Tuesday, September 04, 2012

Initial interest confusion claim over keyword ads must go to trial

Morningware, Inc. v. Hearthware Home Products, Inc., 2012 WL 3721350 (N.D. Ill.)

Morningware sued Hearthware for disparagement of Morningware’s counter-top oven, violation of the Lanham Act, and related torts.  Morningware has a registered mark for MORNINGWARE for small electric kitchen appliances, namely, infrared wave-producing convection ovens.  Morningware also uses “Halo.”  Hearthware bought “morningware” and “halo” (with oven-related terms) as keywords for search engine ads.  The resulting ad contained a link to Hearthware's website, www.mynuwaveoven.com, and states that “[t]he Real NuWave® Oven Pro Why Buy an Imitation? 90–Day Gty.”  Morningware’s survey expert Burger concluded that 43% of people believed they could buy Morningware’s oven from Hearthware’s website.

The court denied cross-motions for summary judgment on trademark infringement.  The Seventh Circuit disfavors summary judgment in trademark cases, and Morningware failed to meet its heavy burden of showing that the evidence was so one-sided that there was no doubt about the proper result.

Morningware’s theory was initial interest confusion, which is actionable in the Seventh Circuit under the incredibly expansive Promatek decision.  Several of the factors favored Morningware: Hearthware used Morningware’s marks exactly, and the parties’ products are very similar.  Both parties sell their products through the internet.  Intent was also “largely undisputed.” Hearthware “chose to bid on those specific keywords with the intent that the search engines would place Hearthware's ads in the search results and knowing that Morningware is a direct competitor…. These facts strongly support a finding that Hearthware intended to divert consumers to its website.”  (Argh!  Since when is diversion confusion?  Advertisers intend to divert consumers all the time.  That’s generally called “competition.”  Intent to divert, likewise, cannot substitute for intent to confuse.) 

The degree of consumer care was less clear.  Developing precedent is that internet use alone doesn’t mean that the degree of care is low. Morningware argued, however, that the degree of care used before deciding whether to click on a link is lower than the degree of care used when purchasing.  (Which, not for nothing, is why IIC is such a dumb theory in its usual online applications.  Yes, consumers are willing to click—and click back—on a variety of links!)  The court agreed that the “relevant” issue was the degree of care consumers used when deciding on which link to click.  But that didn’t mean that the nature of the goods, including cost, and the relevant consumers’ sophistication, were irrelevant.  “Given the ever-increasing commonplace of consumers searching for and purchasing goods online, the fact that this case involves a theory of initial interest confusion in keyword advertising does not, without more, necessitate a finding that consumers exercise a low degree of care.” So this factor didn’t weigh clearly in favor of either party.

The strength of Morningware’s marks also favored a likely confusion finding, but not overwhelmingly.  Morningware’s marks were arbitrary, and the Morningware mark had been in use for almost ten years, and registered since 2010.  (Ancient!)  But Morningware was also a one-person company and had provided no evidence of market strength.

Similarly, the evidence of actual confusion was limited.  Morningware submitted a survey, but Hearthware attacked it on several grounds, including: omitting Southern consumers; leading consumers and asking them to make inappropriate assumptions; and failing to code answers to the survey’s first five questions.  Morningware couldn’t prove actual confusion solely with this survey; Hearthware had created fact issues for the jury.

All together, the evidence was not so one-sided as to make summary judgment appropriate.

The court turned next to Morningware’s disparagement claim, which contended that the Hearthware ad text, “The Real NuWave® Oven Pro Why Buy an Imitation? 90–Day Gty,” confused consumers into believing that Morningware’s ovens were inferior because they were imitations.

Morningware didn’t argue literal falsity.  It relied on its survey, which found that “many of the respondents were under the impression [that] the Nu Wave Oven Pro is an authentic product while the Morningware product was a ‘fake’ or ‘imitation.’”  Again, Hearthware attacked the survey for leading questions, failure to code answers, and unquantified results.  This created material issues of fact.  Materiality was also contested, as was injury.  The court noted, however, that Morningware wasn’t required to offer expert testimony on materiality; thus Hearthware wasn’t entitled to summary judgment in the absence of such testimony.

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