Recognizing Initial Interest Confusion
The 10th U.S. Circuit Court of Appeals has joined other circuits in recognizing initial interest confusion as actionable in trademark infringement cases. Australian Gold Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006). The decision also is one of several recent circuit court decisions to consider the doctrine in connection with the Internet. Some courts have specifically limited the doctrine when applied to the Internet, while others have not expressly limited the doctrine. Australian Gold and other recent decisions underscore that, just as in the brick and mortar world, determining the existence of initial interest confusion on the Internet is a highly fact-specific inquiry.
The 10th Circuit explained in Australian Gold that initial interest confusion results when a consumer seeks a particular trademark holder's product and instead is lured to the product of a competitor by the competitor's use of the same or a similar mark. The consumer may quickly realize that the product is not the one he originally sought but nonetheless may decide to consider the competitor's product. The 10th Circuit concluded there can be damage to the trademark owner even when the consumer does not purchase the competitor's product. For example, the competitor may have more credibility with the consumer because of the initial interest that was generated by the trademark owner's reputation.
Australian Gold involved the unauthorized sale of the trademark owners' products over the Internet. The plaintiffs made indoor tanning products under various marks, and sold many of these products through an exclusive distributor, who was also a plaintiff. The plaintiffs' distributors were required to participate in training programs and to sell the products only to salons that offer indoor tanning and instruction in the use of the products. They were prohibited from selling products over the Internet.
The defendants were using several Web sites to sell tanning products directly to consumers. These sites offered tanning products not only from the plaintiffs but also from their competitors. The defendants actively concealed their identities from the plaintiffs and their distributors, because they realized that the plaintiffs' distributors would not supply them with the plaintiffs' products if they knew the defendants were going to sell them directly over the Internet.
On their Web sites, the defendants displayed pictures and descriptions of the plaintiffs' tanning products and the related trademarks. They also placed the plaintiffs' trademarks in metatags and purchased sponsored listings keyed to the plaintiffs' trademarks. Consumers who reached the defendants' Web sites could purchase not only the plaintiffs' products but also those of the plaintiffs' competitors. The defendants later removed the plaintiffs' products and trademarks from their Web sites, but they did not remove the plaintiffs' trademarks as metatags or sponsored listing keywords.
Diversion of Internet Traffic
Following a jury trial, the district court entered judgment for the plaintiff trademark owners on the claims of trademark infringement and false advertising, and for the exclusive distributor on its claims for tortious interference with distribution agreements and conspiracy to interfere with those agreements. The district court also enjoined the defendants from selling the plaintiffs' products and displaying their trademarks over the Internet, and from placing the plaintiffs' trademarks in metatags or html code.
The 10th Circuit opened its infringement discussion by recognizing initial interest confusion as a variant of potential confusion. The court observed that, on the Internet, this type of confusion derives from the unauthorized use of trademarks to divert Internet traffic. See also Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1061-65 (9th Cir. 1999) (use of mark in metatag allowed defendant to benefit from plaintiff's goodwill); Promatek Indus. Ltd. v. Equitrac Corp., 300 F.3d 808, 814 (7th Cir. 2002) (affirming preliminary injunction against defendant's use of mark in metatag).
The court then evaluated initial interest confusion according to the multifactor likelihood-of-confusion test that the 10th Circuit requires for all trademark infringement cases. With respect to one factor, the defendants' intent, the court observed that the defendants had deliberately used the plaintiffs' trademarks to drive Internet traffic to their own sites, where consumers would find both the plaintiffs' and their competitors' products. The court found that most other factors weighed in favor of the plaintiffs, such as similarity of the marks, products and manner of marketing, and degree of care likely to be exercised.
The 10th Circuit did find that one factor, the absence of any actual confusion, favored the defendants. The court then commented on disclaimers of nonaffiliation that the defendants had placed on their Web sites, concluding that disclaimers cannot prevent the damage of initial interest confusion that occurs through misdirection of consumers looking for the plaintiffs' Web sites.
The defendants argued that the first-sale doctrine protected their right to resell the plaintiffs' products. The court rejected this defense, finding that the doctrine does not protect resellers who use others' trademarks to create the impression they are favored or authorized dealers of a product when in fact they are not. The court pointed to the defendants' metatags and sponsored listings as going beyond the mere displaying and stocking of items for resale.
There was no discussion in Australian Gold of any facts that might have limited the application of initial interest confusion. Would the court have found bad intent if the defendants had not actively concealed their identities from the plaintiffs' distributors and interfered with the plaintiffs' distribution network designed to promote training in the sale and use of their products? Would the court have rejected the first-sale defense if the plaintiffs had not prohibited the sale of their products over the Internet and if the defendants' metatags and sponsored listings simply directed the consumer to accurate resale information? More generally, should initial interest confusion apply if there is evidence that consumers, when reaching Web sites they do not intend to reach, easily and typically click the 'back' buttons on their browsers? Would it matter if consumers understand where they are going to be 'diverted' before they click on a search listing?
Rulings in Other Circuits
While the 10th Circuit did not identify any special requirements for applying initial interest confusion on the Internet, recent decisions from other circuits have imposed some requirements. The 2d Circuit requires evidence of intentional deception before allowing initial interest confusion to be applied in an Internet case. Savin Corp. v. Savin Group, 391 F.3d 439 (2d Cir. 2004), cert. denied, 126 S. Ct. 116 (2005). The plaintiff in Savin made business equipment and used the mark 'Savin' and the domain name savin.com. The defendant was an engineering firm, and used the domain names savinengineering.com and thesavingroup.com.
The 2d Circuit affirmed summary judgment for the defendant, finding that there was no infringement, but reversed summary judgment for the defendant on federal and state dilution claims. On the infringement claim, the court noted that Internet initial interest confusion requires a showing of intentional deception. The court explained that consumers diverted on the Internet can more readily get back on track than those in physical space, thus minimizing the harm to the owner of the searched-for site that consumers will become trapped in a competitor's Web site.
The 2d Circuit sidestepped another opportunity to address Internet initial interest confusion in a decision last year involving pop-up advertising. In 1-800 Contacts Inc. v. WhenU.com Inc., 414 F.3d 400 (2d Cir.), cert. denied, 126 S. Ct. 749 (2005), the district court had entered a preliminary injunction, finding that the pop-up advertising at issue created a likelihood of both source confusion and initial interest confusion. The 2d Circuit decided that because it found that the defendants had not made trademark use of the plaintiff's marks, there was no need to address source or initial interest confusion.
Limits on Applicability
The 4th Circuit last year also noted limits in the applicability of initial interest confusion on the Internet. In Lamparello v. Falwell, 420 F.3d 309, 311 (4th Cir. 2005), cert. denied, 2006 U.S. Lexis 2862 (U.S. April 17, 2006), the court reversed an injunction against the use of the domain name fallwell.com for a Web site that criticized the Rev. Jerry Falwell. The homepage of Christopher Lamparello's Web site contained a prominent disclaimer stating that the site was not affiliated with Falwell or his ministry. At one point, the Web site included a link to the Amazon.com Web page for a book that offered views similar to Lamparello's. However, Lamparello never sold goods or services on his Web site, and the parties agreed that his site had no measurable impact on the quantity of visits to Falwell's Web site, www.falwell.com.
The 4th Circuit refused to apply initial interest confusion, which it described as 'a relatively new and sporadically applied doctrine.' Id. at 315. The court noted that, according to Falwell, initial interest confusion would require a comparison of his mark with Lamparello's mark, without considering the content of Lamparello's Web site. Falwell argued that some who misspell his name may reach Lamparello's fallwell.com Web site, thus giving Lamparello an unearned audience.
The 4th Circuit first responded that it has never adopted the initial interest confusion doctrine, but rather has required courts to determine whether a likelihood of confusion exists by examining the allegedly infringing use in the context in which it is seen by the ordinary consumer. The court distinguished its earlier decision in People for Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir. 2001), finding that the court's inquiry there was limited to whether Michael Doughney's use of the domain name www.peta.org constituted a sufficiently successful parody of the acronym PETA.
The 4th Circuit then stated that even if it did endorse initial interest confusion, the doctrine would not apply to Lamparello's criticism site. The court explained that the few circuit courts to impose liability in Internet cases based on initial interest confusion have done so only in cases involving one business's use of another's mark for its own financial gain. Id. at 317 (citing PACCAR Inc. v. TeleScan Techs. LLC, 319 F.3d 243, 253 (6th Cir. 2003); Promatek Indus. Ltd., 300 F.3d at 812; Brookfield Communications, 174 F.3d at 1055-56). See also Playboy Enters. Inc. v. Netscape Communications Corp., 354 F.3d 1020, 1025-26, 1034-35 (9th Cir. 2004) (reversing summary judgment, recognizing possibility of initial interest confusion based on unlabeled banner advertisements; concurring opinion questioning whether Brookfield should be applied to reach clearly labeled banner advertisements).
The 4th Circuit recognized that when an alleged infringer does not compete with the trademark owner for sales, some initial confusion will not likely facilitate free riding on the goodwill of another mark or otherwise harm the trademark owner. Confusion that has little or no meaningful effect in the marketplace is of little or no consequence to the court's analysis. Id. at 317 (citing Checkpoint Sys. Inc. v. Check Point Software Techs. Inc., 269 F.3d 270, 296-97 (3d Cir. 2001)).
The 4th Circuit concluded that were it to accept the initial interest confusion doctrine in a case involving a criticism site domain name, it must look not only to the allegedly infringing domain name, but also to the underlying content of the Web site.
Recent district court decisions also have addressed the applicability of Internet initial interest confusion and have reached different conclusions. For example, in Edina Realty Inc. v. TheMLSOnline.com, No. 04-4371, 2006 WL 737064 (D. Minn. March 20, 2006), the court denied the defendant's summary judgment motion on an infringement claim. It held that the defendant real estate broker's purchase of a keyword including the plaintiff's mark might create initial interest confusion and is not a nominative fair use. In Tdata Inc. v. Aircraft Technical Publishers, 411 F. Supp. 2d 901 (S.D. Ohio 2006), the court found initial interest confusion to be likely when the defendant used the plaintiff's mark in metatags; the court contrasted the presence of the plaintiff's trademark in a metatag and in a product comparison presented on the defendant's Web site. However, in Fargo Electronics Inc. v. Iris Ltd. Inc., No. 04-1017, 2005 WL 1431653, (D. Minn. March 8, 2005), the court, while recognizing that domain names can create initial interest confusion, found confusion unlikely given the absence of any actual confusion evidence and the sophistication of the relevant customers.
While the 10th Circuit's decision in Australian Gold does not create special requirements for applying initial interest confusion on the Internet, facts such as intentional deception and competition between the parties' products were present in the case. Thus, the 10th Circuit's decision is consistent with decisions such as Savin, in which the 2d Circuit required intentional deception, and Lamparello, in which the 4th Circuit required that the defendant profit from the initial interest confusion.
This article has been reprinted with permission from the May 8th, 2006 edition of The National Law Journal © 2006 ALM Properties, Inc. All rights reserved. Further duplication without permission is prohibited.