Century 21 Real Estate Corp. v. Lendingtree, Inc. - 425 F.3d 211 (3d Cir. 2005)

Rule:

Courts will continue to inquire into confusion, but since the United States Supreme Court's decision in KP Permanent Make-Up has altered the landscape, the United States Court of Appeals for the Third Circuit believes that likelihood of confusion need not, and should not, be solely determinative of nominative fair use. Fairness is a distinct concept from confusion, and it should be measured through a distinct inquiry.

Facts:

Appellees, Century 21, Coldwell Banker and ERA sold real estate through franchisees, who operated by reference to appellees' trademarks. Appellant Lending Tree provided real estate broker referral services on its website; various of appellees' franchisees participated in that service. Appellees' infringement claim arose out of various illustrations and statements contained on appellant's website. Appellee real estate companies filed an unfair competition and trademark infringement suit against appellant internet services company pursuant to §§ 32 and 43(a) of the Lanham Act, 15 U.S.C.S. §§ 1114(1), 1125(a). Appellees alleged that appellant had improperly referenced their trademarked services on its website. Appellant asserted nominative fair use as a defense. It modified its website after a hearing was held on appellees' preliminary injunction motion. Despite the changes, the district court issued the injunction, finding that a likelihood of consumer confusion existed. Appellant challenged a preliminary injunction entered against it by the district court.

Issue:

Did the district court err in issuing the preliminary injunction in finding that a likelihood of consumer confusion existed? 

Answer:

Yes. The court reversed the district court's preliminary injunction order and remanded the case back for further proceedings consistent with its opinion.

Conclusion:

The court ruled that the issue was not rendered moot by the modifications made to the appellant’s website because the website was still potentially infringing and the modifications did not completely obviate the need for injunctive relief. The court further held that a bifurcated test should be used, which required appellees to show a likelihood of confusion before the burden shifted to appellant to show fair use. Thus, the district court erred in conducting its likelihood of confusion analysis. The court offered specific guidance as to how its nominative fair use test should be applied on remand.