May 07, 2008
April 2008 Quick Links
By Eric Goldman
Anti-Gaming
* Even though Ticketmaster won its lawsuit, Minnesota overreacted to the Hannah Montana ticket crush by banning software to circumvent an online ticket allocation process. See Sec. 609.806. Check out the hyperbole in this press release! What's next? Are legislators going to make SEO a crime?
* Google modified its relevancy algorithm 450 times in 2007. And yet courts still cite to Brookfield for how search engines operate!
* The UK cracks down on shill marketing online. ClickZ: "Under the new [UK] Consumer Protection from Unfair Trading regulations, it will be illegal to "Falsely claim or create the impression that the trader is not acting for purposes relating to his/her trade, business, craft or profession," or to "falsely represent oneself as a consumer."" See also AdAge.
IP
* Speaking of SEO....the latest pathetic attempt to grab a generic term and trademark it? "SEO." Sarah Bird is on the job.
* Do student notes of a professor's lecture constitute copyright infringement? We may find out.
* Atlantic v. Howell. More on the "making available" theory of copyright infringement.
* Sarah Bird on registering copyrights in websites and blogs.
* A for-profit T-shirt listing the names of deceased Iraq soldiers sparks a publicity rights lawsuit.
General
* Bowen v. YouTube, Inc., 2008 WL 1757578 (W.D. Wash. April 15, 2008). The court upheld the forum selection clause in YouTube's user agreement.
* eBay is ending its promotion of third party live auctions. Maybe because of this loss?
* Rebecca blogs on SuccessFactors, Inc. v. Softscape, Inc., 2008 WL 906420 (N.D. Cal.), an odd case involving the Computer Fraud & Abuse Act and an "attack PowerPoint" allegedly sent by a competitor to its prospective customers.
* Kate Kaye writes about the new Internet industry lobby group, the "State Privacy and Security Coalition," designed to fight laws like the Utah Trademark Protection Act.
* Kevin Werbach, The Centripetal Network: How the Internet Holds Itself Together, and the Forces Tearing it Apart, UC Davis Law Review, Forthcoming. An interesting paper applying "network formation" theory to show how the Internet came together as a unified network and how those unifying forces are under constant stress.
Posted by Eric at 08:52 PM | Content Regulation , Copyright , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack
April 26, 2008
Injunction Requires Negative Keywords in Future Adwords Campaigns
By Eric Goldman
Orion Bancorp Inc. v. Orion Residential Finance LLC, 2008 WL 816794 (M.D. Fla. March 25, 2008).
It looks like courts/lawyers are finally getting savvier about broad matching (see my previous blogging on the legal understanding of broad matching in the Rhino Sports, Hamzik and Picture It Sold cases). In a default judgment over trademark infringement using the term "Orion," the plaintiff's lawyer got the judge to order a restriction on the defendant:
from purchasing or using any form of advertising including keywords or “adwords” in internet advertising containing any mark incorporating Plaintiff’s Mark, or any confusingly similar mark, and shall, when purchasing internet advertising using keywords, adwords or the like, require the activation of the term “ORION” as negative keywords or negative adwords1 in any internet advertising purchased or used.(emphasis added)
According to this injunction, then, if the defendant buys the keyword 'bank" and broad matches it, the ads still should not show up for a search on the term "Orion Bank." Perhaps there have been other injunctions with similar requirements to use negative keywords, but this is the first I've seen. (I did a search in Westlaw on the term "negative keyword" and this was the only injunction I found). Going forward, I think it's a logical addition to any injunctive relief request in a trademark infringement case.
HT: Tom O'Toole
UPDATE: Sarah Bird provides some helpful context for the injunction.
Posted by Eric at 03:42 PM | Search Engines , Trademark | TrackBack
April 24, 2008
Court Says Keyword Metatags Don't Matter--Standard Process v. Banks
By Eric Goldman
Standard Process, Inc. v. Banks, 2008 WL 1805374 (E.D. Wis. April 18, 2008)
SEOs and SEMs have known for years that most search engines ignore or give minimal acknowledgement to keyword metatags. Lawyers, on the other hand, have been living in a parallel fantasy universe where keyword metatags single-handedly divert unwaveringly brand-loyal customers to piratical competitors. Even today, many courts still rely on the 1999 Brookfield case and its dreadful keyword metatags-as-a-false-billboard analogy as an accurate and definitive statement of how search engines operate today. Prime offender #1: the recent 11th Circuit hairball in National American Medical v. Axiom, where the court may not have even understood the difference between keyword metatags and description metatags.
Despite this, defendants have occasionally defeated trademark claims over their inclusion of third party trademarks in the keyword metatags based on a variety of theories, including a lack of a use in commerce (ex: Site Pro-1, S&L Vitamins), insufficient likelihood of consumer confusion (ex: JG Wentworth), nominative use (ex: Welles) and others. But as far as I can recall, no court had rejected a keyword metatag for the right reason, which is that they are technologically ineffective.
That's why this new opinion appears to break important new ground. The court, citing this paper and Prof. McCarthy's treatise, rejects the argument that keyword metatags create initial interest confusion, in part because keyword metatags are immaterial. Hooray! Hey all of you lawyers still citing to Brookfield for its description of search engine operations, I think you need to acknowledge this case now too.
The rest of the case is really interesting too, with facts highly similar to the Australian Gold cases (see S&L Vitamins v. Australian Gold; Australian Gold v. Hatfield). The plaintiff makes dietary supplements. Through its distribution agreements, it tightly controls its channels to limit retailing to healthcare providers and, not incidentally, preserve high margins; thus, all authorized distributors are prohibited from making Internet sales. The defendant once was an authorized distributor but was kicked out of the chain for selling over the Internet. In response, the defendant bought supplies from other authorized distributors (who were contractually barred from reselling to distributors selling via the Internet) and continued offering the products via his website. The manufacturer is now suing the website for selling these legitimate goods that leaked out of the authorized channel.
As I've mentioned before, efforts to preserve high margins through anti-Internet channel control are doomed. Some of the lawsuits might succeed in controlling the channel in the short run, but Internet competition will prevail, like it or not, and supra-competitive margins will be a relic of the past.
In any case, under the trademark exhaustion/first sale doctrine, the defendant may resell the legitimate goods so long as consumers are not confused about a sponsorship relationship between the manufacturer and distributor.
(That's not to say that the defendant has the right to buy the goods. If the plaintiff really cares about the channel conflict, the plaintiff can clamp down on the authorized distributors who are leaking the goods to the defendant and therefore dry up the defendant's supply. But it may have to do so without the aid of trademark infringement claims.)
So, the main issue in this case is whether consumers will be confused about a sponsorship relationship between the manufacturer and the website. The court says no with respect to website sales where the defendant didn't show any product shots and included a prominent disclaimer. In contrast, consumers may be confused by the defendant's emails touting the products when the emails included product shots but didn't have a prominent disclaimer. On that basis, the defendant accepted, and the court ordered, an injunction against further promotion of the product without the disclaimer.
This relatively narrow injunction makes some sense, but I'm still confused why the court discussed the product shots. (The plaintiff is also confused why the defendant wasn't enjoined from using product shots, and yesterday it filed a motion to amend the injunction to include a restriction on product shots). I don't see how the inclusion of product shots can communicate some actual/implied sponsorship between manufacturer and retailer. If the takeaway from this case is that a retailer of legitimate goods that leak out of the channel can't display product shots, it seems like this would hurt consumer decision-making, not help it.
Posted by Eric at 01:49 PM | Search Engines , Trademark | TrackBack
April 21, 2008
March 2008 Quick Links, Part I
By Eric Goldman
It's a sign of my busy March/April that I am just now postinng these...
Reputation/47 USC 230
* I have a lot to say about the JuicyCampus story (AP, MSNBC, Chronicle of Higher Education). Unfortunately, I ran out of time to write a full blog post on the subject. For now, some quick thoughts about this interesting and complex situation:
- Taken to its logical conclusion, 47 USC 230 naturally enables sites to do absolutely nothing to restrict harmful speech. (I'm not saying that accurately describes JuicyCampus--I don't have enough facts to make that claim). However, that's not an unexpected failure of the statute--it's the natural consequence of the statute's design. Any concerns about the costs of unrestricted speech fora need to compared with the costs of more regulated systems. It's not clear that one result is automatically better than the other, and certainly there are costs implicit in all solutions. Sam Bayard explores this issue more.
- Sites that lack credible information will face marketplace responses regardless of any legal rules. In JuicyCampus' case, the marketplace responses include consumers deeming the site not credible, plus intermediaries (in this case, universities) may simply block access by its core users.
- Any possible legal action by the New Jersey Attorney General over JuicyCampus' facilitation of harmful speech should be unambiguously preempted by 47 USC 230--even after Roommates.com.
- The attempted legal bypass to 47 USC 230--trying to convert a negative covenant from the users in the user agreement into an actionable affirmative marketing representation by JuicyCampus--is analytically corrupt. It's also not the law, and it's been rejected in several 230 cases (Noah v. AOL comes immediately to mind). Rebecca has more to say on this issue.
- If negative behavioral covenants by users in a user agreement are actionable affirmative marketing representations that such behavior isn't occurring, then the Internet is a target-rich ecosystem because I imagine that just about every Internet company is eligible for enforcement actions.
- Isn't it typical of an enforcement action to go after the target's vendors (in this case, JuicyCampus' ad networks) and watch them instantly fold?
- This issue reminds us that a website can't promise its users anonymity if it allows anyone else (such as an ad server) to serve up portions of its page and thereby have the ability to collect the same server log data.
* Ciolli v. Iravani: The AutoAdmit lawsuits spill over into a new battleground. As I said when I first blogged on the case, this is a "very messy situation" that has only gotten messier.
* Nemet v. ConsumerAffairs.com. Another lawsuit against an online consumer review site for publishing allegedly defamatory negative critiques.
* Steinbuch v. Cutler, 2008 WL 596747 (8th Cir. Mar. 6, 2008). Steinbuch's lawsuit against Hyperion, the publisher of the Washingtonienne book, can continue in Arkansas. His other claims must proceed in Washington DC if at all.
* Washington Post: Due to the speed at which gossip moves over the Internet, "compared with the pre-Internet era, politicians are less likely than ever to survive a sex scandal with their careers intact."
* H. Brian Holland, In Defense of Online Intermediary Immunity: Facilitating Communities of Modified Exceptionalism, 56 U. Kan. L. Rev. 369 (2008). Prof. Holland wrote a paper I had been meaning to write! He explains how 47 USC 230 enables online communities to use a variety of self-governance structures, while a different liability regime would give communities fewer choices and thereby inhibit community formation and management.
Search Engines
* A Canadian web network called Geosign received $160M of VC money but the company was rendered worthless overnight when Google changed its policies and cut off traffic. Domainers beware!
* New book worth checking out: WEB SEARCH: MULTIDISCIPLINARY PERSPECTIVES (Amanda Spink & Michael Zimmer, eds.) (Springer 2008). A nice cross-section of essays on search engine issues from multiple disciplines.
* Need some original content to improve your SEO? You can automatically generate it through splogging, or you can pay actual humans a small amount of money to write short articles. If the cost is low enough and the SEO credit for truly original content is high enough, the latter may end up being a better economic deal.
Spam
* The FTC has lost a jury trial against Impulse Media on its theory that Impulse Media is liable for the spam sent by its affiliates. This is a pretty important decision because (1) the FTC/DOJ rarely lose at trial, (2) their expansive theories about liability for affiliate behavior may be legally incorrect, and (3) the FTC has strong-armed numerous defendants into settlements based on its theory, and future defendants now be willing to fight back.
* On that topic, Cyberheat won an early round in litigation with the FTC over its affiliate practices but has now settled up with the FTC. The settlement gives some guidance about the FTC's thoughts of how marketers should police affiliates, but the Impulse Media jury loss may undermine the teaching of this settlement.
Posted by Eric at 08:32 AM | Derivative Liability , Licensing/Contracts , Marketing , Search Engines , Spam | TrackBack
April 08, 2008
11th Circuit Freaks Out About Metatags--North American Medical v. Axiom
By Eric Goldman
North American Medical Corp. v. Axiom Worldwide, Inc., 2008 WL 918411 (11th Cir. April 7, 2008)
Oh man, what a bizarre and frustrating ruling from the 11th Circuit on metatags. The parties compete in the "spinal decompression" device market. Defendant Axiom included the plaintiff NAM's trademarks “Accu-Spina” and “IDD Therapy" in the metatags but did not otherwise use the terms. The district court concluded that this constituted trademark infringement, a determination that the 11th Circuit upholds here.
Unfortunately, it's hard to parse this case because the court is imprecise about which metatags were used. I've looked through the defendant's appellate brief and they don't clarify the technology for the court at all--I'm wondering if any of the attorneys involved in this case know that there are multiple types of metatags. We only have the following three facts to work with:
* Axiom included competitive trademarks in the metatags
* Axiom appeared as the second organic search result in Google for the trademarked terms (following the plaintiff, which was #1 in the search results)
* The trademarked terms appeared in the search results descriptions
The court assumes causality here between the metatag inclusion and the search engine displays. This might be possible if Axiom put its competitor trademarks in the description metatags. Doing so isn't automatically problematic; for example, a description metatag that has comparative statements with competitive products should be permissible. However, description metatags--just like any other marketing copy--could be written in a way designed to deceive consumers. If that's what happened here, then I understand the court's anger (even if I might disagree with its analysis).
But another hypothesis fits these facts. The court does not exhibit any understanding of anchor text or the fact that Google sometimes automatically assembles search result descriptions using third party content (such as DMOZ). So it's entirely possible for these three salient facts to occur (i.e., Axiom's site to show up for searches on the competitive trademarks with the trademarks in the site description) even if Axiom only included the trademarks in the keyword metatags (which we know Google ignores). If the latter hypothesis is true, the 11th Circuit completely misattributed responsibility to Axiom for doing things it didn't do.
Predicated on its poorly articulated and possibly erroneous assumptions about Axiom's role in appearing in the search results, the court has little difficulty slamming down Axiom. On the use in commerce question, the court concludes that, pursuant to the "plain meaning" of the statute, metatags are clearly a use in commerce in connection with goods or services because they support advertising objectives. I don't think the statutory language is the least bit clear, especially if search engines ignore keyword metatags and thus the trademark references have no chance of being perceived.
Along the way, the 11th Circuit distinguishes (and denigrates) the Second Circuit's 1-800 Contacts v. WhenU case on two grounds: (1) this involves metatags, not URLs, and (2) "unlike in 1-800 Contacts, the defendant-Axiom in this case did cause plaintiff's trademark to be displayed to the consumer in the search results' description of defendant's site." The court takes an affirmative swipe at the Second Circuit, saying that the analysis in the 1-800 Contacts case is "questionable" and unpersuasive.
On the consumer confusion question, because the plaintiff's trademarks appeared in the search results, the court assumes that "Consumers viewing these search results would be led to believe that Axiom's products have the same source as the products of the owner of the “IDD Therapy” and “Accu-Spina” trademarks, or at least that Axiom distributed or sold all of the products to which the brief description referred, or that Axiom was otherwise related to NAM....Thus, the factual situation in the instant case is that Axiom's use of the meta tags caused a likelihood of actual consumer confusion as to source."
Fortunately, the court does try to limit the collateral damage of its ruling by narrowing the facts at issue:
This is not a case like Brookfield or Promatek where a defendant's use of the plaintiff's trademark as a meta tag causes in the search result merely a listing of the defendant's website along with other legitimate websites, without any misleading descriptions. This is also not a case where the defendant's website includes an explicit comparative advertisement (e.g., our product uses a technology similar to that of a trademarked product of our competitor, accomplishes similar results, but costs approximately half as much as the competitor's product). Although we express no opinion thereon, such a defendant may have a legitimate reason to use the competitor's trademark as a meta tag and, in any event, when the defendant's website is actually accessed, it will be clear to the consumer that there is no relationship between the defendant and the competitor beyond the competitive relationship.
But despite this disclaimer, there's plenty of sloppy and broad language to keep plaintiffs going for some time.
From my perspective, there are two obvious lessons to learn from this case. First, the text of description metatags needs to be reviewed just like any other ad copy. This may seem obvious, but I suspect that many SEMs do not run their metatag scripts by the lawyers. When I was in practice, I would proactively ask our SEM folks to provide a copy.
Second, if you are going to use keyword metatags, you must ensure that competitive trademarks do not appear in your keyword metatags, period. It's just not worth it. They don't buy you much juice with the search engines anyway, and it will leave you exposed to irrational judicial freakouts about keyword metatags if ever tested in court.
Posted by Eric at 12:00 PM | Search Engines , Trademark | TrackBack
April 04, 2008
Rescuecom v. Google Second Circuit Oral Arguments
By Eric Goldman
Yesterday the Second Circuit heard oral arguments in Rescuecom v. Google, and reports from the oral arguments are trickling out.
James Grimmelmann provides a comprehensive report. Many thanks to James for taking the time to write this up. I know how long it takes to write a blog post like his, so we're all the beneficiaries of his work. He concludes with a provocative prediction (thoroughly caveated in his post):
Prediction: 3-0 for Rescuecom, Leval authoring, in a narrow opinion that emphasizes the 12(b)(6) rule against incorporating matters not apparent from the face of the complaint. A Calabresi concurrence mentions the narrowness of the holding and explains why, in his view, it does not affect the settled understanding that retail shelving arrangements, handing out flyers in front of billboards, and other common offline practices are not trademark infringements. Neither opinion says much about the implication of the holding for other online businesses.
Wendy Davis of Mediapost was at the oral argument too, and she wrote up a recap article and an editorial.
Reading James' report, I'm struck by how much of the time the judges spent spinning out hypotheticals, many of them pretty far-fetched. That's unfortunate because judges in full fantasy mode can hypothesize some really crazy scenarios that have no relationship to reality, and writing opinions in response to these hypotheticals ultimately leads to more confusing opinions.
In response to James' prediction, I do think that the case's 12(b)(6) posture heightens the concern for the judges, so I could why the judges would decide to move the legal question to a summary judgment stage. Personally, I am a fan of resolving these issues on the 12(b)(6) because I believe defendants will win these cases anyway after full litigation, so the 12(b)(6) is just a quick way to reach the right result that would likely obtain later only at much higher transactions costs.
The case library:
* Commercial Referential Trademark Uses (Rescuecom v. Google Amicus Brief Outtakes)
* Rescuecom reply brief
* Law professors' brief by Stacey Dogan and me
* Electronic Frontier Foundation amicus brief by Jason Schultz, Corynne McSherry and Fred von Lohmann
* Public Citizen amicus brief by Paul Levy
* eBay/Yahoo/AOL amicus brief by Celia Goldwag Barenholtz, Janet Cullum and others of Cooley Godward Kronish [now mooted]
* Google's initial brief
* Rescuecom's initial brief
* District Court's opinion
Posted by Eric at 05:19 PM | Search Engines , Trademark | TrackBack
March 27, 2008
Rescuecom v. Google Pre-Oral Argument Details
By Eric Goldman
We're anxiously awaiting oral arguments in the Rescuecom v. Google case next week. In advance of that, the court cleaned up a couple of matters:
1) The court denied the amicus brief from Yahoo, AOL and eBay. It didn't give a reason for bouncing the brief, although sometimes it's done to avoid a panelist's recusal.
2) Earlier this week, the court posted the following notice:
"Judge Leval wishes to advise the parties as follows:
1. A year ago Judge Leval was invited by the Stanford Law School to be a participant in a two-day conference at the school focusing on Internet issues, which was to be jointly sponsored and organized by the Stanford Law School and Google, Inc. [Eric's note: this is the Legal Futures Conference--see the conference website.] The conference, which was held at the Law school on March 7 and 8, 2008, will pay the travel, lodging and board expenses of the participants. The conferees, numbering approximately 50, included professors of law, business, economics and communications, participants the Internet from the profit and not-for-profit sectors, writers, lawyers, government representatives, judges, and Stanford law students. In preparation for the conference, Judge Leval communicated by email with a Google representative concerning the subject matter and organization of a panel in which he would participate (The subject of the panel was unrelated to trademark law or to any other issue involved in this case.). On one evening, the conferees were hosted for dinner by Google at its campus. During the two days, Judge Leval met and chatted briefly with Google representatives who were involved in organizing the conference.
2. Judge Leval has been friendly for nearly twenty years with William Patry, Esq., since the time Mr. Patry was employed in the United States Copyright Office in the Library of Congress and as Copyright Counsel to the US House of Representatives, Committee on Intellectual Property. For approximately the last two years, Mr. Patry has been part of the legal staff of Google (Mr. Patry was not a participant in the Stanford conference).
Judge Leval is confident that these contacts with Google, Inc. Would in no way influence his consideration of the case. If either party wishes to move for Judge Leval`s recusal from consideration the case (or to request further information or clarification), it should submit a letter-motion (or letter requesting such further information) to the Clerk of the Court by 11:00am on Friday March 28."
Barring such a recusal request, the panel will be Judges Calabresi, Leval and Wesley.
More case resources:
* Commercial Referential Trademark Uses (Rescuecom v. Google Amicus Brief Outtakes)
* Rescuecom reply brief
* Law professors' brief by Stacey Dogan and me
* Electronic Frontier Foundation amicus brief by Jason Schultz, Corynne McSherry and Fred von Lohmann
* Public Citizen amicus brief by Paul Levy
* eBay/Yahoo/AOL amicus brief by Celia Goldwag Barenholtz, Janet Cullum and others of Cooley Godward Kronish [now mooted]
* Google's initial brief
* Rescuecom's initial brief
* District Court's opinion
Posted by Eric at 04:17 PM | Search Engines , Trademark | TrackBack
Google Site-Specific Search-Within-Search Tool--Why is Everyone So Worked Up About This?
By Eric Goldman
On Monday, Bob Tedeschi at the NYT published an article entitled "A New Tool From Google Alarms Sites" about Google's recently launched site-specific search-within-search box. When I first saw the feature, I really didn't think about it very much because I already use Google to search within a site and bypass the site's internal search function. In fact, I routinely use Google to locate items in my own website and blog instead of my own search tool (blog.ericgoldman.org is the #1 site in my Google Web History).
As a result, I didn't think the tool or the article was particularly blog-worthy. However, I've now gotten at least 4 emails from people wanting to chat about this tool. So, by popular demand, some thoughts:
From a trademark law standpoint, I don't think the tool changes the analysis. In theory, Google is gaining more insights into the searcher's intentions; instead of knowing just X (the first search term), it now knows X+Y, which increases the odds that we might intuit the searcher's intent well enough to assess if the searcher is being "diverted" by alternative options. However, (1) even with the additional information, Google still doesn't know searcher intent, so it will still be improper to make any conclusions of "diversion," (2) in practice, this really isn't any different than if the searcher initially puts in X+Y into the search box, so Google already faces this liability, and (3) in all cases, Google may lack the requisite use in commerce to be liable for trademark infringement regardless of how deep it goes into the consumer search process.
Irrespective of the legal analysis, I think it's interesting that some publishers are revolting against Google, which forces Google to think carefully about how it can maintain good publisher relations. Even more interesting is if Google is cutting special deals with some publishers to remove the site-specific search. I don't think that Google can realistically support treating different sites differently, so I assume that Google ultimately will be pressured to give all sites an opt-out option (or take down the tool entirely).
One last thought--I wonder just how many searchers are using this new search option? It wouldn't surprise me if usage is modest, in which case this could all be a tempest in a teapot.
Posted by Eric at 03:42 PM | Search Engines , Trademark | TrackBack
March 23, 2008
Adwords Ad Creates Initial Interest Confusion--Storus v. Aroa
By Eric Goldman
Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008).
(Sorry for my delay blogging this one).
A federal district court has held that displaying a competitor's trademark in Adwords ad copy constitutes impermissible initial interest confusion, leading to a summary judgment win for the trademark owner. This is one of the first competitor-vs.-competitor search advertising cases where the plaintiff has won the trademark claims. This case also has an interesting and rare discussion about the trademark implications of a retailer’s internal search engine.
Claims Against Aroa
Storus distributes money clips under the trademark "smart money clips." Storus was able to get a federal registration for the mark, which is interesting because I’d love to see the showing of secondary meaning. Given the registration, Aroa instead tries to knock out "smart" as a laudatory phrase, but the court isn't convinced. Thus, the court permits Storus to proceed with a pathetic descriptive mark.
Aroa sells competitive money clips. Through Adwords, it purchased the keyword "smart money clip" to display the following ad:
Smart Money Clip
www.steinhausenonline.com Elegant Steinhausen accessories. Perfect to add to any collection.
Per Google's standard formatting, the trademark shows up bold and underlined, which the court says overshadows Aroa’s display of its own trademarks in the ad copy. The court also invokes initial interest confusion (as part of the Ninth Circuit's inconsistently invoked "Internet trilogy" likelihood of consumer confusion analysis) and notes that "defendants offer no evidence to show a lack of actual initial interest confusion." Summary judgment for plaintiff.
Claims Against Skymall
Skymall is an online retailer of Aroa products. Storus alleges that Skymall included the term "smart money clip" on Aroa product pages, which meant that if a person searched for "smart money clip" in Skymall's internal search engine, Aroa's products would appear in the search results. Storus portrayed this as initial interest confusion, but the court wasn't persuaded enough to grant summary judgment. Instead, the court observes that "a page offering an Aroa money clip will appear as a search result solely because the consumer searches using the phrase “money clip,” irrespective of whether the consumer adds the word “smart” to the search term and irrespective of whether the page contains the word “smart.”" Isn't it amazing that a page containing the phrase "smart money clip" would also appear for a search on "money clip"?!
Implications
On the surface, this case looks problematic for the search advertising industry. Any time a search advertising practice is deemed infringing, it should promptly eliminate all similar ads from other advertisers, taking a chunk of revenues out of search engine pockets. Further, when advertisers are liable for trademark infringement, it increases the risk that search engines will be contributorily liable for those infringing ads.
Yet, Aroa’s practices here (displaying a competitor’s trademark in the ad copy) are already restricted by all of the search engine trademark policies. Therefore, this ruling shouldn’t reduce much ad revenue for search engines.
But that raises the obvious question: why didn't Storus just invoke these search engine policies to shut down Aroa? As Dennis Toeppen might have said, perhaps Storus' lawyer wanted a new boat, because this trademark lawsuit made absolutely no financial sense for Storus. The court determines that over 11 months Aroa got 1,374 clicks on its ads (from 36,164 ad impressions, yielding a 3.7% clickthrough rate--not bad). If we value each click at $1/click (a generous amount given that Aroa sells its money clip for $30), Storus could have acquired the "diverted" clicks for $1,374--an amount that is surely no more than 5% (and perhaps even less than 1%) of what Storus spent in this lawsuit. Smart business decision there, guys.
Doctrinally, this case is a textbook example of how the initial interest confusion doctrine is completely bogus. As I’ve said before, a defendant cannot mount an adequate defense against the initial interest confusion doctrine because the doctrine lacks any rigorous definition or normative support in the first place. The defense challenge is especially problematic where, as here, a court improperly puts the burden on the defendant to disprove that consumers experienced initial interest confusion. Exactly what proof would satisfy the court here? I can’t answer this and I bet the court couldn’t either, and I can go further and assert that evidence to disprove initial interest confusion simply does not exist at all.
This court also unfortunately buys into the tired and outdated syllogism that every click on Aroa’s ad was a “diverted” consumer. As I’ve explained here, this massively overstates the quantum of “diversion” (whatever that means) because we don’t know what consumers expected to find when they entered the search term “smart money clip.” The low general risk of diversion is even lower here because consumers saw Aroa’s trademarks in the ad copy, further reducing the risk that anyone was confused by the time they decided to click on the ad.
Other comments on this case:
* Thomas O'Toole
* Tech LawForum
* IP Law Observer
* Las Vegas Trademark Attorney
Posted by Eric at 10:05 PM | E-Commerce , Search Engines , Trademark | TrackBack
March 11, 2008
Iowa Offers Tax Breaks to "Web Search Portal Businesses"
By Eric Goldman
Iowa, showing its technological savvy, has passed a law providing some tax abatements for "web search portal businesses" that invest $200M in the state in 6 years. See HF 2233, enacted Feb. 28, 2008. Most industry participants would not use the term "web search portal business," but the statute provides a useful definition as an "entity whose business among other businesses is to provide a search portal to organize information; to access, search, and navigate the internet, including research and development to support capabilities to organize information; or to provide internet access, navigation, or search functionalities." Well, that helps narrow down the universe of qualifying companies.
Given the size of investment required, I'll give you three guesses who the Iowa legislature might have been thinking of. Give up? Check out this handy list of lobbyists for the bill and see if you spot any familiar names.
As the fiscal note indicates, they anticipate a whopping TWO buildings to be built pursuant to this abatement. Not that this is special interest legislation or anything... On that note, one of the Iowa senators blogs on the law. Why is he winking at me?
Posted by Eric at 08:13 PM | E-Commerce , Search Engines | TrackBack
March 04, 2008
Utah Quietly Killing the Trademark Protection Act [UPDATED]
By Eric Goldman
[See update below]
We're coming up on the one year anniversary of the Utah Trademark Protection Act, Utah's effort to kill/tax keyword advertising. It looks like the law may not survive until its first birthday, as the Utah legislature is in the process of amending the act. On Feb. 6, the Utah Senate passed SB 151 and sent it to the Utah House, where it is now pending. A quick perusal of SB 151 indicates that the amendments strike every instance of the term "electronic registration mark" (Utah's phrase for the new sui generis property right it created in the Trademark Protection Act). As I blogged before, the amendments instead focus on allowing trademark owners to electronically register their trademarks in a Utah database (more on this in a moment).
Thus, it looks like the Utah legislature will eliminate all of the new substantive provisions added in the Utah Trademark Protection Act--in other words, a complete 180. On the one hand, I applaud the Utah legislature for reaching the only logical conclusion available to it--that the Utah Trademark Protection Act was stupid and untenable, so wiping the slate clean was both the best social policy and the lowest cost option. On the other hand, I remain shocked that Utah residents tolerate legislators who screw up this big and waste valuable resources enacting ill-advised laws only to waste more resources reversing themselves. If a California legislator screwed up like this, he or she would be recalled faster than you can say "Rose Bird" or "Gray Davis." And I apologize if it's rude to say this, but I get asked this question a lot--when the legislature whiffs as bad as this, yes, we do think the Utah legislature is a (bad) joke.
As for the new electronic registry, I'm a little confused about what Utah is considering. If the database is simply an e-government initiative to cut down on paper filings and push registrants to make electronic filings, that sounds like a positive development but I'm not sure why it would require legislative authorization. But there is an intimation that this will generate new incremental revenues from trademark owners who seemingly will value listing in Utah's electronic database. The fiscal report indicates that the law should generate $50,000 of revenues, enough to compensate for $50,000 of database development costs. Perhaps Utah is planning to get into the worthless-registry business, an industry well-known to all trademark owners. After a trademark registers, the owner gets a blizzard of official-looking letters from companies offering to list the trademark in a proprietary but worthless registry. What better way to scare some cash out of unsophisticated trademark owners than an official solicitation on Utah state letterhead?
Even when the Utah Trademark Protection Act has been fully gutted and eliminated as a threat to the keyword advertising industry, I guarantee that the war is hardly over. Future state legislators are going to find regulating online advertising irresistible, and each of these legislative initiatives poses grave risks to our information economy. As a community, we need to undertake the Sisyphean effort of continuously monitoring our legislators and educating them about the harm they can do with misguided regulatory intervention.
UPDATE: Hold the phone! Perhaps this is not surprising, but the Utah legislature is doing more screwy stuff. When the dust clears, I'll post a new blog post trying to make sense of the madness.
UPDATE 2: It appears that Utah passed the law in the form I blogged about. See here and here. This presumably sends the bill to the governor for signature. I'll blog more about the last 24 hours shortly.
Posted by Eric at 11:14 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack
March 02, 2008
Feb. 2008 Quick Links
By Eric Goldman
Advertising
* BusinessWeek: Monetizing social networking sites isn't as easy as everyone had hoped, clickthrough rates are through the floor (0.04%!), and ad proliferation on the sites is driving users away.
* Wilbur, Kenneth C. and Zhu, Yi, "Click Fraud" (January 2, 2008). This paper appears to argue that search engines can increase their profits by failing to disclose the true rate of click fraud on their network.
* In re Miva, Inc. Securities Litigation, 2008 WL 450037 (M.D. Fla. Feb. 15, 2008). This lawsuit alleges that Miva and some associated individuals understated or misreported Miva’s reliance on click fraud, spyware and third party distributors in its public statements and thus inflated the company's stock price. Last year, the court dismissed many of the allegations but let a couple survive. In this ruling, the court dismisses a few more defendants from some statements and lets the rest of the case proceed.
* Going-out-of-business sales are often just another scam. (HT ContractsProf). Note this is completely consistent with economists’ theoretical predictions of final-period behavior of trademark owners.
* Google's stock has lost $70B in market cap in 7 weeks. Oh darn. Clickz offers some theories about why Google's clicks are declining. Could lower rates of click fraud be part of it?
* Hal Varian, Google's Chief Economist, argues that Google's marketplace success is solely due to its "secret sauce" (i.e., the advantage of learning by doing) rather than any defects in the marketplace.
Spam
* Jaynes v. Virginia (Va. Sup. Ct. Feb. 29, 2008). By a 4-3 vote, the Virginia Supreme Court upheld Jeremy Jaynes' 9 year sentence for violating Virginia’s spam law.
* Silverstein v. Experienced Internet.com, 2008 U.S. App. LEXIS 3364 (9th Cir. 2008). Ninth Circuit dismissed a CAN-SPAM lawsuit for lack of jurisdiction when the defendants attest that they didn't send the message and aren't local.
Domain Names
* NSI has been sued for its practice of grabbing pre-registration domain names based on WHOIS searches. The complaint. Good luck defending those practices, NSI!
* Two more breathy articles about the economics of domaining from the New York Times and Network World.
47 USC 230
* Johnson v. Barras, 2007 CA 001600 B (DC Superior Ct Feb. 1, 2008). Court dismisses a lawsuit against a website for republishing a defamatory story per 47 USC 230.
* Yet another doomed lawsuit against MySpace for facilitating communications between an adult male and an underage female that led to sex. Sam Bayard's comments.
Pornography
* NY Lawyer (login required): "Defense Bar Sees Growing Practice in Internet Sex Crimes"
* A federal obscenity prosecution for publishing graphic short stories (without pictures) on the Internet? As Tim Wu says, "astonishing."
* The Utah legislature is considering entering the marketplace again, this time through a certification mark program for Internet access providers who are willing to combat porn. See HB407. Of course, the Utah legislature has had terrific success in the past creating successful new business opportunities that the marketplace has overlooked.
User-Generated Content
* Nick Carr: "What we've seen happen with self-regulating communities, both real and virtual, is that they go through a brief initial period during which their performance improves - a kind of honeymoon period, when people are on their best behavior and rascals are quickly exposed and put to rout - but then, at some point, their performance turns downward. They begin, naturally, to decay." Like, I think, Wikipedia.
* Slate on the top-heavy nature of contributions to Wikipedia and Digg.
* Christian Science Monitor: Teachers Strike Back at Students' Online Pranks.
* Sam Bayard on a motion to quash in the AutoAdmit case.
Reputation
* eBay no longer lets sellers leave negative/neutral feedback for buyers. This putatively stops sellers from retaliating against buyers who leave legitimate complaints, but it also skews the database towards only positive reviews, which ultimately undercuts its credibility.
* In India, where courtships remain very brief by US standards and grooms can be paid dowries by the bride's families, there is an emerging trend for brides to hire "wedding detectives" to ferret out the scoop on grooms and whether their representations are correct.
* Funny article on being a secret shopper for Consumer Reports.
* Dan Solove's book, The Future of Reputation, is now available online for free. Ethan's review of the book.
Patents
* Six years later, eBay finally buys it now: eBay v. MercExchange settles with eBay buying out some of MercExchange's patents and licensing others.
* Mike Masnick: "Psst! Patent Examiners Do Not Scale"
Copyright
* Mike Masnick: “Why We Should All Want Politicians Who Plagiarize.”
* Do Not Resuscitate...My Copyrights (funny).
Miscellaneous
* Citizen Media Law Project has a useful discussion on getting insurance for cyberlaw risks.
* People v. Fernino, 2008 WL 382348 (N.Y. City Crim. Ct. Feb. 13, 2008) (woman violated a no-contact order when sending a MySpace message to the person).
* Mike Masnick: "We Need A Broadband Competition Act, Not A Net Neutrality Act"
* A retrospective on some of the leading dot-coms from the 1990s.
Posted by Eric at 05:32 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Marketing , Patents , Privacy/Security , Search Engines , Spam , Trademark | TrackBack
February 27, 2008
Rescuecom v. Google Oral Arguments Finally Calendared
By Eric Goldman
You may recall Rescuecom v. Google, where the district court dismissed a trademark infringement lawsuit against Google for selling trademarked keywords because the sales lacked the requisite use in commerce. We are all watching this case closely because (1) it involves Google, (2) the district court ruling was such a clean and decisive win for Google, (3) the Second Circuit ducked search engine liability in its influential 1-800 Contacts v. WhenU precedent and will now have to address it squarely, (4) an affirmance might prove persuasive enough to encourage other courts to harmonize on the Second Circuit's rule and eliminate the current circuit split on the trademark use in commerce question, and (5) a reversal could lead to doctrinal anarchy.
Over a year after the appeal and all of the briefs were filed, the Second Circuit has finally calendared oral arguments for April 3 at 10 am in NYC (500 Pearl Street, 9th floor). Each side has been allotted 10 minutes. I won't be there but I suspect many others will be.
More case resources:
* Commercial Referential Trademark Uses (Rescuecom v. Google Amicus Brief Outtakes)
* Rescuecom reply brief
* Law professors' brief by Stacey Dogan and me
* Electronic Frontier Foundation amicus brief by Jason Schultz, Corynne McSherry and Fred von Lohmann
* Public Citizen amicus brief by Paul Levy
* eBay/Yahoo/AOL amicus brief by Celia Goldwag Barenholtz, Janet Cullum and others of Cooley Godward Kronish
* Google's initial brief
* Rescuecom's initial brief
* District Court's opinion
Posted by Eric at 05:50 PM | Search Engines , Trademark | TrackBack
February 26, 2008
Click Fraud Talk at SMX West
By Eric Goldman
At SMX West, I participated on a panel about recent search engine law developments with Clarke Walton, Sarah Bird and Jeffrey Rohrs as moderator. Jeff asked me to address click fraud developments, so here's a recap of my very brief talk:
______
From a legal standpoint, I think click fraud is a relatively unexciting topic. Principally, click fraud is a fairly routine contract interpretation issue--the advertising contract defines the payment mechanism, so search engine-advertiser click fraud cases simply involve the interpretation of that provision. As a result, click fraud cases don't really break any new theoretical ground; the basic legal doctrinal are squarely covered in a first year Contracts course.
The click fraud topic has gotten even less interesting following the 2006 settlements by Google and Yahoo. Since then, I think we've seen a gradual but unmistakable decline in the attention and emotional energy directed towards the topic. Google and Yahoo settled up in part to put the issue behind them, and it looks like they did just that. Let’s consider the denouement from the 2006 settlements:
* Google and Yahoo paid fairly nominal amounts of cash (by their standards)
* The plaintiffs’ attorneys made off with a nice chunk of change (by their standards)
* Advertisers got almost no value from the settlements. My understanding is that the dollar value of credits requests pursuant to the settlement was trivial.
* Hundreds of advertisers opted out of the settlements, and some of those opt-outs have matured into standalone lawsuits of relatively low import (and, IMO, relatively low merit), such as the Feldman v. Google lawsuit. There are some ancillary lawsuits, such as the ongoing Miva securities litigation, that I also think are chickenscratch cases.
Looking forward, I see two main open issues about click fraud:
1) Just how bad is the click fraud problem? We still don’t know the exact rates or volume of click fraud (a topic that has sparked an irresolute war of words and statistics), and advertisers still don’t have a good way to quantify it for themselves. As a result, many advertisers are still mad about click fraud, but at the same time I don’t see any obvious suppression of the click-based advertising market either. I’m sure some advertisers have checked out due to click fraud, and other advertisers have reallocated a portion of their dollars to advertising media less susceptible to fraud, but on the whole the click-based advertising market remains robust, healthy and profitable for all involved. I think this is one of the main reasons that click fraud is receiving less attention.
Another possible reason is that perhaps advertisers are doing a better job managing click fraud despite their imperfect tools. Certainly, advertisers who can track ROI from their click-based advertising can adjust their click bids to account for any valueless clicks. For those advertisers, I recommend that they reduce their bids downward to reflect the value they actually derive. Let your competitors overpay for those clicks.
2) Will there be new class action lawsuits against Google and Yahoo? While the 2006 settlements cleaned up Yahoo and Google’s past liability for click fraud, in theory a new class of advertiser-plaintiffs has been developing since the settlement dates. In light of the sweet deal that the plaintiffs’ attorneys got in the last settlements, it seems inevitable that some entrepreneurial plaintiff-side attorneys are going to round up a new class of post-settlement advertisers.
For more on the click fraud topic, in May 2007, I gathered my blog posts on the click fraud topic into a single PDF.
Posted by Eric at 10:20 PM | Licensing/Contracts , Search Engines | TrackBack
February 08, 2008
Third Circuit Says Google Isn't State Actor--Jayne v. Google Founders
By Eric Goldman
Jayne v. Google Internet Search Engine Founders, No. 07-4083 (3rd Cir. Feb. 7, 2008)
You may recall Jayne v. Google Founders, one of several wacky pro se lawsuits filed against Google last summer. When I first saw the lawsuit, I laughed out loud because the complaint was handwritten in a rather unpolished script and filled with some pretty crazy allegations about the availability of Jayne's social security number--in scrambled format--via Google. The complaint didn't get very far, as the district court dismissed the complaint sua sponte.
Jayne appealed to the Third Circuit, which dismissed his complaint in a terse 267 word per curiam opinion. The key line: "Google and its founders are not state actors, and Jayne’s allegation concerning his coded social security number does not constitute a violation of the Constitution or federal law."
This isn't the first time that Google has been declared not to be a state actor. See the district court KinderStart opinion. But it's nice for Google to have a Third Circuit ruing validating it.
HT: Tom O'Toole
Posted by Eric at 01:40 PM | Search Engines | TrackBack
February 06, 2008
Kentucky Court Votes Keyword Ads = TM Use in Commerce--TDI v. Golf Preservations
By Eric Goldman
T.D.I. International, Inc. v. Golf Preservations, Inc., 2008 WL 294531 (E.D. Ky. Jan. 31, 2008)
In a thinly reasoned opinion with meager facts, a Kentucky federal court meekly voted that keyword advertising is a trademark use in commerce, at least for purposes of a motion to dismiss.
The case involves competitors in the golf course drainage system installation business. Bailey worked for the plaintiffs before starting up his own competing venture. The plaintiffs claim (among other things) that Bailey misappropriated trade secrets when he walked out the door and that his new venture engaged in trademark infringement by buying keyword advertising (apparently the "XGD" trademark, which as of today still triggers a Google AdWords ad for the defendant).
The court describes the precedent cited by both sides regarding the "use in commerce" question (a2z and 1-800 Contacts on the defense; GEICO, American Blinds, Buying for the Home, Edina Realty, JG Wentworth, Rescuecom v. Computer Troubleshooters, Paisola) before throwing up its hands and punting:
The Court has given careful consideration to the arguments and authorities presented by both parties. In light of the uncertain state of the law on the specific issue presented in this case, the Court does not find the Defendants' arguments sufficient to warrant dismissal of the Plaintiffs' Lanham Act claims at this stage in the proceedings.FN1 Accordingly, the Court finds that the Plaintiffs have alleged facts sufficient to “state a claim to relief that is plausible on its face."
In the footnote, the court notes that the plaintiffs alleged other conduct beyond just buying keywords. The case doesn't recount these facts, but they might very well support a use in commerce determination without needing to address the keyword advertising issue at all.
Either way, this case reinforces the pattern that Second Circuit-controlled courts aren't finding trademark use in commerce from keyword triggering and all other courts are. In that respect, this ruling is reminiscent of the American Airlines v. Google ruling, where the court declined to dismiss the complaint without any substantive explanation.
Posted by Eric at 03:33 PM | Search Engines , Trademark | TrackBack
January 29, 2008
ABA IP Section Quietly Considering Anti-Consumer Proposals to Regulate Keyword Advertising
By Corynne McSherry and Eric Goldman
[Eric's note: this is a bit of an unusual post for this blog, as it is being simultaneously posted both here and on the EFF Deep Links site]
The tussle over keyword advertising has spilled over into numerous arenas, including the courts, the legislatures (such as Utah’s ill-conceived attempt to ban keyword advertising), the private trademark policies of the search engines and the law review literature. Given the magnitude of the issue—and the billions of dollars associated with keyword advertising—it’s not surprising that new battlefields are cropping up all over the place. But the latest skirmish has an unexpected venue—the closed-door deliberations of the American Bar Association.
The Trademark Litigation subcommittee of the ABA’s IP Section is evaluating four resolutions relating to keyword advertising. The emergence of this battlefront is hardly good news, however. From a substantive standpoint, the resolutions reflect misguided and anti-consumer priorities. From a procedural standpoint, it’s hard to see why the ABA would take a side in these contentious matters, and it’s not clear how these resolutions add any value to this debate. We strongly urge the subcommittee members to reject the resolutions.
Resolution #1
The first resolution offers a perplexing answer to a problem that doesn’t exist. It declares that the likelihood of consumer confusion is "purely an issue of fact." The question is: who has argued otherwise? As noted by the leading treatise on trademarks, by Prof. McCarthy, this resolution restates the general rule that “Traditionally, the law has classified likelihood of confusion as an issue of fact.” See McCarthy on Trademarks and Unfair Competition Sec. 23:67.
Indeed, no keyword advertising case has suggested otherwise. Having said that, at least one case was resolved on summary judgment when the court concluded that there were no material disputes about the facts—and rightly so. See, e.g., J.G. Wentworth SSC Ltd v. Settlement Funding LLC, 2007 WL 30115 (E.D. Pa. Jan. 4, 2007), where the court granted summary judgment to the advertisers based on the lack of evidence of consumer confusion. The resolution doesn’t seem to affect the J.G. Wentworth situation, so it’s not clear what it’s supposed to accomplish.
At the moment, it appears this resolution doesn’t do anything more than restate current law. Surely the Section has better things to do than pass resolutions approving the status quo.
The resolution also proposes that, with respect to keywords, the analysis must consider how a keyword or trademark is used in an ad or to link to a separate site. Again, in most cases that will already happen. But there may be other circumstances to consider in any given case: e.g., whether links appear in such a way that consumers are highly unlikely to be confused. Judges already have ample guidance on this issue, and they are well capable of applying that precedent to specific factual situations.
The only conceivable benefit of this resolution is that it might discourage courts from using doctrinally deficient heuristics like the initial interest confusion doctrine, which some courts have used to bypass a more careful inquiry into consumer confusion. For more discussion about the problems of the initial interest confusion doctrine, see Eric Goldman, Deregulating Relevancy in Internet Trademark Law. We’d be thrilled if that were the goal, but it would be better accomplished by explicitly encouraging courts to stop using the initial interest confusion doctrine. However, given that the initial interest confusion doctrine is a favorite tool of plaintiffs with weak cases, and given the pro-plaintiff bias of the resolutions, we suspect that wasn’t the point here. So we’re left scratching our heads, wondering why this resolution is being proposed at all.
Resolution #2
The second resolution seeks to declare that a trademark use in commerce always occurs (1)“if it appears directly in an advertisement on the resulting Internet web page,” and/or (2) when a trademark is (a) “hidden in a Metatag,” or (b) “used principally for its importance as a Keyword.”
The first part of this resolution appears to restate the law. Every court that has opined on the topic has concluded that a use in commerce occurs when an advertiser references a third party trademark in a keyword-triggered ad. See, e.g., Hamzik v. Zale Corp./Delaware, 2007 WL 1174863 (N.D.N.Y. Apr. 19, 2007).
Even so, the current state of the law is misdirected, and the Section should not encourage it further. If the ad copy says “our product is cheaper than [competitor’s trademark],” the advertiser isn’t trying to portray its goods as the competitor’s—yet, the advertiser has to defend an expensive lawsuit over whether its reference creates a likelihood of consumer confusion. Instead, trademark law should give more breathing room to advertisers making “referential uses” of third party trademarks. See Universal Communication Systems, Inc. v. Lycos, Inc., 2007 WL 549111 (1st Cir. Feb. 23, 2007); Eric Goldman, Online Word of Mouth and its Implications for Trademark Law.
Because of the misguided state of the current law, Google has adopted a trademark policy that allows trademark owners to prevent competitors from including the phrase “we’re cheaper than [trademark owner]” in the ad copy—or, for that matter, referencing the competition at all in the ad copy. This may make keyword ads more confusing to consumers, not less.
The second part of the resolution has at least two fundamental flaws. The discussion about metatags reflects an uneducated—or, at best, dated—view of the Internet. Back in the 1990s, some search engines considered “hidden text” such as metatags in their rankings algorithms. Today, many search engines—most notably Google—simply ignore hidden metatags when making ranking determinations. If a website includes a third party trademark in its metatags and the search engines simply ignore it, treating it as a use in commerce defies reason.
A blanket rule that a trademark is used in commerce whenever it is “used principally for its importance as a keyword” is equally specious. We don’t understand how this test is supposed to be applied, and the accompanying discussion does little to illuminate matters. For example, the resolution explains that the person making a “use in commerce” is the person “who was to gain click-through monies at the expense of the trademark owner,” which raises a set of impossible-to-determine factual questions, such as when does keyword advertising actually take money out of the pockets of trademark owners, rather than simply presenting consumers with increased choices that improve their marketplace decisions. Of course, some trademark owners mistakenly think that every consumer searching for their trademark is “their” customer and therefore is poached by anyone who seeks to educate that consumer about other marketplace alternatives. We hope the resolution drafters aren’t succumbing to such an empirically unsupportable and anti-consumer view.
Finally, in an ineffectual nod to fair use, the resolution makes a confused distinction between a purely nominative or “otherwise allowable” use and a use intended to trigger keyword ads. Of course, the one does not preclude the other.
Resolution #3
The third resolution proposes that search engine liability for keyword advertising should always be a question of fact. Like the fourth resolution (discussed below), this appears to be a simple attack on 1-800 Contacts ruling—which held that the use of trademarks to display ads does not, by itself, trigger trademark liability—with no justification for why the Section should substitute its judgment for that of the Court of Appeals and allow trademark owner to effectively control what appears on consumers’ desktops.
Moreover, this resolution appears to be designed to ensure that keyword lawsuits will be as expensive as possible, to no good purpose. It rejects the numerous cases that have held that search engines don’t make a trademark use in commerce when selling trademarked keywords (see, e.g., Rescuecom v. Google), which have led to very quick and efficient victories for the search engines. In contrast, when courts have held that search engines do make a trademark use in commerce for their sales, the lawsuits can become needlessly protracted. For example, the American Blinds case went almost four years before American Blinds completely capitulated in a settlement; the 1-800 JR Cigar v. Yahoo case ran a remarkable six years before settling. Years of litigation may generate a lot of legal fees and help lawyers pay the bills, but these lawsuits do little to help most trademark owners or consumers.
Besides, search engines already do plenty to help trademark owners. Every major search engine has an internal policy that allows trademark owners to restrict advertising on their trademarks without needing to run to court. In practice, this means that search engines help censor ads that trademark owners don’t like, especially ads that may increase competitive pressures on trademark owners. If courts ever held search engines liable for selling keywords, search engines would be even more aggressive about squelching ads that might benefit consumers.
Resolution #4
The fourth resolution seeks to declare a 2005 Second Circuit opinion, 1-800 Contacts v. WhenU, to be a “minority position” that is “flawed in its reasoning.” In support of this, the resolution notes that the case was “based on facts too unusual to apply to most other cases in this area.”
The 1-800 Contacts v. WhenU case involved the sale of trademarked keywords by an adware vendor. In that case, the Second Circuit flatly declared that such sales did not constitute a trademark use in commerce, handing a decisive and clean victory to the defense. This case has proven to be a major ruling, with at least a half-dozen cases favorably interpreting it to find for the defendants in keyword advertising cases.
The resolution is therefore factually wrong to characterize the 1-800 Contacts opinion as a minority view, as it is the case that is the most frequently cited favorably. The resolution is also normatively wrong when it says the case is flawed in its reasoning; nor does it offer any explanation for this conclusion.
Procedural Considerations
Beyond the substantive deficiencies, these resolutions raise two interesting procedural issues.
First, why is the ABA IP Section attempting to intervene in this contentious area of the law in the first place? These resolutions are political in nature and reflect a deep trademark owner-favorable bias that does not necessarily reflect the views of American lawyers generally or IP lawyers specifically. It’s hard to see how these biased and divisive statements are an appropriate use of the ABA’s resources or authority.
Second, the ABA subcommittee proposing these resolutions has sought to keep them from public dissemination. An ABA committee representative emailed one of us to claim that we “cannot share committee or subcommittee work product with [non-committee members]” (although we received the resolutions from several sources, including the subcommittee chair himself), and we were asked to destroy “any ABA-IPL Section 208 Keyword Subcommittee work product that you may have received.” We don’t understand why an ABA committee seeks to conduct deliberations about resolutions--that are presumably intended to be promulgated to the legal community--behind closed doors, away from public scrutiny. As this critique of their content indicates, these resolutions would substantially benefit from the input of a wider range of voices. We hope the committee solicits that input or, better yet, squelches this ill-conceived effort to micromanage the courts.
UPDATE: Paul Levy offers more insights.
Posted by Eric at 07:05 AM | Search Engines , Trademark | TrackBack
January 09, 2008
1-800 Contacts Sues LensWorld for Keyword Advertising
By Eric Goldman
1-800 Contacts, Inc. v. LensWorld.com, Inc., 2:08-cv-00015-SA (D. Utah complaint filed Jan. 8, 2008)
My my, look who's decided to go back into court! It's none other than 1-800 Contacts, the online retailer with a lousy trademark and a love-hate relationship towards keyword advertising. This time their target is their chums LensWorld.com for buying "1800Contacts" as a keyword.
You may recall 1-800 Contacts for their decisive loss in the Second Circuit on the keyword advertising issue, in which the court emphatically shut down their trademark claims against WhenU because WhenU didn't make the requisite trademark use in commerce. This ruling has become a major precedent that has spawned no less than a half-dozen Second Circuit-based court rulings that keyword advertising isn't a trademark use in commerce.
Ironically, 1-800 Contacts also has routinely bought third party trademarks as keywords. They admitted to this in the WhenU litigation (a point that the Second Circuit noted sharply). They also were so concerned when Utah legislators banned using third party trademarks for keyword advertising that they helped push the legislators to back down. Hey 1-800 Contacts, maybe I'm missing something, but if you wanted to bring a keyword advertising lawsuit like this one, maybe you shouldn't have badgered your legislators to remove a law that would have ensured your success in court!
So it looks like 1-800 Contacts has a somewhat duplicitous attitude towards keyword advertising--good when they do it, bad when their competitors do it. Hmm. Then again, maybe we shouldn't be surprised; this isn't 1-800 Contacts' only example of marketing duplicity.
In any case, the LensWorld lawsuit is a garden-variety advertiser-vs.-advertiser keyword advertising lawsuit. Based on the limited data we have, I'm guessing the Utah federal court will deem keyword advertising a trademark use in commerce, but after that, who knows? The only twist here is that 1-800 Contacts claims that LensWorld aped their FAQs, prompting a tossed-in copyright infringement claim as part of the package. Also I can't help but note that there appear to be many other possible defendants who are buying 1800contacts as a keyword (see the screenshot in para. 22/page 6)...is a 1-800 Contacts litigation frenzy imminent, or is LensWorld uniquely positioned for 1-800 Contacts' enmity?
Finally, for those of you who purchase contact lenses and other eyecare items online, I trust you've noted 1-800 Contacts' affinity for using legal processes to shut down pro-competitive behavior. Personally, I'm voting against their regressive and duplicitous attitudes towards IP by taking my business elsewhere!
HT Evan Brown.
UPDATE: Tom O'Toole explains why Utah is a great venue for 1-800 Contacts.
Posted by Eric at 11:39 AM | Copyright , Search Engines , Trademark | TrackBack
December 28, 2007
December 2007 Quick Links
By Eric Goldman
Marketing
* I've blogged about Various, which operates AdultFriendFinder.com, before. They made the news recently in two ways. First, they sold to Penthouse for half-a-billion dollars. Second, they settled with the FTC for "pelting" users with unwanted sexually graphic pop-up ads. Do you think these developments are linked in any way... ? Could it be that Various was willing to settle up with the FTC on any terms so that they could get a half-billion dollar check? In this respect, I'm reminded of the MySpace/Intermix $7.5M settlement with the NY Attorney General's office in a dubious enforcement action that was immediately followed by MySpace's sale to News Corp. for $580M. Hey government enforcement agencies--if you can spot hot dot-coms that are negotiating mergers and bring an enforcement action, you can name your price!
* Abrams v. Facebook, the lawsuit over Facebook sending text messages to old phone numbers, has settled. See Michael Erdman and the AP.
* Newsday circulation fraud case (involving inflated circulation numbers) nets $83M restitution, $15M criminal settlement, and nine criminal convictions.
* Texas AG Abbott is prosecuting two companies under COPPA. As far as I know, this is the first state-level enforcement action under COPPA.
* Florida AG Michael Palecki looks to be targeting online advertisers for ads placed by their affiliates.
* The Do-Not-Call registry has become an even less dynamic reflection of preferences.
Copyright
* The Second Circuit kicked out the settlement struck in Tasini's aftermath because it covered unregistered copyrights. Rebecca makes some good points.
* Perez Hilton drops YouTube because they took down one of his videos in response to a takedown notice. On the one hand, this shows that there can be marketplace mechanisms that give feedback to intermediaries based on the restrictiveness of their takedown policies. On the other hand, YouTube was a free service; what did you expect?
* Michael Savage, a radio personality, is suing a website for posting audio clips of his rants as part of the website's criticism of him. See the NYT and CMLP.
* A special master has been appointed in the Grokster case to determine the possible filtering options available to Streamcast. I'm actually amazed that this case is still going!
Reviews and Ratings
* WSJ: Restaurants are giving away free meals to online reviewers to try to get improved consumer ratings.
* BrokerCheck, a regulator-sponsored website for consumer gripes about securities brokers, deletes negative gripes if the complaint settles.
* Retail store signage ("shelf talkers") routinely overstate the Wine Spectator ratings assigned to wine on the shelves.
Best of Mike Masnick
Mike Masnick of Techdirt is a terrific blogger who is smart, prodigious and opinionated. This month he had some noteworthy posts (even by his standards), including:
* Some wise words about Fark's trademark application for NSFW.
* “Noncompete Agreements Are The DRM Of Human Capital.”
* "Anything Goes Wrong Online? Yell 'Net Neutrality' As Loud As Possible!"
Search Engines
* Google appears to have categorically wiped out PageRank for bloggers participating in PayPerPost.
* Danny's sensible remarks on the role of humans in Google's algorithmic search results.
* Search engines pay $31.5M to settle up for running gambling ads. A significant share of this settlement amount is actually public service ads, not cash. Note that enforcement of federal criminal gambling laws is one of the few exceptions to 47 USC 230; if this had been an enforcement of state anti-gambling criminal laws or a civil action, it should have been preempted.
General
* "Like the proverbial tree falling in a forest, the unauthorized use of a trademark that is never perceived by anyone cannot be said to create a likelihood of consumer confusion." Custom Manufacturing and Engineering Inc. v. Midway Services Inc. (11th Cir. Nov. 21, 2007). This statement was made in the context of a counterfeit component part, but it sounds like a good reason to reject liability for including trademarks in keyword metatags.
* Todd Hollis is suing DontDateHimGirl.com a second time. Last time the court sidestepped 230. This time, I hope the court will use 230 to terminate the lawsuit permanently.
* Mark Radcliffe's "2007 Top Ten Free and Open Source Software Legal Issues"
* A nice recap on "location-based mobile services," the delivery of services predicated on GPS devices in cellphones. UPDATE: It looks like mobile marketing/privacy is the topic du jour (or, at least, a topic worthy of end-of-the-year recaps).