GEICO Isn't Good News for Google

Remember the GEICO v. Google case? My partner Jane Coleman does. She's writing a chapter on secondary trademark infringement liability for the second edition of a book on trademark counterfeiting now being edited by our colleague Brian Brokate, a partner at Gibney Anthony & Flaherty. (Brian is one of the leading anti-counterfeiting lawyers in the country. ) Her conclusion is one that Google and its lawyers doubtless know well: Having no trademark monitoring policy may be trouble, but a little policing may be worse than none at all.

The standard is set by a leading case in this area, Inwood Labs. Under Inwood, in a contributory liability trademark infringement case, a court will find contributory liability if the defendant has either (1) intentionally induced a third party to infringe the plaintiff’s mark or (2) supplied a product to a third party with actual or constructive knowledge that the product is being used to infringe the mark. The GEICO lawsuit, like most such cases, is a Prong Two case.

So, on to Prong Two, then: supplying a product to a third party with knowledge that the product is being used to infringe the mark. Product? Here there is no product; Google provides a service. But based on the principles synthesized in a later decision, Lockheed Martin v. Network Solutions from what are known as the "flea market cases," the second prong of this definition of contributory infringement can apply to services, too. Then the court applies a modified version of the Inwood standard: It considers the extent of monitoring and control the defendant has over the infringing activity.

So, what happened in the GEICO case? GEICO, a discount insurance company, sued Google for using GEICO’s trademarks to sell advertising on Google’s search engine, alleging contributory trademark infringement. Two practices of Google were at issue:

1. The sale by Google of GEICO’s marks as search terms or "keywords," and
2. The advertisements or "sponsored links" which contained GEICO’s marks in their text, generated by customers who selected those terms.

Regarding the sponsored links, GEICO had argued earlier that Google was contributorily liable, saying, “the advertisers themselves [made] 'trademark use' of the GEICO marks by incorporating them into the advertisements, which are likely to deceive customers into believing that the advertisers provide accurate information about GEICO products or are somehow related to GEICO.” GEICO also claimed -- remember the "direct control and monitoring" standard of Lockheed -- that Google in fact exercised significant control over the content of advertisements that appeared on its search result pages.

Last December, Google asked the U.S. District Court to grant judgment as a matter of law in its favor. It argued that GEICO could not win its contributory liability claim, because it could not prove that “Google affirmatively encouraged or knowingly assisted in violation of trademark law by the alleged infringers.” Google urged that its own internal trademark enforcement policy bans the infringing advertisements at issue, though “some ads occasionally slip through.” It insisted that the “inability to achieve perfect enforcement of that policy” did not give rise to contributory liability, and that there was no evidence that Google condoned or encouraged infringement.

But this would only matter if Prong One -- intentional inducement-- were at issue. Apparently, it's not. Google understandably would have the court focus on its good intentions, but this is a Prong Two case such as Lockheed -- where, again, the courts ask whether the defendant exercises a level of monitoring and control that Google acknowledges it does effect via its trademark enforcement policy. Google’s argument regarding its internal trademark policing policy may, in fact, prove too much.

It's not clear that Google can get out of responsibility for ads that “slip through,” given its awareness of the existence of infringing ads. If it can police a little, perhaps it can police a lot. Judge Brinkema's oral opinion did not address this, but a final written decision by her or an appellate court might. [UPDATE: As of early May, there is still no written decision. It's a good bet that there won't be one and the parties will settle...]

The court granted in part and denied in part Google’s motion, allowing the case to go forward on the question of whether Google was contributorily liable for trademark infringement arising out of the sponsored advertisements containing GEICO’s marks. The incentive to settle is high -- and maybe that's why it's so quiet.

This is why I have argued that auction websites (read: eBay) should be subject to contributory liability for the sale of counterfeit or other infringing merchandise -- because they (and other web auctioneers) do have control over the auctions. Courts have repeatedly found contributory infringement where a defendant claims "willful blindness." Well, it's certainly a sort of willful blindness to do some kinds of monitoring and not others.

Would it add to the cost of search engines and auctions to do more policing? Yes, of course it would: More fighting over rent. Considering the profits involved, and the tremendous costs imposed on brand owners to try and keep up with counterfeits and online infringers, an outcome that required more policing to protect the IP that contributes to those profits doesn't seem like an unreasonable one.