Network Automation, Inc. v. Advanced Sys. Concepts - 638 F.3d 1137 (9th Cir. 2011)

Rule:

In the context of the use of a trademark as a search engine keyword that triggers the display of a competitor's advertisement, in determining the proper inquiry for a particular trademark infringement claim, the court adheres to two long stated principles: the Sleekcraft factors (1) are non-exhaustive, and (2) should be applied flexibly, particularly in the context of Internet commerce. Finally, because the sine qua non of trademark infringement is consumer confusion, when the court examines initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.

Facts:

The parties both sold job scheduling and management software and advertised on the Internet. The competitor advertised its product by purchasing keywords, such as the trademark owner's mark, which when keyed into various search engines produced a results page showing the competitor's website as a sponsored link. The competitor sued the trademark owner, seeking a declaratory judgment of non-infringement. The trademark owner counterclaimed for trademark infringement under the Lanham Act. The district court granted the trademark owner's motion for a preliminary injunction against the competitor. The competitor appealed.

Issue:

Did the district court err in granting the trademark owner's motion for a preliminary injunction against the competitor? 

Answer:

Yes.

Conclusion:

The appellate court determined that the district court correctly found the prerequisite "use in commerce" in the competitor's use of the mark to purchase keywords to advertise its products for sale on the Internet. However, the district court abused its discretion in issuing the injunction because the most relevant factors to the analysis of the likelihood of confusion were the strength of the mark, the evidence of actual confusion, the type of goods and degree of care likely to be exercised by the purchaser, and the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page. Moreover, the district court did not weigh the Sleekcraft factors flexibly to match the specific facts of the case, and it relied on the Internet "troika," which failed to discern whether there was a likelihood of confusion in a keywords case.