Pleading is Key: Northern District of Texas Clarifies Liability for Use of Another’s Trademark in Pay-Per-Click Advertising
Magistrate Judge David Horan of the Northern District of Texas recently provided additional insight into the less-than-clear jurisprudence surrounding liability for trademark infringement in pay-per-click or keyword advertising. In Jim Adler, P.C., et al. v. Angel L. Reyes & Assoc. PC d/b/a Reyes Browne Reilly, No. 3:19-cv-2027-K-BN (N.D. Tex. Aug. 7, 2020) (hereinafter “Reyes”), Judge Horan considered Defendant’s Rule 12(b)(6) Motion to Dismiss the trademark infringement claims brought by one personal injury law firm against another. In granting the motion to dismiss, the Court made clear that trademark infringement claims can arise out of such conduct, so long as specific key elements are satisfied and properly plead. Ultimately, taking Plaintiffs’ allegations as true, Judge Horan determined that Plaintiffs had adequately plead claims for trademark infringement, false designation of origin, and unfair competition under the Lanham Act, as well as state law claims under Texas law.
Trademarks in Pay-Per-Click Advertising
In Reyes, the plaintiff law firm maintained that the defendant law firm intentionally used plaintiff’s registered trademarks, such as JIM ADLER and THE TEXAS HAMMER (the “Adler Marks”) to confuse consumers using mobile devices to search online for plaintiff, causing them to instead select Defendant’s firm instead. Specifically, Plaintiffs asserted that the Defendant purchased the Adler Marks as keyword advertisements through Google’s search engine on mobile devices to create ads that appear immediately above or below those for Plaintiff. Plaintiff further maintained that Defendant used the Adler Marks in taglines in its ads such as “We Hammer Insurance Companies,” and “Need a Hammer for Your Case?” These same ads also included a link to Defendant’s website (which did not clearly identify Defendant’s firm) and a “click to call” link for Defendant’s call center, where operators were directed to answer with a generic greeting such as “did you have an accident?” or “tell me about your accident,” again without clearly identifying Defendant’s firm. Defendant filed a motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) or, alternatively, a motion for more definite statement, alleging: (1) its use of Plaintiffs’ Adler Marks in keyword advertising was not trademark infringement as a matter of law; (2) Plaintiffs failed to sufficiently plead facts necessary to show a likelihood of confusion; and (3) its use of “hammer” was protected by the fair use doctrine.
In reviewing the defendants’ motion to dismiss, Judge Horan clearly noted that “[a] defendant’s use of plaintiff’s marks in keyword search engine ads to direct users to the defendant may be unlawful if it causes confusion.” Id. at *14, citing e.g. Abraham v. Alpha Chi Omega, 781 F. Supp. 2d 396, 423 (N.D. Tex. 2011). Conversely, “[t]he purchase of a competitor’s trademark as a keyword for search-engine advertising, without more, is insufficient for a claim of trademark infringement.” Id., citing Coll. Network, Inc. v. Moore Educ. Publishers, Inc., 378 F. App’x. 403, 414 (5th Cir. 2010) (emphasis added). Here, because the parties did not dispute the trademark protections afforded the Adler Marks, the only remaining dispute was whether the defendants’ use was likely to cause confusion. Since “liability for trademark infringement depends on how the defendant is using the mark,” the key inquiry focuses on whether the defendant participated in “something more” than the use of trademarks in keyword advertising. See id., citing Tempur-Pedic, N. Am. LLC v. Mattress Firm, Inc., Civil Action H017-1068, 2017 WL 2957912, at *7-8 (S.D. Tex., July 11, 2017). This “something more” involves conduct like misdirecting consumers to a potentially confusing website or one owned by a competitor of the mark’s owner. Tempur-Pedic, 2017 WL 2957912 at *7-8. The central issue, then, is whether a defendant’s keyword ad purchases, combined with the look and placement of the ads, creates a search results page that misleads, confuses, or misdirects a consumer searching for a specific brand and leads them directly to that brand’s competitor.
Judge Horan first determined that Plaintiffs had, indeed, plead “something more,” including that Defendant used confusing advertisements with Adler keywords, often incorporated the Adler Marks into the text of its ads in conspicuous fonts, created special landing pages incorporating the Adler Marks for those who clicked on the confusing ads, used click-to-call technology in the ads to cause consumers searching for Plaintiffs to mistakenly contact Defendant, and had its call centers follow scripts intended to confuse callers seeking Plaintiffs in the hopes of keeping callers on the phone and eventually convincing them to hire Defendant instead.
Judge Horan also held that Plaintiffs had sufficiently plead the elements of a likelihood of confusion, because “the crux of the issue is whether a defendant’s keyword purchases, combined with the look and placement of the ads, creates a search results page that misleads, confuses, or misdirects a consumer searching for a brand to the website of a competitor.” Id. at *5, citing TSI Prods., Inc. v. Armor All/STP Prods. Co., No. 3:17-cv-1331, 2019 WL 4600310, at *5 (D. Conn. Sept. 23, 2019). With regard to the eight “digits of confusion” typically analyzed in evaluating likelihood of confusion, Judge Horan noted (1) the inherent distinctiveness and fame of the Adler Marks in Texas; (2) the terms used by Defendant in its ads and on its landing page were sufficiently similar to the Adler Marks; (3) the parties’ are competitors in personal injury law in the same market; (4) the parties’ seek to reach the same consumers in the same market; (5) the parties both purchase internet ads and display keyword ads on mobile devices; (6) Plaintiffs adequately plead that Defendants’ conduct was intentional and intended to confuse or misdirect consumers; (7) any consideration of actual confusion was premature; and (8) consumers seeking to identify Plaintiffs’ on the mobile devices immediately after an accident are more likely to be confused. These factors all weighed in favor of a likelihood of confusion.
Finally, in considering Defendant’s fair use defense, Judge Horan considered the essential elements of the defense, including that use was made (1) other than as a mark; (2) in a descriptive sense; (3) and in good faith. Id. at *8, citing 15 U.S.C. § 1115(b)(4). Given the use of the term “hammer” in Defendant’s ads and on their landing page, the bold or larger typeface of the term, and the use of such term in the mobile-ad context, which limits space, Judge Horan held that Plaintiffs adequately plead Defendant’s intentionally use of the term as a mark, multiple times, and with the intent to deceive consumers. Accordingly, because other facts sufficient to establish fair use were not plead—and the court could not consider anything outside of the pleadings on a motion to dismiss—Judge Horan held that Defendant’s motion to dismiss on the basis of the fair use doctrine should be denied.
In so ruling, Judge Horan appeared to offer much needed clarification into what facts, specifically, may give rise to trademark infringement liability in the context of online keyword searches and PPC advertising. However, three days later, Judge Horan offered an opinion in the same context (motion to dismiss) in a companion case, Jim Adler, P.C. and Jim Adler v. McNeil Consultants, LLC d/b/a Accident Injury Legal Center, Quintessa Marketing, LLC d/b/a Accident Injury Legal Center, and Lauren Von McNeil, Case No. 3:19-cv-2025-K-BN at *15 (N.D. Tex. August 10, 2020) (“Quintessa”), but with the opposite result.
In Quintessa as in Reyes, the plaintiff law firm and attorneys alleged that the defendant law referral service and its owner intentionally used the law firm’s Adler Marks to confuse consumers using mobile devices to search online for plaintiffs into mistakenly contacting defendants instead. Plaintiffs asserted that the defendant purchased the Adler Marks as keyword advertisements through Google’s search engine on mobile devices and used the Marks in conjunction with click-to-call advertisements. Defendants’ use of the Adler Marks in keyword advertising ensured that their own advertisements appeared at the top of any Google search using the Adler Marks, particularly for mobile users, as shown below:
