." (please see endnote 16)

The Ninth Circuit overcame this "difficulty," however, by the doctrine of initial interest confusion. The panel theorized that consumers might visit the defendant's Web site merely through its appearance on the hit list that was generated by the plaintiff's trademark, thereby creating a diversion of the consumers' initial interest in the plaintiff.

At the same time, the Ninth Circuit noted that the defendant could use the words "movie" and "buff" as metatags because plaintiff's rights were in the mark MOVIEBUFF without a space:

When the term 'MOVIEBUFF' is employed, it is used to refer to [plaintiff's] products and services rather than to mean 'motion picture enthusiast.' The proper term for 'motion picture enthusiasts' is 'Movie Buff,' which [defendant] can certainly use. It cannot, however, omit the space (please see endnote 17).

On the surface, Brookfield appeared to be excellent precedent for Playboy. However, for the reasons already noted, the Playboy court distinguished Brookfield, apparently finding that there was inconclusive proof that an Excite user searching for "playboy" or "playmate" intended to use those words to designate plaintiff's trademarks.

For instance, the court noted the numerous other federal registrations for PLAYBOY and PLAYMATE owned by totally unrelated companies (please see endnote 18). Therefore, this case was governed by the rules applied in Brookfield to the use of "movie buff" as a metatag, rather than to MovieBuff.

Estee Lauder may find Brookfield more helpful. Its marks (e.g., ESTEE LAUDER and CLINIQUE) are not common English words. Nevertheless, Estee Lauder will have to overcome the well established law that a company can use another's trademark to fairly describe the products it offers (please see endnote 19). Someone searching for CLINIQUE may not be looking for an "authorized" dealer, but may prefer the discount outlet. Where is the confusion, then?

This is the ultimate problem for both Playboy and Estee Lauder. The Internet is a new medium. A small company that ran a print advertisement unrelated to IBM products but containing an unauthorized reference to IBM's customer-service telephone number would almost certainly be enjoined based on several theories of confusion, including affiliation confusion. However, on the Internet, hypertext links are understood by virtually everyone not to imply affiliation. Given the fundamental interlocking nature of the Web, how many other assumptions that are accepted in the "real world" do not transfer to cyberspace?

Playboy and Estee Lauder, if they hope to succeed, will need to provide the courts with expert testimony establishing how consumers respond to on-line stimuli. What expectations do consumers have when using a search engine? How do users select terms to search?

Since locating information on the Web can be difficult, do users sometimes use trademarks as search short cuts? For instance, one highly ethical and respected advertising executive specializing in the Internet, speaking off the record, believes that someone entering HONDA in a search engine is just as likely looking for information about Japanese cars as for information specifically about Honda. Therefore, in this executive's view, Toyota might be well advised to include Honda as a metatag (though even this executive concedes that he would not put it high on the list of metatags).

Is this executive correct? Or have users learned that "concept" searching usually works on the Internet? The reality is that at this time there is simply not enough empirical information to know. It is a mistake, however, to assume that consumers make the same assumptions on-line that they do in the "real" world.

Unless Estee Lauder and Playboy can present evidence establishing the expectations that users bring when using search engines, and show how Excite's sale of key words creates confusion by violating those expectations, their respective cases will rise and fall on whether the courts are willing to move closer to a property right view of trademarks. In that event, Ringling Brothers may be the most relevant precedent available to Excite.

Stephen W. Feingold, a partner at Whitman Breed Abbott & Morgan LLP, is co-chairman of the ABA Section on Intellectual Property's Subcommittee on Trademarks and the Internet. Gerry Fifer, a senior attorney at the firm, assisted in the preparation of this article. To discuss these issues with Steve, please call him at 212-351-3416 or e-mail him at sfeingold@WBAM.com.

Reprinted with permission from the July 26, 1999 edition of The New York Law Journal. @ 1999 NLP IP Company.

ENDNOTES

  1. 15 U.S.C. Sec. 1125(c).
  2. 170 F.3d 449 (4th Cir. 1999).
  3. Estee Lauder Inc. v. The Fragrance Counter Inc., No. 99 Civ. 0382 (RWS).
  4. Playboy Enterprises Inc. v. Excite Inc., SA CV 99-321 (AHS) (EEx).
  5. Playboy Enterprises Inc. v. Excite Inc., 1999 U.S. Dist. LEXIS 9638 (C.D.Cal.).
  6. Id. at 6-7.
  7. Id. at 10-12.
  8. Id. at 12-14.
  9. Id. at 25, 38-39.
  10. Id. at 38-39.
  11. Id. at 10. See also pages 29 ("A trademark is not an omnibus property right or a monopoly"), 30-32, 48, 52.
  12. 174 F.3d 1036 (9th Cir. 1999).
  13. Id. at 1045.
  14. Id. at 1054.
  15. Id. at 1057.
  16. Id. at 1062.
  17. Id. at 1066.
  18. Playboy, 1999 U.S. Dist. LEXIS 9638, at 23-24.
  19. Id. at 31-33, collecting cases.

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