The Ninth Circuit analyzed the dispute with a greater focus on the
initial interest confusion doctrine, which it had addressed in
Brookfield Communications, Inc. v. West Coast Entertainment Corp., another recent case involving confusion over the use of trademarked terms during the web search process. Under that precedent, Playboy could claim under the initial interest confusion doctrine that users were likely to be confused about the nature of banner ads at first glance, and would only be able to determine that such ads were or were not affiliated with Playboy after further investigation. This could damage the value of the company's trademarks while adding prestige to unrelated companies. The factors most relevant for Playboy's claim included evidence of actual confusion among consumers, due to evidence to this effect presented by Playboy; the defendant's use of a trademark for its own marketing purposes; the care to be exercised by the average consumer; and the defendant's intent to confuse consumers advertently or inadvertently. The other factors in the initial interest confusion doctrine were found to be irrelevant to this dispute, but those listed here worked in favor of Playboy. Netscape claimed that its use of Playboy's trademarked terms for the keying practice constituted
nominative use, but this defense was rejected by the circuit court due to the advertising-related intent of confusing consumers during the keying process. Netscape also attempted a "functional use" defense; under that doctrine, parts of a design that have a functional use may not receive trademark protection. This claim was also rejected by the circuit court because
Playboy magazine could have received any other name but it would retain the same function. A broader attempt at a
fair use defense was also rejected due to the obvious likelihood of consumer confusion over ownership of the resulting banner ads received after searching for the trademarked terms. Thus, the circuit court reversed the lower court's ruling on
trademark infringement, and granted an injunction to Playboy Enterprises. This restricted Netscape from using Playboy's trademarked terms to generate banner ads via the keying process, unless those ads were clearly labelled with information on their origins, to prevent consumers from assuming they were affiliated with Playboy. Meanwhile, the circuit court determined that some issues of fact remained over whether the keying practice resulted in
dilution of Playboy's trademarked terms. This matter was
remanded to the district court for further
discovery. == Impact ==