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Playboy Enterprises, Inc. v. Netscape Communications Corp.

Reversing the decision of the court below, the Ninth Circuit Court of Appeals denied the motion of defendants Netscape Communications Corp. ("Netscape") and Excite, Inc. ("Excite")  for summary judgment, and allowed plaintiff Playboy Enterprises Inc. ("Playboy") to proceed with trademark infringement and dilution claims brought as a result of defendants' practice of keying banner ads for 'adult' products to plaintiff's trademarks.  Keying is a practice used by the operators of search engines to generate revenue via the sale of banner ads.  For a fee, the search engine operator will display an advertiser's ad along with, and on, a search results page, when a consumer types one of a series of designated terms into the operator's search engine.  In this fashion, defendants keyed the display of their clients' adult-oriented ads to plaintiff's marks.  The Ninth Circuit held that when the advertiser's banner ad is not labeled so as to identify its source, this practice could result in trademark infringement by application of the 'initial interest confusion' doctrine.  The Ninth Circuit accordingly refused to dismiss plaintiff's trademark infringement claims.  The Ninth Circuit further held that issues of fact also precluded the dismissal of plaintiff's dilution claims.

Judge Berzon wrote a concurring opinion, in which she sharply criticized Brookfield Communications, the Ninth Circuit decision from which the 'initial interest confusion' doctrine springs, and the overbroad interpretation he believes it has been given by other jurists. Specifically, Judge Berzon believes that keying clearly labeled ads to plaintiff's marks should not give rise to a trademark infringement claim because the consumer is not confused when he elects to visit the clearly labeled web site of the mark holder's competitor, in lieu of that of the mark holder.

Plaintiff Playboy is the owner of the marks "Playboy"  and "Playmate" which it uses to market adult oriented products of a sexual nature.  Defendants Netscape and Excite operate search engines on the Internet.

Defendants engaged in a practice known as keying, in which they displayed an advertiser's banner ad on their search result page when a consumer typed in one of a series of designated terms related to a selected topic.  Included within the sex category sold to advertisers were over 400 terms, which included plaintiff's "Playboy" and "Playmate" marks.  When a consumer typed either of these marks in defendants' search engines, defendants, in addition to the search results their engine identified as responsive to the consumer's query, also displayed an adult oriented banner advertisement from an advertiser who paid to have the ad keyed to the 'sex' category of search terms.  Many of these banner ads were not labeled so as to identify their source.  Defendants did not require these ads to be so identified.

Claiming that the display of these unlabelled ads infringed and diluted its marks, Playboy brought this action.  On defendants' motion for summary judgment, the trial court dismissed plaintiff's claim.  The Ninth Circuit reversed, finding issues of fact precluded their dismissal.

The Court of Appeals held that plaintiff may be able to establish that consumers are confused by defendants' actions under the 'initial interest confusion' doctrine first announced in the Ninth Circuit in Brookfield Communications.  According to the majority, "initial interest confusion is customer confusion that creates initial interest in a competitor's product.  Although dispelled before an actual sale occurs, initial interest confusion impermissibly capitalizes on the good will associated with a mark and is therefore actionable trademark infringement."  The Court held that Playboy may be able to establish such consumer confusion by showing that consumers believe the unlabelled banner ads displayed on search result pages responding to their queries for Playboy are sponsored by, or affiliated with, Playboy.  Even though the consumer knows he is purchasing from a competitor, and not Playboy, at the time of purchase, by that point the competitor has unfairly profited from Playboy's goodwill, having used Playboy's mark to attract the consumer to his site.

The Court found that Playboy had raised sufficient issues of fact under the eight factor Sleekcraft test used by the Ninth Circuit to determine likelihood of consumer confusion to warrant denial of defendants' motion for summary judgment.  In reaching this result, the Ninth Circuit pointed to an expert's report submitted by Playboy, in which the expert opined that a majority of consumers believed that Playboy sponsored or was otherwise associated with the unlabelled banner ads for adult entertainment products that appeared along with their search results for the term 'Playboy'.  The Court held that this report was sufficient to create an issue of fact as to the existence of actual consumer confusion, the most important of the Sleekcraft factors.  It should be noted that the court did not accept the validity of this report.  That issue was left for another day.

The court further noted that a number of additional Sleekcraft factors may support a finding of likelihood of consumer confusion, including the strength of Playboy's marks, the fact that Playboy's competitors offered products of a similar nature to that offered by Playboy, the fact that defendants used plaintiff's marks in their keying program, the low level of care consumers typically use in making their purchasing decision for adult entertainment products, and defendants' intentions in utilizing plaintiff's marks, which appeared designed to capitalize on the goodwill associated therewith.

As a result, the Court of Appeals denied defendants' motion for summary judgment, and refused to dismiss plaintiff's trademark infringement claims.

The Court similarly refused to dismiss plaintiff's trademark dilution claims, finding issues of fact had been raised which precluded such dismissal.  The Court remanded this claim to the District Court with instructions to apply the Supreme Court's recent decision in Mosley v. V Secret, which mandates a showing of actual dilution of the mark in the eyes of consumers before a mark holder can prevail on a federal trademark dilution claim.

The Court expressly limited its decision to the display of unlabelled ads that do not identify their source.  The use of labeled ads may well eliminate consumer confusion, and thus not infringe plaintiff's marks.  Said the Court:

Note that if a banner advertisement clearly identifies its source, or, even better, overtly compared [Playboy] products to the sponsor's own, no confusion would occur under [Playboy's] theory. … [W]e note that we are not addressing a situation in which a banner advertisement clearly identifies its source with its sponsor's name.  Doing so might eliminate the likelihood of initial interest confusion that exists in this case.

Judge Berzon wrote a concurring opinion concurring in the result reached by the Court.  She went on to criticize Brookfield Communications and the breadth given by other courts to the 'initial interest confusion' doctrine espoused therein.  Specifically, Judge Berzon believes that a search engine operator that keys plaintiff's marks to 'clearly labeled' ads that identify their source does not infringe those marks, because the consumer is not confused when he elects to view the competitor's site.  Said Judge Berzon:

As applied to this case, Brookfield might suggest that there could be a Lanham Act violation even if the banner advertisements were clearly labeled, either by the advertiser or by the search engine.  I do not believe that to be so.  So read, the metatag holding in Brookfield would expand the reach of initial interest confusion from situations in which a party is initially confused to situations in which a party is never confused.  I do not think it is reasonable to find initial interest confusion when a consumer is never confused as to source or affiliation, but instead knows, or should know, from the outset that a product or web link is not related to that of the trademark holder because the list produced by the search engine so informs him.