March 2013 Issue

Civil Cases

AK Metals, LLC v. Norman Indus. Materials, Inc.,
2013 WL 417323 (S.D. Cal. Jan. 31, 2013)

CASE SUMMARY

FACTS
Plaintiff AK Metals, LLC (“AK”) distributes metal supplies under the mark “Escondido Metal Supply.”  AK alleged that Defendant Norman Industrial Materials, Inc. (“NIM”), a direct competitor, infringed AK’s mark by using it as a search-engine keyword trigger and in the header of its paid Google advertisements.  Specifically, NIM included in its initial ads AK’s mark next to NIM’s website address, as shown below on the left.  NIM claimed that Google “automatically” inserted AK’s mark into the ad header.  NIM later removed the mark from the header of its ads, as shown below on the right. 
        
 

ANALYSIS
AK filed a motion for a preliminary injunction, which the court denied, finding that AK was unlikely to prove that a likelihood of confusion existed.  The court applied the Ninth Circuit’s special keyword test for likelihood of confusion from its decision in Network Automation, Inc. v. Advanced Systems Concepts, Inc., 638 F.3d 1137, 1154 (9th Cir. 2011), which emphasized four factors: (1) the strength of the mark, (2) evidence of actual confusion, (3) types of goods and degree of care likely to be exercised by the typical purchaser, and (4) the labeling and appearance of the advertisements.

The strength-of-the-mark factor favored NIM because “Escondido Metal Supply,” as an unregistered mark, was not “inherently distinctive” and also was not a “fanciful or suggestive name.”  Rather, it was merely “a combination of a geographic term and a description of a category of goods” that showed “an obvious connection to the goods to which it refers.”

The actual-confusion factor also favored NIM because of the “sparse record.”  Initially, the court found that “one instance of a consumer potentially being confused . . . was not sufficient evidence of actual confusion.”  AK also argued that at least 35 of 603 individuals searching for “Escondido Metal Supply” on Google during an unspecified period of time clicked on NIM’s advertisement, which, according to AK, “provided something of value to [NIM].”  But NIM failed to explain how this showed consumer confusion. 

The type-of-goods and the degree-of-care factors also favored NIM.  Regarding the goods, AK failed to provide “any information on the cost of [its metal products] and the types of customers that it targets with its marketing,” and thus failed to show that the type of goods supported a finding of customer confusion.  Turning to the degree of care, the court noted the increased sophistication of Internet users, citing Network Automation for the proposition that “the default degree of consumer care is becoming more heightened as the novelty of the Internet evaporates and online commerce becomes commonplace” (emphasis added), and that “consumers searching for expensive products online are even more sophisticated.” 

Finally, the labeling and appearance of NIM’s paid advertisements also favored NIM despite NIM’s ads at one time displaying “Escondido Metal Supply” in the ad headers.  Although the “text of [NIM’s] advertisements could have been misleading if the text included [the mark] in the header,” the court accepted that inclusion of AK’s mark “happened because of an automated process” and that NIM removed it shortly after AK filed its complaint.

AK also argued that, unlike in Network Automation, where the court compared paid advertising and organic search results, the likelihood of confusion was greater here because both AK’s and NIM’s ads both appeared in the “sponsored ads” section.  NIM emphasized that the text appearing immediately above its ad stated “Ads related to Escondido Metal Supply,” not “Ads for . . . .”  The court held that “[b]ecause the ads [were] clearly separated from the search results . . . and labeled as ads ‘related to’ the search terms, this factor [did] not strongly support [AK].”  Accordingly, the court found no likelihood of success on the merits of AK’s claim because none of the Network Automation factors weighed in favor of AK.

Finally, the court held that even if AK could show a likelihood of success on the merits, AK failed to show the required irreparable harm.  While the “loss of goodwill and reputation . . . may support injunctive relief,” the court stated that a “plaintiff must show that the alleged threat of irreparable harm is actual and imminent.”  According to the court, however, AK “merely speculate[d] that if consumers are confused between [AK] and [NIM], and [NIM’s] goods [were] inferior, then some customers may develop a poorer opinion of [NIM]’s products.”  The court also found that AK’s delay of almost two months in bringing its motion was further evidence that the harm to AK’s mark was not immediate.

CONCLUSION
This case is of interest because it is one of the few cases that has applied the Ninth Circuit’s special likelihood-of-confusion test for keywords, and appears to be the first case specifically relying on Google’s “ad related to [search term]” wording appearing above the ad as part of the likelihood-of-confusion analysis.