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:

While the defendants in Quintessa also used the Adler Marks as keywords and their ads included a click to call link connecting to a call center, Defendants did not use the Adler Marks in the specific content of the ads, did not cite to, reference, or link to their website in the ads, and did not identify any lawyer or firm by name. Instead, Defendants’ ads displayed generic terms consumers might associate with any personal injury law firm. 

 And while Judge Horan acknowledged the same Fifth Circuit precedent cited in Reyes  requiring “something more” than the use of the Adler Marks in keyword advertising,  he ultimately concluded that Plaintiffs failed to plead such facts. Instead, Plaintiffs’ complained of defendants’ use of generic terms in their ads rather than the specific Adler Marks.  Given that generic terms are not entitled to trademark protections and plaintiffs failed to plead any specific facts showing a connection between defendants’ use of the Adler Marks in misleading or misdirecting consumers to plaintiffs’ competitors, Judge Horan recommended the dismissal of plaintiffs’ trademark infringement claims. Horan also recommended dismissal of all claims plead against the defendant owner, in her individual capacity, due to plaintiffs’ failure to attribute any misconduct to the owner, specifically.

More important in Quintessa, however, is Judge Horan’s move beyond the confines of Fifth Circuit precedent to rely on 10th Circuit case law in support of his conclusion that “[w]here an advertisement does not include the plaintiff’s trademark, there is no likelihood of confusion as a matter of law.” Id. Thus, Judge Horan appears to embrace replacement of the Fifth Circuit’s “something more” analysis with the position that there can be no infringement absent use of another’s trademarks in the actual content of online advertisements.  On this basis, Judge Horan concluded that Plaintiffs failed to plead trademark infringement as a matter of law and failed to plead the necessary elements and facts to support their claims such that Defendants’ motion to dismiss should be granted.

 Overall, having provided much-needed clarification regarding potential liability for trademark infringement related to the use of keyword and pay-per-click advertising in Reyes, Judge Horan simultaneously muddied the waters, moving beyond Fifth Circuit precedent in Quintessa to conclude that there can be no trademark infringement as a matter of law unless the advertisement, itself, includes reference to the plaintiff’s trademarks. 

 As the conclusion in Quintessa can be construed to contradict that of Reyes, until the Fifth Circuit provides express guidance, the takeaway for practitioners in the Fifth Circuit is limited:  current Fifth Circuit precedent (and Reyes) provide that a defendant may be liable for trademark infringement arising out of the use of another’s trademarks in keyword or pay-per-click advertising if the plaintiff pleads “something more” that causes confusion, such as misdirecting consumers to a potentially confusing website or one owned by a competitor, special landing pages incorporating the marks for those who clicked on the confusing ads, or using click-to-call technology in the ads to cause consumers searching for Plaintiffs to mistakenly contact Defendant and eventually convincing them to hire Defendant instead—all without any reference to whether the advertisements at issue expressly reference the plaintiff’s trademarks.  Yet, practitioners and plaintiffs alike should be prepared for defendants to assert the arguments and conclusion of Quintessa and the Tenth Circuit requiring express use of another’s trademarks in the actual content of an advertisement in order to give rise to trademark liability.

Additional Cases Discussing Pay-Per-Click Trademark Infringement

The Adler cases actually deal with “click-to-call” advertisements instead of pay-per-click ads, but the infringement theory is essentially the same for both: keyword marks being used by unauthorized parties in search engine advertising. See WickFire, L.L.C. v. Laura Woodruff; TriMax Media, L.L.C., 989 F.3d 343, 348 (5th Cir. 2021), as revised (Mar. 2, 2021) (“Advertisers pay search engines on a cost-per-click basis, meaning they pay the search engine every time a user clicks on one of their advertisements. If the user thereafter makes a purchase on the merchant's site, the merchant pays a commission to the advertiser.”). Specifically, an unauthorized party pays to have their pay-per-click ads show up when a trademarked keyword is entered into a search engine. Those pay-per-click ads then confuse the consumer (initial interest confusion) about the affiliation of those ads with that of the trademarked searched keyword.

Cases:

• Jim S. Adler, P.C. v. McNeil Consultants, L.L.C., 10 F.4th 422, 425 (5th Cir. 2021).

• Ben Abbott & Associates, PLLC v. Quintessa LLC, No. 3:20-CV-1790-B, 2020 WL 5633006 (N.D. Tex. Sept. 21, 2020).

• Jim S. Adler, P.C. v. Angel L. Reyes & Associates PC, No. 3:19-CV-2027-K-BN, 2020 WL 5099596, (N.D. Tex. Aug. 7, 2020), report and recommendation adopted, No. 3:19-CV-2027-K-BN, 2020 WL 5094678 (N.D. Tex. Aug. 29, 2020).

• WickFire, L.L.C. v. Laura Woodruff; TriMax Media, L.L.C., 989 F.3d 343, 349 (5th Cir. 2021), as revised (Mar. 2, 2021).

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