District of New Jersey: Initial interest, other confusion okay in search terms claim

Just when the Southern District of New York was hinting that it might be safe to go back in the water and stop worrying about “initial interest confusion,” a friend in a position to care a lot about the result passes along the just-out decision in 800-JR Cigar, Inc., v. GOTO.COM, Inc., from the other side of the water (the Hudson, that is). Salient points:

1. Is search-term use of a trademark “trademark use“?

Here, [defendant] GoTo makes trademark use of [plaintiff] JR[‘s] marks in three ways. First, by accepting bids from those competitors of JR desiring to pay for prominence in search results, GoTo trades on the value of the marks. Second, by ranking its paid advertisers before any “natural” listings in a search results list, GoTo has injected itself into the marketplace, acting as a conduit to steer potential customers away from JR to JR’s competitors. Finally, through the Search Term Suggestion Tool, GoTo identifies those of JR’s marks which are effective search terms and markets them to JR’s competitors.FN8 Presumably, the more money advertisers bid and the more frequently advertisers include JR’s trademarks among their selected search terms, the more advertising income GoTo is likely to gain.

Notice the lack of citations. This is a fairly new definition of trademark use: “Trading on the value” of marks, “injecting oneself into the marketplace,” and “marketing” the marks themselves. It is not an unfair or an obviously wrong assertion, but it is not one that Learned Hand would have recognized.

2. Is “diversion” of Internet traffic actionable even though there is no confusion by the time a sale is made due to initial interest confusion?

[C]ourts have found that damage to a trademark holder results even where a consumer eventually becomes aware of the source’s actual identity or where no actual sale occurs. This damage can manifest itself in three ways: (1) the original diversion of the prospective customer’s interest to a source that he or she erroneously believes is authorized; (2) the potential consequent effect of that diversion on the customer’s ultimate decision whether to purchase caused by an erroneous impression that the two sources of a product may be associated; and (3) the initial credibility that the would-be buyer may accord to the infringer’s products-customer consideration that otherwise may be unwarranted and that may be built on the strength of the protected mark, reputation and goodwill.

The probative value of initial interest confusion and its significance varies from case to case. Relevant factors include (1) product relatedness (i.e., whether the goods or services are similar; whether the products at issue directly compete), (2) the level of care exercised by consumers in making purchasing decisions, (3) the sophistication of the purchaser/consumer; and (4) the intent of the alleged infringer in adopting the mark. Initial interest confusion in the internet context derives from the unauthorized use of trademarks to divert internet traffic, thereby capitalizing on a trademark holder’s good will. Thus, in this factual context, evidence of the diversion of traffic away from JR’s website to those of its competitors is also a significant factor.

OK, here I took out the citations for readability (they’re here, though). Thus lives on the dubious concept of “diversion of traffic” as a form of trademark infringement, regardless of whether consumers know by the time they make a purchase that they’re buying “B,” not “A.” To his credit, Judge Lifland then actually goes on to consider each of these four factors on the record before it and does, indeed, find likelihood of confusion under the initial interest concept.

For my money, this is the most interesting question in trademark law today. But I’m prejudiced.

UPDATE: Eric Goldman weighs in, right on the money as usual.

By Ron Coleman

I write this blog.