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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...

North American Medical Corporation, et al. v. Axiom Worldwide Inc.

No. 07-11574 (11th Cir., April 7, 2008)

Eleventh Circuit holds that defendant’s unauthorized use of a competitor’s trademarks in meta tags of its website, which use caused those trademarked terms to appear in search result descriptions of defendant’s website, is likely to infringe plaintiff’s marks.  The Court held such use was likely to falsely lead consumers to believe defendant’s site was affiliated with plaintiff or sold plaintiff’s products.  Importantly, other than in meta tags, plaintiff’s trademarks appeared nowhere on defendant’s website.  In reaching this result, the Eleventh Circuit found that such use of plaintiff’s trademarks constituted a use of such marks in commerce.

Nonetheless, the Eleventh Circuit vacated the preliminary injunction issued by the District Court, which barred defendant from further use of plaintiff’s trademarks in its site’s meta tags.  In reaching this result, the Court called into question the traditional presumption of irreparable injury available to trademark holders who have demonstrated a likelihood of success on the merits of their trademark infringement claim.  Demonstration of such irreparable injury is a prerequisite to injunctive relief.  In light of the Supreme Court’s decision in eBay v. MercExchange, LLC, 547 US 388 (2006), the Eleventh Circuit remanded the case to the District Court with instructions to determine whether plaintiff had sufficiently demonstrated irreparable injury as a result of defendant’s infringing use of its trademarks in its site’s meta tags to warrant the issuing of injunctive relief.   The Court did not, however, decide whether the traditional presumption of irreparable injury in such circumstances survived eBay.

The Eleventh Circuit further upheld the District Court’s ruling that plaintiff was likely to prevail on its claims that defendant engaged in false advertising in violation of the Lanham Act.  The Eleventh Circuit held that defendant’s claims of an affiliation between NASA and either Axiom or one of its products, the DRX 9000, or that that product was FDA ‘approved,’ were literally false, and likely to be material in consumers’ purchasing decisions. 

Nonetheless, the Eleventh Circuit vacated the preliminary injunction issued by the District Court, prohibiting further use of such advertisements, and remanded for further consideration as to whether plaintiff had adequately demonstrated that it would sustain irreparable injury in the absence of such relief.  The Eleventh Circuit held that no presumption of irreparable injury exists in such circumstances, as the claims were not made in the context of comparative advertising about the parties’ respective products.  As the District Court had presumed irreparable injury, the matter was remanded to it for further consideration.

Plaintiff North American Medical Corporation (“NAM”) and defendant Axiom Worldwide Inc. (“Axiom”) are competitors in the sale of physiotheaputic spinal devices to the public.  In connection with its sale of such products, NAM uses the registered trademarks “Accu-Spina” and “IDD Therapy.” 

Defendant Axiom, without permission, included these trademarks in the meta tags of its own website for its competing products.  These trademarks did not appear anywhere else on defendant’s site.  Defendant did not offer plaintiff’s products for sale on its site, nor did the site contain either comparative advertising, or commentary concerning plaintiff’s products.
The District Court found that such use of plaintiff’s trademarks influenced search engine results, both causing defendant’s site to appear in searches for the trademarked terms “Accu-Spina” and “IDD Therapy” and those terms to appear in the description of Axiom’s site contained in such search results.

NAM also accused Axiom of engaging in false advertising.  Among other things, NAM claimed that Axiom’s assertion that an affiliation existed between NASA and either Axiom or its DRX 9000 product, as well as its claim that such product was FDA ‘approved,’ were untrue and improperly gave Axiom a competitive advantage over NAM and its products.

As a result of this misconduct, NAM brought suit, asserting that defendant’s acts constituted both trademark infringement and false advertising in violation of the Lanham Act.  The District Court, finding plaintiff likely to succeed on the merits of these claims, issued injunctive relief enjoining Axiom from continuing the complained of conduct.  The Eleventh Circuit affirmed so much of the District Court’s determination that found plaintiff likely to succeed on the merits of its claims for both trademark infringement and false advertising.  However, finding the District Court had improperly presumed the presence of irreparable injury in the absence of injunctive relief, the Eleventh Circuit remanded for further consideration as to whether such irreparable injury would in fact occur, a prerequisite to injunctive relief.

To establish a claim of trademark infringement, the mark holder must show “(1) that they possess a valid mark, (2) that the defendants used the mark (3) that the defendants’ use of the mark occurred ‘in commerce’ (4) that the defendants used the mark ‘in connection with the sale … or advertising of any goods,’ and (5) that the defendants used the mark in a manner likely to confuse consumers.

On appeal, Axiom did not challenge the District Court’s finding that plaintiff possessed a valid trademark.

Affirming the court below, the Eleventh Circuit held that Axiom’s use of plaintiff’s marks in the meta tags of its site to promote the sale of its products constituted a use of those marks in commerce.  Said the Court:

The facts of the instant case are absolutely clear that Axiom used NAM’s two trademarks as meta tags as part of its effort to promote and advertise its products on the Internet.  Under the plain meaning of the language of [the Lanham Act] such use constitutes a use in commerce in connection with the advertising of any goods.

In reaching this result, the Eleventh Circuit criticized the Second’s Circuit’s decision in 1-800 Contacts Inc. v. WhenU.com Inc., 414 F.3d 400 (2d Cir. 2005), stating that “to the extent the [Second Circuit] based its use analysis on the fact that the defendant did not display the plaintiff’s trademark, we think the Second Circuit’s analysis is questionable.  Although we believe that the absence of such a display is relevant in deciding whether there is a likelihood of confusion, we believe that, when the analysis separates the element of likekihood of confusion from the other elements, this fact is not relevant in deciding whether there is a use in commerce in connection with the sale or advertising of any goods.”

The Eleventh Circuit further held that such use was likely to cause consumer confusion, and as such, constituted trademark infringement.  In reaching this result, the Court relied on the fact that defendant used plaintiff’s exact trademarks in the meta tags of its website to promote its sale of a competitive product.  The Court further relied on the fact that this use of plaintiff’s trademark in the site’s meta tags caused a description of defendant’s site - containing plaintiff’s marks - to appear in responses to searches for those trademarks.  This was true despite the fact that defendant neither offered plaintiff’s goods for sale on its site, nor posted thereon any comparative advertising or commentary about plaintiff’s products.  As such, held the Court, this use of plaintiff’s trademarks in the meta tags of defendant’s site was likely to cause actual source confusion among consumers, who might visit defendant’s site believing it to be affiliated with, or selling plaintiff’s products.  Said the Court:

In the instant case, when consumers entered NAM’s trademarks into a search engine, the search results not only displayed Axiom’s competing website, but they also included a brief description of Axiom’s site, which description included and highlighted NAM’s trademarked terms. … Consumers viewing these search results would be led to believe that Axiom’s products have the same source as the products of the owner of “IDD Therapy” and “Accu-Spina” trademarks, or at least that Axiom distributed or sold all of the products to which the brief description referred, or that Axiom was otherwise related to NAM.  This, of course, was misleading to the consumer because Axiom is not related in any way to NAM, nor does Axiom distribute or sell the products of NAM.  Moreover, there was nothing in Axiom’s website itself to disabuse consumers of the notion … that there is some relationship between Axiom and NAM. …  Because Axiom’s use of NAM’s trademarks as meta tags caused the Google search to suggest that Axiom’s products and NAM’s products had the same source, or that Axiom sold both lines, or that there was some other relationship between Axiom and NAM, Axiom’s use of the meta tags caused a likelihood of actual source confusion.

The Court made clear that it would not necessarily reach the same result if defendant had used plaintiff trademarks in the meta tags of a site that featured comparative advertising about its competitor’s products, or offered those products for sale.  The outcome of those cases would have to wait another day.  Similarly, the Court did not decide whether initial interest confusion caused by a competitor’s use of another mark in the meta tags of its site, without more, would be sufficient to create the consumer confusion needed to sustain a trademark infringement claim.

The Eleventh Circuit further held that plaintiff was likely to prevail on its false advertising claims.  The Court found both that the challenged statements were literally false, and would have a material effect on consumer purchasing decisions.  The Eleventh Circuit held that defendant’s claims of an affiliation between NASA and either Axiom or one of its products, the DRX 9000, or that that product was FDA ‘approved,’ were literally false.  In fact, the DRX 9000 had only obtained FDA ‘clearance.’  Similarly, the Court found that the evidence supported the District Court’s determination that these misstatements were likely to have a material effect on a consumer’s purchasing decision, including complaints from doctors about the possibility they would not be able to use defendant’s claims to market DRX 9000s should they prove to be untrue.

Notwithstanding its finding that plaintiff was likely to succeed on the merits of its claims, the Eleventh Circuit vacated the District Court’s issuance of injunctive relief, and remanded the case for further consideration as to whether the acts complained of were likely to cause plaintiff irreparable injury.

The District Court, relying on the presumption of irreparable injury typically afforded mark holders who have established a likelihood of success on the merits of their claims of trademark infringement, enjoined defendant from further use of plaintiff’s marks in the site’s meta tags.  Citing the Supreme Court’s decision in eBay Inc. v. MercExchange, 547 US 388 (2006) the Eleventh Circuit remanded the case to the District Court for further consideration as to the availability of this presumption to the injured mark holder.  The Eleventh Circuit did not resolve this issue, but noted that eBay, a case that addressed the availability of injunctive relief in patent cases, was applicable to trademark cases as well.  The Supreme Court there had admonished the courts against applying categorical rules for the grant or denial of injunctive relief in patent infringement cases, urging the courts instead to apply the traditional four factor tests needed to obtain injunctive relief generally.  In particular, the Federal Circuit had held that permanent injunctions shall issue once infringement is established.  This decision was reversed by the Supreme Court.

The Eleventh Circuit further remanded for reconsideration as to whether the plaintiff would sustain irreparable injury as a result of defendant’s false advertising.  The District Court again had presumed such injury because of plaintiff’s likelihood of success on the merits of its false advertising claims.  The Eleventh Circuit held such a presumption was warranted only in cases “when the false statement is made in the context of comparative advertising between the plaintiff’s and defendant’s products.”  As such was not the case at bar, the presumption was not warranted.   The Eleventh Circuit accordingly vacated the injunction issued by the District Court, and remanded for consideration as to whether plaintiff would indeed sustain irreparable injury from defendant’s wrongs.

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