## Facts

- Playboy Enterprises, Inc. (PEI) owned federally registered trademarks for “PLAYBOY” and “PLAYMATE” used in adult entertainment services and publications.
- Netscape Communications Corp. and Excite, Inc. operated internet search engines that displayed paid banner advertisements on search results pages.
- Defendants sold “keyed” advertising, allowing advertisers to have banner ads appear when users searched for selected terms.
- Defendants maintained a list of more than 400 sex- and adult-oriented terms, including “playboy” and “playmate,” and required adult-oriented advertisers to link their banner ads to those terms.
- When users searched for “playboy” or “playmate,” competitors’ adult-oriented banner ads appeared on the results page.
- PEI offered evidence that these banner ads were often graphic and were confusingly labeled or not labeled, obscuring the advertiser’s identity.
- Clicking a banner ad took the user directly from the search results page to the advertiser’s website.
- PEI alleged defendants misappropriated the drawing power of its marks, caused initial interest confusion, and diluted the distinctiveness of the marks.

## Issues

1. Whether defendants’ use and sale of PEI’s trademarks as “key” terms to trigger adult-oriented banner ads created a triable issue of likelihood of confusion, including initial interest confusion, under the Lanham Act.
2. Whether the keying practice created a triable issue of dilution (by blurring or tarnishment) of PEI’s allegedly famous marks under the federal dilution statute then in effect.

## Decision

- The Ninth Circuit reversed the summary judgment for defendants and remanded.
- The court held there were genuine disputes of material fact on whether keying competitor banner ads to “playboy” and “playmate,” combined with ambiguous or absent source labeling, was likely to cause consumer confusion, including initial interest confusion, about sponsorship or affiliation.
- The court held there were genuine disputes of material fact on whether this practice diluted PEI’s marks through blurring or tarnishment.
- The court treated defendants’ use of the marks in their keyed advertising system as “use in commerce” for Lanham Act purposes because it was part of selling and delivering advertising tied to the marks.

## Legal Principles

- Using another’s trademark as a trigger for delivering advertising can constitute actionable trademark use where the mark is exploited commercially to sell and target ads.
- Likelihood of confusion may exist even if confusion is dispelled before purchase; initial interest confusion can satisfy the Lanham Act when a mark is used to attract users to a competitor through misleading or unclear source cues.
- In evaluating confusion in online advertising, the clarity of source identification in the advertisement is significant; ambiguous or missing labeling can support a finding of likely confusion as to affiliation or sponsorship.
- On summary judgment, trademark infringement and dilution claims must proceed to trial when evidence would permit a reasonable jury to find likely confusion or dilution, particularly where famous marks are used to channel users to competing, closely related services.

## Conclusion

The Ninth Circuit held that a search engine’s keyed advertising tied to famous trademarks may support infringement and dilution claims where resulting competitor ads lack clear source identification, creating a triable risk of initial interest confusion and dilution, and it therefore reversed summary judgment and remanded for further proceedings.


Playboy Enters., Inc. v. Netscape Commc'ns Corp., 354 F.3d 1020 (9th Cir. 2004)