New Trademark Case Filed in D RI --- Can Erwin Pearl Stop JC Penney's Internet Keyword Purchases?

Erwin Pearl, Inc. v. J.C. Penney Corp., No. 12-207-S (D.R.I. filed March 20, 2012)

From the complaint, this case appears to be one where Erwin Pearl is complaining about J.C. Penney’s purchase from Google of “Erwin Pearl” as a keyword for a “sponsored link,” when J.C. Penney did not sell that brand of jewelry  This practice caused J.C. Penney’s advertisements to appear at the beginning of the search results page whenever a computer user entered “Erwin Pearl” as a search term.

Even though the courts continue to struggle with how to characterize “keyword” cases, it may be difficult for Erwin Pearl to prevail unless it shows that JC Penney used its trademarks in the text of the ads, or stated that it sold Erwin Pearl branded jewelry when it did not.

According to the Complaint, in 2011 Google “suspended” J.C. Penney’s ability to appear prominently in search results for a period of 90 days.  J.C. Penney allegedly used methods of improving its rankings in search results that Google felt were unfair.  As a result, J.C. Penney turned to purchasing keywords to promote “Sponsored Links.”  The Complaint alleges that in October, November, and December 2011 (Erwin Pearl’s most important selling season), whenever a computer user entered a search term of “Erwin Pearl” or “Erwin Pearl Jewelry”: into Google’s search engine, J.C. Penney’s advertisement showed up in the number one spot on the search results page as a “Sponsored Link.”  The Complaint further alleges that the advertisement referred to prices of “40-60% off” select Erwin Pearl jewelry, and misleadingly suggested that Erwin Pearl’s jewelry was available for purchase at J.C. Penney at prices far less than at the retails stores of Erwin Pearl or its distributors. Unfortunately, a copy of the advertisement was not attached to the Complaint.

Erwin Pearl’s complaint contains claims that J.C. Penney’s actions constitute federal and common law trademark infringement, federal and common law unfair competition, federal and state trademark dilution, and unjust enrichment..  The Complaint seeks an accounting, monetary relief and attorneys’ fees.

The case has been assigned to Judge Smith.

Analysis

The courts have struggled over the years with keyword cases since Google first introduced the practice.  Initially, some courts held that the purchase of a competitor’s trademarks as a keyword was not actionable under trademark law  because the purchase and use of the keyword was not a “use in commerce.”  Since the Second Circuit’s Rescuecom decision, however, [link] most defendants  concede that the use is a use in commerce.  For example, in Hearts on Fire Co., LLC v. Blue Nile, Inc., 603 F. Supp. 2d 274 (D. Mass. 2009), the Court found that “there is little question that the purchase of a trademarked keyword to trigger sponsored links constitutes a “use” within the meaning of the Lanham Act.” 

More recently, courts and defendants have turned to arguments that the purchase of the keyword and its use as a “trigger” for sponsored ads is not an infringement because it creates no likelihood of confusion.  In the Hearts on Fire decision, Judge Gertner examined the traditional likelihood of confusion factors, but found that “likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context.”  She identified the following non-exhaustive list of “relevant elements” to showing a likelihood of confusion in the Internet context:  (1) the overall mechanics of web-browsing and Internet navigation, in which a consumer can easily reverse course; (2) the mechanics of the specific consumer search at issue; (3) the content of the search results webpage that was displayed, including the content of the sponsored link itself; (4) downstream content on the defendant’s linked website likely to compound any confusion; (5) the web-savvy and sophistication of the Plaintiff’s potential customers; (6) the specific context of a consumer who has deliberately searched for trademarks [products] only to find a sponsored link to a retailer of that product, and, in light of the foregoing factors, (7) the duration of any resulting confusion. 

The Erwin Pearl Complaint does not attach a copy of the advertisements in question, so it is difficult to undertake an analysis of the strength of Erwin Pearl’s claims.  Plaintiffs have not had much luck in many recent cases, however, as the courts have continued to find that there has been no likelihood of confusion when a potential customer has been momentarily diverted to a competitor’s website but the competitor has not actually used the plaintiff’s trademark publicly, other than to trigger the sponsored advertisement.   Erwin Pearl may have a stronger case if JC Penney used Erwin Pearl's trademarks in the text of the ad, or stated that they sold Erwin Pearl branded jewelry when they did not.

If the case results in a substantive decision, it may be the first in Rhode Island dealing with whether the purchase of keywords by competitor constitutes trademark infringement.