A district court applied an analysis that was "too rigid" in determining that a seller of job scheduling and management software was entitled to a preliminary injunction barring a competitor from purchasing the seller's trademark ActiveBatch as an Internet search engine advertising keyword used to trigger the display of sponsored links to the competitor's website, the U.S. Court of Appeals in San Francisco has held. A district court's order granting the preliminary injunction was reversed, the injunction was vacated, and the case was remanded for further proceedings to examine whether confusion was likely to result from the competitor's conduct.

Likelihood of Confusion Test

According to the appellate court, the district court erred by focusing too rigidly on three of the Sleekcraft likelihood of confusion factors known as the "Internet troika" or "Internet trinity" --the similarity of the marks, the relatedness of the goods and services, and the simultaneous use by the parties of the Internet as a marketing channel. A more flexible analysis was required, keeping in mind that the factors listed in Sleekcraft were non-exhaustive. In addition, to establish initial interest confusion, the seller was required to demonstrate likely confusion, not mere diversion, the court said.

The most relevant factors to the analysis of the likelihood of confusion in this case were (1) the strength of the ActiveBatch mark, (2) the evidence of actual confusion, (3) the type of goods and degree of care likely to be exercised by the purchaser, and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.

Mark Strength

The strength of software seller's registered ActiveBatch mark weighed in favor of a finding that the competitor's use of the mark as an Internet search engine advertising keyword was likely to cause consumer confusion, the court said. The mark was suggestive because it required a mental leap to understand the nature of the seller's product. Because the mark was both the seller's product name and a suggestive federally registered mark, consumers searching for the term online were presumably looking for the specific product and not a category of goods.

Actual Confusion

The complaining seller failed to present evidence of actual confusion resulting from the competitor's use of the mark as an advertising keyword. The lack of actual confusion evidence, however, was a neutral factor in the likelihood of confusion analysis, in the court's view.

Type of Goods and Purchaser Care

Although the parties sold products that were virtually identical, the district court erred by focusing on this factor in isolation in finding a likelihood of confusion, the appellate court said. The factor had to be considered in conjunction with the labeling and appearance of the advertisements and the degree of care exercised by the consumers of the seller's software.

The district court erroneously determined that the low degree of care typically exercised by Internet consumers weighed in favor of finding that confusion was likely to result from the keyword use. In many contexts, consumers using the Internet to search for products were sophisticated about the sponsorship of websites, the appellate court said. Experienced Internet users expected to find some sites that were not what they initially seemed to be based on a glance at the domain name or search engine summary.

Network Automation, Inc., 9th Cir., ¶61,765.