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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...

Designer Skin LLC v. S & L Vitamins, Inc., et al.

No. CV 05-3699-PHX-JAT (D. Arizona, May 19, 2008)

Court holds that unauthorized internet reseller of plaintiff’s tanning products is not guilty of trademark infringement as a result of its use of plaintiff’s trademarks in the meta tags of a website at which such products are sold, and as search engine keywords triggering the display of a link to such a website.  In reaching this result, the Court rejected plaintiff’s claim that such use of its marks causes actionable ‘initial interest confusion’ by directing those searching for plaintiff’s site to that of the defendant.  To sustain such a claim, holds the court, defendant’s conduct must be deceptive.  Plaintiff failed to meet this burden because defendant’s site does indeed offer plaintiff’s products for sale, and thus, its use of plaintiff’s mark in the site’s meta tags is not deceptive, but rather accurately describes the contents of defendant’s site.  This was true, held the Court, notwithstanding the fact that S & L offered plaintiff’s competitors products for sale on its site as well.

The Court also dismissed trademark dilution claims arising out of defendant’s use of plaintiff’s marks.  The Court held that, under the circumstances, defendant’s use of plaintiff’s marks in the meta tags of its site, and as search engine key words, constituted a permissible nominative fair use of those marks.  To establish that a use of a trademark qualifies as a permissible nominative fair use, the defendant must ‘do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.’  Notably, the Court reached this result because plaintiff failed to submit adequate evidence as to the impact this use of its marks had on the listing of defendant’s site in search results for plaintiff’s mark.  The Court left open the possibility that such a use of plaintiff’s mark may not qualify as a nominative fair use if in fact it caused defendant’s site to appear at or near the top of search engine results for plaintiff’s mark, and thereby suggested that plaintiff sponsored or endorsed defendant’s site. 

The Court denied so much of defendant’s motion for summary judgment which sought dismissal of copyright infringement claims arising out of its use of electronic renderings of plaintiff’s products to promote the sale of such products on its web site.  Issues of facts as to whether defendant copied such images from plaintiff’s web site, or created its own, precluded an award of summary judgment.  In allowing this claim to proceed to trial, the Court rejected defendant’s argument that its alleged use of plaintiff’s images was protected as a fair use.  Notwithstanding the fact that defendant’s use did not effect the potential market for plaintiff’s images – which plaintiff does not offer for sale – the Court rejected defendant’s fair use argument, pointing to the fact that its use was commercial, and copied plaintiff’s image, which was a creative work, in its entirety.

Finally, the Court rejected plaintiff’s claim for intentional interference with contractual relations, which arose out of prohibitions contained in contracts with plaintiff’s distributors precluding their resale of plaintiff’s products to Internet resellers such as defendant.  Defendant obtained plaintiff’s products from tanning salons, to whom the distributors were permitted to sell such products.  Because there was no evidence either that such tanning salons were acting as defendant’s agent in purchasing goods from plaintiff’s distributors, or that defendant directly purchased such goods from the distributors in breach of the prohibitions contained in their agreements, this claim failed.

Unauthorized Internet Reseller Use Plaintiff’s Mark On Its Site To Market Plaintiff’s Products, In The Site’s Meta Tags, And In Keyword Advertisements

Plaintiff Designer Skin LLC (“Designer Skin”) manufactures tanning products.  To promote such products, Designer Skin uses various trademarks of which it is the registered owner.  Designer Skin also maintains a website, at which it has posted images of its products to promote their sale.  Plaintiff holds the copyright in such images.

Designer Skin sells its tanning products via independent distributors.  By agreement, such distributors are prohibited from selling plaintiff’s products to Internet resellers.  They are permitted, however, to sell such products to tanning salons.
 Defendant S & L Vitamins (“S & L”) is an internet retailer which sells both Designer Skin’s tanning products, and those of its competitors, online at its website.  To aid in its marketing of plaintiff’s products, S & L’s website contains images of plaintiff’s products, which products are identified on defendant’s site by Designer Skin’s trademarks.  Defendant also uses Designer Skin’s trademarks in the meta tags of its website to aid in alerting third parties of defendant’s ability to sell such products.  In addition, S & L purchases keyword advertisements from search engines which cause defendant’s site to appear in the results of searches incorporating plaintiff’s marks in their search terms.

Defendant S & L does not obtain its supply of Designer Skin tanning products directly from either Designer Skin or its distributors.  Instead, S & L orders such products from tanning salons, who in turn order them from Designer Skin distributors.  S & L pays such tanning salons an agreed mark-up on such orders, ranging from 10-20% depending on the product purchased.

Upset with defendant’s conduct, plaintiff commenced suit, charging defendant with trademark infringement and dilution, copyright infringement, and tortuous interference with contractual relations.  The parties cross-moved for summary judgment.

No Initial Interest Confusion Because Defendant’s Use Of Plaintiff’s Marks Is Not Deceptive As Defendant Offers Plaintiff’s Products For Sale

The Court granted so much of defendant’s motion which sought dismissal of plaintiff’s trademark infringement claim.  At the hearing of its motion, plaintiff conceded that S & L’s use of plaintiff’s mark on its website to offer plaintiff’s products for sale did not constitute actionable trademark infringement.

It rested its claim instead on defendant’s use of plaintiff’s trademark in the meta tags of its website, and its purchase of search engine key word advertisements triggered by plaintiff’s marks.  Such uses, argued plaintiff, constituted actionable initial interest confusion.

The Court rejected this argument.  To cause initial interest confusion, defendant’s use of the mark must be deceptive.  Said the Court:

Initial interest confusion has been equated to a ‘bait and switch’ scheme.  It occurs when potential customers are lured away from a trademark holder’s product to a competitor’s product through the deceptive use of the holder’s mark.  Deception, it bears emphasizing, is essential to a finding of initial interest confusion.

The Court held that S & L’s use of plaintiff’s marks was not deceptive, because S & L did, in fact, offer plaintiff’s products for sale on its site.  The fact that S & L also offered for sale products from Designer Skin’s competitors did not alter this result. Said the Court:

In contrast to the deceptive conduct that forms the basis of a finding of initial interest confusion, S & L Vitamins uses Designer Skin’s marks to truthfully inform internet searchers where they can find Designer Skin’s products.  Rather than deceive customers into visiting their websites, this use truthfully informs customers of the contents of those sites.  Indeed, in practical effect S & L Vitamins invites Designer Skin’s customers to purchase Designer Skin’s products.  The fact that these customers will have the opportunity to purchase competing products when they arrive at S & L Vitamins sites is irrelevant.  The customers searching for Designer Skin’s products find exactly what they are looking for when they arrive at these sites.  S & L Vitamins is not deceiving consumers in any way.  Thus, its use of the marks does not cause initial interest confusion.

In reaching this result, the Court disagreed with a contrary holding of the Tenth Circuit in Australian Gold Inc. v. Hatfield, 436 F.3d 1228 (10th Cir.  2006).  Said the Court: 

In this Court’s view, there is a meaningful distinction between (1) using a mark to attract potential customers to a website that only offers products of the mark holder’s competitors and (2) using a mark to attract potential customers to a website that offers the mark holder’s genuine products as well as the products of competitors.  As discussed above, in the latter situation no ‘bait and switch’ occurs.

Trademark Dilution Claims Fail

The Court also granted so much of defendant’s summary judgment motion which sought dismissal of plaintiff’s trademark dilution claims.  The Court held that defendant’s use was a protected nominative fair use of plaintiff’s trademark, and hence non-actionable.  To constitute a nominative fair use, a use must meet three elements:

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.

Plaintiff argued that defendant’s use of its mark in its site’s meta tags, and to trigger key word advertisements, caused listings for defendant’s site to appear high in the search engine results for plaintiff’s marks, and thereby suggested plaintiff’s sponsorship of defendant’s site.  The Court recognized that such an argument may have merit.  However, because plaintiff failed to prove that listings for defendant’s site did in fact appear high in the results of searches for plaintiff’s marks, that argument failed here.  The Court also noted that plaintiff’s dilution claim may also fail because it could not demonstrate that it suffered the injury the Dilution Act was designed to prevent – namely an association between plaintiff’s mark and a different good or service.  Here, the mark was used to refer to plaintiff’s products.  “Thus [concluded the Court] the harm the anti-dilution statute seeks to prevent is absent from this case.”

Use Of Copyrighted Promotional Images To Market Copyright Holder’s Products Not A Protected Fair Use

Issues of fact precluded the Court from determining the validity of plaintiff’s copyright infringement claims.  These claims arose out of defendant’s use of images of plaintiff’s products on its site to market those products.  Designer Skin claimed that the images defendant S & L used were in fact copies of copyrighted images of Designer Skin’s products found on Designer Skin’s own website.  S & L disputed this fact, claiming that it had in fact created the images it used from original photographs it took of plaintiff’s products.  The Court held that this issue must be resolved at trial.

In reaching this result, the Court rejected S & L’s claim that its alleged use in marketing plaintiff’s products of copyrighted images plaintiff created for that very purpose constituted a permissible fair use that did not infringe plaintiff’s copyright in these images.

By statute, the court must weigh four factors to determine whether a use is in fact a permissible fair use of a mark:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes: (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.  17 U.S.C. Section 107.

Notwithstanding the fact that the most important of the four factors – the effect of the use upon the potential market for the copyrighted work – favored the defendant, the Court held that such an unauthorized use of plaintiff’s images to advertise its products was not a permitted fair use.  Thus, the Court found that the proposed use would have no effect on the potential market for plaintiff’s images, which it did not sell.  However, because defendant’s use was commercial and copied plaintiff’s image, which was a creative work, in its entirety, the Court held it was not a permitted fair use.

Intentional Interference With Contractual Relations Claims Fail

Finally, the Court dismissed plaintiff’s claim for intentional interference with contractual relations.  This claim arose out of prohibitions contained in plaintiff’s contracts with its distributors precluding their resale of plaintiff’s products to Internet resellers such as defendant.  Defendant obtained plaintiff’s products from tanning salons, to whom the distributors were permitted to sell such products.  The tanning salons make a 10-20% profit on the transaction, depending on the item purchased.  Plaintiff failed to submit any evidence that defendant purchased these products directly from distributors.  Similarly, held the Court, plaintiff failed to show that any tanning salon acted as S & L’s agent when it purchased the products at issue.  Instead, S & L bought the products from the tanning salon, which, in turn, bought the products from the distributors.  The Court accordingly dismissed this claim on defendant’s motion for summary judgment.

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