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May 2011

The Ninth Circuit Holds That the "Internet Troika" Is Not the Appropriate Test for All Trademark Disputes Involving the Internet

Network Automation, Inc. v. Advanced Systems Concepts, Inc. 2011 U.S. App. LEXIS 4488; 97 U.S.P.Q.2d (BNA) 2036 (March 8, 2011)

In Network Automation, Inc. v. Advanced Systems Concepts, Inc., the Ninth Circuit Court of Appeals addressed whether the "Internet troika" was the appropriate test for trademark disputes involving the Internet.   

Network Automation ("Network") and Advanced Systems Concepts ("Systems") sell competing job scheduling and management software and both entities advertise their products on the Internet.  Systems sells its product under the trademark ActiveBatch, while Network sells its product under the mark Auto-Mate. 

Network decided to advertise its product by purchasing certain keywords, including Systems' ActiveBatch mark, which promoted Network's website when typed into various search engines such as Google and Bing.  As a result, consumers searching for business software who enter the search term "ActiveBatch" would arrive at a results page with links to Systems' website, as well as advertisements for Network's website. 

Systems demanded that Network cease and desist from using the ActiveBatch mark in its search engine advertising because Network's use of the mark infringed Systems' trademark rights.  In response, Network filed a lawsuit seeking declaratory judgment of noninfringement.  Systems then filed a counterclaim for trademark infringement and moved for a preliminary injunction.

The district court found a likelihood of initial interest confusion and granted injunctive relief against Network's use of ActiveBatch.  In doing so, the district court focused on three factors it viewed as most significant for cases involving infringement on the Internet.  These factors, referred to as the "Internet trinity" or "Internet troika," are: (1) the similarity of the trademarks; (2) the relatedness of the goods; and (3) the simultaneous use of the Web as a marketing channel.  These three factors were originally used to analyze the risk of source confusion caused by similar domain names. 

On appeal, the Ninth Circuit reversed the district court's finding.  Writing for the Circuit, Judge Kim McLane Wardlaw noted that focus on the "Internet troika" is not appropriate in all Internet infringement cases.  Instead, it is more appropriate to analyze Internet infringement cases by considering the traditional eight-factor analysis from AMF v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), and assigning to each factor an appropriate weight depending on the specific context. The Court emphasized that the Sleekcraft factors are not exhaustive and should be applied flexibly, particularly in the context of Internet commerce. 

In following this guideline, the Court found the most relevant factors in this keyword advertising dispute to be: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and the degree of care to be exercised by the purchaser; and (4) the appearance of the advertisements and surrounding context on the screen displaying the results page.

Because the district court relied on the "troika," it failed to analyze the most relevant factors in this case.  The Ninth Circuit therefore reversed the district court's ruling, vacated the preliminary injunction and remanded the case for further proceedings.  

This opinion is noteworthy because it clarifies the inquiry for trademark infringement matters involving the Internet.  The "Internet troika" is not the appropriate analysis for all Internet trademark disputes.  Rather, the traditional Sleekcraft factors must be applied in a flexible manner according to the specific facts of each case. 

This case also implies that the purchase of a trademarked term for use in keyword Internet advertising does not, on its own, rise to the level of trademark infringement.  Should a business choose this method of advertising, it must be mindful of the factors articulated by the Ninth Circuit and avoid situations which create consumer confusion as to the source of goods or services.


Intellectual Property

Intellectual Property