Playboy Gets OK to Continue Netscape Suit - Watch Out You Auto Channel (TM )Stealers ...You know who you are!

SAN FRANCISCO January 14, 2004; Rachel Konrad writing for the AP reported that in a decision that could cast scrutiny over Internet search engines and online advertisers, a federal appeals court Wednesday reinstated a trademark infringement lawsuit by Playboy Enterprises Inc. against Netscape Communications Inc.

A three-judge panel of the 9th U.S. Circuit Court of Appeals said the Chicago-based adult entertainment company could proceed with its case against the Mountain View-based subsidiary of America Online Inc., which used words such as "playboy" and "playmate" in online search engines to link to advertisements for adult-themed rivals. Playboy argued the links tarnished and diluted its brand name by associating its trademarks with inferior products.

The case, originally filed in Los Angeles in 1999, could determine the legal limits of "keying." The online advertising practice allows advertisers to target individuals who are most likely interested in specific types of products.

For example, a person who types "circular saw" into a Yahoo search engine might see a listing sponsored by Home Depot.

"Playboy" and "playmate" were included in a list of about 400 words that Netscape's search engine used to identify people who were likely interested in buying adult-themed merchandise. Other words included "sex" and the names of certain body parts. People who typed in those words would receive banner ads for numerous adult-themed sites that were not associated with Playboy.

Playboy is suing Netscape for financial damages "well into the seven figures" and hopes the case will set a precedent, said Barry G. Felder, who represents Playboy for New York-based Brown Raysman Millstein Felder & Steiner LLP.

"There are all types of methods used by search engines and Internet advertisers to sell products, and I believe that the principles established here - that one cannot use trademarks in a confusing way on the Internet - will have an impact on other cases," Felder said. "We feel very good about what happened today."

AOL spokesman Nicholas Graham said the ruling "disappointed" AOL. He said the company, which acquired Netscape in 1999, is "assessing and considering the legal options available."

No court date has been set.

According to court records, Web surfers who typed in "playboy" or "playmate" into a Netscape search engine received banner ads whose fonts and capitalization mirrored those of the official Playboy site. In earlier courtroom testimony, an expert witness in advertising and psychology determined that 51 percent of people who typed in "playboy" believed the iconic entertainment empire started by Hugh Hefner sponsored the resulting ads.

Playboy attorneys said rivals' sites featured products and surfing experiences that were inferior to Playboy's. According to a 28-page decision written by Judge Thomas G. Nelson, Playboy's brand may have suffered "tarnishment" because of the confusion.