Century 21 Real Estate Corp. v. Lendingtree, Inc., 03-4700.

• Citation: 425 F.3d 211
• Decision Date: 11 October 2005
• Docket Number: No. 03-4700.,03-4700.
• Parties: CENTURY 21 REAL ESTATE CORPORATION; Coldwell Banker Real Estate Corporation; Era Franchise Systems, Inc. v. LENDINGTREE, INC., Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

425 F.3d 211

CENTURY 21 REAL ESTATE CORPORATION; Coldwell Banker Real Estate Corporation; Era Franchise Systems, Inc. v. LENDINGTREE, INC., Appellant.

No. 03-4700.

United States Court of Appeals, Third Circuit.

Argued December 6, 2004.

October 11, 2005.

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COPYRIGHT MATERIAL OMITTED

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Bruce I. Goldstein, Saiber, Schlesinger, Satz & Goldstein, Newark, NJ, Jeffrey A. Conciatori [Argued], Quinn, Emanuel, Urquhart, Oliver & Hedges, New York, NY, for Appellant LendingTree, Inc.

Stephen W. Feingold [Argued], Pitney Hardin, New York, NY, for Appellees Century 21 Real Estate Corporation; Coldwell Banker Real Estate Corporation; Era Franchise Systems, Inc.

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Before RENDELL, FISHER, Circuit Judges, and YOHN,^* District Judge.

FISHER, Circuit Judge, concurring in part and dissenting in part.

OPINION OF THE COURT

RENDELL, Circuit Judge.

This case presents an opportunity for us to consider the contours of the traditional test for trademark infringement where the defendant asserts the defense of "nominative fair use." More specifically, we must determine what role likelihood of confusion plays in a trademark infringement case where the defendant claims that its use was nominative and fair.

Appellees, Century 21, Coldwell Banker and ERA ("CCE") complain that Appellant Lending Tree ("LT"), in the process of marketing its mortgage services, improperly referenced CCE's trademarked services. LT contends that its use was nominative and fair, and permitted as a matter of law.

"Nominative" fair use is said to occur "when the alleged infringer uses the [trademark holder's] product, even if the alleged infringer's ultimate goal is to describe his own product. Nominative fair use also occurs if the only practical way to refer to something is to use the trademarked term." KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 328 F.3d 1061, 1072 (9th Cir.2003) (rev'd. on other grounds) (quotations omitted). By contrast, "classic" fair use occurs where the defendant uses the plaintiff's mark to describe the defendant's own product. New Kids on the Block v. News America Pub., Inc., 971 F.2d 302, 308 (9th Cir.1992).

The use of the term "Volkswagen" by a car mechanic in an ad describing the types of cars he repairs has been held to constitute a nominative fair use. See id. at 307 (citing Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350 (1969)). Clearly, the mechanic is referring to another's product, but does so in order to describe what he does. On the other hand, the use of the term "micro-colors," a registered trademark of one make-up company, referring to the pigments of the product of a different and competing make-up company that it used in its own product, was classified as a classic fair use. See KP Permanent Make-Up, Inc., 328 F.3d at 1072. There, the reference to the mark of another was made in describing its own product and its attributes.

Traditionally, we have looked to whether a trademark is likely to cause confusion in order to determine whether a violation of the Lanham Act has occurred and, thus, whether the use should be enjoined and prohibited. However, it is unclear what role "likelihood of confusion" plays in the analysis when "fair use" is asserted as a defense. Recently, the United States Supreme Court provided guidance to the courts regarding the test for classic fair use in KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111, 125 S.Ct. 542, 160 L.Ed.2d 440 (2004). The issue before us is the extent to which its reasoning applies to the nominative fair use analysis as well.

I. Factual and Procedural Background

Appellees Century 21 and ERA have each been in business for over 30 years. Coldwell Banker has been in business for almost 100 years. Each of these real estate companies oversees a system of franchisees

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who operate by reference to the franchisor's trademark (e.g., Century 21 Smith Realty). Franchise agreements permit those brokerage companies to provide realty services under trademarks held by Cendant Corporation. Every franchisee is granted a license to use its franchisor's trademark only in connection with its "d/b/a" name. (Thus, a franchisee could only refer to itself as Century 21 Smith Realty and not just Century 21). There are over 8,200 franchisees in CCE's collective systems in the U.S.

Appellant LendingTree describes itself as a diversified consumer-oriented Internet business that helps consumers identify and select qualified lenders, real estate brokers, auto insurers, and other financial service companies. It has a real estate referral service that consumers can access by visiting its website and inputting the location and characteristics of the house they are seeking to buy or sell. LT then selects and transmits information about up to four real estate companies participating in LT's referral network that service that community. If consumers ultimately use an LT referred broker, they receive rewards, such as airline frequent flier miles and gift cards. LT also has an established mortgage referral program based on contractual relationships with participating financial institutions identified on its website.

At the time of this action, LT's real estate referral network consisted of more than 650 real estate broker member companies in the U.S., which collectively operated more than 2,500 offices. More than 9,000 real estate agents in those offices were registered participants in LT's network. At least 257 of the approximately 650 real estate broker member companies participating in the LT network operated a Century 21, Coldwell Banker, or ERA franchise.

LT's real estate referral network was formed in 1998 by HomeSpace, a company from which LT acquired certain assets in August 2000. As early as 1999, HomeSpace publicly advertised its real estate referral network in printed materials as "including brokers representing the nation's leading franchises, such as Coldwell Banker, Century 21 ... and ERA."

The alleged infringement here is based on the following uses of CCE's marks:

(1) A Coldwell Banker "For Sale" sign with a woman, purporting to be a real estate agent, next to it, on which the blue and white Coldwell Banker logo was somewhat obscured by the word "SOLD." LT's phone number was at the bottom. This scene was depicted at the bottom of LT's homepage on its website.

(2) A statement by LT on its "Find a Realtor" homepage stating that LT will "give you access to a national network of brokers representing the country's leading real estate companies, including Coldwell Banker, ERA and Century 21." These three names headed a bullet-pointed list of all such realtors to whom LT promised access. The marks on those pages were in block letter format.

(3) LT's statement on its website's Help Center that LT is "[r]epresented by large independent real estate companies and members of major franchises — Coldwell Banker, Century 21, Prudential, ERA, ReMAX, GMAC (formerly Better Homes & Gardens), and Realty Executives."

(4) LT's use of printed marketing materials that stated that "LT is affiliated with more than 700 certified brokers such as Coldwell Banker, Century 21, Prudential, ERA and RE/MAX."

In January 2003, Kathryn Geib, in-house counsel for CCE's parent company responsible for the enforcement of its trademarks, wrote to LT to demand that it stop

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using CCE's "marks" on its website in any manner in the operation of its business. At that time, LT was using CCE's logos on its website. After receipt of the letter, LT stopped using the logos (or any other of CCE's marks) on that webpage, but continued to use CCE's marks in block letter form on other webpages. In March 2003, Geib learned that LT was using a marketing coupon containing the "affiliated language" described above. Geib sent a letter asking LT to stop such use. In May 2003, CCE discovered that LT was using CCE's marks, but in block letters, on its webpage. Geib again wrote, asking LT to stop such use.

Not satisfied with the response from LT, CCE commenced this action and applied for a preliminary injunction against LT's use of its marks, claiming unfair competition and trademark infringement in violation of §§ 32 and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114(1) and 1125(a). At issue in the case before the District Court was the use of CCE's marks in block form in bullet points on LT's webpage, marketing materials using the "affiliated with" language described above, and the Coldwell Banker "For Sale" sign.

After oral argument before the District Court, LT voluntarily implemented certain modifications to its website. It changed the background color of the "For Sale" sign from blue to red and removed the phone number at the bottom of the sign, moved the position of the bullet points with plaintiffs' names on them from first to last in its "Find a Realtor" list, and added a disclaimer to its real estate homepage that "LT is not sponsored by or affiliated with the parent franchisor companies of any of the participating members of its network." LT also added a note to a pop-up screen saying that "A particular franchisee in your geographic area may not be available to you through the LendingTree network if that franchisee is not a participating member of the network. In addition, it is possible that the network may not include any franchisee of a particular national company in a given area." (Text from www.LendingTree.com at JA689.) LT notified the District Court of these changes and represented that all of the language allegedly giving rise to CCE's motion had been permanently removed from LT's website and would not be used in the future.

The District Court issued its ruling with respect to the language used by LT at the time the complaint was filed, as well as the modified language. The District Court determined that LT's use of Appellees' names was likely to cause consumer confusion, that the nominative use defense did not shield LT in this instance, and...