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Keyword Advertising Protected From State Law Claims by Immunity Provision of CDA

Thursday, December 12, 2013
By Anandashankar Mazumdar

Dec. 10 --Claims under California state law of trademark infringement, unfair and deceptive trade practices and trademark dilution targeting Yahoo's keyword advertising program were barred by an immunity provision of the Communications Decency Act, the U.S. District Court for the Southern District of California ruled Dec. 4 (Parts.com, LLC v. Yahoo! Inc., 2013 BL 339124, S.D. Cal., No. 3:13-cv-01078-JLS-WMC, 12/4/13).

The court dismissed most of the claims under state and federal law brought by a trademark holder against Yahoo based on Yahoo's sale of the trademark as a keyword to trigger competitors' ads when users entered the plaintiff's trademark in a Yahoo search. However, the federal trademark infringement claim survived dismissal and the court gave the trademark holder the opportunity to amend some of those claims to cure pleading defects.

Parts.com Objects to Keyword Ads
Since 2002, Parts.com LLC of Del Mar, Calif., has operated an online retail operation focusing on automotive replacement parts. In 2008, the Intelligentz Corp. obtained a U.S. trademark registration for the term “Parts.com” and in 2012, Intelligentz assigned the registration to Parts.com LLC.

Yahoo! Inc. of Sunnyvale, Calif., which was founded in 1994 as “David and Jerry's Guide to the World Wide Web,” started as an online directory service and now provides a range of services including as a web portal and search engine service provider. Throughout its history, Yahoo has remained one of the most popular portals for U.S. internet users and it maintains portals for internet users worldwide in numerous languages.

Like other search engine operators, notably Yahoo's rival Google Inc., Yahoo sells advertising space adjacent to its search results and through its keyword advertising service it offers advertisers the opportunity to link their search results to search terms entered by users.

Parts.com objected to the sale of its trademark for keyword-triggered advertising and sued Yahoo, alleging trademark infringement, false designation of origin, unfair competition, and trademark dilution under federal law as well as common law trademark infringement and unfair competition, unfair and deceptive trade practices, and trademark dilution and injury to business reputation under California state law.

Yahoo moved for dismissal under Fed. R. Civ. P. 12(b)(6) for failure to state a claim for which relief is available under the law.

Trademark Infringement Claim Sufficiently Pleaded
Judge Janis L. Sammartino first determined that Parts.com had sufficiently alleged likelihood of confusion to avoid dismissal of its trademark infringement claim. Yahoo argued that the complaint was conclusory, noting that the language had been substantially “cribbed” from other complaints.

“Despite the cribbing,” the court said, the complaint sufficiently pleaded trademark infringement.

The court distinguished Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 2011 BL 5938, 97 U.S.P.Q.2d 2036 (9th Cir. 2011) (47 PTD, 3/10/11), which involved a trademark infringement claim based on Google's sale of keyword ads.

Network Automation vacated a federal district court's imposition of a preliminary injunction against Google, after casting doubt on the lower court's conclusion that the trademark holder had established a likelihood of initial interest confusion. Thus, Yahoo argued, under Network Automation, Parts.com could not establish a likelihood of confusion arising from the keyword ads.

However, the court emphasized that Network Automation was addressing a showing of a likelihood of success of showing likelihood of confusion at the preliminary injunction stage. The district court could still have ultimately found likelihood of confusion following full evidentiary proceedings, the court said.

Moreover, Network Automation's ruling was based on only one of the factors of the likelihood of confusion balancing test, specifically, the factor addressing the sophistication of consumers. This did not bar a finding in the instant proceeding that Parts.com had sufficiently pleaded a claim of trademark infringement.

Lanham Act Claims Dismissed Without Prejudice
Turning to the Lanham Act claim of false designation of origin and unfair competition, the court compared the instant facts to those in Jurin v. Google Inc., 695 F. Supp. 2d 1117, 2010 BL 43700, 95 U.S.P.Q.2d 1803 (E.D. Cal. 2010), which rejected such a claim after finding that consumers would not be likely to believe that Google was the source of the plaintiff's products.

Similarly, the court said, there was no plausible basis for the claim that the appearance of keyword-triggered ads would lead consumers to believe that Yahoo was affiliated with Parts.com. Thus, the court dismissed this claim without prejudice.

CDA Immunity Applies to State Law Claims
However, the court dismissed with prejudice the state law claims for trademark infringement, unfair and deceptive trade practices, and trademark dilution, finding them barred under an immunity provision of the Communications Decency Act, 47 U.S.C. §230(c)(1). According to that statute:

No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.

 

The court determined that in this case, Yahoo did qualify as an interactive computer service and it also was not the provider of the content at issue. Again, the court found the situation to be comparable to that in Jurin, and concluded that Yahoo did have immunity against the state law claim under Section 230. The court said:

Without anything in the Complaint to suggest that Yahoo creates advertisement content, the Court is left with a portrait of Yahoo analogous to Google in Jurin. Jurin involved Google's sales of keywords for the display of sponsored links in search engine results--a business model almost identical to Yahoo's. … Like Google, Yahoo “provides a space and a service and thereafter charges for its service,” which “allows competitors to post their digital fliers where they might be most readily received in the cyber-marketplace.” … The court in Jurin concluded that this activity was entitled to CDA immunity. … Yahoo, therefore, should also be entitled to CDA immunity for its advertising activities.

 

The court thus dismissed the state law claims.

Fame of Mark Insufficiently Supported
Finally, the court dismissed the federal trademark dilution claim after finding that Parts.com had failed to establish that it held interest in a famous mark. In making this determination, the court applied factors for fame as set forth by 15 U.S.C. §1125(c)(2)(A)(i)-(iv). Only the final factor--whether the claimed trademark was subject to federal registration--was found to weigh in Parts.com's favor.

Of the remaining factors, Parts.com had failed to submit evidence to support its assertions regarding the “duration, extent, and geographic reach of advertising and publicity of the mark.” The court noted a lack of evidence of promotion, advertising, use in trade publications, and resources expended.

Regarding “amount, volume, and geographic extent of sales,” the court found that the record showed only evidence of Parts.com's inventory rather than its sales. And, finally, with respect to actual recognition of Parts.com's trademark among consumers, the court found no evidence in the record that the company's efforts to promote its mark had had any impact on the public conscience.

Taking all the factors together, the court found that there was no support in the record for Parts.com's assertion of fame and thus this claim was also dismissed. The court offered Parts.com the opportunity to amend its complaint to re-plead this claim, as well as the Lanham Act false designation of origin and unfair competition claim.

Parts.com was represented by James V. Fazio III of the San Diego IP Law Group LLP, San Diego. Yahoo was represented by David K. Caplan and Larry W. McFarland of Kilpatrick Townsend & Stockton LLP, Beverly Hills.

 


Text is available at http://www.bloomberglaw.com/public/document/PartsCom_LLC_v_Yahoo_Inc_Docket_No_313cv01078_SD_Cal_May_06_2013_/1.

To contact the reporter on this story: Anandashankar Mazumdar in Washington at amazumdar@bna.com

To contact the editor responsible for this story: Naresh Sritharan at nsritharan@bna.com

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