BEYOND CONFUSION: REEXAMINING TRADEMARK LAW'S GOALS IN THE WORLD OF ONLINE ADVERTISING

St. John's Law Review, Fall 2007 by Bonewitz, Paul L

INTRODUCTION

Trademark law has its roots in the common law of deceit.1 Trademarks emerged as "identifier [s] of the particular source of particular goods,"2 functioning to inform, not deceive, the public. Preventing confusion has therefore been the core policy underlying trademark law since its inception.3 Given the origin of trademark law, it is no surprise that current trademark uses typically avoid confusion by passing accurate and reliable information from trademark holders to consumers.

Trademark law does not prevent confusion, however, simply for the sake of preventing confusion. Legal theory has increasingly recognized that prohibiting confusing trademark uses is largely a means employed to achieve other goals.4 Chiefly, however, leading scholars have advanced the view that "trademark law . . . can best be explained on the hypothesis that the law is trying to promote economic efficiency."5 Specifically, economists have justified trademark law on the grounds that it decreases consumer search costs.6 In theory, then, the language of confusion has worked within trademark law as a "proxy for incorporating considerations of consumer search costs."7

Congress codified this proxy in 1946 when it passed the Lanham Act, which prohibited trademark uses in commerce that were "likely to cause confusion, or to cause mistake, or to deceive."8 More recently, however, Congress has expanded trademark liability beyond the realm of confusing uses. In 1995, the Federal Trademark Dilution Act created a federal right of action targeting unauthorized trademark uses that diluted famous marks, but disclaimed the need to prove a likelihood of confusion.9 In keeping with the statute's language, several circuits have interpreted the Act as requiring only a showing of actual economic harm.10 Moreover, the stated justifications for proscribing trademark dilution were largely economic and included reducing consumer search costs. In this instance, achieving economic efficiencies replaced avoiding confusion as the explicit touchstone of trademark liability.

Several commentators have argued that online trademark uses are analogous to offline uses and that, therefore, no law beyond the confusion-based Lanham Act is needed to account for them. In at least one instance, Congress disagreed, extending dilution protection to the internet through the Anticybersquatting Consumer Protection Act of 1999, specifically to account for the then unfamiliar practice of registering trademarks as domain names.11 Equally unfamiliar trademark uses currently exist in the world of online advertising. In particular, businesses using other companies' trademarks in search-based advertising and contextual advertising have frequently faced litigation. Lacking new legislation, courts have turned to trademark doctrine developed in the offline world. The results have been predictably inconsistent. Using a doctrine known as "initial interest confusion" that traditionally addressed a form of pre-sale confusion, several courts found instances of trademark infringement even while acknowledging that no confusion was likely to occur.12 Critics have charged that such holdings contravene not only the Lanham Act's express confusion requirement, but also the underlying goals of trademark law.

This Note asserts that although such holdings clearly violate the Lanham Act, they may nonetheless be justifiable on normative grounds. Despite critics' suggestions, certain online advertising techniques differ from their offline counterparts. The advent of search engines and contextual advertising has allowed commercial actors to not only transmit information to consumers, but to also respond to trademark selections made by consumers in ways that actively interfere with their search activity, in some cases even impeding consumers from reaching their objectives. This Note argues that in the limited instances where nonconfusing trademark uses increase consumer search costs, legislation is needed both to provide certainty and uniformity to an open area of law, and to better effectuate trademark law's goals.

Part I of this Note traces the theoretical and statutory expansion of trademark law from its originally limited focus on preventing confusion to its currently broader concern with economic efficiencies. Part II first describes the mechanics of internet advertising practices, including keyword search-based advertising and contextual advertising. It then discusses several cases in which courts ignored the Lanham Act's confusion requirement when applying the doctrine of initial interest confusion to online advertising practices. Finally, Part III critiques the validity of popular analogies between online and offline advertising and, finding significant differences, concludes by suggesting that the existence of situations in online advertising in which trademark uses increase search costs without creating confusion justifies limited legislative extension of trademark protection.

I. THE THEORETICAL AND STATUTORY DEVELOPMENT OF TRADEMARK LAW