Technology & Marketing Law Blog

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

As usual, I'm running late with my year-end recap. This post begins with my countdown of the top 5 Internet Law developments of 2011, then it lists other interesting developments and cases. It concludes with some of the most linked posts and then my editor's choice of some posts in 2011 that might have been a little overlooked. As usual, thanks for reading the blog in 2011!

Countdown: My Top 5 List of Developments in 2011

#5: Righthaven Implodes. Since the beginning, I've been skeptical of Righthaven's business model. Seriously, who else thinks it's a good idea to sue small-time mom-and-pop bloggers and non-profits on a one-by-one basis? However, even I had no idea that Righthaven would accelerate their own demise by routinely making basic litigation errors. A sketchy business model + a litigation shop that isn't very good at litigation = one dead start-up. It's always fun (in a bloodsporty way) to watch hubristic bullies get their just desserts, but watching the Randazza firm school the Righthaven litigators in Litigation 101 has been amazing. THAT'S how you litigate.

Righthaven lost often in 2011 (see my August reset). They lost fair use rulings (e.g., CIO, Choudry). They lost on standing grounds (e.g., Democratic Underground, Wolf). They were hit with sanctions. They were hit with hundreds of thousands of dollars of attorney fee shifts (e.g., Leon, Wolf, DiBiase). They even lost their domain name in an auction--a delicious irony given that Righthaven's complaints improperly demanded its defendants' domain names on the theory that it might need the domain name to satisfy a judgment against the defendant, when in fact it was Righthaven's domain name that was used to help satisfy a judgment against it!

Righthaven ended 2011 on death's door, but the trend of newspapers trolling for copyright litigation isn't going away. I'll be watching NewsRight closely in 2012.

#4: Medical Justice Gives Up. Speaking of hubristic bullies... You recall Medical Justice, the organization that helped doctors and other medical service providers take copyright assignments from patients in their as-yet-unwritten reviews so that the doctors could expeditiously remove unwanted reviews by sending 512(c)(3) takedown notices to review sites. It's an interesting legal hack, but it has some bad side-effects, including the fact that patients hated it, the copyright assignments almost certainly were void (for public policy reasons and others), doctors were hurting themselves by discouraging patient reviews (patients prefer to choose doctors when there's a critical mass of patient reviews), and (as our research uncovered) most consumer review sites ignored the doctors' 512(c)(3) takedown notices. Obviously, with those defects, Medical Justice wasn't exactly adding a ton of value to its clients. Medical Justice finally gave up, but too late to prevent a lawsuit against one of its clients and a complaint to the FTC. Chances are Medical Justice will be living with a long-term hangover from this entrepreneurial foray.

Seeing Medical Justice stop peddling anti-patient review tools was slightly satisfying, but that result was always a fait accompli. The reason Medical Justice's change of heart matters is that shady or clueless vendors keep developing new ways to suppress unwanted consumer reviews, and I hope Medical Justice's experiences will discourage other vendors from trying the copyright hack. I talk about these dynamics more in my paper on regulating reputational information.

#3: gTLD Expansion. It remains unclear exactly what ICANN's rollout of unlimited top level domains will do. Due to the expansion of new namespaces, brand owners face a long list of complicated--and potentially expensive--choices to make. Unfortunately, these choices don't really benefit society; instead, the gTLDs tax businesses while the benefits accrue to a small number of service providers (and, of course, ICANN itself). I think many businesses will reserve their name in multiple new gTLDs to prevent squatting--with the net effect that businesses will spend more money just to preserve the status quo. Meanwhile, most consumers are likely to be bewildered by the unlimited number of TLDs, which is just going to increase their tendency to rely on search engines and link directories rather than domain names to navigate to their desired destinations.

#2: Internet Consumer Privacy Lawsuits Tank. 2011 initially looked like the year of the Privacy Plaintiff. A torrent of privacy lawsuits had been filed, plaintiffs had wrested a few important and lucrative settlements, and Internet companies continue to make questionable privacy decisions that create a steady supply of potential new lawsuits.

But the path to riches didn't materialize. Instead, 2011 emerged as the year when privacy class action lawsuits mostly failed miserably. Courts principally rejected the lawsuits on standing grounds for lack of cognizable harm, but plaintiffs failed on other related grounds, such as a lack of damages negating the prima facie case. There were some exceptions where plaintiffs made a little progress (see, e.g., Claridge v. RockYou, Anderson v. Hannaford, Fraley v. Facebook). I'm sure the privacy plaintiffs' bar will be studying those rare successes to formulate a better battle plan--and to better prepare their cases and find strong named plaintiffs, a recurring omission that hasn't gotten a lot better over the year. However, for now, it's clear that the privacy plaintiffs' bar can't just show up in court and hold out their hands for a payday.

#1: Regulators Broke the Internet. We've always known that regulators could combat bad online activity by working "up the chain," i.e., by making upstream service providers liable for the bad acts or obligated to cut off the activity. However, for the most part, we've shared a tacit understanding that systematically going up the chain was a "nuclear" option--it would fix the specific problem but only at significant collateral cost that, on balance, makes the option unattractive.

I think we'll look back at 2011 as the year that tacit understanding broke down. In 2011, regulators around the world showed a seemingly insatiable demand for working up the chain. Although we in the USA like to think we're different from other repressive regimes, the evidence suggests otherwise. Some examples of "up the chain" activity in 2011:

* Arab Spring. Repressive regimes got local Internet access providers to turn off Internet access in the country.
* Operation in Our Sites. The Immigrations and Customs Enforcement (ICE) agency keeps seizing domain names of suspected foreign rogue websites on an ex parte basis, making errors and breaking the law in the process. Mike Masnick blew open the story on Dajaz1.com, which ICE seized on an ex parte basis, conducted secret proceedings for a year, and then gave back the domain name with no explanation.
* Graduated Response. Copyright owners got Internet access providers to voluntarily (?) agree to restrict, and eventually terminate, their users' accounts.
* Secondary liability against intermediaries. Rightowners keep expanding their intermediary targets, including lawsuits against ad networks and SEOs/web designers. To be fair, some of these lawsuits aren't going very far, and expansive secondary liability theories aren't new in 2011.
* Ex Parte Seizures. Rightsowners are asking for the moon against third party service providers in ex parte proceedings, and courts are giving it to them because the third parties aren't there to represent their own interests. We recap this epidemic in this post.
* SOPA and PIPA. These proposed bills were the finest examples of rightsowners pursuing the nuclear option regardless of the collateral damage. The bills' basic architecture was to attack a wide range of intermediaries for third party actions--domain name registrars, search engines, payment service providers, ad networks. By seeking to deputize the intermediaries, the bills sought to instantiate "up the chain" duties across virtually the entire Internet. Putting aside their other policy deficiencies, I think we should resist all laws predicated on that fundamental assumption of intermediary deputization. See my post on the OPEN bill for why I reject the compromise "follow the money" solution. Sadly, I stand virtually alone in my stance.

Other Interesting Developments.

Some other interesting developments this year:

* Patent Reform. The America Invents Act is the most dramatic patent reform bill in years, and it has many provisions that may affect Internet companies, including the joinder standards, the prior user defense, and the novelty/priority standards. The law doesn't fix the overall problems with bad Internet patents or unmeritorious assertions of those patents, but it nevertheless could make some dramatic changes in what Internet companies do.

* Google and Antitrust. Google has become the incumbent in search, and all of its rivals--especially the companies Google is disintermediating--are desperately seeking to knock it off its perch. I believe Google and antitrust was the #1 topic prompting reporter phone calls to me in 2011. We are waiting to see what comes from the FTC investigation into Google's practices, and the list of Google-haters keeps growing daily. At the same time, the anti-Google forces made surprisingly little actual progress in 2011, including suffering a conspicuous (and not even close) loss in the myTriggers case. See my paper on why I am so over the Google antitrust battles.

* DC's Obsession with Busting Silicon Valley Companies. Sometimes, it feels like DC insiders wake up in the morning and wonder, "What Silicon Valley company do I feel like busting today?" Drive down the 101 from San Francisco to San Jose and play the "Spot the FTC/DOJ Bust" bingo game. Some of DC's targets in 2011: Google Buzz, Twitter (finalized in 2011), Facebook, Google pharma ads, Apple and others for no-poaching restrictions, and others. Good times!

* Judges Order Litigants to Hand Over Passwords to Social Networking Sites. This year, several judges ordered litigants to turn over their Facebook passwords to their litigation opponents for discovery purposes. See, e.g., Zimmerman v. Weis (which I added to my Internet Law reader this year). In 10 years, we'll look back at this mini-trend and shake our heads at the judicial cluelessness. Social networking sites contain a mix of public and private information, and letting a litigation opponent root around the account is just as objectionable as making a litigant hand over the keys to his/her house so the opponent can rummage around.

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

* Author's Guild v. Google. The court rejected the Google Book Search settlement agreement for good reasons, but it sent the parties back to square 1. Why the parties haven't been able to broker a legislative compromise is beyond me.

* Barclays v. theflyonthewall. The Second Circuit took a big bite out of the hot news doctrine. Unfortunately, the Second Circuit didn't kill the hot news doctrine outright, but the opinion leaves open very little room for hot news plaintiffs.

* Network Automation v. Advanced System Concepts. The most important keyword advertising ruling to come out in several years. While the ruling itself was a mixed bag for the litigants, the opinion tore down a number of crusty plaintiff-favorable legal doctrines that had cluttered up trademark jurisprudence for years--including virtually mooting the initial interest confusion doctrine and killing the "Internet trinity" bypass to the standard multi-factor likelihood of consumer confusion test. I've noticed that the opinion has already noticeably tilted courts towards more defense-favorable rulings.

* Betty Boop case (Fleischer Studio v. AVELA). For a few months, it looked like the Ninth Circuit had eliminated trademark merchandising rights in characters that were out-of-copyright. Then it changed its mind; but still it liberated Betty Boop to the world.

* PhoneDog v Kravitz. An interesting battle over ownership of a Twitter account.

* Levitt v Yelp/Ascentive v. PissedConsumer. 47 USC 230 still works really, really well as an immunity. In Levitt, Yelp got a 230 dismissal that Yelp had tried to get advertisers to pay to manage consumer reviews. In Ascentive, the court rebuffed a plaintiff's effort to use a trademark infringement claim against a consumer review website to work around 230.

* Habush v Cannon. Buying a person's name as the trigger for keyword advertising doesn't violate their publicity rights.

* UMG v. Shelter Capital. While everyone waits for the Second Circuit's decision in Viacom v. YouTube, the Ninth Circuit stole some of that thunder with a powerful endorsement of the 17 USC 512 safe harbor. Too bad Veoh didn't live long enough to enjoy the win.

* In re Rolando S. Rolando was convicted of felony identity theft for taking a classmate's Facebook page for a joyride. My vote for the most interesting Internet Law case of 2011, and an instant cyberlaw classic. I've already added it to my Internet Law reader, and the students seemed to enjoy discussing the case.

Some of the Most Linked Blog Posts in 2011 (Per Topsy)

* New Advertising & Marketing Law Casebook Available for Review
* Court Orders Plaintiff to Turn Over Facebook and MySpace Passwords in Discovery Dispute -- Zimmerman v. Weis Markets, Inc.
* "App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon (Apple legal issues are always good link bait)
* Twitpic Modifies Terms and Claims Exclusive Rights to Distribute Photos Uploaded to Twitpic
* Republishing Entire Newspaper Story is Fair Use--Righthaven v. CIO
* Court Rules That Instant Message Conversation Modified the Terms of a Written Contract -- CX Digital v. Smoking Everywhere (the most popular post of the year by far--a modern Contract Law classic)
* Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices--Amaretto Ranch Breedables v. Ozimals

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

* Cyberbullying and Restorative Justice [a Long-Delayed Post on DC v. RR]
* Racy Teen Photos Posted to Facebook Are Constitutionally Protected Speech--TV v. Smith-Green
* Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion
* Free-to-Consumers Ad-Supported Website Isn't Illegally Priced--Cammarata v. Bright Imperial
* What Would a Government-Operated Search Engine Look Like in the US?

Lists of Yore

Previous top 10 lists from 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 09:45 AM | Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Patents , Privacy/Security , Search Engines , Trademark | TrackBack

January 20, 2012

Google Gets Significant Win in AdWords/Parked Domains Case

By Eric Goldman

In re Google AdWords Litigation, 2012 WL 28068 (N.D. Cal. Jan. 5, 2012)

Google defeated class certification in an AdWords-related case over Google's placement of ads on parked domains. This almost certainly ends this case in practice, as few if any advertisers will find it worth continuing the case on their own. This ruling also takes us closer to the end of litigation wars over parked domains.

The advertisers sued Google for placing AdWords ads on parked domains and error pages and not adequately disclosing these facts.

The court finds standing under both California UCL/FAL and Article III based the named plaintiffs' allegations that they bought advertising they wouldn't have bought if they knew where Google was going to put it. This was also good enough to confer standing for the unnamed plaintiffs; the court says that "where one class representative in a UCL or FAL class action has already established Article III standing, the court need not analyze the standing of unnamed class members."

The court also finds numerosity, typicality, adequacy, and commonality (on the question of “whether Google’s alleged omissions were misleading to a reasonable AdWords customer”). However, the court rejects class certification on predominance grounds. Even though there are common legal questions among the advertisers, their idiosyncratic factual questions are more important than the common legal questions. Specifically, because only some advertisers were financially harmed by Google's placement of ads on parked domains and error pages, the court would have to investigate each advertiser's results to determine if restitution were appropriate. Further, because each click was auctioned off and sold for a constantly changing price, it would be hard to calculate the "but for" pricing that advertisers would have paid. Plus, not every advertiser is seeking click conversion; presumably (although not articulated in the court's opinion) some advertisers compute their bids on the branding value of ads. The court thus concludes this discussion by saying "any effort to determine what advertisers “would have paid” under a different set of circumstances requires a complex and highly individualized analysis of advertiser behavior for each particular ad that was placed."

To fix this problem, advertisers' counsel suggested a variety of restitution formulae that relied on blanket assumptions applicable to all advertisers. The court rejects these categorical approaches, saying "[s]ince the purpose of restitution is to return class members to status quo, the amount of restitution due must account for the benefits received from ads placed on parked domains and error pages." This too requires a per-advertiser assessment.

Google continues to make substantial progress cleaning up its AdWords litigation docket. Recently, it got rid of Woods v. Google over click fraud and improper pricing discounts; it defeated class certification in FPX v. Google over trademark triggering; and the Ninth Circuit upheld its settlement of the CLRB Hanson case. Even so, it's also clear that litigation forays by advertisers will be a perennial aspect of Google's life going forward; partially due to Google's occasional corner-cutting, but mostly due to advertisers' wish that they could get unlimited traffic at no cost. Then again, the plaintiffs' bar will be sharing some of that joy with Facebook too.

This lawsuit was just one of several lawsuits over the legitimacy of parked domains. I've criticized Google before for its AdSense for Domains program, which fosters an ecosystem that motivates questionable domain name registrant behavior while providing little if any real value to consumers. From my perspective, it's pathetically anachronistic that Google still offers its parked domain program--what is this, 2004? Time for Google to grow up a little more.

While I think it's sad Google can't wean itself from the questionable revenues it derives from its parked domains program, I think it's even sadder to see plaintiffs trying to attack the parked domains ecosystems using proxy defendants like intermediate service providers rather than just going after the domain name owners directly. See, e.g., Vulcan Golf v. Google; In re Yahoo; uBid v. GoDaddy; etc. Let's hope this ruling discourages plaintiffs from bringing future proxy battles over parked domains.

Posted by Eric at 09:24 AM | Domain Names , Licensing/Contracts , Marketing , Search Engines | TrackBack

January 19, 2012

Just How Egregiously Must a Trademark Plaintiff Act Before a Court Awards Attorneys' Fees to the Defendant?--1-800 Contacts v. Lens.com

By Eric Goldman

1-800 Contacts v. Lens.com, 2012 WL 113812 (D. Utah Jan. 13, 2012). Prior blog posts on the case dismissal in December 2010 and 1-800 Contacts' fee dispute with its attorneys.

The federal trademark statute says judges may award attorneys' fees to the winning party in "exceptional" cases. What does it take for a case to be "exceptional"? Apparently, it has to be pretty egregious conduct, as this long-running money pit of a case illustrates.

1-800 Contacts sued Lens.com for competitive keyword advertising. Through the course of the litigation, we learn the following facts:

* 1-800 Contacts accrued $650k in legal fees pursuing the case and capped its legal fees at $1.1M before it stiffed its law firm.
* the defendant Lens.com made less than $21 in profits from its competitive keyword ad buys. 1-800 Contacts also tried to attribute to Lens.com keyword ad buys made by Lens.com's affiliates, a legal argument the court ultimately rejected.
* 1-800 Contacts had done the same thing it was suing Lens.com for doing. 1-800 bought Lens.com's keywords and made about $220k in profit from those keyword ad buys, yet it had duplicitously tried to shut down Lens.com for making less than $21.

To me, this looks like an egregious misuse of the litigation process--exactly the kind of sanctionable behavior that should be considered "extraordinary" enough to make the plaintiff reimburse the defendant for its sizable legal fees. Indeed, the court has harsh words for 1-800 Contacts, including calling 1-800 Contacts' behavior "troubling" and specifically referencing its hypocrisy for suing over behavior it had itself engaged in. The court also says "1-800 Contacts’ actions raise questions about vexatious suits to defeat competition."

Nevertheless, the court decides not to award attorneys' fees. The court cites the following factors in denying the attorneys' fee request:

* the legitimacy of keyword advertising remains legally unsettled. Even when it was clear the direct infringement case was weak, 1-800 Contacts still had a non-frivolous claim for secondary infringement.
* Lens.com did engage in competitive keyword advertising, even if its purchases were "minuscule."
* Lens.com itself was sanctioned for discovery violations.
* even though 1-800 Contacts' expert reports were largely tossed, some of the reports were admitted.

It's clear the judge had distaste for both parties. Lens.com also has a parallel antitrust claim going against 1-800 Contacts in a different forum, and the judge seemed to be deferring to that case to remediate any abuses by 1-800 Contacts. Still, given 1-800 Contacts' condemnable conduct, it's curious the judge didn't stick them with a fee shift.

I think this ruling gives us some more insight into the trademark bullying phenomenon. The mockably ridiculous USPTO report on trademark bullying noted that trademark law's fee shift provision acts as a deterrent against abusive trademark litigation. (For example, it says "the potential for an award of attorneys’ fees is an existing deterrent to misuse of the litigation process in trademark disputes.") Given how hard it is to get a fee shift in light of a ruling like this, this was just another way in which the USPTO completely understated a very real problem in the field.

Posted by Eric at 03:34 PM | E-Commerce , Marketing , Search Engines , Trademark | TrackBack

January 15, 2012

Attempted Trademark Workaround to 47 USC 230 Immunity Fails Badly—Ascentive v. PissedConsumer [Catch-Up Post]

By Eric Goldman

[This is one of the top dozen or so most important Internet law opinions of 2011, but unfortunately it came out just as I was going into my exam-grading exile and I had to put blogging it on hold. Even over a month later, it's still worth your careful review.]

Ascentive, LLC v. Opinion Corp., 2011 WL 6181452 (E.D.N.Y. Dec. 13, 2011). A prior blog post on a different Ascentive lawsuit, Ascentive v. Google.

In my Regulation of Reputational Information paper, I explain how vendors are misusing intellectual property to control consumer perceptions of their businesses. One example is Medical Justice, which tried to use copyright law to work around 47 USC 230 and suppress unwanted reviews. Fortunately, Medical Justice has abandoned that effort.

Other vendors try to use trademark law to work around 47 USC 230. By definition, consumers must reference a vendor's brand in order to review it, and trademark's doctrinal plasticity means that such references arguably support a prima facie trademark claim. (I explain that issue more in my Online Word of Mouth paper). As a result, we've seen a number of vendors dabble with trademark claims against consumer reviews. For two examples, see Lifestyle Lift v. RealSelf and Eppley v. Iacovelli. (For more on the noteworthy litigiousness of doctors against consumer reviews, see this post).

In this case, the plaintiffs used trademark law to make a no-holds-barred assault on the 47 USC 230 immunity's applicability to consumer reviews. Their arguments go nowhere. I hope this emphatic ruling will discourage other plaintiffs from trying to use trademark law to work around 230.

Likelihood of Consumer Confusion

The court tried to do a straight-laced multi-factor LOCC analysis, but as I've noted before, the LOCC factors don't make sense when comparing apples and oranges like a vendor and a review site of the vendor. On the bad faith factor, the court says:

While it may be true that PissedConsumer has engaged in sharp-elbowed and perhaps unethical SEO tactics meant to make its webpages appear more relevant to search engines such as Google or Yahoo! than they actually are, that fact has no bearing on the inquiry here—whether PissedConsumer has attempted to sow confusion as to the source, origin, or affiliation of its products and services with those of plaintiffs.

The court instead observes: "Indeed, it is clear that PissedConsumer is not using plaintiffs’ marks as source identifiers at all." Well, that's only partially true--PissedConsumer is using the plaintiffs' marks as referents for the plaintiffs. (See Deregulating Relevancy for more on the implications of that). In a footnote, the court said there wasn't a dispute that PissedConsumer was using the marks in commerce, but the court failed to reconcile these seemingly inconsistent statements.

To bolster their unmeritorious trademark claim, the plaintiffs argued that several specific technological features used by PissedConsumer supported trademark infringement. The court rejects the plaintiffs' arguments on each feature:

* using the plaintiff's trademark as a third level domain name, i.e., ascentive.pissedconsumer.com. The court said that the pissedconsumer.com domain name makes it clear to consumers that the site is critical of, and therefore not affiliated with, the mark owner.

* using the plaintiff's trademark in the consumer reviews. The court says there's no consumer confusion here either:

after a brief inspection of the content of PissedConsumer’s website, the user would realize that they were visiting a third-party gripe site for “pissed” consumers.

* metatags. The court rejects initial interest confusion. First, there can't be competitive diversion because PissedConsumer isn't selling anything to consumers. Second, no one searching for the plaintiffs would be "diverted" to the defendants' website. (A point I make in gory detail in my Deregulating Relevancy article). Third, initial interest confusion imposes minimal (if any) harm on consumers because they can hit the back button. Finally, the court recognizes that technology has evolved since the 1999 Brookfield ruling such that metatags don't matter (citing, among other things, Google's 2009 blog post to that effect—thanks, Matt Cutts, for doing that!)

* black hat SEO. The opinion talks in some detail about linking archive posts from Twitter with the hope that Google will treat the posts as fresh content. The court says:

While it may be—and likely is—the case that PissedConsumer’s SEO practices are intended to make its webpages seem more relevant to search engines than they actually are and these methods may indeed violate the search engines’ terms of services, the remedy for this conduct is not trademark law but instead with the search engines themselves.

Amen to getting trademark law out of the way and letting search engines fix the gaming! This is another point I made ad naseum in my Deregulating Relevancy article.

* serving ads (through Chitika) showing the plaintiffs' trademarks, presumably automatically triggered by keywords on PissedConsumer's pages. The court says that, at most, PissedConsumer as the publisher is contributorily liable to any infringement committed by the ad network (Chitika), but the plaintiffs didn't allege contributory infringement. The court seemed to treat Chitika as the direct infringer instead of the advertisers, but in fact I think Chitika should be evaluated under contributory infringement as well, with the advertiser being the direct infringer (if there is one).

Although the court gets to the right place, its doctrinal jujitsu shows what happens when trademark law is stretched to places it doesn't belong. We've lost too many of the limiting principles in trademark law that should help make a case like this an easy one for judges. Among other things, a more robust use in commerce doctrine would have ended much of this case early, and the very lengthy opinion oddly doesn’t mention the seemingly applicable doctrine of nominative use at all.

47 USC 230

Having dispatched the plaintiffs’ trademark assault, the court mops up all of the remaining state law claims using 47 USC 230. The court says "a website such as PissedConsumer constitutes an ‘interactive computer service,’" which makes PissedConsumer's officers "providers" of an ICS. This is an unusual reading of the statute, but it's all good.

The court rejects the plaintiffs’ Roommates.com attack on 230, saying "determining what makes a party responsible for the ‘development’ of content under § 230(f)(3) is unclear, and the CDA does not define the term." Thus, the court says it's appropriate to examine the totality of the circumstances; plus, "one is responsible for the ‘development’ of information when he engages in an act beyond the normal functions of a publisher (such as deciding to publish, withdraw or modify third-party content) that changes the meaning and purpose of the content." The Roommates.com attack fails here because the plaintiffs provided no evidence that PissedConsumer actively created the content; their unsupported general assertions weren't enough. The court rejected the application of the old (and quite outmoded, IMO) Badbusinessbureau opinion, saying PissedConsumer's "actions are not unlike the targeted solicitation of editorial material engaged in by a narrow genre of publishers." (Huh?) Inviting consumers to post reviews and SEOing the pages didn't change the analysis. Accord Asia Economic Institute v. Ripoff Report.

Separately (and not relying on 230), the court tosses the RICO claim because the plaintiffs didn't show that PissedConsumer engaged in commercial bribery or extortion.

On these bases, the court rejects the plaintiffs' request for a preliminary injunction. However, the case is ongoing, and the plaintiffs still get discovery.

Implications

Although not a party to the suit, the real party-at-interest in this case is Google, because both Ascentive and PissedConsumer depend on Google traffic as virtually their entire marketing plan. In Ascentive's case, it said that 99% of its sales are made online, and a majority of that came from Google searches. Indeed, Ascentive had previously sued Google for trademark infringement before abandoning that claim. Meanwhile, PissedConsumer's business is to get favorably indexed in Google for businesses' names and then sell them services that take the edge off any negative user content that gets indexed. As a result, both litigants are competing against each other for favorable placement in Google search results. In my Online Word of Mouth paper, I discuss how brand owners face unusual and effectively unprecedented competition on their own brands for scarce consumer attention—in this case, the scarce resource of top search engine placement—and how that dynamic leads to weird trademark lawsuits like this one.

The legal ruling may be good for PissedConsumer, but this opinion isn't exactly a clean bill of health for its business model. Indeed, "the Court finds some aspects of PissedConsumer’s business practices troubling and perhaps unethical." I continue to believe that all consumer review businesses that seek to get paid by the vendors they review have a major structural conflict-of-interest—especially when the review site’s sales pitch to the vendor is reputation management. I ultimately think Google will need to restructure its algorithm to reflect the inherent untrustworthiness produced by these conflicts of interest.

Paul Levy's comments on the ruling.

Posted by Eric at 01:08 PM | Content Regulation , Derivative Liability , Search Engines , Trademark | TrackBack

January 13, 2012

Some Thoughts About Google Search Plus Your World (SPYW)

By Eric Goldman

[Normally I don't like to blog about these types of newsy product releases, especially when the facts are still being developed. However, I have spoken with some reporters about Search Plus Your World (see, e.g., this article by Robert Hof at Forbes), and I put together the following comments for a different reporter that seemed worth sharing.]

I have been consistently skeptical about the antitrust gripes about Google. Despite the dogged efforts of a long list of adversaries, no one has yet surfaced any "smoking gun" evidence that Google has acted impermissibly under antitrust law. Instead, most antitrust gripes about Google sound like sour grapes or, worse, efforts to misuse antitrust law to increase the complainer's profits at the expense of the public interest. For example, when other online intermediaries raise antitrust complaints that Google should be giving them more free traffic, I start to question the motives of the complainers. For a little more on this, see my recent article on search engine bias.

Having said that, Google's strongest defense all along has been that its search redesign choices have been in consumers' best interests. I think the widespread negative response to Search Plus Your World reflects, in part, a skepticism that Google's favoritism towards Google+ is solely in the consumers' best interests. Indeed, Google's own use case (the example involving Chikoo) seemed quite weak as a situation where the search results were actually improved--and I presume Google tried to showcase one of the strongest examples it could find. In my limited experience with Search Plus Your World so far, I haven't yet seen a single search results page where the prominent display of Google+ results actually improved the relevancy of my results. If anything, I have had some search results page where it was clearly harder for me to find the most relevant results.

If we lose faith that Google's integration of Google+ was in the searchers' best interest, our imaginations can run wild with speculation about other reasons why Google made the choices it made. I believe this is what's happening in the court of popular opinion. From a legal standpoint, I don't think Search Plus Your World adds very much to the antitrust complaints against Google (and some of the complaints, especially Twitter's, seem more like sour grapes than bona fide concerns). It's just another example where Google is cross-promoting its services, which is not inherently wrong and often can improve the consumer experience. However, if Google can't prove to us that each of its specific choices to integrate Google+ are in our best interests given the widespread speculation that they weren't, Google creates a major wedge in the trust relationship with users--and invites judges and regulators to impute bad motives to Google if they want.

_____

One more point. Just last summer, many folks were cheering Google+ as the first bona fide competitor to Facebook to emerge in some time, which is important because Facebook has some serious issues with a dominant market share itself. Google's efforts to bolster Google+ have the ancillary benefit of keeping Facebook on its toes and improving competition in the social networking space. On balance, having choices among social networking sites is a good thing, especially as Facebook continues to degrade the user experience by putting surreptitious ads in the newsfeed and with the MySpace-ification of its profile page UI via Timeline. This alone doesn't excuse all of Google's choices about integrating Google+, but we shouldn't lose sight of this big picture either.

UPDATE: Some of my favorite articles on SPYW so far:

* Danny Sullivan: Search Engines Should Be Like Santa From “Miracle On 34th Street”
* Steven Levy
* Tim Carmody

UPDATE 2: Techcrunch: Not At Any Price: Twitter Denied Data To Google And Bet On Itself

Posted by Eric at 09:49 AM | Search Engines | TrackBack

January 04, 2012

Keyword Advertiser Mostly Defeats Trademark Lawsuit--Scooter Store v. SpinLife

By Eric Goldman

Scooter Store, Inc. v. SpinLife.com, LLC, 2011 WL 6415516 (S.D. Ohio Dec. 21, 2011). The Justia page.

This is a spirited litigation between two retailers of wheelchairs, motorized scooters and related items. Maybe that retailing sector is so profitable that it warrants a litigation cat-fight, but my guess is these litigants are spending their retirement money beating up each other in court.

Today's ruling deals with SpinLife's AdWords advertising triggered on keywords such as “the scooter store,” “scooter store,” “my scooter store” and “your scooter store” as well as the inclusion of such terms in the spinlife.com's metatags. The plaintiff (let's call them TSS) has registered trademarks in "The Scooter Store" in certain classes but not for retail stores, because the PTO rejected that usage as generic. TSS asserted that SpinLife's keyword ads and metatags infringed its trademark rights.

The court ultimately concludes that "The Scooter Store" is generic for retail stores. This isn't surprising; the PTO had said the same thing to TSS. In fact, I've argued that all "[noun] store" marks (where the store sells the noun) are generic. Surprisingly, a different court ruled otherwise with respect to Apple's claims over "app store." I still think that court got it wrong.

Weirdly, having held the term generic, the court then spends several pages considering the question: "Can SpinLife's use of generic phrases cause consumer confusion?" What??? TSS tried to argue that it's enforcing its trademarks from other classes, not the generic term. The court wisely rejects that. If a term is generic in a class, then it's free for competitors to use in that class--FULL STOP, end of story.

The weirdness continues when the court doesn't dismiss the state anti-dilution claim based on TSS's purported rights in a generic term. WHAT??? Apparently the court is willing to consider TSS's trademark registrations in the other classes for dilution purposes, even though the court just said the registrations were irrelevant for infringement purposes. I understand that dilution claims cut across classes, so that part makes sense, but it's crazy to consider that a registered mark could control the term's use in a class where it's generic. The federal anti-dilution statute has a number of defenses that would clearly free the defendant, so the court's ambivalence may just be a quirk of Texas' anti-dilution statute. In any case, I imagine the judge will get to the right place eventually, but the fact it didn't get there instantly is puzzling.

Before the court declared TSS's marks generic, SpinLife argued that buying trademarked keywords is categorically permissible under trademark law per 1-800 Contacts v. Lens.com. The court rejects this strong proposition, saying "this Court will not rely on a single out-of-circuit case to conclude that the Adword purchases are not actionable under any circumstances." The court's decision isn't surprising given the diversity of rulings we've seen over trademarked keywords, although I think the world would be a better place if the court did adopt the strong proposition.

In the end, the court says SpinLife is free to use "scooter" and "store" in AdWords and its metatags without restriction. Furthermore, TSS ends up with weaker assets than it thought it had pre-litigation (see, e.g., American Blinds which exited its keyword advertising enforcement case similarly bereft) and a clear signal that it should stop spending money on its lawyers and start investing those dollars towards competing on the merits.

Other cases in the category of irrational enforcement actions against keyword advertisers:

- King v. ZymoGenetics. The defendant advertiser got 84 clicks.
- Storus v. Aroa. The defendant advertiser got 1,374 clicks over 11 months.
- 800-JR Cigar v. GoTo.com. The search engine defendant generated $345 in revenue from the litigated terms.
- Sellify v. Amazon. The defendant got 1,000 impressions and 61 clicks.
- 1-800 Contacts v. Lens.com. 1-800 Contacts spent no less than $650k (and was willing to spend $1.1M) to pursue Lens.com, which made $20 of profit from competitive keyword ads. It also tried to hold Lens.com responsible for affiliate ad buys which generated about 1,800 clicks, which under the most favorable computations were worth about $40k.
- InternetShopsInc.com v. Six C. The defendant got 1,319 impressions, 35 clicks and zero sales.

Posted by Eric at 09:00 AM | E-Commerce , Marketing , Search Engines , Trademark | TrackBack

January 02, 2012

Nov.-Dec. 2011 Quick Links, Part 1

By Eric Goldman

47 USC 230

* Wang v. OCZ Technology Group, Inc., 2011 WL 4903190 (N.D. Cal. Oct. 14, 2011). In a false advertising suit, the plaintiff argued that the defendant quoted/linked to third party testimonials on the defendant's website and those contributed to the misrepresentations. The defendant counterargued that the third party content was immunized by 47 USC 230 and therefore shouldn't be attributed to it. The court rejects the defendant's use of 47 USC 230 on a motion to strike material from the complaint, saying that it was too premature. Rebecca's coverage.

* News report that, per 47 USC 230, Worcester Telegram & Gazette wasn't liable for user-posted comments to one of its stories. Naturally, the plaintiff was an attorney. Prior blog coverage of lawsuits against newspapers for user-posted comments.

* Unsurprisingly, the plaintiffs appealed their 230 loss in Levitt v Yelp to the 9th Circuit. Prior blog post.

* Parisi v Sinclair, another 230 case, is being appealed to the DC Circuit. Prior blog post.

* An insurance company sued Google for the high search placement of Scam.com and PissedConsumer reports about it. Hello 47 USC 230!

* Techdirt: Dentist Who 'Invoiced' Patient For Negative Reviews, Getting Slammed On Yelp. Prior blog post.

Content Regulation

* Yoder v. University of Louisville, 2011 WL 5434279 (W.D. Ky. Nov. 8, 2011). Yoder graduated from University of Louisville with her nursing degree, but her lawsuit isn't moot due to her damages claim. Prior blog post.

* Roberts v. McAfee, Inc. (9th Cir. Nov. 7, 2011). Due to the single publication rule, failing to remove a press release on the website does not reset a defamation statute of limitations.

* Mattingly v. Milligan, 2011 WL 5184283 (E.D. Ark. Nov. 1, 2011):

Milligan won a hotly contested race for the position of Saline County Circuit Clerk. Following his election, Milligan sent a letter to four employees informing them that he would not retain them. That evening, Mattingly made two posts on Facebook in quick succession stating that bad things were all around and that her heart went out to those ladies who were told they were no longer needed. The posts could be viewed directly by at least 1,300 people, most of whom were residents of Saline County. As Milligan said in his letter of termination, Mattingly's statements were "in a public domain."...As evinced by their comments in response, some who read the posts understood Mattingly to be speaking about Milligan's decision to terminate some employees in the Circuit Clerk's office. These comments included criticisms of Milligan's termination decisions. According to Milligan, six constituents were motivated by Mattingly's posts to call him at home to complain about the terminations. Television news stations, newspapers, and an internet blogger reported on the Milligan's decision to terminate the employees. Viewing the evidence in Mattingly's favor, her Facebook posts touched on a matter of public concern.

* Obsidian Financial v. Cox, 2011 WL 5999334 (D. Or. Nov. 30, 2011). The court held that an Oregon blogger isn’t a journalist for shield law purposes. I think the case got so much attention in part because the judge said unnecessarily derogatory things about bloggers. However, Kash Hill reports that the defendant doesn't appear to adhere to journalistic standards, either. Eric Robinson explains why the judge got to the right legal result. The EFF also contextualizes the ruling.

* Louisiana Crisis Assistance Center v. Marzano-Lesnevich (E.D. La. Nov. 23, 2011). Interesting anti-SLAPP decision.

* India asks Google and Facebook to prescreen UGC to prevent the publication of disparaging content.

* The Smoking Gun reports on a prosecution for posting revenge porn.

Search Engines

* Not surprisingly, myTriggers appealed its loss in its antitrust claims against Google. (Because the case has nothing to do with its legal merits, I'm sure myTriggers will keep appealing losses until they exhaust all appeals). Prior blog post.

* In an expected move, ShopCity filed an antitrust complaint against Google with the FTC.

* buySafe v. Google complaint: As part of a patent battle, buySafe asserts that Google promises better search placement for participants in its Trusted Stores program.

* More insight into the Google Search Quality Raters. Prior blog post.

* On a related note, Bing is going back to hand-picking some search results. Could you imagine how the Google Haters would respond if Google did the same thing?

* Also related? New Scientist: “Google and Microsoft have won a major victory in the fight against such content farms”

* Google is cracking down on parked domains in its search results. Compare Vulcan Golf v. Google.

* Google Knol is another casualty of Google's project cleanup. Remember some Google Haters thought Google Knol would crush other encyclopedic-style projects due to Google favoritism of its own properties? (See, e.g., this article). What say you now?

* Google, Bing and Yahoo shut down fraudulent mortgage advertisers (WSJ, Search Engine Land).

* Search Engine Land: Google Instant Costs Google $65,000 In France. Given all of its prior losses, I had thought Google already was completely illegal in France.

* MediaPost: “consumers’ failure (or refusal) to differentiate between their search and browser bars shaped search behavior in 2011.” I wrote about this same issue...back in 2005!

* Clive Thompson: Why Kids Can’t Search.

Social Networking Sites

* Zoya Co. v. Julep Nail Parlor Co., 2011 WL 5975054 (N.D. Ohio Nov. 29, 2011). Website wasn't passive for Zippo purposes because, among other things, "It includes links that allow customers to “Connect on Facebook” and “Connect on Twitter” and to subscribe to a monthly newsletter." Compare DFSB Kollective Co. v. Tran.

* U.S. v. Cassidy, 2011 WL 6260872 (D. Md. Dec. 15, 2011). Reversing a harassment conviction based on talking a lot about a person on Twitter and in a blog.

* Dimas-Martinez v. State, 2011 Ark. 515 (Ark. Dec. 8, 2011). “Because of the very nature of Twitter as an on online social media site, Juror 2's tweets about the trial were very much public discussions. Even if such discussions were one-sided, it is in no way appropriate for a juror to state musings, thoughts, or other information about a case in such a public fashion….Thus, this court has recognized the importance that jurors not be allowed to post musings, thoughts, or any other information about trials on any online forums. The possibility for prejudice is simply too high. Such a fact is underscored in this case, as Appellant points out, because one of the juror's Twitter followers was a reporter. Thus, the media had advance notice that the jury had completed its sentencing deliberations before an official announcement was made to the court. This is simply unacceptable, and the circuit court's failure to acknowledge this juror's inability to follow the court's directions was an abuse of discretion.”

* U.S. v. Juror Number One, 2011 WL 6412039 (E.D. Pa. Dec. 21, 2011). A juror was fined $1,000 for criminal contempt for using email to discuss the case with other jurors during the trial after being dismissed from the jury.

* State v. Gordon, 2011 WL 5354265 (Ohio App. Ct. Nov. 7, 2011):

if Gordon's use of the computer for personal purposes during work time constitutes theft in office, it would mean that every public official or government employee who sends a personal email, reads a text message, or checks Facebook during working hours would be guilty of committing a felony. We do not believe that is the intended purpose of R.C. 2921.41. Therefore, we find that there was insufficient evidence that Gordon's use of the Village's computers for personal purposes constituted Theft in Office pursuant to R.C. 2921.41

* Woodward v. State, 2011 WL 6278294 (Ala. Crim. App. Ct. Dec. 16, 2011). Inflammatory online comments about a defendant (who allegedly killed a police officer) don’t necessitate a change in venue: “the unsolicited, unreviewed, largely anonymous online comments did not rise to the level of saturated, prejudicial media coverage. Moreover, we believe that any readers of the comments would value those comments at their true worth and not as “news coverage” at all.”

* Facebook “accidentally” blocked Snopes.com as a spammy link. Prior blog post.

* Kash Hill: How Not To Use Facebook To Get Custody Of Your Kids. Horrifying story!

* Gizmodo: Facebook Is Making Us Miserable [and not for the reason you think!]

* The truth about students using Facebook and their grades.

* A quarter of the blogs listed on the inaugural ABA Journal Blawg 100 from 5 years ago are now gone. This blog didn't make the first list, but next month we'll be celebrating our SEVENTH anniversary!!!

* K-12 schools are adopting social media policies restricting teacher-student interaction on social networking sites.

Posted by Eric at 07:49 PM | Content Regulation , Derivative Liability , Search Engines | TrackBack

December 10, 2011

The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP

By Eric Goldman

Sen. Wyden and Rep. Issa have released a draft of OPEN: Online Protection & ENforcement of Digital Trade Act, intended as an alternative to SOPA/PROTECT-IP. See my prior posts opposing SOPA and linkwrapping the discussion. Unlike SOPA's disgustingly blatant rent-seeking, which was such an over-the-top abuse of the legislative process that it did not (and could not) support a principled or even intelligent conversations about it, OPEN provides a useful starting point for a sensible conversation that could actually lead to acceptable compromises. For that reason alone, I think Congress should immediately stop all work on SOPA/PROTECT-IP and redirect that energy towards vetting this proposal. Having said that, for reasons I'll explain in a moment, I continue to believe the assumptions underlying SOPA/PROTECT-IP and OPEN are misguided, meaning that forging a compromise from OPEN’s more sensible proposal may be tricky.

Before I get further into substance, two process notes:

First, SOPA was the product of rent-seekers who were talking only amongst themselves and legislators tethered to their campaign contributions. The drafting process was disturbingly closed-door and exclusionary, exactly the kind we wish didn't take place in our representative democracy. In contrast, the OPEN sponsors want to have a dialogue about their ideas. In support of that, they have posted the draft to a website that allows comments and discussion. This is the way our democracy SHOULD work. Why is such an open process the exception instead of the rule?

Second, OPEN is a comparatively svelte 18 pages focused mostly on one core concept, compared to SOPA's 78 page monstrosity that advanced about a dozen different substantive proposals. I can't tell you the number of times I've seen very smart people stymied to keep all of SOPA's moving parts separate, and the failure to do so meant that they were conflating different parts of the statute in ways that prevented productive discussion. (Just two examples: the Colbert Report, where Zittrain mostly focused on SOPA's felony streaming provision while his counterpart was mostly talking about the cutoff provisions; and Business Insider's infographic where the felony streaming sanction was presented as a remedy to the cutoff provisions). By reducing the number of topics at issue, OPEN substantially reduces the chance that policy discussants will simply talk past each other.

An Overview

The law contemplates that rightsowners can file a petition against rogue websites at the ITC, an independent federal agency best known for its adjudication of certain patent disputes. In response to the rightsowners’ petition, the ITC will conduct an administrative adjudication. If the ITC determines that the website is a rogue website, then (1) the website is required to cease its conduct (not sure how enforceable that is), (2) the site also will be subject to any other unspecified consequences following from its determination as a rogue actor, and (3) most importantly, the rightsowner can take the ITC determination to payment service providers (PSPs) and ad networks and have them cut off the flow of money to the rogue website. The PSPs and ad networks would be protected by several immunities for trying to comply with the orders or their other efforts to protect the public.

This makes OPEN similar to SOPA in that it seeks to cut off funds flowing to rogue actors. However, among other key differences, PSPs and ad networks have no legal obligations until the ITC makes a ruling. In contrast, SOPA imposed cutoff obligations on PSPs and ad networks based merely on rightsowners’ unsubstantiated assertions.

What's Good

Substantively, some of the things I liked about OPEN:

* it situates the discussion about "rogue websites" in foreign trade policy. This fixes SOPA's overinclusive application to both domestic and foreign actors. However, if we really think rogue websites are a transborder enforcement problem, there are many other trade policy solutions that might be better options to consider—the most obvious being transborder enforcement coordination like the FTC does with its foreign counterparts.

* OPEN doesn’t touch the domain name system or search engines. SOPA had the potential to destroy the DNS and to jeopardize search engine functioning. OPEN sidesteps both pitfalls.

* OPEN builds in some due process before any formal legal obligations attach. As we've recently seen, due process is actually quite important, and we suffer from its absence. I say “some” due process because I’m not sure how much due process will attach in practice. For example, I have some concerns about the notice provision--not every targeted website will receive notice of the ITC investigation. However, I did like that any website the ITC labels as rogue can correct any identified problems, reapproach the ITC and ask it to remove the “rogue” determination.

* the definition of rogue website is tightened up substantially. It requires three elements:
a) a "non-domestic domain name," which requires that the registry, registrar and registrant all have to be located outside the US (I'm not sure what "located" means in this context). Venkat asked me what happens to a .com registered with a foreign registrar; I believe OPEN does not apply to this domain name.
b) conducting business in the US; and
c) "has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site to willfully engage in infringing activity."

The last element, in particular, is quite restrictive by requiring willful infringement. The meaning of the word "willful" is notoriously murky (see, e.g., the multitudinous Supreme Court cases over the word), so the statute would be improved by using a more detailed synonym. No matter what, though, willful is a high scienter level that should easily exclude most legitimate players. The statute further expressly excludes any sites that:

- follow good notice-and-takedown procedures
- qualify for 17 USC 512 (the DMCA online safe harbors) [this means that the statute sits next to 512 instead of rendering 512 moot like SOPA threatened to do], or
- distribute "copies that were made without infringing a copyright or trademark." I’m not 100% sure what this means. It apparently excludes websites reselling goods covered by the First Sale doctrine. I presume that the exclusion includes sites that sell legitimate knock-off goods, such as replicas of goods that aren’t protected by copyrights or trademarks.

* if a PSP or ad network fails to comply with an ITC order, the only consequence is that the DOJ can seek injunctive relief. Rightsowners do not have a private cause of action in those cases. As discussed below, this doesn't eliminate all PSP/ad network exposure to rightsowners, but rightsowners can't introduce evidence of ITC orders in any civil suits they bring against PSPs or ad networks.

* on the trademark side, it expressly limits its applicability to counterfeiting (although there is a erroneous cross-reference in the draft). Presumably, dilution or garden-variety trademark infringement disputes don't qualify under the statute.

What's Not Good

Substantively, some of the things I don't like about OPEN:

* OPEN still contemplates reestablishing a Fortress USA. Fortress USA marginally makes sense regarding the shipment of physical goods across geographic borders. It makes zero sense for digital bits zinging around the borderless network.

* in particular, because OPEN would burden only US-governed PSPs and ad networks, it may drive websites—including legitimate websites who want to reduce their risk of being mistargeted—to shift their business to foreign-based PSPs and ad networks. If lots of businesses make a switch based on these concerns, OPEN could counterproductively result in net financial losses for the US economy.

* similarly, foreign websites can opt-out entirely of the ITC process by consenting to US judicial jurisdiction. I like the idea of an opt-out, but imagine if other countries offered the same quid-pro-quo of allowing US websites to opt-out of some nasty foreign process so long as the websites consent to jurisdiction in their countries. I think we’d be outraged and insulted; which is how I would expect foreign countries to view this quid-pro-quo. Cf. Venkat's recent post on Facebook v. Faceporn. Then again, other countries might think it’s a pretty good idea, leading to a proliferation of transborder quid-pro-quo jurisdictional offers.

* designating the ITC to conduct the investigations is a little odd. First, the ITC is an administrative agency, not a federal court. I don't fully understand all of the implications of administrative vs. judicial review, but I believe there are substantial procedural differences that could lead to important substantive differences. Second, the ITC has been gamed in the patent world (see, e.g., my colleague Colleen Chien's research on the ITC explaining how the ITC hears many US company vs. US company disputes), so I fear similar gaming will emerge. For example, a rightsowner chasing a rogue website could simultaneously pursue a domestic court action, a foreign court action and an ITC proceeding. How would these types of parallel proceedings play out in practice? We’re still trying to resolve the parallel proceeding problems in patents.

* like SOPA, the bill covers copyright infringement, trademark infringement *and* 1201 circumvention. I don't understand why the circumvention issue is getting equal billing or how often transborder circumventions are a real problem. Seeing how 1201 circumvention lawsuits have devolved into anti-competitive enforcements, picking up the circumvention piece could increase the risk of competitive misuse of the statute.

* like SOPA, the definitions are vague. Consider, for example, the definition of Internet advertising service:

The term Internet advertising service means a service that serves an online advertisement in viewable form for any period of time on an Internet site.

Hmm...what does that mean? Notice that the definition doesn't directly distinguish between third-party ad networks and sites that sell their own ads. I think in practice sites that sell their own ads drop out of the statute, so one possible implication is that more sites will ramp up their own ad sales. (This is doubtful, but just throwing the possibility out there). I think the focus on "viewable" is interesting; are audio-only ads excluded? And what does it mean to "serve" content? This contemplates a specific technological interaction that I don't fully understand today and will almost certainly evolve over time.

Why I’m Not Enthusiastic About OPEN

Even though OPEN is worth discussing intelligently, unlike SOPA, I believe it's based on two underlying assumptions that aren’t fixable.

First, like SOPA, OPEN assumes there is a problem with foreign rogue websites that needs to be solved. I'm not saying there isn't, but the policy discussions have been startlingly devoid of reliable and credible facts demonstrating the nature and scope of the problem.

Instead, the evidence in support of a rogue website "problem" typically consists of two main threads: (a) people are dying from counterfeit drugs, and (b) bad guys are "stealing" our stuff. With respect to the former, I've never seen anything more than ad hoc assertion; but if there’s a real problem, counterfeit drugs can be fixed with a highly targeted solution. With respect to the latter, it's hard to give those arguments much credit. After all, all of rightsowners’ arguments are inherently self-interested: it's in their financial interest to say that they would like to make more money than they are making. It's also in their interest to bemoan broad sectoral changes in the economy as evidence that someone is capturing money they think they are entitled to (and to use rent-seeking to thwart those broad sectoral changes). More importantly, there is lots of evidence that a lot of rightsowners are making a lot of money today, both via the Internet and more generally. So it's hard to break out the quantity of actual economic losses that rightsowners are truly suffering when those claims are intermingled with rightsowners’ general rent-seeking efforts.

Therefore, until the rightsowners offer us more than the trumped-up BS already-discredited statistics, I'm still not clear on the problem, how bad it is, how any legislative solution would remediate that problem, and if the collateral consequences of the effort to remediate the problem are greater or less than the problem itself. OPEN does nothing to fill the void of supporting foundational evidence of the problem, so it's hard for me to be enthusiastic about its solution.

Second, and more importantly, attacking the money supply to supposed bad actors remains too blunt an instrument. I may be truly on my own on this point, as many people I respect--including, notably, Rep. Lofgren--are prepared to embrace the policy solution of cutting off money flows. However, by embracing an attack on the movement of money, OPEN replicates one of SOPA's sins. If a player is engaged in legitimate and illegitimate activity and its money supply is cut off, both activities go down the tubes. In contrast, one of the positive aspects of 17 USC 512(c) and (d) is that they require the copyright owner to identify infringing items and target only those items. Giving rightsowners a remedy that would affect an entire site for only some items on the site goes too far.

The OPEN bill tries hard to minimize overbreadth by narrowly defining the targeted websites. Perhaps this definition is narrow enough that there won't be much collateral damage. However, in practice, regulating money flows nevertheless could have pernicious effects in the field. A PSP or ad network drawn into an ITC proceeding frequently will “voluntarily” choose to toss the targeted website before the ITC proceeding reaches its conclusion—even if the ITC proceeding would have rejected the challenge. Furthermore, rightsowners still will send cutoff notices to PSPs/ad networks without filing any ITC petition, and the PSPs/ad networks will often honor them as a way of preempting an ITC proceeding.

What this teaches me (in combination with the Elsevier v. Chitika case) is that PSPs and ad networks need robust statutory immunities which are not based on a notice-and-takedown scheme. On the trademark side, the need for an immunity became clear after the sloppy language in Gucci v. Frontline. On the copyright side, 512 doesn’t cover PSPs and ad networks, probably because in a million years the safe harbor drafters never thought PSPs and ad networks would be liable for third party infringing activity in the first place. Now that we've seen copyright law and trademark law creep much further than we could have imagined in 1998, we should plug this liability hole completely. If OPEN proceeds, it should have a broad-based immunity for PSPs and ad networks with the idea that rightsowners are getting a specific remedy against them in the new law.

While OPEN can’t really be fixed to resolve my two structural concerns, my hope is that the discussion about OPEN will force rightsowners to provide *credible* evidence of harms that they or consumers are suffering (no more self-serving hype, please), and that such evidence will force us to think carefully about how "rifle shot" solutions (as opposed to shotgun solutions) can ameliorate those harms. If we have a discourse that even slightly resembles this ideal, then OPEN will be successful no matter what final outcome we reach.

Posted by Eric at 09:55 AM | Copyright , Derivative Liability , Search Engines , Trademark | TrackBack

November 08, 2011

Australian Court Says Google Isn’t Liable for Advertiser’s Misleading Ad--ACCC v. Trading Post (Guest Blog Post)

By Guest Blogger Mark Bender, with some comments by Eric

Australian Competition and Consumer Commission v Trading Post Australia Pty Ltd [2011] FCA 1086 (September 22, 2011, corrected October 10, 2011)

[Eric’s introduction: Mark Bender is a business law lecturer at Monash University in Australia and an expert in Australian online trademark law. When this opinion came out in September, I flagged it for possible blogging. However, I was put off by the opinion’s 357 paragraphs—not unusually long by foreign standards, but it proved too much for me to handle! Fortunately, Mark agreed to write this guest blog post about the opinion:]

History

The Australian Competition and Consumer Commission ('ACCC'), comparable to the US Federal Trade Commission (FTC), commenced proceedings in the Federal Court of Australia against Trading Post Australia Pty Ltd ('Trading Post') and Google Inc., Google Ireland Limited and Google Australia Pty Ltd (collectively, 'Google') for breaches of the Trade Practices Act 1974 (Cth) ('TPA') in July 2007. As a result of legislative changes, the provisions of this statute are now found in the Competition and Consumer Act.

The ACCC alleged breaches of Section 52 of the TPA, which provides that 'A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.' The ACCC also alleged breaches of Section 53(d), which provides that 'A corporation shall not, in trade or commerce, in connexion with the supply or possible supply of goods or services or in connection with the promotion by any means of the supply or use of goods or services; represent that the corporation has a sponsorship, approval or affiliation it does not have'.

Facts

Trading Post was formerly Australia's leading classified periodical, and it may be familiar to some from references in the Australian legal film, The Castle. It published weekly and contained advertising by both private sellers and traders. As with other traditional print businesses, it transitioned to the online environment and is entirely web-based. Traditionally, the Trading Post had been a primary method for the sale and purchase of used motor vehicles.

Trading Post used Google's AdWord service to display some advertisements on Google's search result pages. An example of the advertisement is:

Kloster Ford

www.tradingpost.com.au New/Used Fords – Search 90,000 + auto ads online. Great finds daily!

Kloster Ford is a Ford motor vehicle dealer. It had no association with Trading Post and did not consent to Trading Post’s use of the Kloster Ford name.

The appearance of 'Kloster Ford' in the headline of the advertisement distinguishes this case from the scenario where the use of another's name or trade mark is used merely as a keyword to trigger the display of an advertisement. The headline in the Kloster Ford advertisement was generated by Google's keyword insertion tool, based on Trading Post specifying 'Kloster Ford' as a keyword.

The Case

The ACCC's case was comprised of two parts.

Google’s Alleged Failure To Distinguish Adequately Between Organic Search Results and Paid Advertisements

The ACCC alleged that a number of factors contributed to their argument that Google engaged in misleading and deceptive conduct, included that Google failed adequately to distinguish between search results and advertisements and failed to identify advertisements as such, based on the allegedly similar appearance and nature of search results and advertisements.

The ACCC argued that this failure to distinguish was contributed to by:

* both advertisements and organic results being generated by the same search term and pertaining to the same general subject matter of the search term
* both advertisements and search results being listed below the heading and appearing together on the left side of the result page

The ACCC alleged the overall impressions created by these factors was that the contents of the search results page are generated by the Google Search Tool and displayed in order of relevance and are not advertisements.

The ACCC argued that Google's shading and labeling of the sponsored links were 'insufficient to counteract the overall impressions'. They further argued that the phrase 'sponsored links' is 'itself ambiguous'; and 'does not have, as its primary meaning, advertisement'.

In considering whether conduct is misleading and deceptive, the conduct as a whole is to be considered 'in light of the relevant surrounding facts and circumstances' (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60).

The court observed that 'there was no evidence called to show that any person had been mislead into thinking that the Kloster Ford advertisement or the Charlestown Toyota advertisement (or any of the other advertisements about which the ACCC complained) was not an advertisement. Nor was there any survey or other evidence based upon observation or experiment adduced by the ACCC to show that users of the Google search engine were likely to be mislead into thinking that sponsored links are not advertisements or that they are no different to organic search results'.

In considering all of the circumstances, it was held that reasonable internet users would not be misled or deceived as to the nature of the sponsored links. It was considered unlikely that the 'sponsored links' label was likely to go unnoticed, though the judge indicates that advertisement might be a clearer term than 'sponsored link'. It was observed that there are not 'likely to be any ordinary and reasonable people within the relevant class who believed that Google was advertisement free'.

The Use of Competitors’ Names in the Headlines

The court considered that the publication of the Kloster Ford advertisement could give rise to eight different possible representations:

A: by clicking on the headline of the Kloster Ford advertisement, a person would be taken to a website associated with Kloster Ford;
B: there was an association between Trading Post and Kloster Ford;
C: there was an affiliation between Trading Post and Kloster Ford;
D: Kloster Ford approved of the link between its name and the Trading Post Site;
E: Kloster Ford had paid for the link between its name and the Trading Post Site;
F: Kloster Ford was a sponsor of the Trading Post Site;
G: information regarding Kloster Ford could be found at the Trading Post Site; and
H: information regarding Kloster Ford car sales could be found at the Trading Post Site.

The court found that representations B, C, G and H had been conveyed by Trading Post and were likely to mislead or deceive ordinary and reasonable members of the relevant class. Google was held not have conveyed these representations.

The court held that Google was not liable for the use of the Kloster Ford name as it was

satisfied that the keyword “kloster ford” was not selected or recommended by Google. Of course, Google made available to Trading Post and other advertisers the technical facility that enabled keywords to be uploaded which, if made the subject of a search by a user of the Google search engine, might then generate top left or right side sponsored links. And Google also made available to Trading Post and other advertisers the technical facility which allowed for keyword insertion to occur. However, it was Trading Post, not Google, that choose to use these facilities to produce headlines containing the name Kloster Ford in response to search queries including those words.

It was also held that 'Google merely communicated what Trading Post represented without adopting or endorsing any of it' and that

the technology employed in on-line advertising may be quite different to that associated with the publication of advertisements in newspapers or magazines or the broadcasting of television or radio advertisements, it is nevertheless clear that the publisher or broadcaster of such advertisements always provides at least some of the technical facilities that permit the relevant advertisement to be seen or heard. It does not follow that these publishers or broadcasters have thereby endorsed or adopted any information conveyed by the advertisement or that they have done anything more than pass it on for what it is worth.

The court considered previous decisions where a range of intermediaries, including real estate agents (Butcher v Lachlan Elder Realty Pty Ltd [2004] HCA 60), television broadcasters (Universal Telecasters (Qld) Ltd v Guthrie [1978] FCA 9) and newspapers (Australian Ocean Line Pty Ltd v West Australian Newspapers Ltd [(1985) [1985] FCA 37), had not been liable for misleading and deceptive conduct for merely displaying advertising.

Outcome

Although the ruling was good news for Google, the news is mixed for advertisers. The court declared that using an unrelated businesses name in the headline of an advertisement can be misleading and deceptive and can represent an affiliation where none exists. I would have this said was fairly well-settled law.

Whilst there is some discussion of the unique nature of search, the issue of whether the use of another's business name or trade mark as a keyword can amount to misleading and deceptive conduct was not definitively stated (this was not at issue in the case). Even so, it does appear that any such liability would not be Google’s. The court says that 'Trading Post, not Google, that choose to use these facilities to produce headlines containing the name Kloster Ford in response to search queries including those words' .

The court ordered Trading Post to pay $28,000 to the ACCC 'by way of agreed contribution to the applicant’s costs'. Obviously, $28,000 is a minuscule fraction of the cost of the proceeding. Before the action, Trading Post was acquired by our largest telco (their first-half net profit was just under $1.2 billion), so the payment amount is trivial to them.

Meanwhile, the court ordered the ACCC to pay Google’s costs, making this a money-losing lawsuit for the Australian public.

Appeal

The ACCC have appealed the decision (see their press release), insofar as it related to Google's liability, and are expected to argue that 'Google would have been unable to show that it had no reason to suspect that publication of these advertisements was a breach of the Act'.

The ACCC 'considers that the Full Court may find that Google made the representations in question and find Google directly responsible for the publication.'

In their appeal, the ACCC also put the view that Google’s role, including the keyword insertion system, were fundamental to the representations being made.

The ACCC are also questioning the extent to which the previous Federal Court decisions considered by Justice Nicholas, which related to publishers of advertisements in traditional media (real estate agents, television broadcasters and newspapers), can be applied to search engine advertising.
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Eric’s Comments

I’m struck by how much the court’s analysis depends on empirical questions about consumer perceptions. In the Internet context, consumer perceptions, of course, are constantly changing. As time passes, consumers learn how to navigate and parse new user interfaces, plus Google keeps changing its interfaces (such as changing the ad labeling from “sponsored links” to “ad”). Trying to track these changes over the four years of litigation seems futile!

This case is a win for Google, but perhaps only superficially. Obviously, the court dismissed Google’s liability, and surely Google is pleased about that. However, like the Google ECJ opinion, the opinion throws Google’s advertisers under the bus—and what’s bad for Google’s advertisers could be bad for Google’s revenues. To the extent advertisers feel liability exposure from running ads on Google, they may reduce their advertising. Fortunately, it seems like the opinion could be read to apply only when an advertiser uses a third party trademark as the ad headline, which I suspect is a fairly rare occurrence.

As for Google's culpability when it suggests ad copy for advertisers to include in their ads, this case reminded me a little of the Roommates.com case and its predecessor, the Carafano case. In all of these cases, the website gave prompts to the "speaker" about what to say, but the speaker ultimately adopted the words as its own. I expect situations like this will continue to give courts some trouble, but it sounds like the court made a sensible ruling in this case.

Posted by Eric at 09:28 AM | Marketing , Search Engines , Trademark | TrackBack

November 06, 2011

October 2011 Quick Links

By Eric Goldman

Copyright

* MUST READ from Techdirt: MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized. On the topic of errors in determining copyright infringement, the incident a powerful reminder both that even those "in the know" overclaim copyright infringement, and that the targets of such overclaiming can suffer catastrophic losses. That makes the incident an important reminder of the value of procedural safeguards in the copyright setting.

* An amended Capitol v MP3Tunes opinion explains why 17 USC 512 applies to state copyright claims (see pages 14-17). Prior blog coverage.

* Megaupload settles with Perfect 10, and the judge vacated her opinion. Prior blog coverage.

* Permanent injunction issued against Zediva. Prior blog coverage.

* Supplemental briefing requested in Viacom v. YouTube:

The parties are hereby ordered to submit letter briefs, not exceeding ten pages doublespaced, on the following questions: (1) whether and how the red-flag knowledge provision would apply under the Defendants’ “specific” knowledge construction of § 512(c)(1)(A); and (2) whether YouTube’s “syndication” of videos to third parties falls outside the scope of safe harbor protection for activities that occur “by reason of . . . storage at the direction of a user” under § 512(c)(1).

Mark Lemley on Viacom v. YouTube.

* Mick Haig Productions, e.K. v. Does, 2011 WL 5104095 (N.D. Tex. Sept. 9, 2011). In a mass copyright lawsuit, the plaintiff's lawyer issues subpoenas without authorization to identify the defendants and gets sanctioned $10k for it.

* Righthaven LLC v. Newman, 2011 WL 4762322 (D. Nev. 2011):

the restated SAAs are not a simple attempt to clarify or supplement the facts pleaded in the complaint with additional facts that were present at the time of filing. Rather, the restated SAAs present a new set of facts with respect to the alleged copyright ownership, which is impermissible because Righthaven may not amend the defects in the jurisdictional facts themselves. See Newman–Green, 490 U.S. at 830. Next, the restated SAAs' terms substantially contradict the original SAA. Again, defects of allegations may be amended, but not defects in the facts themselves.

* Righthaven LLC v. Inform Technologies, Inc., 2011 WL 4904431(D. Nev. Oct 14, 2011). Upholding personal jurisdiction in Nevada but issuing an order to show cause why the suit shouldn't be dismissed for lack of standing.

* Righthaven v. Newsblaze (D. Nev. Nov. 4, 2011). Another Nevada judge, this time Judge Jones, dismisses a Righthaven case for lack of standing.

* Sam Francis Foundation v eBay complaint: Class action suit against eBay under CA's "resale royalty" statute.

* Google got a good copyright win in a German case over its image search service.

* Wired: U.S. Copyright Czar Cozied Up to Content Industry, E-Mails Show

Search Engines

* Google implements SSL on its search results pages and knocks out search terms from the referrer URL. This may sound like a privacy win, but it also means that Google will increase the gap between its database and the databases of indexed websites. So this is a backdoor way for Google to hoard data for itself...and perhaps increase incentives for advertisers to pay. More on this point from Danny Sullivan: "if Google thinks this needs to be done for privacy reasons, then it needs to block referrers for everyone and not still allow them to work for advertisers. That move is one of the most disturbing, hypocritical things I’ve ever seen Google do."

* Google Buzz is dead, but Google has a 20 year hangover with the FTC, which approved the settlement. Prior blog post. Francoise Gilbert offers some lessons.

* Search Engine Land: Organic Click-Thru Rates Tumbling; Only 52% Click On Page One, Study Suggests

* News.com: Google's whimsical Easter eggs.

Content Regulation

* Darm v. Craig, the Oregon Twitter libel lawsuit, settled.

* Language Line Services, Inc. v. Language Services Associates, LLC, 2011 WL 5024281(N.D. Cal. Oct 13, 2011). Complicated dispute between two competitors. Many claims based on one competitor's blog post were stricken under CA's anti-SLAPP law. Rebecca’s coverage.

* Crookes v Newton, 2011 SCC 47 (Can Sup Ct): Linking to defamatory content on 3rd party site isn't "publication" of linked content.

* Hollywood Reporter: Misappropriation of personality claim in Hurt Locker case gets anti-SLAPPed.

Miscellaneous

* Ninth Circuit will rehear the Nosal case en banc. Prior blog post. Tom O’Toole’s reset.

* Zing Brothers LLC v. Bevstar LLC (D. Utah Oct. 14, 2011: “This specific inclusion of Utah in the drop down list of states, and the website statements that orders are solicited anywhere "inside the USA" is sufficient to establish that this site is "something more" than a non-targeted transaction site.”

* Ferris & Salter P.C. v. Thomson Reuters Corp. (E.D. Mich. Oct. 19, 2011): “There is no basis under Michigan law or, for that matter, in the vast majority of those states whose courts have considered the issue, to deem computer consultants and service providers professionals…. Thus, the Court concludes that—under Minnesota or Michigan law—no professional negligence action will lie against computer engineers and technicians.”

* From the Chronicle of Higher Ed: What Wikipedia Deletes, and Why.

* A new article tries to answer the question, "Why did Wikipedia succeed while other encyclopedias failed?" My Wikipedia article touched on this issue.

* Actors' unions ask IMDb not to publish the age of actors. NY Times coverage.

* Tom O’Toole: ICANN's .xxx sunrise period was a success--for ICANN.

* A behind-the-scenes look at the creation of the Paris Hilton brand:

* I was on TWiL 134 with Denise Howell, Evan Brown and Ernie Svenson. Listen in.

Posted by Eric at 03:35 PM | Content Regulation , Copyright , Derivative Liability , Search Engines | TrackBack

November 04, 2011

Stebbins' Lawsuit Against Google Dismissed as "Frivolous"--Stebbins v. Google

By Eric Goldman

Stebbins v. Google, Inc., 2011 WL 5150879 (N.D. Cal. Oct. 27, 2011). Stebbins' motion to confirm arbitration award (the equivalent of his complaint in this case).

Arkansas resident David Stebbins appears to be cranking up a one-man pro se/pro per litigation machine based on mockably tendentious legal arguments and outrageous damages claims ($500B in this and other cases). Last Spring, I blogged about his unsuccessful lawsuit against Walmart, which tried some too-clever legal arguments that ended up failing resoundingly.

In a separate set of actions, Stebbins sued Microsoft and Google based on an almost-too-bizarre-to-explain legal theory. It goes something like this: YouTube's contract allows unilateral modification (which, crucially, only lets YouTube unilaterally modify the contract, a point Stebbins didn't internalize), so Stebbins emailed a modification of the contract terms to YouTube that included an arbitration clause and an "I automatically win the arbitration if you don't respond" clause. He then disputed YouTube's handling of his account, sent them a proposal to arbitrate the dispute for $500B, and declared himself the arbitration winner (without an actual arbitration) when YouTube didn't respond in time. He then filed a federal claim to enforce the arbitration judgment even though there wasn't a judgment since there was no arbitration proceeding.

The magistrate judge recommended dismissing the claim as frivolous, but Stebbins didn't consent to proceeding before a magistrate. So the case goes to Judge Koh and, in a straight-laced opinion, she reaches the same result. She says:

there was no actual arbitration. That is to say, no arbitrator or arbitration panel actually awarded a judgment. Thus, there has been no arbitration proceeding and no award "made pursuant to [an] arbitration."

The court goes on to label Stebbins' filings "frivolous," "indisputably meritless" and "clearly baseless," concluding:

Plaintiff's claim is based on an indisputably meritless legal theory. Additionally...[i]t is fundamentally contradictory for Plaintiff to assert the existence of an arbitration award on the basis of a contract clause that states that no arbitration proceeding is to take place, and no award need be entered.

As I've suggested before, tendentious online contract formation claims do not fare well in courts. Even if the plaintiff can stitch together a theory of contract formation, judges quickly cut through any hyper-formalism to reach sensible results. If your contract formation theory depends on overly formalistic interpretations of contract law, don't be surprised if it will fail in court.

Posted by Eric at 12:45 PM | Licensing/Contracts , Search Engines | TrackBack

October 26, 2011

Ex-Employee Converted Social Media/Website Passwords by Keeping Them From Her Employer--Ardis Health v. Nankivell

[Post by Venkat, with comments from Eric]

Ardis Health, LLC, Curb Your Cravings, LLC and USA Herbals, LLC v. Ashleigh Nankivell, 2011 WL 4965172 (S.D.N.Y. Oct. 19, 2011)

Nenkivell worked for CYC as a "video and social media producer." Her work included producing videos, "websites, blogs, and social media pages" for CYC and the other two plaintiffs, which were founded by Jordan Finger. Her responsibilities included:

maintaining passwords and other login information for websites, email account, and social media accounts, a well as for third-party servers where plaintiffs stores content

Fortunately for plaintiffs, Nenkivell signed an agreement with CYC which vested ownership in her work product to CYC and required Nenkivell to return all confidential information at CYC's request.

In 2010, Finger and Nenkivell developed a service called "whatsinurs," which the court described as a "social media website for cosmetic products." Ardis applied for a trademark in Whatsinurs and registered the copyright for the website. Finger sent Nenkivell an agreement for the organization and ownership of the new site, which Nenkivell never signed. Nenkivell was restless and looked around for alternate employment. Plaintiffs were unhappy about this and fired Nenkivell in June 2011. After the termination, Finger requested the laptop, which plaintiffs had provided her, and the access information for the various websites. She declined to provide this. Plaintiffs sued and sought injunctive relief.

The Access Information: The court says that it's "uncontested that plaintiffs own the rights to the Access Information," and as a result, Nenkivell's retention of this information can form the basis of a conversion claim. The court also says that plaintiffs' inability to access and update their site ("to react to online trends" and effect a new initiative to participate in "'daily deal' promotions") constitutes irreparable harm. The court orders the information turned over to plaintiffs pending resolution of the dispute.

The Laptop: The court declines to order the laptop returned, saying that the laptop is a "mass-produced object," the loss of which can be compensated by money damages. Plaintiffs also argued that they were entitled to the information on the laptop but the court faults plaintiffs for not fully developing their argument--they relied on confidentiality terms in the agreement and nothing more. Nenkivell also argued that the laptop had continuously synched to plaintiffs' computer. Plaintiffs argued that they could not be sure of this without seeing the laptop, but this argument does not get much traction with the court.

Display of Whatsinurs Content on Defendant's Website: Plaintiffs also argued that they suffered irreparable harm from the display of the whatsinurs site's content on her personal website (as an example of her work). Plaintiffs' key argument on this score was that a search for "whatsinurs" would display both defendants' website and the same contents, as displayed on Nenkivell's personal website. Plaintiffs argued that consumers would be confused as to the source of the website and this would dilute plaintiffs' "whatsinur" brand.

The court says this argument "is preposterous on its face":

Not only do defendant's websites appear below plaintiffs' in search results, defendant's [sic] do not purport to be, or in any way give the impression of being, portals for the sale of commercial goods. On both of defendant's websites, the Whatsinurs content is wholly non-functional, little more than dressed-up image captures. It is clearly labeled as an example of defendant's "Design" capabilities and surrounded by content from other projects defendant has worked on. It does not compete with plaintiffs' websites or pose potential issues of confusion.

Plaintiffs argued that Nenkivell's bad faith raises a presumption of confusion, but the court says that Nenkivell has an innocent explanation and there's no bad faith. Even assuming that there is a presumption of confusion, the court says that this is alone insufficient to warrant injunctive relief.

__

Yet another dispute over access to websites and social media profiles. It look like plaintiffs half-followed the basic advice of having a written agreement in place that documents the relationship between the company and the individual who manages the company's website and social media profiles. But the agreement in this case was not necessarily clean--the agreement was between Nenkivell and CYC, but one of the other plaintiff entities actually (Ardis) asserted ownership over the "whatsinurs" website. The court does not get into the issue of whether Nenkivell's development of the "whatsinurs" website was outside the scope of her relationship with CYC and therefore not subject to the agreement, but this seems like an issue that should come up. Social media accounts do not neatly fit into existing categories of property and we haven't seen many disputes over account ownership fully play out. (See the OMG Facts case for one ongoing dispute.) While an agreement that expressly covers ownership is ideal, it's interesting to note that the confidentiality provisions of the agreement do the job in this case.

On the web developer/social media producer side, holding any sort of website or social media credentials (or domain names) hostage is legally risky behavior. We've seen a slew of cases where this type of behavior resulted in possible liability. In DSPT Int'l v. Nahum, the Ninth Circuit held that holding domain name hostage may be bad faith under the ACPA. Maremont v. Susan Fredman Design Group involved a social media manager who continued to post on the Twitter and Facebook accounts following termination (this case was dismissed for lack of prosecution). Finally, the Ohio Court of Appeals held earlier this year in Eyesoldt v. Proscan that obstructing access to a website and email account can constitute conversion. The contours of legal liability are far from clear, but there is definitely risk when you hold website, email, or social media credentials hostage! Courts have shown a willingness to treat these credentials as intangible personal property that can support a claim for conversion. We all know how important it is to constantly update our social media accounts. It looks like the courts get this.

[Eric adds: some other analogous cases include New Mexico v. Kirby, Mikhlyn v. Bove, In re Rolando S., Ground Zero Museum v. Wilson and TEG v. Phelps.]

The court's rejection of plaintiffs' request to have Nenkivell's "portfolio copy" of the site taken down was interesting. Courts have moved away from automatically granting injunctive relief based on copyright or trademark claims. You have to show actual irreparable harm now. Plaintiffs proceeded primarily based on a trademark theory, and the court's rejection of their argument that the portfolio copy of the site appearing in search results would cause them irreparable harm will get Eric's resounding endorsement. Any time a court credits an end user with the shred of common sense necessary to parse the origin of content on the internet is a cause for celebration in his book (and rightfully so).
_______

Eric's Comments

1) Kudos to the plaintiffs for having a written agreement that governed the social media credentials, but demerits to them for not learning those credentials before they needed them. If an employee has login credentials to an account that they use for the company, at minimum that employee's manager should get those credentials too.

2) The judge's references to the employee "converting" those credentials makes me want to cry. The court had a half-dozen other legal doctrines easily available to order the defendant to turn the credentials over. Calling her retention of those intangible data strings "conversion" was completely unnecessary and adds to the growing confusion on what it means to "convert" electronic information. Perhaps that ship is sailed, but I continue to insist that "conversion" only applies to physical chattel, not intangible assets, and conflating the two inevitably leads to doctrinal meltdowns.

3) As Venkat predicts, I do cheer that mere appearance in search results should be legally irrelevant. However, I definitely don't like the judge's reference to the relative placement of the search results. I last "bitched" about that issue in my post on the Bitchen Kitchen case, so check that out.

Posted by Venkat at 06:42 AM | Copyright , Privacy/Security , Search Engines , Trespass to Chattels

October 20, 2011

Keyword Metatags are Back...Will Judicial Freakouts Continue?

By Eric Goldman

Keyword metatags are back, and I couldn't be less thrilled. Few Internet technologies have so thoroughly baffled judges as keyword metatags.

From a technologists' perspective, keyword metatags were a 1990s experiment by public search engines at improving their rankings. The experiment failed, of course, as marketers overgrazed keyword metatags. Seeking to improve their relevancy, the search engines quickly reduced or eliminated the weight they assigned to keyword metatags in their ranking algorithms. As a result, keyword metatags probably reached their peak efficacy in the late 1990s and quickly slid to irrelevancy. The final technological blow (so we thought) was in 2009, when Google finally publicly announced that it didn't honor keyword metatags at all (a fact we had known informally for years).

(A side note: keyword metatags are still useful for internal search engines when the search engine can trust the metatag creators' intentions. That trust is completely lacking in the public search engine environment).

Courts started dealing with keyword metatags in the late 1990s, when keyword metatags were at their zenith. Even then, courts ascribed far more power to keyword metatags than the search engines did, effectively treating them as the neutron bomb of ranking tricks. However, while keyword metatags were a quickly passing technological fad, it's taken more than a decade for judges to entertain the possibility that keyword metatags are not omnipotent. See, e.g., Southern Snow v. Snowizard from earlier this year. As usual, the legal system is massively lagging the technological environment. But after Google's 2009 announcement, and given its dominant share of the search market, I had hoped savvy litigants would have an easier time convincing judges that keyword metatags were legally irrelevant.

Thus, I was crestfallen to see Danny Sullivan of Search Engine Land announce that Bing explicitly considers keyword metatags in its ranking algorithm. Bing may be an also-ran, but it's a big enough player to muddle the keyword-metatags-are-dead message for judges. This can only mean one thing: the legal death of keyword metatags presumably got pushed back another decade.

However, Bing's consideration of keyword metatags is a far cry from the initial implementation in the late 1990s. Whereas the initial implementations treated keyword metatags as a "plus factor" for ranking, Bing treats them as a negative factor like spam--i.e., a few types of keyword metatag misuse (apparently, keyword stuffing) will reduce the website's ranking instead of improving it. In a sense, Bing technologically treats users of keyword metatags as presumptive bad guys.

It will be interesting to see what this does to the keyword metatag jurisprudence. Scenario #1 is that judges get the message that websites using keyword metatags are now even less likely to rank favorably on indexed terms than if they didn't use them, so keyword metatags reduce the chance that any consumer saw the defendant's website. This only further reinforces the idea of keyword metatags as the tree that falls in the forest when no one is around to hear it.

Scenario #2 is that judges will treat the inclusion of keyword metatags as further confirmation of the defendant's bad intent. After all, if Bing technologically treats the defendant website as a presumptive abuser, the judges could equally assume bad intent by the defendant. The judge's assessment of the defendant's intent is a huge driver of the likelihood of consumer confusion analysis, so further equating keyword metatag usage with bad defendant intent will lead to many more defendant losses.

The advice to websites remains the same as it has for many years: don't include third party trademarks in keyword metatags, period. We can now say with confidence that, at best, it won't help technologically; and at worst, it could hurt the website both in Bing's rankings and in court.

Posted by Eric at 08:42 AM | Search Engines , Trademark | TrackBack

October 18, 2011

Lawsuit Against Google Over Invalid Clicks and Special Partner Advertising Dismissed -- Woods v. Google

[Post by Venkat Balasubramani with comments from Eric]

Woods v. Google, 5:10-cv-1263-JF (N.D. Cal.; Aug 10, 2011)

This is an advertiser vs. Google lawsuit where the plaintiff argued on behalf of a putative class that (1) he was improperly charged by Google for "invalid clicks," (2) he did not receive a "smart pricing" discount that Google allegedly promised to all of its advertisers, and (3) Google entered into deals with "special partners" allowing the special partners "to place advertisements in ways that are prohibited to other . . . publishers." Here is Eric's recap of the complaint: "Another Advertiser Class Action Lawsuit Filed Against Google--Woods v. Google."

Invalid clicks: The crux of the "invalid clicks" claim was that generally applicable Google policies, FAQs, and explanations, state that invalid clicks are prohibited, and advertisers would not be charged for invalid clicks. Woods argued that these policy statements were incorporated into the contract. According to the court, there are several problems with this argument. First, the agreement in place states that the advertiser's sole remedy is to seek a refund, and in order to do so, the advertiser must raise the issue within 60 days. Woods did not allege that he did either of these.

Second, whether a click is "invalid" is (according to the documentation cited by plaintiff) something that Google will determine (those clicks "that [Google] suspects may constitute click fraud"). According to the court, this means that Google was vested with discretion in determining whether a click was invalid, and there was no allegation in the complaint that Google "acted beyond its discretion" in administering this policy.

The final overarching problem with Woods's claim with respect to invalid clicks is that Woods cited to documentation outside the agreement and argued that statements made in the documentation was incorporated (as contractual terms) into the agreement. The court walks through the placement of the various statements and concludes that Google's "policy statements" regarding invalid clicks is not incorporated into the AdWords agreement. The AdWords agreement contained a statement that the "program" was "subject to all applicable Google and Partner policies, including without limitation, the Editorial Guidelines, Google Privacy Policy, and Trademark Guidelines, and Google and Partner ad specification requirements." Notwithstanding this "clear and unequivocal" statement of intent to incorporate "all applicable Google policies," the court declines to find that the policies are incorporated into the agreement because the "invalid clicks policy" which plaintiff pointed to was not "known or easily available to the contracting parties."

Special Partner sweetheart deals: Woods alleged that Google allowed its special partners to generate clicks in a way that its regular customers were not allowed to, but the court does not give this argument much credence.

"Smart Pricing" discount: Woods made a similar argument with respect to the smart pricing discount, arguing that language in the "Adwords Help Center" indicated that Google "promised to apply its Smart Pricing discount to all advertisements generated from its Adsense publishers." He did not argue that the help center language was expressly incorporated. He pointed to sections in the agreement which stated that the program was subject to "all Google policies," and a statement in the agreement that payment was to be made by advertisers "in accordance with the payment terms in the . . . Program FAQ." The court accepts Google's argument that the reference to the "Program FAQ" in the agreement was intended to only incorporate terms relating to payment options and not any terms which relate to how Google calculates the charges. The court also holds that even if the Adwords Help Center language is deemed to be incorporated into the agreement, the complaint is value about what Google's obligations were exactly to apply the smart pricing discount to all advertisements.

Breach of the duty of good faith: The court acknowledges that Woods can bring an action for the breach of the duty of good faith "irrespective of whether [Google] breached its contractual obligations directly." Notwithstanding, the court notes that Woods failed to allege that "Google deprived Woods of a benefit to which he was entitled under the Agreement." The court says that Google is vested with "wide latitude" in administering its Adwords program, but at the same time, this discretion is not unlimited: Google must carry out its responsibilities in good faith. Woods's vague allegations of a conspiracy between Google and its Special Partners are insufficient in the court's view to suggest bad faith.

Unfair competition, false advertising, and fraudulent business practices claims: Finally, the court also pokes holes in the legal elements of Woods's unfair competition and false advertising claims. It states that unless Woods can show that he had a legal right to the smart pricing discounts and to not be charged for invalid clicks (so-called "Banned Ad Implementations") he can't show any cognizable injury. The fraud claims do not satisfy Rule 9(b)'s particularity requirement.

Finally, the court questions whether Woods has standing to bring misrepresentation claims. The Adwords Agreement expressly indicates that the contracting parties have not relied on any outside statements or promises in entering into the agreement. Woods argues that UCL liability may exist where a party to a contract makes "contradictory or misleading representations in order to obfuscate or obscure the actual terms of the contract." The court rejects this argument:

the issue is whether 'a reasonable jury could find' that Woods was reasonable in relying upon the extraneous statements notwithstanding an unambiguous disclaimer . . . [i]n light of Woods's sophistication as an attorney and the complaint's lack of particularity with respect to the statements that were alleged to have induced his reliance, the Court concludes that Woods has not alleged facts sufficient to support such a claim.

__

It's disheartening to see lawyer-plaintiffs get no love in the courts!

Seriously, Google nicely dodged a bullet here. As online agreements have become "longer and more byzantine," and often cross reference other terms and policies, the possibilities of online agreement circuits getting crossed increases. (We recently saw GoDaddy be deprived of an easy contractual defense due to a cross-reference gaffe: "GoDaddy Mis-Manages Its User Agreements.") While the court rejects Woods's claims on the merits, it also made clear that the various policies and FAQs referenced in Google's agreement were not incorporated and made a part of the contract terms.

There is some tension inherent in Google saying that it is the sole arbiter of what constitutes a valid click. I sense an illusory contract term lurking in the background here. What is an "invalid click"? The court ends up saying that it's whatever Google says it is. The court does pay lip service to the fact that Google's discretion is not unbounded in this regard, but you don't get the sense that Woods will be able to allege any sort of bad faith sufficient to get the court's attention here.

Woods made a valiant effort to argue that whatever the metric was for determining an invalid click, Google did not apply it equally across the board, but the court gives this argument little or no credence. This was one of the more intriguing aspects of Woods' claims, but the court expresses serious reluctance to allow Woods' claims to move forward and allow Woods discovery into Google's business practices in this area. (This would have been a big hassle for Google and I'm sure it's breathing a sigh of relief for not having to respond to Woods' discovery.)

The court gives Woods leave to amend. Let's see if his amended complaint adds any clarity to the allegations.

[This case languished in the blogging queue. In the time between when it was added to the "to blog" list and I actually wrote this blog post, Woods already filed an amended complaint and Google filed a motion to dismiss. You can access those documents here (amended complaint) and here (motion to dismiss).]

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Eric's Comments:

I can't believe people are still suing Google for click fraud, especially after Google buttoned up its legal agreements to prevent further click fraud suits. Then again, Judge Fogel recently let a click fraud lawsuit against Facebook keep going when he probably shouldn't have. This one won't get that far. [However, Judge Fogel is giving up his docket for an administrative appointment in DC, so perhaps the successor judge who inherits this case will be more receptive.]

I think the best part of this opinion is when Judge Fogel rejects the plaintiffs' efforts to cut-and-paste various statements from Google's support materials to manufacture a purported contract breach. The plaintiffs worked really hard to find contrary statements from Google's website as an end-run around the contract's plain language (plain, in the sense that it says plaintiffs should lose). Judge Fogel has none of it:

The complaint refers to more than a dozen pages in both the AdWords Help Center and AdSense Help Center that allegedly identify Google’s obligations under the invalid clicks policy, including a video clip and an expert report from another lawsuit, both of which are linked to the AdWords Help Center.(See Compl. ¶¶ 77-93.) The fact that statements about invalid clicks are spread across a variety of pages in a variety of formats make it difficult to identify the terms of any actual and unambiguous contractual obligations. This stands in sharp contrast to other Google policies,which include clear terms.

I think it's become de rigeur in the plaintiff community to slice-and-dice every public statement a company has ever made through its entire history, looking for anything that could be construed as false. But when the contract makes it really, really clear that Google isn't on the hook for click fraud, it would take a really strong and prominent contrary statement to trump it. The plaintiffs apparently fell far short of finding such a smoking gun, and the slicing-and-dicing just made them look silly. Note to plaintiffs: if you have to work that hard to find snippets that purportedly trump the plain language of a contract, you're probably overthinking things. My recommendation is to let such complaints go, although I know you won't heed that advice.

I do agree with Venkat that websites should try to consolidate their sprawling expanse of legal T&Cs documents. As the number of these documents grows, the odds grow exponentially that at least one of the linkages will fail. I bet Google would benefit from putting its legal T&Cs on a strict diet and chopping the number of words in half (or more). This would streamline the documents and perhaps make it easier to consolidate documents.

Venkat also notes that the named plaintiff, Woods, is an attorney. I used to keep a running count of all of the lawyer-as-plaintiff lawsuits against Google. For reasons I've never understood, Google's run-ins with lawyers-as-plaintiffs seem disproportionately frequent. (Please email me if you have any hypotheses). And, even more embarrassing for the legal profession, the lawyer-as-plaintiff cases seems to fare especially poorly against Google, usually getting soundly thumped.

Posted by Venkat at 09:09 AM | Licensing/Contracts , Marketing , Search Engines

October 12, 2011

Google Defeats Class Certification in Keyword Ad Lawsuit--FPX v. Google

By Eric Goldman

FPX, LLC v. Google, Inc., 2011 WL 4783376 (E.D. Tex. Sept. 29, 2011)

Google obtained a major victory in one of the most serious pending lawsuits against it challenging its AdWords keyword advertising program. Putative class action lawsuits were filed in the Eastern District of Texas--which many folks view as a plaintiff-friendly jurisdiction for patent cases--by some lawyers/litigants with ties to the patent NPE community. (The FPX case was consolidated for discovery purposes with parallel and virtually identical cases by John Beck Amazing Profits, LLC and the Rodney Hamilton Trust; I believe this ruling effectively applies to all three). On the surface, this looked like a major showdown over Google's practices in a potentially hostile venue with a venal adversary.

However, so far the case is working out fine for Google. Judge Ward (adopting Magistrate Judge Everingham's report verbatim) refused to certify the class, meaning that each advertiser will have to proceed against Google individually--or give up. Without the potential payoffs from a class adjudication, it's possible/probable that the plaintiffs' lawyers will lose interest in the case; NPE litigation may be more lucrative than continuing to pursue Google on an advertiser-by-advertiser basis. Even if the plaintiffs decide to push ahead with individual cases, Google's consequences of an adverse ruling go down substantially.

The ruling isn't all that surprising or groundbreaking. As I wrote in my initial blog post on the case in 2009, "the judge is very unlikely to certify the class." The opinion walks through various reasons why trademark lawsuits don't lend themselves to class adjudication, including:

* initial interest confusion must be examined with respect to each trademark. The court notes the different, and trademark-specific, analyses in GEICO v. Google and the Network Automation case. "Thus, Plaintiffs' common contention (i.e., that Google's policy of selling trademarks as keywords leads to initial interest confusion) is not capable of classwide resolution and, as such, does not meet Rule 23(a)(2)'s commonality requirement."

* each trademark's strength has to be individually evaluated. See the Vulcan Golf v. Google ruling.

* any affirmative defenses have to be evaluated on a trademark-by-trademark basis (another cite to Vulcan Golf).

* the request for equitable disgorgement was problematic under the applicable FRCP.

[If you're looking for a good paper topic, here's one: when (if ever) are trademark lawsuits appropriate for class adjudication, and how and why does this differ from other false advertising lawsuits?]

A procedural note: since this ruling, the case was reassigned from Judge Ward to Judge Folsom. This appears to be triggered by Judge Ward's October 1 retirement. It's not clear to me if this reassignment helps or hurts one litigant compared to the other.

As a practical matter, the defeat of class certification here leaves the Rosetta Stone v. Google case as the most serious trademark challenge to AdWords still remaining. Should Google get a good ruling in that appeal, it is probable that Google will successfully run the table on the remaining lawsuits and obtain a de facto clean bill of health for its AdWords program.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on October 12, 2011):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google and the related cases John Beck Amazing Profits v. Google and Rodney A. Hamilton Living Trust v. Google, plus the now-dead Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google [on appeal]
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
* Pathak v. ICG
* Groupion v. Groupon

Posted by Eric at 12:54 PM | Derivative Liability , Search Engines , Trademark | TrackBack

October 01, 2011

Facebook's Trademark Suit Against Teachbook Survives Motion to Dismiss

by Eric Goldman

Facebook, Inc. v. Teachbook.com LLC, 2011 WL 4449686 (N.D. Ill. Sept. 26, 2011).

Facebook has been helping many lawyers send their kids to private school with an expensive enforcement campaign to control the prefix "face" and suffix "book" for social networking sites. Its "-book" targets have included Lamebook (which recently settled; see some speculation why), Bearbook for the hirsute gay community and Teachbook, the subject of this lawsuit, which targets teachers.

Facebook's entire campaign is fraught with peril given the intensely descriptive nature of Facebook's own trademark, the historical meanings of "facebook" prior to The Facebook, and the interest of budding new entrepreneurs in taking advantage of the pre-The Facebook lexical meanings of the term. But the reality is that Facebook is apparently willing to sink a significant amount of money into an aggressive legal position, which helps it bully 9 out of 10 targets off the term just by threatening them.

Teachbook is one of the few that didn't back down, and it even won an initial legal victory in May when it got Facebook's trademark infringement lawsuit dismissed for lack of jurisdiction. Facebook promptly refiled in Teachbook's home court, and Teachbook's subsequent motion to dismiss gets zero traction with this judge.

Evidentiary Issues

Teachbook submitted 300 pages of exhibits and asked the court to consider them on the motion to dismiss, and the court rejects all of it. For example, the court declines to take judicial notice of a filing Facebook made in a European trademark proceeding, USPTO filings and various dictionaries. The court also declines to consider printouts from Facebook's website, saying those printouts aren't "central" to Facebook's complaint.

The good news for Teachbook is that all of this material can be considered at a later stage of the lawsuit. The bad news is that it has to fight long enough to get there.

Is the "Book" Suffix Generic?

Teachbook made the reasonable argument that the suffix "book" is generic, and therefore Facebook should not be able to enforce any rights in the term "book." (If I recall correctly, Facebook had to disclaim the "book" suffix in its US trademark application). Facebook logically retorts that it is seeking to enforce the entirety of its "Facebook" mark, not just any standalone rights in the suffix "book." The court accepts Facebook's spin, at least for purposes of the dismissal motion, saying "one could reasonably infer that the choice of the TEACHBOOK mark—which, like the FACEBOOK mark, is a curt, two-syllable conjunction of otherwise unremarkable words—to offer a similar service in the same medium was no accident." The court also notes that Facebook has a registered trademark (prima facie evidence that the term "Facebook" is not generic) and that Teachbook has the burdens on a motion to dismiss.

The court says that even if Facebook is enforcing just the "book" suffix, that term isn't generic:

Facebook is using the suffix-BOOK to offer social networking services via the internet. Even in this age of “e-books,” social networking services do not fall within the category of what one would traditionally call “books.”...were we to narrow the focus of our inquiry to the suffix -BOOK, we would still be unable to conclude that Facebook's mark is merely generic in the context of offering social networking services on the internet

It appears the court has only one definition of "book" in mind--presumably, a long-form bound-cover published BOOK. The court even says "the word “book,” unlike “top,” does not instantly call to mind a multiplicity of meanings." But I couldn't disagree more, the "book" can mean many things in addition to a classic BOOK. Indeed, before The Facebook, a facebook was a printed photo directory of people in a small social network, such as the incoming 1L class at a law school. For more on the legal ambiguity of the term "book," see our blog post on the California Reader Privacy Act, which I still oppose in large part due to the semantic ambiguity of the term "book" (and which I predict will lead to a privacy plaintiff lawyer fiesta on that point).

Likelihood of Consumer Confusion

On mark similarity, the court sees enough similarity for now: "Both marks are a combination of the suffix-BOOK preceded by fairly mundane, monosyllabic words. And in both instances, it is the uninterrupted conjunction of the mundane words with the suffix-BOOK that gives the marks their verve." The court distinguishes between sites that draw users through "word-of-mouth, hyperlinks, and search engine results" versus user browsing, saying:

Given the similarities between the TEACHBOOK and FACEBOOK marks, it is reasonable to infer that someone browsing the internet might understand Teachbook to be “in some way related to, or connected or affiliated with, or sponsored by” Facebook.

Huh? If the user reaches the site by browsing, then they will see the entire site--including any disclaimers, and the market positioning that Teachbook is an alternative to Facebook. A quick inspection of Teachbook should have instantly ended the possibility of any user confusion about Facebook's sponsorship or affiliation.

The court then goes off the rails when he discusses search engines. He tries to parse the abominal Seventh Circuit case Eli Lilly v. Natural Answers (the Prozac v. Herbrozac case) from over a decade ago. In the Eli Lilly case, the court inferred the defendant's bad faith from the defendant's inclusion of the plaintiff's trademark in the metatags. This is one of the classic judicial freakouts about metatags; fortunately, most judges have learned a lot about Internet search since then, but this judge is still stuck in the 1990s. The judge thinks the "Teachbook" domain name could serve as the functional substitute for metatags and therefore supports the same inference of bad faith:

It is reasonable to infer from the complaint that the same thing may be happening here, albeit with website domain names rather than meta tags. Indeed, one can imagine teachers searching the internet for www.facebook.com and hitting upon www.teachbook.com. And even though these same teachers might also read Teachbook's attempt to define itself as an alternative to Facebook, the initial interest stems from the goodwill associated with Facebook, not Teachbook.

Uh, no. I can't think of any reasonably likely keyword search for "Facebook" or any variation thereof that is likely to produce the Teachbook search result anywhere in the top 100 search results (except, perhaps, for stories about this lawsuit). And relying on initial interest confusion is a joke; check out the Google search results for "Teachbook" and see if you can find any reason to think initial interest confusion (whatever that means) will occur. Plus, the initial interest confusion doctrine is typically an analytical crutch for plaintiffs' lawyers and judges who can't think of any real justifications for their decisions. Finally, just up above, the court had said that the risk was people browsing to Teachbook instead of getting there via search engines; now, the judge is worried about search engines. Which is it, judge?

The judge wraps up his misguided likelihood of confusion discussion by assuming that teachers are idiots:

Furthermore, who is to say these teachers might not think that Teachbook is Facebook's response to some schools banning teachers from using Facebook? In light of such policies, a reasonable consumer might assume that Facebook was offering social networking services targeted specifically at teachers and addressing the privacy concerns at which the schools' policies are apparently aimed. The same consumer might further assume that Facebook, in order to draw on its famous name, decided to call that service TEACHBOOK. Indeed, nothing in the statement from Teachbook's website indicates that this is not the case.

It's true that if judges keep giving Facebook trademark protection for the suffix "book," the world will assume Facebook owns all brand extensions of "-book." This is a classic bootstrap of weak trademark rights into powerful ones. But judges could just as easily reverse that presumption by authorizing Lamebook and Bearbook and Teachbook and all of the other legitimate derivations of the suffix "book." Hey judge, we trust teachers to teach our kids; I think we can trust them to figure out the differences between Teachbook and Facebook (although I'd venture a guess that even a second grader would have zero difficulty distinguishing between Facebook and Teachbook).

Trademark Dilution

The court shoots down Teachbook's argument that "Teachbook" and "Facebook" are too dissimilar to create dilution. The court logically cites Levi Strauss & Co. v. Abercrombie & Fitch Trading Co., 633 F.3d 1158 (9th Cir. 2011), but that case has really ripped open the door for trademark dilution claims for dissimilar marks. The court then says Facebook sufficiently alleged blurring to let this claim continue.

I wonder about Facebook's dilution posture given the dozens (hundreds? thousands?) of third party precedent trademarks with the term "book" in them, suggesting that Facebook itself has a narrow range of protectable interests. Further, Facebook might be exposing itself to greater dilution risk from other famous trademark owners with "book" in their trademarks who might have dissimilar marks but could claim Facebook is blurring theirs. It seems to me that Facebook is playing with fire here--not that such risks are likely to deter Facebook in its highly aggressive quest to own "face" and "book."

Conclusion

Good judges can adjust their evaluation to the legal standard at issue, i.e., the presumptions are often against the defendant on a motion to dismiss, but the plaintiff has a greater burden of persuasion at later stages in the case. If the judge modulates his standards, this opinion doesn't necessarily portend doom for Teachbook. But if that modulation doesn't happen (and potentially even if it does), this opinion clearly indicates that Teachbook is in deep, deep trouble with this judge.

This opinion trots out some moldy oldie Seventh Circuit freakouts about the Internet, such as the Eli Lilly case and the eminently mockable Promatek v. Equitrac case. In light of the Ninth Circuit's Network Automation case, I'm wondering if Teachbook would actually have had more favorable precedent in the Ninth Circuit rather than moving the case back to the Seventh Circuit. Something for future trademark defendants to think about.

Posted by Eric at 11:40 AM | Evidence/Discovery , Search Engines , Trademark | TrackBack

September 21, 2011

Bad SEO Advice May Support Negligence Claim--D'Agostino v. Appliances Buy Phone

By Eric Goldman

D'Agostino v. Appliances Buy Phone, Inc., 2011 WL 4345674 (D.N.J. Sept. 15, 2011). One iteration of the complaint.

This is a confusing dispute, so I'm just going to focus on a few aspects. Based on the court's description, it appears that D'Agostino helped Appliances Buy Phones (a baffling TM, but we'll call them ABP) build an e-commerce site in 2003. In 2009, the parties allegedly agreed to have D'Agostino build a second website ("Appliance4Sale") that was more SEO-optimized, and D'Agostino would get a cut of the revenue from the second site. Allegedly, D'Agostino indexed the second site in Google Products and started generating some sales; but subsequently ABP put the kibosh on sales through the second site, and then Google hit the sites with a duplicate content penalty that dried up traffic to the second site, so ABP shut it down to revitalize the indexing of the first site. ABP allegedly didn't pay D'Agostino for his development work on the second site, even though he claimed to spend 1,000-2,000 hours working on the site. On a pro se basis, D'Agostino sued ABP and its principals as well as Google.

The most interesting ruling relates to the counterclaim by ABP's principal, Sigman. Sigman brought counterclaims against D'Agostino for a violation of New Jersey Consumer Fraud Act, negligence and contract breach. The court refuses motions to dismiss the three counterclaims.

On the NJCFA claim, Sigman claimed "Plaintiff knowingly created the Second Website that threatened the existence of the First Website and profitability of ABP." On the negligence claim, Sigman argued that D'Agostino claimed to be an SEO expert but negligently triggered a duplicate content penalty. Finally, Sigman claimed that D'Agostino breached their contract by "jeopardizing defendant’s website, violating Google policies, and causing the interruption of defendant’s enterprise."

Now, if someone selling SEO services wasn't aware of Google's duplicate content rules, that would be a big problem. At the same time, those rules can be pretty arcane, so I could see how even well-meaning SEOs could run into unexpected duplicate content problems, especially if a site were engaged in aggressive grey-hat activities (which may or may not describe the sites involved in this litigation).

This particular judge appears to be a very cautious judge; so cautious that he might refuse a motion to dismiss even when it's warranted just to give a pro se plaintiff more time and space to develop the case. Thus, it's possible/probable that Sigman's counterclaim won't do as well at later stages in the case. Even so, this ruling has to be disconcerting to the SEO community. Combined with the Roger Cleveland case, where the vendor providing (among other things) SEO services got tagged with a big contributory trademark infringement damages award, it seems like the risks of being in the SEO consulting business keep going up.

I'm not 100% clear on D'Agostino's claims still standing against Google, but Google invoked its forum selection clause in one of its agreements to try to get out of New Jersey. (It's not clear which agreement applied, although the court references Google's Merchant Center Terms). We've had a long string of cases upholding Google's forum selection clauses, but here the court waffles on its application to D'Agostino. The court says that even if D'Agostino registered the second website with Google, he may have done so as ABP's agent, in which case he's not a party to the contract. This sounds wrong on two fronts. First, the second website appears to have been a joint endeavor of D'Agostino and ABP, so he may very well have been a party; and even if he was acting as an agent, then he should be bound equally with the principal. The court rejects Google's motion without prejudice, which means Google may still be able to transfer the case if it can show facts binding D'Agostino to the contract, but for now Google's still stuck in New Jersey.

Just yesterday, regarding the Ground Zero Museum Workshop v. Wilson case, I wrote:

Hey people, when you have vendors help run your website, PLEASE dot your i's and cross your t's. When the shit hits the fan and the contract isn't in place or clear enough, the resulting litigation fusillade can destroy your life.

This is another example where the contracts weren't air-tight enough to cut short a murky litigation. In fact, the basic architecture of this business deal--giving the SEO financial interest in the second website but still running the first website--seemed fraught with conflicts from inception. The structure apparently put the two different websites in competition with each other (because there were different economic payoffs associated with each site), so perhaps a falling-out was inevitable.

Posted by Eric at 06:55 AM | Licensing/Contracts , Search Engines | TrackBack

September 01, 2011

Google Gets a Good Win in the MyTriggers Lawsuit

By Eric Goldman

BFS Finance v. My Triggers Co., 09CV-14836 (Franklin County Court of Common Pleas, Aug. 31, 2011)

This lawsuit started all so innocently. It was just a routine collections matter against MyTriggers, an AdWords advertiser, for a few hundred thousand dollars. Unexpectedly, Google found itself pinned down in a dangerous venue (Ohio state court) against lawyers with impressive resumes and apparently bottomless legal budgets raising issues that are central to Google's business. My original blog post on MyTriggers' counterclaims.

For the moment, Google is having the last laugh. Although it cost them lots of money in discovery and managerial focus, yesterday Google got a thoroughly satisfying win on its motion to dismiss MyTriggers' counterclaims. I'm confident the plaintiff won't let this ruling stand as the final word, but it's clear MyTriggers has gotten zero traction in court. Combined with the ignominious dismissal of TradeComet's similar lawsuit against Google on jurisdictional grounds (being handled by some of the same plaintiff's lawyers), I'm even more confident now that both the TradeComet and MyTriggers lawsuits lack any merit. Unfortunately, these lawsuits' likely demise probably will only encourage the anti-Google forces to redirect their energy and resources into the multitudinous other efforts to bust Google.

Some specifics about this ruling:

* the state antitrust claim (the Valentine Act) fails because MyTriggers only alleged that Google harmed MyTriggers as a competitor, not that it harmed competition. In particular, MyTriggers alleged that Google favored some vertical search engines over others, so this allegation undercut MyTriggers' claim. MyTriggers' allegation of a boycott were too general, and its allegation of unilateral conduct weren't supported by any allegation of antitrust injury.

* MyTriggers' contract breach claim fails because MyTriggers never properly identified the allegedly breached contract or Google's breach.

* MyTriggers' promissory estoppel claim fails because MyTriggers couldn't allege a sufficiently unambiguous promise or any detrimental reliance on those promises.

* MyTriggers' rescission claim (based on fraud) failed for many of the same reasons: no identification of the contract and weak promises by Google.

Stepping back from the details, this is quite a stinging--and thorough--rejection of MyTriggers' pleadings, even though they were aided by many months of discovery. These are not the kinds of dismissal grounds one normally expects to see from a complaint drafted by lawyers with national reputations.

The only sour note is the judge's rejection of Google's 47 USC 230(c)(2) defense to the antitrust claims. Google's basic position is that it rejected MyTriggers' ads because it objected to them, and therefore it gets the statutory immunity for blocking "otherwise objectionable" content. The court rejects the contention, applying the ejusdem generis doctrine to interpret "otherwise objectionable" more narrowly. Citing the National Numismatics case, the court rejected the Langdon v. Google ruling and said that objectionable content must relate to porn, violence, obscenity or harassment. It distinguished other Google citations (such as the e360 case) as involving spam, which the court characterized as a subset of harassment, or 230(c)(1).

I don't agree with this reading of 47 USC 230(c)(2), and there are many cases applying the "otherwise objectionable" language more broadly than this court did. See my overall recap of 47 USC 230(c)(2). On the other hand, I think it's a tough sell for courts to apply 230(c)(2) to antitrust claims (see, e.g., the concurrence in Zango v. Kaspersky), and this ruling shows the natural reluctance of judges to go that direction.

Posted by Eric at 02:05 PM | Derivative Liability , Marketing , Search Engines | TrackBack

August 31, 2011

Pillow Pets Knockoff Enjoined from Keyword Advertising--CJ Products v Snuggly Plushez

By Eric Goldman

CJ Products LLC v. Snuggly Plushez LLC, 2011 WL 3667750 (E.D.N.Y. Aug. 22, 2011)

Pillow Pets are cuddly and soft, but if you make knockoff versions of them, be prepared to meet the sharp end of their sword in court--a fate that befell the defendants in this case. However, before we condemn the defendants too much, recognize that (a) the term "pillow pets" is very descriptive ("It's a pillow...it's a pet"), and (b) the idea of making stuffed animals that turn into pillows goes back at least decades.

Nevertheless, the court concludes that the defendants mimicry was too close. It violated Pillow Pets' copyright registration in sculptural works, and the marketing campaign constituted false advertising (for, among other things, saying "As Seen on TV" and claiming to be "original" and "authentic") and trademark infringement. To reach the latter conclusion, the court concluded that "pillow pets" was a descriptive term that had achieved secondary meaning.

Unusually, this ruling broke out its discussion of the trademark implications of the defendants' keyword ad campaign (rather than incorporating the discussion into the other trademark infringement analysis). The defendants ran ads like:

Official PillowPets.CO- Soft Chenille Plush Pillow Pets
Low Prices, New Styles Now in stock
www.pillowpets.co

and

PillowPets.Co™
Official Site. SuperSoft chenille plush pillow pets Now in Stock!
www.pillowpets.co

I could see how this ad copy for a knockoff might confuse some consumers, and the plaintiffs introduced some evidence that consumers had mistakenly transacted with the defendants. This case reminded me a little of the Edriver case in terms of the defendants' online efforts to look "official."

The court, like many others, says the ads make a trademark use in commerce. Fortunately, inspired by the Network Automation case, the court refused to apply an Internet exceptionalist likelihood of consumer confusion analysis for keyword advertising. The court expressly rejected the Hearts on Fire keyword-specific bonus multi-factor test.

Instead, the court cited evidence of actual confusion, the defendants' efforts to mimic the plaintiff's home page, and the resulting traffic bump as reasons to grant "plaintiffs’ motion to enjoin defendants’ use of the terms “Pillow Pets” and “My Pillow Pets” in the Google AdWords program to trigger sponsored links." Given the court's view that the defendants were impermissible knockoffs that had used overly aggressive marketing tactics, an injunction was the logical denouement.

Personally, I'm surprised the pillow pet fad has lasted as long as it has. Then again, my kids still sleep with their pillow pets every night. Check out Dina's excitement when she first got her unicorn pillow pet.

Rebecca also blogged this ruling.

Posted by Eric at 08:35 AM | Marketing , Search Engines , Trademark | TrackBack

August 29, 2011

Bev Stayart Racks Up Two More Losses--Stayart v. Yahoo and Stayart v. Google

By Eric Goldman

Stayart v. Yahoo, Inc., 2011 WL 3625242 (E.D. Wis. Aug. 17, 2011)
Stayart v. Google Inc., 2:10-cv-00336-LA (E.D. Wis. Aug. 17, 2011)

Persistence is a virtue, but sometimes, enough is enough. You probably remember Bev Stayart as the woman who was upset that sploggers had built pages associating her name with the drug Levitra. In a litigation campaign now spanning 2 1/2 years, she has sued both Google and Yahoo for showing these splogged results. Her lawsuits have gotten zero traction. See the end of this post for my prior blog posts on her futile campaign.

The most recent rulings address her motions to reconsider the dismissal of her publicity rights claims, as well a dismissal in the Yahoo case for lack of subject matter jurisdiction and a motion in the Google case for attorneys' fees. Stayart avoids paying Google's fees--which I would have enthusiastically awarded against her if I had been judge--so I guess she might call that a win. She loses everything else.

The court rejects Stayart's publicity rights claim under Wisconsin's statute. It says that Stayart must establish a substantial connection between her name and advertising, not a de minimis or incidental connection. She didn't do that; her allegations only suggest that "defendant reported the results of its search of other websites." The court wraps up this point by saying:

Because it is not a misappropriation to use a person’s name primarily for the purpose of communicating information, displaying these search suggestions does not provide a basis for plaintiff’s claims.

The court doesn't cite the Habush v. Cannon ruling (also interpreting Wisconsin publicity rights law, although that case involved ads), but I think its ruling is philosophically in sync with that case.

In the Google case, Stayart pointed out that a keyword search for "bev stayart levitra" triggered ads for Levitra. The court, without using the phrase "broad matching," concludes that the logical conclusion is that the ads are based on broad-matching to Levitra. The court's discussion isn't so definitive that this language will be followed as precedent, but the court's reasoning would help defendants in keyword advertising lawsuits where broad matching is involved as well.

In the Yahoo case, the court dismisses subject matter jurisdiction because she didn't clear the $75,000 threshold. She tries to count the possibility of punitive damages towards the $75,000, but noting the Gore case, the court says:

Even assuming that punitive damages were available, such damages would necessarily be limited given the de minimis nature of the compensatory damages alleged.

The court couches the discussion in fairly turgid legal prose, but the message is clear: Bev Stayart's claims substantially overread the law, and she hasn't suffered any damage the court is going to recognize. Most plaintiffs would get the hint and cut their losses.

Among other consequences of her litigation campaign, Bev Stayart's litigation campaign has irrevocably changed the search results on her name. Instead of associating her with sexual dysfunction drugs, her search results forevermore will be associated with unmeritorious litigation. Thus, I still fail to understand why these lawsuits aren't fundamentally counterproductive to her apparent goal of improving her online reputation.
____

Prior blog posts:

* Google Not Liable for Suggested Vanity Searches--Stayart v. Google
* Seventh Circuit Tosses Beverly Stayart's False Endorsement Claims--Stayart v. Yahoo
* Beverly Stayart Strikes Again! This Time, Stayart Sues Google
* Yahoo's Search Results Snippets Aren't False Endorsement--Stayart v. Yahoo
* Yahoo/Overture Sued for Search Results Snippets Containing Plaintiff's Name--Stayart v. Yahoo

Posted by Eric at 10:12 AM | Publicity/Privacy Rights , Search Engines | TrackBack

August 08, 2011

Google Gets Default Injunction Against AdWord Gamers--Google v. Jackman

By Eric Goldman

Google v. Jackman, 2011 WL 3267907 (N.D. Cal. July 28, 2011)

This is a default ruling, so the facts are based on Google's allegations. The defendants ran AdWords campaigns for online pharmacies that sold anabolic steroids. This broke Google's rules in two ways: first, Google didn't permit the advertising of anabolic steroids; and second, the advertised pharmacies weren't certified by Google's mandatory certification program (VIPPS, "the National Association of Boards of Pharmacy’s Verified Internet Pharmacy Practice Sites"). The defendants further evaded Google's crackdown efforts by misspelling terms and opening up new bogus accounts. Google eventually cleaned out the defendants' ads through its manual "sweeps."

Without the defendants around to defend themselves, Google easily won its case. The court upheld the venue selection clause in Google's TOS and that the defendants' ads breached the TOS. As for remedies, Google dropped its claim for money damages, and the court grants the following injunction:

Defendants Gina Wyant, Gregory Gavin and Amanda Odell, and their agents, representatives, successors, assigns, and any persons in active concert or participation with them are immediately and permanently enjoined from advertising or attempting to advertise through Google’s AdWords advertising network, without regard to contact name, address, or email address and without regard to what URL or website is advertised.

From time to time, Google goes on the offensive against folks it thinks are trying to game it. You may recall Google v. Auction Experts International, 1-04-CV-030560 (Cal. Superior Ct. 2005) in which Google sued an alleged click fraudster and won a $75k default judgment; and United States v. Michael Anthony Bradley, CR 04 20108 (N.D. Cal. indicted June 23, 2004), a prosecution over alleged threats to help spammers defraud Google if the defendant didn't get $100k (that case ultimately fizzled out). Google's efforts to get tough against its spammers have typically struck me as publicity stunts. Default injunctions and dropped prosecutions don't do anything to scare the bad guys, but they intended to persuade third parties that Google will fight for its site's integrity.

In this case, no doubt Google wanted to show the DOJ that it really hates illegal pharma ads enough to "bust" the bad guys. This enforcement effort may have some value in working out a deal to reduce its half-billion dollar exposure. As a result, we won't really know if Google won this case until we see the terms of its DOJ deal.

Posted by Eric at 03:50 PM | Licensing/Contracts , Marketing , Search Engines | TrackBack

August 02, 2011

Ninth Circuit Reconsiders SEO-Destroying Injunction Against DMV.Org--TrafficSchool v. EDriver (Joint Blog Post)

By Rebecca Tushnet and Eric Goldman

TrafficSchool.com, Inc. v. Edriver Inc., 2011 WL 3198226 (9th Cir. July 28, 2011)

[Over the years, Rebecca and I have blogged dozens of the same cases. However, we've never done a joint blog post until today. Rebecca and I had both blogged on the district court ruling in this case, so it made sense that both of us were going to blog on the Ninth Circuit ruling. It made even more sense for us to do it together! Rebecca's post. Warning: both Rebecca and I write long blog posts, so our combined effort is a beefy 3,800+ words.]
______________

Rebecca's comments:

District court opinion discussed here. Judge Kozinski has long been a proponent of political-speech-level protection for commercial speech, and that position has its influence on this opinion, which is written in his usual highly readable style. You can also see here the growing lawsuit-limiting effect of standing doctrine, though here at least there was an actual factfinding before the judges decided whether the plaintiff had been harmed.

As Judge Kozinski explains, “Consumers visit DMV.org for help renewing driver's licenses, buying car insurance, viewing driving records, beating traffic tickets, registering vehicles, even finding DUI/DWI attorneys. The more eyeballs DMV.org attracts, the more money defendants earn from selling sponsored links and collecting fees for referring site visitors to vendors of traffic school courses, driver's ed lessons and other driver-related services. This seems like a legitimate and useful business, except that some visitors mistakenly believe the site is run by their state's department of motor vehicles (DMV).”

After trial, the district court found a violation of the Lanham Act but not of California’s UCL. Its injunction required every site visitor to go through a splash screen with a disclaimer. (The Electronic Commerce & Law Reporter blurb described it as a pop-up. It’s not.)

The district court found that plaintiffs “failed to prove ... that they have suffered an injury in fact and lost money or property as a result of Defendants' actions,” and that they “provided no evidence showing a causal connection between Defendants' actions and any harm Plaintiffs incurred.” Edriver argued that this finding proved that TrafficSchool also lacked Lanham Act standing. This was wrong because California’s UCL defines standing more narrowly (pecuniary injury and “immediate” causation) than the Lanham Act, which only requires a plaintiff to believe that it’s likely to be injured.

What about Article III standing? The UCL also defines injury in fact more narrowly than Article III does, so the loss doesn’t necessarily preclude Article III standing. The district court didn’t independently analyze Article III standing, but the court of appeals did, looking for injury in fact, causation, and redressability. The key here was injury in fact.

Article III injury exists in a false advertising case if some consumers who bought defendant’s product under a mistaken belief fostered by the defendant would otherwise have bought plaintiff’s product. This can be proven by actual market experience and probable market behavior. Probability is fine “because proving a counterfactual is never easy, and is especially difficult when the injury consists of lost sales that are predicated on the independent decisions of third parties; i.e., customers. A plaintiff who can't produce lost sales data may therefore establish an injury by creating a chain of inferences showing how defendant's false advertising could harm plaintiff's business.”

TrafficSchool produced ample evidence that it competes with DMV.org for referral revenue, sometimes with the same course providers. “Sales gained by one are thus likely to come at the other's expense. Evidence of direct competition is strong proof that plaintiffs have a stake in the outcome of the suit, so their injury isn't ‘conjectural’ or ‘hypothetical.’ Plaintiffs also presented testimonial and survey evidence that a ‘recommended by DMV’ endorsement is an important factor in consumers' choice of traffic schools and driver's ed classes. It stands to reason that defendants will capture a larger share of the referral market—to plaintiffs' detriment—if they mislead consumers into believing that DMV.org's referrals are recommended by their state's DMV. Plaintiffs have therefore established sufficient injury for Article III standing.”

Lanham Act standing requires (1) a commercial injury based upon a misrepresentation about a product; and (2) a competitive injury. (Footnote: a plaintiff can show both these things and still lack standing if the purpose of its false advertising suit is to enforce someone else’s statutory rights—plaintiffs here couldn’t sue on the California DMV’s trademark rights. But they sued to enforce their own right to be free of unfair competition.) Defendants argued that DMV.org was a publisher, while plaintiffs’ sites are self-promotional tools, but plaintiffs introduced evidence that they compete in the referral market.

Defendants argued that the only injury here was to the public. Though plaintiffs didn’t prove “identifiable” injury to themselves, the standard for “commercial injury” was different. Likely injury is all that’s required, not actual injury. “[W]hen plaintiff competes directly with defendant, a misrepresentation will give rise to a presumed commercial injury that is sufficient to establish standing.” Kozinski defended this presumption; advertising is about competing for consumer dollars, and misleading ads can upset competitive positions. “Moreover, the Lanham Act is at heart a consumer protection statute. Requiring proof that defendant's ads caused plaintiff to lose sales as a prerequisite to bringing suit would frustrate its ability to act as the fabled vicarious avenger of the consuming public.” The court didn’t need to decide whether the presumption was conclusive or rebuttable because defendants didn’t provide any evidence to rebut it.

The remaining question was whether the ads were misleading. They were.

When plaintiffs sued, Californians who googled (Judge Kozinski fears no neologism, especially when it is useful) “dmv” or “drivers ed” would see DMV.org’s sponsored listings for “ca.dmv.org” or “california.dmv.org.” respectively. “While there's nothing inherently misleading about sponsored search results, they can mislead if they are named so as to give a false impression as to the likely sponsorship of the website to which they refer.” The ca. and california. prefixes were obviously designed to suggest official affiliation. The website design also mimicked an actual DMV site, copying slogans and state symbols, and linking to DMV-related pages like applying for a license, registering a car and signing up for traffic school. The disclaimer was easy to miss because it was displayed in small font at the bottom of each page, where many consumers would never scroll.

There was also plenty of evidence of actual confusion, including two declarations from confused individuals and hundreds of emails from obviously confused consumers. “Some of these emails contained sensitive personal information that the typical consumer wouldn't share with a commercial website”:

My boyfriend George [redacted] ... got a ticket in South Carolina in 2006.... Mr. [redacted] driver's license number is [redacted]. His date of birth is [redacted]. I have his social security number if needed, but I don't want to put all of his personal information on this e-mail if possible.... I was told by Central Court for Lexington County in South Carolina that if we contacted the Arkansas DMV that y'all would be able to tell us what court this is in and where to pay the ticket.

Law enforcement officials and state DMV employees were also confused, seeking help with, among other things, DUI cases (again a situation where the subject undoubtedly wouldn’t like that information out in the open). Two California cities, a private law firm in Texas and a number of newspapers mistakenly linked their websites to DMV.org instead of a state DMV website.

Plaintiffs didn’t stop there, but also provided an internet survey showing that “a majority of California residents searching online for traffic schools believed that (1) DMV.org's website was actually the California DMV's and (2) a search engine listing for DMV.org was endorsed or sponsored by the California DMV.” There were significant flaws, including failure to use a control, but the district court found it more credible than defendants’ survey and gave it “some” weight, which was not reversible error.

Overall, there were “volumes” of evidence of competition and misleadingness. This established that the DMV.org site deceived a substantial segment of the audience, and plaintiffs also showed that a “recommended by DMV” endorsement will affect purchase decisions, causing likely injury to plaintiffs.

Remedy: the district court ordered DMV.org to present every site visitor with a splash screen stating, “YOU ARE ABOUT TO ENTER A PRIVATELY OWNED WEBSITE THAT IS NOT OWNED OR OPERATED BY ANY STATE GOVERNMENT AGENCY.” Visitors have to click to continue. Defendants argued that this was overbroad and restrained conduct not at issue in the complaint, and violated the First Amendment.

The district court reasoned that the splash screen was necessary to: (1) “remedy any confusion that consumers have already developed before visiting DMV.ORG for the first time,” (2) “remedy the public interest concerns associated with [confused visitors'] transfer of sensitive information to Defendants,” and (3) “prevent confusion among DMV.ORG's consumers.” Defendants argued that the splash screen doesn’t do these things (I’ll have a bit to say about this shortly). Their only evidence was a declaration from DMV.org’s CEO stating that they tested several alternative disclaimers and “found them to be more effective than the splash screen in preventing consumers from emailing DMV.org with sensitive personal information.” Even crediting this self-serving declaration, defendants didn’t prove that the splash screen was ineffective, and said nothing about whether the alternative disclaimers served the other interests identified by the district court. Citing Home Box Office, Inc. v. Showtime/The Movie Channel Inc., 832 F.2d 1311 (2d Cir.1987), the court of appeals ruled that defendants hadn’t carried their “heavy burden” of showing that alternative disclaimers reduced likely confusion. The district court didn’t abuse its discretion when it concluded that the splash screen was the best way to correct the false advertising.

“Courts routinely grant permanent injunctions prohibiting deceptive advertising. Because false or misleading commercial statements aren't constitutionally protected, such injunctions rarely raise First Amendment concerns.” However, the permanent injunction here did because it erected a barrier to all content on the website, not merely that which is deceptive. “Some of the website's content is informational and thus fully protected, such as guides to applying for a driver's license, buying insurance and beating traffic tickets. The informational content is commingled with truthful commercial speech, which is entitled to significant First Amendment protection. The district court was required to tailor the injunction so as to burden no more protected speech than necessary.”

The injunction was a permanent and unnecessary burden to accessing DMV.org’s First Amendment-protected content. “The splash screen forces potential visitors to take an additional navigational step, deterring some consumers from entering the website altogether,” and defendants submitted evidence that splash screens typically drive away up to a quarter of potential visitors, prevent them from tailoring the landing page, and interfere with search engine indexing and ranking.

The district court premised the injunction on its findings that defendants’ search engine marketing and natural listings, including the DMV.org domain name, caused confusion prior to viewing any content, and then identified specific misleading statements. “The splash screen is justified to remedy the harm caused by such practices so long as they continue,” and so long as it helps remedy lingering confusion, but not forever. On remand, the district court had to reconsider the duration of the splash screen “in light of any intervening changes in the website's content and marketing practices, as well as the dissipation of the deception resulting from past practices.” If the district court continued the requirement, it needed to explain the continuing justification (comment: which would be the deceptive domain name) and what conditions defendants must satisfy in order to remove the splash screen in the future. The district court could also simply ban deceptive marketing or placing misleading statements on DMV.org.

My comment: I really don’t get this. It’s the domain name that’s at the core of the deception, something the district court pointed out—if the splash screen is justified “so long as [the deceptive practices]” continue, they will continue until there is a new domain name. Maybe if defendants only advertise the new domain name and simply redirect anyone who goes to dmv.org to the new domain, they should be allowed to remove the splash screen eventually. But for now, I don’t see why this isn’t a dilemma of defendants’ own deceptive making.

There is a potential bright spot, I suppose: the current splash screen is pretty bad (I would infer deliberately so). Take a look: Defendants have removed “Unofficial Guide to the DMV” from their license plate logo. The disclaimer runs at the very top, a couple of pixels away from the top of the browser window, in grey rather than black text (a nearly transparent tactic, pun intended!), not near the action invitation to click to continue, and not near the dmv.org logo, both of which are far more prominent to the eye. This placement clearly flunks the FTC’s guidelines for online disclosures, and defendants who already managed to mis-implement disclosures (of which more below) should not get the benefit of the doubt in this area. On remand, I sincerely hope that the revised remedy, whether splash page or not, forces the disclaimer into a prominent position.

The district court denied plaintiffs’ request for an award of profits because they provided no evidence of causation, nor did they quantify the harm they suffered. “Nothing in the Lanham Act conditions an award of profits on plaintiff's proof of harm, and we've held that profits may be awarded in the absence of such proof,” though it’s an uncommon remedy without proof of harm. Profits are appropriate in false comparative advertising cases, “where it's reasonable to presume that every dollar defendant makes has come directly out of plaintiff's pocket.” Likewise “where ordinary damages won't deter unlawful conduct: for example, when defendant associates its product with plaintiff's noncompetitive product to appropriate good will or brand value.”

But neither line of cases were relevant here. Profits may be awarded only as compensation and not as a penalty, but without comparative advertising plaintiff’s injury may be a small fraction of defendants’ profits. There was no error in denying damages.

The potential attorneys’ fee award did require some rethinking, though. The district court denied fees because, while plaintiffs received an injunction, they didn’t get damages, and they had unclean hands. This was reviewed for abuse of discretion.

An exceptional Lanham Act case justifying fees usually involves conduct that was “fraudulent, deliberate, or willful.” “By examining only the relief awarded to plaintiffs, and failing to consider defendants' conduct, the district court applied the wrong legal standard.” The district court may take failure to recover damages into account, but it should also consider that plaintiffs obtained a judgment and an injunction to ameliorate serious public harm caused by defendants’ unlawful conduct. “It would be inequitable to force plaintiffs to bear the entire cost of enjoining defendants' willful deception when the injunction confers substantial benefits on the public.” Plaintiffs stopped the confusion (maybe) and stopped consumers from mistakenly transferring sensitive personal information to a commercial website. “The district court abused its discretion by failing to consider these substantial benefits or defendants' bad acts in determining whether to award attorney's fees.”

Defendants challenged the finding that their deception was willful. But there was plenty of evidence to support that, including evidence that one defendant had a pattern of registering misleading domain names. “Defendants associated their website with URLs and search terms that falsely implied DMV.org was a government site. They had in their possession hundreds of emails sent by consumers who contacted DMV.org thinking it was a state agency. And DMV.org's director of customer service testified that he voiced concerns about these emails to senior management.”

Defendants responded that they added disclaimers, but they knew the disclaimers were ineffective, because that didn’t change the stream of emails from confused consumers. Given this knowing inaction, the district court could reasonably infer willfulness.

Moreover, the district court’s finding of unclean hands was clearly erroneous. This rested on two findings: (1) plaintiffs registered similar domain names, such as Online-DMV.org, Internet-DMV.org and cadmvtrafficschool.com; and (2) they attempted to advertise their products on DMV.org despite being aware that the site deceived the public. Neither was clear and convincing evidence of inequitable misconduct related to the subject matter of the false advertising claims. (In a footnote, Judge Kozinski commented that it wasn’t clear that the fee award was subject to equitable doctrines such as unclean hands, since the relevant statutory provision doesn’t use the term “equity.”)

Merely registering a domain name wasn’t proof of unclean hands, since registration couldn’t cause confusion unless the domain name was associated with a website visible to consumers, and plaintiffs’ ads on DMV.org ran for just six hours. There was no evidence of actual deception caused by plaintiffs' advertising. There was an email from plaintiffs’ co-founder recommending taking an “[i]f you can't join ‘em, shut ‘em down approach” to DMV.org. “But the doctrine is unclean hands, not impure thoughts. … And the email here actually undermines the rationale for finding unclean hands. Plaintiffs acquired information showing that defendants confused the public; using litigation to shut down a competitor who uses unfair trade practices is precisely what the Lanham Act seeks to encourage.” (I’m not sure that’s undermining, precisely.)

Remand for further proceedings.
______________

Eric's comments:

This lawsuit is just the latest courtroom fracas involving privately operated websites that seem designed to create the appearance of official government sponsorship. Other sites in this genre include ConsumerAffairs.com and FreeCreditReport.com. As I indicated in my prior blog post on this case, the operators of DMV.org were probably too zealous about trumping up their officialness, thus destroying a promising domain name when a lighter touch would have left some short-term profits on the table but generated more profits over the long-run.

Rebecca highlights how this opinion has some important things to say about false advertising standing, consumer confusion in false advertising and attorneys' fees in Lanham Act cases. I'm going to focus on more of the technical issues:

First, DMV.org bought keyword ads that displayed the URL "ca.dmv.org" and "california.dmv.org." The opinion says "Defendants' use of the "ca." and "california." prefixes obviously was designed to suggest an affiliation with the State of California." As far as I can recall, this is the first time a court has explicitly treated the URL displayed in keyword ad copy as contributing to consumer confusion. I know some SEMs like to play games with the domain line in keyword ad copy. Even if Google won't police the URL line, courts will.

Second, the opinion shreds DMV.org's argument that consumers didn't think it was affiliated with a government agency; it concludes that DMV.org "willfully" and "egregiously" deceived consumers because

Defendants associated their website with URLs and search terms that falsely implied DMV.org was a government site. They had in their possession hundreds of emails sent by consumers who contacted DMV.org thinking it was a state agency. And DMV.org's director of customer service testified that he voiced concerns about these emails to senior management.

This deceptive conduct wasn't curable with a website disclaimer: "defendants knew that the disclaimers were ineffective, because adding them didn't end the stream of emails sent by consumers who thought they'd contacted their state DMV." Marketing people love to "fix" any legal problems with disclaimers, but they often simultaneously resist making the disclaimers prominent enough to actually fix the problem, leaving the website no better off.

As usual, Judge Kozinski adopts a realpolitik perspective that we all know what's going on here, and he isn't going to countenance it. This discussion doesn't directly link to or cite the scienter battles in online copyright and trademark cases, but it could be a little uncomfortable for defendants like Fung who rely on form-over-substance arguments.

Third, the district court ordered DMV.org to display a splash screen to incoming visitors containing a disclaimer of government affiliation. I believe the remedy of a mandatory splash screen was also unprecedented. Among other problems with the splash screen, it can hurt or destroy search engine indexing, effectively rendering the domain name worthless. Therefore, even though the district court didn't award any damages (a ruling affirmed on appeal), the mandatory splash screen was potentially far more detrimental.

On appeal, the court partially reverses the mandatory splash screen, noting that it applied equally to deceptive and non-deceptive content that DMV.org is publishing. The court also notes the disadvantages of interfering with search engine indexing:

[The injunction] also precludes defendants from tailoring DMV.org's landing page to make it welcoming to visitors, and interferes with the operation of search engines, making it more difficult for consumers to find the website and its protected content.

In a footnote, the court explains:

Defendants introduced unrebutted evidence that splash screens commonly interfere with the automated "spiders" that search engines deploy to "crawl" the Internet and compile the indexes of web pages they use to determine every page's search ranking. And splash screens themselves don't have high search rankings: Search engines commonly base these rankings on the web page's content and the number of other pages linking to it, and splash screens lack both content and links.

This is a pretty savvy explanation of why a splash screen destroys SEO, and it's heartening to see the court recognize the First Amendment value of SEO (at least, nondeceptive SEO).

The court gives DMV.org some very good news by giving it a chance to work its way out of the splash screen:

On remand, the district court shall reconsider the duration of the splash screen in light of any intervening changes in the website's content and marketing practices, as well as the dissipation of the deception resulting from past practices. If the district court continues to require the splash screen, it shall explain the continuing justification for burdening the website's protected content and what conditions defendants must satisfy in order to remove the splash screen in the future. In the alternative, or in addition, the court may permanently enjoin defendants from engaging in deceptive marketing or placing misleading statements on DMV.org.

On the other hand, as Rebecca points out, the DMV.org domain name is, itself, designed to prey on consumer interest in official DMV services. Perhaps there will be no way for DMV.org to fix this, no matter what disclaimers it uses.

One final note: this opinion was authored by Judge Kozinski, the third domain name opinion he has written in the last 13 months. (The other two are the Tabari and eVisa cases). I went back and counted a total of 9 Ninth Circuit domain name cases in that time--the others being Advertise.com, Christensen (a 2 paragraph opinion), DSPT, Balsam, Office Depot (a non-substantive affirmance) and Vericheck. Kozinski was not on the other panels, so he wrote the opinion in each of the 3 domain name cases he heard. Is all of this just random luck?

UPDATE: Something about this opinion is spurring blog posts focusing on its arcania. Tom O'Toole notes this is the second opinion using the term "googler." Shaun Martin focuses on Kozinski's self-citations.

Posted by Eric at 09:42 AM | Domain Names , Marketing , Search Engines | TrackBack

July 20, 2011

Social Media Marketing Is Relevant to Trademark Confusion Analysis--Quia v. Mattel

By Eric Goldman

Quia Corp. v. Mattel, Inc., 2011 WL 2749576 (N.D.Cal. July 14, 2011)

Both parties offer educational games under the brand "IXL" (presumably a homophone for "I excel"). The parties dispute who came first.

Mattel sought a determination that Mattel's product's presence in search results was legally irrelevant. Judge Fogel tosses Mattel a bone, saying "The mere fact that an internet search engine intermingles links to two products is not evidence of consumer confusion."

Quia responded that it wasn't kvetching about search at all (at least, not after Mattel boxed it in). Instead, Quia says the fact both parties are engaged in social media marketing increases the likelihood of consumer confusion. Quia offers the following evidence:

Defendants have taken steps such as reserving “tags” to improve search results on Google and Bing; monitoring “Google Blogs Alert for: ixl,” sending email “blasts,” creating Facebook applications, developing You-tube “channels,” and fostering tie-ins with “mommy bloggers.”

What are they talking about? What does it mean to "reserve tags" to improve Google search results? And why does it matter that Mattel has a Google Blog alerts on its purported trademark? And surely it's not a surprise that an educational game has mommy-blogger tie-ins?

Exploring the Network Automation case and its implications for a Sleekcraft analysis in the online context, Judge Fogel responds:

While purchasing search engine keywords or selling product on Amazon.com are now “ubiquitous marketing channels,” social media marketing, such as tie-ins with “mommy bloggers,” may be more akin to niche marketplaces such as the specialty retail outlets and trade magazines at issue in Sleekcraft. At this stage of the proceedings, the Court cannot conclude that Plaintiff's theories with respect to Defendants' marketing strategies are irrelevant to the issue of consumer confusion.

That's clearly the correct reading of Network Automation. Even so, given the things it's alleged so far, I'm not clear what information Quia can introduce regarding marketing channels that will matter to the analysis.

Posted by Eric at 02:00 PM | Marketing , Search Engines , Trademark | TrackBack

July 04, 2011

June 2011 Quick Links, Part 2

By Eric Goldman

Social Media

* The Third Circuit issued its en banc rulings in Layshock v. Hermitage School District and J.S. v. Blue Mountain School District, both involving school discipline against kids who created fake MySpace profiles of school administrators. Prior blog post on both cases. The good news is that the kids won in both cases; the courts held that the administrators overreacted. However, the decisions don't resolve any of the fundamental issues about the legitimacy of school discipline for kids discussing school-related issues online.

* Too Much Media, LLC v. Hale, 2011 WL 2305620 (N.J. June 7, 2011). A blog commenter doesn’t qualify for the NJ reporter shield law.

* Dr. T.S. v. Plain Dealer, No. 96201 (Ohio App. Ct. June 16, 2011). Uploading a 20 year old version of a newspaper doesn’t reset the single publication rule, even if the article becomes newly indexable in Google.

*Back in September 2010, Xcentric v. Bird settled in a no money deal. The settlement agreement. Ripoff Report's appended response to the original blog post. Prior blog post.

* Scott P. v. Craigslist dismissed. It appears Scott P. gave up against Craigslist. Prior blog post.

* News.com: Is the FTC going after Twitter...again?

* Another PR agency loses a client account over an ill-advised tweet.

* NY Times tries to deconstruct the Twitter hashtag convention.

* Art of Living Foundation v. Does, 2011 WL 2441898 (N.D. Cal. June 15, 2011). Griping bloggers about Ravi Shankar and his organization avoid defamation and trade secret liability for now.

* Jakobot v. American Airlines, 2011 U.S. Dist. LEXIS 64824 (S.D. Fla. June 20, 2011). In a battle over whether the plaintiff lives in Florida or Texas, the court says: “The internet is often filled with old, out-of-date, unsubstantiated, self-aggrandizing and misleading information. It is not enough to submit a selective chunk of Plaintiff's 'Google footprint' and note every time that a tie to Florida appears -- Defendant must do more to connect the dots.”

* State v. Hanson, 2011 WL 2301801(Minn. App. June 13, 2011). Statutory rape conviction reversed based on a mistake of age defense when the victim misreported her age to MySpace. Prior blog post.

* The Duluth doctor is appealing his defamation lawsuit loss against a patient's family member who criticized him online.

* Marin IJ: "A Greenbrae cosmetic surgeon who filed a defamation suit against an online reviewer was ordered to pay nearly $20,000 in attorney's fees after a judge dismissed the case."

* IT World: Is Facebook really 'hated' more than Bank of America?

* Job opening: Executive Director, Public Participation Project, to work towards a federal anti-SLAPP law. Spread the word!

Google

* Reuters on how the FTC's investigation of Google could chill innovation regardless of its outcome. Google's blog post about the investigation.

* In June, I participated in a TechFreedom panel on search engine bias on Capitol Hill. Declan McCullagh moderated. His writeup: "On Capitol Hill, it's all about beating down Google". The video.

* News.com: Google's Enemies: a Primer.

* Google hires TWELVE lobbying firms to fight the FTC (on top of the 6 they already had).

* Neeley is appealing his loss to Google. Prior blog coverage.

Spam

* Spam filters have taken a huge bite out of spam. See my 2003 article expressing confidence that technology would do a much better job fighting spam than legislation.

* Amazon's Kindle hit by spammed e-books. Another example that service providers have to exercise editorial control to curb spam.

Miscellaneous

* The FTC approved the final order in the Chitika case.

* CA enacts an Amazon tax and Amazon instantly tosses its affiliates overboard--including me! More evidence that the taxman will effectively kill the affiliate industry.

* Weinstein v. eBay Inc., 2011 WL 2555861 (S.D.N.Y. June 27, 2011). As a secondary market, StubHub does not need to comply with NY state law requiring printing the face value on tickets.

* Ni v. Slocum, A128721 (Cal. App. Ct. June 30, 2011). Rejecting electronic signatures in support of a ballot petition. Contrast Anderson v Bell in Utah about the application of UETA to election petition signatures.

* Zamora Radio, LLC v. Last.fm LTD., 2011 WL 2580401 (S.D. Fla. June 28, 2011). A defense-favorable Internet personal jurisdiction ruling: "the AccuRadio website reflects a low quality of commercial activity; visitors cannot purchase products or download music and are primarily limited to live streaming audio. Moreover, Plaintiff has not established that (1) Florida constitutes a principal consumer base for AccuRadio's service; (2) AccuRadio.com makes any reference to Florida, or directs visitors to any Florida establishments; (3) AccuRadio has engaged in any print, radio, television, or Internet advertising targeting Florida residents; or (4) AccuRadio has in any way specifically encouraged Florida residents to visit AccuRadio.com." The court distinguishes co-defendant Last.fm: "AccuRadio users do not have to download a program to access and listen to AccuRadio's programming and AccuRadio users do not download music from AccuRadio's website....Further, AccuRadio's website is not specifically directed at Florida consumers and local information about concert events is not provided on AccuRadio's website."

* Take James Grimmelmann's Internet Law exam.

Posted by Eric at 08:43 AM | Content Regulation , E-Commerce , Search Engines , Spam | TrackBack

June 24, 2011

George Mason "Law and Economics of Search Engines and Online Advertising" Conference Recap

By Eric Goldman

Last week I participated in a conference entitled "The Law and Economics of Search Engines and Online Advertising" at George Mason Law School, sponsored by Google. In light of this week's disclosures about the FTC, state AGs and Senate Judiciary Committee all circling around Google looking to carve it up like a turkey, the event was exceptionally timely.

Because Google sponsored the conference, this event was much more Google-partisan than we normally see at an "academic" event. (Note: George Mason deals with all sides; it did an analogous event sponsored by Microsoft in 2009). Two speakers were Google employees; at least two other speakers expressly acknowledged their financial support from Google; and several others were unabashedly Google-friendly, even if they don't explicitly enjoy any Google largess.

As usual, these talk notes are my filtered impressions of the day’s proceedings and not verbatim transcriptions. You should double-check anything you want to cite or quote.

Panel 1: Network Effects in Search?

Geoff Manne: Google faces competition for advertising from online and offline sources. Online ads are a small part of the global ad industry’s revenue. Ex: Pepsi didn’t advertise during the 2009 Super Bowl and instead put that money into social media advertising. For online ads, Google competes with other search engines, social media sites, and other sites that aggregate eyeballs. Google’s ads also face competition from its own organic search results. Finally, there’s a cross-elasticity of demand between SEO and paid ads.

Network effects: ad networks aren’t just selling consumer quantity; they are selling their ability to deliver relevant consumers. The ad quality score helps mediate ad relevancy for consumers. Advertisers pay only for clicks, not for access to the entire ad network’s population. The auction format eliminates any uninternalized externalities. [In Q&A, Katz pushed back on whether this an “externality.”] Advertisers’ willingness to pay is based on improvements in click quality, not a competition-reducing network effect.

Michael Katz: Market characteristics: (1) weak/non-existent network effects, (2) switching costs are low, and there's no evidence that personalization has had a lock-in effect, and (3) room for product differentiation. If a new search engine enters the market, searchers can move and it doesn’t matter if other searchers do (no coordination between searchers is required). Because consumers and advertisers can try multiple vendors for free and without switching costs, multiple competitors should be able to survive. For advertisers, the auction format permits them to try multiple sites—there’s no quantity discount motivating them to consolidate their business with one vendor.

Stanley Liebowitz: Clearly no network effects for searchers. The story is more complicated for advertisers. In 1990s, we were concerned about lock-in effects and allowing an inferior offering to become the winner. If there were network effects among advertisers, he might worry more than Michael. But he hasn’t found examples where network effects cause consumers to get stuck with the wrong products. Many past claims to the contrary look silly now. We can’t predict where markets are going.

Q&A
Bill Page: does a search algorithm improve with greater number of searches? Liebowitz: he would call that an economy of scale, which could lead to natural monopoly. But are we worried about getting stuck with the wrong natural monopoly? Katz: is Google pushing its competitors below the minimum competitive scale? Manne: how many consumers make decisions on failed long tail searches? [at Epinions, failed long tail searches were make-and-break. Damien Geradin made this point in Q&A.]

Manne: Bing’s cashback program for searchers who bought from advertisers was an example of how new entrants can buy market share.

Liebowitz: he's a little surprised by consumer stickiness. Why don’t consumers try different search engines more frequently?

My Q: advertisers face transaction costs dealing with multiple publishers/ad networks, and as a result, they may require a minimum quantity of eyeballs to consider working with a publisher/network. How would those transaction costs affect the competitive environment? Katz: larger advertisers are more likely to multi-home with large search engines [multi-home being jargon for using multiple vendors simultaneously]. [My note: even if this is true for the larger search engines, start-ups could be frozen out from ad dollars]. Manne: all search engines in the market face this same problem. Katz: VCs are willing to provide enough capital to let companies ramp up enough scale. [I wasn't totally satisfied with these answers. I think there's a possible paper topic on understanding the transaction costs that advertisers face in vetting and managing multiple ad networks and publishers and how those transaction costs help or hinder competitive forces.]

Panel 2: Defining the Relevant Market

Dan Rubenfeld: Internet advertising has developed rapidly and is likely to keep changing rapidly.

Does online advertising constrain offline advertising? Not clear. His gut: yes, but not in every case. There may be geographic or industry advertisers who find offline advertising more useful.

Does offline advertising constrain online advertising? Also not clear. There are lots of offline advertising options, and many advertisers use multiple advertising options.

Focusing just on search vs. non-search online advertising markets. In DoubleClick, the FTC said they are two separate markets. But it’s too simple to say that display ads are for branding and search advertising for direct marketing. Many advertisers use search advertising to build their brands, so they may be the same market.

Damien Geradin: In Google/Doubleclick, the FTC concluded that offline and online advertising markets are different. Why? (1) Online ads can reach more targeted audiences in more effective way. (2) Reporting mechanism lets advertisers see their ad performance. (3) Differences in pricing mechanisms. This was confirmed in Microsoft/Yahoo. EU lawyers think the market definitions are already settled, so why are we still talking about this?

Search ads v. other online ads. Damien thinks they are different:
* Not demand-side substitutes. French Competition Authority (2010): search advertising is distinct relevant market. Google/Yahoo 2008: search advertising and search syndication are different markets. DoubleClick 2007: search and display are different markets. Damien: 1) different characteristics and intended use of search and non-search ads (brand v. direct marketing). 2) Different pricing methods (CPC v CPM). 3) ROI from search ads is higher than non-search ads because it can be better tracked.
* Not supply-side substitutes. A publisher/network faces lots of costs and time switching from running display ads to providing a search advertising offering.
* Algorithmic search doesn’t constrain search advertising. SEO isn’t a substitute for advertisers because SEO is less effective than ads at driving traffic, search engines change algorithms, and search ads yield better conversion.

Catherine Tucker: results of study on alcohol advertising restrictions:
* online display ads had the largest impact on consumers in geographic jurisdictions that legally restricted out-of-home ads
* the Internet reduces the effectiveness of these local regulations
* thus, online ads substitute for offline advertising

Another study: How offline advertising affect online ad pricing. Personal injury lawyers will pay more for online advertising when there is a ban on direct (offline) marketing to victims.

Her conclusion: “offline advertising appears to regulate both the effectiveness and pricing of online advertising.” This is consistent with other literature that online activity is integrated into an entire marketing campaign.

Q&A
Baye: He was the FTC chief economist during the DoubleClick review. Facebook wasn’t even on the commission’s radar screen at the time. [Eric: This isn’t surprising; the market continues to change rapidly.]

Geradin: Google has way more advertisers than Bing.

Q: if ROI is higher in search ads, doesn’t that indicate a price constraint? [The discussion was odd, but it seems that if search ad ROI was truly higher, advertisers should shift dollars to search ads over lesser-performing ads and arbitrage the ROI advantage. So either some factor is preventing advertisers from doing this, advertisers don’t know their ROIs enough to realize they should be shifting their dollars, or the ROI argument is wrong.]

Manne Q: even if the government agencies have made a judgment about market distinctions in the past, we should later check if they got it right.

Berin Szoka: what if Google synced with other search engines so that advertisers could have a one-stop place to manage their campaigns across all engines? Would that raise/end antitrust Qs? [There was a lot of consensus in the room that this would be a good thing.]

Lunch: Mark Paskin, Google Engineer

Search has moved far beyond 10 blue links. When the database was static, people thought search was about looking for encyclopedic information. Google’s freshness has changed this. There are 1 trillion documents on web, 1 billion searches/day, and 1 million new spam pages created every day.

In A/B tests of search relevancy, 25% of queries lead to irresolute differences about what people thought was the best ranking. This suggests there’s no “right” order.

Google’s ranking signals include how often query terms appear, where the query term appears on the page, and document quality signals like PageRank. Any one signal isn’t enough. Hand-coded knowledge can’t handle diverse queries.

Ways that Google exercises manual controls over rankings:
* security. Ex: warning that a site might harm the user's computer if they click on the link
* legal issues, such as child porn and copyright infringement
* exception lists = when algorithm fails but it’s easy to correct manually. Ex: essex.edu being blocked by SafeSearch because it contained the phrase "sex"
* spam. Google uses manual actions to deal with the whack-a-mole problem

Google decides what algorithm changes to explore by “losses,” which it defines as the opportunity to improve results. One solution: reinterpret searches to substitute synonyms, but those reinterpretations depends on context. Ex: GM cereal vs. GM motors vs. GM university vs. GM tomatoes.

Google’s process for making algorithmic changes:

Hypothesize an idea of how to change the algorithm => implement the idea in sandbox => generate a sample of before/after differences => send the differences to carefully trained external raters (who act as “proxies for users”) and look for statistically significant differences in ratings as well as the best and worst results from the changes => divert a tiny slice of live traffic to the sandbox and see where they click => forward data to data quality analyst, who prepares an independent report => forward the report to the launch committee, who approves the change or denies it. Launch considerations: (1) benefit to users, (2) how simple is the implementation, (3) is it an efficient use of resources. Factors that aren't considerations: how the change will affect ads or other monetization, how partners/clients rank, external metrics. There is a wall between search and ads: people in search don’t talk to people in ads about work. Divisions are in different buildings.

Last year: 13,311 algorithmic change ideas led to 8,157 side-by-side A/B experiments, which led to 2800 click evaluations, which produced 516 algorithm changes.

Dealing with misspellings: some users missed Google’s “did you mean” suggestion and clicked on low quality results. Even for situations where Google was really sure the consumer meant something different than they wrote, 5% of users missed Google's prompt. In response, Google changed the presentation to show results for the correction. It told the user and showed the substitute results page and gave user a prompt to go back to original results. Some users get frustrated by that. For a while, they tried a compromise: show the top 2 results at the suggested query, but below that, show results for the original query. Their way of thinking about it: which it comes to misinterpreting misspellings, a loss is worse for searchers than a win is good. Google’s standard for misspelling changes: it should get 50 searcher wins for every searcher loss. Now: when Google is very sure for the correction, it shows the replacement results plus the option to get the original results; otherwise, it gives the original results with a “did you mean?” prompt.

Baye Q: does Google show location-specific results? A: location is a big part of user’s context

Q: duration of retaining user queries. A: if you have 2x users in a month, it’s the same as retaining data from 2 months (but he noted the challenge of seasonal queries). He thinks personalization isn’t essential because web information is so rich.

Berin Q: can Microsoft replicate what Google does? A: in theory, but Google’s algorithm is really good, and that’s a key differentiator. Also, Google has a good system for improving efficiently.

Berin Q: does it matter that Microsoft has a smaller sample size for experiments? A: there are diminishing returns from bigger datasets.

Pasquale Q: does Google’s algorithm preference its own pages? A: no, and he didn’t agree with the Q framing. Ex: if Google prioritizes image search results, those pictures are still 3rd party info.

Q: how do you find testers? A: Google uses third party contractors to find testers. They muist have a minimum educational level. Q: does Google screen out testers who have a pro-Google bias?

Panel 3: Competition and Search Markets

Ben Edelman did his usual shtick.

Randy Picker: His talk generally related to how platforms try to extend their boundaries and what happens when two platform providers collide. His talk slides.

EU’s remedy of ordering Microsoft to distribute OS without media player completely failed. Almost no one took the version without the media player. But this was irrelevant to the development of the media player space—Apple rolled up the space and left Microsoft behind.

Then, EU deal with Microsoft re IE: order to let users choose between different browsers (5 shown first, but 12 available totally). Confusing for users.

Google Buzz was attempt to leverage its platform to strengthen its identity. Google is now in FTC Hell for 20 years.

ITA acquisition was conditioned on neutral treatment and spillover of information.

Paul Liu (Google Economist): How to define a market when the core product is free?

Search queries can be:

* navigational (30% of queries). Alternative options for searchers: typing into URL bar, selecting bookmark, clicking on link. 68% of users did both direct navigation and navigational queries in a week. Google did an unintended A/B test when Google accidentally flagged all sites as malware. At the peak of the incident, this led to a 9% increase in direct navigation (or 80% of navigational queries shifted to direct navigation).

* informational (50% of queries). Alternative options for searchers: other search engines, other websites (especially brand-name trusted sites), mobile apps. Many well-known branded sites get a small fraction of their traffic from search engines.

* transactional (products/services) (about 20% of queries, maybe half product and half service). Alternative options for product searches: other search engines, marketplaces, retailers, shopping comparison sites, review sites, social networks, official stores/malls, mobile apps. Many alternatives don’t depend on search engines for their traffic. Mix of online and offline activity: 51% of consumers research online and buy in-store. 32% research online, visit offline store, then buy online.

Service queries (i.e., trip planning, local services). Alternative options for service queries: other search engines, review/vertical sites, offline (yellow pages, word-of-mouth, radio, TV, magazines, local advertising), mobile apps (many sites have their own apps). In response to these searches, searchers clicks on local organic results: 28%; clicks to other organic results: 67%; 5% to Google Places. Some sites in this group get a lot of traffic from search: CitySearch gets nearly ½).

Most of Google’s search revenue comes from transactional queries. If Google degrades search result quality, users will switch to transactional alternatives—buy from Amazon, research travel on TripAdvisor, book restaurants on OpenTable, buy services at Groupon. If Google loses even a small percent of its transactional queries, that would have a disproportionate decrease in Google’s revenues.

Q&A
Liu in Q&A: switching between travel CRSs was much harder than switching with search engines. Google always focuses on user experience, so the changes are what consumers want.

There was some discussion about how some of Google’s competitors do the same thing as Google. If the competitors do the same thing as Google, does this indicate that those practices aren't the result of market power but instead benefit consumers?

Then, as expected, the Q&A devolved into heavy questioning of Ben’s assertions and lighter but still active questioning for Paul.

Panel 4: Potential Costs and Benefits of Search Regulation

Frank Pasquale: He's interested in transparency. His troubles with Google: the algorithm is a black box. Opacity + market concentration = concern. Frank’s core message for Google: if you’re ashamed about what you’re doing such that you don’t want it disclosed, then don’t do it.

Google’s duality: Is Google a platform for innovation, or an innovator? Is it a conduit or a content provider? We should be skeptical of blanket antitrust exception and blanket First Amendment protection.

Regarding technological innovation. Google’s unassailable competitive advantage: ability to self-promote itself + ability to impose blackbox penalties on others. Like a pharaoh, Google may be strangling its competitors in the crib. Inconsistent to say that competition is one click away while aggregating big search data.

Regarding the First Amendment. Google says it’s protected by the First Amendment. But this is discordant with being a conduit enough to take advantage of 47 USC 230 and 17 USC 512. [I didn’t understand this point--neither of those statutes depend on "conduit" status.] When Google’s owns its properties and they show up in organic searches, he thinks this is like an undisclosed ad.

Examples of Google’s transparency efforts:
* Webmaster Forum
* They show up at SEO conferences
* Discovery in litigation
* StopBadware participation

Still, it's not easy to see what they are doing. This is a general problem with companies driven by trade secret protection rather than patents.

Google’s definition of duplicate content: Google’s search engine looks like its own duplicate content.

His solutions:
* more technical expertise among government regulators so they can do better auditing
* more due process for penalized sites
* publicly funded alternatives

Eric Goldman. I blogged the notes from my talk yesterday.

David Balto: Where’s the beef?

Search engines democratize information and make markets more efficient.

There isn't enough emphasis on the remedies for problems with search engines.

Consumer sovereignty: choice, transparency, lack of conflicts of interest. Google’s conduct aligns with all three elements of consumer sovereignty. [I thought this was an odd argument because Google’s opponents are contesting them on all three.]

Search providers’ conduct aligns with consumers’ interest: accuracy, relevancy, disclosure, self-regulation. [Again, I think this is exactly what people are contesting]

Google’s algorithm is a fair umpire—it calls balls and strikes the right way. Google is agnostic as to the source of content. Google’s focus is matching consumer demand.

Evaluating cures:
* relevancy is inherently subjective
* transparent adjudication system would be ineffective
* increased disclosure is unnecessary
* consumers do not want regulation of search

Q&A
Frank’s Q: maybe the Google/CIA co-venture is an alternative model to a fully government-owned search engine. [I thought this was a disconcerting example!]

Randy Picker Q: we may see a government-operated search engine from the detritus of the Google Book Search settlement. The parties may develop a public digital library, and it may not be indexable by commercial search engines.

Berin Q: Frank is talking about Fannie Mae/Freddie Mac meets NPR meets search.

Josh Wright Q: why not just apply the standard antitrust model looking for consumer harm? [I didn’t answer this Q at the event, but I think it’s a useful framework. If no one can show consumer harm, then there’s no problem that antitrust law needs to fix. However, this only addresses antitrust issues; there may be other problems where a different standard of harm is useful.]

Damien Q to Balto: is your argument that we should just trust Google? David’s A: he sees industries where consumer interests aren’t prioritized, and Google acts as if the consumer could walk away.

Damien Q to Frank: nationalizing a search engine doesn’t seem like a good idea. In antitrust, the first remedy is to ask the company to stop the offending practice.

Liebowitz Q to Balto: advertisers are the consumers, so Google tries to maximize revenue from them. This is where the problem would be located, not on the searcher side. Eric’s A: I wonder if the auction model for pricing for advertisers partially ameliorates those concerns.

Mark Paskin Q for Frank: how would transparency affect gaming/spam? Frank: not arguing for complete transparency, just oversight of the algorithm. This is a general concern about the competitive restrictions when a company relies on trade secret protection.

Q: EU remedy on Microsoft Explorer was ridiculous. Assume any intervention in search would also be ridiculous. How could we deal with the situation that only one competitor in market is regulated while others aren’t? Frank: we do long-term regulatory oversight of marketplace actors. Ex: ASCAP. [once again, I wasn't sure this was a good exemplar]

Posted by Eric at 02:26 PM | Search Engines | TrackBack

June 23, 2011

What Would a Government-Operated Search Engine Look Like in the US?

By Eric Goldman

[Today's WSJ announcement that the FTC plans to subpoena Google reminds us that search engine bias issues are heating up rather than winding down. I recently posted my article recapping the last 5 years of developments on the topic.

Last week, I attended a conference at George Mason Law School on the topic, and I will post a comprehensive recap of the event shortly. I was scheduled for the last panel of the day, and it was clear that anything I said from my recent article or my 2006 article was likely to be preempted by discussion throughout the day. Therefore, I came up with a topic that was unpreemptable, but I could do this only by setting up a strawman from fantasyland. My talk notes:]

Publicly-funded search engines are sometimes floated as a way to address search engine bias. Indeed, Europe attempted to develop its own publicly-funded search engine, Quaero, although that effort has apparently collapsed.

This led me to a thought exercise: what if US government tried to build its own search engine? (We could call this hypothetical engine “The Googlement”). My talk explores a pure case of a government-operated engine. Other models, such as subsidies to a private company, might avoid some of the pitfalls but also might produce fewer of the benefits.

The Case for a Government-Operated Search Engine

Some arguments in favor of a government-operated search engine:

1) it could advance national objectives, such as prioritizing nation-specific content. This particular rationale seems hollow given the US-centric bias of existing search engines.

2) more competition is good. The marketplace relies on the invisible hand. Another well-funded competitor in the market could help discipline other market players.

3) search engines create positive externalities. We might decide this infrastructural component is too important to be left to market forces. Otherwise, due to the positive externalities, the marketplace may undersupply it.

4) the search engine will be subject to public oversight, which can ensure transparency, due process and accountability to the people.

The Case Against a Government-Operated Search Engine

On the other hand:

1) in response to the positive externality point, we don't have good evidence of any market failure, or at least any undersupply.

2) operating a competitive search engine is expensive. Indeed, Yahoo offloaded a couple hundred million dollars of costs to Microsoft as part of their alliance. Also consider some of the second-order impacts of undertaking a major public infrastructure project like a search engine:

a) like most government works projects, the search engine would be under constant pressure to reduce costs or find new revenue sources. For example, PACER charges us to access public documents. And if the government defrayed costs through advertising, would it encounter the same church-state problems we fear with private actors?

b) the government could have difficulty recruiting best engineering talent. PACER's 1980s state-of-the-art technology is a good example.

c) providing due process for complaints (discussed below) would be expensive. For example, Saferproducts.gov has developed complex vetting mechanisms before publishing consumer complaints.

3) consumers may fear giving their personal information to Big Brother more than they fear Little Brother. For example, in Gonzales v. Google, Google fought back against ridiculous government request for data. If the government operated the search engine itself, it could have just arrogated the data for its own purposes without even Google's (thin) buffer.

4) who would make the editorial decisions about relevancy? I couldn't even parameterize this problem. Would it be done by committee? Following guidelines, or just using their own judgment? Frankly, I couldn't think of many examples of government-operated editorial publications where similar editorial judgments are made. A related question: who would decide the definition of spam?

5) decisions to downgrade, de-index or never index sites may be subject to First Amendment scrutiny.

For example, Christ’s Bride Ministries, Inc. v. Southeastern Pennsylvania Transportation Authority, 148 F.3d 242 (3d Cir. 1998) held that government bus ads are a limited public forum. In White Buffalo v. UT Austin (5th Cir. 2005), the court held that UT Austin's anti-spam filter were OK under First Amendment because they regulated high-volume commercial email. If the judgments were about other types of communications, would the same result apply?

Numerous plaintiffs against search engines have unsuccessfully tried First Amendment complaints—as sword, not shield—against private actors. Ex: Langdon, KinderStart, Murawski v. Pataki. The many terminated user account cases, such as Estavillo v. Sony and Young v. Facebook are also analogous. These would become tenable lawsuits against a government-operated search engine.

6) We get the purported benefits only if consumers actually use the government-operated search engine. However, if the search engine fails on relevancy or its anti-spam efforts, consumers simply won’t use it. Given the significant challenges, it would be tough for the search engine to win consumers from market-driven alternatives.

Conclusion

Even though it's a trip to fantasy-land, the thought exercise reinforces the merits of market-driven search engines:

* market forces will drive their quest for relevancy
* the marketplace will bear the costs rather than the public fisc
* the government doesn’t have direct access to consumer data
* for marketplace actors, the First Amendment acts as a shield for relevancy/anti-spam determinations, rather than a sword against the government

Posted by Eric at 05:44 PM | Search Engines | TrackBack

June 14, 2011

Advertiser Fails in Suit Against Trademark Owner over Google Trademark Complaint--Pandora Jewelers v. Pandora Jewelry

By Eric Goldman

Pandora Jewelers 1995, Inc. v. Pandora Jewelry LLC, 2011 WL 2174012 (S.D. Fla. June 2, 2011)

The plaintiff is a long-time single-storefront jewelry retailer in Florida (in a strip mall, naturally) with an e-commerce website. Pandora Jewelry, one of the main defendants, is an international jewelry manufacturer and retailer. To make things more complicated, the Florida Pandora retailer was an authorized distributor of the Pandora manufacturer's goods for several years in the last decade. The parties terminated that relationship, the international Pandora moved more aggressively into opening retail outlets in Florida, and the Florida Pandora sued.

The lawsuit has lots of interesting angles, but I'm interested in Google's role in the battle. The international Pandora submitted a trademark complaint to Google for "Pandora," which affected about 67 advertisers, including the Florida Pandora. This meant that Florida Pandora couldn't advertise on "Pandora Jewelry," "Pandora bracelets," "Pandora charms," and "Pandora beads." The opinion is ambiguous about the nature of international Pandora's complaint, but given that it was placed by a Danish subsidiary, it appears that it was in Europe under Google's old rules and thus prevented the Florida Pandora's ads altogether on the blocked phrases. In the US, at most, the international Pandora should have only been able to block the Florida Pandora's reference to "Pandora" in the ad copy.

Florida Pandora claimed the trademark block was a tortious interference. That claim fails because Florida Pandora couldn't show the requisite malice in making the complaint. I believe the court is trying to say that because international Pandora was just attempting to enforce its trademark rights, the takedown lacked malice. The court also rejected several related claims by Florida Pandora.

Compare this discussion with yesterday's post on the Twilight-themed song, where the court said that the takedown might constitute a violation of 17 USC 512(f), a tortious interference and a defamation. Today's ruling is more comforting for rightsowners, but they shouldn't get too comfortable. There are increasing signs that an overzealous takedown campaign entails significant legal risk.

Posted by Eric at 07:43 AM | Marketing , Search Engines , Trademark | TrackBack

June 10, 2011

"Revisiting Search Engine Bias" Article Now Online

By Eric Goldman

In 2006, I published an article entitled Search Engine Bias and the Demise of Search Engine Utopianism in the Yale Journal of Law & Technology. The paper was based on my presentation at a December 2005 conference entitled "Regulating Search?" at Yale Law School.

At that time, I expected angst about search engine bias would die down over time as people became more familiar and comfortable with search engines generally. To my surprise, discussions about search engine bias/search "neutrality" are still going strong--perhaps stronger than ever. Next week, I'm speaking on the topic twice in Washington DC. First, on Tuesday, I'm speaking at a TechFreedom event, "Search Engine Regulation: A Solution in Search of a Problem?" Second, on Thursday, I'm speaking at George Mason Law School at a conference, "The Law and Economics of Search Engines and Online Advertising." If you're in the DC area, I hope to see you at one or both events.

In light of all this continued interest, I have posted to SSRN a new essay, "Revisiting Search Engine Bias." This essay supplements my 2006 article by talking about how the industry and technology has changed in the past 5 years and how those changes affect the discussion in my 2006 article. The abstract is below. As always, I welcome your feedback.

One of the arguments in my 2006 article was that search engines (and other information resources) compete on relevancy, and consumers who don't get relevant results will quickly lose confidence that the search engine is solving their informational needs. This argument doesn't completely address concerns that consumers don't know what results they are not seeing, but it does respond directly to critics who believe that search engines may self-promote other services at the expense of their competition. If a search engine self-promotes but the promoted services aren't what consumers want, they'll view those self-promotional efforts critically.

On this topic, Gord Hotchkiss published an interesting article at Search Engine Land called "Why Results Quality is So Important to Search Engines." Gord explains:

We’re none-too-patient in our hunt for usefulness....In our many studies over the years, we’ve found the typical session time, from first scan to first click, to be in the 10 to 12 second range. And in that time, we scan approximately 4 to 7 listings. This provides a clue as to why 3 ads at the top of the page seems to be the upper limit that users will tolerate.

This means search engines have a brief opportunity to make a good impression on consumers. If they don't get the top results right for consumers, and quickly, consumers will grade the experience as a fail.

Gord's research also reinforces the importance of ad relevancy. He describes an A/B test where they replaced the top ad with both a relevant and less relevant ad and kept everything else the same. The site with the less relevant ad fared poorly on several key consumer satisfaction metrics--including this conspicuous statistic:

For the first question – would you use the engine for a similar search, only 5% of the group shown the less relevant ad said yes. 75% of the group shown the relevant ad said they would use the engine again.

This seems to be an excellent cautionary tale for search engines trying to self-promote their own services. If those self-promotions aren't what consumers want, then the risk is high that it will drive away consumers.

While Google's "competition is one click away" argument depends on there, in fact, being a competitor that is only one click away, Gord's research supports the underlying assumption that consumers are finicky and not sticky--and thus Google is in a battle to win its consumers each and every time they visit.

_____

The abstract for my Revisiting Search Engine Bias article:

This essay takes stock of the search engine industry circa 2011. It recaps four important changes over the past half-decade:

1) Google now dominates the search engine industry, but it faces emerging competition from entities that are not traditional search engines.
2) Google has changed its search results pages substantially.
3) Google has expanded its proprietary service offerings, which it promotes on its search results page.
4) The emergence of Net Neutrality as a policy issue has spurred consideration of a “Search Neutrality” analogue.

The essay concludes with some observations about how these changes affect the discussion about search engine bias.

Posted by Eric at 10:30 AM | Search Engines | TrackBack

June 09, 2011

Buying Personal Names for Keyword Ads Isn't a Publicity Rights Violation--Habush v. Cannon

By Eric Goldman

Habush v. Cannon, 09-CV-18149 (Wis. Cir. Ct. June 8, 2011). The June 2010 denial of the motion to dismiss. A good overview article from when the complaint was filed.

Introduction

A Wisconsin court has said that a keyword advertiser didn't violate publicity rights by buying a person’s name for keyword advertising. Although the propriety of keyword advertising on a third party trademark has been hotly contested since at least 2004, I believe this is the first ruling addressing the publicity rights issue.

The legal novelty of the ruling makes it an important early precedent, but the opinion is not especially persuasive. To me, the judge seemed overwhelmed by both the challenging legal doctrines and technology at issue in this case. In response, the judge issued one of the most citation-free opinions of its length that I have ever seen. This is not a scholarly opinion, and that makes less likely to influence other courts. It also means that an appellate court will likely give this opinion relatively low deference.

The fact that the court dismissed the lawsuit is, on its face, good news for both search engines and advertisers. However, I thought the judge's arguments were questionable and, at least at one crucial juncture, internally inconsistent. The ruling turned on a specific word in the Wisconsin publicity rights statute, and courts applying other statutes can easily distinguish this opinion if they want to rule for the plaintiffs. Therefore, this ruling could morph from a defense win into a plaintiff's friend depending on how future courts rely on and interpret it.

Facts

The case involves two of the highest profile and most successful personal injury law firms in Wisconsin. The defendants bought two of their competitors' last names ("Habush" and "Rottier") for keyword ads at Google, Bing and Yahoo, in some cases bidding enough to ensure the first ad position. The ad copy didn't display those last names.

The plaintiffs sought an injunction. However, in that sense, the plaintiffs may have gotten a de facto extrajudicial win. It appears the defendants have stopped the ad campaign. Neither the court nor I could replicate the ads any more.

The Prima Facie Case

The court holds that the keyword ad buys satisfied the prima facie elements of a publicity rights claim but one. Among other arguments, the defendants argued it didn’t "use" the name "for advertising purposes or purposes of trade." This argument recalls the old and loquacious trademark battles over what constitutes a "use in commerce." The non-"use" defense doesn't get any more traction here than it did in the trademark cases. The court thinks it’s irrelevant that the "use" is invisible to consumers: "the simple, plain English meaning of the word ‘use’ certainly includes the purchase of a name to trigger results from a computer algorithm." Thus, the court concludes:

the defendants used plaintiffs‘ names for advertising and trade purposes without the plaintiffs‘ consent. Thus, plaintiffs have established that, under Wis. Stat. § 995.50, defendants invaded their privacy.

"Unreasonably"

It looks like the plaintiffs are home free. But then, the court says that the plaintiffs must also show that the defendant's use was "unreasonable." This appears to have been a contentious battle over the prima facie requirements; see lengthy FN9 and this transcript from March 2010.

The court then explains why a "privacy invasion" by buying keywords ads was reasonable in this case, including:

* positioning keyword ads by organic results is analogous to competitive adjacencies, such as competitors locating their stores next to each other and advertisers bidding against each other for prime positions in Yellow Pages. In the trademark context, I thoroughly examined these arguments in my uncited Brand Spillovers article. The judge sees the defendant lawyers' ad buys as "energetic business competition." Kudos to the judge for recognizing that keyword ads are usurping lawyers' Yellow Pages ads.

* the specific names here (Habush and Rottier) are part of their law firm's name, and the court says their publicity rights effectively merge with the firm's trademark. In other words, a person searching for "Habush" might be looking for the firm, not the lawyer, and it's impossible to separate those searcher motivations.

* users aren't confused by keyword ads (nor did the plaintiffs show any confused consumers), consumers scan the results page to find what they are looking for, and any confusion they experience will be brief (no acknowledgement of the abominable initial interest confusion doctrine). Further, "Internet users, and consumers in general, have learned to be skeptical about the first impression they may receive from a web page or commercial advertisement." If only that were unequivocally true!

* search engines are evolving, and the court can't figure out what an injunction would look like given how search engine user interfaces might change.

* no attorney ethics rules have banned these keyword advertising practice.

All of these are interesting and meritorious public policy considerations. None of them got any meaningful empirical or legal precedent support for the judge's arguments. An appeals court will feel free to substitute their own considerations for the judge’s proffered rationales.

Also, notice the problem with this court's solution. Other publicity rights statutes may not have the word "unreasonable" in their statutory language, and common law publicity rights doctrines may not require "unreasonableness" either. As a result, where the publicity rights doctrine doesn’t require defendants to engage in “unreasonable” usage, this ruling says pretty clearly that competitively buying a person's name is a publicity rights violation—in other words, what could be a clean win for the plaintiffs. I don't think this judge intends that result, but it’s the implications of the judge’s doctrinal solution.

Defenses

The court rejected the unclean hands defense. It appears that the plaintiffs' firm had bought category ads in some Yellow Pages sites, which caused their ads to show up on the defendants' firm listings in those categories. The court logically distinguishes category ads from keyword ads, though the 9th Circuit's Playboy v. Netscape panel treated them as equivalent.

The court also rejected a First Amendment defense because buying keyword ads is conduct, not speech: "This lawsuit involves the hidden process which causes the link to appear at all. That process is content neutral. It is not information; nor is it a message of any sort. It is not speech, commercial or otherwise."

What??? First, the court ahistorically ignores the 1990s-era rulings about encryption software and the First Amendment. Second, I believe this is internally inconsistent with the court's conclusion that the publicity rights statute applies to invisible activity (i.e., a use of a person’s name that a consumer never sees). The court seems to be saying that conduct without speech can constitute a publicity rights violation, and I don't see how that's possible. My position is that publicity rights violations necessarily require the defendant to engage in speech; so conduct without speech can never satisfy the statutory requirements.

Implications

This opinion got to the right result, but its reasoning is shaky and the opinion was poorly constructed and inadequately cited. The plaintiffs have already vowed to appeal—a fact the judge anticipated as you can see in the March 10, 2010 transcript. (After all, litigators litigate—and good litigators savor the challenge). Given the opinion’s weakness, I would be surprised if the appellate court relied very heavily on this opinion's analysis. However, I hope the appellate court recognizes that the judge's policy concerns were spot-on and finds a way to respect those concerns.

I can't take the lead on an amicus brief in the appeal, but I would be interested in actively supporting the effort. Contact me if you would be interested in working together on one.

Irrespective of what happens on appeal, I can't imagine this opinion will be the last word on publicity rights and keyword advertising. If you are looking for a paper topic, I think that issue offers a few promising angles to explore.

Finally, this opinion complements the uncited Stayart v. Google, which also involved alleged violations of Wisconsin's publicity rights statute and ended in favor of the defense. The Stayart v. Yahoo 7th Circuit opinion turned on the Lanham Act, but it too is relevant. I don’t have a good explanation why Wisconsans are trail-blazing litigation over search engine use of their names.

Posted by Eric at 07:04 AM | Marketing , Publicity/Privacy Rights , Search Engines | TrackBack

June 06, 2011

April-May 2011 Quick Links, Part 3

By Eric Goldman

Search Engines

* Google is working on a deal with the DOJ over illegal pharmaceutical ads and has set aside $500M for fines. Some background on the problem. Google isn’t the only search engine with problematic pharmaceutical ads. Will the other companies be getting the DOJ’s call too?

* Kevin Kelly: "This is the great gift of the free web. It has made some goods so cheap to acquire -- like answers, encyclopedia facts, directions, weather reports, recommendations -- that we generate entirely new realms of activity by doing far more of them. More is different. We ask so many more questions than before that this ask-and-answer is something new. Have you ever wondered where all our questions were before search engines? We didn't even bother to ask them."

* Vitaly Borker, who tried to game Google’s algorithm by seeking out bad consumer reviews, will be going to prison.

* Google won ALM's Best Legal Department in 2011. This article has a great inside look at Google’s legal department and how it makes decisions.

* More winners and losers from Google's algorithmic update.

* Latest antitrust enforcement challenge for Google: South Korea.

* More search censorship in Argentina. The ruling in Spanish.

* Yahoo changed its search log retention period from 3 months to 18.

* Market America is appealing its court loss to Google to the Third Circuit. Most recent blog post.

* Apple jiggers with the ranking algorithm for apps in its app store.

* CNET: “Bing head says 'traditional search' is dying.”

* Realcomp II, Ltd v. FTC, 11a0084p.06 (6th Cir. April 6, 2011). A monopolistic real estate electronic network violated antitrust laws when it provided only limited syndication of real estate listings subject to non-standard brokerage fee arrangements. Implications for Google?

* JC Penney’s 90 day timeout from Google for black hat SEO appears to be over.

* Gord Hotchkiss: “Why Results Quality Is So Important to Search Engines”

Privacy and Security

* Facebook tried to conduct a whisper campaign to bash Google on privacy. That backfired. Steven Levy: “Facebook’s Stealth Attack on Google Exposes Its Own Privacy Problem.” Danny Sullivan: “How Facebook Enables The Google Social “Scraping” It’s Upset About.”

* Not everyone loves the WSJ “What They Know” series.

* Kate Kaye of ClickZ on which of the half-dozen Congressional privacy bills the ad industry should favor.

* WSJ: Schmidt: Google Trying to Simplify Privacy Policies, but Lawyers Get In the Way.

* Less than 1% of Firefox users are using Do Not Track TPLs.

* Third party misuse of an open wifi leads to an unhappy wake-up call for the wifi owner.

* FTC gets $3M settlement from Playdom for COPPA violations. Among other purported defects, Playdom asked kids their ages and purported to bounce underage kids, but gave those kids the option to proceed just by checking a box rather than obtaining verifiable parental consent.

* An IP address can now pin down your location to within a half mile.

* The Sony Playstation hack of 70M member records will probably make my year-end list of top 10 Internet law developments. This event will be horking the law for the better part of a decade.

* EFF on how the Kerry-McCain privacy bill would preempt state law.

* Apple tried to squash the Mac Defender malware in its latest operating system release, but didn't get very far. Microsoft has made such benevolent dictatorship decisions before as well.

Publicity Rights and Trade Secrets

* Reality TV show participants were sued for prematurely revealing the show's outcome (in a lawsuit over the show's alleged failure to pay). See my first year Contract Law problem on maintaining secrecy in reality TV shows.

* Stars on the red carpet grant an implied license to their publicity rights in photos taken there.

* Basketball player Chris Bosh sues the mother of his child to prevent her from appearing in a reality TV show “Basketball Wives.”

* Larry Montz v. Pilgrim Film and Television, 08-56954 (9th Cir. May 4, 2011). In an idea submission case, “We again hold that copyright law does not preempt a contract claim where plaintiff alleges a bilateral expectation that he would be compensated for use of the idea, the essential element of a Desny claim that separates it from preempted claims for the use of copyrighted material.” The panel also reversed the district court conclusion that a “breach of confidence” claim was preempted.

* Many publicity rights complaints over Facebook's "Sponsored Stories": Fraley v. Facebook; JN v Facebook; and EKD v. Facebook. Filings in the Cohen v. Facebook case: motion to dismiss and supplemental brief on 47 USC 230.

* Litigation over Donald Trump’s licensing of his name to home developers. Interesting issues about a trademark licensor’s liability for a licensee’s activity and liability by endorsers for bum offerings.

* MGA spent $130M in its legal battle with Mattel.

Posted by Eric at 07:19 AM | Privacy/Security , Publicity/Privacy Rights , Search Engines , Trade Secrets | TrackBack

May 24, 2011

Keyword Advertising and Domain Name Law Slides

By Eric Goldman

Today, I spoke to an audience of Chinese IP judges about keyword advertising and domain names in the United States. I put together some slides and written materials. These materials aren't especially profound, especially for regular readers, but you might find them a useful recap nonetheless. I learned a number of things from the talk:

1) It's very hard and unnatural for me to slow down my presentation enough for translators to keep up!

2) One judge believed that all of Baidu's search results are pay-for-play, i.e., rank-ordered based on the amounts that advertisers pay Baidu. Is this true? (It feels like something I should know, but the information I'm finding online is surprisingly scrappy). If Baidu is pure pay-for-play, this would reinforce why it was so detrimental for Google to pull out of China. I made the point last year that Google's departure could be a long-term drag on the Chinese economy because the Chinese economy will have less effective search engines than other economies.

3) Although there was a significant language barrier that might have obscured their intent, it seemed like the Chinese judges were having a hard time wrapping their heads around the idea that Google's trademark liability for selling keyword advertising wasn't notice-and-takedown. In fact, we don't know that notice-and-takedown for Google's keyword sales won't ultimately prevail in the United States; but it hasn't yet.

Posted by Eric at 05:54 PM | Domain Names , Search Engines , Trademark | TrackBack

May 15, 2011

Quityerbitchin: Relative Search Results Placement Doesn't Support Trademark Injunction--Bitchen Kitchen v. Bitchin' Kitchen

By Eric Goldman

Martha Elizabeth, Inc. v. Scripps Networks Interactive, LLC, 2011 WL 1750711 (W.D. Mich. May 9, 2011)

It seems inconceivable to me that people would litigate over the term "Bitchin" almost 30 years after the Valley Girl song popularized the term. Didn't the term become passe DECADES ago? For a similar observation, see my post on the trademark battles over the term "Rad." (Partially related: saying "awesome" was worth $1.2M).

This is a sophisticated and interesting dispute over the trademark "Bitchen Kitchen"/"Bitchin Kitchen" as used by a kitchen supply retailer (the alleged senior user), a Canadian food podcaster who morphed into the eponymous star of a food-oriented cable TV show, and show producers (the alleged junior users). Rebecca runs down the complete details. This post focuses on just one small piece about the intersection between search engine placement and the trademark analysis.

The retailer argues that the emergence of the TV show pushed it down in the search engine rankings. The TV show contests that assessment and submits more recent search results from Google, Bing, Yahoo and Ask.com. The defendants also note that the retailer didn't show its search engine placement before the TV show's emergence, so without a baseline, we don't know for sure that the retailer has actually gone down. Either way, the court rightly says this inquiry isn't that useful:

In any event, whether or not the mark “The Bitchen Kitchen” has become less prominent on search-engine results because of Bitchin' Kitchen, and whether or not MEI/Rapp's underlying business has correspondingly suffered vis-a-vis what it would have been without the existence of Bitchin' Kitchen, the record does not support the plaintiffs' rather extreme allegations that The Bitchen Kitchen has “all but disappeared” from search-engine results on the Internet. The court therefore accords little weight to the plaintiffs' evidence and assertions regarding search-engine rankings.

This argument reminded me of Chad Doellinger's uncited article from a decade ago (Chad J. Doellinger, Trademarks, Metatags and Initial Interest Confusion: A Look into the Past to Reconceptualize the Future, 41 IDEA 173) where he argued that trademark infringement should be based on relative search engine placement--i.e., if a junior user got better placement than the senior user, that should support a trademark infringement claim.

It was a wacky argument at the time, and history has not been kind to it. First, search engines don't agree with each other--so what happens if one search engine ranks plaintiff first and another ranks defendant first? Second, search engines don't agree with themselves over time. In fact, a search engine's result placements can change from moment-to-moment for reasons completely outside of any individual website's control. As a result, basing legal analysis on relative placement could easily mean that the legal outcome could vacillate from day to day. Finally, search engines deliver different results to the same keyword searches at the same time based on who is asking. Search engines personalize results and deliver geographic-specific results. So often person A's search results aren't replicable by person B. Given that there is a potential infinite variety of search results ordering for the same keywords at the same search engine conducted at the same time, how do we decide which ordering dictates the legal conclusion?

For more on these arguments, see my 2005 Deregulating Relevancy article and James Grimmelmann's more recent search neutrality article. Rebecca gets at some of the same issues in her comment on this case:

The search results are complicated by various forms of personalization/geolocation, and it seems to me a reliable foundation would have to be provided to show that any of these are the types of results a reasonable consumer is likely to get. For example, my own search for bitchen kitchen (I did not use quote marks) produced a first page with links only to defendants’ sites, which may be because Google autocorrected to bitchin kitchen (no apostrophe), and then offered me the opportunity to search instead for bitchen kitchen, which search did indeed provide top results for plaintiffs' site. Also, it seems like it’s about time to start including Facebook in these evaluations, especially here since (a) some of the confusion evidence here is about Facebook and (b) both parties encourage potential customers/viewers to use Facebook.

Back to the Bitchen Kitchen case. The court says it is more "significant and helpful" to the plaintiff that the TV show apparently bought its trademark as a keyword and used the misspelled phrase "bitchen" in the ad copy. Later, the court says that this misspelling could support a bad faith inference.

Nevertheless, the court declined to issue a preliminary injunction against the TV show based on First Amendment considerations. The way I read the opinion, the court did not enjoin even the TV show's misspelled keyword ad copy. However, the court did enjoin the podcaster's individual behavior.

Posted by Eric at 10:27 AM | Search Engines , Trademark | TrackBack

April 08, 2011

March 2011 Quick Links, Part 3

By Eric Goldman

Search Engines

* Lots of Google antitrust activity:
- Apparently, an EU antitrust investigation IS something that Microsoft would wish on its worst enemy.
- Every legal regulator in the world is considering antitrust investigations into Google, including Ohio and Wisconsin (see my prior blog post about Texas’ investigation) and the FTC.
- The DOJ approved the Google-ITA merger—with conditions. This is superficially a win for Google, but I expect the anti-merger coalition won’t go away quietly.
- I interviewed with the SF Chronicle about Google and search engine bias (with photos!).

* New Google design features:
- Google lets each person individually block websites from their search results.
- Will Google’s +1 become the gold standard for personalized search, or will it be another failed attempt by Google to get social?
- A rundown of Google Autocomplete and its quirky blocking approaches.

* Blekko blocks 1.1M websites from its search index. Does this create 1.1M new plaintiffs who will sue for their "right" to be in Blekko's index?

* More eye-tracking studies showing that searchers mostly ignore the ads on the right side of the page.

* Rebecca notes that the litigation between eBay and Craigslist has a keyword advertising component.

* Expedia and American Airlines have kissed and made up. My prior blog post.

Social Networking Sites

* Facebook is doing real-time ad targeting. Does this mean we'll get Facebook's notoriously poorly targeted ads faster? Something to look forward to.

* U.S. v. Gamory, 2011 WL 832554 (11th Cir. March 11, 2011). YouTube video being shown in court was a harmless error.

* New York Times: "Across the nation, millions of young people are lying about their ages so they can create accounts on popular sites like Facebook and Myspace....Parents regularly go along with the age inflation, giving permission and helping children set up accounts. They often see it as a minor fib that is necessary to let their children participate in the digital world." My related blog post.

* Spooner v. Associated Press: Another lawsuit over an allegedly defamatory tweet.

* NYT on evolving norms about Twitter etiquette.

* Evan Brown on another sad case of online impersonation.

* Ceglia v. Zuckerberg, 2011 WL 1108607 (W.D.N.Y. March 28, 2011). Mark Zuckerberg is domiciled in CA for purposes of jurisdiction.

* I participated in an ABA Journal Podcast entitled “What Are the Ethics of Lawyer Review Sites Like Avvo?”

Content Regulation

* ICANN approved .xxx. India has already announced it will block .xxx. Meanwhile, how long until the .xxx registry vendor, in a rent-seeking fiesta, goes around to various state legislators and asks them to pass laws requiring pornographers to locate only at a .xxx domain?

* French court tosses a criminal libel prosecution over an academic book review--with sanctions.

* Craigslist drops its lawsuit against former South Carolina AG McMaster.

* The oft-cited study that Craigslist contributes to human trafficking may be junk science.

* An entrepreneurial law firm sets up anti-bullying practice. Expect lawsuits galore to ensue.

* Nature reports on lawsuits over rebuttals to scientific research and how a federal anti-SLAPP law might help. My prior blog post.

Miscellaneous

* A blogger takes down a DHS sting site for underage sex tourism.

* Latest iAWFUL list of bad Internet proposed legislation.

* National Federation of the Blind complains about universities that put students on Gmail accounts, saying the accounts don't work well with speech reading software.

* Senators ask various companies to pull apps that identify drunk driving checkpoints.

* Believe it or not, some ban in-bound links. A list.

Posted by Eric at 11:16 AM | Content Regulation , Domain Names , Evidence/Discovery , Search Engines | TrackBack

April 01, 2011

Trademark Owner Gets Injunction Against Keyword Ad Campaign That Generated No Sales for the Advertiser

By Eric Goldman

InternetShopsInc.com v. Six C Consulting, Inc., 2011 WL 1113445 (N.D. Ga. March 24, 2011)

[I know the headline sounds like an April Fools joke, but no April Fools here...although, as I will show, this case definitely involved some foolishness.]

I hate sounding like a broken record, but I'll say it again. Most keyword ad lawsuits are not economically justified, so trademark owners are almost invariably making a bad business decision bringing them. Check out this beautiful case study of that principle.

The plaintiff has a trademark in "Dura Pro" for practice golf mats. Six C is a competitor who outsourced its PPC campaign to Channel Advisor. Channel Advisor placed competitive keyword ads triggered by "Dura Pro." In January 2009, the trademark owner complained to Six C, who promptly told Channel Advisor to drop the keyword. Channel Advisor didn't follow this instruction completely, meaning that some ads continued despite Six C's instructions. The plaintiff sued March 2009, and the court indicates that Channel Advisor fully dropped the term by April 2009 (although elsewhere it says the rogue ads persisted for 14 months).

For reasons not explained in this opinion, Six C admitted that its keyword ad buys constituted trademark infringement, narrowing the issues in this case to remedies for the admitted infringement.

The court rejects the plaintiff's claims for lost sales. The plaintiff submitted a spreadsheet showing a decrease in sales, but the court says the spreadsheet showed monthly fluctuations in sales, and the plaintiff only showed correlation, not causation, with the post-advertising decrease.

The plaintiff also sought the defendant's profits from the keyword advertising, and this is where the lawsuit gets farcical. It turns out that the defendant only got 1,319 impressions on its Dura Pro ads, 35 clicks from those impressions (2.6% clickthrough rate) and NO SALES from those clicks. Are you kidding me? The plaintiff sued over a keyword ad campaign that generated ZERO SALES for the defendant? It seems like the plaintiff should have been thrilled that its competitor was wasting money on an ineffective campaign. Instead, foolishly, the trademark owner spent its own money to pay its lawyers to get the defendant to stop wasting its advertising dollars. Great business decision, guys.

The court also denies attorneys' fees, citing Six C's responsiveness to the trademark owner's initial C&D (even if Channel Advisor didn't properly execute Six C's instructions). The court does award the trademark owner the court costs of the action, but these should be relatively small.

Finally, the court grants the trademark owner's request for an injunction (with the exact restrictions to be hashed out), but big whoop. Six C dropped the keyword a long time ago, and given the keyword's conversion rate, that wasn't really a sacrifice. The court says that the trademark owner was suffering irreparable injury "regardless of the fact that defendant's unauthorized use appears to have been unintentional, and that it did not result in any readily quantifiable harm to plaintiff." I think the judge could have more aggressively scrutinized the trademark owner's arguments on this point, but an injunction is a logical outcome for an admitted trademark infringement, even if it's mostly inconsequential in this case.

Notice that the defendant gets a decent outcome here in large part because it chose to quickly drop the keyword at the trademark owner's request. Not all advertisers would be so risk-adverse. Then again, I would expect most advertisers to fight the trademark infringement claim rather than admitting to it.

I'm adding this outcome to the list of irrational keyword ad lawsuits. Other precedents in that genre:

- King v. ZymoGenetics. The defendant advertiser got 84 clicks.
- Storus v. Aroa. The defendant advertiser got 1,374 clicks over 11 months.
- 800-JR Cigar v. GoTo.com. The search engine defendant generated $345 in revenue from the litigated terms.
- Sellify v. Amazon. The defendant got 1,000 impressions and 61 clicks.
- 1-800 Contacts v. Lens.com. 1-800 Contacts spent no less than $650k (and was willing to spend $1.1M) to pursue Lens.com, which made $20 of profit from competitive keyword ads. It also tried to hold Lens.com responsible for affiliate ad buys which generated about 1,800 clicks, which under the most favorable computations were worth about $40k.
- and now InternetShopsInc.com v. Six C. The defendant got 1,319 impressions, 35 clicks and zero sales.

Posted by Eric at 11:56 AM | E-Commerce , Marketing , Search Engines , Trademark | TrackBack

March 28, 2011

Groupon Hit With Two Lanham Act Lawsuits, and One Takes Google Along for the Ride

By Eric Goldman

Groupion, LLC v. Groupon, Inc., 3:11-cv-00870-EMC (N.D. Cal. complaint filed Feb. 24, 2011)

San Francisco Comprehensive Tours, LLC v. Groupon, Inc., CV-1300 (N.D. Cal. complaint filed March 17, 2011)
__________

A company doesn't reach a purported $6B valuation without generating some angst. Groupon's marketing litigators will be earning their keep.

The Groupion Suit

Groupion is CRM software vendor. It's a pretty young company itself. having registered its domain name in 2007. It's unhappy with big spotlight on its friend without the "i," including being irked when Google suggests "Groupon" for searches on "Groupion."

It seems like the world should be big enough for Groupion and Groupon to coexist given their different spellings and market niches. I'm more interested in the fact that Groupion also named Google as a defendant. Apparently Groupon is buying "Groupion" as a keyword, so Groupion sues both Groupon and Google for these ads.

Side note: why is Groupon buying the keyword Groupion? Is it because consumers often make that misspelling? I also noticed that LivingSocial showed up as a keyword advertiser when I searched "Groupion" today. Will LivingSocial be the next defendant in Groupion's quest?

The complaint itself is minimalist drafting in a bad way. The actual claims appear to be cut-and-paste from a form book; the complaint simply recites the claim elements without applying any of the legal standards to the alleged facts. So it's a little hard to tell exactly why Groupion is beefing with Google. I imagine Groupion will have to do a better job explaining what Google did wrong if it wants to survive a motion to dismiss.

Groupion's pursuit of Google in an otherwise garden-variety trademark case reminded me a little of the Parts Geek v. US Auto Parts lawsuit, where a competitor-vs.-competitor suit similarly ensnared Google as a collateral victim. Parts Geek ended up voluntarily dropping Google, which is what I imagine Groupion will do eventually. Why tangle with a $30B/year company if you don't really need to???

San Francisco Comprehensive Tours suit

The plaintiff offers San Francisco area tours. It has successfully bid on keywords such as "San Francisco Tours," "Alcatraz Tours" and "Napa Wine Tours" for years. Then, starting in September, Groupon started bidding on these terms as well--and ranking very well, driving up the plaintiff's costs. The plaintiff is unhappy that Groupon uses those phrases in its resulting ad copy, although it asserts Groupon rarely offers "tours" as such. This made me wonder if Groupon was broad-matching to the place name and then automatically filling the ad copy with the search term as a variable. The complaint never addresses this possibility.

Even if Groupon is broad-matching, the plaintiff's beef could be legitimate if Groupon's ad copy constitutes false advertising. The complaint (para. 17) gives the example where, in response to the keyword "Alcatraz Tickets," Groupon's ad copy read "Alcatraz Tickets - 1 ridiculously huge coupon a day / Do Alcatraz CA at 50-90% Off." Yet, the ad that day was for acting lessons. The complaint further gripes about the resulting landing page, which it says are essentially content-free.

In this sense, the complaint tells a pretty good story that Groupon is using an algorithmic-driven ad campaign that has gone awry, much like eBay's algorithmic AdWords campaign used to reach farcical results. Even if Groupon wins this lawsuit, I hope they take a closer look at their AdWords campaign to make sure it's not generating nonsensical ads. What's less clear to me is why Google's ad relevancy scores aren't adequately punishing Groupon if this is the case. The complaint offers some hypotheses for Groupon's high rankings, none of which seemed very convincing to me. If Google drops the boom on Groupon for AdWords spamming, Groupon could end up being very unhappy itself.

The plaintiff alleges violations of the Lanham Act, California's false advertising law (B&P 17500) and other claims. Wisely, the plaintiff doesn't try to drag Google into this lawsuit.

The Pending Google AdWords Cases

One update of note: in the FPX and John Beck Amazing Profits cases, the court held a consolidated hearing regarding class certification. The court does not appear to have issued its ruling yet.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on March 27, 2011):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google [on appeal]
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
* Pathak v. ICG
* Groupion v. Groupon

Posted by Eric at 08:55 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 27, 2011

Another Advertiser Class Action Lawsuit Filed Against Google--Woods v. Google

By Eric Goldman

Woods v. Google Inc., 5:11-cv-01263-HRL (N.D. Cal. complaint filed March 15, 2011)

Since Google settled its click fraud lawsuits in 2006 and the CLRB Hanson case in 2009, it's been a little quiet on the advertiser-vs.-Google class action lawsuit front. This lawsuit breaks that calm. It's a 300 paragraph broadside against many of Google's advertising practices that lead to alleged overcharges, which the complaint characterizes as click fraud.

A quick note about the named plaintiff: he describes himself in the complaint (para. 16) as "an Arkansas attorney advertising his legal services." (Is this him?) What is it with lawyers who sue Google as plaintiffs? I previously noted how lawyers suing for their own account were unusually common plaintiffs against Google.

Beneath the bloated and mind-numbing prose in the complaint, there could be some potentially juicy allegations here. Unfortunately, weak drafting prevents me from fully understanding the plaintiffs' beefs. It appears to have something to do with Google's AdSense terms restricting certain publisher behavior, which the complaint appears to treat as promises to advertisers that they would not be charged for such behavior. If I'm reading this correctly, the plaintiffs' complaints are predicated on the unfortunately all-too-common but nevertheless obviously flawed logic that Z's negative behavioral covenants with party X are Z's affirmative promises to party Y that such behavior won't occur. See, e.g., para. 70, which tries to convert the AdSense terms into affirmative promises to advertisers. More typically, Y tries to take advantage of X's negative behavioral covenants by claiming to be a third party beneficiary of the Z-X contract, but those arguments rarely work, and the plaintiffs don't try them here.

As a specific application of the flawed logic about advertisers as beneficiaries of the Google AdSense terms, the plaintiffs appear to be unhappy that Google cut special deals with big advertising distribution partners (such as IAC and Infospace) who were governed by different (and less advertiser-friendly) ad display rules than rank-and-file AdSense publishers. I believe this gripe is predicated an implicit assumption among advertisers that the published AdSense contract is the only rules that govern AdWords distribution. The cloak-and-dagger stuff about special partners having favorable hidden deals can be pretty interesting, but the complaint's assumption that advertisers didn't know that some AdSense publishers had customized terms seemed dubious to me.

The complaint also goes into some detail about Google's "Smart Pricing" mechanism and argues that it didn't work properly. The complaint gives some examples where the advertiser's bids allegedly were inflated because Smart Pricing wasn't turned on as it expected. I must confess that I find Google's explanation of this mechanism pretty opaque (the explanations talk about "business results," whatever that means), so I had a tough time evaluating the significance of the complaint's gripes.

Based solely on the complaint, it's virtually impossible to gauge the likelihood of the plaintiffs getting a payoff here. There are the usual challenges to class certification, including commonality/predominance of class issues. In this case, there's the additional variables of how the prior class action settlements might limit this complaint, plus the overlay of any statute of limitations (a number of citations were to 2007 publications). And, as usual, so much depends on discovery (if the plaintiffs survive the inevitable motion to dismiss)--can they find smoking guns, or will their arguments remain mostly conjecture and assumptions? Despite all of these potential impediments, I can't imagine Google is thrilled to be wrangling with a lawsuit like this.

Posted by Eric at 10:12 AM | Licensing/Contracts , Marketing , Search Engines | TrackBack

March 10, 2011

Google Not Liable for Suggested Vanity Searches--Stayart v. Google

By Eric Goldman

Stayart v. Google, Inc., 2011 WL 855316 (E.D. Wis. March 8, 2011)

Beverly Stayart (a/k/a Bev Stayart) has graced these pages so many times, I feel a little silly recapping her story yet again. The short story behind this case: In the course of doing vanity searches, Bev Stayart discovered that Google suggested her name plus the name of a sexual dysfunction drug ("bev stayart levitra"). Rather than ignoring these search results, as almost all of us would do, she boldly clicked on the results and decided they were worth a lawsuit because these searches degrade her sterling reputation and generate profits for Google.

She brought a similar lawsuit against Yahoo and lost. Now, she racks up a loss against Google. Her litigation quest has unquestionably helped define her reputation in the Internet law community, but perhaps not in the way she might desire.

This opinion is relatively brief and breezy, befitting a case so devoid of merit. The court references 47 USC 230 (which should have worked, as it did in her suit against Yahoo) but sidesteps it, instead granting a 12(b)(6) motion to dismiss on the elements themselves. The court rejects Stayart's publicity rights claim because she didn't show her name has any commercial value or that Google made any use of it (commercial or not). Instead, "Google enables internet users to access publically available materials connected to plaintiff’s name." The court also says Google isn't impermissibly selling the phrase "bev stayart levitra" because clearly any resulting ads are broad-matched to "levitra."

The Seventh Circuit already has had one chance to mock Stayart (in the Yahoo lawsuit). I wonder if she will give them a second mocking opportunity.

UPDATE: On the same day, the court also dismissed Stayart's latest foray against Yahoo on less substantive grounds.

Prior blog posts on Beverly Stayart's litigation:

* Seventh Circuit Tosses Beverly Stayart's False Endorsement Claims--Stayart v. Yahoo
* Beverly Stayart Strikes Again! This Time, Stayart Sues Google
* Yahoo's Search Results Snippets Aren't False Endorsement--Stayart v. Yahoo
* Yahoo/Overture Sued for Search Results Snippets Containing Plaintiff's Name--Stayart v. Yahoo

Posted by Eric at 10:02 AM | Publicity/Privacy Rights , Search Engines | TrackBack

March 09, 2011

Important Ninth Circuit Ruling on Keyword Advertising, Plus Recaps of the Past 4 Months of Keyword Ad Decisions

By Eric Goldman

Network Automation, Inc. v. Advanced System Concepts, Inc., 2011 WL 815806 (9th Cir. March 8, 2011)

[warning: this blog post is nearly 5,000 words]

Introduction

We've had surprisingly few appellate decisions involving keyword advertising generally, and almost none involving trademark owners’ lawsuits against keyword advertisers (as opposed to suing keyword sellers like search engines). On that basis alone, this ruling is important. The case is also remarkable because the opinion, written by highly regarded Judge Wardlaw, gets so many things right. Perhaps that sounds like damning with faint praise, but the reality is that the Ninth Circuit's Internet trademark law has become horribly tortured due to deeply flawed opinions like the 1999 Brookfield case. This opinion deftly cuts through the accumulated doctrinal cruft and lays a nice foundation for future Internet trademark jurisprudence.

The only sour note is that the opinion makes some unnecessary and empirically shaky "presumptions"--exactly the kind of unfortunate appellate court fact-finding that got the Ninth Circuit into trouble into the first place. Still, given how this opinion could have turned out, I still give this opinion very high marks.

Background

The litigants both make software for job scheduling and management. This is reasonably expensive ($1k-$10k) software targeted at businesses. The advertiser (Network Automation) purchased the trademark owner's trademark as keywords (at both Google AdWords and Bing) for comparative advertising. Thus, this case deals with a nice, clean example of comparative competitive keyword advertising.

The ad copy read:

The text of Network’s advertisements begin with phrases such as “Job Scheduler,” “Intuitive Job Scheduler,” or “Batch Job Scheduling,” and end with the company’s web site address, www.NetworkAutomation.com. The middle line reads: “Windows Job Scheduling + Much More. Easy to Deploy, Scalable. D/L Trial.”

The ad copy doesn't reference the trademark, presumably because the trademark owner blocked it via the search engines' trademark policies.

The lower court proceedings appear to be fairly typical (other than the fact the advertiser initiated the litigation with a declaratory judgment; hence why its name is first). The trademark owner argued that the comparative competitive ads created initial interest confusion; the court used a bastardized form of the Sleekcraft multi-factor likelihood of consumer confusion test to slam the advertiser; and the court issued a preliminary injunction.

Use in Commerce

The court actually addresses this factor explicitly, a vast improvement over the garbled words in Playboy v. Netscape. Unsurprisingly, the court says that buying keyword ads constitutes a use in commerce. I say unsurprisingly only because no court outside the Second Circuit has ruled otherwise, and the Second Circuit said that selling keyword ads was a use in commerce in the Rescuecom case.

The court doesn't explore the potential differences between selling keywords (a la Rescuecom) and buying keywords (this case). Even so, it continues to be clear that courts aren't going to adopt the use in commerce defense to either buying or selling keyword advertising. Oh well.

A Side Note About Metatags

In recounting the history of the Brookfield case and its discussion of metatags, the court drops FN3: "Modern search engines such as Google no longer use metatags. Instead they rely on their own algorithms to find websites. See McCarthy at § 25:69." Metatag plaintiffs, take note. I don't think this footnote puts the nail in the coffin of judicial overreactions to metatags, but it's a nice incremental step retreating from Brookfield.

Likelihood of Consumer Confusion

As a procedural matter, the court addressed the "Internet trinity/Internet troika" variation of the standard Sleekcraft test. In Brookfield, and then again in the 2000 GoTo case, the Ninth Circuit said that 3 of the 8 Sleekcraft factors were more important in Internet trademark cases and thus should get priority. This expedited version of Sleekcraft tended to work in plaintiffs' favor. Here, the court tries to kill the Internet trinity variation, saying:

we did not intend Brookfield to be read so expansively as to forever enshrine these three factors — now often referred to as the “Internet trinity” or “Internet troika” — as the test for trademark infringement on the Internet. Brookfield was the first to present a claim of initial interest confusion on the Internet; we recognized at the time it would not be the last, and so emphasized flexibility over rigidity....Given the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology, however, it makes no sense to prioritize the same three factors for every type of potential online commercial activity. The “troika” is a particularly poor fit for the question presented here.

The court also does not expressly kill off initial interest confusion. Instead, it sidesteps that issue altogether. For example, it doesn't define initial interest confusion or explain when it may or may not be present. Nevertheless, it subtly tries to merge initial interest confusion into the standard Sleekcraft test:

when we examine initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.

Well, if you're going to have to use the Sleekcraft test to evaluate likely confusion, exactly what work does the initial interest confusion doctrine do? It would have been great if the court had just gone ahead and said that initial interest confusion is worthless, but I'll take this. I especially like that the court say diversion isn't enough. Although that is not an express repudiation of the initial interest confusion standard in Brookfield, the Brookfield case was all about diversion, and here the court implicitly undercuts it.

The court then proceeds to work through a standard Sleekcraft test:

Mark Strength. This is the first place (of several) where the court makes unnecessary and unfounded factual assumptions. The court says "a user searching for a distinctive term is more likely to be looking for a particular product, and therefore could be more susceptible to confusion when sponsored links appear that advertise a similar product from a different source. The court continues "Because the mark is both Systems’ product name and a suggestive federally registered trademark, consumers searching for the term are presumably looking for its specific product, and not a category of goods."

Uh, no. As I explained in lengthy detail here, we can't accurately infer a searcher's objectives when they use a trademark as a search term. In fact, I give examples of circumstances where searchers may use a trademark as the search query for a class of goods. The court’s presumption here, an empirical question that the court doesn’t defend, is off-base.

The court partially redeems itself when it says "if the ordinary consumers of this particular product are particularly sophisticated and knowledgeable, they might also be aware that Systems is the source of ActiveBatch software and not be confused at all." True, but I don't think a high degree of sophistication is required to make this type of source distinction. Even poorly educated consumers can distinguish Coke and Pepsi in the marketplace and will not be confused if a Pepsi ad appears in response to a keyword search for Coke. It’s not the consumer sophistication that matters; it’s whether or not the consumer already has a mental map of the various existing brands in the market niche. Ironically, because Google and Microsoft don’t allow a comparative competitive ad to explain the relationship between the brands, it may be harder for comparative advertisers to teach consumers in the ad copy about the relationship between competitive brands.

Proximity of Goods. The court adds a new twist: "the proximity of the goods would become less important if advertisements are clearly labeled or consumers exercise a high degree of care."

Mark Similarity. The court says this factor also depends on ad labeling and consumer sophistication.

Evidence of Actual Confusion. No evidence was introduced for the preliminary injunction, so the court weighs this as a non-factor. This is actually good news, because many courts have counted this factor against defendants by hypothesizing the existence of initial interest confusion as a substitute for any evidence of actual confusion.

Marketing Channels. Given that most companies have an Internet presence now, the court said the district court erred by counting this factor against the defendant.

Purchaser Care. The district court said that Internet consumers categorically exercise low care. Given the rich information on the Internet and the ability of consumers to do more research than ever, this has always been a dumb standard (see, e.g., Ann Bartow's Likelihood of Confusion article).

This court rightly shreds that assumption. The court says we should not rely on "a conclusion reached by our court more than a decade ago in Brookfield and GoTo.com that Internet users on the whole exercise a low degree of care."

Intent. The court says the lower court improperly assumed deceptive intent by the advertiser without considering the advertiser's desire for comparative advertising.

Product Line Expansion. Unimportant when the litigants are already in direct competition, such as in this case.

Other Factors. In a footnote, the court rejects the bonus 7 factor test from the Hearts on Fire case. However, going back to language from Playboy v. Netscape, the court says the "appearance of the advertisements and their surrounding context on the user’s screen" are important, and the search engines' presentation of ads--separated and labeled--should also be considered.

Instead of the Internet trinity or the Hearts on Fire supplemental test, the court possibly offers up a Internet quadrangle of Sleekcraft factors:

the most relevant factors to the analysis of the likelihood of confusion are: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.

I'm not sure a new expedited form of Sleekcraft avoids the problems we saw with the Internet trinity. But these factors are a step forward.

Holding

After dissolving the preliminary injunction, the court remands the case to the district court. It's not clear to me what will happen there. On the one hand, the district court judge showed that it was moved by the plaintiff's story, so it still may be sympathetic to the trademark owner. On the other hand, the Ninth Circuit opinion has a lot of language favoring the advertiser, and the district court judge might interpret that language as an imperative to rule for the advertiser lest it get reversed again. I think this is a close call.

Implications

I am often asked by other Internet Law professors for a single keyword advertising case they should consider teaching. Until now, I haven't had a good answer. I've taught several keyword ad cases over the years. The last two years I've taught the Hearts on Fire case, which has been pretty good. Other folks have taught the Second Circuit's Rescuecom case, a theoretically interesting case but a lousy teaching case. In my opinion, this ruling is clearly the best keyword advertising teaching case now available. Unless something better comes along, I'll be substituting this case for the Hearts on Fire case in my Internet Law reader. Assuming many of my colleagues make the same choice, I expect this opinion will be an instant classic.

For more on the opinion, see Paul Levy's take.

UPDATE: Rebecca's cogent critique of the case.
_______________________________________

I have accrued a bunch of other keyword advertising cases over the past 4 months that I simply haven't had time to blog. In the remainder of this post, I'll catch up with recaps of those cases as well. However, for the most part, this nicely written Ninth Circuit opinion trumps the remaining precedential import of these other cases.

Defense Wins

Montana Camo, Inc. v. Cabela's Inc., 2011 WL 744771 (D. Mont. Feb. 23, 2011). Cabela's buys fabric from Montana Camo and manufactures clothes using the fabric. In a hangtag, Cabela's indicates that the fabric is from Montana Camo. Cabela's buys "Montana Camo" as keywords.

The court rejects Montana Camo's 1125(a)(1)(B) false statement of fact claim because "the purchasing of a sponsored link is not a statement of fact. Further, considering that Montana Camo products were sold on Cabela's website, it was not a false statement of fact." The court rejects the 1125(a)(1)(A) unfair competition claim because Montana Camo didn't marshal enough evidence of confusion.

Thus, this case indicates that a manufacturer may be able to bid on the trademarks of its component suppliers without running afoul of Lanham Act false advertising rules.

Consumerinfo.com, Inc., v. One Techs., LP, CV-09-3783-VBF (MANx) (C.D. Cal. jury verdict Jan. 12, 2011).

The TM owner asserted its purported TM rights in "freecreditreport.com," a problematic domain name designed to take advantage of misdirected consumers who were really seeking annualcreditreport.com, the government-mandated website that lets consumers get free access to their credit reports. Consumers at freecreditreport.com get coopted into credit monitoring services that they may not want and probably don't need.

Given the marginal legitimacy of freecreditreport.com, you'd think it would lay low legally. Instead, like other owners of crappy trademarks (see, e.g., 1-800 Contacts, discussed below), they tend to be more bare-knuckled litigious than typical trademark owners. In this case, they sued businesses that registered typosquatting domain name variations of freecreditreport.com. I trust you see the irony--freecreditreport.com plays on consumer misrecollections of annualcreditreport.com, yet they don't like anyone doing the same to their purported trademark. Nice. The jury awarded a big cybersquatting judgment under the ACPA to the tune of $1.9M; however, the jury found that the defendants' keyword bidding did not create a likelihood of consumer confusion.

We don't have many jury verdicts about keyword advertising. The two I can think of are College Network v. Moore and Fair Isaac v. Experian. This would make the third time a jury has found in favor of the keyword advertiser over the trademark owner when the jury finally gets the question asked to them. This reinforces that juries may be more tolerant of keyword advertising than judges (and are certainly more tolerant than trademark owners!). This particular jury ruling is especially noteworthy because the jury thought the defendants were bad guys (hence the very large ACPA judgment), yet the jury still approved the keyword advertising.

1-800 Contacts, Inc. v. Lens.com, Inc., 2010 U.S. Dist. LEXIS 132389 (D. Utah Dec. 14, 2010).

This case, another suit over competitive keyword bidding, got stuck in my blogging queue. It's a tremendously important ruling and a terribly embarrassing one for 1-800 Contacts, so I planned to devote a lengthy blog post exploring its interstices. Unfortunately, the time never materialized in my schedule. Why was this case so high on my list? Three highlights:

1) It was a resounding loss for 1-800 Contacts, a company that has earned my ire over the years for their duplicity and pugnaciousness about trademarks and keywords. (For my blog coverage of them, see here). Some lowlights in 1-800 Contacts' track record:
* they are hyper-aggressive about protecting a marginal trademark. In my mind, it's not a trademark at all, it's a phone number. Frankly, I think we should categorically declare phone numbers as ineligible for trademark protection, just like we no longer recognize trademarks in [noun].[tld].
* they buy third party competitors' trademarks as keyword triggers, yet they sue competitors for buying their name (I can't really call it a trademark) as keyword triggers. Indeed, the court recounts that 1-800 Contacts bought "1 800 lens; 1 800 lense; 1 800 lenses; 1 800 the lens; 1 800 Lens; 1-800 lens; 1800lenses; 1800lens; 1800lenses; 1-800-lenses; 800 lens; 800 lenses; 800lens. These keywords generated 91,768 impressions, 8,477 clicks, and about $219,314 in profits for Plaintiff." HYPOCRITE ALERT. (BTW, their $26 of profits per click is mind-bogglingly impressive).
* they flip-flopped on the Utah legislature's efforts to ban keyword advertising, helping to kibosh the first law and then trying to sneak in a second law that favored their interests--aided by the fact that their in-house lobbyist is also a legislator and voted in favor of the bill her employer advocated. Yet, on its site, 1-800 Contacts claims "1-800 CONTACTS engages on public policy issues related to ocular health and the right of contact lens wearers to choose where they fill their prescriptions. We have not and will not get involved in public policy outside of the scope of this interest." Sorry, I'm going to have to call BS on that.

2) The case rejects 1-800 Contacts' attempt to hold the defendant Lens.com liable for keyword ad buys made by Lens.com's affiliates. Trademark owners have been angling to establish a legal doctrine that online retailers are automatically liable for keyword ad buys by affiliates, but this case gives some additional reason to believe that trademark owners have been overreaching.

3) The case gets into details about how much money Lens.com made and, in theory, 1-800 Contacts lost due to Lens.com's keyword ad buys. The court says Lens.com bought the following keywords:

1 800 contact lenses; 1800 contact lenses; 800 contact lenses; 800comtacts.com; 800contacta.com; 800contavts.com;800contaxts.com; 800contzcts.com; and 800conyacts.com. These nine keywords generated about 1,626 impressions, 25 clicks, and $20.51 in profits

Wait, what? The parties are fighting over Lens.com’s $20 of profits??? Hey, 1-800 Contacts, if you'll stop bringing pitiful lawsuits, I'll send you an Andrew Jackson out of my own pocket. Clearly, the real thrust of this lawsuit were the affiliates' keyword ad buys, but even those weren't voluminous: one affiliate bought 65,000 allegedly infringing impressions generating 352 clicks, and another affiliate allegedly bought 240,000 impressions generating 1,445 clicks.

Are ~1,800 allegedly misdirected clicks worth making a federal case out of? Even at 1-800 Contacts’ impressive (and probably overstated) $26 of profit per click, we’re talking about less than $40k of value that 1-800 Contacts purportedly lost. Yet, 1-800 Contacts was prepared to spend $1.1 MILLION on this lawsuit (and actually spent at least $650k). Great business decision there, guys. WHAT A WASTE. As I wrote in that earlier blog post, "I'm super-skeptical that the value of the consumers "diverted" (whatever that means) by Lens.com's competitive keyword advertising is more than $1.1M." The financial details in the case reinforce that I was 100% right about that.

Substantively, the court says keyword ad buys are a use in commerce. The court correctly explores the effect of broad matching on searches like "1-800 Contacts"--due to broad matching, competitive ads keyed to "contacts" may show up. The court grants summary judgment to Lens.com for its ads.

It suggests that some of Lens.com affiliates' ads may have infringed because they mention 1-800 Contacts in the ad copy. (The court later clarifies that it wasn't the ad buy that infringed; it was the ad copy). However, those actions aren't imputed to Lens.com because Lens.com got its affiliates through Commission Junction, and therefore Lens.com didn't know their identity and had little direct contact with them. The court also rejects 1-800 Contacts' takedown notice to Lens.com because 1-800 Contacts didn't give enough information to find the affiliate who ran the ad.

Finally, 1-800 Contacts tried to argue that Lens.com contractually agreed not to buy its trademarks as keywords during their various correspondences in response to 1-800 Contacts' legal threats. This is similar to Barnes v. Yahoo and Scott P. v. Craigslist in that the plaintiff is arguing that the defendant promised to remediate and thus its failure to do so is a contract breach. The court rejects this bypass.

You can see why I love this opinion. It's a long but rewarding read. Check it out.

(For people interested in Ben Edelman's work, you might be interested in the court's discussion about Ben's expert report on pages 20-23. A sample: "parts of Edelman’s declaration are improper in that he presents evidence not within his personal knowledge by reciting what another said in deposition and stating that testimony as fact, he opines on facts for which no expert testimony is needed, and he draws legal conclusions that are outside his role as an expert").

Plaintiff Wins

FTC v. Cantkier, 2011 WL 742647 (D.D.C. March 3, 2011). The court's recap of the complaint:

The FTC has alleged that Lady and certain other defendants were running deceptive online advertisements featuring the names, phone numbers, and website addresses of federal homeowner relief and financial stability programs. The advertisements allegedly appeared on popular web search engines, such as Google and MSN, and were targeted to users using as search terms keywords related to the federal assistance programs. The Second Amended Complaint alleges that the advertisements represented that they were sponsored by federal homeowner relief and financial stability programs by featuring text and titles associated with those programs, including "makinghomeaffordable.gov" and "financialstability.gov." When web users clicked these ads, they were not directed to the websites for the federal programs, but rather to private Internet websites ("lead collection websites") that collected marketing leads for mortgage loan modification or foreclosure relief services. These lead collection websites had no actual connection with government programs; they solicited consumers to enter personal identifying and confidential financial information, and then the operators of the websites sold the consumers' confidential information as marketing leads to persons who sell mortgage loan modification or foreclosure relief services....

Plaintiff alleges that Lady purchased advertisements on www.google.com ("Google"). On Google, Lady bid on keywords "financial stability.gov," "fha.com," "financialsecurity.gov," "hope now alliance," "hope for homeowners," "www.makinghomeaffordable.gov," and "makinghomeaffordable.gov." On Google, his advertisements displayed titles "Makinghomeaffordable.gov," "Financial Stability.gov," "Fha Gov," "wwwhud.gov," "www.995hope.org," and "www.hopenow.com/." The FTC alleges that consumers who clicked on Lady's advertisements were not directed to the government websites, but rather to his own websites that collected marketing leads for mortgage loan modification or foreclosure relief services. Lady's websites prompted consumers to enter personal identifying and confidential financial information, which Lady then allegedly sold as marketing leads to persons who sell mortgage loan modification or foreclosure relief services. (cites omitted)

On this basis, the FTC alleged deceptive acts under the FTC Act. The court rejects the defendant's motion to dismiss.

There are a number of interesting points in the discussion. Some highlights:

* the defendant argued that consumers understood they were clicking on ads. The court acknowledges this but says the FTC's complaint is that the ad copy was deceptive.

* the defendant argued that his advertised websites didn't look like official government websites. The court responds: "Internet users may not know what the real federal program website looks like until they successfully navigate to it. If they are diverted by advertisements bearing the name and web address of the federal program before ever reaching the program's actual website, reasonable consumers could assume they have reached their intended destination, when, in fact, they have reached a commercial service."

This is a little like the old Promatek v. Equitrac discussion of diversion, to which the "back button" is a solid retort. However, it feels qualitatively different to me that we're dealing with allegedly false ad copy trying to mimic official government services. Contrast the rulings in the Consumerinfo case above, where the jury found no consumer confusion from keyword advertising for a website replicating a government-mandated website, and the recent Canadian decision in Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc., where the defendants’ websites mimicked community colleges. In the latter case, the court said that prospective students would figure out any confusion before enrolling in college. That case clearly expected consumers to be more sophisticated than the FTC did in this case. Also along this lines (but not a keyword ad case) is the lawsuit over dmv.org.

Rebecca's post on the case.

Binder v. Disability Group, 2011 WL 284469 (C.D. Cal. Jan. 25, 2011). This is another lawyer-as-plaintiff suit, so you know we’re in trouble. The advertiser, a direct competitor, purchased the law firm's name as keywords. The court breezily says that keyword purchases are a use in commerce. The district court found a likelihood of confusion by focusing on the Internet trinity of factors; the opinion also made a number of other statements inconsistent with the Network Automation case. Unlike Network Automation, in this case there was some evidence presented of actual confusion, including after users clicked on the ad (so the confusion was not solely attributable to the keyword ad). That might suggest the ruling would withstand further scrutiny, especially given that we're talking about law firms competing with each other and clients could get into trouble by connecting with the wrong law firm.

In underdeveloped parts of the opinion, the court also finds Lanham Act false advertising and California unfair competition violations, saying "Plaintiffs have proven by a preponderance of the evidence that Defendants used Plaintiffs' mark in their advertising campaign through Google to market their business in a manner that was likely to confuse potential clients and that deceived potential clients into thinking they were being led to Plaintiffs' website" and "Plaintiffs have proven by a preponderance of the evidence that Defendants used Plaintiffs' marks in their online campaign and in doing so attempted to pass off their website as Plaintiffs', and/or infringed on Plaintiffs' trademarks." This deserved way more words than the court gave it. The court also has some garbled discussion that the TM owner did not need to mitigate harm by complaining to Google.

Using some questionable methodologies about conversion rates (18%!), revenue per case and costs of serviced cases (95% revenue margin!), the court calculated damages and then doubled them for willfulness to nearly $300k. Regarding willfulness, the court says:

Plaintiffs have established willfulness in this case. As described above, Defendants chose Plaintiffs' marks based on the market. In doing so, Defendants intentionally misled potential clients and directed business away from Plaintiffs and to their own websites. Defendants had the deliberate intent to direct clients to their sites with the false impression that they were Binder and Binder. Defendants also intentionally chose Plaintiffs' marks with knowledge that they were registered trademarks and in an attempt to profit from them.

Equating willfulness with exceptional, the court also awards attorneys' fees and costs. The court also extended liability to the defendant's principal personally. However, the court refused a request for corrective advertising and punitive damages (which were available for the CA unfair competition claim).

On the surface, this looks like a problematic case. Partially in response to this case, a Search Engine Land contributor asked if "Is It Time To Rethink Bidding On Trademarks?". However, there are three mitigating factors that undercut its import:
1) the suggestion that the advertisers engaged in misleading activity after the keyword ad.
2) the court clearly disbelieved the defendant's principal, never a good indicator of a successful defense.
3) I wonder how much of this case survives the Network Automation ruling. It appears potentially vulnerable to an appeal or rehearing request.

1-800 Contacts, Inc. v. Memorial Eye, PA, 2010 WL 5149269 (D. Utah Dec. 13, 2010).

In one of 1-800 Contacts' multitudinous trademark lawsuits against competitors over competitive keyword ad bidding, the advertiser asserted an unclean hands defense (on the basis that 1-800 Contacts buys competitors' trademarks for competitive keyword advertising itself) and a trademark misuse counterclaim. The court rejects both. In general, this ruling is trumped in importance by the Lens.com ruling. However, it is interesting that the court thought 1-800 Contacts engaging in identical behavior as the behavior it was suing over wasn't good enough for an unclean hands defense. In the court of popular opinion, 1-800 Contacts is unacceptably duplicitous.

Posted by Eric at 04:21 PM | Marketing , Search Engines , Trademark | TrackBack

February 27, 2011

Jan.-Feb. 2011 Quick Links, Part 2

By Eric Goldman

Search Engines

Google’s search algorithm has been very much in the news the past 2 months!

* Google’s announcements:
- “Google search and search engine spam”
- Matt Cutts explains Google penalties in a video.
- “Microsoft’s Bing uses Google search results—and denies it.” Comments from Search Engine Land and Greg Linden (on privacy)
- Interview with Amit Singhal on content farming

* Google publicly penalized numerous targets, including
- JC Penney, punished for black hat SEO (the 4th time Google had penalized them).
- Overstock, punished for coopting too many .edu domains
- Forbes, punished for passing PageRank to paid links
- Then, Google dropped the hammer on content farms

The running question with all of these changes: should we praise—or regulate—Google for fighting back against the algorithm gamers? My 2006 article on search engine bias answers that question. I recently wrote a short essay updating the 2006 article—more on that soon.

* Speaking of regulators, they are hardly standing on the sidelines:
- EU regulators hate Google. They really hate Google.
- The Italian antitrust authority dropped its investigation into Google News after Google agreed to make it easier for publishers to opt-out.
- More details emerged on the Texas AG’s investigation into Google. WSJ and AllThingsD (including the actual letter). My prior blog post.
- Interestingly, FWIW, it’s not clear consumers are sold on the need for regulatory intervention. 77% of Americans say "there is no need for government regulation of the way that search engines select the recommendations they provide in response to search inquiries." Then again, survey wording is key. I could see an equal percentage say that we should prevent search engine bias.

* Questions about Google’s algorithms:
- Techdirt: "Will Google's New Hamfisted Censorship On Autocomplete Raise Questions Of Human Meddling?"
- News.com: Google's double standard on user-generated content

Privacy

* H.R. 654, "Do Not Track Me Online Act of 2011." The law would require the FTC to promulgate regulations that “establish standards for the required use of an online opt-out mechanism to allow a consumer to effectively and easily prohibit the collection or use of any covered information and to require a covered entity to respect the choice of such consumer to opt-out of such collection or use.”

* Information Law Group's 2010 privacy law recap.

* Jeff Jarvis: "the emergence of Privacy, Inc., as a industry built on scaring people is beginning to scare me."

Remember, every regulation creates winners and losers, and we should always ask what’s in it for the winners. On that score, see James D. Campbell et al, Privacy Regulation and Market Structure, reaching the conclusion: “privacy regulation can benefit incumbents and reduce innovation.”

* Lyall v. City of Los Angeles, Not Reported in F.Supp.2d, 2011 WL 61626 (C.D. Cal. Jan. 6, 2011). Publicizing an event on MySpace made the event space into a public place for purposes of a police search.

* After Pineda v. Williams-Sonoma treating zip codes as private information, a flood of lawsuits. In response to the Supreme Court's ruling, Sacramento urgently needs to make a statutory fix to Song-Beverly to avoid business-sapping and socially wasteful litigation.

* FTC: Data Resellers Liable for Downstream Security Failures

Social Media/Web 2.0

* Reuters: "Companies warily eye new consumer complaint sites"

* Mountain View Voice: Contractor files big claim for bad Yelp review.

* Teacher is suspended for blogging about her "whiny" students. Compare Yoder v. Univ. of Louisville.

* Reuters recaps e-discovery of social networking site content.

* NYT: Is blogging passé?

* Facebook ads have really low clickthrough rates, but the clickthrough rate improves if another user "likes" the ad.

* Unintended consequences of CA's E-personation law are beginning to manifest themselves. Apple goes after the @ceostevejobs parody Twitter account.

* NYT surveys some esoteric niche online dating websites.

* U.S. v. Forde, 2011 WL 63831 (4th Cir. Jan 10, 2011):

In a post-trial motion, Forde informed the district court that while the trial was proceeding, a friend of the husband of the jury foreperson posted on Twitter an explanation of the difference between “assume” and “presume.” Ford contended that, since the posting occurred during trial, it was possible that the jury foreperson had talked to her husband about the case, her husband then talked to his friend about the case, the friend then posted the statement on Twitter, and the foreperson saw the Twitter posting. Forde thus requested that the district court hold a hearing to investigate the potential misconduct. The district court denied the request.

...Forde's string of possibilities about the origin of the Twitter posting—that the foreperson possibly talked to her husband, who possibly talked to his friend, who possibly took to Twitter in response to what the husband possibly told him—is nothing but speculation and thus falls far short of establishing reasonable grounds for investigation. The district court therefore did not err by denying Forde's request for an evidentiary hearing to investigate his claim.

Posted by Eric at 04:22 PM | Content Regulation , Evidence/Discovery , Marketing , Privacy/Security , Search Engines | TrackBack

February 24, 2011

Savvy Louisiana Ruling on Metatags--Southern Snow v. Snowizard

By Eric Goldman

Southern Snow Mfg. Inc. v. Sno Wizards Holdings, Inc., 2011 WL 601639 (E.D. La. Feb. 16, 2011)

Have I ever mentioned how much I hate metatags cases? They have led to some godawful rulings. But surprisingly, today's opinion was quite refreshing. It's just the iceberg tip of a litigation battle royale taking place among Louisiana manufacturers of shaved ice equipment and flavorings. Sno Wizards manufactures the trademarked "SnoWizard" shaved ice machine. The defendant in this ruling, Parasol, makes syrup for shaved ice and put the term "snow wizard" in its metatags. (I checked a few pages on Parasol's website and couldn't find the reference any more). Presumably, Parasol wants to tell shaved ice retailers to consider their syrup for shaved ice manufactured using Sno Wizards' machine. Given that Sno Wizard also sells its own flavorings, it's easy to speculate why Sno Wizard might object to Parasol's efforts.

Sno Wizard argued the trademark owner's standard party line that use of its trademarks in someone else's metatags is per se infringement; no further proof required. The court recaps the argument: "SnoWizard retorts that the cases applying Brookfield Communications recognize that the defendant's use of the plaintiff's mark in website metatags creates initial interest confusion and therefore constitutes trademark infringement and unfair competition as a matter of law." From Sno Wizard's standpoint, res ipsa loquitur.

Fortunately, this judge digs deeper. Although the opinion is light on citations, it's rich with wisdom. The court starts out with this winner:

It would be odd indeed for the law to require a plaintiff in an ordinary trademark infringement case to prove likelihood of confusion to the jury, yet to create a lighter burden where metatags are involved, given that with metatags the consumer never actually sees the trademark or knows that it is in use. Thus, the Court is persuaded that SnoWizard cannot passively assume that likelihood of confusion is established as a matter of law in this case.

Why, YES! I enthusiastically agree that the typical pro-trademark owner metatag rulings get the burdens completely backwards.

The court continues by asking the key metatags-related technological question that has eluded most judges: just what do they do? (Google has given its answer). The court says:

SnoWizard cannot prevail on its metatag claim without evidence of what actually takes place as a result of the phrase "snow wizard" being hidden in Parasol's website. Is every consumer diverted to Parasol's website, or is Parasol listed at the top of many search results, or somewhere in the middle of a result list, or twenty names down the list? Does the consumer have to type in just "snow wizard" or is the metatag triggered by other variations of the phrase too?

This inquiry is in stark contrast to most judges' assumption that metatags are the most effective SEO tool ever and therefore guarantee top placement and masses of unwittingly diverted consumers. See, e.g., Art Attacks v. MGA and Venture Tapes v. McGills; but see Standard Process v. Banks, which would have been a helpful cite here.

The court concludes by noting the potential difference between "snowizard" (the trademark) and "snow wizard" (the metatag) to keyword searches:

the jury would be left to guess that "snow wizard" and SNOWIZARD are synonymous to a computer search engine but the Court is not even persuaded that such an assumption is factually correct.

Amazingly, the fact that an extra space might affect keyword searches baffled the Ninth Circuit in the Brookfield case, which similarly involved references that differed by a space ("moviebuff" and "movie buff"). The possible difference also escaped the Seventh Circuit in the Promatek v. Equitrac case, where the trademark ("Copitrak") differed from the metatag ("Copitrack") and actually did produce different search results in Google (see the screen shots yourself, thanks to when Google posted an unmodified copy of its 2001 index).

And in a final display of savviness, the judge doesn't simply roll the issue to trial to examine these factual issues. Instead, saying the trademark owner didn't present enough evidence to earn its way to a trial, the judge dismisses the metatag claim on the spot. This case appears to be a much better context for Judge Kozinski's famous admonishment in Mattel v. MGA (the Barbie Girl case): "The parties are advised to chill."

The author of this gem is Judge Jay Christopher Zainey. Great work, your honor.

Posted by Eric at 01:49 PM | Marketing , Search Engines , Trademark | TrackBack

February 18, 2011

Google Suffers Surprising Preliminary Loss in Keyword Advertising Case--Jurin v. Google

By Eric Goldman

Jurin v. Google, 2011 WL 572300 (E.D Cal. Feb. 15, 2011)

A surprising ruling! You may recall Jurin, trademark owner of the term "styrotrim." He sued Google in summer 2009, but quickly dismissed the lawsuit after he had a falling-out with his attorney. I thought the case was over then. Surprisingly, he found a new attorney and sued Google again in Fall 2009. The court fined Jurin $6,000 for wasting Google's time with the first go-around. Again, I thought the fine would end the case, but Jurin shockingly paid up. In round 2, Google has been progressively carving up the lawsuit, getting the court to dismiss some claims last March (including a pretty significant 47 USC 230 win) and more claims in September. Frankly, given the brutal treatment Jurin has been getting in court, I had already mentally counted this case as a win for Google.

Not so fast! In a stunning turnaround, the court refuses Google's motion to dismiss Jurin's "false association" claim. This is wholly unexpected for two reasons: first, the court had already rejected Jurin's "false association" claim TWICE (Jurin is on his Second Amended Complaint), and second, the court does not cite a directly relevant case on point--Heartbrand v. Lobel's--that dismissed a false designation of origin claim against Yahoo.

How did this case do a 180??? The court addresses Google's contention that a "false association" claim only applies when the defendant produces the falsely associated goods--which doesn't apply to Google, who simply presents advertising from other vendors. This argument worked in the March 2010 dismissal. This time, the court says "this Court declines to require Defendant to be the producer of goods in order to continue a claim for false association." In a footnote, the court acknowledges its internal conflict:

To the extent this conclusion runs counter to the Court’s 4 previous orders (ECF Nos. 19, 39) on Defendant’s prior Motions to Dismiss, the Court has now concluded that the analysis set forth herein is the correct one. Any earlier determination to the contrary is hereby revised in accordance with the provisions of Federal Rule of Civil Procedure 54(b).

Whoops. Nice try to bury an embarrassing flip-flop. Actually, IMO, the court got it right the first time(s).

This ruling would be a good choice for a motion for reconsideration to force the court to revisit its change with more precision. Failing that, it ultimately may be appropriate for an appeal.

On the plus side, the court does finally dismiss the breach of contract claim without leave to amend. I didn't really understand the court's discussion here, but at least the court got to the right result.

While this case plods to a more definitive conclusion, I fear this denial of a motion to dismiss will motivate a bunch of unnecessary, low-merit, and cost-unjustified lawsuits against Google and other search engines--just like we saw the Rescuecom case (also a motion to dismiss case) spurred the last flurry of lawsuits against search engines. Listen up, plaintiffs: this case only offers false hope! This is a bad ruling and Jurin will unquestionably lose in the end. Don't buy your lawyer a new boat when you could invest those dollars in a better product or more effective marketing.

PS: I have several other keyword ad cases to blog, including 1-800 Contacts, Consumerinfo.com and Binder. Sorry I'm running so far behind.

The roster of pending AdWords cases (I most recently double-checked the status of pending cases on September 11, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google [on appeal]
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
* Pathak v. ICG

Posted by Eric at 10:39 AM | Derivative Liability , Search Engines , Trademark | TrackBack

February 15, 2011

Microsoft Adopts Google-Style Trademark Policy for Keyword Advertising

By Eric Goldman

I have gotten several emails relaying this announcement from Microsoft:

We are writing to alert you to some pending changes to the trademark policy within the Microsoft Advertising adCenter Intellectual Property Guidelines. Starting March 3, 2011, adCenter will no longer review trademark keyword complaints. However, adCenter will continue to investigate brand owner complaints related to trademark use in ad text.

We want to make it easier for you to manage your search advertising campaigns. By aligning the adCenter trademark policy with the current industry standard, we hope to help simplify your marketing efforts across the various online advertising programs. Please take a moment to review our updated trademark policy in the Intellectual Property Guidelines so that you may prepare for this change. If you have questions or need further assistance, please contact our support teams.

You can see the policy here.

Microsoft's reference to "the current industry standard" is interesting. For many years, Google's trademark policy has differed from almost every other search engine. But since Google is nearly 80% of the keyword ad market, I guess Microsoft can acknowledge them abstractly as the "industry standard" without actually referencing Google by name. Now that Microsoft has adopted Google's general approach, I assume Yahoo will fall in line next. [UPDATE: as a reader pointed out, now that Yahoo has outsourced keyword ad sales to Microsoft as part of their overall search integration, this policy change automatically applies to Yahoo's search engine as well.]

I'm interested in the timing of Microsoft's announcement. On the one hand, as I mentioned last year in my "Internet Law Trends" slide, the keyword ad battles--especially against search engines--seem to be winding down, and Google appears to have prevailed decisively. Given that Google has done all of the hard legal work for Microsoft, Microsoft can free-ride on its results. On the other hand, we still have a major pending appeal in the Rosetta Stone v. Google case, and the appeals court could issue a ruling that casts doubt on both Google's and (now) Microsoft's trademark policies. I guess Microsoft is willing to take that risk. The good news for Google is that with Microsoft and Google both standardized on the same program, Google doesn't look like an industry outlier, and it has gained a new and well-financed ally to support its policies.

Although Microsoft's new policy makes sense to me both doctrinally and as a matter of policy, Microsoft's decision reiterates how badly it is trailing Google, such that it has to follow the market leader. Microsoft is much more used to dictating terms rather than having to adopt someone else's. Also, I wonder if this is really just a cash grab. In the past, Microsoft's margins were so outrageous that it could ignore low-hanging revenue fruit if it wanted to. This development could be a suggestion that those days are over--especially in search, where Bing isn't profitable, so Microsoft's online endeavors need every cent they can get to keep up with the Google juggernaut.

Related posts:
* Google Liberalizes Its European Trademark Policy
* Google Liberalizes US Trademark Policy: "What, Me Worry?" Part 2
* Google's International Trademark Policy Change: "What, Me Worry?"
* Hotels Benefit When Distributors Reference the Hotel's Trademark in Keyword Ad Copy

UPDATE: World Trademark Review has more to say.

Posted by Eric at 02:05 PM | Derivative Liability , Search Engines , Trademark | TrackBack

February 05, 2011

Grimmelmann on "Search Neutrality"

By Eric Goldman

James Grimmelmann, Some Skepticism About Search Neutrality, in THE NEXT DIGITAL DECADE: ESSAYS ON THE FUTURE OF THE INTERNET (Berin Szoka & Adam Marcus, eds. 2010).

James Grimmelmann wrote a terrific must-read book chapter on search neutrality. His blog post on the chapter. The book chapter taxonomizes the various arguments that have been advanced in favor of search neutrality, and then with his characteristic pointedness, he proceeds to eviscerate each and every one as only a law professor can do. There are so many good parts to the chapter, I'm only going to cherry-pick some of my favorite quotes and present them without comment. If you like these excerpts, then as the saying goes, read the whole thing.
___

* "the case for search neutrality is a muddle. There is a fundamental misfit between its avowed policy goal of protecting users and most of the tests it proposes to protect them"

* "Of course Google differentiates among sites—that’s why we use it. Systematically favoring certain types of content over others isn’t a defect for a search engine—it’s the point."

* "what difference should it make that Yahoo! and others liked Foundem? So? That’s their opinion. Google had a different one. Who is to say that Yahoo! was right and Google was wrong? One could equally well argue that Google’s low ranking was correct and Yahoo!’s high ranking was the mistake."

* "If you want Google to steer users to websites with views that differ from their own, your goal is not properly described as search neutrality. In effect, you have gone back to asserting the objective correctness of search results"

* "Just as the subjectivity of search means that search engines will frequently disagree with each other, it also means that a search engine will disagree with itself over time."

* "Search neutrality will be born with one foot already in the grave of regulatory capture."
___

For a complementary perspective, check out Geoff Manne's contribution to the book entitled "The Problem of Search Engines as Essential Facilities". Plus, I have written a brief "update" to my 2006 Search Engine Bias article where I talk about how the issues have evolved in the past half-decade. I plan to post that in the near future.

Posted by Eric at 09:45 AM | Search Engines | TrackBack

January 27, 2011

Top 5 Cyberlaw Developments of 2010, Plus a 2010 Year-in-Review

By Eric Goldman

Earlier this Fall, I posted my top 8 trends in Internet law, and that's a good place to start if you want to see how I think things are developing. Because of that post, this year I'm shaking up the format of my year-end recap post a little bit. We'll start with the top 5 Cyberlaw events of 2010, but then we'll move to other topics. (This is a variation of my post to InformIT on Tuesday).

Top 5 Legal Developments

#5: Google pulls out of China. China's native search engines rejoice, but is this really a win for China's long term prospects? Meanwhile, I keep hoping Google will do the same in the EU too given how much the EU regulators hate Google.

#4: COICA and the pre-enactment COICA workaround, ICE's lawless seizure of 82 supposedly pirate-oriented domain names. Showing once again that domain name censorship is irresistible to government regulators.

#3: Righthaven goes on a litigation frenzy on behalf of newspapers. Which do you think will happen first--bloggers stop discussing newspaper articles for fear of being sued, or newspapers go out of business? What's amazing is that newspapers don't realize that the first will accelerate the second.

#2: Oracle gets $1.4B+ from SAP for competitive scraping. Oracle hit a grand slam with the damages in this case, ranking highly on several all-time-largest-awards charts.

And the top cyberlaw story of the year goes to...

#1: Wikileaks. Wikileaks finally forces us to confront many of the cyberspace governance issues we were debating in 1996. I'm sad to say that our government, and many private businesses, failed the test.

Other Key Developments

* Tiffany v. eBay. The Second Circuit thumps Tiffany's pathetic arguments and gives eBay a clean bill of trademark health. However, this ruling just preserved the status quo, so for my money, the much more important secondary trademark rulings involved providing other services to alleged counterfeiters. See Gucci v. Frontline, potentially exposing credit cards and other payment service providers to secondary liability for providing payment services to alleged counterfeiters, and Roger Cleveland Golf v. Price, potentially exposing SEOs/web designers to secondary liability as well.

* Viacom v. YouTube and Arista v. Limewire. These companion cases told us what we already knew: YouTube + 512(c) defense = good, P2P file sharing software vendor - DMCA safe harbor = bad.

* Sony v. Tenenbaum. I'm still waiting to see if this case is a blip or a watershed. It has the potential to make every copyright statutory damages case into a constitutional due process inquiry.

* Legally, it was a good year for Google. Google got a favorable trademark ruling in the ECJ. Google got a decisive win in its Rosetta Stone AdWords trademark case (and, as mentioned before, the YouTube case as well). Most of the other trademark plaintiffs lost or simply gave up.

* Legally, it was a lousy year for Google. Everyone in the world seems to be considering if they can run Google's algorithms better than it can: EU antitrust regulators, French antitrust regulators, the Texas AG, private plaintiffs, the New York Times and so many more. Google got trapped in a dangerous antitrust litigation in the unfavorable venue of Ohio state court. Google Street View has been a legal train wreck world-wide. The DOJ busted up a possible hiring cartel among Silicon Valley companies, and Google almost immediately handed out 10% pay raises for everyone. Buzz was a lousy product with a horrible launch, and it led to a multi-million dollar litigation kicker.

* It was a quiet year for 47 USC 230 litigation. From my perspective, quiet is good! The biggest defense win of the year: Milgram v. Orbitz. The biggest plaintiff win of the year: Swift v. Zynga.

* Perfect 10 v. Google. Google gets yet another win in this case, this time on 512(d)--one of the few cases interpreting the 512(d) safe harbor for linking to infringing content.

Notice I didn't put *any* of the Ninth Circuit Internet law jurisprudence on the list. There were plenty of interesting rulings this year: Krottner v. Starbucks, MDY v. Blizzard, Vernor v. Autodesk, DSPT v. Nahum, the Freecycle naked licensing case, Advertise.com v. AOL, Toyota v. Tabari, Visa v. JSL, CRS Recovery v. Laxton, Office Depot v. Zuccarini. However, I have lost all faith that 3 judge panel decisions by the Ninth Circuit have any binding precedential on other panels, so every case is effectively a one-off.

Less-Heralded But Nevertheless Interesting Disputes of the Year

Some under-the-radar legal disputes that I thought were more interesting than the overhyped stories:

* Barclays v. theflyonthewall. A brokerage house gets an injunction against the republication of its stock recommendations based on a hot news doctrine. The case is now on appeal to the Second Circuit. The case exposes the precarious business model of brokerage houses: they are content publishers trying to monetize via a commodity service, and brokerage house stock recommendations were exactly the kind of information John Perry Barlow explored in his 1994 Economy of Ideas article. Will the hot news doctrine prop up a doomed business model?

* Anderson v. Bell. Electronic signatures count towards the requirements for an election petition. This could launch a new era of citizen petitioning of the government.

* Snap-on v. O'Neil. A company can't scrape its own data from its outsourced vendor, seemingly authorizing the vendor to play hold-up games for companies that don't handle the contract correctly. The Eventbrite v. Cvent case provided some interesting contrast.

* Goforit v. Digimedia. A court upholds domain name wildcarding and says the TM owner/plainitff pursuing those wildcarded domain names may have engaged in reverse domain name hijacking.

* Lara Jade Coton v. TVX. The blog post title said it all: "Tip for Clean Living: Don't Use a 14 Year Old's Self-Portrait in Advertising for Porn."

Most Overhyped Stories

This year, for the first time, I'm separately breaking out a category for most overhyped stories of the year.

* Craigslist shuts down its adult services category. A toxic mix: Craigslist took a legally defensible but nevertheless obstinate position, and state AGs love to show their constituents how much they hate the Internet. When Craigslist finally gave in and shut down its adult services category (with a whining F-U), people went crazy.

* Borings get $1 for their trespassing claim. Google's Street View contractors made a mistake, drove up a private driveway, and captured what they saw. Google posted the photos until it got a complaint, then the homeowners with the odd surname ("Boring") went on a litigation frenzy. Their payoff for several years of litigation? $1. Not even enough for extra foam on a Starbucks mochachino.

* The Supreme Court's tech docket. Several fizzled out non-decisions from SCOTUS this year: Bilski, Quon, Costco. The Supreme Court is taking a steady diet of tech-related cases, but they are gun-shy about actually resolving them.

* Mark Hurd. Mark Hurd, Hewlett Packard's CEO, had an inappropriate relationship with an HP contractor/former B-list softcore porn actress and maybe fudged his expense reports. When he tried to take a job at HP's frenemy Oracle, HP got litigious, but it turns out their fur can be smoothed for a few million.

* Lost iPhone Prototype. Stop me if you've heard this joke before: an engineer walks in a bar and...loses a super-stealthy prototype of one of the most important new consumer technology launches ever...? I realize it's an uber-cool phone, but still, IT'S A PHONE, PEOPLE!

Our Snarkiest Company-Specific Posts

Occasionally, we get snarky about specific companies' practices. It's not our norm, but these posts sure do boost traffic. Companies in our crosshairs this year:

* The Problems With Google House Ads. Google's response to this post was pathetic and embarrassing.

* Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. I still use Scribd, but I have zero loyalty.

* Hypocrisy Alert?! Expedia, a "FairSearch" Member, Marginalizes American Airlines in Its Search Results. If you're going to wave the "Search Neutrality" flag, please keep it hypocrisy-free.

* Facebook pulls a rare hat trick of snark this year: Q2 2010 Quick Links Part 3 (Special Facebook Edition), Facebook's Anti-Spam Filter Blocks Legitimate Conversations about Power.com, Distrust in the Cloud Part #2: Facebook Blocks J.mp Links and Takes Down Lots of Status Updates in the Process. I'm officially no longer in love with Facebook. I post the exact same content to Twitter and Facebook, so please follow me at Twitter instead.

* My RapLeaf Profile is Amusingly Mistaken. This is What the Fuss is All About?. In response to an article in the Wall Street Journal's "What They Know"/privacy plaintiffs lawyers full-employment series of articles.

Most Popular Blog Posts of the Year

1) Scribd Puts My Old Uploads Behind a Paywall and Goes Onto My Shitlist. Nearly 2X the traffic of #2. Putting profanity in the post title still works as a traffic booster.

2) Deleted Facebook and MySpace Posts Are Discoverable--Romano v. Steelcase (Topsy 100). I still can't figure out why this post was so popular; it just reminded us of something we already knew. See also the related but overreaching Millen v. Hummingbird Speedway.

3 & 5) #3: Twitter Clarifies Usage Rules, but AFP Still Claims Unbridled Right to Use Content Posted to "Twitter/TwitPic". Venkat also had an end-of-the-year hit with the #5 post, "Court Rejects Agence France-Presse's Attempt to Claim License to Haiti Earthquake Photos Through Twitter/Twitpic Terms of Service -- AFP v. Morel." Both posts were Topsy 100.

4) Viacom v. YouTube Summary Judgment Motions Highlights. Not surprisingly, the gossip about the lawsuit is way more popular than the blog post on the actual ruling.

One other post reached Topsy 100: "Ripoff Report Defeats Extortion Claim, But Plaintiffs Keep Trying--AEI v. Xcentric."

Lists of Yore

Previous top 10 lists from 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

Posted by Eric at 06:56 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , Evidence/Discovery , Internet History , Licensing/Contracts , Search Engines , Trademark , Trespass to Chattels | TrackBack

January 13, 2011

Keyword Advertiser Headed to Trial--Soaring Helmet v. Nanal

By Eric Goldman

Soaring Helmet Corp. v. Nanal, Inc., 2011 WL 39058 (W.D. Wash. Jan. 3, 2011)

I previously blogged on this case in 2009 when Soaring Helmet sued Google for selling keyword advertising triggered on its trademark. Soaring Helmet quickly dropped Google from the suit but continued against the keyword advertiser.

Soaring Helmet makes...(wait for it)...motorcycle helmets and related motorcycle riding gear. The registered trademarks at issue here involve "VEGA" for motorcycle helmets and protective clothing. The case goes on and on about how Soaring Helmet doesn't deal with Internet-only retailers because its brick-and-mortar retailers hate the price competition (reinforced by Soaring Helmet's resale price maintenance). The implicit anti-consumer/anti-competitive nature of Soaring Helmet's distribution system should have been a huge strike against it, but the opinion seems rather unconcerned with it.

The defendant runs Leatherup.com, an Internet-only retailer of motorcycle gear. The court recaps the allegations about the defendant's activity:

On or about September 1, 2008, Nanal bought the keywords "vega helmets" through Google AdWords. Albert Bootesaz, president of Nanal, testified that the keywords were suggested by Google after he entered "helmets" as a search term. At the time that he bought the keywords "vega helmets" he thought that it referred to a solar system or a star. Nanal ceased using the keywords "vega helmets" in April 2009 after receiving a cease and desist letter from Soaring Helmet's counsel. Nanal also took the additional step of incorporating a negative instruction to Nanal's Google AdWords campaign so that LeatherUp.com's advertisements do not appear when the word "Vega" is searched. Mr. Bootesaz also testified that the word "Vega" has never been used on the LeatherUp.com website and he has never directed that the word be incorporated into the website in any manner.

Contrary to Mr. Bootesaz representation, Ms. Demund provides evidence showing that the LeatherUp.com website advertised the "XElement Vega Leather Jacket," which was neither manufactured nor licensed by Soaring Helmet. As of November 22, 2010, Ms. Demund testified that the XElement Vega Leather Jacket was still being offered for sale on eBay.com and Cobragear.com. [citations omitted]

Because of the latter allegations, the court handles the discussion glibly. For example, on the trademark infringement claim, the court's discussion is unclear whether the defendant referenced "Vega" in the ad copy or only as a keyword trigger. If the defendant only used Vega as an ad trigger, then perhaps the court could have resolved this on summary judgment (in the defendant's favor, natch).

The false advertising discussion is more troubling. The court says "Nanal's president admitted both that he used "vega helmets" as an Adword through Google and that his company was not authorized to, nor did it, sell vega helmets....The falsity of Nanal's advertisement creates a presumption of deception and reliance." Wait a minute, did I miss something there? How is having an ad triggered by the Vega keyword make a false statement? Depending on the ad copy, for example, there could be an express comparative advertisement; but even if the defendant's ad just merely referenced its own goods, there's no reason to assume that the "Vega" keyword is incorporated into the advertiser's statement. At minimum, the court did a lousy job articulating how it derived a false statement here. Compare Jurin v. Google and Heartbrand Beef v. Lobel's discussing the search engines' (lack of) liability for false designation of origin.

As a result, the court sends this case to trial on the trademark infringement, false advertising and other claims.

[Note: I still have to blog the 1-800 Contacts v. Lens.com decision from last month]

Posted by Eric at 07:20 AM | Marketing , Search Engines , Trademark | TrackBack

January 12, 2011

Search Engines Sued for Accepting Keyword Advertising on "Cheese of the Month Club" Trademark--Pathak v. ICG

By Eric Goldman

Pathak v. ICG America, Inc., 5:11-cv-00055-VAP -OP (C.D. Cal. complaint filed Jan. 6, 2011)

Pathak's lawsuit is the latest iteration in the litigation deathmatch royale taking place among retailers with "[Food] of the month club" trademarks. See this AP story about related litigation brought by Harry & David against Pathak over "Fruit of the Month Club," plus Harry & David has sued both Hickory Farms and ICG (one of the defendants in this case). See a recent ruling in favor of Harry & David in the ICG case. Finally, Pathak previously sued the PTO over its granting a trademark in "fruit of the month" (and Pathak sued Google as part of that lawsuit over keyword ad revenues). I suspect I'm missing some other battlefronts in the deathmatch.

What a load of nonsense. The world would be a better place if we just declared the phrase "[food] of the month club" generic so that no one could claim a trademark in it. Even if the phrase once was descriptive and thus capable of secondary meaning, it has become genericized through overuse. In contrast, so long as we recognize trademark rights in watered-down descriptive terms like "[Food] of the month clubs," we get bogus disputes between companies with crummy trademarks, all of them tearing each other down rather than actually doing a better job for their customers. What a shame.

OK, back to the latest case. Pathak runs a "Cheese of the Month Club" and has a registered trademark in the term. Apparently he learned some tricks from his defense of the Harry & David lawsuit, because now he's going on the offensive using recycled arguments that apparently were used against him. (Indeed, he apparently cloned-and-revised an anti-cybersquatting claim from his precedent source even though the complaint never discusses domain names). He asserts that some advertisers bought his trademark as keywords and used the term in ad copy. He then pulls the search engines into the lawsuit as well, arguing that they ignored his C&D against selling the trademark as an ad trigger and that makes them culpable. As a pro se going up against some mighty companies, I'd say Pathak's likelihood of success against the search engines is very, very low.

The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google [on appeal]
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic
* Pathak v. ICG

Posted by Eric at 08:54 AM | Derivative Liability , Search Engines , Trademark | TrackBack

December 30, 2010

Hypocrisy Alert?! Expedia, a "FairSearch" Member, Marginalizes American Airlines in Its Search Results

By Eric Goldman

Just like manufacturers often have complicated relationships with their retailers, airlines and travel aggregators simultaneously compete and cooperate with each other. Airlines value the extra visibility that aggregators give them, but the airlines pay for that premium; aggregators siphon traffic away from the airlines' more lucrative direct-to-consumer sales. Airlines constantly must decide which sales approach (aggregated or direct sales) maximizes profits, which leaves aggregators with a constant risk of being disintermediated.

American Airlines' recent decision to pull out of Orbitz instantly created a disequilibrium in the entire online travel industry. American Airlines is one of the biggest US airlines, meaning Orbitz users will notice its absence, and Orbitz is one of the biggest online travel aggregators, meaning that a potentially significant number of fliers will take their business to other Orbitz listings. Either American will have to reengage with Orbitz and other aggregators, or other airlines could pull out as well and kill off the aggregator industry. Until we reach a new equilibrium, anarchy will ensue.

As part of the anarchy, Expedia reduced the visibility of American Airlines' offers in Expedia's search results in two ways. As Reuters explains:

American's ticket prices are no longer displayed in Expedia's initial search results. Consumers must click through to a separate Expedia page to get detailed information on flights and airfares. [American Airlines] is also no longer one of the first carriers to be displayed on Expedia when consumers make flight queries.

Expedia's choice is a little unexpected because American Airlines hasn't pulled the plug on Expedia (yet); it only pulled the plug on Expedia's competitor Orbitz. Explaining this puzzle, Expedia released a statement saying "This has been done in light of both American Airlines' recent decision to prevent Orbitz from selling its inventory and a possible disruption in Expedia's ability to sell American Airlines tickets when our contract with American Airlines expires." Retaliation, or a warning shot?

Expedia's move raises issues I explore in my Search Engine Bias article. As a consumer, I am annoyed when a search engine has a conspicuous omission; and online, I can easily switch between online travel aggregators and conduct my search at another site that offers me more useful results. So Expedia might be hurting itself with its users by offering less value to them. Or, due to its degraded sales, American Airlines might beg Expedia to restore its visibility. It will be interesting to see who blinks first.

For the reasons I describe in my Search Engine Bias article, I have no policy problems with Expedia's move against American Airlines. They don't "owe" it to American Airlines to show them in the results, and there is no such thing as "correct" search results. The market will drive a resolution to the Expedia/American Airlines tiff.

However, I have a huge problem with Expedia's apparent hypocrisy. Expedia participates in a mistitled alliance called "FairSearch.org." This alliance started as a self-interested way for the participating companies to harass Google's attempted acquisition of ITA, but their name and rhetoric stakes out the broader theme of search engine bias.

For example, FairSearch.org stakes out two main guiding principles it wants: "transparency" and "innovation." It defines transparency as:

TRANSPARENCY: Consumers – not search engines – should choose winners in the marketplace. Consumers benefit from more choices in the search marketplace competing to win users, innovating to improve products and displaying results transparently. When search providers engage in search discrimination – manipulating search results to promote a favored product and punish competitors – consumers pay the price.

Wait a minute...didn't Expedia do EXACTLY what FairSearch said it didn't want search engines to do? Expedia appears to be engaging in "search discrimination" (a nonsensical phrase for reasons I explain in my Search Engine Bias article) by manipulating its search results to punish American Airlines, which competes with Expedia through its direct sales to consumers. Worse, I couldn't find any on-site explanation of why Expedia was treating American Airlines' search results differently, thus seemingly displaying its results opaquely, not transparently.

Given the rhetoric on FairSearch's website, it looks like FairSearch should be leading a charge against Expedia for violating the alliance's principles. Perhaps Expedia ought to drop out of FairSearch.org if it can't abide by the group's rules. Or perhaps FairSearch.org should drop the "fair" in its titling to make clearer that its real organizational raison d'etre is to advance the parochial interests of online travel intermediaries who are paranoid that Google will disintermediate them. Until then, Expedia's position looks uncomfortably duplicitous.

To be clear, I understand that, unlike Google's organic results, Expedia's airline search is a pay-for-play search engine (although I don't believe Expedia transparently discloses how much it gets paid, by whom and for what). For purposes of the ridiculous rhetoric from FairSearch and Expedia's fidelity to the organization's articulated principles, I think it's equally (or even more) important for pay-for-play search engines not to punish their competition by downgrading search results or make sorting decisions opaquely.

Posted by Eric at 01:52 PM | Search Engines | TrackBack

Google Files Unredacted Brief in Rosetta Stone v. Google Appeal

By Eric Goldman

After some prodding by Paul Levy of Public Citizen, Google has filed an unredacted version of its response brief in the Rosetta Stone v. Google appeal. As Paul explains in his blog post, the newly disclosed information is nowhere close to confidential. Some of the new information:

* page 9: Google advertising performs well for Rosetta Stone. Between 2007-10, it made $27M from Google referrals (organic and paid) and got 330k+ orders from Google ads.
* page 10: Google helped Rosetta Stone catch fraudsters
* page 33: Rosetta Stone customers take 2-4 weeks to make a purchasing decision
* page 56: in 2005, Rosetta Stone's unaided consumer recognition was 2% and aided recognition was 13%

Some of these facts may be mildly embarrassing to Rosetta Stone, but way more embarrassing is that anyone thought this information was actually confidential.

In a partially related development, Marty Schwimmer and I are working with Public Citizen to request unsealing of the entire joint appendix in this appeal. Paul Levy blogged an explanation.

UPDATE: Oral arguments in the case are scheduled for the week of March 22.

The case library:

* Public Citizen's motion (with Marty Schwimmer and me) to intervene and request to unseal the joint appendix.
* Rosetta Stone reply brief.
* Public Citizen amicus brief in support of Google.
* Public Knowledge/EFF amicus brief in support of Google.
* eBay/Yahoo amicus brief in support of Google.
* Google's opening response brief: redacted and unredacted (warning: 60MB file).
* UK Intellectual Property Law Society amicus brief in support of neither party.
* Rosetta Stone's opening appellate brief: redacted and unredacted.
* INTA's amicus brief in support of Rosetta Stone.
* Carfax et al amicus brief in support of Rosetta Stone.
* Association for Competitive Technology et al amicus brief in support of Rosetta Stone.
* ConvaTec et al amicus brief in support of Rosetta Stone.
* Volunteers of America amicus brief in support of Rosetta Stone.
* District court's main opinion granting SJ. My blog post.
* District court's opinion granting a motion to dismiss on the unjust enrichment claim.
* Rosetta Stone's initial complaint. My blog post.

Posted by Eric at 07:49 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

December 27, 2010

Nov.-Dec. 2010 Quick Links, Part 1 (Trademarks and Advertising Edition)

By Eric Goldman

I have a big backlog of Quick Links from the last 2 months. I'll post them over the next few days. I also have a backlog of other blog posts I need to write, especially my reassessment of my prediction of Wikipedia's demise. I'll get to those posts after I finish grading final exams.

An administrative note: This blog was named to the ABA Blawg 100 for the second year in a row, although oddly in the Legal Tech category. Many thanks for your continued readership. Feel free to vote in the popularity contest if you’d like. I voted for Techdirt and Not-So-Private Parts in their respective categories.

Trademark

* Tiffany (NJ) Inc. v. eBay Inc, 2010 WL 3416635 (U.S. Nov 29, 2010). The Supreme Court denied cert in this long-running case. My prior blog post.

* FreecycleSunnyvale v. The Freecycle Network (9th Cir. Nov. 24, 2010). A rare ruling saying that a trademark owner (The Freecycle Network) abandoned its TMs due to naked licensing. If you have a logo license program, this is a good reminder to make sure you have both quality control provisions in the license agreement and actually exercise quality control. For more on naked licensing, see this article by my former colleague Irene Calboli.

* NYT on an auction of 170 “retro” trademarks revived just for auction purposes. About 2 dozen trademarks were sold for a total gross of $132k. Marty keeps it real about the auction’s validity.

* A fight over the name "Ernie's Liquor" in Palo Alto.

* K.S.R. X-Ray Supplies, Inc. v. Southeastern X-Ray, Inc., 2010 WL 4317026 (S.D. Fla. Oct. 25, 2010). ACPA violation and $10k award when a competitor registers a slight variation of its competitor's trademark as a domain name.

* Rebecca on a bizarre trademark battle over vehicle license plate designs.

* Sellify is appealing its loss against Amazon. My initial blog post.

* NYT: Star athletes are trying to trademark their catchphrases.

* B&B Hardware, Inc. v. Hargis Industries, Inc., 2010 WL 4683725 (E.D. Ark. Nov. 10, 2010): "Here, the jury expressly found that B & B copied Hargis' fastener photos and size/weight charts and posted them on its website as its own, thus causing Hargis to prevail on its cross-complaint for false advertising and false designation of origin. The Court finds B & B's conduct focusing on the creation of a new website as well as its contacting Hargis customers, using metatags and purchasing domain sites using the term “sealtite” or phrases containing that term, introducing bogus design drawings into evidence of purported construction fasteners, and other conduct previously discussed, was a willful and deliberate attempt to manufacture evidence to support its trademark infringement claim. The Court finds this is an exceptional case in which the award of fees is justified."

* NYT: A New York state law requires “the education commissioner’s consent for the words library, school, academy, institute and kindergarten, among others to be used in a certificate of incorporation or company name.” Thus, the incorporation papers for a library-themed chocolatier named “Chocolate Library” got bounced.

* I'm helping Paul Levy and Public Citizen try to unseal the "confidential" joint appendix in Rosetta Stone v. Google.

Advertising

* The EU has opened an antitrust investigation into Google. I know that Google's making too much money to just walk away from Europe, but I think both the EU and Google would live happier lives if they were to go their separate ways.

* Google is changing its ad label from "Sponsored Link" to "Ad." Google has rolled this change out in Gmail, and I've also noticed a new ad unit right by the place where I archive or delete messages--sloppy clicking will earn Google a few extra pennies.

* Congress enacted the “CALM Act” to regulate the volume of TV commercials.

* California's rules on Political Online Advertising. (see items 19 and 20)

* Seattle mandates an opt-out system for Yellow Pages book deliveries, which prompts a lawsuit. Meanwhile, Verizon wants to stop distributing white pages directories.

* The FTC approved the Reverb settlement over fake blog posts. Venkat’s prior blog post.

* In re Facebook PPC Advertising Litigation, 2010 WL 5174021 (N.D. Cal. Dec. 15, 2010). Facebook gets another dismissal without prejudice. The judge says:

To the extent that Plaintiffs allege that Facebook is subject to UCL liability merely because its filtering system is insufficient or ineffective, such allegations fail to state a claim….To the extent that Plaintiffs could allege that Facebook failed to employ any "filtering" system to protect against click fraud or knew but did not disclose that its system was subject to regular and frequent failure in excess of flaws inherent in such systems, they might state a claim.

Previous blog posts (1, 2).

* More detail on the Largo Cargo v. Google settlement.

* ClickZ: Still No Answers for Digital Pharma Marketers.

* Google is telemarketing local advertisers.

Posted by Eric at 08:33 AM | Marketing , Search Engines , Trademark | TrackBack

December 22, 2010

Hotels Benefit When Distributors Reference the Hotel's Trademark in Keyword Ad Copy

By Eric Goldman

Lesley Chiou of Occidental College and Catherine Tucker of MIT have posted an empirical study, How Does the Use of Trademarks by Third-Party Sellers Affect Online Search? The study tries to model what happens when distributors use a manufacturer's trademark in keyword ad copy, specifically by looking at data for the hotel industry.

This intra-channel conflict was exacerbated by Google's 2009 trademark policy change that meant manufacturers could not prevent channel members and aggregators from using the third party manufacturer's trademark in their keyword ad copy. Trademark owners did plenty of teeth gnashing about this change, and that change (plus the Rescuecom Second Circuit decision) helped open the floodgates of trademark litigation against Google that peaked with a dozen pending lawsuits.

As usual with empirical studies, we could debate the data, the assumptions and the conclusions in this study. Acknowledging these limitations, the article reaches a provocative yet perhaps intuitive conclusion that trademark owners were unnecessarily freaking out about Google's policy change. According to this study, when travel distributors/aggregators reference specific hotel trademarks in their ad copy, the hotel sees a slight reduction in the clicks on the hotel's own ad but simultaneously gets a more significant increase in the clicks on the hotel's organic listing. Effectively, then, when channel members include the upstream "manufacturer's" trademark in their ad copy, it indirectly contributes to the manufacturer getting more users for "free" (i.e., by clicking on the free organic links instead of the CPC links). As the article says:

when third-party ads started displaying the brand name, this encouraged search engine users to click directly on the main link to the branded website. This change in click-through behavior for the main non-paid link after a change in the composition of paid search ads suggests that there are spillovers from the presence of a branded search ad to that brand's main non-sponsored link.

I discuss spillover effects from keyword advertising in more detail in my Brand Spillovers article.

The article offers some social science theories to try to explain this phenomenon. I personally didn't find the explanations compelling, but they are worth considering if you are thinking about this topic.

If we find these empirical results credible, I can see some implications:

1) TM owners should be *encouraging*, not discouraging, its channel members to reference its trademarks in keyword ad copy.

2) Aggregators/distributors might decide it's not in their best interests to include the actual trademark in the ad copy, even if Google's policy lets them do so. The article suggests that these advertisers may drop poor-performing ads over time, so advertisers may be reaching this conclusion independently.

3) This article supports the cases that have found that keyword ads aren't likely to cause consumer confusion (e.g., the trial findings in College Networks and Fair Isaacs cases and the summary judgment in the Rosetta Stone case).

4) It would be ridiculous to hold search engines liable for trademark infringement from keyword advertising when the keyword advertising may be creating positive spillovers for the trademark owner. I explore the possibility of trademark owner duplicity in my Brand Spillovers article.

The article doesn't address the implications where channel members purchased a trademarked keyword but don't show the trademark in the ad copy. That issue is just one of many unresolved questions about consumer perceptions of and interactions with keyword advertising.
___

The article abstract:

Should firms who want to promote their direct channel allow the use of their trademarked brand name by third-party sellers of their products? This paper examines this question empirically using a natural experiment in advertising on search engines. In June 2009, Google started allowing any third-party reseller for a product to use a trademark, such as "Doubletree," in the text of its ad, even if the reseller did not have the trademark owner's permission. We study the effects of this practice within the hotel industry. We find some evidence that allowing third-party sellers to use a trademark in their online search advertising did indeed divert clicks from the hoteliers' paid search ads. However, this decrease in paid clicks was more than outweighed by an increase in consumers clicking on the unpaid links to the hotelier's website within the main search results. We provide evidence from both historical data and a lab experiment as to why this occurs. When third-party sellers focus on the trademarked brand in their ads, this distracts from their own low-price marketing message, and customers are consequently more likely to buy from the direct channel.

Posted by Eric at 07:37 AM | Marketing , Search Engines , Trademark | TrackBack

December 07, 2010

Rosetta Stone v. Google Amicus Briefs in Support of Google

By Eric Goldman

Three amicus briefs were filed in support of Google in the Rosetta Stone v. Google appeal.

eBay and Yahoo.

This is the "industry" brief, although in the past, typically more players have joined a brief like this. Easily the most interesting aspect is that eBay emerged as a Google supporter after an organization it supports, the Association for Competitive Technology, joined a pro-Rosetta Stone brief along with co-joiner Tiffany. I haven't heard what happened in response to that apparent oversight, but I've always assumed it would end badly for eBay's relationship with ACT. (As of now, eBay is still listed as an ACT "supporter").

Substantively, the brief addresses contributory trademark infringement standards and the importance of keyword advertising. The brief surprisingly engages in a few places with the Carfax amicus brief (most of the time, amici ignore each others' briefs). The brief also tries to distinguish the troubling 4th Circuit decision in Georgia Pacific Consumer Products LP v. Von Drehle Corp.

Public Knowledge and EFF.

This brief argues that Google doesn't make a trademark use in commerce (I can't believe they waded into those waters again) and Google and its advertisers engage in trademark fair use.

Public Citizen.

The summary:

We argue that, because both keyword advertising, and the “sale” of keywords, are commercial speech, the regulation of this practice must be consistent with the First Amendment. Next, we discuss trademark law’s basic principles and show that they are limited to protecting consumers against confusion about whether goods and services emanate from the trademark holder, and show that it is not Google’s function to deliver Internet users to a trademark holder’s official website. We further contend that those who compete with or criticize a trademark holder are entitled to call their own web content to the attention of those who have displayed interest in a trademarked term. Finally, we argue that, if any trademark confusion is at issue in this case, it is “initial interest confusion.” This Court has previously expressed skepticism about that doctrine; Rosetta cannot rely on that concept to hold Google liable here.

______

The case library:

* Public Citizen amicus brief in support of Google.
* Public Knowledge/EFF amicus brief in support of Google.
* eBay/Yahoo amicus brief in support of Google.
* Google's opening response brief.
* UK Intellectual Property Law Society amicus brief in support of neither party.
* Rosetta Stone's opening appellate brief: redacted and unredacted.
* INTA's amicus brief in support of Rosetta Stone.
* Carfax et al amicus brief in support of Rosetta Stone.
* Association for Competitive Technology et al amicus brief in support of Rosetta Stone.
* ConvaTec et al amicus brief in support of Rosetta Stone.
* Volunteers of America amicus brief in support of Rosetta Stone.
* District court's main opinion granting SJ. My blog post.
* District court's opinion granting a motion to dismiss on the unjust enrichment claim.
* Rosetta Stone's initial complaint. My blog post.

Posted by Eric at 01:25 PM | Derivative Liability , Search Engines , Trademark | TrackBack

December 06, 2010

Rosetta Stone v. Google Appellate Briefs: Google's Opening Brief and Rosetta Stone's Unredacted Brief

By Eric Goldman

Due to the intervention of Public Citizen, Rosetta Stone filed an unredacted brief in its appeal of Rosetta Stone v. Google. The actual redacted material seemed hardly worthy of confidentiality; in some cases, the information already was clearly public, and in other cases the information was so inconsequential that it strains my mind trying to think why anyone cared about its confidentiality.

I've gone through the redactions, and a few of the more interesting tidbits of newly revealed information:

- discussion of Google's consumer survey in 2004 when third party trademarks appeared in the ad copy (page 8). One survey distillation said that there was an "overall very high rate of consumer confusion" with an average of 30-40% and 94% of consumers confused at least once. I'd need to parse the actual studies, but we should remember this was 2004, when Google's method of presenting advertising was relatively new. Six years later, I would love to see the stats if we replicated that study. I am confident there would be much lower rates; and compared against a baseline level of confusion among online users generally regardless of what they see, my guess is that the numbers would be pretty close to the baseline.

- discussion of Google's trademark policy change in 2009. The brief argues that the 2004 survey evidence shows Google knew consumers would be confused in 2009. Given the many changes in technology and consumer expectations from 2004 to 2009, that's not really a credible argument to me. More remarkable to me is that Google says it didn't test consumer reactions to this policy change at all. Google is known for being an obsessive tester of UI changes, so to fly blind on this seems conspicuously anomalous.

The evidence also indicates that Google expected to generate at least $100M of new annual incremental revenues from the 2009 policy change, and up to $1B annual. For those pundits who were loving Google's year-over-year profit increases from 2009 to 2010, we have a partial explanation.

- Rosetta Stone has spent approx. $100M on advertising (page 23). It would be interesting to compare how much Rosetta Stone is wasting on legal fees in this case and how far they could advance their marketing objectives if they redirected those litigation dollars.

- Both Google's current and former Chief Trademark Counsels (Terri Chen and Rose Hagan, respectively) "could not tell that three of the sponsored links - two ads for counterfeiters and one for a Rosetta Stone competitor - were not advertising the sale of genuine Rosetta Stone software" (page 36).

This seems to cut against Rosetta Stone's position. If Google's most experienced trademark counsel can't spot the ads for fakes, then how does Rosetta Stone expect lower-level employees or machines to do so?

In this respect, I'm reminded of the ludicrous arguments from Viacom about YouTube's ability to spot fake uploads. Viacom and its lawyers couldn't do it (recall that Viacom's lawyers TWICE withdrew its complaint about videos that it thought were illicit uploads but weren't); so how could Viacom expect YouTube to be more accurate than its lawyers? Ditto for Rosetta Stone.
______

Unfortunately, Google's opening appellate brief is similarly swiss-cheesed by redactions. I believe Paul Levy will be working to get those redactions revealed. Substantively, Google's brief covers predictable ground; I thought this paragraph nicely distilled Google's factual position:

The core facts relating to the alleged trademark infringement are undisputed. It is undisputed that Google operates an advertising program through which advertisers can bid for the opportunity to have their ads displayed next to search results in response to user queries that contain trademarks. It is undisputed that Google does not prohibit resellers and information websites from using trademarks in ad text to refer to genuine products. It is undisputed that advertisers are responsible for their selection of keywords and ad text and that Google contractually prohibits advertising counterfeit goods or otherwise infringing intellectual property. It is undisputed that Google takes substantial proactive and reactive efforts to enforce its policies. It is also undisputed that counterfeiters exist and sometimes violate Google’s policies and take evasive actions to further their own agendas. It is undisputed that Google has never suggested to any counterfeiter that it copy and sell fake Rosetta Stone software, or otherwise induced any counterfeiter to do so. And it is undisputed that Google responded to Rosetta Stone’s complaints about ads that were not in compliance with Google’s policies.

______

The case library:

* Google's opening response brief
* UK Intellectual Property Law Society amicus brief in support of neither party
* Rosetta Stone's opening appellate brief: redacted and unredacted.
* INTA's amicus brief in favor of Rosetta Stone.
* Carfax et al amicus brief in favor of Rosetta Stone.
* Association for Competitive Technology et al amicus brief in favor of Rosetta Stone.
* ConvaTec et al amicus brief in favor of Rosetta Stone.
* Volunteers of America amicus brief in favor of Rosetta Stone.
* District court's main opinion granting SJ. My blog post.
* District court's opinion granting a motion to dismiss on the unjust enrichment claim.
* Rosetta Stone's initial complaint. My blog post.

Posted by Eric at 09:07 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 01, 2010

Seventh Circuit Tosses Beverly Stayart's False Endorsement Claims--Stayart v. Yahoo

By Eric Goldman

Stayart v. Yahoo! Inc., 2010 WL 3785147 (7th Cir. Sept. 30, 2010).

I have previously blogged about Beverly Stayart's lawsuits against Yahoo and Google for apparently sploggy (and possibly cloaked) objectionable search results delivered when she searched on her name. Whatever sympathy I might otherwise feel for her is overridden by the lawsuits' complete lack of merit.

Yesterday, the Seventh Circuit affirmed the dismissal of her false endorsement claims against Yahoo. My prior posts on the district court opinion and her initial complaint. The court efficiently points out that she has not made a use in commerce of her name sufficient to trigger Lanham Act protection, and therefore she lacks standing for a false endorsement claim.

Stayart argued that her humanitarian/charitable work satisfies the Lanham Act commerciality requirement. This is a nonsense argument that the court easily rejects: "While Stayart’s goals may be passionate and well-intentioned, they are not commercial. And the good name that a person garners in such altruistic feats is not what § 43 of the Lanham Act protects." The Lanham Act's false endorsement provisions are not a general purpose publicity right.

The district court cited two other reasons (beyond standing) to dismiss the case, including an analytically confused 47 USC 230 defense. The Seventh Circuit opinion did not address the 230 issue at all.

While this *should* be the end of Stayart's litigation, it probably won't be. She can refile her state law claims against Yahoo in state court. She also still has a pending lawsuit against Google.

An aside: It's been a busy Cyberlaw week at the Seventh Circuit, including uBID v. GoDaddy, Chicago v. Craigslist and now this opinion.

Posted by Eric at 01:02 PM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

September 11, 2010

Google Gets Good Results in Three AdWords Trademark Cases (Jurin, Flowbee, Dazzlesmile)

By Eric Goldman

Jurin v. Google, 2010 WL 3521955 (E.D. Cal. Sept. 8, 2010)

Jurin is one of the multitudinous trademark owners objecting to Google's AdWords program. Echoing a prior ruling, the court has rejected Jurin's claims for false designation of origin and false advertising on a 12(b)(6) motion to dismiss. The court also rejected Jurin's claim of contract breach (based on Google allegedly failing to follow its trademark takedown policy) because Google never made the promises that Jurin asserts. The court gives Jurin another chance to file a second amended complaint, so I'm counting this as a pending lawsuit. However, Jurin has no chance of winning, and I wonder if he will get hit with an attorneys fee award again if he continues his futile quest.

Separately, last month, Google resolved the Dazzlesmile and Flowbee trademark cases over AdWords. See the Dazzlesmile stipulation of dismissal and Flowbee stipulation of dismissal. I couldn't easily find any public announcements about either case, but both appear to be settlements.

With these two dismissals, Google has whittled its portfolio of pending AdWords trademark lawsuits down to three from a high of twelve. (I'm not counting the Rosetta Stone case, which is on appeal after Google's remarkable win).

The roster of pending AdWords cases (I most recently double-checked the pending cases on September 11, 2010):

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and the companion Google v. John Beck Amazing Profits
* Stratton Faxon v. Google
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google 1.0 (voluntarily dismissed), succeeded by Jurin v. Google 2.0
* Rosetta Stone v. Google [on appeal]
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 12:17 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack