United States District Court, S.D. New York
REPORT AND RECOMMENDATION
GABRIEL W. GORENSTEIN, Magistrate Judge.
Plaintiff LBF Travel, Inc. ("LBF") has brought this action alleging that Fareportal, Inc. and WK Travel, Inc. (collectively "defendants") infringed upon its trademarks and trade dress and engaged in other deceptive business practices. Defendants now move to dismiss the first amended complaint pursuant to Rules 12(b)(1), 12(b)(6), and 13(a) of the Federal Rules of Civil Procedure. For the following reasons, this motion should be granted in part and denied in part.
A. Facts Alleged in the Complaint
For purposes of deciding defendants' motion to dismiss, the Court assumes the allegations in LBF's amended complaint are true and draws all reasonable inferences in LBF's favor. See, e.g., Steginsky v. Xcelera Inc. , 741 F.3d 365, 368 (2d Cir. 2014).
1. LBF's Business Practices and Trademarks
LBF is an online discount travel services business that owns and operates travel brands "Smartfares" and "Travelation, " which offer discount travel products to online customers through the websites "www.smartfares.com" and "www.travelation.com." See First Amended Complaint, filed Mar. 7, 2014 (Docket #13) ("Compl."), ¶¶ 2, 17. LBF has owned and operated www.smartfares.com since at least 2010, and on November 21, 2013, LBF filed an application to register "Smartfares" with the United States Patent and Trademark Office. Id . ¶ 18. The Smartfares trademark application is currently pending. Id . LBF has owned and operated www.travelation.com since at least 2010 and has owned a federally registered trademark for "Travelation" since 2008. Id . ¶ 19. For several years, LBF has continuously used the Smartfares and Travelation brands to provide customers with air travel bookings, hotel reservations, and booking services for car rentals, packages, and insurance. Id . ¶ 20.
The Smartfares and Travelation brands "have come to be associated in the minds of consumers throughout the country with [LBF's] services, and the use of [these] Marks... substantially increases the marketability of travel, reservation, and booking services rendered by [LBF] through its www.smartfares.com and www.travelation.com websites." Id . ¶ 23. Also, "[t]hrough great expense and care, [LBF] has become well known and famous in its market and has acquired a reputation for excellence and outstanding service to customers... [and thus] [LBF's] reputation, and the goodwill associated with LBF's Marks are very valuable business assets, which [LBF] vigorously protects." Id . ¶ 18. Because of this fame, "potential customers will search specifically for LBF's Marks through a variety of Internet search engines, including Google." Id . ¶ 23.
2. Defendants' Business Practices and Trademarks
Defendants Fareportal and WK Travel are competitors with LBF that operate travel websites offering discounted airfare, accommodations, car rentals, and vacation packages to online customers. See id. ¶¶ 3, 25, 37-39. Fareportal and WK Travel are affiliated with each other and have common ownership. Id . ¶ 3. Defendants' websites include www.cheapoair.com, www.onetravel.com, www.cheapostay.com, www.insanelycheapflights.com, and www.farebuzz.com. Id . ¶¶ 3, 25, 37-39. Defendants own the following federally registered trademarks: "CHEAPOAIR, " "CheapOstay, " "CHEAPOAIR.COM THE ONLY WAY TO GO!!, " "CHEAPOAIR.COM THE ONLY WAY TO GO!! (stylized mark)." Id . ¶¶ 26, 43-45. Additionally, defendants have pending applications for the following trademarks: "CHEAPOAIR.COM, " "www.cheapOair.com, " and "ONETRAVEL." Id . ¶ 40. American Travel Solutions, LLC, a non-party that holds trademarks similar to the ones defendants seek to have registered, has initiated opposition proceedings against defendants' applications for the "CHEAPOAIR.COM" and "www.cheapOair.com" trademarks. See id. ¶¶ 46-51.
3. Defendants' Improper Use of Search Engine Marketing Programs
LBF alleges that defendants have "improperly infringed upon and diluted [LBF's] trademarks by purchasing [LBF's] trademarks as keywords from Google and other search engines (activity known as search engine marketing' or SEM'), so that when an internet user searches for Travelation' or smartfares' on Google or another search engine, an advertisement hyperlink for one of the websites of [defendants]... will appear on the first page of the search results." Id . ¶ 6.
Google operates a program called "AdWords" which allows advertisers to bid on advertising hyperlinks, also known as "sponsored links, " that appear on an Internet user's search results page when the user has inputted certain keywords into Google's search engine. See id. ¶ 65. The sponsored link contains both an advertisement for the advertiser's business and a direct link that takes the Internet user directly to the advertiser's website when the user clicks on it. Id . According to LBF, "[the] sponsored links' do not always clearly identify themselves as advertisements, and Google's layout of the ads does not conspicuously identify them as such." Id . ¶ 66. In particular, "[the] ads at the top of the search results are designed by Google to look like part of the non-sponsored' search results, and by virtue of the fact that they appear at the top of the list of Search Results, Internet users may infer that they are the most relevant websites on the Search Results page." Id . Other search engines, such as Yahoo! and Bing, offer similar SEM programs that typically "award the first sponsored result to the [advertiser] that has placed the highest bid on the keyword, i.e. the [advertiser] that has agreed to pay to the search engine operator the highest amount each time an independent internet user takes a particular action (such as searching a term or clicking on a link in the advertisement)." Id . ¶ 67.
LBF has bid on its own trademarks with Google AdWords and other SEM services so that whenever an Internet user searches the keywords "Smartfares" or "Travelation, " LBF's sponsored links appear above or to the right of the search results, thus allowing the user to go directly to LBF's websites by clicking on the sponsored links. See id. ¶ 68. However, defendants have also bid on the Smartfares and Travelation keywords with Google AdWords so that defendants' sponsored links also appear on the results page when a user searches for these terms. Id . ¶ 69. According to LBF, defendants have "purchase[d] advertising using LBF's Marks as Keywords for the specific purpose of intercepting consumers and customers of [LBF] and those who are specifically looking for TRAVELATION and SMARTFARES and diverting them to" defendants' competing websites. Id . ¶ 70. In support of this assertion, LBF has included in its amended complaint screen images of Google searches demonstrating that defendants' "www.cheapoair.com" website has been listed as a sponsored link for the "smartfares" and "travelation.com" keywords. See id. ¶¶ 77-78.
LBF alleges that "Defendants' use of the LBF's Marks via search engine advertising programs causes confusion in the marketplace that Defendants' goods and services are affiliated with or otherwise approved or sponsored' by [LBF]; causes LBF's Marks to be diluted by losing their distinctive quality of being associated solely with [LBF]; allows Defendants to financially benefit from and to trade off of the goodwill and reputation of [LBF] without incurring an expense similar to that incurred by [LBF] in building up its brand name; and causes [LBF] to lose, in part, control over the commercial use of its own name and LBF's Marks by placing such control in the hands of Defendants." Id . ¶ 72.
With regard to the potential confusion caused by defendants' practices, LBF contends, "[w]hen an Internet user searching on a search engine for LBF's Marks is presented with a search results page which contains multiple sponsored links, one of which may be for [LBF's] websites, and others for Defendants' competing websites... [the user] may click on one of the sponsored links for Defendants' websites, believing that it is related to, or sponsored by [LBF]." Id . ¶ 73. Furthermore, "[e]ven if the Internet user realizes that the website they have been taken to is not [LBF's] website, a percentage of such Internet users may either stay at the Defendant's [sic] websites, or may otherwise discontinue their search for LBF's Marks." Id . Additionally, "[a]n Internet user may associate the quality of goods and services offered on Defendant's [sic] website with those offered by [LBF], and if dissatisfied with such goods or services, may discontinue their search for such services entirely." Id.
4. Defendants' Allegedly Infringing Websites
LBF additionally alleges that defendants have "intentionally heightened the likelihood of confusion among consumers as to the affiliation, sponsorship, or source of the services provided by imitating the graphic user interface of [LBF's] websites, in order to mimic the look and feel' of [LBF's] websites." Id . ¶ 83. LBF asserts that it "has established distinctive, nonfunctional design elements for its websites, which consumers have come to associate with [LBF's] services." Id . ¶ 84. LBF explains that "[t]he layout of [its] websites appears not as a static presentation, but rather as a series of overlapping layers aimed at accomplishing specific tasks... [and] [t]he graphic design of the pages of [LBF's] websites, the look', is tied to the interface design, ' comprised of dynamic navigation elements, such as hyperlinks, boxes, buttons, menus." Id.
Specifically, LBF contends that its Smartfares.com website has a distinctive "look and feel, " including the following design elements: "the search engine in the upper left hand corner; with tabs for flights, cars, hotels, vacations, and cruises immediately above the search engine; promotional deals just to the right of the search engine; three columns listing cheap flights below the search engine; Promo Codes' juxtaposed beside the cheap flights columns; and customer service number in large, orange letter at the top of the homepage." Id . ¶ 90. Additionally, the browser page for Smartfares.com displays as a title "Cheap Flights, Cheap Airline Tickets, Cheap Flights Airfare, Flights Airfare Deals - Smartfares." Id . LBF alleges that defendants' website OneTravel.com has "blatantly imitated" many of these elements in that it "also features the search engine in the upper left hand corner; with tabs for flights, cars, hotels, and vacations immediately above the search engine; promotional deals just to the right of the search engine; three columns listing cheap flights below the search engine; Promo Codes' juxtaposed beside the cheap flights columns; [ ]customer service number in large, orange letter at the top of the homepage [;]... [and] the browser page displays a title Cheap Tickets, Cheap Flights & Discount Airfare - OneTravel." Id . ¶ 91. LBF has attached as exhibits to its complaint screenshot images of the home pages of Smartfares.com and OneTravel.com on December 10, 2013, to demonstrate the design similarities of these websites. See id. ¶¶ 90-91; Smartfares.com Homepage Image (annexed as Ex. K to Compl.); OneTravel.com Homepage Image (annexed as Ex. L to Compl.). Similarly, LBF asserts that the search screen for its Travelation.com website, which "features a bar with moving stripes, the TRAVELATION mark in the upper part of the screen, and a message indicating that the website is searching for the best fares for the user's selected criteria, " Compl. ¶ 92; Travelation.com Search Screen (annexed as Ex. M to Compl.), has been copied in the search screen of defendants' OneTravel.com website, see Compl. ¶ 93; OneTravel.com Search Screen (annexed as Ex. N to Compl.).
LBF alleges that it has "received several complaints from Internet users, who have been confused and mislead [sic] by Defendants' advertising practices and design of Defendants' websites into believing that they were visiting [LBF's] websites, " Compl. ¶ 94, and that it has "suffered real damage to its business standing and reputation... by being associated with Defendants' businesses... in light of the extremely negative reviews that Defendants' websites [have] received, " id. ¶ 95. LBF further contends that defendants' brands have a negative reputation because defendants regularly "advertise misleading savings and discounts that do not offer actual savings to consumers" and engage in other deceptive practices. Id . ¶ 109; see also id. ¶¶ 103-08. In support of these assertions, LBF has provided screenshots of negative reviews of defendants' website cheapoair.com, see id. ¶ 95, as well as an online Better Business Bureau report discussing "a range of complaints with the BBB against CheapOAir.com, " id. ¶ 97.
B. Procedural History
On December 27, 2013, LBF filed the instant suit against Fareportal and WK Travel. See Complaint, filed Dec. 27, 2013 (Docket # 1). After defendants moved to dismiss, LBF filed the amended complaint in which it asserts the following claims against defendants:
(a) trademark infringement, unfair competition, and false designation of origin under 15 U.S.C. §§ 1051 et seq. (the Lanham Act); (b) trademark infringement and unfair competition in violation of New York State common law; (c) trademark dilution and injury to business reputation under New York. General Business Law ("NY GBL") § 360-1; (d) trade name infringement under NY GBL § 133; (e) unfair and deceptive trade practices under NY GBL § 349; (f) false advertising under NY GBL., § 350; (g) unfair business practice under New York State ...