Trademark Law - Initial Interest Confusion MBF Law

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Source: http://www.mbf-law.com/pubs/client/ip_alert_9_02.cfm.
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INTELLECTUAL PROPERTY ALERT
August 2002
New Seventh Circuit Ruling Restricts Use of Competitors'
Trademarks on Web sites

In Promatek Industries, Ltd. v. Equitrac, Corp. 2002 U.S. App. LEXIS 16207 decided on August 13, 2002, the United States Court of Appeals for the Seventh Circuit, whose decisions are binding on federal courts in Wisconsin, Indiana, and Illinois, held that putting a competitor's trademark in the metatags for your Web site creates "initial interest confusion," and therefore, it constitutes trademark infringement and can be prohibited, even if you believe you are only using the metatags descriptively to indicate that you service your competitor's products.
The court made a distinction between the content of the site itself and the metatags, or key words that search engines hone in on to direct traffic to a site, holding that a company which services another company's products may use its competitor's trademark in the content of its site to describe those services but may not use its competitor's trademark in metatags for the site. In so holding, the court relied on a line of cases decided outside the context of the Internet in which the creation of "initial interest confusion" was held to be trademark infringement. "Initial interest confusion" arises when one company lures a potential customer into discussions about potentially buying its product through the deceptive use of its competitor's trademark.
It is called "initial interest confusion" because in the cases where the theory has been applied, the customer quickly learns that they are not dealing with the competitor and thus are not confused about who they are buying from if they ultimately decide to make a purchase; nevertheless, the courts have held that this is actionable because that customer might never have talked to the company in the first place, and the company thus never would have made the sale, if the customer hadn't been lured initially by the misleading use of the competitor's trademark.
An example of this is a company which made cold calls using the name "Pegasus Petroleum;" when they first answered the phone and heard this name, customers thought the call was from an arm of Mobil Oil, owner of the Pegasus logo. As the call went on, they realized their mistake and that the caller was not affiliated with Mobil, but the court nevertheless enjoined use of the "Pegasus Petroleum" name.
The same type of initial interest confusion happens with metatags; a customer types a well-known trademark into a search engine and gets a list of Web pages; that customer might be confused initially by the list, but the confusion might be dispelled once the customer actually clicks on a link and sees the actual site itself; nevertheless, without the metatags, it's likely the customer would never have gone to that site at all, because it would not appear in the search results.
The Seventh Circuit clearly made the distinction between this type of impermissible metatag usage, which creates initial interest confusion, and descriptive Web site content:
What is relevant to the preliminary injunction is not that Equitrac may advertise that it is capable of servicing Copitrak. Equitrac is free to do so; it is also free to place comparison claims on its Web site, or include press releases involving the litigation between Equitrac and Promatek. It is Equitrac's use of the term Copitrack in its metatag that is a prohibited practice because of its potential for customer confusion.
If you would like to read the Seventh Circuit decision, the Web site address is as follows: www.ca7.uscourts.gov/op3.fwx?submit1=showop&caseno=00-4276.PDF.