Companies frequently advertise their products online by purchasing keywords from search engine sites, such as Google and Bing. When internet users search for these terms, the company’s advertisement appears at the top of the results, within a designated advertisement section.
Network Automation, Inc. v. Advanced Systems Concepts, Inc. involved two competitors, Network Automation (“Network”) and Advanced Systems Concepts (“Systems”).[1] Both companies advertised their products online. Systems had a trademark for its product, “ActiveBatch.” To advertise its own product, Network purchased the search engine keyword “ActiveBatch” (System’s trademark) from Google and Bing. Thus, when a customer searched for the phrase “ActiveBatch” on Google or Bing, a link to Network’s website was shown in a designated advertisement section. (See below image). The search result contained no reference to Network’s product. The only reference to Network was the link beneath the advertisement containing Network’s website URL.
The Court of Appeals reversed the injunction and remanded the case for further proceedings. The decision turned on whether Network’s use of System’s trademark was likely to cause “initial interest confusion.”[2] Initial interest confusion occurs when the defendant uses the plaintiff’s trademark in a manner calculated to capture initial consumer attention. Generally, courts have applied a rather rigid test in determining initial interest confusion.[3] However, the Court of Appeals stated that for trademarks in the internet context, courts must be “acutely aware of excessive rigidity” and “emerging technologies require a flexible approach.” Thus, other variables beyond the rigid test should also be considered. For example, in Network, the court considered variables including evidence of actual confusion, the degree of care likely to be exercised by the purchaser, the appearance of the advertisement and the surrounding context on the screen. The court acknowledged that in other circumstances, different factors may be more relevant.
This case illuminates the ongoing changes in online intellectual property law. The court stated that as the novelty of the internet dissipates, the default degree of consumer care is elevated. This means that consumers are less likely to be confused by online advertisements for two competing products. For example, internet users are accustomed to receiving both sponsored and unsponsored results when using search engines, and do not often confuse the two types of results. This is a departure from other courts’ previous reasoning that internet consumers exercise a low degree of care. The Court of Appeal’s acknowledgement of increasingly sophisticated internet users creates a heightened standard for proving confusion. Thus, it may be more difficult for future plaintiffs to prove initial interest confusion.
Network provides insight to the court’s evolving and more flexible approach to internet trademark cases. The court’s tolerance of Network’s use of System’s trademark may cause other companies to reconsider their internet strategy. Moreover, has what the court condoned ultimately a new form of cyber-squatting? While there are many other intersections of internet and intellectual property which have not been addressed by this decision, Network illustrates a shift from rigidity to flexibility that may eventually be applied in other areas.
[1] Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011).
[2] 15 U.S.C.S. § 1114 of the Lanham Act requires (1) the plaintiff have a protectable ownership interest in the mark; and (2) the defendant’s use of the mark is likely to cause consumer confusion.
[3] The rigid test evaluated initial interest confusion based on 3 factors, known as the “Internet Troika”: (1) the similarity of the marks; (2) the relatedness of the goods; and (3) the marketing channel used.
