Playboy Enterprises, Inc. v. Netscape Communications Corp.

Playboy v. Netscape, 354 F.3d 1020 (9th Cir. 2004) was a case regarding trademark infringement and trademark dilution decided by the United States Court of Appeals for the Ninth Circuit. Playboy Enterprises Inc. took legal action against Netscape Communications Corp. and Excite, Inc., accusing them of infringement and dilution of Playboy's marks "playboy" and "playmate".[1][2]

Playboy Enterprises, Inc. v. Netscape Communications Corp
CourtUnited States Court of Appeals for the Ninth Circuit
Full case namePlayboy Enterprises, Inc. v. Netscape Communications Corporation v. Excite, Inc.
ArguedSeptember 11 2001
DecidedJanuary 14 2004
Citation(s)354 F.3d 1020
Holding
When a court is to determine if a company's trademark is being infringed upon, the court should work through the eight factor test as first enunciated in AMF Inc. v. Sleekcraft Boats, with factor number four being carrying the heaviest weight. Here, the factors weighed heavily in favor of the Plaintiff and infringement was found.
Court membership
Judge(s) sittingBetty B. Fletcher, Thomas G. Nelson and Marsha S. Berzon
Case opinions
MajorityThomas G. Nelson

Facts

Netscape allows advertisers to target specific users of its search engine by displaying certain ads to certain people, depending on what the user searches for. The display and profiting of ads by a search engine operators such as Netscape is referred to as "keying." This "keying" technique is considered more effective than random ads.

Netscape uses this technique for adult entertainment and has a list of terms for which to display related ads. This list contains the terms "playboy" and "playmate" which are trademarked by Playboy. Netscape displays ads for various companies in response to those search terms, which includes Playboy's competitors.

Playboy claims that Netscape's use of those terms in its keying technique constitutes trademark infringement. In addition, by displaying competitor's ads that are not obviously from a competitor at first glance, Playboy claims that Netscape has committed trademark dilution. Netscape displayed banner ads of a company similar to Playboy, however Netscape did not specify the secondary company's name. Playboy argued that, upon viewing their banners and those of the other company similar in nature, the user would become confused and assume they were both under ownership of Playboy Enterprises, Inc. This action is legally considered trademark infringement under the initial interest confusion act.

According to the Ninth Circuit, failing to sufficiently identify the source of a banner advertisement could result in trademark infringement on the part of the search engine operator in accordance with the 'initial interest confusion' doctrine. There is no infringement provided the ads are properly labeled and identified with the advertiser's marks as the consumer is aware of the source of the advertisement and the definite website to which the advertisement will direct him.

The defendants profited from the plaintiff by keying through the display of banner ads in conjunction with one of four hundred search terms which included "Playboy" and "playmate", two of the plaintiff's registered trademarks. The defendants has multiple advertisers whose ad banners would display upon the presence of these search terms. The ads were not required by the defendants to be identified as to their source. Thus upon the search of the plaintiff's registered marks Playboy and Playmate, outside advertisers were able to connect their banners to these search queries without the need to specify the ad's source to the patrons browsing the web.

Procedural history

PEI sued Netscape, asserting that they were using PEI's marks in a manner that infringed upon and diluted the marks. The district court denied PEI's request for a preliminary injunction, and the appeals court affirmed in an unpublished disposition.

On remand, the parties filed cross-motions for summary judgment. The United States District Court for the Central District of California granted summary judgment for Netscape.

PEI appealed.

Decision

The Court of Appeals for the Ninth Circuit allowed Playboy Enterprises, Inc. to proceed with their claims of trademark infringement and dilution by Netscape and Excite according to the "initial interest confusion" doctrine established by Brookfield Communications, Inc. v. West Coast Entertainment Corp. in the Ninth Circuit.[3]

Using this decision as reference, the plaintiff could claim such confusion by demonstrating that consumers believe the banner ads displayed with the results of their search for the plaintiff's registered marks are sponsored by or associated with Playboy Enterprises, Inc. Despite the customer's later knowledge that the products they are purchasing are in fact not from Playboy, the competitor getting business is unfairly profiting off of Playboy's goodwill and registered marks.

The Ninth Circuit employed an eight-factor test, originally set forth in AMF Inc. v. Sleekcraft Boats, to determine the likelihood of confusion. Because each factor is weighted differently and some factors are more important than others, the court started with factor four. The eight factors are:[2]

Factor One: Strength of the Mark

PEI established that a strong secondary meaning for its descriptive marks existed, and that a genuine issue of material fact exists as to whether it created the secondary meanings. Thus, the first Sleekcraft factor favored PEI.

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 favored PEI as well.

Factor Three: Similarity of the Marks.

No doubt exists regarding this factor. Aside from their lack of capitalization, their font, and the fact that Defendant Netscape used the plural form of "playmate," the terms Netscape used are identical to PEI's marks. Thus, they were found "certainly similar."

Factor Four: Evidence of Actual Confusion

The court found in favor of PEI for factor four because the expert study PEI introduced established a strong likelihood of initial interest confusion among consumers. Thus, factor four alone sufficed to reverse the grant of summary judgment but in the interest of being thorough, however, the court examined the other seven Sleekcraft factors.

Factor Five: Marketing Channels Used

This factor is equivocal. The court found that PEI and the advertisers used identical marketing channels: the Internet. More specifically, each of their sites appeared on Netscape's search results pages. Given the broad use of the Internet today, the same could be said for countless companies. Thus, this factor merited little weight.

Factor Six: Type of Goods and Degree of Consumer Care Expected

This factor favored PEI. Consumer care for inexpensive products is expected to be quite low. Low consumer care, in turn, increases the likelihood of confusion.

In addition to price, the content in question affected consumer care as well. The court presumed 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 weighed in PEI's favor as well.

Factor Seven: Defendants' Intent in Selecting the Mark

This factor favored PEI somewhat. A defendant's intent to confuse constitutes probative evidence of likely confusion: Courts normally assume that the defendant's intentions were carried out successfully. In this case, the evidence did not definitively establish defendants' intent. At a minimum, however, it did suggest that defendants did nothing to prevent click-throughs that resulted from the confusion. Moreover, Netscape profited from such click-throughs.

Factor Eight: Likelihood of Expansion of Product Lines

Because the advertisers' goods and PEI's were already related, as discussed within factor two, this factor was found to be irrelevant.

Defenses to Infringement

Having examined all of the Sleekcraft factors, the court concluded that the majority favor PEI. Accordingly, the court concluded that a genuine issue of material fact existed as to the substantial likelihood of confusion. The court then proceeded to the defenses advanced by defendants.

Defendants assert three defenses: fair use, nominative use, and functional use. Because the court found that a genuine issue of fact existed as to likelihood of confusion under Sleekcraft, the court denied summary judgment as to the fair use defense. A fair use may not be a confusing use. Accordingly, the court turned to defendants' other asserted defenses. Defendants Netscape asserted that they make a nominative use of PEI's marks. The court applied a slightly different test for confusion in the nominative use, as opposed to the fair use, context. To be considered a nominative use, the use of a mark must meet the following three-factor test, as originally stated in PEI v. Welles:

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

Before the court applied this test to the facts, the court emphasized what facts were not at hand. It noted that defendants' use of PEI's marks to trigger the listing of PEI sites, and other sites that legitimately use PEI's marks, was not at issue. In addition, it noted that it is not addressing a situation in which a banner advertisement clearly identified its source with its sponsor's name, or in which a search engine clearly identifies a banner advertisement's source. The court stated that it also did not address a situation in which advertisers or defendants overtly compare PEI's products to a competitor's—saying, for example "if you are interested in Playboy, you may also be interested in the following message from[a different, named company]." Rather, the court acknowledged it was evaluating a situation in which defendants display competitors' unlabeled banner advertisements, with no label or overt comparison to PEI, after Internet users type in PEI's trademarks. PEI v. Welles The situation with which the court was dealing runs afoul of the first requirement for nominative use. Accordingly, it did not consider the other prongs. Defendants could have used other words, besides PEI's marks, to trigger adult-oriented banner advertisements. Indeed, it was found that they already did so. The list they sold to advertisers included over 400 terms besides PEI's marks. There is nothing indispensable, in this context, about PEI's marks. Defendants did not wish to identify PEI or its products when they key banner advertisements to PEI's marks. Rather, they wished to identify consumers who are interested in adult-oriented entertainment so they can draw them to competitors' websites. Accordingly, their use is not nominative. Thus, the court reversed the district court's grant of summary judgment based on nominative use.

Trademark Dilution

The plaintiff's claim for trademark dilution was remanded by the Ninth District Court to the District Court, who was given instruction to apply the case of Mosley v. V Secret Catalogue, recently decided by the Supreme Court. The Ninth District Court concluded that the infringement only applied to those ad banners which contained no identification of source as these were the only ones subject to consumer confusion.[2]

Conclusion

Genuine issues of material fact exist as to PEI's trademark infringement and dilution claims. Accordingly, the court reversed the district court's grant of summary judgment in favor of defendants and remand for further proceedings.[2]

See also

References
  1. http://www.internetlibrary.com/cases/lib_case336.cfm
  2. 354 F. 3d 1020 - Playboy Enterprises Inc v. Netscape Communications Corporation, January 14, 2004, retrieved July 18, 2014
  3. http://www.ca9.uscourts.gov/
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