Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137 (9th Cir. 2011) was a court case decided on March 8, 2011, where the United States Court of Appeals for the Ninth Circuit ruled that the use of a competitor's trademark as an Internet search advertising keyword did not constitute trademark infringement. In the case, Network Automation advertised their own competing product in search queries that contained Advanced Systems Concepts' "ActiveBatch" trademark. In determining whether trademark infringement occurred, the court evaluated factors relevant to the likelihood of customer confusion outlined in AMF Inc. v. Sleekcraft Boats and concluded that confusion was unlikely.
Background
Google and other Internet search engines and e-commerce sites have made search engine keyword advertising ubiquitous. Network Automation ("Network") and Advanced Systems Concepts ("Systems") both sold job scheduling and management software that were advertised on search engine results. Network's product was called Automate, and Systems' product was called ActiveBatch. Network decided to buy the keyword "ActiveBatch" so that when users searched for "ActiveBatch", Network's website would be displayed as a sponsored link in separate sections from search results, including Google Search and Microsoft Bing. Systems sent a letter to Network saying Network's usage of "ActiveBatch" as a keyword was infringing Systems' trademark rights. As a result, Network filed a lawsuit seeking declaratory judgement of non-infringement. Subsequently, Systems counterclaimed, and asserted trademark infringement under the Lanham Act, 15 U.S.C. § 1114 and therefore sought a preliminary injunction against Network's usage of "ActiveBatch".
Trademark infringement background
An essential condition for trademark infringement is customer confusion. A 1979 Ninth Circuit Court case, AMF Inc. v. Sleekcraft Boats, identified eight factors in determining whether confusion between related goods was likely: strength of the mark proximity of the goods similarity of the marks evidence of actual confusion marketing channels used type of goods and the degree of care likely to be exercised by the purchaser defendant's intent in selecting the mark likelihood of expansion of the product lines
In 1999, another Ninth Circuit Court case, Brookfield Communications, Inc. v. West Coast Entertainment Corp., determined that of the eight Sleekcraft factors, three of them were the most significant for cases involving the Internet, which are known as the "Internet trinity" or "Internet troika". the similarity of the marks the relatedness of the goods and services offered the simultaneous use of the Internet as a marketing channel
The Brookfield case also emphasized flexibility in applying the law to the Internet, a new, emerging technology:
Holding of the district court
The district court ordered a preliminary injunction against Network using the "ActiveBatch" mark. The district court analyzed the eight Sleekcraft factors and emphasized that the "Internet troika" from Brookfield were most significant, and found that they all favored Systems. The court's decision relied on Network usage of an identical mark, "ActiveBatch", to sell a product directly competing with Systems' product, and the fact both Network and Systems used the Internet to advertise. The district court also concluded that many of the other Sleekcraft factors were in favor Systems, including the degree of consumer care because "there is generally a low degree of care exercised by Internet consumers."
Network promptly appealed.
Opinion of the Ninth Circuit
The United States Court of Appeals for the Ninth Circuit reversed the district court's decision in the case's reconsideration. It concluded that the likelihood of confusion was insufficient to support trademark infringement and therefore removed the injunction placed on Network. The Ninth Circuit clarified that in its ruling for Brookfield, it did not intend the "Internet troika" as the rigid test for trademark infringement on the Internet. Rather, it re-emphasized that the factors and principles considered in Sleekcraft are non-exhaustive and should be applied flexibly in the context of Internet commerce and other emerging technologies. The Ninth Circuit Court decided that the district court applied the Brookfield factors too rigidly, and emphasized flexibility over rigidity for the "Internet troika" from Brookfield.