Select Comfort Corporation v. Baxter, No. 12-2899, 2016 WL 158516 (D. Minn. Jan. 13, 2016)
A lot of stuff going on here. The parties compete in the market for adjustable air beds and related products. Select Comfort has a market share of over 90% in the adjustable air bed market. It has registrations for “Sleep Number,” “Select Comfort,” and “What’s Your Sleep Number.” Defendant Comfortaire is the second largest market participant; Baxter developed its online advertising. It used Select Comfort’s marks as search terms in AdWords, as did defendant Personal Comfort.
A consumer who clicked on a Personal Comfort link would see this comparative ad:
Personal Comfort’s logo is at the top of the page, beneath which smaller text reads “Compare Us to Sleep Number Bed®,” then “PREFERRED OVER SLEEP NUMBER® BED.” On the left side under the bold “Compare” heading, it reads “vs. Sleep Number’s®.” Another bold heading: “The Sleep Number® Bed versus Personal Comfort® Bed Comparison.” Lower on the page (not shown in the screenshot), there is another link to “Compare to Sleep Number®,” and the following: “We invite you to do your homework and check out the competition.” At the very bottom of the webpage, there’s also a disclaimer of any affiliation and a link: “No affiliation exists between Personal Comfort® or Sleep Number Bed®. No product belonging to Select Comfort® or Sleep Number Bed® is sold on this site and any reference is for comparison purposes only. Select Comfort® and Sleep Number Bed® are registered trademarks of Select Comfort® Corporation you can visit them at www.sleepnumberbed.com.”
Select Comfort objected to ads displayed in pay-per-click ads, such as the following: “Sleep 55% Off Number Beds”; “Number Bed Sleep Sale 60% -Closeout Sale”; “Comfort Air Beds On Sale”; “50% Off Sleep Number Beds”; “50ff Queen Number Beds ... PersonalComfortBed.Com/SleepNumber”; “Select 55ff Comfort Bed PersonalComfortBed.Com/SelectNumber.” Select Comfort also objected to banner ads on third-party websites, such as:
In addition, Select Comfort argued that defendants used its marks in phrases such as “Sleep Number bed” and “Sleep Number Beds on sale” in hyperlinks on third-party sites leading to Personal Comfort’s website. Further, Select Comfort objected to various uses on the Personal Comfort site, including, for example, the use of “Sleep Number Bed” in the title tag of the Internet Explorer tab; the use of meta-tags on Defendants’ websites; and the use of “WHAT’S YOUR NUMBER?” “Number Bed” also appears in the Personal Comfort logo:
Somewhat differently, Select Comfort objected to defendants’ use of a “lead generating” website, Mattress Quote. The Mattress Quote website was created by defendants Baxter and Stenzel, and it allowed consumers to obtain quotes on a number of brands, including Sleep Number and Comfortaire products. Though it was billed as an independent website, Select Comfort submitted evidence that when consumers selected either Sleep Number or Comfortaire, they received a quote from defendants. Select Comfort also submitted evidence that, in responding to a direct inquiry from the Mattress Quote website, defendants responded purporting to be “Sleep Number.” Select Comfort also submitted evidence that defendants made allegedly false statements to consumers who visited defendants’ website, called, or participated in a live chat.
The court found issues of material fact as to whether “Sleep Number” and “Number Bed” were protectable marks, descriptive, descriptive with secondary meaning, generic, or even suggestive (Sleep Number seems non-suggestive for beds that are adjustable—I may not know exactly what it is, but I immediately know there’s a range). Similarly, there were fact issues as to whether defendants engaged in descriptive or nominative fair use. And there were fact issues on likely confusion, with some factors favoring each side and some contested.
Notably, the court held that it was inappropriate to use initial interest confusion in this circumstance, where the products are expensive (the average Select Comfort bed costs between $1,600 and $2,300) specialty products purchased online. “These factors lead to the conclusion that consumers would exercise a high degree of care in purchasing such a mattress. Therefore, Plaintiffs’ trademark infringement claim will require Plaintiffs to establish a likelihood of actual confusion at the time of purchase.” This mattered in part because most of Select Comfort’s confusion evidence, according to defendants, involved only post-sale mistakes/confusion, and because the key question in Select Comfort’s survey didn’t test for source confusion (again, according to defendants). Defendants’ own survey showed only 1.5% confusion regarding the source or affiliation of their ads.
On the false advertising claims, defendants argued that Select Comfort lacked standing. It didn’t, because it had a sufficiently close connection to the asserted false advertising under Lexmark, so this serves mainly as a reminder that Justice Scalia has lost the war on calling this inquiry “standing.” The other aspects of the falsity claim were contested and had to go to a finder of fact.
The court likewise found that a jury would have to decide whether “Sleep Number” and “What’s Your Sleep Number?” were famous under the rigorous federal dilution standard. Select Comfort submitted that they had spent over $150 million in 2014 and over $1 billion since 2010 in marketing, advertising, and promoting their Sleep Number products across many media. Publicity included “rankings in industry magazines, positive reviews in Consumer Reports, celebrity endorsements, and numerous mentions in magazines, newspapers, online, television programs, and comics,” as well as other pop culture references. It claimed over $10 billion in sales since 2010, and that in 2012, “Sleep Number” achieved 21% unaided brand awareness and 75% total awareness.
Defendants disagreed, arguing that this wasn’t enough for fame, since unaided brand awareness for the “Sleep Number” mark achieved under 20% awareness from 2001 to 2011, reached a high point of 21% in 2012, and hovered around 12-13% from 2007-2009. The court declined to resolve the battle and would let the jury decide.
Unjust enrichment went away as a separate claim because Select Comfort had an adequate remedy at law. The Minnesota Deceptive Trade Practices Act claim survived, however, because it might provide a separate basis to calculate damages.
Finally, the court dismissed a counterclaim based on Select Comfort’s purchase of competitive trademarks as keywords. Select Comfort acknowledged that the keyword purchase alone wasn’t infringing or unfair competition. “What Plaintiffs do contend is that Defendants’ purchase of the keywords in conjunction with the resulting advertisements is wrongful.” This is an excellent limitation and I hope more potential plaintiffs pay heed.