Plaintiffs, musical artists, alleged that defendant MP3.com, an on-line music service, engaged in false descriptions and false designation of origin by including plaintiffs' names in its search engine. Specifically, plaintiffs alleged in their complaint that when an artist's name was typed into the search engine, a box appeared saying: "Want to hear [artist's name] on-line? Try My.MP3.com, where you can beam your CDs and listen to them anytime, anywhere." According to plaintiffs, use of their names in this way "creates a false impression in the user of the database that the artist endorses the service or has some other relationship with it." The court disagreed, however, and granted MP3.com's motion to dismiss, holding that the language at issue was "simply a permissible ‘nominative use,’ i.e., a fair use of the artist's name as a necessary means of accurately identifying the inventory in question offered by MP3.com.”
On appeal, the Second Circuit vacated and remanded the district court’s dismissal of the plaintiffs' Lanham Act claim because it extended beyond the specific example listed above. Although the Second Circuit noted that the example relied on by the district court "may" constitute a fair use, the plaintiffs’ "Lanham Act claim is broader than the example and encompasses the use of plaintiffs' names and likenesses, as well as MP3 format files other than those involving plaintiffs' works." The appeals court remanded the case, noting that the district court had discretion whether to allow plaintiffs leave to replead to clarify the scope of their allegations.
On remand, the district court denied defendant's motion to dismiss plaintiffs' trademark claims. The court rejected defendant’s nominative fair use argument because plaintiffs amended their complaint to allege additional examples of defendant’s infringing activity and added a new theory of infringement, i.e., false endorsement. The court also noted that defendant’s uses of plaintiffs' marks were not automatically permissible simply because they were truthful attributions. Even a truthful use is not permissible under the nominative fair use test if it creates a likelihood of confusion regarding the trademark owner's affiliation or sponsorship. Nor was the presence of a disclaimer on defendant’s website sufficient evidence on which to decide a motion to dismiss. Moreover, it was unclear whether the disclaimer had been posted during the entire time the allegedly infringing activity occurred.