Disparagement as TM infringement? One court thinks, sure

Homelight, Inc. v. Shkipin, 2022 WL 16528142, No. 22-cv-03119-TLT (N.D. Cal. Oct. 28, 2022)

Defendants allegedly both disparaged Homelight and infringed its trademark, which seems a weird combo, but half of the TM claims aren’t as contradictory as they seem—the other half really are. The parties operate “online platforms that match real estate agents with residential homebuyers or sellers.” Homelight alleges that defendants’ reviews and articles falsely and misleadingly accuse Homelight of engaging in illegal price fixing, violating other state and federal laws, defrauding or misleading the public, or otherwise harming consumers. Also, “defendant HomeOpenly allegedly misuses plaintiff HomeLight’s registered logo in a way that is likely to confuse consumers, and HomeOpenly Inc.’s logo is confusingly similar to HomeLight’s logo.”

The court found that trademark infringement was plausibly pled, which is unfortunate. The allegations of the complaint make clear that the putative “misuse” of the logo is, per the complaint, that, “[i]n its many webpages that make false and misleading allegations about HomeLight, HomeOpenly prominently uses the HomeLight logo in a manner that falsely suggests association or sponsorship, and which results in consumer confusion or is highly likely to result in consumer confusion.” Using HomeLight’s logo on pages that allegedly falsely disparage HomeLight is not infringement—it is simply implausible that consumers would believe that HomeLight associated with or sponsored a company that disparages it.

plaintiff's registered logo

defendant's logo

OTOH, while the logo claim is a stretch—they share colors and descriptive conceptual elements, and it’s hard to imagine the logo is really that strong—it’s not facially unbelievable, though there’s still some tension between the two theories of disparagement and confusion.

The court, unfortunately, misapplies nominative fair use, reasoning that “[i]n this case, however, plaintiff alleges that defendants are using plaintiff’s trademark to refer to defendants’ goods or services. Therefore, the traditional fair use doctrine is the proper analysis rendering the nominative fair use doctrine inapplicable.” But the putative services are information about the plaintiff (albeit allegedly disparaging)—that is, as in New Kids, clearly nominative. Sigh.

False advertising: Sufficiently pled, despite Shkipin’s argument that his reviews were not commercial speech. Courts consider: whether (1) “the speech is an advertisement,” (2) it “refers to a particular product,” and (3) “the speaker has economic motivation.” Here, (3) is the key issue. While “[a] mere failure to disclose bias or financial interest would not necessarily make speech commercial,” plaintiffs alleged that defendants used the reviews to disparage competitors, pushing business towards HomeOpenly. Although it’s a free website, it “makes money through ad revenue, and so it indirectly benefits when consumers use its site.” [This on its own is clearly not enough—so does the New York Times.]

In addition, while the site allowed consumers to post their own reviews, defendants allegedly “exercise control over consumer reviews to cast further dispersions on plaintiff. (For instance, the defendants allegedly include disclaimers below positive reviews warning that plaintiff has solicited the reviews in exchange for a cash gift card.)” This was plausibly commercial speech. [This really has to be seen in the context of direct competition, because otherwise it makes all ad-supported review sites into commercial speakers.]