Designer Skin LLC v. S & L Vitamins, Inc., et al.
800-JR Cigar, Inc. v. Goto.com, Inc.
437 F. Supp. 2d 273 (D.N.J., July 13, 2006)
Search Engine's Sale Of Plaintiff's Mark As Keyword Is Actionable Trademark Use
Federal District Court holds that the use of plaintiff's 'JR Cigars' trademark as a keyword in GoTo.com's pay-for priority search engine to trigger the display of advertisements from third party competitors constitutes a "trademark use" sufficient to support trademark infringement and dilution claims under the Lanham Act. Such trademark use arises out of GoTo.com's acceptance of bids from JR Cigar's competitors for a linkage to plaintiff's marks, by which GoTo trades on the value of those marks. Such trademark use also arises out of GoTo's act of giving such advertisers priority over 'natural' search results, and thereby steering potential customers away from JR Cigar to its competitors. Finally, such trademark use arises out of GoTo.com's use of a "Search Term Suggestion Tool" to assist in marketing JR Cigar's marks to its competitors, which tool shows the search traffic attracted by plaintiff's mark.
The Court went on to deny cross-motions by JR Cigar and GoTo.com for summary judgment, holding issues of fact precluded its determination of the likelihood of consumer confusion arising out of such usage of plaintiff's marks, and hence from resolving the trademark infringement claims at issue.
Finally, the Court dismissed claims advanced by plaintiff under both New Jersey's Consumer Fraud Act, N.J.S.A. §56:8 et seq. and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act, 15 U.S.C. §6102(b). The Court held that plaintiff lacked standing to proceed under New Jersey's Consumer Fraud Act, and that the reach of the Telemarketing Act did not extend to the acts at issue in the case at bar.
GoTo Sells Advertisers The Right To Have Listings Displayed In Response To Search For Plaintiff's Trademark
Plaintiff 800-JR Cigar Inc. ("JR Cigar") is a prominent retailer of discount cigars. Plaintiff has marketed its products for over 30 years under its federally registered mark "JR Cigars," and other similar marks. Plaintiff also does business at a website it operates at jrcigars.com.
Defendant GoTo.com Inc. ("GoTo") operates a pay-for-priority search engine. GoTo displays search results first by affording priority to the advertisers who bid the most for the privilege of having their 'search result' displayed in response to a user's search request. After all paid advertisers' sites are displayed, GoTo lists 'natural' search results -- i.e., search results most relevant to the user's inquiry (excluding those of the advertisers).
GoTo solicits bids for keywords from advertisers. To assist advertisers in deciding the keyword(s) they should bid on, GoTo provides a "Search Term Suggestion Tool." The tool shows how often users searched for both the keyword the advertiser is interested in, and related keywords, in designated time periods.
GoTo sold to various competitors of JR Cigar the right to have advertisements for their websites appear as search results in response to searches for "JR Cigars," and slight variants thereof. Complaining that this diverted internet shoppers from JR Cigar's website to those of its competitors, and allowed GoTo to improperly profit in the use of its marks, plaintiff commenced this lawsuit, advancing claims of trademark infringement, unfair competition and dilution under both the Lanham Act and New Jersey State statutes. Plaintiff also asserted claims under New Jersey's Consumer Fraud Act and the federal Telemarketing and Consumer Fraud and Abuse Prevention Act.
The parties cross-moved for summary judgment.
Sale Of Plaintiff's Trademark As Keyword Is A Trademark Use
The Court determined that GoTo's use of plaintiff's trademark was a "trademark use" sufficient to sustain claims of trademark infringement and dilution. Said the Court:
The Court further held that "the Search Term Suggestion Tool permits GoTo to channel advertisers directly to JR's trademarks by demonstrating quantitatively the potential for successful advertising, thereby implicitly recommending those terms to advertisers."
Issues Of Fact Preclude Summary Judgment
The Court held that issues of fact as to the likelihood that consumers would be confused by the display of competitors' ads in response to searches for plaintiff's mark precluded granting either side summary judgment on the trademark infringement claims. While certain of the Lapp factors used in the Third Circuit to determine likelihood of confusion favored JR Cigar, material issues of fact existed as to the "evidence of confusion and the impact, if any of initial interest confusion [as well as] … GoTo's intent in adopting the mark" which precluded resolution on this motion.
The Court did dismiss JR Cigar's claim under New Jersey's Consumer Fraud Act on the grounds that JR Cigar lacked standing to assert such a claim. The Court held that only consumers and commercial competitors had standing to bring such claims. As JR Cigar was neither, its claim had to be dismissed.
The Court also dismissed the claims asserted by JR Cigar under the Federal Telemarketing and Consumer Fraud Abuse Act, holding the statute's reach did not extend to internet activity of the type that was the subject of the instant action.