The holding that keyword buys don't give rise to trademark claims is not the most interesting part of the case, though notably the court extends the "no trademark use" finding to cases in which the ad triggered by the keyword actually includes the plaintiff's mark. I really don't think the doctrine can be stretched that far, since I don't see how ad text is any different from text appearing on a defendant's webpage in terms of "use" -- what this is about is a shortcut to saying the use is legitimate.
I agree with Goldman and Sag that the court stumbled on §113(c): the reseller of authentic products plainly had the right to take photos of lawfully made merchandise and use those photos without the manufacturer’s consent. Section 113’s “lawfully reproduced” requirement applies to the labels on the merchandise, not to the photos of the merchandise; this is necessary to avoid an infinite regress.
The fact that the court retreated to the fair use doctrine to reach the right answer is not that reassuring. Rather, it is an example of the trend to use fair use as a dumping ground for any limit on copyright owners’ rights, which both ignores large portions of the Copyright Act and increases the pressure on that already only partially coherent doctrine.
The false advertising bit: the manufacturer argued that, by putting the words “All Rights Reserved” on its photos of the manufacturer’s products, the reseller “falsely proclaimed that [it] is the creator of the images of [the manufacturer’s] Products and its copyrighted label artwork.” (The first part of this – that the reseller created the images – is true, so it's an odd allegation.) The reseller argued that it labeled the pictures to keep other resellers from knocking off its pictures (which might possibly have enough creativity to be copyrightable, but I wouldn’t hold my breath).
On the one hand, I am willing to accept that most consumers have no idea what “All Rights Reserved” means with respect to photos of a product. But “no idea” doesn’t mean “deceived”; it means that the term is meaningless. For a literal falsity claim, this shouldn’t suffice. And the court found no literal falsity – and further held that “All Rights Reserved” was not material. Without any evidence of consumer perception, any implicit falsity claim also failed. The one purported consumer complaint submitted by the manufacturer asked whether the reseller was an authorized distributor, not whether it was the products’ creator.
The only surprising thing about this conclusion is that the court didn’t invoke Dastar to get there.
Dilution: since the manufacturer was seeking money damages and the conduct began before the TDRA became law, the court applied the FTDA. Which meant, naturally, that it was curtains for the federal dilution claim. Because state dilution claims are routinely analyzed as echoes of federal dilution claims regardless of actual language, the New York dilution claims failed as well.