Trademark Owners in the First Circuit Can Sue to Stop Competitor from Embedding Their Trademarks in Website and Collect Damages and Attoney's Fees

December 22, 2008

The First Circuit Court of Appeals, which handles federal appeals in Maine, New Hampshire, Massachusetts, and Rhode Island, ruled in the Venture Tape case1 that it is unlawful trademark infringement prohibited by the federal trademark law (the Lanham Act) for a website operator to use the trademark owner’s mark on its website without permission even though the trademark is never displayed or viewed on the site.  

The plaintiff registered “VENTURE TAPE” and “VENTURE FOIL” with the United States Trademark Office in 1990.  It advertised in print and on the internet, building a reputation for the “Venture” name in the worldwide stained glass market.  In 2000, the defendant, which is a direct competitor, embedded Venture’s marks in its website by including them as "metatags" and as white lettering on a white background screen.  Neither the metatags nor the white letters are visible to persons viewing the webpage.

It took Venture Tape a couple of years to discover the defendant's use of its marks.  When it filed suit in 2003 and asked the court for summary judgment, the defendant admitted that it was using Venture’s marks without permission but argued that the use was not likely to cause consumer confusion and therefore was not infringing.  Summary judgment was granted and upheld on the defendant’s appeal.  The court applied the test it commonly uses (which is known as "the Pignons analysis" in a reference to the 1981 case listing the eight factors used to determine infringement) and found the defendant liable. The court further upheld the award of money damages based on Venture Tape’s proof of direct competition and infringement by the defendant.  The Lanham Act permits the court to award "an equitable share of the infringer's profits," considering that the defendant intentionally incorporated the plaintiff’s trademarks and failed to meet its burden of proving deductions and costs to be subtracted from gross revenue to determine its profit margin.

In this case, the defendant admitted that it was using the plaintiff’s trademarks when it incorporated them as metatags and invisible text on the website.  However, cases from other federal appeals courts have reached the opposite conclusion when search firms2 and competitors3 named as defendants have argued that use of a trademark in keywords and metatags, where the use is strictly internal and not communicated to the public, does not constitute a “trademark use” and, therefore, does not support an action for infringement.  These courts have not reached the question of "likelihood of confusion" analysed by the court in the Venture Tape case.

Until there is a uniform body of law surrounding internet advertising, owners of registered trademarks should be vigilant about policing the uses of their marks by others on the web and should at a minimum demand that competitors cease any unpermitted uses in their websites or search features.

1 VENTURE TAPE CORPORATION V. MCGILLS GLASS WAREHOUSE, 540 F.3d 56, 88 U.S.P.Q.2d 1051 (1st Cir. 2008).
2 RESCUECOM CORP. V. GOOGLE, INC., 456 F.Supp. 2d 393 (N.D.N.Y. 2006)(case on appeal to the Second Circuit Court of Appeals).
3 S&L VITAMINS V. AUSRALIAN GOLD, 521 F. Supp. 2d 188 (E.D. N.Y. 2007).