Nominative Use is a Powerful Defense in Trademark Infringement Keyword Advertising Cases

In trademark cases involving keyword advertising, the nominative use defense is often a powerful tool that leads to early success on summary judgment.  We recently had a case where we represented a payment processor review site.  At issue was whether or not a review site is able to advertise by purchasing trademarked terms on Google Adwords.  In this post, we will run through the analysis and ultimate answer.

Where a trademark claim arises from the use of a trademark as a reference to mark owner’s goods or services such as a review site, the case is among a “class of cases where the use of the trademark does not attempt to capitalize on consumer confusion or to appropriate the cachet of one product for a different one” and the plaintiff’s claims fall to the doctrine of “nominative use.”  New Kids on the Block v. News Am. Pub., Inc., 971 F.2d 302, 308 (9th Cir. 1992).

Nominative use protects the defendant’s use of a mark because the mark is the only word reasonably available to describe a particular thing and such use lies outside the strictures of trademark law: Because it does not implicate the source-identification function that is the purpose of trademark, it does not constitute unfair competition; such use is fair because it does not imply sponsorship or endorsement by the trademark holder.  Thus, the doctrine provides protection for a review site even if that review site is bidding on the mark owner’s keywords.

A slew of Ninth Circuit cases holds that internet consumers are highly sophisticated and do not form opinions of sponsorship based upon cursory reviews of domain names and search results.  As such, cases like Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1153 (9th Cir. 2011) have applied the nominative use defense to dismiss keyword based claims of trademark infringement.

The first part of the nominative use test asks whether the “use of the mark was ‘necessary’ to describe” Defendants’ business.  For review sites, the answer will almost always be yes.  There simply is no way to review a restaurant, car or payment processing service without using the protected trademarks of the respective brand.  Furthermore, bidding on the keywords of the reviewed companies is the logical way to draw viewers to the content.  Although typically obvious to anyone with a brain, review sites do not need to specifically disavow an association with the trademark holder so long as confusion over sponsorship or endorsement does not arise.  Use of marks can go beyond keywords to include URL’s, meta-data and tags.

When the nominative use defense is so powerful and so obvious, why do mark holders continue to file infringement claims based upon keyword advertising?  Because litigation is expensive and achieving victory, even early based upon a nominative use defense, will approach $100,000.  Even though a summary judgment may be filed in response to a complaint, plaintiffs are often granted Rule 56 discovery in order to oppose the summary judgment.  This often includes robust interrogatories and at least a few depositions.  Plaintiffs count on the fact that review sites will acquiesce, opting to simply remove content or cease keyword bidding rather than spend $100k.  Further encouragement for Plaintiff’s in such suits arises from the fact that Courts are unlikely to award attorney fees to the successful defendant because this requires a finding of an “exceptional” case.

The conclusion is that keyword advertising cases are typically a no win proposition in that defendants are almost 100% likely to get the case dismissed but will be out of pocket around $100,000.