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Courts Struggle With Search Engines’ Use of Trademarked Keywords

Lawyers love to have cases on the “cutting edge” – they thirst for it in law school, and brag about it when they get into practice. No law, no precedents, difficult issues? Bring it on! they say.

Clients, of course, feel exactly the opposite – no law, no precedents, no predictability? How is that possible?, they complain.

For the last few years Internet search engines have repeatedly found themselves astride this proverbial cutting edge. One of the “issues de jour” faced by the search industry is the sale of advertising triggered by trademarks owned by a competitor. Is it a violation of trademark law for Nissan to pay Google to have ads for Nissan appear when you search for Ford? (The last time I checked this actually occurred).

In evaluating legal challenges to this practice courts have focused on a somewhat narrow legal issue: is a search company’s sale of a company’s trademark as a keyword triggering third-party advertising “trademark use”? The answer to this question is critical because “trademark use” could give rise to legal claims, while its absence precludes them. This issue has confounded the courts, as several recent cases, summarized below, illustrate:

  • In the recent case of 800-JR Cigar, Inc. v. Goto.com, Inc. the District Court of New Jersey ruled that Goto did make “trademark use” of JR’s “JR Cigar” trademark and allowed its claims for trademark infringement and dilution to proceed. Specifically, the Court held that Goto’s pay for priority search engine results made “trademark use” of JR’s marks in three ways: by selling the right to display competitive advertising in response to searches for JR’s trademarks, by ranking the paid competitors’ advertising ahead of the “natural” search results for JR’s marks, and through Goto’s “Search Term Suggestion Tool” which identified “JR Cigar” and JR’s other marks as effective search words and marketed them to competitors. In support of its holding, the Court relied on several decisions from other jurisdictions including the Eastern District of Virginia case of Government Employees Insurance Co. v. Google, Inc. and the Ninth Circuit decision in Playboy Enterprises, Inc. v. Netscape Commc’n Corp., both of which reached the same result with respect to “trademark use.”
  • In another recently decided case involving similar facts, the Northern District of New York reached the opposition conclusion in Rescuecom Corp. v. Google, Inc. Here, the Court granted Google’s motion to dismiss Rescuecom’s trademark claims because Rescuecom could not show actionable “trademark use.” The Court made this finding after analyzing two of Google’s advertising practices: its use of the plaintiff’s “Rescuecom” trademark as a keyword initiating competitors’ advertising for a fee, and its “Keyword Suggestion Tool” that recommends to potential advertisers which keywords, including plaintiff’s mark, will yield the best results. Ultimately, the Court found that Google did not use Rescuecom’s mark in connection with any goods or services, a legal requirement for trademark claims, since Google’s use of the “Rescuecom” mark was strictly internal to Google’s computer systems and not displayed by Google in connection with its advertising practices. As support for its conclusion the Rescuecom Court relied on the Southern District of New York case of Merck & Co. Inc. v. Mediplan Health Consulting, Inc. and the Second Circuit decision in 1-800 Contacts v. WhenU.com, Inc.

Eventually, of course, a consensus opinion on this issue will emerge and this particular “cutting edge” of trademark law will become a thing of the past. Until then, companies that use search engine key word advertising (or whose competitors do so) need to remain aware of this issue.

Electronic Discovery and the New Federal Rules: What Every Lawyer Should Know

At long last, the highly anticipated amendments to the new federal rules of civil procedure are here. The federal court system has amended its rules of procedure to address electronic discovery, aka “e-discovery”. The amendments became effective on December 1, 2006.

Unfortunately, this news has been greeted with yawns from many attorneys who believe this is just another run-of-the-mill procedural change. Far from it; the e-discovery revolution represented by this rules change – and it is a revolution – is anything but ordinary, and the courts (which have been warming up to this issue for some time) have warned that its effects will be profound and far-reaching.

The rule changes themselves may not appear earth-shattering, but they change the standard for both lawyers and clients as it relates to the exchange and management of information in litigation. Since the federal court system has provided summaries of the changes (see rules 16, 26, 33, 34, 37 and 45), we won’t go into fine detail. However, there are a few changes worth highlighting, including the obligations placed on litigants and the courts to confront e-discovery at the outset of a case (see rules 16 and 26), the definitional changes designed to address “electronically stored information” (see rules 26 and 34), and the “safe harbor” exception which protects parties from sanctions if data is lost during the routine, good-faith operation of their computer system (see rule 37).

What is truly special about e-discovery, however, is not really the letter of the law. What all lawyers should know is that courts and the new federal rules have placed a significant part of the responsibility for the location, preservation and production of litigants’ electronic data on their attorneys. One need only review the following examples to get the picture:

  • Zubulake v. UBS Warburg LLC, (S.D.N.Y. July 20, 2004) – “Counsel must oversee compliance with the litigation hold, monitoring the party’s efforts to retain and produce the relevant documents. . . Once a ‘litigation hold’ is in place, a party and her counsel must make certain that all sources of potentially relevant information are identified and placed ‘on hold,’ . . . To do this, counsel must become fully familiar with her client’s document retention policies, as well as the client’s data retention architecture. This will invariably involve speaking with information technology personnel, who can explain system-wide backup procedures and the actual (as opposed to theoretical) implementation of the firm’s recycling policy. It will also involve communicating with the ‘key players’ in the litigation, in order to understand how they stored information. . . Once a party and her counsel have identified all of the sources of potentially relevant information, they are under a duty to retain that information . . . and to produce information responsive to the opposing party’s requests. . . . There are thus a number of steps that counsel should take to ensure compliance with the preservation obligation. While these precautions may not be enough (or may be too much) in some cases, they are designed to promote the continued preservation of potentially relevant information in the typical case. First, counsel must issue a ‘litigation hold’ at the outset of litigation or whenever litigation is reasonably anticipated. The litigation hold should be periodically re-issued so that new employees are aware of it, and so that it is fresh in the minds of all employees. Second, counsel should communicate directly with the ‘key players’ in the litigation, i.e., the people identified in a party’s initial disclosure and any subsequent supplementation thereto. Because these ‘key players’ are the ’employees likely to have relevant information’, it is particularly important that the preservation duty be communicated clearly to them. As with the litigation hold, the key players should be periodically reminded that the preservation duty is still in place. Finally, counsel should instruct all employees to produce electronic copies of their relevant active files. Counsel must also make sure that all backup media which the party is required to retain is identified and stored in a safe place.”
  • Heng Chan v. Triple 8 Palace, (S.D.N.Y. Aug. 11, 2005) – “The preservation obligation runs first to counsel, who has a duty to advise his client of the type of information potentially relevant to the lawsuit and of the necessity of preventing its destruction. . . Where the client is a business, its managers, in turn, are responsible for conveying to the employees the requirements for preserving evidence. . . Thus, once a party reasonably anticipates litigation, it must suspend its routine document retention/destruction policy and put in place a ‘litigation hold’ to ensure the preservation of relevant documents. When the failure to meet these obligations results in the destruction of evidence, sanctions are warranted. And, though the nature of the sanction depends in part on the state of mind of the destroyer, some remedy may be appropriate even where the destruction is merely negligent.”

Until now, issues related to document preservation fell squarely on the client who, after all, typically has exclusive control over their own documents and information. For various reasons, including the dynamic nature of electronic data and modern computer systems as well as several high-profile e-discovery catastrophes involving large corporations, the courts are now are placing affirmative and stringent obligations on attorneys. And in-house attorneys should note that these obligations do not end with outside litigation counsel but expressly include in-house counsel and appear to reach any attorney who advises their clients about litigation or document retention.

The new federal rules require attorneys to confer about their clients’ electronic data and make “electronically stored information” completely discoverable. Therefore, the amended federal rules now require lawyers to investigate and understand their client’s computer systems and data and ensure that the relevant data is preserved and then produced in accordance with their discovery obligations. Gone are the days when lawyers could tell a federal judge that they don’t understand all of this technical computer stuff.

While these e-discovery obligations must be taken seriously, there is no reason to feel overwhelmed. In fact, if you’ve read this far then you should already be able to identify many of the key issues and pitfalls. Moreover, today there are numerous legal decisions highlighting the mistakes of others from which we can all learn a tremendous amount. There is also available a wealth of publications, vendors and other resources focusing on e-discovery. These resources – which were practically nonexistent just 3-4 years ago – now make it possible for lawyers, including the non-specialist, to understand and keep up with this evolving issue.