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E-Commerce News

Paid-Search Listings Can't Use Trademarks; eBay Not Subject To Fair Credit Reporting Act

November 7, 2006

PAID-SEARCH LISTINGS CAN'T USE TRADEMARKS

A search engine that sells paid-search listings triggered to appear whenever a user queries another party's  trademark is a "use in commerce" of the mark that may constitute infringement, according to a recent ruling by a federal district court in New Jersey.  In reaching its ruling, the court distinguished previous  cases which had approved a similar plan tied to "pop up" advertising. 
 
For the New Jersey court, the key difference was the fact that in the pop-up cases, advertisers bid on categories of terms that may or may not have included trademarks. In the case before it, advertisers were able to purchase specific marks as keywords.

According to the New Jersey court, "Such conduct is qualitatively different from the pop-up advertising context, where the use of trademarks in internal computer coding is neither communicated to the public nor for sale to the highest bidder." 

The case was a fight over cigars, sure to leave a bad taste in someone's mouth (sorry).  The plaintiff, 800-JR Cigar Inc. sued search engine GoTo.com Inc. for selling paid-search listings tethered to variations of its "JR Cigar" marks.  JR Cigar filed a complaint, which alleged trademark infringement.  Shortly after filing the complaint, it filed a motion for summary judgment.  In ruling on the motion, the court needed to address two distinct issues - did the sale of the marks constitute a "use in commerce" and did the use create a likelihood of confusion? 

Based on the following factors, the court concluded that the sale of the marks did constitute a use in commerce:

  • GoTo traded on the value of the marks by accepting bids on them; 
  • GoTo steered potential JR customers to competitors by ranking its paid-search listings more prominently than its organic results; 
  • GoTo's "Search Term Suggestion Tool" channeled rival advertisers to select JR Cigar's marks by providing statistical data on the most frequent search terms for the desired product.

The court found that the issue of "likelihood of confusion" could not be resolved on a summary judgment motion, because there were too many factual issues presented.  JR Cigar, however, did present statistical evidence that GoTo search engine queries accounted for 20,000 of the 70,407 Internet searches during the relevant period. Approximately 1,000 of those 20,000 clicked-through to ads for competitors of JR Cigar.  

The ability to use trademarks to steer search engine users is an issue that presents enormously high stakes both for the trademark owner and the search engines.  Don't be surprised if the United States Supreme Court is asked to decide this issue at some point in the near future.

eBAY NOT SUBJECT TO FAIR CREDIT REPORTING ACT

eBay did not transform itself into a "consumer reporting agency" by providing a forum for pseudonymous users to rate their experiences with a particular seller.  That's the conclusion of a federal appellate court sitting in Chicago.

An online seller, in an effort to force eBay to correct alleged inaccuracies in posted information, argued that eBay was subject to the federal Fair Credit Reporting Act ("FCRA").  The FCRA applies to  "consumer reporting agencies," which provide "consumer reports."

The appellate court didn't accept the argument that the online auction service was a "consumer reporting service" for at least two reasons.  In the first place, the FCRA applies only to reports used for consumer purposes, not ones prepared for commercial purposes.  eBay's Feedback Forum, in the court's view, is "an inherently commercial activity."

In the second place, the court recognized the FCRA's purpose - to protect the privacy of a consumer-- who must be an identifiable person.  Since the very point of the Feedback Forum is to provide anonymity, it "cannot be considered a 'consumer reporting agency' within the FCRA," according to the court.

Despite a clever attempt, the court simply refused to put form over substance here.

This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.