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September 30  |  Newsletter  |   christina

In an opinion issued August 8, the United States District Court for the Eastern District of Virginia held that sponsored ads which appeared with search results on Google, in the circumstances of that case, violate trademark law.

Government Employees Insurance Company brought suit against search engine giant Google because it discovered that when the search term “GEICO”, which is a federally registered trademark of the plaintiff insurance company, is entered as a search term in the Google search engine, sponsored ads of its competitors would appear adjacent to the search results.  That happened because Google used the term “GEICO” in its computer coding for the sponsored ads.  In addition to the term “GEICO” appearing in Google’s computer coding, some of the sponsored ads also contained the term “GEICO.”

A trademark is infringed under federal law if a company uses in interstate commerce a word or design, which is substantially similar to the trademark or service mark of another company, in connection with the sale, distribution, or advertising of goods or services, in a manner which is likely to confuse an ordinary consumer as to the source of origin of the goods or services.   Cases often turn on the issue of likelihood of confusion.  Actual confusion occurs when a customer thinks he is buying from company “A” when in fact he is buying from company “B.”  It is not necessary for a plaintiff to show actual confusion to establish infringement, only the likelihood of confusion.   The legal theory of “initial interest confusion” is a variation of the issue of likelihood of confusion.  Some courts  have recognized this theory that a trademark may be infringed when a consumer is mislead into investigating company B’s product or service because of B’s advertising a name or mark which is confusingly similar to A’s.  A’s mark would be infringed even if the consumer did not purchase B’s product, or at some point after the consumer’s initial confusion but prior to his purchase, the consumer came to realize that A and B are not affiliated and that he was buying from B, not A.

The court in GEICO based its decision upon initial interest confusion.  The case has drawn widespread interest because Google is a party and because of the impact the case could have on the future of the Internet.  But the court’s opinion is curious in several respects and does not provide the guidance which many hoped it would.  The Court severely criticized the survey methodology used by GEICO in attempting to demonstrate consumer confusion caused by use of the term “GEICO” in the sponsored ads.  Google, however, presented no evidence on that issue apparently thinking its attack on GEICO’s survey methodology would be sufficient to prevent GEICO from establishing its burden of proof.  It didn’t work.  The Court held that even though the survey results offered by GEICO were flawed, they were sufficient to establish likelihood of confusion.  The Court previously ruled that GEICO had established the other elements of trademark infringement.  Accordingly, the Court held GEICO’s trademark was infringed.

In another curious aspect of it’s opinion, however, the Court stopped short of holding Google liable for the infringement and instead reserved that issue, apparently in an effort to put settlement pressure on the parties.  Since the companies which purchased the sponsored ads are not parties to the suit, there is no one other than Google who can be held liable.

The one thing that is clear from the opinion is that Google’s use of the term “GEICO” solely in its computer coding, which is invisible to the computer user, without more, does not constitute trademark infringement.  It is because of the additional fact that some of the advertisers also used the term “GEICO” in their sponsored ads that the Court held there was infringement.

The Court does not describe in any detail how GEICO’s name was used by its competitors in the sponsored ads, so we cannot easily follow the Court’s discussion of initial interest confusion to determine how that legal theory applies to the facts of this case.  We only know that the tainted survey concluded there was confusion.

The theory of initial interest confusion has never been accepted by the United States Court of Appeals for the Fourth Circuit.  An appeal of GEICO would go to the Fourth Circuit.  In an opinion in another Internet trademark case  which was decided by a unanimous panel on August 24, only two weeks after the trial court released its written opinion in GEICO, the Fourth Circuit addressed the legal theory of initial interest confusion.  While not expressly rejecting it, the appellate panel stated:  “(W)e have followed a very different mode of analysis. . . .”  The settlement value for GEICO just dropped significantly.

While initial interest confusion may not be a viable theory in the Fourth Circuit, it remains important for a company to protect it’s trade name or mark by registering it as a trademark or service mark.  In a case where the facts would fit an initial interest confusion framework but using a different analysis, the Fourth Circuit has protected the owner of a trademark in an Internet context.

Assuming GEICO and Google do not settle, expect an appeal to the Fourth Circuit.  It will provide an opportunity for perhaps another panel of the Fourth Circuit to address the legal theory of initial interest confusion in the context of the Internet and expressly adopt it or reject it.  An appeal will be closely watched for guidance to web page designers, to companies which advertise on the Internet, and to practitioners in this developing area of the law.  If the Fourth Circuit should reject the theory, it will result in a split among the Circuits which could lead to an appeal being heard by the United States Supreme Court which has not previously addressed the issue.

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