T.G. NELSON, Circuit Judge.
Playboy Enterprises International, Inc. (PEI) appeals from the district court's grant of summary judgment in favor of Netscape Communications Corporation and Excite, Inc. PEI sued defendants for trademark infringement and dilution. We have jurisdiction pursuant to 28 U.S.C. § 1291. Because we conclude that genuine issues of material fact preclude summary judgment on both the trademark infringement and dilution claims, we reverse and remand.
This case involves a practice called "keying" that defendants use on their Internet search engines. Keying allows advertisers to target individuals with certain interests by linking advertisements to pre-identified terms. To take an innocuous example, a person who searches for a term related to
Defendants have various lists of terms to which they key advertisers' banner ads. Those lists include the one at issue in this case, a list containing terms related to sex and adult-oriented entertainment. Among the over-400 terms in this list are two for which PEI holds trademarks: "playboy" and "playmate."
PEI introduced evidence that the adult-oriented banner ads displayed on defendants' search results pages are often graphic in nature and are confusingly labeled or not labeled at all. In addition, the parties do not dispute that buttons on the banner ads say "click here." When a searcher complies, the search results page disappears, and the searcher finds him or herself at the advertiser's website. PEI presented uncontroverted evidence that defendants monitor "click rates," the ratio between the number of times searchers click on banner ads and the number of times the ads are shown. Defendants use click rate statistics to convince advertisers to renew their keyword contracts. The higher the click rate, the more successful they deem a banner ad.
PEI sued defendants, asserting that they were using PEI's marks in a manner that infringed upon and diluted them. The district court denied PEI's request for a preliminary injunction, and this court affirmed in an unpublished disposition.
II. STANDARD OF REVIEW
We review the district court's grant of summary judgment de novo.
A. Trademark Infringement
With regard to PEI's trademark infringement claim, the parties disagree on three points. First, the parties dispute whether a direct or a contributory theory of liability applies to defendants' actions. We conclude that defendants are potentially liable under one theory and that we need not decide which one. Second, the parties disagree regarding whether PEI has successfully shown that a genuine issue of material fact exists regarding the likelihood of consumer confusion resulting from defendants' use of PEI's marks. We conclude that a genuine issue of material fact does exist. Finally, the parties dispute whether any affirmative defenses apply. We conclude that no defenses apply. We will address each dispute in turn.
1. Theory of liability.
Whether the defendants are directly or merely contributorily liable proves to be a tricky question. However, we need not decide that question here. We conclude that defendants are either directly or contributorily liable. Under either theory, PEI's case may proceed. Thus, we need not decide this issue.
2. PEI's case for trademark infringement.
The "core element of trademark infringement," the likelihood of confusion, lies at the center of this case.
PEI's strongest argument for a likelihood of confusion is for a certain kind of confusion: initial interest confusion.
PEI asserts that, by keying adult-oriented advertisements to PEI's trademarks, defendants actively create initial interest confusion in the following manner. Because banner advertisements appear immediately after users type in PEI's marks, PEI asserts that users are likely to be confused regarding the sponsorship of un-labeled banner advertisements.
PEI's theory strongly resembles the theory adopted by this court in Brookfield Communications, Inc. v. West Coast Entertainment Corporation.
In this case, PEI claims that defendants, in conjunction with advertisers, have misappropriated the goodwill of PEI's marks by leading Internet users to competitors' websites just as West Coast video misappropriated the goodwill of Brookfield's mark. Some consumers, initially seeking PEI's sites, may initially believe that unlabeled banner advertisements are links to PEI's sites or to sites affiliated with PEI. Once they follow the instructions to "click here," and they access the site, they may well realize that they are not at a PEI-sponsored site. However, they may be perfectly happy to remain on the competitor's site, just as the Brookfield court surmised that some searchers initially
Although analogies to Brookfield suggest that PEI will be able to show a likelihood of confusion sufficient to defeat summary judgment, we must test PEI's theory using this circuit's well-established eight-factor test for the likelihood of confusion to be certain. Accordingly, we turn to that test now.
The Ninth Circuit employs an eight-factor test, originally set forth in AMF Inc. v. Sleekcraft Boats,
In the Internet context, courts must be flexible in applying the factors, as some may not apply.
a. Factor 4: Evidence of Actual Confusion.
The expert study PEI introduced establishes a strong likelihood of initial interest confusion among consumers. Thus, factor four alone probably suffices to reverse the grant of summary judgment.
PEI's expert, Dr. Ford, concluded that a statistically significant number of Internet users searching for the terms "playboy" and "playmate" would think that PEI, or an affiliate, sponsored banner ads containing adult content that appear on the search results page. When study participants were shown search results for the term "playboy," 51% believed that PEI sponsored or was otherwise associated with the adult-content banner ad displayed.
Defendants criticize Dr. Ford's procedures and conclusions. They offer their own interpretations of his data, with significantly
Defendants may have valid criticism of Dr. Ford's methods and conclusions, and their critique may justify reducing the weight eventually afforded Dr. Ford's expert report. The district court's evidentiary ruling is not before us on appeal, however, and weighing admissible evidence at this stage is improper.
Because actual confusion is at the heart of the likelihood of confusion analysis,
b. Factor One: Strength of the Mark.
PEI has established that strong secondary meanings for its descriptive marks exist, and that a genuine issue of material fact exists as to whether it created the secondary meanings.
At this point, defendants concede that they use the marks for their secondary meanings.
PEI offered evidence, in the form of expert reports, tending to show that PEI did create the secondary meanings of "playboy" and "playmate." PEI's expert evidence countered the defendants' expert evidence to the contrary, and suffices to generate a genuine issue of material fact on this issue.
c. Factor Two: Proximity of the Goods.
From an Internet searcher's perspective, the relevant "goods" are the links to the websites being sought and the goods or services available at those sites. The proximity between PEI's and its competitor's goods provides the reason Netscape keys PEI's marks to competitor's banner advertisements in the first place. Accordingly, this factor favors PEI as well.
d. Factor Three: Similarity of the Marks.
No doubt exists regarding this factor. Aside from their lack of capitalization, their font, and the fact that defendants use the plural form of "playmate," the terms defendants use are identical to PEI's marks. Thus, they are certainly similar.
e. Factor Five: Marketing Channels Used.
This factor is equivocal. PEI and the advertisers use identical marketing channels: the Internet. More specifically, each of their sites appears on defendants' search results pages. Given the broad use of the Internet today, the same could be said for countless companies. Thus, this factor merits little weight.
f. Factor Six: Type of Goods and Degree of Consumer Care Expected.
This factor favors PEI. Consumer care for inexpensive products is expected to be quite low.
In addition to price, the content in question may affect consumer care as well. We presume that the average searcher seeking adult-oriented materials on the Internet is easily diverted from a specific product he or she is seeking if other options, particularly graphic ones, appear more quickly. Thus, the adult-oriented and graphic nature of the materials weighs in PEI's favor as well.
g. Factor Seven: Defendants' Intent in Selecting the Mark.
This factor favors PEI somewhat. A defendant's intent to confuse constitutes probative evidence of likely confusion:
PEI introduced evidence suggesting that labeling the advertisements would reduce click-through rates. It would also reduce confusion. However, although defendants control the content of advertisements in other contexts, defendants do not require that advertisers identify themselves on their banner ads. Moreover, they do not label the advertisements themselves. Perhaps even more telling, defendants refuse to remove the highly-rated terms "playboy" and "playmate" from their lists of keywords, even when advertisers request that they do so.
The above evidence suggests, at a minimum, that defendants do nothing to alleviate confusion, even when asked to do so by their advertisers, and that they profit from confusion. Although not definitive, this factor provides some evidence of an intent to confuse on the part of defendants. This factor thus favors PEI.
h. Factor Eight: Likelihood of Expansion of Product Lines.
Because the advertisers' goods and PEI's are already related, as discussed within factor two, this factor is irrelevant.
Having examined all of the Sleekcraft factors, we conclude that the majority favor PEI. Accordingly, we conclude that a genuine issue of material fact exists as to the substantial likelihood of confusion. We now proceed to the defenses advanced by defendants.
Defendants assert three defenses: fair use, nominative use, and functional use. Because we have found that a genuine issue of fact exists as to likelihood of confusion under Sleekcraft, we must deny summary judgment as to the fair use defense. A fair use may not be a confusing use.
Defendants assert that they make a nominative use of PEI's marks. We apply a slightly different test for confusion in the nominative use, as opposed to the fair use, context.
Before we apply this test to the facts at hand, we would like to emphasize what facts are not at hand. We note that defendants' use of PEI's marks to trigger the listing of PEI sites, and other sites that legitimately use PEI's marks,
The situation with which we are dealing runs afoul of the first requirement for nominative use. Accordingly, we do not consider the other prongs.
Defendants could use other words, besides PEI's marks, to trigger adult-oriented banner advertisements. Indeed, they already do so. The list they sell to advertisers includes over 400 terms besides PEI's marks. There is nothing indispensable, in this context, about PEI's marks.
Defendants' final asserted defense, functional use, also fails. Defendants appear not to have raised this defense before the district court. Even if they have not waived the defense, however, it fails. Under the functional use doctrine, parts of a design that have a functional use may not receive trademark protection.
Nothing about the marks used to identify PEI's products is a functional part of
The fact that the marks make defendants' computer program more functional is irrelevant. Defendants designed their program to identify consumers interested in adult-oriented entertainment so that some percentage of those consumers might be attracted to competitors' websites, thereby helping defendants generate advertising revenue. Thus, defendants might conceivably be unable to trademark some of the terms used in their program because those terms are functional within that program. Because we are not dealing with defendants' wish to trademark their computer program, but with PEI's ability to protect the trademarks it already uses to identify its products, the doctrine of functional use does not help defendants here.
We hold that genuine issues of material fact exist with respect to defendants' keying practices. Thus, we conclude that summary judgment was inappropriate on the trademark infringement claim.
B. Trademark Dilution
We reverse the district court's grant of summary judgment on PEI's second cause of action, trademark dilution,
1. Famousness of the mark.
The federal dilution statute provides eight factors courts may use, along with other relevant factors, "[i]n determining whether a mark is distinctive and famous."
No grounds exist to contest factors (B), (C), (D), (E), and (H), all of which favor PEI. Defendants directly contest only factor (G): "the nature and extent of use of the same or similar marks by third parties."
Defendants introduced evidence that more than forty third-party trademark registrations exist for the terms "playboy" and "playmate," as well as evidence that hundreds of companies use the terms within their company names. Plaintiffs countered, however, by showing that: (a) many of the companies cited by defendants are active infringers whom PEI is diligently pursuing; (b) others are merely companies who have applied for similar marks but who have not yet received them; and (c) still others are listed several times. The remainder, PEI asserts, are in different fields or in localized areas and should not be counted, at least not when considering whether PEI's marks are famous within their market.
Thus, defendants introduced evidence of third-party use and PEI disputed the evidence with evidence of its own showing that defendants' list was substantially over-inclusive. A dispute of material fact thus exists as to the only factor relevant to the famousness of the marks that defendants contest. Accordingly, the first contested requirement of dilution favors PEI on summary judgment.
2. Defendants' commercial use of the mark.
Congress intended to limit only commercial speech, as opposed to political or other more closely protected speech, when it passed the dilution statute; thus, it included the requirement that the use be a commercial one.
3. Dilution of distinctive quality of marks.
We conclude that the district court erred when it held, applying the standard then in force,
Under the old standard, PEI established a genuine issue of material fact regarding likelihood of dilution. With respect to blurring,
Defendants argue that dilution cannot be found because they do not label their own goods with PEI's marks. However, when one considers things from the consumers' perspective, defendants' argument fails. According to PEI's evidence, in the minds of consumers, defendants implicitly label the goods of PEI's competitors with its marks.
Finding fault with the methods used to collect and evaluate PEI's evidence regarding Internet searchers' association between the keyed advertisements and PEI, defendants criticize PEI's evidence regarding the likelihood of blurring. As with the evidence regarding the likelihood of confusion in the infringement claim, however, defendants' critique of PEI's evidence pointed to a genuine issue of fact on this issue, not to summary judgment.
Defendants did not counter PEI's evidentiary showing in support of tarnishment. Accordingly, PEI showed a likelihood of tarnishment as well.
Because we conclude that the district court erred under the traditional theories of dilution, we need not reach the parties' arguments regarding whether Panavision International, L.P. v. Toeppen
Because the old standard, requiring a showing of a mere likelihood of dilution, no longer applies, we vacate the district court's decision as to the third element of the dilution claim and remand in order to allow the district court to apply the proper standard.
Genuine issues of material fact preclude summary judgment on PEI's dilution claim. The fame of the marks and the likelihood of dilution are in dispute, thereby precluding summary judgment.
Genuine issues of material fact exist as to PEI's trademark infringement and dilution claims. Accordingly, we reverse the district court's grant of summary judgment in favor of defendants and remand for further proceedings.
REVERSED AND REMANDED.
BERZON, Circuit Judge, concurring.
I concur in Judge Nelson's careful opinion in this case, as it is fully consistent with the applicable precedents. I write separately, however, to express concern that one of those precedents was wrongly decided and may one day, if not now, need to be reconsidered en banc.
I am struck by how analytically similar keyed advertisements are to the metatags found infringing in Brookfield Communications v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir.1999). In Brookfield, the court held that the defendant could not use the trademarked term "moviebuff" as one of its metatags. Metatags are part of the HTML code of a web page, and therefore are invisible to internet users. Search engines use these metatags to pull out websites applicable to search terms. See also Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 812-13 (7th Cir.2002) (adopting the Brookfield holding).
Specifically, Brookfield held that the use of the trademarked terms in metatags violated the Lanham Act because it caused "initial interest confusion." Brookfield, 174 F.3d at 1062-66. The court explained that even though "there is no source confusion in the sense that consumers know[who] they are patronizing, ... there is nevertheless initial interest confusion in the sense that, by using `moviebuff.com' or `MovieBuff' to divert people looking for `MovieBuff' to its website, [the defendant] improperly benefits from the goodwill that [the plaintiff] developed in its mark." Id. at 1062.
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
There is a big difference between hijacking a customer to another website by making the customer think he or she is visiting the trademark holder's website (even if only briefly), which is what may be happening in this case when the banner advertisements are not labeled, and just distracting a potential customer with another choice, when it is clear that it is a choice. True, when the search engine list generated by the search for the trademark ensconced in a metatag comes up, an internet user might choose to visit westcoastvideo.com, the defendant's website in Brookfield, instead of the plaintiff's moviebuff.com website, but such choices do not constitute trademark infringement off the internet, and I cannot understand why they should on the internet.
For example, consider the following scenario: I walk into Macy's and ask for the Calvin Klein section and am directed upstairs to the second floor. Once I get to the second floor, on my way to the Calvin Klein section, I notice a more prominently displayed line of Charter Club clothes, Macy's own brand, designed to appeal to the same people attracted by the style of Calvin Klein's latest line of clothes. Let's say I get diverted from my goal of reaching the Calvin Klein section, the Charter Club stuff looks good enough to me, and I purchase some Charter Club shirts instead. Has Charter Club or Macy's infringed Calvin Klein's trademark, simply by having another product more prominently displayed before one reaches the Klein line? Certainly not. See Gregory Shea, Note, Trademarks and Keyword Banner Advertising, 75 S. CAL. L. REV. 529, 554 (2002) (comparing keyed banner advertisements to a customer entering a supermarket, requesting Tylenol, and then being directed to the pain reliever section which includes generic Acetaminophen, along with other generic and name-brand pain relievers); Julie A. Rajzer, Comment, Misunderstanding the Internet: How Courts are Overprotecting Trademarks Used in Metatags, 2001 L. REV. MICH. ST. U.C.L. 427, 462-63 (2001) (highlighting the brick-and-mortar world in which Kellogg's Raisin Bran and Post Raisin Bran both appear next to one another on the same aisle).
Similarly, suppose a customer walks into a bookstore and asks for Playboy magazine and is then directed to the adult magazine section, where he or she sees Penthouse or Hustler up front on the rack while Playboy is buried in back. One would not say that Penthouse or Hustler had violated Playboy's trademark. This conclusion holds true even if Hustler paid the store owner to put its magazines in front of Playboy's.
One can test these analogies with an on-line example: If I went to Macy's website and did a search for a Calvin Klein shirt, would Macy's violate Calvin Klein's trademark if it responded (as does Amazon.com, for example) with the requested shirt and pictures of other shirts I might like to consider as well? I very much doubt it.
Accordingly, I simply cannot understand the broad principle set forth in Brookfield. Even the main analogy given in Brookfield belies its conclusion. The Court gives an example of Blockbuster misdirecting customers from a competing video store, West Coast Video, by putting up a highway billboard sign giving directions to Blockbuster but telling customers that a West Coast Video store is located there. Brookfield, 174 F.3d at 1064. Even though customers who arrive at the Blockbuster realize that it is not West Coast Video, they were initially misled and confused. Id.
But there was no similar misdirection in Brookfield, nor would there be similar misdirection in this case were the banner ads
The degree to which this questionable aspect of Brookfield affects this case is not clear to me. Our opinion limits the present holding to situations in which the banner advertisements are not labeled or identified. See ante at 1029-1030. Whether, on remand, the case will remain so limited is questionable. PEI may seek to reach labeled advertisements as well.
There will be time enough to address the continuing vitality of Brookfield should the labeled advertisement issue arise later. I wanted to flag the issue, however, as another case based on the metatag aspect of Brookfield was decided recently, Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036 (9th Cir.2003), so the issue is a recurring one. Should the question arise again, in this case or some other, this court needs to consider whether we want to continue to apply an insupportable rule.