The case was bought by Playboy Enterprises in 1999 against the search engines Excite (now defunct) and its licensee Netscape Communications (now owned by AOL).
Playboy sued the companies because their search engines displayed banner ads from competing pornography companies whenever its trade marks "playboy" or "playmate" were used as search terms. This practice, popular among search engines, is known as "keying" or "key word" advertising.
In September 2000 a federal court ruled against Playboy in a decision that the company's lawyers said "essentially legitimises" some unauthorised sales of trade marks. The decision has now been reversed on appeal and the case sent back to the district court for reconsideration.
The key factor for the three judge panel appears to have been the fact that the pop-up ads did not make clear that they were neither from nor endorsed by Playboy. This meant that the user viewing the ads could be confused as to whether they were Playboy ads or not.
Judge Thomas Nelson wrote:
"The above evidence suggests, at a minimum, that defendants do nothing to alleviate confusion, even when asked to do so by their advertisers, and that they profit from confusion."
In a concurring opinion, Judge Marsha Berzon added:
"There is a big difference between hijacking a customer to another web site by making the customer think he or she is visiting the trademark holder's web site (even if only briefly), which is what may be happening in this case when the banner advertisements are not labelled, and just distracting a potential customer with another choice."