Saturday, February 14, 2009

keyword buys as unfair competition

Heartbrand Beef, Inc. v. Lobel's of New York, LLC, 2009 WL 311087 (S.D. Tex.)

Eric Goldman seems to like this decision, but my read is a little different. Yahoo!’s lawyers here may have assumed the judge knew more TM law than the judge in fact knew. Heartbrand alleged a bait-and-switch scheme by four defendants, including Yahoo!; the other defendants settled out. Heartbrand sells Akaushi beef, a heavily regulated Japanese product, and alleged that it’s the only provider of Akaushi beef in the US. One defendant allegedly operated, which had no content other than links, some of which included “Akaushi.” Clicking on those links took people to; Lobel’s sells beef, but not Akaushi beef.

The complaint against Yahoo!: when a user searched for “Akaushi,” the first paid listing was Heartbrand alleged violations of the Lanham Act and Texas common-law unfair competition.

According to the court, Yahoo! devoted much of its argument to arguing that Heartbrand hadn’t adequately alleged direct or secondary trademark infringement. But, the court reasoned, Heartbrand didn’t make any trademark infringement claims. Its claims were labeled “False Designation of Origin” and “Common Law Unfair Competition.”

Is false designation of origin a claim under 43(a)(1)(A) or (a)(1)(B)? Cases have said different things. However, the Fifth Circuit “consistently” lists five elements to be proven regardless of which section is at issue. (Here we start to go off the rails; this is just not so, though it may be true with respect to false designation of origin claims.) The elements are: (1) The defendant made a false or misleading statement of fact about its product or service (comment: nope; the Lanham Act specifically contemplates that statements about one’s own or someone else’s products or services can be false advertising); (2) deception/capacity to deceive; (3) materiality; (4) interstate commerce; and (5) likely injury to plaintiff.

From faulty premise (1), the court proceeded to get half the right answer. False designation of origin, the court said, is often passing off or reverse passing off, which Yahoo! can’t be doing because it’s not in the business of selling beef. Regardless, Heartbrand didn’t identify any actual statement made by Yahoo! Yahoo! only placed a link to in response to certain searches, which it did at the direction of third parties. That’s not a “statement.” (In other words, Yahoo!’s liability could only be secondary at most.) Anyway, even if Heartbrand had alleged a statement, that statement wasn’t about Yahoo!’s own goods or services. (As noted, not relevant.) So, there’s no false designation of origin claim.

The trouble with not understanding Yahoo!’s arguments—that this conduct of targeting paid ads to search terms, if actionable at all, is only actionable as secondary trademark infringement, or perhaps secondary false advertising—is that it invites repleading. Plus, here the court determined that Yahoo!’s arguments didn’t cover the common law unfair competition claim, which survived. But what was the nature of the unfair competition here? It used to be a standard line, as Mark McKenna has noted, that “unfair competition” requires “competition,” clearly not present here. So the state claim, whatever it means, breathes on.

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