• Appeals Court Rules For Playboy In Internet Trademark Dispute
  • January 30, 2004
  • Law Firm: Manatt, Phelps & Phillips, LLP - Los Angeles Office
  • On January 14, 2004, the U.S. Court of Appeals for the Ninth Circuit reversed a lower court decision dismissing a trademark infringement and dilution case brought by Playboy Enterprises and found that triable issues of fact exist as to whether the defendants, Excite and Netscape Communications, wrongly utilized Playboy's trademarks in connection with "keying" banner advertisements. (Netscape is now owned by TimeWarner and Excite has filed for bankruptcy.) The case was remanded to the lower court for reconsideration.

    Playboy initially commenced the lawsuit against Netscape, a search engine operator, and Excite, a search engine software developer, on April 15, 1999 in U.S. District Court for the Central District of California. The complaint charged that the defendants wrongly used Playboy's trademarks -- PLAYBOY and PLAYMATE -- as triggers for unlabeled banner advertisements for other companies on search result pages. The lower court dismissed the case on summary judgment, finding that the defendants did not use Playboy's trademarks in commerce and thus could not have infringed its trademark rights. The court also rejected Playboy's assertion that the use of its trademarks resulted in "initial interest confusion" The Ninth Circuit adopted the theory of trademark infringement based on initial interest confusion in Brookfield Communications, Inc. v. West Coast Entertainment Corporation. It is defined as confusion that creates an initial interest in a competitor's product but is dispelled prior to an actual sale being made.

    The Ninth Circuit's decision to reverse was largely based on its finding of a strong likelihood of initial interest confusion. The court found that a "significant number of Internet users searching for the terms PLAYBOY and PLAYMATE would think that Playboy or an affiliate sponsored banner ads containing adult content that appeared on the search results page." It noted that most of the ads that appear on the search result pages after a search for PLAYBOY or PLAYMATE contain no label or reference to the entity sponsoring the banner ad. As a result, the consumer is required to click on the ad to ascertain its sponsor (and to learn that it is not Playboy). Circuit Court Judge T.G. Nelson stated that through this initial consumer confusion, the competitor placing the banner ad "will have gained a customer by appropriating the goodwill that [Playboy] has developed in its mark."

    The court was not persuaded by the defendants' defense that the use of Playboy's trademarks was nominative and a fair use. The court rejected the fair use defense, noting that a fair use "may not be a confusing one." To show a nominative use, the court noted that all of the following factors must be present:

    • the product or service in question must be one not readily identifiable without the use of the trademark;
    • only so much of the mark may be used as is reasonably necessary to identify the product or service; and
    • the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.

    The court determined there was no nominative use because the first prong of the test was not met: there was nothing "indispensable" about using Playboy's marks to trigger advertisements for competitors' products. In fact, the court noted that the Playboy trademarks were two of over 400 other terms used to trigger those ads.

    Significance: This decision could potentially have a far-reaching impact on the economics of advertising on the Internet. Although the lower court has yet to determine the parameters of the lawful use of trademarked terms in the context of banner ads, search engine companies may want to consider whether to remove trademarks from key word searches to avoid potential lawsuits. A less onerous solution alluded to by the court may be for search engine companies to require the labeling of banner ads. Consumers would then have more knowledge about the site which they are visiting prior to clicking on a banner ad and would be less likely to experience initial interest confusion. Taking this action may help neutralize the court's criticism of search engine companies allowing and profiting from the confusion resulting in higher click-through rates.