Webloyalty.com, Inc. v. Consumer Innovations LLC

Webloyalty.com, Inc. v. Consumer Innovations LLC, 73 U.S.P.Q. 2d 1898 (D. Del. Jan. 13, 2005). The parties compete in the online club membership business, selling packages of services that combine price discounts, insurance-esque protections and other low-value services that consumers rarely use. For example, for a low monthly fee, Webloyalty offers “Reservation Rewards” containing the following services:

“An entertainment and travel protection program with benefits that include:

Up to 50% Top Attraction Discounts

Up to 50% Dining Discounts

Shopping and Service Discounts

Movie Ticket Discounts

Hotel Over-Booking Protection

Baggage Delay and Loss Protection

Travel Delay Protection

24-Hour Road & Tow Protection”

Walter Drake, a catalog/Internet retailer of widgets that you don’t need (like a brown sugar saver and cotton cooking twine), first offered its customers Webloyalty’s program but then switched to Consumer Innovations. In its offering to Walter Drake’s customers, Consumer Innovations allegedly copied the following language from Webloyalty’s “sell page”:

· “Try all the benefits for the next 30 days FREE and see how much you save! There’s no obligation to continue. If you are completely satisfied, do nothing and you’ll enjoy ongoing savings for only $_7 a month;”

· “For your convenience [service provider] will use the contact and credit or debit card information you provided to Walter Drake today for billing and benefit processing;”

· “To thank you for your purchase at Walter Drake today, click YES below to get your $10.00 Cash Back Gift … on your next Walter Drake purchase plus sign up for all the money-saving benefits of [service provider], our … online travel … discounts … program!”

Webloyalty believes this language maximizes prospective customer conversion-to-sale. Therefore, a second comer would prefer to use this language because it may be more effective at its goal (close deals) than alternative language.

On that basis alone, this seems like a difficult case for copyright. We could argue that the language is uncopyrightable, either because it lacks sufficient originality or because it is not covered per 102(b). Alternatively, this seems like a perfect case for the merger doctrine or scenes a faire, especially in light of cases like Morrisey v. Procter & Gamble Co. 379 F.2d 675 (1st Cir. 1967) (which held that sweepstakes rules could be subject to merger).

Yet, the court rebuffed Consumer Innovations’ motions for summary judgment on originality (giving deference to Webloyalty’s copyright registration) and the merger doctrine (because there are multiple ways to express promotions like this). Consumer Innovation could still win at trial or based on other doctrines like fair use, but I would have thought they could knock out the case on summary judgment.

From a policy standpoint, this case is troubling. The court has effectively allowed Webloyalty to protect its sales optimization techniques under the cloak of copyright. This shows the weakness of the court’s merger doctrine analysis. There may be multiple inferior ways to sell memberships; but by denying the merger doctrine, the court says that Webloyalty and not Consumer Innovations can use the optimized way. Should this opinion have any precedential value, this case might offer a new route for search engine optimizers to protect their HTML tricks. [tip to SEOs: the copyright registration certainly helped Webloyalty; if you want to protect your HTML code, you should get the registration before you need it]

UPDATE: In a September 26, 2005 order, CI’s infringement was deemed to be willful, and CI was hit with a total dollar award (including damages, attorneys’ fees and costs) of about $320,000.

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