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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...

J.K. Harris & Co. LLC v. Steven Kassel, et al.

Civ. No. 02-0400 CW (N.D.Ca., Mar. 22, 2002) vacated and amended (N.D.Ca., Mar. 28, 2003)

Court issues preliminary injunction, enjoining defendants, direct competitors of plaintiffs who operate a commercial website containing information critical of plaintiff, from continuing certain uses of plaintiff's trade name on that site.  The injunction enjoined defendants from using plaintiff's mark in ways designed to dramatically increase the site's ranking on search engines in response to queries for plaintiff's trade name.  The court enjoined defendants from "using 'J.K. Harris' or any permutation thereof as a keyword for the taxes.com website more often than is necessary to identify the content of the website," from using header tags and underline tags around sentences containing plaintiff's trade name, or from increasing the prominence and font size of sentences which include plaintiff's trade name.  The court denied plaintiff's request to enjoin defendants from making any use of plaintiff's trade name on the site however, holding that defendants could use the trade name in links to other sources of information about plaintiff on the web, as well as in disseminating truthful factual information about plaintiff, provided such use, as noted above, was "reasonably necessary" and not excessive.

The court also enjoined defendants from continuing to post on its website several identified negative statements about plaintiff, derived from third parties, which plaintiff claimed were false and/or misleading.

Plaintiff, J.K. Harris & Company, LLC ("J.K. Harris") and defendant Firse Tax Inc. d/b/a Taxes.com ("Taxes.com") are direct competitors each engaged on behalf of their clients in negotiating reductions in tax assessments, and favorable payment terms of past due tax obligations.  Both use the Internet to promote their services.

Defendant operates a web site for this purpose at taxes.com.  At this site, defendant published negative information about plaintiff on a page titled "JK Harris Employees Tell of Wrongdoing While Complaints Pile Up" much of which plaintiff claimed was false and/or misleading.  According to plaintiff, this web page was designed so as to be prominently featured in the search engine results of those seeking information about plaintiff.  This was achieved by "creating key word density" on the page in question, on which plaintiff's trade name, or permutations thereof, were used seventy-five times, by using header and underline tags around sentences containing plaintiff's trade name, by increasing the font size and page prominence of sentences containing plaintiff's trade name, and by the use of links to websites containing information about plaintiffs.

This page design achieved the desired result.  In various searches for plaintiff's trade name performed on search engines, defendant's site was prominently featured.  On one of those searches, defendant's site was the first site listed.  On most others, defendant's site was among the top ten sites identified.

Plaintiff commenced suit, and sought a preliminary injunction, enjoining defendants both from using plaintiff's trade name anywhere on the taxes.com site, and from posting on that site any defamatory or untrue statements about plaintiff.  Finding plaintiff entitled to some, but not all of the relief requested, the Court granted in part, and denied in part plaintiff's motion.

Plaintiff argued that it was entitled to injunctive relief on the ground that defendants, by their conduct, were violating section 43 of the Lanham Act, 15 U.S.C. § 1125.  More particularly, plaintiff alleged that defendants' conduct caused "initial interest confusion," by attracting customers to defendants' site, where they, after reading the negative information posted there about plaintiff, might elect to do business with defendants.

The Court held that defendants' use of plaintiff's trade name would be permitted if it was a 'nominative fair use.'  As set forth in New Kids on the Block v. News Am. Publ'g Inc., 971 F.2d 302 (9th Cir. 1992) a use is a permitted nominative fair use if it meets three requirements:

First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.

The Court held that each of the challenged uses met the first and third prongs of the nominative use test.  Thus, the court held that plaintiff's service could not be adequately described without using the "J.K. Harris" trade name, and that, given the negative nature of the information posted on defendants' site, no user would believe it was sponsored or endorsed by plaintiff.

However, the Court held that "some of the computer programming techniques that defendants are alleged to be using may not satisfy" the second prong of the New Kids test, which requires that "only so much of the mark or marks be used as is reasonably necessary to identify the [mark holder's] product or services."

After reviewing the uses before it, the Court held that "defendants' use of plaintiff's trade name in links to other web pages and when disseminating truthful factual information [about plaintiff] is [a] nominative fair use."  However, it was not necessary, to reasonably identify plaintiff, to use header or underline tags around sentences containing plaintiff's trade name, to increase the font size or page prominence of sentences containing plaintiff's trade name, or to weight the keyword density of its page by using plaintiff's trade name, or permutations thereof, seventy-five times on its web page.

Finding that, as to these uses, there was no nominative fair use defense, the court turned to the question of whether the use ran afoul of the Lanham Act.  The court held that plaintiff was likely to prevail on its 'initial interest confusion' claim as consumers were likely to be confused by defendants' use of plaintiff's trade name.  As a result, because irreparable harm is presumed under the Lanham Act after a demonstration of likelihood of confusion, the court issued a preliminary injunction, enjoining defendants from "using 'J.K. Harris' or any permutation thereof as a keyword for the taxes.com website more often than is necessary to identify the content of the website," from using header tags and underline tags around sentences containing plaintiff's trade name, or from increasing the prominence and font size of sentences which include plaintiff's trade name.

The court also issued an injunction, enjoining defendants from continuing to post on its website certain designated statements plaintiff claimed were false and/or misleading.  The court refused to issue a blanket injunction, enjoining defendants from posting any defamatory, untrue or misleading statements on the Taxes.com site, holding such an injunction would be overbroad.  In so holding, the court noted that "false or misleading commercial speech may be prohibited entirely."  However, the appropriate balance between the Lanham Act (which prohibits use of a mark in false and misleading statements) and First Amendment concerns is to only enjoin those commercial statements which are found to be false and deceptive.  As to each of the enjoined statements, plaintiff presented admissible evidence that the statement was untrue, which evidence was not countered by any admissible evidence from the defendants.  (Defendants' sources for this information were alleged to be third parties.)  As to these statements, the court held that plaintiff had shown sufficiently serious questions going to the merits, as well as balance of hardships tipping decidedly in plaintiff's favor, to be entitled to a preliminary injunction.  As to those statements that defendant personally attested were true, however, the court declined plaintiff's request for injunctive relief, holding that "because enjoining these statements prior to an adjudication of their truth or falsity would suppress arguably protected speech, the court concludes that the balance of hardships does not tip decidedly in plaintiff's favor."

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