Texas personal injury law firm Jim S. Adler P.C. and its founder Jim Adler (collectively, “Adler”), known for their “eccentric” TV spots, succeeded in reversing dismissal of their trademark infringement claims against operators of a lawyer referral service and call center, McNeil Consultants, LLC and Quintessa Marketing, LLC, and their sole owner Lauren Von McNeil (collectively, “McNeil”).  In a matter of first impression, the United States Court of Appeals for the Fifth Circuit held that Adler adequately alleged likelihood of confusion based on McNeil’s use of Adler’s marks as keywords for search-engine advertising and that Adler’s complaint should not have been dismissed.

According to the complaint, Adler had purchased Google “keyword ads” for their registered marks JIM ADLER, THE HAMMER, TEXAS HAMMER, and EL MARTILLO TEJANO (collectively, the “Adler Marks”), meaning that searching any of the Adler Marks using Google search returned Adler’s advertisements among the results.  McNeil also purchased keyword ads for the Adler Marks—at higher prices—to ensure their advertisements appeared next to or before Adler’s own.

Specifically, McNeil’s advertisements did “not identify a particular lawyer or law firm as the source of the advertisement,” but instead “display[ed] generic terms that consumers might associate with any personal injury law firm.”  The advertisements were also “click-to-call,” or in other words, clicking on them using a mobile phone placed a call to McNeil’s call center.  Adler alleged that McNeil’s advertisements “confused consumers, who were specifically searching for Jim Adler and the Adler Firm, on the phone and talking to [McNeil’s] employees as long as possible in a bait-and-switch effort to build rapport with the consumer and ultimately convince [the consumer] to engage lawyers referred through [McNeil] instead.”

In response, Adler sued McNeil for trademark infringement under the Lanham Act and other claims under Texas law.  As the Fifth Circuit recounted, to plead a claim for trademark infringement in violation of the Lanham Act, a plaintiff must allege that: “(1) [the plaintiff] possesses a legally protectable trademark and (2) [the defendant’s] use of this trademark ‘creates a likelihood of confusion as to source, affiliation, or sponsorship.’”  Streamline Prod. Sys., Inc. v. Streamline Mfg., Inc., 851 F.3d 440, 450 (5th Cir. 2017) (citation omitted). 

The magistrate judge, however, recommended dismissal of the complaint for failure to state a claim on the basis that:  (1) Adler’s trademark infringement claims were based solely on McNeil’s purchase of the Adler Marks as keywords for search-engine advertisements; (2) the allegations regarding McNeil’s bait-and-switch scheme were conclusory; and (3) Adler could not plead likelihood of confusion as matter of law because McNeil’s advertisements were generic and did not visibly use the Adler Marks.  Adler objected to the magistrate’s report and recommendation, and filed a motion for leave to amend the complaint.  The district court, however, adopted the report and recommendation, dismissed the complaint, and denied Adler’s motion for leave to amend as futile.

On appeal, the Fifth Circuit explained that its review was limited to whether Adler sufficiently pleaded likelihood of confusion because McNeil did not dispute the protectability or ownership of the Adler Marks.  On the issue of confusion, the Court specified that Adler had alleged “initial interest confusion,” or confusion that “creates initial consumer interest, even though no actual sale is finally completed as a result of the confusion.”  Elvis Presley Enters., Inc. v. Capece, 141 F.3d 188, 204 (5th Cir. 1998).  Recognizing that the Fifth Circuit had not yet addressed initial interest confusion in the context of search-engine advertising in a published opinion, the Court relied on other authority. 

First, the Court examined a non-precedential Fifth Circuit opinion, Southwest Recreational Indus., Inc. v. FieldTurf, Inc., No. 01-50073, 2002 WL 32783971 (5th Cir. Aug. 13, 2002), which analyzed initial interest confusion in the context of “meta tags,” or programming code instructions given to online search engines.  Citing Southwest Recreational, the Court explained that meta tags are similar to keyword advertising because are detected by search engines and increase the likelihood that a user searching for a particular topic will be directed to that web designer’s page but are also invisible to the user.  It recounted that Southwest Recreational looked to Ninth Circuit cases finding trademark infringement in meta tag cases where plaintiffs had evidence of customer confusion or illegitimate use of meta tags, and thus affirmed a verdict of no infringement based on a lack of such evidence.

Second, the Court examined Ninth Circuit caselaw post-Southwest Recreational, noting that Playboy Enters., Inc. v. Netscape Commc’ns Corp., 354 F.3d 1020, 1034 (9th Cir. 2004) held that using keywords for search-engine advertisements could create initial interest confusion if consumers initially believed that “unlabeled banner advertisements” were links to sites belonging to or affiliated with the trademark owner.  It further stated that in Network Automation, Inc. v. Advanced Sys. Concepts, Inc., 638 F.3d 1137, 1148 (9th Cir. 2011), the Ninth Circuit adopted a distinction from Judge Marsha Berzon’s concurrence in Playboy Enters. “between hijacking a customer to another website by making the customer think he or she is visiting the trademark holder’s website (even if only briefly), . . . and just distracting a potential customer with another choice, when it is clear that it is a choice.”

Then, the Court expressly agreed with Southwest Recreational and the Ninth Circuit opinions that “the critical issue is whether there is consumer confusion” and “[d]istraction is insufficient.”  On this point, the Court held that Adler adequately alleged confusion because they pleaded specific factual allegations describing how McNeil’s use of their marks, combined with their generic advertisements and misleading call-center practices (which the Court determined were not conclusory) caused initial interest confusion, and therefore did not rely merely on purchasing of trademarks as keywords.

The Court also clarified that although the Lanham Act does not protect generic terms, Adler had not alleged trademark infringement solely because of the generic text of McNeil’s advertisements, but rather on McNeil’s use of the Adler Marks.  It distinguished the circumstances here because the genericness of McNeil’s advertisements enhanced, rather than dispelled, the likelihood of initial interest confusion.  Thus, it determined that the district court improperly concluded Adler could not plead a likelihood of confusion as a matter of law on the basis that McNeil’s advertisements were generic.

Furthermore, the Court found no Fifth Circuit authority supporting the district court’s conclusion that Adler’s trademark infringement claims failed as a matter of law because McNeil’s advertisements did not visibly use the Adler Marks.  Instead, the Court pointed to Tenth Circuit precedent in 1-800 Contacts, Inc. v. Lens.com, Inc., 722 F.3d 1229, 1242-49 (10th Cir. 2013) which held that even where users cannot discern marks in sponsored advertisements, “if confusion does indeed arise, the advertiser’s choice of keyword may make a difference to the infringement analysis.”  In sum, the Court held that “whether an advertisement incorporates a trademark that is visible to the consumer is a relevant but not dispositive factor in determining a likelihood of confusion in search-engine advertising cases.” 

Due to its conclusion that Adler adequately alleged initial interest confusion, the Court reversed dismissal of the complaint, vacated denial of leave to amend, and remanded for further proceedings.

The case is Jim S. Adler, P.C. v. McNeil Consultants, L.L.C., No. 20-10936, _ F.4th _, 2021 WL 3508713 (5th Cir. Aug. 10, 2021)