As the internet ever-increasingly becomes the default medium for advertising and commerce, businesses are pushing the boundaries of what is ethically and legally acceptable in advertising, employing search engine optimization tactics to increase their chances of showing up in your search results. Generally speaking, search engine optimization is the process of using keywords on your website, sometimes imperceptibly, so that your website appears prominently in search results when a prospective customer searches certain keywords or phrases that might be associated with your business.
This article will address the common situation of one business listing other businesses on its site, oftentimes well-known clients or competitors, in order to establish marketplace credibility and to appear in search engine results for those other businesses. Specifically, this article will help clarify where acceptable conduct ends and unfair competition and trademark infringement begins.
A "trademark" is a distinct word, phrase, or logo that is used to mark goods and services to distinguish them from their competitors. A trademark not only allows a purchaser to identify the origin of goods but also the reputation that is associated with the brand. "Microeconomic theory teaches that trademarks perform at least two important market functions: (1) they encourage the production of quality products; and (2) they reduce the customer's costs of shopping and making purchasing decisions." 1 J. McCarthy on Trademarks and Unfair Competition Section 2:3 (5th ed., December 2020 Update).
The U.S. Supreme Court noted that trademarks confer a property right because a trademark holder can exclude others from using that mark. See Coll. Sav. Bank v. Fla. Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666, 673 (1999) (citing K mart Corp. v. Cartier, Inc., 485 U.S. 176, 185-186, 108 S.Ct. 950, 99 L.Ed.2d 151 (1988) ("Trademark law, like contract law, confers private rights, which are themselves rights of exclusion. It grants the trademark owner a bundle of such rights").
However, the right to exclude others from using your trademark is not unlimited. Nominative use, or the right of competitors to use your trademark comparatively, is one such limitation on a trademark owner's right to exclude. The nominative use exception is rooted in the First Amendment's right to free expression. The 9th U.S. Circuit Court of Appeals has found that "[i]t is often virtually impossible to refer to a particular product for purposes of comparison, criticism, point of reference or any other such purpose without using the mark." New Kids on the Block v. News Am. Pub., Inc., 971 F.2d 302, 306 (9th Cir. 1992). The nominative fair use doctrine allows truthful comparative use of a mark, even if the speaker fails to expressly disavow association with the trademark holder, so long as it is unlikely to cause confusion as to sponsorship or endorsement. See Playboy Enterprises, Inc. v. Welles, 279 F.3d 796, 803 n.26 (9th Cir. 2002).
Nominative Use Cases from the 9th Circuit
In true California fashion, the two precedent-setting 9th Circuit cases on nominative use were brought by the 80s boy-band New Kids on the Block and Playboy magazine in the New Kids and Playboy Enterprises cases.
In New Kids, a newspaper conducted a poll for readers to vote on their favorite New Kids on the Block member. Readers were directed to a 900 number to register their votes; each call cost 95 cents per minute. New Kids on the Block sued the newspaper for trademark infringement, generally based on the fact the newspaper was making 95 cents a minute from fans of New Kids on the Block. The district court granted summary judgment in favor of the newspaper on First Amendment grounds. New Kids, 971 F.2d at 305. The 9th Circuit affirmed the district court's decision, finding that "[w]hile the New Kids have a limited property right in their name, that right does not entitle them to control their fans' use of their own money. Where, as here, the use does not imply sponsorship or endorsement, the fact that it is carried on for profit and in competition with the trademark holder's business is beside the point."
In Playboy, Terri Welles used the Playboy trademark on her website to generally promote her services and photos for sale. A biographical section of her website noted her selection as Playmate of the Year in 1981 and her years modeling for Playboy. Playboy Enterprises, 279 F.3d at 799.
Playboy alleged four different infringing uses of its trademarked terms on Welles' website: (1) the terms "Playboy" and "Playmate" in the metatags of the website; (2) the phrase "Playmate of the Year 1981" on the masthead of the website; (3) the phrases "Playboy Playmate of the Year 1981" and "Playmate of the Year 1981" on various website banner ads, which may appear as advertisements on other websites; and (4) the repeated use of the abbreviation "PMOY ′81" as the watermark on the pages of the website. Playboy Enterprises, 279 F.3d at 800.
Welles raised the nominative use defense and the District Court granted summary judgment in her favor and Playboy appealed.
Nominative Use Test
The 9th Circuit analyzed Welles' nominative use defense utilizing the three-part test developed in the New Kids matter: "(1) the product or service in question must be one not readily identifiable without use of the trademark; (2) only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and (3) the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder." Playboy Enterprises, 279 F.3d at 801.
The 9th Circuit found a nominative use by Welles and affirmed the district court's reasoning, finding that: "[T]here is no other way that Ms. Welles can identify or describe herself and her services without venturing into absurd descriptive phrases. To describe herself as the "nude model selected by Mr. Hefner's magazine as its number-one prototypical woman for the year 1981" would be impractical as well as ineffectual in identifying Terri Welles to the public."
The court compared Welles' use of the Playboy marks to an analogous case wherein an auto shop was allowed to use the trademarked term "Volkswagen" on a sign describing the cars it repaired, in part because the shop "did not use Volkswagen's distinctive lettering style or color scheme, nor did he display the encircled 'VW' emblem" -- that is, the shop did not use more of the mark than was reasonably necessary to describe itself.
The third and arguably most important factor requires the user to avoid any questioning of sponsorship or endorsement by the trademark holder. In Playboy, the court took into account that her website contained a clear statement disclaiming any connection with Playboy.
Metatags consist of online keywords that are usually invisible to the consumer but are embedded into the code of a website to describe the contents of that website. Some search engines use metatags to identify websites relevant to a search. The 9th Circuit held that Welles' use of "playboy" in the metatags for her website was protected by the nominative us doctrine. In so finding, the court noted that restricting a nominative use such as Welles' "would have the unwanted effect of hindering the free flow of information on the internet, something which is certainly not a goal of trademark law.
Repeated Trademark Use Fails Nominative Use Tests
However, Playboy was not a complete victory for Welles. The background, or wallpaper, of Welles' site consists of the repeated abbreviation "PMOY ′81," which stands for "Playmate of the Year 1981." Importantly, the court held that Welles' repeated use of "PMOY '81 was unnecessary to describe Welles, noting that her likeness or name do not appear before or after each use of "PMOY '81" thereby failing the nominative use test. The 9th Circuit sent the case back to the district court to determine whether the abbreviation "PMOY," as used in the wallpaper was a protectable mark.
Applications Going Forward
The New Kids and Playboy cases establish that a company can truthfully and accurately use the trademark of another company on its site and metatags, as long as (1) using the trademark is necessary to describe the goods or services; (2) the user does not use more of the mark than what is absolutely necessary -- for example typing out the name of a company instead of using its logo is an example of the minimum use; and (3) there is no ambiguity regarding sponsorship or endorsement. A statement noting there is no partnership, endorsement, or affiliation by the owner of the trademark being used is safest practice.
In addition to trademark law, one must also consider any contracts or nondisclosure agreements signed with customers about disclosing their relationship. While one may not be liable under trademark law, one can still incur contractually liability. Ultimately, it is best practices to only use logos and marks on your website with permission of the trademark holder. Even if one has a winning nominative use defense, one can still be stuck in an expensive lawsuit to establish that defense. It is advised to make a well-considered business judgment in light of the risk of litigation to determine whether the nominal use is worth the potential dispute.
Finally, the reader is advised that this article is a general opinion and not intended to be relied upon as legal advice. Every case is unique and requires a thorough analysis on its own merits.