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Selling Keywords Is Not Trademark Infringement

 

In a decision being haled as an important recognition that intellectual property rights online can be limited, a federal judge in California dismissed a lawsuit filed by Playboy Enterprises against Excite, Inc., a search engine company, and Netscape Communications, its licensee.

The suit was based on a search engine sales practice known as "keying." Keying occurs when a search engine sells banner ads to a customer based on the premise that the ads will be displayed when a user enters certain keywords.

In this case, Playboy sued Excite and Netscape, claiming that when users entered the terms "playboy" or "playmate" for searches, banner ads from pornography merchants were displayed. Playboy claimed that the search engines were infringing on Playboy trademarks and diluting them. Playboy owns trademark rights to both "playboy" and "playmate."

Playboy's legal counsel argues that the decision means that trademarks can be sold by someone who does not own them. However, counsel for Excite declares that search engines, which are free to users, depend on the sales of keyword advertising.

Advertising that is targeted to each individual is indeed the major distinction, and selling point, of internet ads. Most search engines charge a higher rate for such targeted ads. Displaying a company's ad when a competitor's name is keyed in as a search term is both more effective and very contentious.

The judge in the case called Excite's use of the disputed terms "non-trademark use of a mark," a use not covered by infringement laws. Excite, she pointed out, is not a competitor of Playboy's, and did not use the terms to identify its own products. Thus, she argued, there was no dilution of Playboy's trademarks. Furthermore, the judge pointed out that both "playboy" and "playmate" are common English words, and indeed are trademarked by companies other than Playboy for their own, non-sex-related products.

Supporting the judge's decision, one legal scholar compared keyword advertising to comparative advertising in other venues. For example, a shop selling a name-brand perfume with a protected trademark might sell shelf space next to the better-known perfume to the manufacturer of a competing brand. Another opinion expressed after the decision was reached argues otherwise, claiming that Excite used Playboy's trademarks to direct users to Playboy's competitors, and profited by doing so.

Other companies have protested keyword advertising. Estee Lauder, the cosmetics company, sued iBeauty and Excite last year, claiming, like Playboy, trademark infringement. Excite had sold banner ads to iBeauty, an online cosmetics company, that were keyed to searches for Estee Lauder trademarks, including the name "Esteee Lauder" itself and its most famous brand, "Clinique." In August, the two companies settled, with iBeauty agreeing to remove Estee Lauder's trademarks from its list of keywords.

The two suits underline a difference in trademarks. The terms "Clinique" and "Estee Lauder" are not words in common usage, where the terms "playboy" and "playmate" are commonly used words with meanings beyond their status as Playboy trademarks.

Playboy lost a suit last year, when a judge dismissed the company's claim for trademark infringement against a woman who had once been a Playboy playmate. The woman had placed her titles "Playboy Playmate of the Month" and "Playboy Playmate of the Year 1981" on her web site. The judge ruled that the woman had used her titles in good faith to describe herself, not to comment on Playboy.

Links:

Playboy Ruling Recognizes Limits to Online Rights of Trademark Holders (requires registration with The New York Times web site, which is free)

iBeauty and Estee Lauder make up