Hearts On Fire Company, LLC v. Blue Nile, Inc.

• Decision Date: 27 March 2009
• Docket Number: Civ. Action No. 08cv11053-NG.
• Citation: 603 F.Supp.2d 274
• Parties: HEARTS ON FIRE COMPANY, LLC, Plaintiff, v. BLUE NILE, INC., Defendant.
• Court: U.S. District Court — District of Massachusetts

603 F.Supp.2d 274

HEARTS ON FIRE COMPANY, LLC, Plaintiff, v. BLUE NILE, INC., Defendant.

Civ. Action No. 08cv11053-NG.

United States District Court, D. Massachusetts.

March 27, 2009.

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COPYRIGHT MATERIAL OMITTED

Leota L. Bates, Perkins Coie LLP, Washington, DC, Dennis N. D'Angelo, Mark S. Puzella, Goodwin Procter LLP, Boston, MA, Elizabeth L. McDougall, Perkins Coie LLP, Seattle, WA, for Defendant, Blue Nile, Inc.

Zachary N. Coseglia, Bruce E. Falby, Robert P. Sherman, DLA Piper U.S. LLP, Boston, MA, for Plaintiff, Hearts on Fire Company, LLC.

MEMORANDUM AND ORDER RE: MOTION TO DISMISS

GERTNER, District Judge:

This case raises complex allegations of trademark infringement on the internet—through the use of trademarks in search engines, in sponsored links, and on commercial websites. The Plaintiff, Hearts on Fire Co., LLC ("Hearts on Fire"), principally claims that one of its competitors, Blue Nile, Inc. ("Blue Nile"), committed trademark infringement when it used the Plaintiffs trademark as a keyword to trigger search engine advertisements known as "sponsored links." While sponsored linking is a common form of internet advertising, the use of a competitor's trademark to trigger these links has generated both litigation and academic debate.¹

The Complaint encompasses three different uses of the Plaintiffs mark by Blue Nile: (1) the Defendant's purchase of the trademark as a search engine keyword, which displayed a sponsored link directing the computer user to Blue Nile's website whenever the phrase "hearts on fire" was entered as a search-term, (2) the display of trademarked text in the Blue Nile advertisement attached to the sponsored link, and (3) the search results list generated within the Blue Nile website when the computer user searches there for the phrase "hearts on fire." Together, the Plaintiff argues, these uses constitute a course of conduct likely to confuse internet shoppers, improperly diverting them to its competitor's website.

The Defendant has filed a Motion to Dismiss (document # 5). Significantly, the Defendant's present motion is not directed toward Plaintiffs allegation that the trademark "hearts on fire" appeared alongside Defendant's sponsored link. See Compl. ¶ 21. Blue Nile agrees that this allegation, if true, amounts to infringement. Def. Mot. to Dismiss Mem. at 1 (document # 6). Rather, Blue Nile asks this Court to dismiss the Plaintiffs allegation that the Defendant's use of the trademark to trigger the sponsored link constitutes infringement under Section 32(a) of the Lanham Act, 15 U.S.C. § 1114. Likewise, the Defendant argues that Plaintiff's third theory is unavailing, because Blue Nile does not use the "hearts on fire" trademark on its own website.

For the reasons below, the Court finds that Blue Nile's adoption of the Plaintiffs trademark as a search engine keyword constitutes a "use" within the meaning of the Lanham Act. To be sure, this use is not, by itself, enough to prove infringement. If the Plaintiff can show that the resulting sponsored links and the content of the Blue Nile website likely led to consumer confusion, Blue Nile's purchase of the search term would meet the requirements of the Act. Accordingly, Blue Nile's Motion to Dismiss is DENIED.

I. BACKGROUND

The Plaintiff sells trademarked diamonds and jewelry to authorized retailers, many of whom resell these diamonds online. Compl. ¶ 2 (document # 1). "Hearts on Fire" is a registered trademark of the Plaintiff, and the name of the Plaintiffs diamond company. Id. at ¶ 14. The Plaintiff does not sell diamonds directly to the public, though it does "provide services relating to the sale of jewelry," including a public website that promotes the trademarked jewelry and directs customers to authorized dealers of the trademarked diamonds. Id. The Plaintiff considers itself a "recognized worldwide industry leader," which has used the trademark "Hearts on Fire" to promote its diamonds since as early as 1996. Id.

The Defendant, Blue Nile, operates an online diamond and jewelry retail store where consumers can purchase diamonds. Id. at 3. Importantly, the Defendant is not an authorized dealer of Hearts on Fire diamonds and consumers cannot buy the Plaintiffs trademarked diamonds at the Defendant's website. Id.

The mechanisms of the alleged infringement, which is based upon keyword purchasing and the display of search engine sponsored links, warrant some description. When a consumer wants to search the internet for information, she or he often begins at a search engine, such as Google or Yahoo. Once there, the computer user types words or phrases into a search box on the search engine website. The search engine then generates a list of web addresses, called a "search results list," that may be relevant to the computer user's interests based on the searched-for word or phrase. Search engines use complex algorithms to search their databases and determine which web addresses will appear in the search results list. These algorithms generally rank the web addresses according to relevancy, using factors such as whether the search terms appear on the webpage and whether previous computer users using that search term have decided to click on the link to the web address. See Jackson v. Scotts Co., 2009 WL 321010, at *6 n. 32 (S.D.N.Y.2009) (citing Preston Gralla, How the Internet Works 192 (7th ed. 2004)); Playboy Enters., Inc. v. Netscape Comm'ns Corp., 55 F.Supp.2d 1070, 1077 (C.D.Cal.1999).

In addition to search results based on relevancy, many search engines also display so-called "sponsored links" on their results page. These sponsored links are a form of advertising, by which the search engine permits a company to purchase a keyword or phrase which triggers the paid advertisement. Specifically, when a computer user enters a search that includes the purchased keyword, a link to the website of the company that purchased the keyword, together with a small advertisement, appears near the top of the results list displayed. This listing is usually demarcated, quite accurately, as a "sponsored link." All in all, purchasing a keyword allows a company to circumvent the search engine's usual relevancy factors and prominently display its sponsored link to internet users.

In this case, the Plaintiff alleges that the Defendant paid a search engine, www. webcrawler.com, to display a sponsored link with the web address of the Defendant's website when a computer user searched for the phrase "hearts on fire." Compl. ¶ 21. The text of the sponsored link, which included the Plaintiffs trademark, reads as follows:

Ideal Cut Diamonds at Blue Nile Find hearts on fire diamonds at Forbes Favorite Online Jeweler. Sponsored by: www.bluenile.com.

Id. The Plaintiff also alleges that the Defendant has used the "hearts on fire" keyword to trigger Blue Nile sponsored links that do not include the trademark in their text. Id. at ¶ 23. In either case, if the internet user clicks the sponsored link and proceeds to the Defendant's web address, www.bluenile.com, the Blue Nile website contains an internal search engine that exclusively searches web pages within the Defendant's website. If the computer user then types the trademarked phrase into the Defendant's search box, a list of search results containing the individual words of the trademark are displayed— i.e., a list of webpages with the words "hearts" or "on fire"—albeit none of these results containing the exact trademarked phrase. Id. at ¶ 24.

The Plaintiff alleges that these uses of its mark, either separately or together, constitute trademark infringement under Section 32(a) of the Lanham Act, 15 U.S.C. § 1114,² unfair competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),³ unfair competition at common law, and unfair and deceptive practices under M.G.L. ch. 93A. Compl. ¶ 37. Plaintiff is harmed because Defendant's use of the "hearts on fire" trademark confuses consumers, diverting potential internet customers from their original intent to buy the Plaintiffs diamonds and directing them instead to the Defendant's website. Id. at ¶ 27. Whether this diversion—achieved through the purchase of sponsored links triggered by the trademarked phrase— constitutes trademark infringement is the central issue here.

II. STANDARD OF REVIEW

In deciding whether to grant a motion to dismiss under Fed.R.Civ.P. 12(b)(6), this Court must determine whether the Plaintiff has stated a claim upon which relief can be granted. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 514, 122 S.Ct. 992, 152 L.Ed.2d 1 (2002) (citing Conley v. Gibson, 355 U.S. 41, 47, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). The Court must accept as true the claims in the complaint, with all reasonable inferences drawn in favor of the Plaintiff. Watterson v. Page, 987 F.2d 1, 3 (1st Cir.1993). A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the Plaintiff can prove no set of facts in support of its claim. See Miranda v. Ponce Fed'l Bank, 948 F.2d 41, 44 (1st Cir.1991) (citing Conley, 355 U.S. at 45, 78 S.Ct. 99). The Plaintiffs factual allegations, however, must be more than speculative, and require more than labels and conclusions. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964, 167 L.Ed.2d 929 (2007). Thus, dismissal would be appropriate if "it appears from the facts alleged that the claimant cannot recover on any viable theory." Rumford Pharm., Inc. v. City of East Providence, 970 F.2d 996, 998 (1st Cir.1992).

III. DISCUSSION

The Defendant has filed a partial motion to dismiss, seeking to eliminate the first and third theories of trademark violation that the Plaintiff pursues, namely the Defendant's purchase of the "hearts on fire" trademark as a keyword to trigger sponsored links, and the results when "hearts on fire" is entered into the Defendant's internal search engine. As described above, the Defendant has not challenged...