Stay away from Juliet: keyword infringement and dilution case continues

Romeo & Juliette Laser Hair Removal, Inc. v. Assara I, LLC, No. 08-CV-442, 2014 BL 263647 (S.D.N.Y. Sept. 23, 2014)

A keyword case gets past the pleading stage (though the worst part is the dilution ruling).  The parties compete in the hair removal business.  R&J, which operates in the NYC area, alleged that Assara used its marks, bought deceptive ads through Google, and posted fraudulent reviews to consumer websites to divert customers from R&J to Assara. 

In 2007, Assara allegedly bought “Romeo & Juliette” as a keyword, and also allegedly used “Romeo Juliette Laser” in “hidden links and text on its websites” to deceive the public about R&J’s source or sponsorship of Assara’s services.  Assara also allegedly published defamatory statements about R&J on consumer review sites such as Yelp.

Trademark infringement claims: R&J sufficiently alleged the validity of its mark and likely confusion by alleging that “whenever the public searched for plaintiff's mark a sponsored link to defendants' website would appear,” and that its name and marks were used on “hidden links” (hunh?) on Assara’s website.  This was allegedly likely to confuse the public about the connection between the parties, “because a person searching on the internet for hair-removal services using plaintiff's marks stood a strong chance of being directed to defendants' website.”  Not analyzed: whether this “direct[ion]” would be the result of confusion or interest in competing alternatives.

Plus, R&J sufficiently alleged willfulness/bad faith, required for NY unfair competition, because posting negative reviews to consumer websites would harm plaintiff's business.

Dilution under the Lanham Act.  Incredibly, the court found that the complaint alleged the fame of the mark, because R&J alleged that “its marks were used widely in advertisements on the internet and that its services were readily searchable through internet search engines.” Of course, this does not allege facts making wide recognition by the general consuming public of the United States plausible.  It alleges only that plaintiff ran ads and had a website that didn’t use robots.txt to exclude itself from search engines.  Even aside from that, the complaint alleges that plaintiff’s services are confined to the New York City area.  How could it be widely recognized by the general consuming public of the United States?  This claim shouldn’t pass the laugh test. Cf., e.g., TCPIP Holding v. Haar (2d Cir. 2001) (holding, before the TDRA increased the fame standard, that trademark holder’s annual sales of $280 million were not enough to constitute fame); Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 879 (9th Cir. 1999) (marks used for decades and parent company had annual sales of $3 billion and annual advertising costs of over $5 million; no fame).

No matter.  R&J alleged confusing use and negative reviews, which sufficiently pled dilution through damaging its reputation and inappropriately associating it with Assara.  Also: disparaging the services identified by the mark is not the same as disparaging the mark.  Otherwise all the careful limitations on defamation and disparagement, mandated by the First Amendment I should emphasize, disappear for owners of famous marks.  This is neither sensible nor constitutional.  The plaintiff’s review-based allegations should fail for the additional reason that they plead disparagement of the services, not disparagement of the mark.

As for the deceptive business practices claim under NY GBL §349, when a competitor plaintiff brings a claim, its gravamen must be consumer injury or harm to the public interest.  Trademark infringement isn’t enough without “specific and substantial injury to the public interest over and above the ordinary trademark infringement,” including potential danger to the public health or safety.  While R&J alleged misleading consumer-oriented misconduct, it didn’t allege facts showing the public health or safety were threatened.  Claim dismissed.

Query: why not the obviously applicable Lanham Act false advertising claim based on the allegedly false reviews?  

Common law defamation and disparagement claims did survive.  Both require special damages or per se actionable statements.  A statement is defamatory per se if it impugns "the basic integrity" of a business. For product disparagement, “a plaintiff need not plead specific damages if the nature of the plaintiff's business makes it difficult, if not impossible, to identify which customers have been lost.”  Allegedly disparaging and false reviews on consumer websites plausibly maligned the basic integrity of R&J’s business, and the fact that the misconduct occurred online made it impossible at this stage to determine actual lost customers. (Which is one reason the common law torts aren't suited for mass advertising cases.)