Technology & Marketing Law Blog

September 01, 2010

Griping Patient Goes Too Far Posting Fake Content in Doctor's Name--Eppley v. Iacovelli

By Eric Goldman

Dr. Barry Eppley v. Lucille Iacovelli, 2010 WL 3282574 (S.D. Ind. Aug. 17, 2010). The CMLP entry. The Internet is filled with commentary about this long-running saga if you want more information.

Dr. Eppley is a plastic surgeon. In 2001, he performed a facelift for Iacovelli. After a few months, Iacovelli complained of an obstructed airway. Dr. Eppley believes there is no way the facelift caused the obstructed airway. Iacovelli apparently saw it differently, and she took to the Internet to blame and criticize Dr. Eppley--allegedly including (directly or through cohorts) making fake postings in Dr. Eppley's name and publishing critical content at domain names that include Dr. Eppley's name. Dr. Eppley claims that this criticism has cost him a lot of money; at least 1 or 2 patients a month cancel appointments with him (presumably because the search results scare them off), and an unknown number never contact him in the first place. He has also fought back with a reputation management campaign costing $2-3k/month. Dr. Eppley has a registered trademark in his name.

[note: the court says Iacovelli did not properly contest Dr. Eppley's summary judgment motion, so the court appeared to accept Dr. Eppley's statement of facts. It’s unclear if Iacovelli’s no-show related to her failing health; but in a sad development, she passed away on August 2, before this ruling was issued.]

The court’s description makes Iacovelli sound like a fairly typical griper. For example, the court says:

Ms. Iacovelli has utilized Dr. Eppley's name in tabs, links, websites and throughout her campaign of internet disparagement, with the conscious design of driving internet traffic away from Dr. Eppley's authorized websites and toward her own.

Right, that’s what gripers do. However, there is one key exception: the fake postings in the doctor’s name. The court drops the boom on Iacovelli for this. The court grants Dr. Eppley summary judgment for defamation and false light (although I think the false light actually should have been normal defamation) and says Dr. Eppley is entitled to damages and attorneys' fees, both to be quantified in a later proceeding. Given Iacovelli’s death, I’m not sure any of that will matter.

The allegations in the case also suggest that the false postings might have constituted criminal epersonation in California if Gov. Schwarzenegger signs the pending bill into law. The court even says Iacovelli engaged in "virtual identity theft" of Eppley's trademark. Rhetorically, this is a little over-the-top; I half-expected the court also to say that Iacovelli shanghai'ed his identity.

However, in the zeal to take down Iacovelli, the court goes too far in concluding that Iacovelli committed a false designation of origin. There are several problems with this discussion.

First, Iacovelli allegedly misdesignated the origin of content, rather than the origin of marketplace offerings. As the court says:

The creation of internet sites with names such as "barryeppleyplasticsurgeon.com" and "barry-eppley.owndoc.com," the undertaking to create a series of "Eppley sites," and the appropriation of Dr. Eppley's name and likeness in social network and other websites demonstrate a deliberate effort to attract internet users to the websites controlled by Ms. Iacovelli and her associates and to create the false impression that they are websites and pages created or authorized by Dr. Eppley.

My position is that the Lanham Act applies to misrepresentations about marketplace offerings, not misrepresentations about the *source of information* about marketplace offerings. See my deconstruction of the SMJ Group v. 417 Lafayette Restaurant case. So in my opinion, structurally, the Lanham Act doesn’t apply to misdesignated content about Dr. Eppley’s services.

Second, even if the Lanham Act applies to falsely sourced content, Iacovelli’s griping seemingly lacks the requisite commerciality to satisfy the Lanham Act. Unfortunately, the court strains itself to find commerciality:

The record indicates an effort to elevate Ms. Iacovelli to celebrity status by publicizing her as the "star" of an HBO documentary and to promote the market for the book about her that Mr. Bergeron is writing. Ms. Iacovelli, furthermore, has asserted that her internet publications are regarded by her as her primary occupation, and that she operates them on a "sole-proprietor" basis. It is apparent that Ms. Iacovelli has sought to enhance her fame and notoriety by associating her story and her defamatory message with Dr. Eppley's name. A desire to achieve derivative celebrity status by diverting the internet traffic arising from Dr. Eppley's trademarked name constitutes a calculated effort to take advantage of his name recognition in order to boost the status and attention paid to her "sole-proprietor" sites. In addition, some of the websites and postings have included advertising content, apparently generating advertising revenue or other valuable consideration.

I disagree with the last point that ad-supported content should qualify as commercial activity under the Lanham Act. See my Online Word of Mouth article. But I'm more interested in the first argument--that a desire for fame, even if it doesn't actually translate into revenues, is a commercial activity. It reminds me a little of the Napster Ninth Circuit opinion, where the court found that Napster had a direct financial interest in the infringing P2P files being shared because the files were a "draw" to the system, even though Napster had not actually earned a dime of revenue. If no revenue = direct financial benefit, then I guess a desire for fame = commercial activity. Maybe the judge was overly influenced by Goldhaber's Attention article from the 1990s.

In the same paragraph, the court concedes "Ms. Iacovelli has also been motivated in part by non-commercial goals, but this does not affect her trademark transgressions." Um, say what? Could you go over that again?

The court’s finding of false designation of origin is misguided and unsupportable. However, it’s also clear that false content isn’t cool. Consider this ruling as another data point in the developing legal precedent about inauthentic online content. See also the FTC’s settlement with Reverb, Lifestyle Lift’s settlement with the New York Attorney General’s office, the RealSelf v. Lifestyle Lift lawsuit and settlement, Meyerkord v. Zipatoni and Buckles v. Brides Club. It’s already pretty clear that adjudicators won’t tolerate inauthentic online content.

Posted by Eric at 08:31 AM | Content Regulation , Marketing , Trademark | TrackBack

August 20, 2010

Selling Replacement Supplies Could Constitute Contributory Trademark Infringement–Georgia Pacific v. Von Drehle (Guest Blog Post)

by guest blogger Mark Bartholomew

[Eric's introduction: Mark is a law professor at the University of Buffalo. He has written several articles on secondary copyright and trademark infringement. See his SSRN page. We were swapping emails about this ruling, and he graciously agreed to write a post about it. I've appended a brief comment after his.]

Georgia Pacific Consumer Products LP v. Von Drehle Corp., 2010 WL 3155646 (4th Cir. Aug. 10, 2010)

The Fourth Circuit recently held that a maker of paper towels may violate the Lanham Act when it convinced merchants to stuff its paper towels into Georgia Pacific’s branded automatic towel dispensers instead of using towels provided by Georgia Pacific. The case is worth a look as it touches on issues of contributory trademark infringement, post-sale confusion, and antitrust law.

Plaintiff Georgia Pacific (GP) leases hands-free enMotion brand paper towel dispensers to distributors. The distributors then sublease the dispensers to businesses that have a use for them, like stadiums and restaurants. In its leases, GP conditions any use of the dispensers on exclusive use of GP brand paper towels. Unlike other automatic paper towel dispensers, enMotion dispensers are specifically designed to accept only a particular sized towel manufactured by GP.

Von Drehle is also in the paper towel business. In 2004, it developed a new type of toweling specifically for use in GP’s enMotion dispensers. It then instructed its sales staff to go out and convince distributors to resell its cheaper toweling to customers for use in enMotion dispensers. GP sued for contributory trademark infringement under the Lanham Act, along with violations of North Carolina’s unfair competition law and tortious interference with contractual relationships. Von Drehle counterclaimed for violation of the Sherman and Clayton acts.

The district court held in favor of Von Drehle on the trademark infringement and unfair competition claims. It explained that in evaluating likelihood of confusion, it was the mind sets of the business owners who purchase paper towel rolls for their restrooms that matter, not the expectations of restroom visitors. The court rationalized that restroom users don’t have a choice as to what type of paper towel they will receive, and “[n]o evidence exists to indicate that restroom visitors play any meaningful role in deciding which paper towel roll a business owner purchases from a distributor.” It held in GP’s favor on the antitrust claim because it found that GP had not taken coercive actions to enforce its lease agreements.

The Fourth Circuit reversed on the trademark and unfair competition claims. It described “the judicially created doctrine of contributory trademark infringement, derived from the common law of torts” as boiling down to a simple formula enunciated by the Supreme Court in a footnote to its landmark 1984 copyright decision, Sony v. University City Studios:

[A] manufacturer or distributor could be held liable to the owner of a trademark if it intentionally induced a merchant down the chain of distribution to pass off its product as that of the trademark owner's or if it continued to supply a product which could readily be passed off to a particular merchant whom it knew was mislabeling the product with the trademark owner's mark.

Sony Corp. of Am. v. Universal City Studios, Inc., 464 U.S. 417, 439 n. 19 (1984).

The Fourth Circuit decided that there could be actionable post-sale confusion here because GP’s survey evidence showed that over 40 percent of the public expected the paper towels they used to match the brand of the enMotion dispenser, and GP’s reputation may be hurt if it could not control the quality of the toweling used in its dispensers. To the extent Von Drehle intentionally created and distributed its towels for use in the enMotion machines and continued to supply its towels to distributors knowing how they were to be used, Von Drehle could be liable for contributory trademark infringement.

What’s interesting to me about this case is not so much the court’s specific analysis of contributory trademark infringement or post-sale confusion. Both of these topics are controversial issues in trademark law and have been dealt with much more thoroughly in other cases. What’s interesting is how the case shows how these controversial doctrines intersect with antitrust law, and the serious threat wide application of these doctrines poses to the competitive goals trademark law is designed to further. GP designed a new device and required any user of that device to purchase its own, more expensive paper towels. Although in decline in recent years, the doctrine of patent misuse prevents patent holders with sufficient market power from suing a licensee for infringement when the licensee uses a patented device in conjunction with certain materials outside of the patent. A copyright misuse defense has been used to defeat an infringement claim when the copyright holder requires a licensing agreement for use of its work that also prohibits use of competing works. Instead of a patent or copyright claim here, GP is using trademark law to compel users of its device to purchase arguably extraneous goods. The big question here is whether this decision allows GP to make an end run around antitrust concerns.

Yet the Fourth Circuit spends no time on the competitive consequences of its decision. Maybe this is understandable—von Drehle did not appeal the district’s courts adverse ruling on its tying claim. Even so, the Fourth Circuit’s decision strikes at the heart of what is and is not fair competition and the policy issues surrounding enMotion’s practices probably deserved further discussion. (A concurrence by Judge Samuel Wilson hinted at this, noting that the antitrust implications of an arrangement like GP’s “will have to play out . . . on another day and, perhaps, on a different stage.”) In his treatise, McCarthy notes that in not a single reported case has a court refused to enforce a trademark because it was used in violation of antitrust law. But if doctrines like contributory trademark infringement liability and post-sale confusion continue to expand and receive widespread acceptance by the courts, the competitive position of individual manufacturers will continue to strengthen and a defense of “trademark misuse” may deserve more attention.
_____

Eric's comment:

GP's distribution scheme for its towel dispensers is, from an IP standpoint, both brilliant and insidious. If you're a manufacturer looking to control the sale of complementary goods, this case provides a playbook for how to use trademark law to assert control over secondary markets in a way that courts might uphold--despite, as Mark explains, a thick set of antitrust issues. I share Mark's disappointment that the majority opinion basically was blind to the hugely anti-competitive effects of its ruling. But make no mistake, this opinion will not help improve marketplace competition. If GP succeeds with this litigation, it will have successfully kicked out a competitor out of the replacement supplies marketplace, and I expect many, many other manufacturers will try to follow in GP's footsteps to do the same.

Posted by Eric at 12:25 PM | Derivative Liability , Trademark | TrackBack

August 09, 2010

July 2010 Quick Links, Part 1 (IP Edition)

By Eric Goldman

Trademarks

* Rebelution, LLC v. Perez, 2010 WL 3036217 (N.D. Cal. July 30, 2010). The plaintiff is a band named Rebelution. The defendant is a music performer named Pitbull who released an album "Pitbull Starring in Rebelution" without intending to reference plaintiff. No summary judgment to defendant. Wikipedia has a disambiguation page for "Rebelution."

* Southeastern Pennsylvania Transportation Authority v. Mednick Mezyk & Credo (E.D. Pa. complaint filed June 21, 2010). Interesting trademark lawsuit. A government transit authority, SEPTA, has sued personal injury lawyers for the ways they advertise that they represent plaintiffs against SEPTA. I think SEPTA has a tough argument, and they sure look thin-skinned.

* Ryan Gile: "New York New York Hotel/Casino Successfully Hijacks NewYorkNewYork.com"

* Can Chevrolet get people to stop calling it "Chevy"? Not likely.

* The latest article addressing the Trademark Use in Commerce debate: Lee Ann W. Lockridge, When Is a Use In Commerce a Noncommercial Use?, 37 Florida State University Law Review 337 (2010)

Copyright

* The Copyright Office issued new circumvention exceptions for 17 USC 1201 exceptions. The EFF breaks it down.

* MGE UPS Systems v. GE Consumer and Industrial Inc., 08-10521 (5th Cir. July 20, 2010). A significant (and possibly incorrect) ruling on 1201: “Because the dongle does not protect against copyright violations, the mere fact that the dongle itself is circumvented does not give rise to a circumvention violation within the meaning of the DMCA.”

* Mattel Inc. v. MGA Entertainment Inc., 09-55673 (9th Cir July 22, 2010). Another Kozinski bull-in-the-china-shop opinion, it is studded with important legal statements. Among the most interesting: an employee agreement purporting to assign copyrights from the employee failed when the language read more like a patent assignment. But read the whole thing.

* Teter v. Glass Onion, Inc., 5:08-cv-06097-FJG (W.D. Mo. July 12, 2010). Troubling ruling. An art gallery selling an artist’s painting does not make a fair use when making and then publishing thumbnail images of the paintings on the gallery’s website. No first sale defense for making the thumbnail images, either, although I’m not sure how the gallery can advertise the paintings for sale online without the thumbnails. The trademark infringement claim for referencing the artist’s name also survives because of the possibility the gallery looked like an authorized dealer when it wasn’t.

* We learned how much the Viacom v. YouTube ruling cost Google: $100M. Can you imagine what good things might have come if YouTube and Viacom had poured their legal fees into innovation rather than litigation? Also, this is a prime example of just how much it costs when a well-funded company (Google) decides to treat a lawsuit as bet-your-business. No way that most start-ups could have coughed up $100M for the lawyers.

* Scott v. Scribd settled. My original blog post on the case.

* Cable v. Agence France Presse, 2010 U.S. Dist. LEXIS 73893 (N.D. Ill. July 20, 2010), A professional photographer’s claim for 17 USC 1202 for removal of copyright management information survives a motion to dismiss.

* Las Vegas Sun does a thorough expose on alleged copyright troll Righthaven (look at the "related stories" too).

* Copyright enforcement mill gets caught red-handed committing copyright infringement on its website. Whoops!

* SAP has stopped contesting liability in the Oracle/TomorrowNow lawsuit.

* Miller v. Facebook, 2010 U.S. Dist. LEXIS 75204 (N.D. Cal. July 23, 2010). A software copyright registration for a literary work (i.e., the source code) was sufficient to uphold a pleading that the defense infringed the software's look and feel (i.e., an audio-visual work). My most recent post on this case.

Other IPs

* Bimbo Bakeries v. Botticelli: Bimbo Bakeries [great TM!], makers of Thomas English Muffins, gets an inevitable disclosure injunction against a departed employee who knows how to make their "nooks and crannies" and went to a rival baker. See also this post from Trading Secrets.

* Agora Financial LLC v. Samler, WDQ-09-1200 (D. Md. June 17, 2010). This case is similar to the more high-profile Barclays v. theflyonthewall case. The newsletter publisher plaintiff provides stock recommendations to its readers; the defendant republishes the tips on TipsTraders.com. The magistrate rejects a default judgment against the defendant because (1) the hot news doctrine is preempted by copyright law, and (2) even if it isn’t, the “plaintiffs’ writers’ investment recommendations are copyrightable” and therefore ineligible for hot news protection. Ruh-roh. The judge should have stopped at #1. Even the plaintiff admitted that the recommendations were uncopyrightable facts. So now what? Does this now mean everyone who republishes the recommendations is a copyright infringer?

Posted by Eric at 01:25 PM | Copyright , E-Commerce , Trade Secrets , Trademark | TrackBack

August 06, 2010

Google Liberalizes Its European Trademark Policy

By Eric Goldman

After the ECJ's favorable opinion in the Google cases, I've been wondering if Google would liberalize its trademark policy in Europe. It took Google 4 months to parse the ECJ's inscrutable opinion and make a call, but it finally decided that the opinion was favorable enough to support liberalization.

After the changed European policy (starting Sept. 14), Google will have a virtually uniform world-wide policy not to block bids on trademarked keywords at the trademark owner's request. Google will block trademark references in ad copy at the trademark owner's request, but this will be subject to regional differences. In the US and (starting Sept. 14) UK, Ireland and Canada, Google will not block TM references in ad copy for resellers, complementary product sellers and information sites. In the EU and some related countries (EFTA), Google's new policy will be to review ads on an ad-by-ad basis as follows:

in response to a complaint from a trademark owner, we will do a limited investigation as to whether a trademarked keyword in combination with particular ad text is confusing as to the origin of the advertised goods and services. If we find that it is, we will remove the specific ad that is the subject of the complaint.

This language "confusing as to the origin of the advertised goods and services" comes from the Google ECJ opinion, but I'm still not sure exactly what satisfies this standard. Google will likely have to develop its own internal common law to figure out how it interprets the term.

Last year, Google liberalized its US trademark policy. That, combined with the 2nd Circuit's Rescuecom decision, helped spur a flurry of trademark lawsuits against Google (which Google has had some success beating back). Will Google's policy liberalization in Europe similarly prompt a deluge of new litigation?

Perhaps not, because Google is acting on the strength of an ECJ decision, plus additional helpful rulings in the Louis Vuitton case on remand to the French high court as well as a recent ECJ decision in Portakabin. In contrast, Google had no clear litigation success in the US to support its trademark policy liberalization; rather, it came on the heels of Google's 2nd Circuit loss in Rescuecom. In fact, I've been told that a number of trademark lawsuits were dropped in Europe after the Google ECJ decision, presumably because the plaintiffs figured they couldn't win.

At the same time, I can't imagine trademark owners will be happy with Google's new policy. Google has had more adverse rulings in Europe than it's seen in the US, and trademark owners in Europe have a broader array of "unfair competition" doctrines to lob at Google even if they feel constrained by the ECJ rulings. Further, trademark owners might disagree with Google's interpretation of its policy to block confusing ad text/keyword bids. All told, Google could be in for a turbulent ride in Europe.

My main Q is: how much new incremental revenue will this policy change unlock? It bears noting that after Google made its policy changes last year, it subsequently reported huge year-over-year revenue growth. How much of that growth was due to organic growth of Google's business, and how much of it was attributable to new advertising coming from the liberalized policy? I've never gotten a satisfactory answer to that Q. I wonder what will happen with the Europe change. Should we anticipate Google's European revenues are about to get turbocharged by all of the new advertising that was previously squelched by the former policy?

I also wonder if this change will put increased pressure on trademark owners to sue advertisers directly. Already those lawsuits are too numerous to count in the US; and the Google ECJ opinion (combined with the Portakabin opinion, a TM owner v. advertiser suit) put the onus on advertisers not to create confusion through their keyword advertising. Personally, I think most of those TM owner vs. keyword advertiser lawsuits are massive money pits, but far too many TM owners have pursued them nonetheless.

Posted by Eric at 10:41 AM | Search Engines , Trademark | TrackBack

August 05, 2010

9th Cir. Smacks Down AOL's Advertising.com Trademark as Likely Generic -- Advertise.com v. AOL

[Post by Venkat]

Advertise.com, Inc. v. AOL Advertising, Inc., Case No. 10-55069 (9th Cir; Aug 3, 2010).

The Ninth Circuit handed AOL a preliminary trademark loss, finding that ADVERTISING.COM is likely generic for internet advertising services.

Background: AOL owned trademark registrations for ADVERTISING.COM, and brought trademark claims against Advertise.com. The district court found AOL's mark to be descriptive (and thus protectable) and granted AOL's request for an injunction, barring Advertise.com's use of a confusingly similar design (to AOL's ADVERTISING.COM) and also enjoining Advertise.com from using the designation and trade name ADVERTISE.COM. Advertise.com appealed the latter portion of the district court's order.

Discussion: The crux of the appeal - as framed by the Ninth Circuit - was whether AOL's mark was descriptive, as the district court concluded, or generic. The parties agreed that AOL offered "online advertising" or "internet advertising" services.

The court initially concludes that taken individually, "advertising" is generic. AOL argued that when considered together, the mark should be viewed as distinctive. The court wasn't persuaded. The court first looked to the "who-are-you/what-are-you" test and noted that AOL (or this particular division) was "an advertising dot-com." The court also noted the rule that the addition of .com or another TLD "to an otherwise unprotectable term will only in rare circumstances result in a distinctive composite." (See discussions of Hotels.com (TTABlog®) and Mattress.com (MediaPost) for recent cases on this.) AOL unsuccessfully tried to argue that this was one of those rare circumstances.

AOL also argued that the addition of a TLD alters the analysis because only one entity can hold the rights to a domain name at any time - i.e., adding a .com could turn an otherwise unprotectable term into a protectable one, because only one entity could practically use the TLD version of the term. Not surprisingly, the court was unpersuaded by AOL's argument that "a per se rule that the addition of a TLD to a generic term results in a protectable mark." As the court notes, the rule proposed by AOL would grant the domain name owner greater rights than the domain name - i.e., it would potentially allow them to go after the other TLD versions, which would be a bizarro result.

Finally, AOL argued that refusing to protect these types of marks would result in parasite marks, such as "addvertising.com," which would divert business from "advertising.com." The court's reaction to this:

this is the peril of attempting to build a brand around a generic term.

__

It's not necessarily the end of the road for AOL and its mark. This ruling comes at a preliminary stage, so AOL may put forth evidence to win the day. I'm skeptical, but it's possible.

AOL knew its mark was weak at best. The PTO requested a disclaimer of the standard text version of the mark. Although AOL was able to register the stylized version of the mark without a disclaimer, it abandoned its attempt to register the standard text mark. Which is one aspect of the ruling I found puzzling. Since AOL didn't have a word mark, could the stylized version of the mark support issuance of an injunction over use of the words? I didn't think this was the case, but the court didn't really touch on this at all.

One interesting part of the opinion was the discussion about how "dot com" is a generic way of describing an internet business in ordinary conversation:

When any online advertising company . . . is asked the question "what are you?" it would be entirely appropriate for the company to respond . . . "an advertising dot-com." . . . . We see strong evidence of this in the common use of ".com" to refer to internet businesses. For example, the American Heritage Dictionary defines "dot-com" as "of or relating to business connected on the Internet: dot-com advertising." [Ouch - rough for AOL that the dictionary chose to use this particular example to illustrate the definition!]

This has potential to affect many domain names. Domain names that are generic for the services offered are on shaky ground to begin with, but this passage will not help in efforts to secure trademark protection.

At the end of the day, getting a trademark over a .com term is of little use (at least the .com part), and if the underlying mark is weak, the addition of .com doesn't do much for you and may even work against you.

Posted by Venkat at 09:04 AM | Domain Names , Trademark

August 04, 2010

Google Gets Complete Win in Rosetta Stone Case

By Eric Goldman

Rosetta Stone Ltd. v. Google Inc., 1:09-cv-00736-GBL-TCB (E.D. Va.). Opinion granting Google's motion to dismiss filed August 3, 2010, 2010 WL 3063152. Order granting Google's motion to dismiss the unjust enrichment claim filed August 2, 2010, 2010 WL 3063857.

Back in late April, many of us were eagerly awaiting the impending trial in Rosetta Stone v. Google, which was going to be the first trial in a trademark owner v. search engine keyword advertising case since the GEICO v. Google case in 2004. Then, just days before the scheduled trial, the judge granted Google's motions to end the case, which negated the scheduled trial. However, because the case had been moving too fast in the Rocket Docket, the judge made that ruling without providing any written explanation of why. For about 3 months, we've been wondering how good a win Google got.

The opinions are finally out, and we've learned that Google got a complete win, in that the judge endorsed Google's basic business structure. As I explore below, the specifics are a little sketchy (the judge obviously cut some analytical corners), but the opinion’s overall tenor is that the judge completely rejected Rosetta Stone's fundamental contention that Google was doing something wrong by making money off Rosetta Stone's trademarks. Because Rosetta Stone's core liability paradigm failed to convince the judge, all of opinion's detailed reasoning is less essential.

Unfortunately for Google, the opinion contains several minor doctrinal errors that could attract attention from an appellate court. That makes this ruling vulnerable on appeal. I could see why Rosetta Stone would choose to appeal the case to fix those errors--although even a Fourth Circuit reversal would be only marginally helpful to Rosetta Stone if the case gets remanded to the same judge, who clearly isn’t going to find for Rosetta Stone.

Irrespective of subsequent proceedings in this case, for now this opinion could prove extremely useful to Google in trying to finish off the half-dozen remaining trademark lawsuits against AdWords (and thwarting new cases). In particular, I expect Google will tout two of the key rulings in this opinion--summary judgment on the likelihood of consumer confusion, and Google's eligibility for the trademark functionality defense. If other judges accept either of these two rulings, Google might quickly clear its AdWords litigation docket.

A deeper look at some of the judge's discussion:

* the judge grants Google summary judgment on the likelihood of consumer confusion question. The court says "no reasonable trier of fact could find that Google's practice of auctioning Rosetta Stone's trademarks as keyword triggers to third party advertisers creates a likelihood of confusion as to the source and origin of Rosetta Stone's products." This is just the latest defense win on the factual question consumer confusion attributable to keyword advertising, joining such recent cases as College Network v. Moore and Fair Isaac v. Experian (both trademark owner v. advertiser lawsuits). As precedent builds that trademark owners aren't likely to win on the central consumer confusion question, we might see a categorical reduction in AdWords-related litigation.

* In reaching this conclusion, the court rejects several typical plaintiff arguments:
- on the question of Google's intent, the court rejects that an intent to profit is sufficient, even if Google liberalized its trademark policy to goose its revenues. Instead, the judge requires evidence of palming off by Google--which keyword ad sales clearly are not.
- on the question of actual confusion, Rosetta Stone offers the testimony of 5 allegedly confused individuals. The court says this de minimis confusion out of the 100M ad impressions delivered on searches for Rosetta Stone's trademarks. Further, those 5 testimonials apparently all relate to counterfeit Rosetta Stone purchases, and the court attributes those sales to confusing web vendors and not Google's role in the keyword advertising of those sites. Other consumer complaints in Rosetta Stone's logs weren't necessarily attributable to keyword advertising. Finally, the court rejects the plaintiff's survey on whether consumers thought Rosetta Stone "endorsed" the ads, saying endorsement confusion isn't the same as source confusion. I'm not sure about that distinction, but clearly the court wasn't interested in the survey.
- on the question of consumer sophistication, a language learning system is an expensive and complicated purchase, which makes consumers more cautious.
- the court says the parties didn't contest the other likelihood of consumer confusion factors, although it's unclear how many of those other uncontested factors favored Rosetta Stone. Thus, the court does a truncated multi-factor analysis, only looking at the 3 contested factors, saying they all weigh in favor of Google, and then finding this supports SJ for Google. I could see an appellate court wanting to look more closely at the other undiscussed factors.

* The court's most novel ruling is that Google's use of trademarks as keyword ad triggers qualifies for the trademark functionality doctrine. Typically, the functionality defense arises only in trade dress cases. The functionality defense in the keyword advertising context failed in the 9th Circuit's Playboy v. Netscape ruling, which this court surprisingly doesn't cite. The court says that the trademarked keyword triggers "have an essential indexing function because they enable Google to readily identify in its database relevant information in response to a web user's query." This is correct, of course, but doctrinally I think this conclusion better fits into a doctrinal conclusion that Google isn't using the trademark as a mark. (See more on this point in my Deregulating Relevancy article). Nevertheless, Google and other keyword advertising sellers will be thrilled if other courts accept the functionality defense. I expect most other courts will address the 9th Circuit's Netscape ruling before doing so.

* Google's keyword suggestion tool does not constitute inducement for contributory trademark infringement. The court says it's smart business practices, not inducement, for Google to upsell its advertisers. Per Tiffany v. eBay, Google also lacks the requisite scienter because it contractually prohibits counterfeiter ads, honors takedown notices, and has a Trust & Safety team looking for problems. Plus, like eBay, Google had no way of confirming if advertisers were selling legitimate or counterfeit goods.

* The court uses a goofy legal standard for vicarious trademark infringers, which it says can occur if "Google has joint ownership or controls the allegedly infringing advertisements appearing on its site." This standard is WRONG. Unlike vicarious copyright infringement, vicarious trademark infringement is rooted strictly in agency law. So the vicarious infringer normally requires a principal/agency-like control over the direct infringer's conduct. Here, the court devolves the vicarious trademark infringement test into a bastardized version of the vicarious copyright infringement test. This is a significant doctrinal error. Nevertheless, it proves to be harmless for Google because "Rosetta Stone has not shown that Google controls the appearance and content of the Sponsored Links and the use of the Rosetta Stone Marks in those Links."

* I'm no fan of the dilution doctrine, but this court's rejection of the dilution claim was bizarre. Google wins the dilution claim because it "does not sell language learning software," i.e., Google wasn't using the trademark as an identifier of its own products. Huh? The court also says blurring did not occur because Rosetta Stone's brand awareness grew during the period of time Google is selling keyword-triggered ads. Huh? This confuses correlation with causation. What would Rosetta Stone's brand awareness have been without the keyword ads? We have had very few rulings addressing keyword advertising and dilution (this uncited 2007 ruling is the only one that comes immediately to mind), so this conclusion on dilution could be a fairly influential ruling as well.

* In a separate opinion, the judge rejected Rosetta Stone's unjust enrichment claim on a motion to dismiss. It's a little odd to be dealing with a pending motion to dismiss when the case was on the brink of trial, but that's the consequence of racing too fast in the Rocket Docket. The court rejects the unjust enrichment claim for failure to satisfy the requisite claim elements--basically, because this is not a quasi-contract situation where Google made an implied promise to pay Rosetta Stone. As I mentioned earlier, the court otherwise rejected Rosetta Stone's basic contention that Google has money it doesn't deserve. Interestingly, the court also rejects the unjust enrichment on 47 USC 230 grounds, basically treating the unjust enrichment claim as an attempt to hold Google liable for third party conduct. I didn't totally follow the judge's reasoning, and frankly I'm not sure 230 is the right basis to squelch the unjust enrichment claim. Nevertheless, unjust enrichment claims are almost always junky/throwaway claims, so a 230 immunity would be an effective way to clean them up fast.

In a mostly unrelated development, today Google liberalized its AdWords trademark policy in Europe. I'll blog on that soon.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 11:55 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

August 03, 2010

Baidu Can Maintain Negligence Claims Against Register.com for Lax Security Practices Which Allegedly Facilitated Cyber-Attack - Baidu v. Register.com

[Post by Venkat]

Baidu, Inc. v. Register.com, Inc., Case no. 10 Civ. 444 (DC) (S.D.N.Y.) (July 22, 2010).

Background: Baidu registered the domain name with Register.com, a domain name registrar, which provided Baidu with "Internet traffic routing services." A third party launched a cyber-attack against Baidu - the third party gained unauthorized access to Baidu's account with Register and re-directed Baidu's website to a webpage "showing an Iranian flag and a broken Star of David." The webpage stated that the Baidu site "had been hacked by the Iranian Cyber Army."

The cyber-attacker gained access to Baidu's account with Register through engaging in an online chat with a Register customer service representative. The representative asked the intruder for Baidu's security verification information. The intruder did not provide the representative with the correct information, "but the [representative] nonetheless emailed a security code to the email address that Baidu had on file." When asked for the security code, the intruder did not provide the correct code (the intruder did not have access to the Baidu email address on file). Notwithstanding the discrepancy in the security codes, at the intruder's request, the representative changed the email address on file (to "antiwahabi2008@gmail.com"). From here, the intruder was easily able to access the account, by utilizing the "forgot password" function.

Discussion: Baidu brought claims for breach of contract, negligence (gross negligence), recklessness, and contributory trademark infringement.

The limitation of liability clause: Register pointed to the limitation of liability clause in its Master Services Agreement. The clause provided that Register would not be held liable for, among other things, "termination . . . or modification of [the Services,] . . . inability to use the Service[s], . . . loss incurred in connection with [the customer's] services," or "any other matter relating to [customer's] use of the Service[s]." The agreement also contained a limitation of liability clause that limited Register's liability at five hundred dollars, and also provided that it was the customer's "responsibility to safeguard the User name, password and any secret question/secret answer . . . from any unauthorized use."

The court held that as a general matter, courts in New York enforce limitations of liability clauses, particularly where these limitations are contained in a contract entered into by "those of equal bargaining power." However, New York courts do not enforce such limitations where they purport to limit liability for willful or grossly negligent acts. This "gross negligence exception" applies even to agreements between sophisticated commercial parties, although the standard for gross negligence is somewhat higher in this context. The court held that the complaint satisfied this standard, in alleging that:

(1) the rep proceeded with processing the intruder's request even though the intruder provided an incorrect response to the security question; (2) the rep didn't even bother to compare the code provided by the intruder with the security code on file; (3) the rep failed to notice the red flags raised by the rep providing the "antiwahabi2008@gmail.com" email address (which was tied to Google, a Baidu competitor); and (4) the rep ultimately provided the intruder with Baidu's user name.

Ultimately, the court found that Register's failure to follow its own security procedures (or any minimal security procedures, for that matter) were sufficient to get Baidu past the gross negligence hurdle. Register also pointed to the provision in the contract that the customer was responsible for maintaining the security of any password/security information and thus Register had no duty to maintain any security procedures with respect to Baidu's account. The court rejects this argument, noting that although Register may not have had any duty to provide any security, once it undertook to do so, it was required to do so in a non-negligent manner:

The attack by the Intruder was reasonably foreseeable - it was precisely because these cyber attacks are foreseeable that the security measures were adopted.

Lanham Act Claim: With respect to the Lanham Act claim, Register argued that it was entitled to immunity as a registrar and in any event Baidu failed to adequately allege the elements for contributory trademark infringement.

The court rejects the registrar immunity argument out of hand (registrars are only entitled to immunity when they act as registrars - i.e., "when [a registrar] accepts registrations for domain names for customers"). However, the court agreed with Register that Baidu failed to allege the elements for contributory trademark infringement. Citing to Inwood Labs., Inc. v. Ives Labs., Inc. (a flea market case) the court notes that contributory liability only attaches where the defendant either intentionally induces infringement or continues to supply products or services to the infringer where the defendant knows or has reason to know that the infringer is engaged in infringement. The court also cites to the Tiffany v. eBay case (discussed by Professor Goldman here).

___

The interesting aspect of this case is the fact that Register's broad contractual protections did not protect it against Baidu's claims. It's unclear as to whether the court's ruling would encompass a situation where someone just plain hacked into Register's system and gained access to Baidu's accounts. I would think not. Disclaimers often insulate service providers (see Duffy v. The Ticketreserve and Grace v. Neeley) but here the facts alleged by Baidu with respect to Register's negligence were pretty egregious. Given the exception in New York law for gross negligence and reckless conduct, I'm not sure any sort of limitation/disclaimer could have saved Register here.

The trademark claims are curious. To be honest, I can't even see where there's basic trademark infringement by the cyber-attacker. The cyber-attacker was not interested in selling any products or services, and the Baidu webpage text clearly stated that the website had been hacked. Moreover, any finding of infringement would have been based on the much-discredited initial interest confusion doctrine. In any event, it's tough to see - given Baidu's allegations of an attack - how Register would have harbored the requisite knowledge to have been able to prevent the infringement.

It's worth noting also that this isn't a typical domain name conversion case (a la sex.com). The case is really about failed security procedures, and the ease of gaining access to an account through social engineering. There's a big lesson in the Register rep's alleged dealings with the cyber-attacker.

Added: This interview with Elisa Cooper by Dancho Danchev ("Hundreds of High Profile Sites Unprotected From Domain Hijacking") looks at the efficacy of using Verisign's "Registry Lock Service." Some interesting bits from the interview:

1. The Registry Lock Service offers protection at the registry-level so even if the registrar account is compromised, the attacker will not be unable to update any domain settings.
2. Elisa notes that DNS hijacking may only amount to a PR/brand hit unless the website is collecting information or conducting transactions.
3. "[D]omains that are registered by large retail registrars are . . . highly vulnerable to social engineering attacks." [That's exactly what happened in the Baidu case.]

Of course, the registrar does not have an obligation to implement the additional security measures that are mentioned in the interview. It would be up to the registrant to do so.

Posted by Venkat at 11:54 AM | Domain Names , Licensing/Contracts , Privacy/Security , Trademark

July 27, 2010

Yet Another TM Owner Gives Up Against Google--Ezzo v. Google

By Eric Goldman

Jamil Ezzo has apparently given up his lawsuit against Google over AdWords. The dismissal. This was a silly lawsuit that never should have been brought (it was over the purported trademark "Locate Plastic Surgeon" for gosh sakes), and the only surprising thing is that the lawsuit lasted this long. The most noteworthy thing about this dismissal is that Google has successfully whittled the pending AdWords trademark cases down to five from a high water mark of a dozen--an impressive display of litigation skill and financial wherewithal.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 04:19 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 14, 2010

Funky Ninth Circuit Opinion on Domain Names and Nominative Use--Toyota v. Tabari

By Eric Goldman

Toyota Motor Sales, U.S.A., Inc. v. Tabari, 2010 WL 2680891 (9th Cir. July 8, 2010)

Every time I see a federal appellate opinion on domain names, I'm vaguely reminded of the Country Joe song I-Feel-Like-I'm-Fixin'-To-Die Rag, whose course goes "And it's one, two, three, what are we fighting for?" Fortunately, domain name disputes do not lead to the senseless loss of life we experienced from the Vietnam War. Unfortunately, lengthy domain name litigation usually has little more strategic value. Invariably, the domain name litigation has less to do with rational economic decision-making and more to do with chest-beating and posturing.

I bring this up because the Ninth Circuit's latest domain name opinion involves litigation that makes no financial sense for either side. The Tabaris are independent auto brokers that help their customers find and buy Lexus vehicles from an authorized Lexus dealer. They run a business called Fast Imports from the domains buy-a-lexus.com and buyorleaselexus.com.

What is Lexus’ problem with those domain names? The Tabaris are helping people buy Lexuses, so Lexus is going to get its fair share no matter what. The appellate opinion did not indicate that the Tabaris are crooks or trying to divert Lexus customers to other brands. So Lexus, why sue your friends? The opinion hints that Lexus was trying to improve dealer relations by squelching a broker who plays dealers off each other, but hey, that’s fair competition.

From the Tabaris’ perspective, losing these domain names should not be intrinsically fatal to their business. The Tabaris could set up shop at any number of other domain names, in which case they would lose only the built-up clicks from existing links to the site (I wonder how many of those there were in this case) and any extra Google juice from having a seasoned domain name with the trademark in it. I always find it weird when appellate courts treat a defendant’s domain name as the dispositive linchpin of communication between interested parties rather than just one of many SEO tools.

Refreshingly, this opinion does not overestimate the domain name’s value. However, it doesn’t see any reason to consider a switch either: "the Tabaris needed to communicate that they specialize in Lexus vehicles, and using the Lexus mark in their domain names accomplished this goal. While using Lexus in their domain names wasn’t the only way to communicate the nature of their business, the same could be said of virtually any choice the Tabaris made about how to convey their message."

While the opinion focuses on domain names, the Tabaris' websites also, at some point, used copyrighted Lexus photos and displayed the Big L logo. Normally, a photo rip and unauthorized logo display will get a district court judge to rule in favor of the IP owner. Before Lexus sued, the Tabaris cleaned up those issues, so the Ninth Circuit panel focuses solely on the two domain names (because an injunction was the only remedy at issue). This is a logical move by the Ninth Circuit, but most courts will not be so forgiving of sites that borrow the official logo and copyrighted photos.

With the Tabaris' use of the two domain names in their auto brokerage business the only issue on appeal, this should be an easy call per the nominative use doctrine. However, the words "easy" and "nominative use doctrine" go together like peanut butter and artichokes. Personally, I still have no idea when businesses outside a manufacturer's authorized channel can legally include the manufacturer's trademark in their name. Each case seems to be sui generis.

To segregate legitimate from illegitimate uses of third party trademarks in domain names, the opinion lays out a surprisingly lucid taxonomy with 3 categories of presumptively illegitimate domain names:

1) "When a domain name consists only of the trademark followed by .com, or some other suffix like .org or .net, it will typically suggest sponsorship or endorsement by the trademark holder." This makes sense intuitively, but (A) the court doesn't address the seemingly contradictory Lamparello case, and (B) the opinion’s reasoning remains predicated on dicey assumptions about consumer search behavior, such as consumers typing in trademark.com into their web browser address bar—an assumption that has grown dicier with the rise of omniboxes.

2) "Sites like trademark-USA.com, trademark-of-glendale.com or e-trademark.com will also generally suggest sponsorship or endorsement by the trademark holder."

3) "domains like official-trademark-site.com or we-are-trademark.com affirmatively suggest sponsorship or endorsement by the trademark holder and are not nominative fair use"

By implication, other domain names generally should be eligible for nominative use. At minimum, buy-a-TRADEMARK.com and buyorleaseTRADEMARK.com should be fair game for resellers and related parties like buying agents. In support of this, the court rejects Lexus' argument that there was something untoward about the Tabaris brokering other auto manufacturers if their customers decided they didn't want a Lexus. For more on this, see my Brand Spillovers article.

The opinion suggests that the following domain names should qualify for nominative use or otherwise be permissible as well:

* mercedesforum.com
* mercedestalk.net
* starbucksgossip.com
* frys-electronics-ads.com
* mercedesboots.com
* mercedeshomes.com [although I wonder about dilution with these two]
* comcastsucks.org

Procedurally, the opinion addresses several key issues about the interaction between the nominative use test and the likelihood of consumer confusion test. The opinion says that an evaluation of consumer confusion is implicitly built into the New Kids on the Block nominative use test. Therefore, "if the nominative use satisfies the three-factor New Kids test, it doesn’t infringe" without needing to consider the likelihood of consumer confusion test at all. Thus, "nominative fair use 'replaces' Sleekcraft as the proper test for likely consumer confusion whenever defendant asserts to have referred to the trademarked good itself." Further, once a "defendant seeking to assert nominative fair use as a defense...show[s] that it used the mark to refer to the trademarked good," the trademark owner bears the burden of disproving nominative use. All of these procedural points have been hotly contested in prior cases.

The court concludes that the district court's injunction against the Tabaris using "Lexus" in domain names was too broad and remands the case to the district court to try again. Although the court doesn't tell the district court exactly what to do, it does indicate: "At the very least, the injunction must be modified to allow some use of the Lexus mark in domain names by the Tabaris."

This is a rich and multi-faceted opinion written in a confident and emphatic style…perhaps too emphatically, as the opinion swings around like a bull in a china shop, breezily overturning or sidestepping numerous 9th Circuit precedents on both domain names and nominative use. Were this opinion to become the definitive 9th Circuit statement on either domain names or nominative use, this case would be a landmark opinion. However, the 9th Circuit's Internet trademark jurisprudence has awkwardly accreted on a case-by-case basis for more than a decade, and I doubt this opinion will meaningfully affect the next 9th Circuit panel’s considerations.

Even so, this case has to be good news for shopbots. Although the Tabaris were “manual” shopping agents, the case's reasoning should apply equally well to all shopbots comparison search engines and review sites that use third party trademarks as part of their taxonomy. These sites regularly get nastygrams from trademark owners. It will be interesting to see if this case helps turn that tide.

A final oddity: Judge Kozinski wrote both this opinion and the recent eVisa decision. Although the opinions involve different trademark doctrines applicable to domain names (a nominative use defense instead of dilution), their spirit couldn't be more different. The eVisa case was decidedly pro-plaintiff, while this opinion is very defense-favorable. I wonder if Kozinski bent over backwards to help a pro se litigant (the Tabaris represented themselves), or perhaps Lexus' anti-competitive intent set him off. Otherwise, although the split opinions in theory can be harmonized on numerous bases, they struck me as schizophrenic.

More comments from Rebecca Tushnet (smart and challenging, as always—especially about the numerous empirical deficiencies in the opinion), Ryan Gile and Tom O’Toole.

Posted by Eric at 01:08 PM | Domain Names , E-Commerce , Marketing , Trademark | TrackBack

July 08, 2010

Griper Gets Attorneys' Fees After Successful Defense--Career Agents v. Careeragentsnetwork.biz

By Eric Goldman

Career Agents Network, Inc. v. Careeragentsnetwork.biz, 2010 WL 2632298 (E.D. Mich. June 29, 2010). The CMLP page.

The underlying dispute involves a non-commercial gripe site. The trademark owner sells a type of "business in a box" (like a franchise). The defendant was an unhappy buyer of the "business in a box." The defendant set up a gripe site, warned potential buyers that they weren't likely to recoup their investment, and then SEOed the gripe site. In late February, the court dismissed trademark infringement and ACPA claims on summary judgment. Career Agents Network v. careeragentsnetwork.biz, 2:09-cv-12269-RHC-MJH (E.D. Mich. Feb. 26, 2010). I didn't blog the February decision because it seemed rather straightforward, but other people covered the decision (Wendy Davis, Tom O'Toole, Ars Technica).

Having dispatched the underlying lawsuit, the defendant moved for attorneys' fees under the Lanham Act fee-shifting provision. The court says that the plaintiff's ACPA claim became objectively unreasonable when plaintiff realized that the griper was a disgruntled customer (i.e., bummed-out business buyer) rather than a competitor or cybersquatter (cite to the Sixth Circuit's 2004 Lucas Nursery case, binding law on this court). The trademark claim was "weak but colorable" because the domain name didn't include the "sucks" suffix. (In this era, try to find me a trademark case that isn't colorable at some level). In terms of the plaintiff's subjective intent, "the court finds that Plaintiff's principal motivation was to silence Defendant White's criticism of Plaintiff's business." The court also praises the defendant's persistence given his counsel's settlement advice and an initial TRO loss.

In theory, the court could have just awarded the ACPA fees and excluded the trademark fees, but the court says the entire lawsuit "stood on thin ice" and therefore gives the whole enchilada to defendant. The court does take a haircut on the fees associated with seeking the fee award--too high an hourly fee for too many hours for a fee request motion the court unfairly characterizes as "only as difficult as shooting fish in a barrel." Nevertheless, the defendant got a lot of what it asked for--a total fee award of $23k. All told, this is another case where a plaintiff picked a fight only to end up writing a check to the defendant. Another poor enforcement decision by a plaintiff.

UPDATE: Paul Levy provides a behind-the-scenes look at this ruling.

Posted by Eric at 08:36 AM | Domain Names , Trademark | TrackBack

July 07, 2010

Q2 2010 Quick Links Part 2

By Eric Goldman

Marketing and Advertising

* Good talk from FTC Chair Leibowitz: “we have great hopes for self-regulation….So long as self-regulation is making forward progress, the FTC is not interested in regulating” behavioral targeting.

* NYT on teaching middle schoolers how to interpret ads. We're going to need to teach kids how to consume information if we have any chance to survive infoglut.

* The LA Times and Chicago Tribune are integrating paid text links into story content.

* Search Engine Land: Google: Now Recommending Brands For Searches.

* Keeller v. Groupon Inc., No. 10 CH 8666 (Ill. Cir. Ct. Cook Cty. March 2, 2010). Groupon settles lawsuit over expired and unused coupons.

* NYT: Online coupons may not be as anonymous as people assume.

* An inside look at the MPAA's self-regulatory effort to police movie ads.

* Avi Goldfarb & Catherine Tucker, Privacy Regulation and Online Advertising.

* Microsoft sues for click laundering. Coverage at Search Engine Land and WSJ

* The FTC shut down Pricewert/3FN.net.

Contracts

* News.com: Second Life sued by its users for changing the terms of land “ownership.” Evans v. Linden Research complaint.

* Shell v. AFRA: website venue selection clause not binding just because web visitors viewed it.

* Omri Ben-Shahar & Carl E. Schneider, The Failure of Mandated Disclosure. This paper shows why mandatory disclosures fail in part because regulators think in terms of what consumers SHOULD want to know rather than what information consumers ACTUALLY want to know.

* WaPo: Reality TV secrets are hard to keep in the age of social media. My 2003 analysis of using contract law to keep reality TV secrets.

* Want to be on the TV show Survivor? Check out its contract first.

* Anderson v. Bell, No. 20100237 (Utah June 22, 2010): “electronic signatures may satisfy the Election Code’s requirements under section 20A-9-502 regarding unaffiliated candidates wishing to run for statewide office.” Tom O’Toole’s writeup.

Trademarks/Copyrights

* Jim Jansen: “Only 4% of sponsored ads were triggered by competitors’ trademarked terms. When it does happen, the results are pretty much what consumers are use to seeing, so there doesn't appear to be many negative consequences….Thus, competitive use of trademarked terms to trigger online ads does not appear to be a widespread phenomenon and is similar to the query suggestion feature that many search engines employ.”

* Michael Geist on the first Canadian keyword advertising ruling (a nice defense win).

* 2010 Joint Strategic Plan on Intellectual Property Enforcement.

* Qassas v. Daylight Donut Flour Company LLC, No. 09-663 (N.D. Okla. June 10, 2010). A company and its entrepreneur are liable for their web developer's infringements when creating the company's own website.

Miscellaneous

* Stephen Wu on Estate Planning for Online Assets

* Declan at News.com lauds Justice Stevens' Internet jurisprudence. We owe Justice Stevens many thanks for helping the Internet bloom.

* Anthony v. Yahoo!, Inc., 2010 WL 1552819 (9th Cir. April 20, 2010). Upholding Yahoo's settlement in a class action lawsuit over its online dating site. My original blog post on the case.

* Tom O'Toole reports on various stupid state efforts to regulate technology, inadvertently making the case that they are a terrible laboratory of experimentation.

* Vacation Club Services Inc. v. Rodriguez (M.D. Fla. April 22, 2010). No CFAA action against the buyer of data from a database the seller allegedly acquired in violation of the CFAA.

* Lawyers behaving badly on the Internet.

* 23 state AGs have contacted Topix about its takedown procedures, including its fee for expedited takedown review.

Posted by Eric at 03:18 PM | Copyright , E-Commerce , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark , Virtual Worlds | TrackBack

July 06, 2010

Puzzling 9th Circuit Dilution Opinion Over eVisa.com--Visa v. JSL

By Eric Goldman

VISA International Service Ass'n v. JSL Corp., No. 08-15206 (9th Cir. June 28, 2010)

A number of us in the trademark community are scratching our heads at last week's Ninth Circuit trademark dilution opinion, authored by Judge Kozinski. The case involves evisa.com, run by Joseph Orr. The domain name's origin is explained:

Orr traces the name eVisa back to an English language tutoring service called “Eikaiwa Visa” that he ran while living in Japan. “Eikaiwa” is Japanese for English conversation, and the “e” in eVisa is short for Eikaiwa. The use of the word “visa” in both eVisa and Eikaiwa Visa is meant to suggest “the ability to travel, both linguistically and physically, through the English-speaking world.”

We might be skeptical of this explanation, but the case poses two doctrinal problems for dilution. First, eVisa.com is not the same trademark as "Visa." As the opinion says, the "marks here are effectively identical." Well, yes and no. We have a line of cases ignoring the top level domains in trademarks, and many cases ignore an "e" or "i" prefix in Internet-related trademarks. But they are not literally identical, and given dilution's power to preempt all uses of a trademark irrespective of confusion, we have to tread carefully when extending protection beyond truly identical uses. The opinion treats this issue too breezily.

Second, and perhaps more importantly, the word "Visa" already has several dictionary definitions. This poses a problem for the blurring analysis. Visa the trademark can't co-opt the existing dictionary meanings. So does dilution-by-blurring mean that Visa the trademark can preempt every non-dictionary commercial use of the word? That seems to be a logical implication of this opinion. The court says "despite widespread use of the word visa for its common English meaning, the introduction of the eVisa mark to the marketplace means that there are now two products, and not just one, competing for association with that word."

Even so, the defendant argued it was using eVisa to invoke the dictionary meaning of the term Visa, i.e., Visa as a passport for Japanese who are going to travel to an English-speaking country. If the dictionary meaning isn't covered by the trademark, it seems logical that everyone should be free to suggest the dictionary meaning in their own trademarks. On that basis, if we believe the defendant's explanation for how it ended up using eVisa.com, the defendant should be in the clear.

Yet, instead, Visa the trademark wins the blurring case. The opinion treats the defendant's suggestion of the dictionary meaning as a "multiplication" of the word's meaning: "these allusions to the dictionary definition of the word visa do not change the fact that JSL has created a novel meaning for the word: to identify a 'multilingual education and information business.'" Apparently, any use of a dictionary word for anything other than a literal invocation of its dictionary meaning could now support a dilution claim.

This case has been floating around since 2002, so perhaps it's not surprising that the entire dispute seems a little old-school. The ruling reminded me a lot of the 1990s pre-ACPA domain name disputes where courts were so frustrated with cybersquatters that they stretched dilution law well beyond its intended scope because dilution was the only tool to effectively nail cybersquatters. Many of those dilution-stretching cases dropped away after the ACPA provided a better anti-cybersquatting tool for judges, and in some ways, the 2006 TDRA has made it even harder to use dilution in a domain name enforcement action. That makes this case that much more anomalous. Putting aside the law, it's logical to say that Visa the trademark should be the owner of eVisa.com. Yet, because infringement and the ACPA weren't getting the job done, the panel expands (bastardizes?) dilution law to make it happen. The outcome may make sense, but the intellectual shortcuts along the way are still a little cringe-inducing.

One final sour note in the opinion. The opinion says that plaintiffs can rely solely on intuition-based arguments to support their likelihood of dilution cases. The court says "a plaintiff seeking to establish a likelihood of dilution is not required to go to the expense of producing expert testimony or market surveys; it may rely entirely on the characteristics of the marks at issue." This is deeply troubling ruling for 9th Circuit law (now reversible only through an en banc opinion). We have never been clear what evidence was required to support a plaintiff's "likelihood of dilution" showing, but I had always assumed the plaintiff had to show some evidence, i.e., greater than zero. So now, what exactly must a plaintiff show to establish its prima facie dilution case? Under the 9th Circuit's standard, apparently anything that can convince a judge.

This case's tortured application of dilution law is a good excuse for me to remind you: if you haven't been there before (or recently), check out the materials from the High Tech Law Institute's 2007 academic symposium on trademark dilution, where we attempted to come up with good rationales for the dilution doctrine and largely struck out.

Posted by Eric at 11:20 AM | Domain Names , Trademark | TrackBack

June 29, 2010

Payment Service Providers May Be Liable for Counterfeit Website Sales--Gucci v. Frontline

By Eric Goldman

Gucci America, Inc. v. Frontline Processing Corp., 2010 WL 2541367 (S.D.N.Y. June 23, 2010)

This case relates to an online seller of Gucci counterfeit goods called TheBagAddiction.com, run by Laurette. Gucci already successfully shut down the counterfeit website, but it remains on the warpath, looking to nail more defendants. It has sued three additional companies, Durango, Frontline and Woodforest. Durango helps hard-to-service merchants such as TheBagAddiction and other sellers of "replica products" find payment service providers. Frontline and Woodforest are both payment service providers that service Visa, Mastercard and AmEx (Frontline also services Discover). Thus, in this action, Gucci is chasing the payment service providers who helped the counterfeit site get paid. In this respect, the case is analogous to Perfect 10's suits against ccBill and Visa, except that Gucci is proceeding on a trademark claim and not copyright.

In this ruling, the court says that Gucci's contributory trademark claims survive the defendants' motion to dismiss. The court dismisses the direct and vicarious trademark claims.

The court says that Durango, the matchmaker/finder, could be liable on an inducement theory because it advertised its services as finding payment services for "high risk" merchants such as those selling "replica" merchandise. Gucci is basically taking the realpolitik position that everyone knows that high-risk merchants selling replicas are just counterfeiters and so Durango should be brought to justice for assisting that retailer niche. Gucci also alleges that Durango encouraged merchants to reduce chargebacks by including a checkbox on the consumer checkout screen saying that they acknowledged they were buying replicas. Although the checkbox didn't help Durango here, I wonder what it will do to the underlying questions of consumer confusion about product source.

In contrast, Frontline and Woodforest didn't induce because "they did not bring [the website] to the table the way Durango allegedly did." While that's true, I'm not clear about the line the judge is drawing.

The court instead evaluates Frontline's and Woodforest's contributory trademark liability (as well as Durango's) under the following legal standard: "if it supplied services with knowledge or by willfully shutting its eyes to the infringing conduct, while it had sufficient control over the instrumentality used to infringe." This appears to be a further bastardization of the loosely-drafted and gratuitous language in Tiffany v. eBay about "willful blindness." As I wrote in my post about the Tiffany ruling, "I expect plaintiffs to get frisky with this 'willful blindness' toy and start asserting that defendants had 'reason to suspect' user infringement and 'ignored that fact.'" This case appears to be an example of that friskiness.

Gucci's allegations against Durango satisfied the scienter requirement because:

Durango allegedly held itself out to high risk replica merchants. Its sales agent, Counley, traded emails with the Laurette Counterfeiters who expressly told him that they were unable to get credit card services because they sold “replica” items. Counley later wrote back to say he had found a U.S. bank that “can do replica accounts now.” Surely, a connection between an inability to get the services needed to transact goods online and the sale of replicas should have attracted Durango's attention.

[note: throughout this post, I have removed some citations from the blockquotes]

Gucci's allegations against Frontline satisfied the scienter requirement because:

Laurette completed an application to obtain Frontline's services, and Nathan Counley, though a Durango employee, is listed as Frontline's sales agent. Counley “acted as Frontline's agent in soliciting and directing credit card processing business from replica merchants like the Laurette Counterfeiters” and therefore Frontline may be charged with his knowledge, including his understanding of Laurette's difficulty to obtain services for selling replicas. Gucci alleges that the “replica acknowledgment” described above that was created for the Laurette website with Counley's assistance was also reviewed by Frontline, who made suggestions as to where they should place this warning on the website. Even more significantly, Frontline allegedly performed its own investigation of products sold through TheBagAddiction.com as part of Frontline's chargeback reviews. When faced with a chargeback, Gucci claims that Frontline received supporting documentation from Laurette that included information about the specific item ordered, including a description of the item purchased. Not only did Frontline allegedly review the specific item description, Plaintiff also claims that the relatively small price tag for the item, as well as specific complaints from customers who made chargebacks about not receiving what the website purported to sell, e.g. a product made of genuine leather, should have alerted Frontline that these were infringing products. These fact-specific claims are enough to at least infer that Frontline knew or consciously avoided knowing that the counterfeit products were sold on TheBagAddiction.com

There are a number of analytical problems with this reasoning, but I'm still stuck on the argument that the payment processor is charged with the knowledge of a third party entity's salesperson. What?

Gucci's allegations against Woodforest satisfied the scienter requirement because:

As was the case with Frontline, Counley represented himself on Laurette's application as Woodforest's sales agent. The application itself said that Laurette was a “wholesale/retail designer [of] handbags,” and listed the supplier as a Chinese bag manufacturer rather than Gucci. Gucci also claims that Woodforest specifically reviewed the website and the products listed on it as part of its initial decision to do business with Laurette. A Woodforest employee allegedly completed an “Internet Merchant Review Checklist,” which required him or her to review the website and confirm whether it contained a complete description of the goods offered. Based on these claims and the website images provided by Plaintiff, even a cursory review of the TheBagAddiction.com would indicate that they claimed to sell replica Gucci products. Indeed, Plaintiff alleges that Woodforest printed out a number of pages that displayed goods that were for sale, including counterfeit Gucci products, and maintained these pages as part of their business records. Woodforest would also perform a second-level review, performed repeatedly after it accepted the business, where an employee would complete a purchase and request a refund. Finally, like Frontline, Woodforest investigated chargeback disputes and received supporting documentation that allegedly should have tipped them off to the infringing conduct. These claims are more than sufficient to suggest, at this stage of the litigation, that Woodforest knew or shielded themselves from the knowledge that Laurette was selling counterfeit Gucci products with their credit card processing system.

Even with the court's generous standards for scienter, what about control over the infringing instrumentalities? In Lockheed v. NSI, a domain name registrar lacked that level of control because it simply provided a matching service between domain names and IP addresses. In contrast, in Louis Vuitton v. Akanoc, Akanoc arguably had the requisite control because it hosted the sites. Here, Durango was just a matchmaker between merchants and payment service providers, and on that ground lacked the requisite control. However, Gucci sufficiently alleged the requisite control by the payment service providers:

Gucci's complaint indicates that Frontline and Woodforest's credit card processing services are a necessary element for the transaction of counterfeit goods online, and were essential to sales from TheBagAddiction.com. Although other methods of online payment exist, such as online escrow-type services like PayPal, generally speaking “credit cards serve as the primary engine of electronic commerce.” Perfect 10, 494 F.3d at 794. Indeed, Gucci points out that Durango's website claims that “9 out of 10 people use a credit card for their online orders.” As such, without the credit card processing operation set up by these two defendants, Gucci alleges that TheBagAddiction.com would largely have been unable to sell its counterfeit Gucci products. They further support this claim with an affidavit by one of the website owners, who states that “[a]pproximately 99% of payments from my customers were made using credit cards.” Both Frontline and Woodforest processed transactions for cardholders with major credit card institutions-Visa, MasterCard, and so forth-and, according to Gucci, Laurette sold over $500,000 in counterfeit products “during the time they utilized Defendants' merchant bankcard services.” By processing these transactions, both companies allegedly earned significant revenue from the transaction fees they charged. Put another way, “[t]hey knowingly provide a financial bridge between buyers and sellers of [counterfeit products], enabling them to consummate infringing transactions, while making a profit on every sale.” Perfect 10, 494 F.3d at 810-11 (Kozinski, J., dissenting). Though both Frontline and Woodforest insist they are middlemen with no ability to prevent a transaction, they do not dispute that they could have simply refused to do business with “replica” internet merchants, just like the flea market purveyor who refuses to provide a booth to a counterfeiter. See Compl. ¶ ¶ 87-89 (Woodforest and Frontline “facilitated the Laurette Counterfeiters ability to quickly and efficiently transact sales for Counterfeit Products through their website by enabling customers to use personal credit cards to pay for purchases on TheBagAddiction.com”). According to one of the website operators, “[i]f I did not receive an approval for a credit card charge, I would not ship the customer's order.” These allegations indicate that the infringing products “are delivered to the buyer only after defendants approve the transaction ... This is not just an economic incentive for infringement; it's an essential step in the infringement process.” Perfect 10, 494 F.3d at 811-12 (Kozinski, J., dissenting).

While all of this is true, how does this relate to the *instrumentality* used to infringe? The court closes the loop by effectively reading that requirement out of the test, saying "instrumentality in this case is the combination of the website and the credit card network, since both are allegedly necessary elements for the infringing act-the sale and distribution of the counterfeit good." But using this standard, every "sine qua non" vendor to a counterfeit website is an instrumentality--the power company, the water company, the landlord, etc. That's exactly what the 9th Circuit rejected in Perfect 10 v. Visa. The court weakly distinguishes that case by noting the difference between rivalrous and non-rivalrous goods; the copyright infringing websites could continue publishing the non-rivalrous goods without credit card payment, while the Gucci counterfeit site wouldn't ship the rivalrous goods until credit card payment was made.

This is a terrible ruling on both a doctrinal and normative level. On a doctrinal level, the court bypassed the main holdings of Tiffany v. eBay (binding on the court), Perfect 10 v. ccBill and Perfect 10 v. Visa. Instead, the court stitched together crappy dicta from the Tiffany v. eBay case with Kozinski's dissent in Perfect 10 v. Visa to come up with an expansive secondary trademark liability rule applicable to vendors to counterfeit websites. I expect payment service providers to become the latest defendant-du-jour among trademark plaintiffs looking for deep pockets in web infringement cases. Something to look forward to.

Normatively, this ruling raises the specter that payment service providers will attempt to exercise even more business control over the businesses they service, effectively deputizing the payment service providers into cops on the Internet beat. As I mention in my notes about the OECD efforts on Internet intermediaries (which I will post soon), this deputization of private vendors into content cops has numerous disadvantages. I'm hoping this ruling gets fixed by the judge or on appeal so that we don't suffer the logical consequences of this bad ruling.

Posted by Eric at 12:19 PM | Derivative Liability , E-Commerce , Trademark | TrackBack

June 23, 2010

YouTube Gets Decisive Win in Viacom/FAPL Case

By Eric Goldman

Viacom International, Inc., v. YouTube, Inc., 2010 WL 2532404 (SDNY June 23, 2010).

The Viacom v. YouTube case has been noteworthy for numerous reasons. It involves the cherished Internet brands YouTube and Google, it's been going on forever (see my initial blog post on Viacom's complaint from March 2007), and it's generated lots of water cooler talk (see the salacious details from the parties' summary judgment motions).

Now, the case is also noteworthy because it hands YouTube a clean and decisive win on the DMCA 512(c) safe harbor. The ruling basically says that the current industry standard practices of notice-and-takedown for user-caused copyright infringement satisfies the safe harbor. Although this seems like an uncontroversial result when stated like that, the reality is that copyright owners have repeatedly angled to get a better deal than Congress gave them in 512. This case will squelch many of those copyright owner requests to force service providers to go beyond current industry-standard practices. Of course, we have to see how the opinion fares on appeal.

The opinion stays above the fray and avoids most of the messy facts from the parties' voyeuristic filings earlier this year. On the decisive question of what constitutes YouTube's actual knowledge or red flags awareness of infringement, the court immediately turns to the legislative history. Fortunately for YouTube, the legislative history is replete with defense-favorable statements. Thus, the court summarizes the legislative history by saying its "tenor" requires that service providers have "knowledge of specific and identifiable infringements of particular individual items. Mere knowledge of prevalence of such activity in general is not enough." Subsequently, the court reinforces that "General knowledge that infringement is 'ubiquitous' does not impose a duty on the service provider to monitor or search its service for infringements."

The court supports these conclusions by noting the difficulty service providers have monitoring/policing large databases of UGC and the fact that the notice-and-takedown system worked well in Viacom's case when it actually submitted notices. The court also favorably cites the ccBill, UMG v. Veoh, Corbis v. Amazon and Tiffany v. eBay cases. By doing so, the court subtly does two things. First, it imports 9th Circuit 512 jurisprudence into a 2nd Circuit-bound court, and second, it imports the 2nd Circuit's recent secondary trademark liability analysis into a copyright case. Both moves also favored YouTube.

The latter is particularly interesting because it seems to accept a notice-and-takedown regime for trademark--not the statutory requirement, but nevertheless the logical implication of Tiffany v. eBay. Perhaps we are seeing some convergence in secondary copyright and secondary trademark infringement cases, despite their different statutory foundations.

The court distinguishes Grokster "and its progeny" (Usenet.com, Fung and LimeWire) as having "little application here." Grokster, Fung and LimeWire all involved P2P file sharing services, which are not covered by 512 (although I've always thought 512(d) deserved more consideration than it did). The court distinguishes Fung as "an admitted copyright thief."

The court further distinguishes Grokster by saying "its application to the particular subset of service providers protected by the DMCA is strained." I completely agree with this, and the court properly notes the factual differences between a P2P file sharing service and a web host. In response to Viacom's apparent belief that Grokster was highly relevant, the court cites that "Viacom’s General Counsel said in a 2006 e-mail that '....the difference between YouTube’s behavior and Grokster’s is staggering.'" This was the only duplicitous statement the court pulled out of the many ones quoted (on both sides) in the summary judgment briefs.

The court makes a few other abbreviated rulings rejecting various attempts to kick YouTube out of the safe harbor:
* YouTube's video embedding feature does not eliminate the 512 safe harbor, citing the Io v. Veoh case. The court does indicate that some activities are beyond the fair meaning of "storage" and ancillary activities, and it appears the plaintiffs could try to push this angle (although I doubt they will get much play if they try).
* the court says that YouTube's "right and ability to control" must be measured on an item-specific basis, so the "right and ability to control" does not kick in until the service provider gets a qualifying notice or otherwise has red flags awareness. This is a powerfully restricted interpretation of that term.
* YouTube's method of counting three strikes did not disqualify it from the statute. This includes the fact that YouTube does not count a strike when Audible Magic automatically filtered UGC.
* the fact that the statute allows copyright owners to submit a "representative list" of infringed works does not override their obligation to specifically identify the location of any allegedly infringing UGC files in their notices.

The opinion does not clearly say it applies to all of the plaintiffs and not just Viacom. However, Google's post indicates that it thinks the opinion applies to all plaintiffs, thus effectively removing most issues from the case. The court orders the parties to talk further to see what's left open by this ruling. There isn’t much. One possibility: 512(c) only eliminates damages, not an injunction, so the plaintiffs could press for an injunction despite this ruling. However, based on the judge’s treatment of the plaintiffs’ arguments, I don't see how that would be productive. At most, I think this judge would only require YouTube to keep following the statute--something YouTube has already proven that it does. Therefore, probably the next major step in the case will be the appellate ruling--which, in the Second Circuit, could take years.

Posted by Eric at 04:10 PM | Copyright , Derivative Liability , Trademark | TrackBack

June 10, 2010

Google Can't Shake Cybersquatting Claim--Vulcan Golf v. Google

By Eric Goldman

Vulcan Golf, LLC v. Google Inc., 1:07-cv-03371 (N.D. Ill. June 9, 2010). My 2007 blog post when the complaint was filed. My 2008 blog post on the denial of a motion to dismiss. My 2008 blog post on denial of class certification.

A year ago I blogged about Solid Host v. NameCheap, a case that raised the specter of a "contributory cybersquatting" claim under the ACPA. This case also deals with a type of contributory cybersquatting. It might represent the vanguard of increased trademark owner efforts to proliferate ACPA cybersquatting claims against a wider range of defendants.

This long-running case involves Google's AdSense for Domains program, which the plaintiffs believe violates their trademark rights when the parked domains contain their trademarks or variations thereof. The case appears to be entering the home stretch. In late 2008, the plaintiffs were denied class certification, which substantially narrowed the scope of the lawsuit. All other defendants have now settled, leaving only Google's liability for resolution. This ruling addresses Google's unsuccessful attempt to knock out the ACPA claim on summary judgment. As a result, the ACPA claim is queued up for trial unless the parties settle.

Google's ACPA liability turns on whether it is an "authorized licensee" of the parked domains. If so, the ACPA is clear that a licensee of a cybersquat domain name can be on the hook. The court holds that if there is a license agreement that calls itself a license, then the ACPA applies to the agreement. However, the court will not infer a licensing agreement from some less explicit arrangement, i.e., presumably not from a parking arrangement where the ad provider (Google) does not expressly license the domain name. Therefore, it appears that where Google licensed the domain name from the parker (a seemingly unnecessary step for delivering ads to parked domains), Google put itself into the ACPA liability chain.

With the legal standard established, normally this should be an easy case to resolve on summary judgment. However, apparently Google and the plaintiffs can't agree on the accurate copy of the applicable agreements with domain parkers (specifically Dotster). If the parties can work out the confusion over documents, the ACPA claim is ripe for a settlement.

Posted by Eric at 07:05 AM | Derivative Liability , Domain Names , Licensing/Contracts , Search Engines , Trademark | TrackBack

June 07, 2010

Another Trademark Owner Apparently Gives Up Lawsuit Against Google--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. U.S. Auto Parts Network, Inc., 5:10-cv-01713-JF (N.D. Cal. voluntary dismissal May 5, 2010)

In April, Google successfully transferred the Parts Geek keyword advertising lawsuit from New Jersey to its home court in Northern California. Then, in an abandonment reminiscent of Rescuecom's, Parts Geek quietly dropped the lawsuit last month against both US Auto Parts and Google. It's not clear if the venue transfer was fatal to the case, but it certainly didn't help Parts Geek's cause. There was an interesting competitive website scraping issue in the case as well; the dismissal means we won't learn more about the legality of that, either.

I have been waiting to blog on Google's successful dismissal of the Rosetta Stone case until I see the written opinion. That, plus this voluntary dismissal, means that Google has successfully whittled its docket of over a dozen trademark challenges to its AdWords program down to 6. Google has several nice intermediate wins with some of those other cases, including its venue transfer in the Flowbee case and its partial elimination of the Jurin case. After we see the Rosetta Stone written opinion, the remaining cases may be substantially undercut further.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on June 6, 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:19 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 03, 2010

April-May 2010 Quick Links Part 1 (IP Edition)

By Eric Goldman

[Note: I just got back from the Netherlands, where I had extremely limited Internet connectivity, so sorry for my absence in the last week (although you were in good hands with Venkat). I will be posting more material from my Netherlands trip to my personal blog and Twitter. You might want to follow me at those places too. I have a long list of "quick links" to share with you as I get the opportunity. The first installment:]

Copyright

* NYT: Current TV defeats a claim that in-line linking is copyright infringement.

* Google won a copyright challenge against Image Search in Germany, apparently on implied license grounds.

* Smoking Gun reports that ESPN sportscaster Erin Andrews has acquired the copyrights to the peephole videos made of her, which should make it a little easier for her to go after online republishers.

* UMG v. Veoh has been appealed to the Ninth Circuit. Although Veoh declared bankruptcy, its law firm, Winston & Strawn, is still fighting it. Ben Sheffner has posted the amicus briefs on behalf of UMG.

* Ben Sheffner also reports that Scott v. Scribd did not get class certification. My initial blog post.

* Arista Records LLC v. Doe 3 (2d Cir. April 29, 2010). P2P file sharer can't claim anonymity to resist copyright owner's subpoena. This ruling also signals that the Second Circuit will take a dim view of fair use claims in P2P file sharing cases and might import the Napster standards for secondary infringement claims.

* Lyrics website hit with preliminary injunction, but not the shutdown requested by the plaintiffs. The court rejects a 17 USC 512 defense because the defendant did not file the required agent designation with the copyright office.

* The RIAA’s campaign to sue file sharers led to a bubble in copyright litigation activity. Ars Technica suggests the bubble may be coming back.

* International Swaps and Derivatives Ass'n, Inc. v. Socratek, L.L.C., 2010 WL 1780999
(S.D.N.Y. 2010). Socratek aggregates agreements from EDGAR and resells them on its website. The plaintiff is upset that Socratek aggregated and resold the plaintiff’s allegedly copyrighted order form for ordering derivatives. The plaintiff sells blank forms, but Socratek grabbed completed versions that had become material agreements for SEC filing purposes. The court denies Socratek’s dismissal motion but also denies a preliminary injunction.

* The Second Circuit upholds the dismissal of Bio-Safe v. Hawks. My initial blog post.

* Zusha Ellison of the Recorder catches up on three copyright First Sale cases pending before the Ninth Circuit. This is a good time to remind you about our November 5 conference on the First Sale doctrine.

* Cosmetic Ideas v IAC InteractiveCorp (9th Cir. May 25, 2010): "receipt by the Copyright Office of a complete application satisfies the registration requirement of § 411(a)."

Trademark

* Google has won the Rosetta Stone case, but we’re waiting to see the written opinion to figure out why (and how good the win is).

* Au-Tomotive Gold v. VW (9th Cir. May 6, 2010). Post-sale trademark confusion trumps the First Sale doctrine. We'll also be discussing trademark exhaustion at the November 5 conference!

* Boston Marathon sues CafePress and Zazzle for trademark infringement.

* Dan Burk, Cybermarks, Minnesota Law Review. The abstract:

The commercial development of the Internet has been punctuated with legal disputes over the use of trademarks as domain names, as metatags, as search terms, and as advertising keywords. As in previous disputes in copyright over the legal status of software, these Internet trademark disputes arise from the overlap of communicative and functional symbols in information technology. Such “cybermarks” are not merely indicators of product source, but function both as symbolic indicia for human recognition and as strings of computer code in the operation of automated search and indexing mechanisms. Application of trademark law’s functionality doctrine, perhaps with some modest amendment, could begin to resolve disputes over the use of cybermarks.

* Nature’s Footprint, Inc. v. Providnet Co Trust, 2010 WL 1903183 (W.D. Wash. May 11, 2010): “The Court is convinced that plaintiff sought to use its superior position vis-a-vis the trademark to, cause harm to a competitor. Given this Court’s strongly-held belief that a significant part of this litigation was motivated by plaintiff’s desire to quash competition, no fees will be awarded under the Lanham Act’s ‘exceptional case’ authority.”

Posted by Eric at 11:06 AM | Copyright , E-Commerce , Marketing , Privacy/Security , Trademark | TrackBack

May 25, 2010

Life May Be "Rad," But This Trademark Lawsuit Isn't--Williams v. CafePress.com

By Eric Goldman

Williams v. Life's Rad, 2010 U.S.Dist. LEXIS 46763 (N.D. Cal. May 12, 2010)

This lawsuit bummed me out. The trademark at issue--the surfing-inspired "Life's Rad"--is supposed to lift people up, but it's hard to maintain a sunny outlook once the lawyers take over. It reminds me of other hippie-dippy icons that have been the basis of IP legal battles, such as the "Keep on Truckin'" logo, color designs for tie-dye shirts (Banzai v. Broder) and the smiley face. IP lawsuits like these really harsh my mellow.

Both Life's Rad and "Life is Rad" (Williams' offering of radiology-related apparel--get it?!) sell merchandise via CafePress, which means they both agreed to CafePress' user agreement. [An aside: does anyone still use the slang "rad" any more? I thought it died out with "bitchin," "tubular" and "grody."] Life's Rad sent a takedown notice to CafePress, which CafePress honored. Life's Rad seems a little thin-skinned here given its trademark's significant contextual distance from radiology-themed schwag. Further, perhaps CafePress should not have been quite so trigger-happy, although their position is understandable in light of trademark's amorphous boundaries. Williams protested the takedown to no avail and then sued both Life's Rad and CafePress. Williams proceeded pro se. In this ruling, CafePress exits the lawsuit.

Williams tried several of the typical legal arguments that customers trot out when vendors terminate them, such as due process violations (nope--no state action), unfair competition (no--CafePress just exercised its rights under its user agreement) and interference with prospective economic advantage (the court calls that "frivolous"). I haven't pulled the filings to see if CafePress argued 230(c)(2), but that also should have been a possibility.

Williams also tried some unusual legal twists. He argued that CafePress violated the DMCA put-back provisions (17 USC 512(g)). This is misguided on several fronts. First, 512 only applies to copyright, not trademark. Second, CafePress' user agreement authorized its takedown. Third, Williams did not send a proper 512(g)(3) putback request. Fourth (a point the court doesn't note), 512(g) is an option available to a service provider to minimize its liability, not a mandatory requirement to put back content at the user's request.

Williams also claimed that CafePress' takedown violated his trademark rights. The court tosses this aside because (1) Williams didn't claim a trademark in "Life is Rad," (2) CafePress' user agreement authorized the takedown, and (3) "Plaintiff has not identified (nor has the Court been able to identify) any provision of the Lanham Act that restricts an internet service provider's discretion to remove items from its website as a result of any third party party claim of trademark infringement."

This is a great win for CafePress, especially because the court implicitly upholds CafePress' user agreement. Further, this ruling is yet another data point showing that vendors have a lot of discretion to take down their users' offerings without fear of liability to the user. Among other cases in this line: Mehmet v. Add2Net, Estavillo v. Sony and the various Google de-indexing lawsuits (KinderStart, Langdon). See also my 2005 article on virtual world provider discretion to terminate customers.

Some other blog posts on CafePress-related litigation:
* Connecticut Blogger Not Subject to Texas Jurisdiction--Healix Infusion v. Helix Health
* Griper Selling Anti-Walmart Items Through CafePress Doesn't Infringe or Dilute--Smith v. Wal-Mart
* CaféPress Denied 230 Motion to Dismiss--Curran v. Amazon

Posted by Eric at 09:26 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

May 24, 2010

Steps Brand Owners Can Take to Deal With Brandjacking on Social Networks

[Post by Venkat]

Winston & Strawn published an article titled [pdf] "Five Steps to Protect Your Trademarks in a Web 2.0 World." The article sets out some steps brand owners can take to prevent or deal with infringement of their marks on sites such as Facebook and Twitter.

I thought the article was great because it urged a measured approach. Here is a summary of the five recommended steps (I particularly liked step one!):

1. Don't panic.
2. Be proactive (get familiar with the sites - "maintain some presence").
3. Don't go guns blazing against the social networking website - it's tough to hold the social networking site liable (Tony La Russa's lawsuit against Twitter is an example of this approach).
4. Use the tools and informal processes provided by the site.
5. Use traditional enforcement strategies.

Consider the Internet Reaction: I would also add one to the list: consider how the internet will react, and take a close look at possible fair use, parody, satire, and First amendment issues. The internet does not react kindly to overzealous brand owners who are not mindful of these issues. Also, it is well worth monitoring any reaction, and having some sort of plan in place to deal with it.

The Streisand Effect: Along these lines, as mentioned in the article, consider the "Streisand effect" (a term coined by Mike Masnick according to internet lore).
__

As described in the article, there have been "few lawsuits . . . for infringement occurring in a social networking context." This points in the direction that either infringement on social networks isn't as rampant as people think, or that brand owners are satisfied with the informal processes made available by sites such as Twitter and Facebook.

Related: Someone recently started a Twitter account for "@BPGlobalPR," noted by VF Daily here: "Somehow, the Internet Appears Not to Understand 'BPGlobalPR' Twitter Is a Joke." While the account is obviously intended as a joke (sample tweet: "Doing our best to turn oil into oilinade. So far the stuff tastes TERRIBLE"), it has over 15,000 followers (which is more than the real BP account has). At least some of those followers appear to take the account seriously.

I can't think of the best approach to dealing with this situation from BP's standpoint, but one suggestion I would not rule out is to hire the person running the account to be on BP's public relations team. Whoever he or she is has a sharp wit and marketing chops (at least when it comes to Twitter)! I'm mostly joking, and in any event, this is pretty far-fetched, given that BP's PR team can't be happy with the person running this account.

Added: The BrandBuilder Blog has a detailed post on the BPGlobalPR Twitter account that's worth reading: "Living in the past = working in the past: How not to get 'brandjacked' like BP Global PR." As noted in that post, the BPGlobalPR Twitter account started up on May 19, 2010!

Posted by Venkat at 07:57 PM | Trademark

A First Look by Tom McCarthy at the Sixth Circuit’s 2010 Victoria’s Secret Tarnishment Decision [Guest Blog Post]

By J. Thomas McCarthy

[Eric's note: Last week, the Sixth Circuit issued a new ruling in the long-running V Secret Catalogue v. Moseley case, this time featuring three opinions from a three-judge panel. Tom McCarthy has generously shared his views on the case:]

After the Supreme Court's 2003 decision in the VICTORIA'S SECRET versus VICTOR'S SECRET battle, the case finally was decided on remand in 2008, the district court applying the 2006 Trademark Dilution Revision Act. The district court granted summary judgment for Victoria's Secret, finding that the use of VICTOR'S SECRET for a small store selling men's and women's lingerie, adult videos and sex toys was likely to cause dilution by tarnishment of the VICTORIA'S SECRET mark for a large chain of stores selling women's lingerie and wearing apparel. I found that decision very troubling because the district court based its finding of a likelihood of tarnishment upon the very same testimony that the Supreme Court in 2003 had characterized as not being evidence of tarnishment.

The district court relied on the same Army officer's testimony that the Supreme Court characterized in its opinion. That is, an Army Officer was offended by the junior user's use of its name on what he considered to be tasteless goods. The Supreme Court said that: “The officer was offended by the ad, but it did not change his conception of Victoria's Secret. His offense was directed entirely at [the junior user], not at [the senior user Victoria's Secret].” Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 434 (2003). Yet, on remand, the district court said this same testimony “suggests the likelihood that the reputation and standing of the VICTORIA'S SECRET mark would be tarnished.” This did not trouble the Sixth Circuit, which affirmed the summary judgment. V Secret Catalogue, Inc. v. Moseley, ___ F.3d ___, 1020 WL 1979429 (6th Cir. 2010).

I entirely agree with the position of Judge Karen Nelson Moore in her dissent. I think that the majority’s creation out of thin air of a presumption (or “strong inference”) of dilution by tarnishment if there is an “association” with “sex related products” is wildly misguided. The majority essentially creates a hard edged rule that no one can use a “famous” mark (or one so similar that there is an “association”) as a mark for any product or service that a court thinks is “sex-related.” Of course, neither the 2006 TDRA nor its legislative history contains a hint of anything like this and requires (as the dissent points out) proof from the plaintiff of some likely tarnishment of the famous mark.

A central message of the Supreme Court's 2004 Microcolor decision is that the burden of proving a likelihood of confusion always remains with the plaintiff. KP Permanent Make-Up, Inc. v. Lasting Impression I, Inc., 543 U.S. 111 (2004). This same reasoning should apply with equal force to an anti-dilution case. The Sixth Circuit majority shifted the burden to the defendant. The majority said that the defendants had ample opportunity “to offer evidence that there is no real probability of tarnishment and have not done so.” I thought that it was always the trademark owner’s burden to prove its case.

The decision also raises troubling issues of commercial speech. The majority creates a presumption of dilution by tarnishment if the junior mark appears on “sex-related products,” invoking the tort doctrine of res ipsa loquitur. This sounds like the court is making value judgments about what is “sexy.” As dissenting judge Moore points out, it’s ironic that the “tarnished” plaintiff’s VICTORIA’S SECRET mark itself is widely promoted as a source for “sexy little things” intimate lingerie. See Menashe v. V Secret Catalogue, Inc., 409 F. Supp. 2d 412 (S.D. N.Y. 2006) (Victoria’s Secret claimed “Sexy Little Things” as its trademark)

I predict that the majority’s ruling will provoke a storm of criticism. At least it will be grist for the mill of IP commentators and academics, such as myself.

Posted by Eric at 09:07 AM | Trademark | TrackBack

May 23, 2010

Twitter May Allow Competitors to Purchase Trademarks as Keywords for Sponsored Tweets

[Post by Venkat]

via Reid Wilson (at the INTA Annual Meeting):

Twitter's General Counsel spoke with Fionn O’Raghallaigh in greater detail about sponsored tweets and issues for brand owners. You can check out that informative interview at Managing Intellectual Property here: "Branding Challenges for Twitter and its Users."

This is one of Professor Goldman's favorite topics so I'm sure he will comment on it down the road (if and when interesting issues arise). I just wanted to flag it, and to try out Twitter's embedded tweets function.

Reid's tweet illustrates one of the key benefits of Twitter. I did not attend the INTA annual meeting, but still caught some relevant goings on as they happened.

Posted by Venkat at 11:01 AM | Trademark

May 19, 2010

How Much Does 1-800 Contacts Hate Competitive Keyword Advertising? $1.1M Worth!?

By Eric Goldman

Rader Fishman & Grauer PLLC v. 1-800 Contacts, Inc., 2:10-cv-00191-TS-DN (redacted complaint filed March 30, 2010; answer and counterclaim filed March 25, 2010; counterclaim answer filed April 19, 2010)

1-800 Contacts has been a repeated guest star on this blog, principally for their duplicitous attitudes towards keyword advertising. 1-800 Contacts has used competitive keyword advertising in the past and was part of a coalition that helped scuttle Utah's second attempt at regulating keyword advertising. On the other hand, 1-800 Contacts was a major player in Utah's third attempt to regulate keyword advertising, and it has been an aggressive plaintiff in numerous lawsuits against competitive keyword advertisers, including the infamous 1-800 Contacts v. WhenU case and numerous obscure lawsuits that no one is closely watching.

We get an inside look at 1-800 Contacts' litigation against competitive advertisers through the filings in Rader Fishman v. 1-800 Contacts. Rader Fishman was one of 1-800 Contacts' "go to" law firms until a key partner switched to a different law firm (Holland & Hart), and 1-800 Contacts made the switch with him. This left the small matter of 1-800 Contacts' outstanding bills, totaling over $650,000. An amount that size is enough to get a law firm to bring a collections action, even if malpractice counterclaims are inevitable.

What really catches my attention, however, is the fee agreement between Rader Fishman and 1-800 Contacts in the Lens.com enforcement action, one of numerous 1-800 Contacts' lawsuits against competitive keyword advertisers. Although the number is redacted in the complaint, 1-800 Contacts' answer (para. 33) reveals that the law firm agreed to cap fees in that litigation at $1.1M.

Wait a minute...what??? How much for a keyword advertising enforcement action? Either the contact lens business is extraordinarily lucrative, or 1-800 Contacts made a really bad business call. As I have repeatedly said, trademark owners should view competitive keyword advertising lawsuits as an investment and measure their ROI accordingly. I haven't seen the numbers, but 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--especially after 1-800 Contacts avails itself of the search engine trademark policies. Of course some or all of this difference could be made up by a damages award from Lens.com--if it wins and can collect--but even then I'm skeptical that the total expected value of this litigation was, or is, cost-justified.

Meanwhile, 1-800 Contacts could have taken the same $1.1M and poured it into advertising for itself. It could have invested the money to improve its products/services, which would enhance its overall competitiveness. 1-800 Contacts could have reduced its prices by $1.1M and stimulated more consumer demand. Heck, 1-800 Contacts could have used the $1.1M to select and switch to a more defensible trademark than its current crummy one. Instead, they've spent more than enough money to buy their outside lawyers a very, very nice new boat (...if the outstanding bills ever get paid...). And with $1.1M on the line for just one of several enforcement actions, it makes more sense why 1-800 Contacts flip-flopped on the Utah legislature and advanced protectionist legislation that would make its life easier--and cheaper.

Posted by Eric at 10:01 AM | Marketing , Search Engines , Trademark | TrackBack

May 18, 2010

A Jury Verdict That Competitive Keyword Advertising Isn't Trademark Infringement--College Network v. Moore

By Eric Goldman

College Network, Inc. v. Moore Educational Publishers, Inc., 2010 WL 1923763 (5th Cir. May 12, 2010). The jury verdict form from January 2009. The district court's final judgment from June 2009.

In December, I blogged about the Fair Isaac v. Experian case, which I thought was the first jury verdict on trademarked keyword advertising. I now stand corrected on two fronts.

First, although the decision came after the jury trial, the judge made a bench ruling that Experian had not committed trademark infringement by buying competitive keyword advertising. Rebecca has some additional updates on the case.

Second, I've since discovered an earlier case, College Network v. Moore Educational Publishers, which had a January 2009 jury finding that competitive keyword advertising doesn't constitute trademark infringement (see the qualifications below). This jury verdict appears to have gone unnoticed, as I could not find any press coverage of the district court proceedings. In fact, I learned about it only because the case was appealed and the Fifth Circuit upheld the dismissal of the trademark claims.

Unfortunately, the three documents linked in my intro paragraph don't completely explain the alleged trademark infringement. The Fifth Circuit ruling summarizes the situation by saying that the advertiser "had purchased the phrase 'The College Network' from Google and Yahoo as a search-engine keyword to summon MEP’s sponsored-link advertising." The advertiser responded that the trademark owner had bought the advertiser's trademarks as well (which would be consistent with keyword advertising plaintiffs' frequently duplicitous behavior), but this allegation wasn't pursued and appears to be immaterial.

Now the provisos on the jury ruling: the jury verdict probably was skewed by the trial court's ruling (pre-Rescuecom) that the advertiser did not make a use in commerce. So where the jury verdict form indicated that the advertiser didn't infringe the trademark, it's unclear if this was based on the jury's finding of no likelihood of confusion or a lack of use in commerce.

On appeal, the Fifth Circuit sidesteps the use in commerce question and says that "the evidence does not compel a finding of likelihood of confusion"--a conclusion that the court weakly explains as it rejects many of the trademark owner's arguments on procedural technicalities. However, in a footnote, the Fifth Circuit partially explains:

In any event, sufficient evidence supported the jury’s finding of no likelihood of confusion under the Fifth Circuit test. MEP and Moore presented extensive documentary evidence on the issue. The jury was permitted to view the keywordsearch process and visually compare the companies’ websites. TCN’s own expert testified as to lack of actual confusion. The evidence does not point so “strongly and overwhelmingly in favor” of TCN that a reasonable jury could not arrive at a contrary verdict.

I haven't parsed through the lower court proceedings to see how the trademark owner's expert (Otto Wheeler, presumably this gentleman) undercut his client's case, but the Fifth Circuit's characterization sure doesn't sound good. Perhaps there should be a motto among litigation experts similar to a doctor's ethical tenet: First, Do No Harm.

[UPDATE: I received a letter from Otto Wheeler saying that the Fifth Circuit opinion mistakenly identified him as the expert providing the unsuccessful opinions. He says he only opined on damages. Instead, he suggests Howie Jacobson, PhD provided the expert opinion which failed to impress the court.]

The trademark owner's loss is doubly ironic because the Fifth Circuit mostly upheld the lower court's conclusions that it owes the advertiser (and its principal) approximately $700k on a defamation counterclaim. Perhaps the advertiser would have sued the trademark owner for defamation no matter what, but a counterclaim was apropos once the trademark owner decided to dance in court. So once again, a trademark owner kicks off a keyword advertising fight only to end up writing a check to the defense. Smart move, guys.

Posted by Eric at 10:35 AM | Marketing , Search Engines , Trademark | TrackBack

May 10, 2010

Geographic Trademark Leads to Interesting (& Tortured) Injunction--Skydive Arizona v. Quattrocchi

By Eric Goldman

Skydive Arizona, Inc. v. Quattrocchi, 2010 WL 1743189 (D. Ariz. April 29, 2010).

A jury found that the defendants had committed trademark infringement, false advertising and cybersquatting and awarded $2.5M in damages, which the judge doubled. Unfortunately, the court's opinion does not precisely spell out what the defendants did wrong. This story gives a little background,and this site shows that the defendants are pretty unpopular. The opinion indicates there was testimony that the defendants had sold bogus gift certificates for the plaintiffs' offerings and had offered inferior services using the same name as plaintiffs'. The court also says "numerous websites operated by Defendants falsely claimed Defendants owned or operated skydiving centers in Arizona, Phoenix, Tempe, Scottsdale, Mesa, Glendale, Yuma, Flagstaff, Chandler, Peoria, and Tucson when Defendants neither owned nor operated any such facilities. Additionally, the Court found that Defendants engaged in unfair competition by using photographs of Plaintiff's business on their website."

The main trademark at issue appears to be "Skydive Arizona," one of those lousy trademarks that sits right at the border of descriptive and generic. See, e.g., the Boston Duck Tours case. With such a crummy trademark at issue, the court sliced injunctive relief carefully. On the question of Internet marketing, the court says:

Plaintiff also requests that this Court prohibit Defendants from using the “Skydive Arizona” trademark or other confusingly similar terms in links or keywords on their websites. The Court finds that such relief is appropriate, especially because Defendants' business primarily utilizes the internet, and will extend Plaintiff's request to include the phrases “Arizona Skydiving” and “Skydiving Arizona” as well. Persons searching for Plaintiff's business should not be erroneously led to Defendant's website due to these marks placement in a meta tag or other link on Defendant's websites. See, e.g., Bernina of America, Inc. v. Fashion Fabrics Intern., Inc., 57 U.S.P.Q.2d 1881, 1884 (N.D.Ill.2001) (preliminarily enjoining defendant from using plaintiff's trademark in meta tags); DeVry/Becker Educ. Dev. Corp. v. Totaltape, Inc., 2002 U.S. Dist. LEXIS 1230, *7-8 (N.D.Ill. Jan. 22, 2002) (enjoining use of plaintiff's trademark in internet links and keywords, and “in any other manner in connection with the internet that would cause consumers to believe erroneously that [defendant's] goods or services are somehow sponsored by, authorized by, licensed by, or in any other way associated with [plaintiff]”.). In taking this step, the Court is not unaware of Defendants' concerns that the generic nature of the words “skydive” and “Arizona” will unfairly prevent Defendants from practicing their business in Arizona. The injunction, however, is not a blanket prohibition against using these words on its website or in meta tags. It merely prohibits Defendants from using “Skydive Arizona,” “Arizona Skydiving,” “Skydiving Arizona,” and any other combination of those words that is confusingly similar to that mark. There is, for example, a difference between using those words in combination as proper nouns, and merely utilizing them individually or in the course of a sentence. The former, depending on the circumstances, is likely prohibited by this injunction, but the latter usage probably is not.

This translates into the following injunction:

from using the trademark “Skydive Arizona,” or any marks that are confusingly similar to or colorable imitations of that trademark, and from using “Skydiving Arizona,” and “Arizona Skydiving,” on or in connection with or as part of any website, including in meta tags, keywords in pay-for-placement or payfor-rank search engines, in source code or other computer code, for the retrieval of data or information or as search terms, in the domain names of any websites, in any titles, headings, statements, links or other text appearing on any page of any website in any location on any websites registered, owned, or used, directly or indirectly, by any of the Defendants

I find the fretting about metatags anachronistically amusing (in a cynical way), but I wonder about the specific contours of this injunction. For example, is it a violation for the defendants to broad-match "skydive" or "skydiving" and geographically restrict the ad to Arizona? It also appears that the site can include statements like "Skydiving in Arizona" or "If you're in Arizona and want to skydive, visit us." I appreciate that the judge recognized the speech restriction concerns of an overbroad injunction, but these types of language contortions are a good sign that the trademark may not have deserved the protection it apparently is getting.

The court also rejected some other overreaching plaintiff requests, such as that the defendants be barred from using the word "Arizona" in any domain name or website and limiting the defendants to operating only 1 skydiving-related website. The defendants also get to keep skydivinginarizona.com.

Posted by Eric at 02:09 PM | Domain Names , Search Engines , Trademark | TrackBack

April 26, 2010

Amazon Wins Keyword Advertising Suit--Video Professor v. Amazon

By Eric Goldman

Video Professor, Inc. v . Amazon.com, Inc., 1:09-cv-00636-REB-KLM (D. Colo. April 21, 2010)

Video Professor has been involved in a few interesting legal scrapes. For example, you may recall that in 2007 they launched a major crackdown against the publishers of negative product reviews. See this recap.

In this lawsuit, Video Professor sued Amazon for bidding on the keyword "video professor" and then displaying competitive options on the linked landing page. This type of fact pattern--online retailers advertising on third party trademarks to promote competitive alternatives--has created significant confusion for trademark law. See the irresolute rulings in BabyAge v. Leachco (involving the alleged misuse of product reviews to redirect a retailer's consumers to a house product) and Hearts on Fire v. Blue Nile (a retailer buying keywords for a manufacturer's product it didn't sell).

In Amazon's case, this should be a laughably easy case. So long as Amazon has any legitimate Video Professor products in inventory--even if it or third party vendors are reselling used Video Professor goods via the First Sale doctrine--it should have the right to accurately advertise that fact. See Tiffany v. eBay. The fact that consumers might redirect to other offerings once they get into the retailer's premise is completely irrelevant. As I explain in gory detail in my Brand Spillovers paper, using third party trademarks to generate consumer interest and redirect them to other products is an essential part of offline retailing and virtually unchallenged by anyone. Yet, when the same behavior happens online, people freak out. My paper concludes that these freakouts are due to cyberspace exceptionalism, not any rational or doctrine-based concerns.

Amazon doesn't win this case on First Sale grounds (although it should have). Instead, Video Professor was an Amazon vendor for a while, and Amazon makes vendors enter into a "Vendor Manual" that contains a perpetual trademark license. Therefore, Amazon successfully defended its keyword purchases as being authorized by this perpetual trademark license. Summary judgment for Amazon. This is a neat legal trick by Amazon and almost assuredly a boilerplate "gotcha" for most Amazon vendors, who probably didn't fully understand the implications of the boilerplate language. Then again, I just argued that Amazon should have this right as a matter of default trademark law, so I don't think vendors agreeing to Amazon's Vendor Manual are giving up any legal rights they actually had.

This case illustrates the increasing importance of contracts in governing keyword advertising purchases, a point I mention in my latest keyword advertising legal recap slides. Here, Amazon was able to slip in a perpetual right to buy its vendors' trademarks as keywords into its vendor contract. In theory, if Video Professor objected, it should have rejected the Vendor Manual clause AND promulgated its own more restrictive contractual restrictions on Amazon's keyword purchases.

For those of you who rely on buying third party trademarks as keywords, this case might spur you to redouble efforts to get contractual permission (one way or another) from the third parties. That contractual consent may be highly effective at fending off future cyberspace exceptionalist freakouts by trademark owners.

Posted by Eric at 11:52 AM | Licensing/Contracts , Marketing , Trademark | TrackBack

April 12, 2010

Google Successfully Transfers Another AdWords Case to California--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek, LLC v. U.S. Auto Parts Network, Inc., 2010 WL 1381005 (D.N.J. April 1, 2010)

Google has successfully transferred another trademark lawsuit over AdWords to its home court in California based on the mandatory venue clause in its AdWords contract. This is the latest success Google has had invoking its venue clause; similar recent victories include the TradeComet and Flowbee rulings. Indeed, the only case I can recall where Google has unsuccessfully invoked its AdWords venue selection clause is the Rosetta Stone case (see this transcript from Sept. 2009). (There may be other failed efforts, but I can't recall them). As a result, the Rosetta Stone case remains on the rocket docket with a trial scheduled for next month, but it appears some of Google's other litigation parties will be moving to California.

The most interesting thing about this particular ruling is that the court doesn't cite to either the TradeComet or Flowbee rulings in deciding for Google. Instead, the court anchors its decision in its putatively sui generis analysis of 3rd circuit caselaw.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:50 AM | Derivative Liability , Search Engines , Trademark | TrackBack

April 01, 2010

eBay Mostly Beats Tiffany in the Second Circuit, but False Advertising Claims Remanded

By Eric Goldman

Tiffany (NJ) Inc. v. eBay Inc., 2010 WL 1236315 (2d Cir. April 1, 2010)

In a subtle opinion with potentially significant implications, eBay has preserved most of its big 2008 district court victory in the long-running Tiffany v. eBay case. However, as seems to be the norm with federal appellate opinions, the opinion intentionally sidesteps some key open doctrinal questions squarely raised by the case--such as if the Second Circuit recognizes the nominative use defense, or the Second Circuit's standards for contributory trademark infringement. As a result, we don't get the clean and decisive doctrinal standards that help make a case truly precedent-setting; if anything, some aspects of the case are pretty eBay-specific. And while the opinion is generally a win for defendants, there are at least two tangents (the willful blindness standards and the false advertising discussion) that future plaintiffs will unquestionably explore.

What is clear from the opinion is that Tiffany has lost the battle to force eBay to change its system to do more for Tiffany. (Unless Tiffany successfully appeals to the US Supreme Court, which it has said it is considering). What isn't clear to me is how much money is still on the table for the false advertising claim. If Tiffany can make this a backdoor way to get its alleged damages from counterfeits on the eBay site, then there's still potentially a lot of money left to fight over. But otherwise, it would make way more sense for the parties to settle up rather than pursue the remaining false advertising issue.

Overview of the Rulings

* eBay isn't directly liable for trademark infringement based on its advertising activities due to the nominative use doctrine (even though the panel did not adopt the doctrine)
* eBay isn't secondarily liable for counterfeit sales because generalized knowledge is not enough and eBay followed a notice-and-takedown procedure
* eBay isn't liable for direct trademark dilution based on the unadopted nominative use doctrine
* the appellate court rejected the lower court's reliance on a nominative use defense to the false advertising claim.

The ultimate disposition: “The case is therefore remanded…for further proceedings for the limited purpose of the district court's re-examination of the false advertising claim in accordance with this opinion.”

Direct Trademark Infringement

The Second Circuit has never expressly adopted the nominative use defense, one of the many reasons why I favor doctrinal gatekeepers like "use in commerce" rather than relying on the inconsistently interpreted defenses. This panel doesn't adopt a nominative use defense for the Second Circuit either, but it does say "a defendant may lawfully use a plaintiff's trademark where doing so is necessary to describe the plaintiff's product and does not imply a false affiliation or endorsement by the plaintiff of the defendant." This is pretty similar to the Ninth Circuit’s standard, though it omits the factor that the defendant took only as much of the trademark as was needed (in practice, that might be subsumed in the "necessary" requirement).

eBay qualified for the nominative use defense for both its website references to Tiffany and its use of Tiffany in sponsored links because "eBay used the mark to describe accurately the genuine Tiffany goods offered for sale on its website. And none of eBay's uses of the mark suggested that Tiffany affiliated itself with eBay or endorsed the sale of its products through eBay's website."

Other than the district court opinion in this case, I can't think of another case that has found a nominative use defense in a keyword advertising case. This ruling suggests that anyone who might qualify for a nominative use--certainly retailers and affiliates, but potentially even competitors--might have some additional traction to their defense. Potentially, this case will take some wind out of the sails of Rosetta Stone, which has partially complained about advertisements by folks in its channel. All of those people should be protected by the nominative use doctrine, and the Second Circuit may have just filleted those folks out of Rosetta Stone's case.

Note that at least one of eBay's ads was triggered by "tiffany" and included "tiffany" in the ad copy, so it appears that the nominative use defense extends to the trigger. The ruling does not address what happens if the trademark acts as a trigger but does not show in the ad copy. Before the 2nd Circuit's April 2009 Rescuecom v. Google ruling, the trial judge held that triggering by itself didn't qualify as a use in commerce. The appellate court doesn't cite Rescuecom or address use in commerce at all; but I believe this is the first Second Circuit keyword advertising case since Rescuecom, and it turns out fine for the defense.

The court rejected Tiffany's argument that eBay's general knowledge of counterfeiting activity was relevant to the direct infringement inquiry. The court also sensitive to Tiffany’s apparent motive of trying to suppress competition from legitimate resales.

Contributory Trademark Infringement

The flagship case articulating an online standard for contributory trademark infringement is the 1999 Ninth Circuit Lockheed v. NSI case. This court was squarely presented with the issue of the Second Circuit's standard, and the court punted. Instead, the court said that both eBay and Tiffany had agreed to use the Inwood standard (referencing a 1982 Supreme Court opinion, the leading offline case for contributory trademark infringement). The court recaps the standard: “there are two ways in which a defendant may become contributorially liable for the infringing conduct of another: first, if the service provider ‘intentionally induces another to infringe a trademark,’ and second, if the service provider ‘continues to supply its [service] to one whom it knows or has reason to know is engaging in trademark infringement.’” Inducement was not an issue here.

eBay followed a notice-and-takedown scheme, so actual knowledge was not at issue either. eBay's generalized knowledge of counterfeiting activities on the site was insufficient; the court required "[s]ome contemporary knowledge of which particular listings are infringing or will infringe in the future." Tiffany's demand letters weren't specific enough, and its specific requests were honored. Therefore, eBay lacked the requisite scienter.

Unfortunately, the court did not stop there. Instead, the court brought up the possibility of "willful blindness." The court articulated a new and troublesome legal standard: “When [a service provider] has reason to suspect that users of its service are infringing a protected mark, it may not shield itself from learning of the particular infringing transactions by looking the other way.”

What does this mean??? What lays the foundation for a service provider to have "reason to suspect" that users are infringing? Does a C&D letter do that? The answer seems to be no; Tiffany sent those. Does proactive filtering confer that foundation? Perhaps, because eBay did undertake some extra filtering efforts for Tiffany. In FN 14 the court says “contributory liability may arise where a defendant is (as was eBay here) made aware that there was infringement on its site but (unlike eBay here) ignored that fact.”

It’s great for eBay that it didn’t ignore the fact, but what exactly did eBay do right (other than win at trial court)? I'm not sure, and that's telling for the weaknesses in the court's language and logic. As a result, I expect plaintiffs to get frisky with this "willful blindness" toy and start asserting that defendants had "reason to suspect" user infringement and "ignored that fact."

Sadly for Tiffany, it won't get the benefit of this loose language. The court concludes its discussion on willful blindness by saying “eBay appears to concede that it knew as a general matter that counterfeit Tiffany products were listed and sold through its website….Without more, however, this knowledge is insufficient to trigger liability under Inwood. The district court found, after careful consideration, that eBay was not willfully blind to the counterfeit sales….That finding is not clearly erroneous. eBay did not ignore the information it was given about counterfeit sales on its website.”

Dilution

The court seems to say that there cannot be blurring or tarnishment when the defendant makes a nominative use. The court says simply “There is no second mark or product at issue here to blur with or to tarnish ‘Tiffany.’” This is interesting because the post-TDRA statute expressly provides a defense for nominative use, but the court doesn't rely on it. Instead, it seems to treat nominative use as a definitional requirement--if the defendant is making a nominative use, tarnishment and blurring should be categorically impossible and defendants should win on a 12(b)(6) motion to dismiss. But if that's the case, why have the statutory defense? (Don't get me started on the "commercial use" infinite loop in the dilution statute).

To the extent counterfeiting causes dilution, eBay didn't sell the goods itself, so it did not commit that dilution. The court mucks its words about contributory dilution; what it should have said is that there is no such thing.

False Advertising

The court describes eBay's advertising at issue:

eBay advertised the sale of Tiffany goods on its website in various ways. Among other things, eBay provided hyperlinks to "Tiffany," "Tiffany & Co. under $150," "Tiffany & Co.," "Tiffany Rings," and "Tiffany & Co. under $50."...eBay also purchased advertising space on search engines, in some instances providing a link to eBay's site and exhorting the reader to "Find tiffany items at low prices."

The court says that these statements are not literally false because genuine Tiffany merchandise was available on eBay, "[b]ut we are unable to affirm on the record before us the district court's further conclusion that eBay's advertisements were not ‘likely to mislead or confuse consumers.’” The court effectively rejected the district court's use of nominative use as a categorical defense to false advertising claims. I wasn’t too surprised to see this; in my post about the district court ruling, "I fear the court may have cut some corners here."

What about 47 USC 230? eBay has used the immunity to defend its ad copy from non-IP claims to the extent the ads are rendered untrue by third parties (see the uncited Mazur case). The court does not directly address 230, but it would not be a fan of such a defense: “eBay did affirmatively advertise the goods sold through its site as Tiffany merchandise. The law requires us to hold eBay accountable for the words that it chose insofar as they misled or confused consumers.”

Then, the court takes another weird detour. eBay appears to be free to advertise that it vends legitimate Tiffany goods, but it can't mislead consumers into thinking that all Tiffany goods on eBay are legitimate. How is eBay supposed to strike that balance? The court says: “An online advertiser such as eBay need not cease its advertisements for a kind of goods only because it knows that not all of those goods are authentic. A disclaimer might suffice. But the law prohibits an advertisement that implies that all of the goods offered on a defendant's website are genuine when in fact, as here, a sizeable proportion of them are not.”

Wait a minute. What kind of disclaimer is the court thinking of here? Maybe "Please come to eBay for Tiffany goods. Disclaimer: we have lots of fakes on our site." Putting aside the implications for eBay’s scienter, how is eBay supposed to fit such a disclaimer into the tight space constraints of an AdWords ad? This reminds me a little of the FDA's threats that it expected pharma companies to make side effects disclosures in AdWords copy...NOT POSSIBLE.

And what constitutes a "sizeable proportion"? The parties did not agree on the exact amount of counterfeiting taking place, and Tiffany's expert report was partially discredited by the trial judge. Does this mean we're back to taking snapshots of infringing activity and arbitrarily picking a percentage as too high? I thought we got past that with the Grokster Supreme Court opinion.

Rebecca has useful things to say about the false advertising discussion.

Implications of this Ruling

Between this ruling and the Akanoc ruling (and perhaps the Google ECJ opinion, if you look internationally), I think it's pretty clear now that trademarks are subject to a notice-and-takedown rule. We don't have a DMTA to complement the DMCA's notice-and-takedown procedure, and perhaps we would benefit from some statutory clarity about the precise mechanics/specifications of the notice and takedown. But even without a DMTA, I think we've arrived at the same basic place. From my perspective, this is not inherently good or bad. I guess I've always thought we'd get here eventually.

I continue to believe that courts reward service providers who do more than statutorily required for IP owners. For example, in FN 16, the court favorably notes that “eBay's efforts to combat counterfeiting far exceeded the efforts made by the defendants in” the flea market cases. I continue to encounter pockets of folks who believe that undertaking any voluntary efforts above the minimum makes the site a guarantor against bad activity. I think that's very outdated thinking. When I asked above what eBay did right to avoid being willfully blind, the answer is that they were proactive about working with IP owners. This case shows that those good faith efforts can be rewarded in court. UPDATE: Greg Lastowka explores this point more.

Having said that, I remain concerned that efforts to cater to IP owners' concerns can create a competitive barrier to entry. Not every site is sufficiently capitalized to undertake the same efforts as eBay. I hope courts will be circumspect about letting the law effectively reduce service provider competition from new entrants.

It remains to be seen what result this ruling will have on the keyword advertising cases. Through its broad reading of nominative use, it's possible the Second Circuit implicitly undercut some of the lawsuits against Google.

Finally, junky false advertising claims are so ubiquitous that we often don't give them much respect. However, here's a good example where the false advertising claim was more potent than the trademark claim. I believe false advertising will remain a hot area of legal practice.

Posted by Eric at 02:02 PM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack

March 31, 2010

March 2010 Quick Links

By Eric Goldman

Internet Exceptionalism

* Stern v. Sony Corp., CV 09-7710 PA (C.D. Cal. Feb. 8 2010) "to the extent Plaintiff is suing Sony as a manufacturer of video games, and the provider of online services, Sony is not a ‘place of public accommodation’ and is therefore not liable for violating Title III of the ADA" Nice complement to the Estavillo case. My prior post on Internet exceptionalism.

Online Competition

* Microsoft’s head algorithms guru says that Google's search engine beat Microsoft because Microsoft ignored the long tail of search queries. If Google and Microsoft made different product design choices and the marketplace liked Google's choices better, doesn’t this make it hard for Microsoft to complain about Google’s "anti-competitive" practices? I wonder if this talk was pre-cleared by Microsoft’s antitrust counsel.

* SJ Mercury News: Google's most recent 10-K lists some new self-identified competitors, including Yelp, Kayak & WebMD. By identifying some vertical players as competitors, such as Kayak and WebMD, does Google lend credence to the arguments by TradeComet and myTriggers that Google does compete with vertical search engines?

* In re eBay Seller Antitrust Litigation, 2010 WL 760433 (N.D. Cal. March 4, 2010). eBay wins summary judgment in an antitrust challenge: "Despite the voluminous briefing permitted in connection with both of the instant motions-which includes hundreds of pages of supporting documents-Plaintiffs have not drawn the Court's attention to any actual proof of antitrust injury caused by eBay's alleged anticompetive acts-on an individual or a classwide level."

Online Pornography

* U.S. v. Beckett, 2010 WL 776049 (11th Cir. March 9, 2010). A man posed as a 17 year old girl on MySpace and AOL, engaged boys in discussions, induced them to send nude photos, and then coerced them to have sex with him to prevent his dissemination of the photos.

* Miller v. Mitchell, No. 09-2144 (3rd Cir. March 17, 2010). This is the case where the government prosecutor threatened to bring felony charges against girls for "sexting." The court upholds a preliminary injunction against requiring the girls to go through an education program in lieu of felony prosecution.

* U.S. v. Durdley, 2010 WL 916107 (N.D. Fla. March 11, 2010). No privacy expectations in a flash drive left in a public computer.

Online Security

* Cormac Herley of Microsoft Research, "So Long, And No Thanks for the Externalities: The Rational Rejection of Security Advice by Users." In my observations, users are actually intensely rational when it comes to privacy and security issues, and privacy and security advocates who don't fully account for this user behavior do so at their peril.

* Reuters takes a deep look at Innovation Marketing, a Russian scareware operation.

User-Generated Content

* Who does what on Wikipedia.

* Josh King explains why Avvo supports the proposed federal anti-SLAPP law.

* T.V. ex rel. B.V. v. Smith-Green Community School Corp., 2010 WL 935574 (N.D. Ind. March 11, 2010). Denying class formation for a lawsuit in response to a ridiculously harsh school suspension for a MySpace photo of ribald off-campus activity.

* Melton v. Boustred, 2010 WL 881919 (Cal. App. Ct. Mar 12, 2010). Boustred throws a ragin' party and advertises it via a MySpace open invitation. The plaintiffs show up and were beaten and stabbed at the party by unknown assailants. The court concludes that Boustred isn't liable for the physical injuries. Note to self: stay away from parties advertised via MySpace.

* Yelp Litigation Mania!
- Cats & Dogs Animal Hospital v. Yelp first amended complaint
- LaPausky v. Yelp complaint. A write-up.
- Levitt v. Yelp complaint.
- ClickZ: Ex-Yelper Helps Law Firms Go After Yelp

Anonymity

* Park West Galleries, Inc. v. Global Fine Art Registry, LLC, 2010 WL 742580 (E.D. Mich. Feb. 26, 2010). Using an online pseudonym can lengthen the defamation statute of limitations.

* White v. Baker, 2010 WL 1009758 (N.D. Ga. March 3, 2010). Mandatory reporting of Internet usernames by registered sex offenders violates the First Amendment.

Advertising and Marketing

* ClickZ: New Facebook Policies Clamp Down on 'Loose' Ad Copy.

* Coyote Pub., Inc. v. Miller, 2010 WL 816936 (9th Cir. March 11, 2010). Upholding the constitutionality of Nevada's restrictions on advertising prostitution.

Trademark

* WSJ: It's a crowded namespace for bands.

* 1-800Contacts, Inc. v. Memorial Eye, P.A., 2010 WL 988524 (D. Utah March 15, 2010). It was not objectively baseless for 1-800 Contacts to bring a trademark enforcement action over competitive keyword advertising.

* Rhea Drysdale tells how she busted the trademark application for "SEO."

* The Utah governor has signed SB 26, which (among other things) creates a bastardized version of ACPA. My initial comments on the proposed bill.

Copyright

* James Grimmelmann on Reed Elsevier v. Muchnick.

* Ben Sheffner has some updates in the Scribd lawsuits. My initial post on Scott v. Scribd.

* Ars Technica on an experiment to block users who are using ad blocking software from accessing its site.

General

* Hudson v. University of Puerto Rico, 2010 WL 1131462 (D. Minn. March 23, 2010). Passive blog does not confer general jurisdiction.

* Doe 1 v. AOL LLC (N.D. Cal. Feb. 1, 2010). "Plaintiffs' claims for violation of the ECPA (Count I), unjust enrichment (Count VI) and for public disclosure of private facts (Count VII) are subject to the forum selection clause because none are California consumer law claims." Prior blog post.

* Commonwealth v. Interactive Media Ent’mt and Gaming Ass’n, Inc., No. 2009-SC-000043-MR (Ky. Mar. 18, 2010). Challenge to Kentucky's seizure of 141 gambling-related domain names tossed on standing grounds. Prior blog post.

Posted by Eric at 08:42 AM | Content Regulation , Copyright , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark , Virtual Worlds | TrackBack

March 25, 2010

Craigslist Wins $1.3M Default Judgment Against Autoposting Facilitator -- craigslist v. Naturemarket

[Post by Venkat]

craigslist, Inc. v. Naturemarket, Inc., Case No. C 08-05065 PJH (MEJ) (N.D. Cal. March 5, 2010) [scribd] (report and recommendation adopted on February 5, 2010)

Craigslist obtained a 1.3 million dollar default judgment against defendants Naturemarket, Inc. and Igor Gasov.

Naturemarket (doing business as powerpostings.com [typical bad choice of name]) sold software which allowed its customers to automatically post listings to craigslist. As advertised by defendants, the software made "the difficult craigslist posting process child's play and [helped users] manage and multi-post . . . ads." Defendants also advertised "posting agent" services where defendants would post ads on behalf of customers. Finally, defendants sold software that scraped email addresses from the craigslist site.

Craigslist sued alleging claims under (1) copyright; (2) DMCA; (3) the Computer Fraud and Abuse Act; (4) trademark; (5) breach of contract/terms of use. Defendants failed to contest the suit. The court granted default judgment against defendants:

Copyright Infringement: Craigslist alleged it registered protectable elements of its site (the "post to classified, account registration and log-in features") and that defendants copied these elements of the craigslist site when developing, testing, and using their auto-posting software. The court accepted these allegations at face value, notwithstanding questions as to what parts of the craigslist site were copyrightable (minus the listings themselves, obviously), how the copying here was different from search engine copying under an implied license, and the fact that it's awkward to conclude that browsing in excess of the terms of use constitutes copyright infringement.

DMCA Violations: The court agreed with craigslist that defendants violated two provisions of the DMCA through making available, among other things, "pre-verified craigslist accounts and CAPTCHA credits." There's precedent that supports the proposition that at least some of these types of acts do not violate the DMCA. (See, for example Egilman v. Keller & Heckman, LLP, 401 F. Supp. 2d 105, 113-14 (D.D.C. 2005) ("using a username/password combination as intended--by entering a valid username and password, albeit without authorization--does not constitute circumvention under the DMCA.").) Real made a similar argument to the one defendants would have made here, but this argument was rejected. Either way, the trouble with the court's conclusion is that it's not clear that a violation should be based on use of an anti-circumvention mechanism in a way that's not authorized. This isn't the type of conduct that the DMCA is necessarily meant to address. Mike Masnick flags this aspect of the ruling here.

Computer Fraud and Abuse Act: The Computer Fraud and Abuse Act claims were premised on access of craigslist computers in violation of the craigslist terms of service. This argument is often used in civil cases, but most recently received attention in the Lori Drew case, a criminal case. The Lori Drew case illustrated many of the problems with imposing Computer Fraud and Abuse Act liability based on violations of a terms of use. Professor Goldman's post when the case first started is a good read.

Trademark Infringement: Craigslist alleged that defendants used the craigslist mark "in the text and . . . the headings of sponsored links on internet search engines to advertise their auto-posting products and services." The court cites to American Blinds for the proposition that this will cause "initial customer confusion". (Here's one of Prof. Goldman's posts on American Blinds.) It's odd to see craigslist arguing initial interest confusion. These are the types of arguments one would expect to see against craigslist (for example by someone suing it for trademark infringement, not made by craigslist.

Breach of Contract/Terms of Service: Craigslist pointed to provisions in its terms of use which prohibited the use of automated means and posting agents to post listings. Craigslist argued that defendants violated these provisions and induced craigslist users (who were customers of defendants) to violate these provisions. The court awards $840,000 in liquidated damages based on the terms of use claims asserted by craigslist. Craigslist argued that defendants posted at least 18,200 ads or alternatively defendants posted 4,200 ads as a posting agent. The court assumes for purposes of calculating damages, that the lower number is correct and awards $840,000 based on this number. For each listing posted in violation of the terms of service, the court awarded $100 in liquidated damages (and an extra $100 for each item posted as a "posting agent"). [Note to self: be careful about posting items in violation of the craigslist terms of service!]

Attorney's fees: Craigslist sought $83,614.45 in fees, for the work performed by 5 lawyers and one paralegal. The court found the hours expended reasonable, but reduced the hourly rate slightly, ultimately awarding $65,038.20 in fees. (As a side note, what's up with the reduction in billing rates by one dollar in the April-June 2009 time period. The hourly rates for one partner went from $525 in 2009 to $550 in January-March 2009, to $549 in April-June 2009. Does the one dollar change in someone's hourly rate really matter?)

____

This case is similar in many ways to Ticketmaster v. RMG, where Ticketmaster sued RMG, a company that automated the ticket buying process on behalf of its customers. Following the issuance of an injunction, Professor Goldman noted that this case was "a troubling Cyberlaw development." The claims asserted by craigslist here suffered from some of the same weaknesses as those in Ticketmaster. On the other hand, this was in the context of a default judgment, where the good faith allegations in the complaint are taken as true, and craigslist knew it had to only make colorable arguments. It wants to keep out certain perceived bad actors. In the default judgment context, I'm not sure how much it can be faulted for not fine-tuning its legal arguments. That said, it's always tough to read through these types of rulings without cringing.

One of the more troubling things about the ruling is how the terms of use supports three separate claims: the copyright claims, the Computer Fraud and Abuse Act claim and, of course, the breach of contract claim. It's unsettling to see the website terms of service (which are typically tough to read and digest, rarely read by end users, and incredibly one sided) be given enough clout to support serious statutory violations. But this is nothing new, and courts always seem to be willing to accept these types of arguments.

Another issue for craigslist to consider is whether any of the arguments could come back to bite craigslist. I haven't thought through whether there was a good section 230 argument to be made here, I'm guessing not. Assuming there was, it doesn't seem like such a good idea for craigslist to knock down that argument. It's the classic section 230 beneficiary. At any rate, at a basic level, craigslist is ultimately suing Naturemarket based on harm caused by end users. This is exactly what state regulators did to craigslist. The initial interest confusion argument is also one that does not seem like it's in craigslist's interest to push.

Finally, I'm always curious as to what these damage awards accomplish. How often does the company chase down the defendant's assets? More likely, this is something that can be waved around to other potential defendants to get them to comply and/or settle.

Related: Mike Masnick discusses some of these issues in a post flagging an early round of lawsuits filed by craigslist against spammers: "Craigslist's Dumb Lawsuit Against Spam Tool Provider"

Posted by Venkat at 09:25 AM | Content Regulation , Copyright , Licensing/Contracts , Spam , Trademark

March 23, 2010

Google Gets Favorable ECJ Opinion, But Will It Prove to Be a Hollow Victory?

By Eric Goldman

The European Court of Justice issued its long-anticipated decision in the three Google AdWords cases (C-236/08, C-237-08 and C-238/08) referred to it by the French Cour de Cassation. The ruling only answers the questions posed to it by the Cour de Cassation, so in that sense it does not provide a blanket resolution of keyword advertising legitimacy in Europe. Nevertheless, all three answers by the ECJ are favorable to Google and other keyword advertising vendors—although, as I explore below, litigatable questions remain.

In broad strokes, the ECJ adopted Google’s position that it merely provides technology services to advertisers who make legally significant judgments using the technology. For example, the ECJ says that advertisers, not Google, make the requisite trademark “use,” and Google can qualify as a web host of its advertisers’ content—and thus is eligible for the associated safe harbor—if it remains sufficiently passive.

While these rulings improve Google’s legal position against trademark owners, the news isn’t uniformly good for the keyword advertising industry. The opinion identifies a number of potential legal pitfalls for keyword advertisers. We may learn more about these pitfalls from the other trademark owner-v.-advertiser cases pending before the ECJ. My understanding is that 5 such cases are pending, with one ruling coming on Thursday. Based on the language in this opinion, I think it’s probable that the subsequent ECJ rulings will show that keyword advertisers face significant legal exposure when buying competitive keyword advertising.

As a result, Google’s legal victory may prove to be a little hollow. Even if Google eventually earns a clean bill of health for itself, it could still see revenue contraction if advertisers are dissuaded by their legal exposure.

The ECJ Rulings

As typical with European legal opinions, this ruling (although briefer than many, including the Advocate General’s advisory opinion in the case) was unnecessarily long and written in inscrutable language. For example, the opinion refers to search engines selling keyword advertising as “referencing service providers” and keywords as “signs.” Huh? Further, like most European opinions, the opinion starts out with a lengthy but largely unenlightening recitation of facts and law. If you are looking to save a little time, skip ahead to paragraph 42.

Or, better yet, just start reading the opinion at the end. There, the court helpfully lays out its conclusions in three standalone paragraphs:

1. Article 5(1)(a) of First Council Directive 89/104/EEC of 21 December 1988 to approximate the laws of the Member States relating to trade marks and Article 9(1)(a) of Council Regulation (EC) No 40/94 of 20 December 1993 on the Community trade mark must be interpreted as meaning that the proprietor of a trade mark is entitled to prohibit an advertiser from advertising, on the basis of a keyword identical with that trade mark which that advertiser has, without the consent of the proprietor, selected in connection with an internet referencing service, goods or services identical with those for which that mark is registered, in the case where that advertisement does not enable an average internet user, or enables that user only with difficulty, to ascertain whether the goods or services referred to therein originate from the proprietor of the trade mark or an undertaking economically connected to it or, on the contrary, originate from a third party.

2. An internet referencing service provider which stores, as a keyword, a sign identical with a trade mark and organises the display of advertisements on the basis of that keyword does not use that sign within the meaning of Article 5(1) and (2) of Directive 89/104 or of Article 9(1) of Regulation No 40/94.

3. Article 14 of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market (‘Directive on electronic commerce’) must be interpreted as meaning that the rule laid down therein applies to an internet referencing service provider in the case where that service provider has not played an active role of such a kind as to give it knowledge of, or control over, the data stored. If it has not played such a role, that service provider cannot be held liable for the data which it has stored at the request of an advertiser, unless, having obtained knowledge of the unlawful nature of those data or of that advertiser’s activities, it failed to act expeditiously to remove or to disable access to the data concerned.

A closer look at each of the three holdings.

Holding #1: Keyword Ad Copy Must Sufficiently Distinguish the Trademark Owner

This holding does not directly address Google’s liability; it only references the advertiser’s liability. The EU generally lacks a well-developed doctrine of secondary trademark liability. Therefore, even if an advertiser’s ad is problematic, that may not be imputable to the keyword vendor. (I discuss advertiser liability below).

In several places, the court’s language reinforces that keyword advertising systems do not create independent liability for their vendors. For example, in paras. 56-57, the court says that a “referencing service provider allows its clients to use signs which are identical with, or similar to, trade marks, without itself using those signs….The fact of creating the technical conditions necessary for the use of a sign and being paid for that service does not mean that the party offering the service itself uses the sign.”

Further, in paras. 94-95, the fact that other advertisers’ bids may increase the trademark owner’s price to display ads triggered by its own trademark (and Google’s consideration of ad quality) does not “constitute an adverse effect on the advertising function of the trade mark.” The court goes on to say (paras. 97-98):

when internet users enter the name of a trade mark as a search term, the home and advertising page of the proprietor of that mark will appear in the list of the natural results, usually in one of the highest positions on that list. That display, which is, moreover, free of charge, means that the visibility to internet users of the goods or services of the proprietor of the trade mark is guaranteed, irrespective of whether or not that proprietor is successful in also securing the display, in one of the highest positions, of an ad under the heading ‘sponsored links’. Having regard to those facts, it must be concluded that use of a sign identical with another person’s trade mark in a referencing service such as that at issue in the cases in the main proceedings is not liable to have an adverse effect on the advertising function of the trade mark.

As every SEO knows, nothing is “guaranteed” when it comes to search engine placement. Trademark owners usually show up well in organic search results for their trademark, but Google may have de-indexed or downgraded the trademark owner’s website. Further, personalized search results and universal search results can cause unexpected orderings. What happens to the court’s reasoning when the trademark owner doesn’t show up prominently in the organic results?

Holding #2: Search Engines Don’t Make a Legally Recognized “Use” of the Trademarks

In the Second Circuit ruling in Rescuecom v. Google, which held that Google made a “use in commerce” by selling trademarked keywords for keyword advertising. After that ruling, it was pretty clear that both buying and selling trademarked keywords constituted a “use in commerce” under US trademark law, shifting the litigation battle to likelihood of consumer confusion and the defenses.

Here, the court reaches the superficially opposite result, saying that advertisers, not Google, make the legally actionable “use in the course of trade.” These divergent results may just reflect differences in the statutory wording. Nevertheless, for enthusiasts of the “use in commerce” doctrine, its spirit apparently lives on in Europe!

Holding #3: Keyword Vending Can Qualify for E-commerce Directive

This was a doctrinally interesting conclusion. The E-commerce Directive was inspired by the Digital Millennium Copyright Act online safe harbors (17 USC 512), so it was oriented towards online copyright issues. For example, it has a safe harbor for caching that really only makes sense in the copyright context.

Here, the ECJ applies the E-commerce Directive to a trademark dispute, effectively treating Google as the web host of the advertiser’s ad content. While this is a promising interpretation, it leaves open some ambiguity about what will constitute disqualifying activity. The opinion makes it fairly clear that Google would have an “active role”—and therefore become disqualified for the safe harbor—if it helps the advertiser prepare the ad copy. However, Google can participate in its advertising campaigns in a variety of ways, such as suggesting bid amounts and keywords to purchase (through its keyword suggestion tool). Will these other participatory activities constitute a disqualifying “active role”?

Liability of Keyword Advertisers

The opinion highlights several potential liability risks for keyword advertisers. First, the opinion says that keyword advertisers can’t avoid liability by indicating that their products are “imitations” or “copies” in the ad copy. (Paragraph 102).

Second, regarding Holding #1, the opinion (paras. 83-85) raises concerns about ads triggered by keywords identical to a trademark where “normally informed and reasonably attentive internet users” cannot easily determine if the advertised goods originate with the trademark owner.

The precise wording of Holding #1 limits its applicability to a keyword that is identical to the trademark and to goods that are identical to the trademark owner’s goods. By inference, the language does not govern keywords that are similar to the trademark (does it exclude typographical error versions?) or goods such as complementary goods or replacement components. In addition, the standard seems to limit trademark coverage by class of goods—something that can be ambiguous when a single keyword is the trademark of multiple trademark owners in different classes. However, given the wording of the answer, I do not assume that these unaddressed circumstances will be found permissible when tested in future cases.

In the situations described in the holding, “the use by the third party of the sign identical with the mark as a keyword triggering the display of that ad is liable to create the impression that there is a material link in the course of trade between the goods or services in question and the proprietor of the trade mark.” The court says that national courts have the power to adjudicate whether that source confusion actually occurred (para. 88), but the following ads appear to be presumptively problematic:

* “where a third party’s ad suggests that there is an economic link between that third party and the proprietor of the trade mark” (para. 89).

* “where the ad, while not suggesting the existence of an economic link, is vague to such an extent on the origin of the goods or services at issue that normally informed and reasonably attentive internet users are unable to determine, on the basis of the advertising link and the commercial message attached thereto, whether the advertiser is a third party vis-à-vis the proprietor of the trade mark or, on the contrary, economically linked to that proprietor” (para. 90).

If this language is intended to cover ad copy that constitutes bait-and-switch or passing off, this language isn’t a big deal. However, this language appears to be broader, and I’m not entirely clear what advertisers can do to avoid these risks. A typical text ad has very limited space for subtle legal explanations, and Google’s trademark policies allow the trademark owner to prohibit the advertiser from referencing the trademark in the ad copy even for clarification purposes. For example, an advertiser purchasing the “smith” trademark as a keyword can be blocked from saying “compare our products to smith’s” in the ad copy. If the ad copy says “switch to us” or “we’re better than other brands,” will those types of implicit comparisons be enough to eliminate the ambiguity feared by the court? At minimum, the court’s language leaves plenty of room for trademark owner-vs.-advertiser lawsuits asserting ambiguous ad copy. Perhaps the pending ECJ AdWords cases will provide some further clarity.

What’s Next

I find EU governance structures generally baffling, so it’s impossible to anticipate all of the possible implications of this ruling. However, trademark owners steamed about this ruling have a wide range of options, including the following:

* they could seek a new directive, or seek to modify an existing directive, to expand keyword advertising vendor liability.
* to the extent possible (something I can’t easily evaluate), they can seek legislative changes at the national level to get back some of the ground lost in this ruling.
* they can continue to litigate the interstices of this ruling. For example, they can try to disqualify Google from the E-commerce Directive’s safe harbor by arguing that Google plays an active role in its advertisers’ decisions.
* they can seek to expand advertiser liability through any of these methods.
* they can litigate against advertisers one-by-one.
* as always, they can continue to send takedown notices or avail themselves of the search engine trademark policies.

Other good options may exist.

From Google’s perspective, I wonder if this opinion gives it enough comfort to liberalize its European trademark policy to match the rest of the world (i.e., allow trademark owners to block only certain ad copy references and not keyword purchases). For example, to retain its eligibility for the E-commerce Directive, Google still needs to follow a notice-and-takedown regime, although I wasn’t clear if Google’s takedown can just be the ad copy or has to be the keyword as well. Google did liberalized its UK and Ireland trademark policy after the Mr. Spicy ruling, which also concluded that Google did not make a legally actionable “use,” so perhaps Google will feel emboldened by Holding #2.

What Google SHOULD do is take a more proactive stance on the legality of the keyword advertising industry. It should propose legislation that protects both itself and its advertisers. It should also intervene in some of the trademark owner-vs.-advertiser cases that have the potential to establish disadvantageous legal rules for its advertisers. Google has been remarkably passive in terms of legal developments, playing defense only when threatened. I believe this is not a long-term winning strategy. Cf. the Battle of Hastings and how a determined and powerful opponent can eventually breach a shield wall. Google currently has to defend a wide array of battlegrounds, and a loss in any one of those venues could materially diminish its earning potential. To ensure the long-term viability of the keyword advertising industry, Google may need to go on the offense.

I don’t expect that this opinion will affect any US legal developments. For the most part, the opinion interprets governing EU directives and regulations. Because the words in those statutes are not the same as the words we use in the US, the opinion is not readily exportable to US law.

Nevertheless, this opinion could be the vanguard of an emerging legal trend to put the trademark compliance legal burden on keyword advertisers and not keyword vendors. We have not yet reached that conclusion in the United States, but it’s entirely sensible to me that the keyword vendors should not be trademark arbiters, and my hope is that US judges will get there eventually. For more on why I believe we should deregulate keyword ad sales, see this article.

Posted by Eric at 10:25 AM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 22, 2010

Search Engine Legal Developments to Watch in 2010

By Eric Goldman

I recently spoke on a panel about search engines and the law at SMX West. I previewed four major trends in search engine law to watch in 2010:

1) Competition issues. Antitrust/competition law has become a big part of the search engine industry. There are two main flash points: Google’s high percentage of the search advertising business and Google’s black box algorithm for organic search results. Both facets are troubling to competitors and regulators, but they are creating extra friction with “vertical search engines” that portray themselves as competition for Google.

Recent antitrust/competition battles:

* Google-DoubleClick acquisition scrutiny
* Google-Yahoo search syndication deal killed by DOJ
* >a href="http://blog.ericgoldman.org/archives/2009/07/microsoftyahoo.htm">Microsoft-Yahoo deal
* DOJ and Microsoft opposition to Google Book Search settlement
* Person, KinderStart and Langdon civil lawsuits against Google

Present battles:

a) EU complaints from a UK price comparison site, Foundem, a French legal search engine called ejustice.fr, and Microsoft's Ciao! from Bing. Wired: “Google says the companies accuse it of wielding its dominance as a search engine to squelch competition by preventing people from finding their vertical search engines.”

b) US actions: TradeComet and myTriggers. Do these lawsuits have Microsoft ties? In a blog post “Competition Authorities and Search,” Microsoft came out of the closet and admitted it was harassing Google on antitrust issues.

The underlying battle: who should decide what content and ads that searchers see? Two main options: search engines or regulators. Seems like an easy call to me. See my Search Engine Bias article. An under-addressed issue: the role of 47 USC 230(c)(2) in search engines' filtering decisions.

2) keyword advertising lawsuits against Google. 8 lawsuits are pending. The Rosetta Stone case scheduled for trial in May. There are no known US legislative initiatives, especially now that the Utah legislature has adjourned for the year. We are all anxiously awaiting the issuance of the ECJ opinion tomorrow at 1:30 am CA time (I'll blog it as fast as I can).

3) Search engines and copyright. Pending US cases include Viacom v. YouTube, Perfect 10 v. Google and the Google Book Search settlement. Plus, Google's tussles with AP, News Corp. and other news organizations.

4) Search engine compliance with foreign laws, including the Google-China flap and the Google Videos conviction in Italy. This has stirred the pot in Congress again. The latest: Sen. Durbin’s is threatening to force Web companies to join the Global Network Initiative and stop dealing with repressive regimes…which is a resurrection of Chris Smith’s Global Online Freedom Act. Hypocrisy alert! In light of point #1, will the US itself be put on the list of repressive regimes? Plus, as we’ve seen, Google’s single-handed efforts to take down the Chinese government haven’t worked so well.

Posted by Eric at 10:15 AM | Content Regulation , Copyright , Derivative Liability , Internet History , Search Engines , Trademark | TrackBack

March 20, 2010

Another Bad Ruling in Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 5:07-cv-03952-JW (N.D. Cal. March 19, 2010)

I have not seen a definitive statement of facts in this case, so synthesizing various cryptic statements by the court, here's my understanding of the situation. Akanoc is a US-based web host primarily servicing Chinese customers. Some of those Chinese customers advertise and sell counterfeit goods, including counterfeits of Louis Vuitton, to a US and global consumer base. Louis Vuitton sent copyright and trademark takedown notices to Akanoc, some of which Akanoc ignored. Louis Vuitton sued Akanoc for direct and secondary copyright and trademark infringement. In Dec. 2008, the judge denied Akanoc's dismissal motion, sending the case to a jury trial. In Aug. 2009, the jury tagged the defendants with a $32M+ judgment.

In the latest ruling, Louis Vuitton requests a permanent injunction and Akanoc tries to salvage what it can from the jury loss through various JMOLs. The result is an omnibus ruling that has zero good news for web host defendants. Some "high"lights:

* posting photos of counterfeit goods constitutes direct copyright infringement

* web users who browsed those photos of counterfeit goods did not make a fair use by browsing (FN 9)

* it's not a defense to contributory copyright infringement that the direct infringers were overseas and thus not subject to the court's personal jurisdiction (FN 10) (this seems right to me)

* web hosts made a material contribution to copyright infringement when they (1) "provided servers with data storage, routers, and data bandwidth to the websites," (2) "continued to host those websites despite receiving notice from Plaintiff of particular websites that engaged in such conduct, and (3) "rarely used several of the tools at his disposal to punish or deter the operation of the counterfeiting websites on Defendants’ servers."

* the defendants didn't designate a 512 agent for notice until 4 months after the case was filed, so they could not claim 512 protection before that time (why did they wait so long?)

* the 512 safe harbors also didn't apply because "evidence that Defendants had reasonably implemented a policy to terminate repeat infringers was limited, at best. For example, Defendant Chen, the designated agent for Defendants, testified that he did not understand the DMCA’s requirements as to maintaining or implementing the required policy....Other evidence indicated that Defendants had not terminated certain repeat offenders."

* the web host had the requisite control over the direct trademark infringers to support contributory trademark infringement when "Defendants had numerous tools at their disposal for monitoring their servers and terminating abusive users. For example, Defendants had the ability to suspend a particular user, disable IP addresses used by a particular website or, if necessary, unplug a server that contained the data for a particular website."

* it's become vogue to challenge copyright statutory damages on constitutional grounds, but this court rejects a due process challenge against both copyright and trademark statutory damages. A Gore challenge to the ratio of actual to "punitive" damages was inapplicable to statutory damages. (FN 25)

* the defendant's sole officer was personally liable for the infringements because he "had nearly complete control over Defendants’ operations. He was the general manager and sole owner of the corporate Defendants....He also held the principal decision-making authority as to responding to infringement notices, and he instructed his part-time employee regarding how to respond to such notices....Moreover, he was the designated agent under the DMCA for receiving infringement notices and decided whether or not to terminate offending customers." Does this ruling imply that the person designated as the 512 agent for notice has an increased risk of personal liability...?

Stepping back from the details, I can see why the defendants lost. There appears to be a fair amount of evidence that the web host provided services to counterfeiters and didn't deploy state-of-the-art risk management techniques, such as a proper 512 designation of an agent for notice. More importantly, the web host appeared not to respond to takedown requests in an industry-standard fashion. Finally, the defendants made some bizarre legal arguments that superficially appeared doomed, such as the repeated assertions of extraterritoriality issues when a US-based web host was being sued in a US court for violations of US law. For these reasons, I sincerely hope the defendants don't appeal this case to the Ninth Circuit. That could end up doing a lot of long-term harm to Cyberlaw doctrines.

Despite this, I remain troubled by the implications of this case for all web hosts. For example, this case's legal standard for contributory trademark infringement leaves all web hosts at some risk. At minimum, it seems to confirm a common law notice-and-takedown regime for online trademark complaints. (This is reinforced by the injunction, which codifies a notice-and-takedown system for injunction violations). After this case, I think all web hosts will need to be quick on the trigger when they get trademark takedown notices.

I was also deeply troubled by the court's extension of personal liability to the 512 designated agent for notice. What sucker will agree to be a 512 agent in the future?

Posted by Eric at 01:25 PM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

March 16, 2010

Stratton Faxon v. Google Dismissed

By Eric Goldman

Stratton Faxon v. Google, Inc., NNH-CV-09-5031219S (Conn. Superior Ct. dismissed March 8, 2010)

Stratton Faxon v. Google was always an oddball case in the constellation of trademark owner challenges to Google AdWords. First, the plaintiff--a law firm that woke up one day in 2009 and discovered competitive keyword advertising--didn't allege trademark infringement but instead took an unusual and questionable legal path. Second, the case was filed in state court, not federal court, which made the case much more difficult to track than cases in federal court.

These oddities are now irrelevant. The court issued a "motion for judgment" on March 8 granting a motion brought by Google to dismiss the case. I haven't seen any of the underlying motions, but the net effect is that the case is closed.

However, the case may not be over. In my prior email exchanges with Stratton Faxon, they indicated that they may refile in federal court. So we'll see if this case resurrects itself.

Combined with Rescuecom giving up, Google has now whittled its pending AdWords challenges down to 8 pending cases. Furthermore, the Utah legislature has adjourned for the year without banning Google's cash cow again. In the world of Google's legal affairs, these two developments qualify as good news! Next stop: the ECJ's opinion addressing Google's trademark liability in the EU, expected one week from today.

The roster of pending AdWords cases (I most recently thoroughly double-checked the status of these cases on February 20, 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 05:33 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

March 05, 2010

Rescuecom Abandons Its Litigation Against Google

By Eric Goldman

Today, Rescuecom issued a press release declaring victory in its litigation against Google. But it's an odd definition of "victory" given that Rescuecom has apparently voluntarily abandoned its 6 year litigation effort without any new concessions from Google. The dismissal notice.

This development reminds me a lot of the American Blinds v. Google denouement, where American Blinds also simply gave up and dropped its multi-year lawsuit without any concessions from Google. Note to future plaintiffs: if you're going to threaten Google's $20B/year cash cow, chances are pretty good that they have the resources to outlast you.

Why did Rescuecom give up? According to Rescuecom's press release, "Google has recently confirmed to Rescuecom that it has removed Rescuecom’s trademark from its Keyword Suggestion Tool." That, plus the fact that Google blocks trademark references in ad copy, means that Rescuecom feels it has "obtained two of the three things we initially sought in our complaint against Google." And if two out of three is good enough for Meat Loaf, apparently it's good enough for Rescuecom. At minimum, having low standards makes it a lot easier to declare victory when you give up.

However, this explanation is pretty hollow. Although the press release treats Google's removal of Rescuecom from the keyword suggestion tool as a new development, it appears that Google made this change IN 2005. Wendy Davis reports:

[Rescuecom CEO] Milman says he only learned last week that Google had stopped suggesting Rescuecom as a keyword. "Who knows what would have happened if they had told us back in 2005 that they had taken our name out of their keyword tool?" he said.

Hmm...I think I know the answer to that question! Then again, if getting out of the keyword suggestion tool really was one of Rescuecom's Big Three objectives all along, maybe they might have asked Google about it in 2005...or 2006...or 2007...or, well, you get the point. Spin it however they want, it's hard for Rescuecom to look good while dropping a lawsuit based on a 5 year old fact.

Nevertheless, I'm interested in knowing more about this removal. Does Google have a way for trademark owners to "opt out" of having their trademarks in its keyword suggestion tool? I would expect that option to become very popular if it were well-known. If anyone has information about how trademark owners can make an election with Google, please share it.

Given the completely disingenuous nature of declaring victory based on getting out of the keyword suggestion tool, there may be a better--and more self-interested reason--for Rescuecom to give up. Rescuecom is defending a trademark lawsuit brought by Best Buy over Rescuecom's competitive AdWords purchases of the "geek squad" trademark. Rescuecom was caught in the duplicitous position of making plaintiff-side arguments against Google while making highly contradictory defense-side arguments against Best Buy. As a result, every positive step in its Google case had the potential to degrade its position in the Best Buy case. By abandoning the Google fight, Rescuecom avoids this difficult dilemma.

As an odd byproduct of this development, Google and Rescuecom are now aligned in advancing the arguments that competitive keyword advertising in AdWords is legitimate. Isn't there a passage in the Bible about the lion and the lamb lying down together?

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 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 (not initially a trademark case). Check the status.
* 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 10:45 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 04, 2010

Google Dismisses Some Claims in Jurin v. Google and Gets Some Attorneys' Fees

By Eric Goldman

Jurin v. Google, Inc., 2010 U.S. Dist. LEXIS 18208 (E.D. Cal. March 1, 2010)

Jurin v. Google is one of the 10 outstanding trademark-based claims against Google's AdWords programs--in this case, over advertiser purchases of Jurin's trademark "styrotrim." This particular lawsuit took a sizable hit, as Google successfully got a quick dismissal of several claims. As an added perk, the judge awarded Google $6k in legal fees for harassing litigation behavior.

The court dismisses Jurin's Lanham Act false designation of origin claim because Google never represents that it produces Styrotrim. The court says "Even if one accept as true the allegation that a 'Sponsored link' might confuse a consumer, it is hardly likely that with several different sponsored links appearing on a page that a consumer might believe each one is the true 'producer' or 'origin' of the Styrotrim product." This conclusion is consistent with the uncited Heartbrand Beef v. Lobel's case.

The court dismisses the Lanham Act false advertising claim because Google isn't a competitor of Styrotrim.

The court then dismisses a host of claims (Negligent Interference with Contractual Relations and Prospective Economic Advantage, Intentional Interference with Contractual Relations and Prospective Economic Advantage and Unjust Enrichment) on 47 USC 230 grounds. Jurin argued that Google creates content through its keyword selection tool. The court rejects this, saying that Google is just a provider of advertising space and the keyword selection tool "merely helps third parties to refine their content"--an editorial process protected by 230. The court also says that Google just provides "neutral tools" and "Defendant’s Adwords program simply allows competitors to post their digital fliers where they might be most readily received in the cyber-marketplace."

This is an interesting ruling on at least two fronts. First, I can't recall another conclusion that Google's keyword selection tool is covered by 230 (there may be others, I just can't think of them). Google's keyword selection tool has been problematic because some judges interpret it as Google steering advertisers towards third party trademarks for its own profit (see, e.g., the problems it caused in the Rescuecom case). Here, Google gets a nice judicial affirmation of the tool.

Second, the court echoes Google's mantra that it doesn't sell "keywords" but it just sells "advertising space." I have been to countless dog-and-ponies where Google lawyers have made this pitch to the audience, and it's consistently fallen flat IMO. It may be technically true that Google sells ad space and not keywords, but the reality is that Google takes money for keywords, and I think most judges would embrace substance over form. But in this case, the judge parrots Google's arguments nicely. Again my memory could be failing, but I think this is the first time a court has referenced Google as a space seller rather than a keyword seller.

[Note: I'm still working on another recent 230 ruling in the Subway v. Quiznos lawsuit--more on that soon.]

Finally, the court awards Google $6k in costs incurred the first time Jurin sued Google, which Jurin voluntarily dismissed when he lost his attorney. The court says that the claims are basically the same, so refiling harassed Google. I predict Google's likelihood of getting the $6k is about as high as the sun rising in the West tomorrow.

Despite Google's success, Jurin's trademark claims--the main issue in the lawsuit--are still on the table (Google didn't try to knock those out on the 12(b)(6)). However, the writing is on the wall for this lawsuit, and some of the language from this opinion bodes very well for Google when the court turns its attention to the trademark claims.

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 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 (not initially a trademark case). Check the status.
* 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 08:13 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 02, 2010

February 2010 Quick Links

By Eric Goldman

Copyright

* Mavericks Recording Co. v. Harper (5th Cir. Feb. 25, 2010). 17 USC 402(d) precludes an innocent infringement defense in P2P downloading case when the record companies place proper copyright notices on their works. This is consistent with language from BMG v. Gonzalez in the Seventh Circuit.

* Perfect 10 and Amazon settle on confidential terms; Perfect 10 v. Google will keep going. Previous blog coverage of this case (1, 2, 3, 4, 5).

* Veoh won in court (1, 2, 3) but still got knocked out of the marketplace.

* Project DoD, Inc. v. Federici, 2010 WL 559115 (D. Me. Feb. 11, 2010). In a 512(f) lawsuit I blogged about in December, the judge upheld the magistrate report dismissing for lack of personal jurisdiction because the plaintiff had moved and no longer had ties to Maine.

* MCS Music America, Inc. v. YAHOO Inc., 2010 WL 500430 (M.D. Tenn. Feb. 5, 2010). MCS sued Yahoo over infringement of its songs, and the court says that it can only get statutory damages for each song infringed. This means that if Yahoo performed 8 different covers of the song, MCS is only entitled to statutory damages for one infringed work.

Trademark

* Monex Deposit Co. v. Gilliam, 2010 WL 325570 (C.D. Cal. Jan, 25, 2010). The courts says a gripe site called "MonexFraud.com" may cause initial interest confusion of the Monex trademark. Are you kidding me?

* Typographically erroneous phone numbers always struck me as a much greater problem than "typosquatters."

Contracts

* Jacobsen v. Katzer settles.

* Asch Webhosting, Inc. v. Adelphia Business Solutions Investment, LLC (3rd Cir. Jan. 25, 2010). 3rd Circuit upholds consequential damages waiver in B2B Internet connectivity contract. Prior blog discussion.

Blogging/Social Networking Sites

* Cats & Dogs Animal Hospital v. Yelp (C.D. Cal. complaint filed Feb. 24, 2010). The plaintiffs allege that Yelp violates California B&P 17200 by using a pay-for-play scheme.

* Rick Frenkel speaks about his Troll Tracker blogging days.

* In re Perry, 2010 WL 374770 (Bankr. S.D. Tex. Feb. 3, 2010). Emailing links to a third party's defamatory blog constituted "publication" of the blog for defamation purposes. The court doesn't discuss 47 USC 230 at all!

* Cunningham v. West Virginia, 2010 WL 415257 (S.D. W.Va. Jan. 26, 2010). MySpace does not impermissibly discriminate against sex offenders.

* Evans v. Bayer, 2010 WL 521119(S.D. Fla. Feb 12, 2010). A student's off-campus creation of a Facebook Group called "Ms. Sarah Phelps is the worst teacher I've ever met" may not be an appropriate grounds for school discipline.

* Snowball fight leads to a rampage at Macy's? Blame Facebook!

* Marshall v. City of Savannah, 2010 WL 537852 (11th Cir. Feb. 17, 2010). A probationary firefighter posted an official fire department photo on her MySpace page. After a reprimand, the employment relationship deteriorated and she was fired. The 11th Circuit affirms the dismissal of her discrimination and retaliation claims.

* BoingBoing gets an anti-SLAPP win--including its attorneys' fees--in a defamation lawsuit over one of its blog posts. The anti-SLAPP ruling.

* Berkery v. Estate of Stuart, 2010 WL 610631 (N.J. Super. A.D. Feb. 23, 2010). "The investigative function an author performs is not substantively different from an investigative journalist. The dispositive element is not the form of the investigative process. In an era marked by a diminution of the classic newsmedia and the print investigative journalist and the proliferation of investigative reporting in media such as cable television, documentary journalism-both televisions and movies-internet reporting and blogging, the need for protection remains the same. Whether Hornblum was writing a book, news article, a screenplay or a blog, the substance of his body of work remains the same."

Search Engines

* After some innuendo about Microsoft’s role in harassing Google on antitrust/competition issues, Microsoft effectively admits as much. Also see this Wall Street Journal article on the Microsoft-Google tussles.

* Search Engine Land: Google AdSense Using Search History In Contextual Matching

* Munger v. State, 2010 WL 537641(N.C. App. Feb. 16, 2010). Rejecting a taxpayer challenge against a NC law designed to provide financial incentives for Google to build a facility there.

* Lengthy Wired article on Google's algorithm.

* Nature: Chinese researchers don’t want to lose access to Google. My blog post on this topic.

* Business Insider: In Case You Had Any Doubts About Where Google's Revenue Comes From

Advertising

* Thomas O'Toole: Does "No Contract" Really Mean No Contract?

* MediaPost: Start-Up Links 65 Million IP Addresses To Users, Readies Targeting Platform. This is not going to end well.

* More troubling words for online advertisers from FTC BCP Director David Vladeck.

* Zelotes v. Rousseau (Conn. Grievance Committee). Attorneys participating in an Internet lead generation system that allocated leads geographically didn't violate the attorney Rules of Professional Conduct.

Online Crimes

* F.T.C. v. Pricewert LLC, 2010 WL 329913 (N.D. Cal. Jan. 20, 2010). FTC gets a default injunction against an Internet access provider that allegedly provided connectivity for activities such as child pornography, botnets, spyware, and viruses.

* US v. Little. The Eleventh Circuit disagrees with the Ninth Circuit regarding the appropriate geographic scope to measure the obscenity of Internet material.

* 3 Google executives were convicted in Italy of criminal privacy violations for a user-uploaded video to Google Video. NYT article. Google's response. A refresher on the Felix Somm conviction from 1998.

* Online ticket sellers are getting the smackdown. Criminal prosecutions of online ticket brokers who allegedly played dirty in jumping the queue. The FTC cracks down on Ticketmaster and warns other online ticket sellers.

Posted by Eric at 05:04 PM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

March 01, 2010

Ninth Circuit: Creditor Can Execute Against Domain Name Where Registry is Located -- Office Depot v. Zuccarini

[Post by Venkat]

The Ninth Circuit affirmed the district court's ruling in Office Depot v. Zuccarini [Scribd link], agreeing that a creditor may levy against a domain name in the jurisdiction where the domain name registry is located. The decision is significant for two reasons. First, it affirms (or reaffirms) that domain names are property subject to the claims of creditors. Second, it allows creditors to proceed against domain names where the registry is located, thus allowing creditors to proceed against domain names in one proceeding and more importantly levy against domain names located abroad (where the registry is located in the United States). Overall, this makes getting at a domain name much easier for creditors.

Background: Office Depot originally obtained a judgment against frequent cybersquatting defendant John Zuccarini. Office Depot then assigned the judgment to DS Holdings. Office Depot obtained the judgment in 2000 and it's surprising that 10 years later the judgment is finally being enforced against something. Although Zuccarini is proceeding pro se, it seems like he was or became well versed in putting up roadblocks and delaying resolution of the litigation.

DS went after 190 .com domain names that were registered in Zuccarini's name. DS originally tried unsuccessfully to have the domain names transferred directly to it. (This was the technique successfully used by the plaintiff in Bosh v. Zavala.) Later, DS sought to have a receiver appointed over the domain names. The district court granted DS's request to have the receiver appointed, and Zuccarini appealed. Zuccarini's appeal focused on whether it was proper to appoint the receiver in the Northern District of California, since the domain names were not necessarily "located" there.

The court's ruling: The court runs through basic principles of in rem jurisdiction and what rules apply. The court then looks to federal rules to determine where the receiver should be appointed in this case. Finding no applicable federal rule, the court looks to California law. California law provides that a writ of execution may be issued "in the county where the levy is to be made." With this in the background, the two questions presented by the court are: (1) "are domain names property that is subject to execution?" and (2) "if so, where are the domain names located for purposes of execution?"

With respect to the first question, the court cites to Kremen v. Cohen, and easily concludes that (under California law) "domain names are intangible property subject to a writ of execution." Kremen undermined Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (Va. 2000), a Virginia case widely cited for the proposition that creditors cannot get at domain names because domain names are contract rights rather then property. To the extent Kremen did not refute Umbro, this decision definitely provides the necessary ammunition to creditors. (Again, collection is state-specific, and apart from the analysis of the nature of domain names, the outcome in these cases turns on the statute in question, which vary from state to state. That said, I think given the robust marketplace in domain names, Umbro's conception of the domain name as a personal services agreement seems outdated, and most courts will easily recognize this.)

With respect to the second question, the court acknowledges that "attaching a situs to intangible property is ... a legal fiction," and the determination must be made in a "context-specific" manner. Fairness was relevant to the court's determination of the appropriate situs, and the court was understandably not receptive to Zuccarini's policy arguments that allowing a court to issue an order directed to the registry would mean that every .com and .net domain name could be levied through courts in the Northern District of California. The court also looked to the ACPA, which provides for in rem jurisdiction over certain cases where the "registrar, registry, or other domain name authority" is located. Although this was not an ACPA case, the court found the structure set up by the statute persuasive and that the writ was appropriately issued from Northern District of California since VeriSign (the registry for .com domains) is located there.

My reaction: The decision clears up two things. Although post Kremen v. Cohen there shouldn't have been much dispute that domain names are property which are subject to the claims of creditors, the case clears up any lingering doubt that may have existed. (Kremen and this case applied California law, but the result shouldn't vary much across other states.) Second, the decision makes clear that a court which has jurisdiction over the registry can issue an order allowing the creditor to get at the domain names. The case also implicitly affirms that getting a receiver appointed to sell the domain names is the appropriate route for the creditor. Getting the name transferred to the creditor is not a remedy allowed under California law (Palacio Del Mar Homeowners Ass'n, Inc. v. McMahon). Additionally, a transfer of domain names from a cybersquatter to a judgment creditor raises some issues around potential infringement of third party rights through sales or other exploitation of the domain names. (See this post on Bosh v. Zavala for some discussion of those issues.) The method ultimately used by DS in this case (a receiver) avoids all of these issues, or at least shifts them over to the receiver rather than the creditor.

One of the more significant aspects of the case is that the ruling makes clear that regardless of whether a domain name is registered through a foreign registrar, a court having jurisdiction over the registry can issue an order directing transfer of the domain names to a receiver. With respect to .com and .net domain names, this means that creditors can try to get at these domain names through proceeding in the Northern District of California (as the court notes, VeriSign is the registry for .com and .net domain names and is headquartered in Mountain View). While the ACPA allows plaintiffs to file in rem suits where the registry is located, it's nice (for creditors) to have a similar ruling in the post-judgment context, and one from the Ninth Circuit as well.

Will this cause a rush of similar claims to be filed in the Northern District of California? It's tough to say, but even post Kremen, it does not seem like there's been a ton of post-judgment collections activity with respect to domain names. From a practitioner's standpoint, it's certainly nice to have this rule on the books.

An odd footnote: Zuccarini is a colorful character whose internet exploits have gotten him in trouble with the law. He was arrested in 2003. (Here's a post at CircleID rounding up reactions to his arrest.) According to his Wikipedia entry which contains a link to a Bureau of Prisons search, he was released in 2005.

Previous post: "Domain names as property subject to creditor claims -- Bosh v. Zavala"

Additional coverage: Mike Atkins covers the ruling in a post here.

Posted by Venkat at 06:58 AM | Domain Names , Internet History , Trademark

February 22, 2010

Google AdWords Contract Upheld Again, Causing a Venue Transfer in Flowbee v. Google

By Eric Goldman

Flowbee International, Inc. v. Google, Inc., 4:10-cv-00668-LB (S.D. Tex. Feb. 8, 2010). My post on Flowbee’s initial complaint.

Google has successfully transferred Flowbee v. Google from Texas to California by invoking the venue selection clause in its AdWords contract. The result is noteworthy for three reasons.

First, it’s yet another case upholding Google’s AdWords contract. Similar precedents include the CLRB Hanson, Feldman and Person cases.

Second, the court said the scope of the venue selection clause covered Flowbee’s tort claim for trademark infringement. This was not a guaranteed conclusion. Clearly, the clause governs Flowbee’s AdWords purchases, but it does not automatically govern Flowbee’s beefs with other advertisers’ AdWords purchases under their independent contracts with Google. Compare Miller v. Facebook with Yahoo v. American Airlines. This court, bound by the Fifth Circuit ruling in the Yahoo case, nevertheless distinguished it because the Yahoo clause specified that business partners “submit” to exclusive jurisdiction, while the Google clause used the words “litigated exclusively.”

Third, Google surely is happy to have this case out of a lousy venue (Southern District of Texas) and into its home court. If only it could transfer the other AdWords cases too!

Having successfully transferred the case, Google then filed its answer and a counterclaim that Flowbee breached the mandatory venue clause by suing Google in Southern District of Texas. This is at least the second time Google has tried this type of contract breach claim (I blogged on the same tactic in the John Beck Amazing Profits case), so Google’s turn-the-tables move isn’t really news even though it prompted a TechCrunch post.

However, Google’s contract breach counterclaim highlights how Google got caught in flagrante delicto in its collections suit against myTriggers by bringing that suit in Ohio state court. In Flowbee, Google takes the position that bringing a suit in the wrong venue is an actionable contract breach. I’m not exactly sure how Google would respond if myTriggers countersued Google for breaching its AdWords contract by suing myTriggers in Ohio rather than California. I don’t think myTriggers could claim any damages from Google’s breach, nor do I expect myTriggers would complain about the breach because it’s probably thrilled to have trapped Google in an undesirable forum. However, Google is walking an arguably duplicitous line.

As TechCrunch post points out, Google’s answer contains some “whoops” references to Rosetta Stone instead of Flowbee. By inference, Google probably cloned-and-revised its Rosetta Stone answer for the Flowbee litigation. My tip for clean living: Whenever I clone-and-revise a document to use for a different party, the very first thing I do is a global search-and-replace to change party names.

The roster of pending AdWords cases (I most recently double-checked the status of these cases on February 20, 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 (not initially a trademark case). Check the status.
* 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 09:26 AM | Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

January 31, 2010

January 2010 Quick Links

By Eric Goldman

Copyright

* An English translation of Google's December loss in France on a Google Book Search lawsuit.

* Ed Felten reports on a survey of files available via BitTorrent. Acknowledging some methodological limits, he estimates ~99% were likely copyright infringing.

* Elsevier B.V. v. UnitedHealth Group, Inc., 2010 WL 150167 (S.D.N.Y. Jan 14, 2010). Denying copyright statutory damages and attorneys' fees to unregistered foreign works is constitutional because the Berne Convention (which Elsevier argued prohibits the statutory formalities) is not self-executing.

* Techdirt: Singapore Court Rules That Online DVR Is Infringing...While Noting How Copyright Law Isn't Really Set Up For This

* Techdirt: If Banning The Internet For Sex Offenders Is Unfair, Is Banning The Internet For Copyright Infringers Fair?

* The Copyright Office issued new regulations on the deposit of online-only works: “The regulation establishes that online–only works are exempt from mandatory deposit until a demand for deposit of copies or phonorecords of such works is issued by the Copyright Office.”

Trademark/Publicity Rights

* American Airlines v. Yahoo settled. Previous coverage:
- Yahoo Subpoenas Expedia in American Airlines Lawsuit
- Fifth Circuit Denies Yahoo's Jurisdictional Appeal in American Airlines Case
- American Airlines v. Yahoo Venue Transfer Denied
- Yahoo Countersues American Airlines for Declaratory Judgment
- American Airlines Sues Yahoo for Selling Keyword Advertising

* Duplicity alert! Rescuecom is in court defending its keyword ads triggered by competitor Best Buy's TMs.

* Bev Stayart sues Yahoo again over publicity rights. My September 2009 blog post on her prior loss against Yahoo.

Pornography

* Clark v. Commonwealth, 2009 WL 5125009 (Ky. App. Ct. Dec. 30, 2009). Upholding a conviction when "Clark knowingly used a computer for the purpose of getting a minor, or a peace officer whom Clark believed was a minor, to take a sexually explicit photograph of herself."

* Am. Booksellers Found. for Free Expression v. Cordray, Slip Opinion No. 2010-Ohio-149 (Jan. 27, 2010). Ohio's Supreme Court partially upholds its state law restricting Internet distribution of harmful to juveniles material to juveniles when the communications are to recipients known or believed to be juveniles.

Spam

* United States v. Zein (E.D. Mich. 2009). Posting an ad on Craigslist constituted a "mass marketing" activity sufficient to trigger a 2 level sentencing enhancement.

* Comcast and e360 settled their lawsuit. Previous blog coverage.

Blogs/Social Networking Sites

* Sieber v. Brownstone Publishing Company, 2007 CA 002549 B (D.C. Superior Ct. Dec. 23, 2009). A building contractor sued Angie's List and other people over consumer reviews. My prior mention of the case. After 2 years of litigation, a DC trial judge dismissed all defendants on summary judgment and awarded one defendant-counterclaimant $18k+. The entire text of the memo opinion:

MEMORANDUM OPINION AND ORDER GRANTING MOTIONS FOR SUMMARY JUDGMENT OF ALL DEFENDANTS, DENYING PLAINTIFFS' MOTIONS FOR SUMMARY JUDGMENT, and GRANTING POOLE'S MOTION FOR SUMMARY JUDGMENT ON HIS COUNTERCLAIM signed by Judge Long, efiled, eserved, and docketed in chambers on December 23, 2009. It is ORDERED that the Motions for Summary Judgment of Brownstone Publishing Co., the Washington Post Company, John Kelly, and John W. Poole are granted; and it is FURTHER ORDERED that the Motions for Summary Judgment filed on behalf of the plaintiffs are denied; and it is FURTHER ORDERED that judgment shall be entered in favor of all defendants against the plaintiffs as to all claims in the Second Amended Complaint; and it is FURTHER ORDERED that judgment shall be entered in favor of defendant Poole and against plaintiff SCS Contracting Group LP as to Poole's Counterclaim against plaintiff SCS Contracting Group for $18,300 plus 6% (six percent) per annum interest, and a separate money judgment for this sum shall be docketed. Court Jacket not in chambers.

* FINRA Regulatory Notice 10-06: Guidance on Blogs and Social Networking Web Sites.

* Duer v. Henderson, 2009-Ohio-6815 (Ohio App. Ct. Dec. 23, 2009). A web publication telling a ghost story and describing the location of purportedly paranormal phenomenon on private property is not liable for any resulting trespass to real property.

* The “moldy tweet” lawsuit was dismissed.

* Two lawsuits holding that bloggers aren't subject to jurisdiction in the plaintiff's home court:
- Silver v. Brown, 2009 WL 5220297 (D. N.M. Nov. 30, 2009).
- Workman Sec. Corp. v. Phillip Roy Financial Services, LLC, 2010 WL 155525 (D. Minn. Jan 11, 2010)

* BBC: France ponders a right-to-forget law.

E-commerce

* Appliance Zone, LLC v. NexTag Inc., No:4-09-cv-0089-SEB-WGH (S.D. Indiana Dec. 22, 2009). Upholding NextTag's clickthrough-formed advertiser agreement. Mehmet Munur’s comments.

* Edward A. Zelinsky, “New York’s 'Amazon Law': Constitutional But Unwise.”

* Largo Cargo v. Google, a new complaint over allegedly mismanaged AdWord bids. This is the latest incarnation of the Almeida case. I think Largo Cargo’s complaint is still a no go.

* The NYT catalogs an impressive roster of futility for US dot coms trying to compete in China.

Miscellaneous

* Gmail will consult the user's prior emails to pick an ad if a particular email doesn't lend itself to a good ad.

* Illustrating the divergence between the open source community and the Wikipedia community, APC reports that 75% of Linux code is now written by paid developers.

* Oddee: 15 Funny Facebook Fails.

* I expect to be in the Netherlands May 23-30. Let me know if you would like to meet up there.

Posted by Eric at 01:19 PM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark | TrackBack

January 29, 2010

Terri Chen Replaces Rose Hagan as Google's Chief Trademark Counsel

By Eric Goldman

I previously mentioned that Rose Hagan, Google's longtime chief trademark counsel, was retiring. (Her last day was Wednesday). Rose's next ventures include art and jewelry. Terri Yun-Lin Chen, a current trademark counsel at Google, has taken over Rose's spot. Terri has a bachelors and JD from UC Berkeley, and she practiced IP litigation at Wilson Sonsini before joining Google over 3 years ago.

Before retiring, Rose led Google's trademark functions for 7+ years. During that time, Google went from near-zero revenue to building a $20B+/year business selling keyword advertising, of which an unknown amount is derived from the sale of third party trademarks. While not everything has gone smoothly for Google--most obviously there are 10 pending lawsuits over Google's trademark policies--Google's massive keyword advertising success and its ability to avoid a business-threatening/ending trademark lawsuit are both remarkable achievements that have made a lot of people a lot of money. Also remarkable is Google's rapid ascendancy to become one of the world's most recognized and cherished brands. Kudos to Rose on her role in these accomplishments. She leaves big shoes for Terri to fill.

Posted by Eric at 12:58 PM | Search Engines , Trademark | TrackBack

January 27, 2010

Utah May Repeal Its Spyware Control Act--SB 26

By Eric Goldman

It's that time of year again. The Utah legislature is back in session and cooking up new schemes to regulate the Internet. So far I only see one Internet-specific bill in queue, SB 26. Surprisingly, it does not directly attempt to regulate keyword advertising.

SB 26 is sponsored by Sen. Stephen H. Urquhart, who rocketed to national cyberlaw fame (infamy?) in 2004 when he sponsored Utah's Spyware Control Act. It was such a misguided law that it motivated me (in part) to write a 71 page magnum opus explaining its policy deficiencies. It was also hampered by its fairly obvious unconstitutionality, which was confirmed by a Utah court a few months after passage. (Note: I helped write an amicus brief in that court challenge, so you might interpret my assessment as an advocacy statement). Following the judicial thumping, then-Rep. Urquhart shepherded an amendment to the Spyware Control Act in 2005 that effectively neutered the law. Since then, I believe the law has sat largely dormant. The only court citation I know of was in the 2008 Overstock v. SmartBargains case, easily rejecting Overstock's mystifying attempt to make a claim under the superseded 2004 version of the law.

Among other items I'll discuss in a moment, SB 26 proposes to repeal the Spyware Control Act entirely. If passed, that would be a remarkable development because most legislators let their failed laws sit on the books unused. It takes some work to repeal a law, plus it can be a little embarrassing to repeal a law--especially after hyping up the law to get it passed initially (Urquhart had a lot of tough talk about spyware/adware in 2004-05, see, e.g., here). Kudos to Sen. Urquhart for having the fortitude to admit and fix his errors publicly.

While repealing the law would be a remarkable step on its own, it's even more remarkable in the context of the Utah legislature's track record of Internet regulation. By my count, repealing the Spyware Control Act would be at least the THIRD Utah Internet law that its legislature repealed in the past few years--the other two being Utah's 1995 digital signature act and its infamous Trademark Protection Act. For a legislature that meets only a couple of months a year, a trifecta of repealed Internet laws in the past couple of years is a stunning waste of scarce legislative resources. Wow.

As bad as that is, the three repealed laws don't even tell the full story of the Utah legislature's incompetence when it comes to Internet regulation. Recall Utah's failed attempt to line its coffers by taxing email (which turned into a big money-loser), and don't forget its repeated attempts to regulate Internet content that have spawned years of costly litigation (see, e.g., Free Speech Coalition v. Shurtleff). From my perspective, anyone looking objectively at the Utah legislature's track record of regulating the Internet would logically conclude that they should cut their losses and focus on other legislative priorities.

Unfortunately, SB 26 indicates that either hope springs eternal in the Utah legislature or they are doomed to forget the lessons of history. Despite doing some good by putting down the Spyware Control Act, the bill amazingly proposes more regulations of the Internet! To Sen. Urquhart's credit, the bill is largely clone-and-revise proposals from other places and not drafted from scratch, which may contribute less from a regulatory standpoint but at least they aren't quite as error prone. The proposed law has three main components:

1) anti-phishing/anti-pharming restrictions. I'm not sure where the original text came from. California has an anti-phishing law but I don't think this is a clone-and-revise of that law. Maybe it's cloned from another state's anti-phishing law. In any case, the anti-"phishing" proposal is noteworthy because the regulation doesn't restrict itself to email (presumably to avoid any risk of CAN-SPAM preemption). As a result, as currently drafted, it's an unlimited anti-pretexting law applicable to both online and offline conduct.

2) anti-spyware restrictions. After wiping out the Spyware Control Act, the new anti-spyware proposals are based on the California model of state anti-spyware laws, which have been followed by a couple dozen other states. The California model regulates various types of "intentionally deceptive" conduct regarding software activity. This is what Utah should have done in 2004-05 rather than trying to develop its own sui generis law. I generally don't have a problem with regulating intentionally deceptive software behavior, but it seems a little late to be enacting the laws now. Most of the regulations contemplate practices more common in 2003-06 and largely defunct now, so Utah is showing up late to a party that ended years ago.

3) a state version of the federal Anti-Cybersquatting Consumer Protection Act. I know some other states have enacted domain name protection laws (California comes to mind), but it's not clear what benefits these state laws have. As far as I know, California's law is almost never used. Tom O'Toole speculates that this bill will make it easier for Utah trademark owners to bring in rem lawsuits, but it's not clear to me how much this law will help given the rarity of ACPA in rem lawsuits (UDRPs are usually cheaper and faster for the same results) and already expansive jurisdictional principles under ACPA. Further, I wonder if this law is preempted either by the dormant commerce clause or via field preemption of the federal ACPA.

I should add that I’ve observed that Utah bills can change radically from draft to draft with little warning, even if the law is on the legislative floor for a final vote, so we'll have to see if this law transmogrifies through the process. And I am keeping a vigilant watch for any resurrected attempts to regulate keyword advertising.

Posted by Eric at 09:58 AM | Adware/Spyware , Domain Names , Internet History , Spam , Trademark | TrackBack

January 21, 2010

Keyword Ad and Product Shots Case Survives Motion to Dismiss--FragranceNet v. FragranceX

By Eric Goldman

FragranceNet.com, Inc. v. FragranceX.com, Inc., 2010 WL 174159 (E.D.N.Y. Jan. 14, 2010)

I previously blogged about this case in 2007. That ruling was one of several in New York that, following the Rescuecom v. Google district court ruling, held that buying a competitor's trademarks as keywords did not constitute a trademark use in commerce. As a result, the court granted a motion to dismiss.

Looking back even further, the case has been hanging around for almost 4 years. The first complaint was filed May 2006 and the plaintiff is now on its third amended complaint. This longevity is remarkable in its own right--just how much is this case worth to either litigant to justify four years of litigation costs and yet still be wrassling over motions to dismiss? The defendant tries to dismiss the complaint yet again, but this time the motion to dismiss fails, and the court directed the defendant to answer the complaint.

Copyright in Product Shots

FragranceNet claims that FragranceX copied 900+ product shots from FragranceNet's website and republished them verbatim on the FragranceX website. FragranceX responded that product shots aren't copyrightable. For more on the copyrightability of product shots, see my post on Designer Skin v. S&L Vitamins and the several other times I've addressed the topic.

I am not a fan of copyright protection for product shots. At best, I see them as subject to a very thin copyright that protects against only verbatim republication (although FragranceNet alleges FragranceX did just that). Even then, fair use should provide a wide range of permissible secondary uses. However, I also don't see how the defense thought it could win a motion to dismiss that product shots are not copyrightable at all. The defense had to overcome the presumption that photos generally are copyrightable--a presumption which was significantly reinforced in this case because FragranceNet made a successful and timely registration of the photos with the Copyright Office. FragranceNet further alleged in the complaint that the product shots were taken with creativity. Busting the product shot copyrights may be possible with an evidentiary record, but not beforehand.

Trademark Claims over Metatags and Keyword Ads

FragranceNet also claims that FragranceX put its trademarks in the metatags (good grief, another plaintiff who needs to internalize that Google ignores keyword metatags) and bought them as AdWords keywords. FragranceX responds by alleging problems with FragranceNet's acquisition of trademark interests from a third party, but these attacks fail on a motion to dismiss. (For true legal geeks, there is a brief and uncommon discussion of anti-champerty laws).

Although not discussed/cited in this case, I note that last month FragranceNet defeated a motion to dismiss in a different lawsuit attacking the FragranceNet mark as generic. Especially in light of the Hotels.com and Mattress.com Federal Circuit opinions, I expect both that defendant and this one will pursue genericness in future proceedings.

Posted by Eric at 12:11 PM | Copyright , Marketing , Search Engines , Trademark | TrackBack

January 11, 2010

Top Cyberlaw Developments of 2009 (Eric's List)

By Eric Goldman

Guest blogger John Ottaviani recently dropped by to offer his perspectives on 2009’s top Cyberlaw developments. While I like his list a lot, I independently developed my own top 10 list that has a different emphasis. You might enjoy the contrasts. My list:

#10: Louis Vuitton v. Akanoc. After the judge ordered a web host to stand trial, a jury awarded the trademark owner $32 million due to the web host’s contributions to trademark infringement by its customers. This case stands out for the big damages award and as a rare example where an online provider was held liable under a contributory trademark liability theory. Many trademark practitioners are scratching their heads trying to figure out the import of this case, however. Does this case represent a dangerous new frontier of online liability? Was this a bad jury verdict fueled by poor defense lawyering? Or was this an appropriate outcome because the web host actually engaged in bad behavior that distinguishes it from most “legitimate” web hosts? 2010 may help us understand if this case is part of a new trend or an aberration.

#9: Gordon v. Virtumundo. We’ve seen a lot of silly anti-spam litigation, including the emergence of an entirely new group of entrepreneurs called “spam litigation entrepreneurs” who try to make a living on anti-spam lawsuits. These folks have a true love-hate relationship with spam; they hate it so much that they devote their lives to fighting it, but they love getting spam because each one is a potential revenue source. In general, judges hate spam a lot too, so over the years we have seen a number of doctrinally unsupportable results where judges bent the law to make sure spammers lost.

However, the judicial pendulum has swung in the opposite direction, and in Gordon v. Virtumundo, the Ninth Circuit destroyed a serial anti-spam plaintiff’s entrepreneurial business in a doctrinally questionable but strongly worded opinion. In short order, a number of other spam litigation entrepreneurs have seen their lawsuits shut down with emphasis. Due to this ruling, the era of anti-spammers partying in courts may be on the wane.

#8: Zango v. Kaspersky. The question raised in this issue is simple to state but hard to answer: who should decide what constitutes spam, spyware or a virus? Vendors of software designed to curb these threats would like unfettered discretion to make their classifications; businesses who are classified as a threat would like judges to overturn adverse decisions. As it turns out, in a relatively obscure provision (47 USC 230(c)(2)), in 1996 Congress said that software vendors get to make classifications decisions and unhappy businesses can’t complain about them. In June, the Ninth Circuit upheld Kaspersky’s decision to classify Zango’s software as a threat and rejected Zango’s efforts to take the classification decision out of Kaspersky’s hands. This ruling gives enormous freedom to vendors of anti-spam/anti-spyware/anti-virus software to do their best to keep us safe.

#7: Columbia Pictures v. Fung. This case came out just before the Christmas holiday, so it got lost in the holiday hoopla a bit, but it’s a case of potentially significant import. First, it held that the specific torrent sites at issue induced copyright infringement. Second, the court denied the torrent sites’ eligibility for the DMCA online safe harbors. In part, the court said that an inducing website was categorically disqualified from the DMCA online safe harbors. Like the Akanoc case, it’s not entirely clear if this result was a legal aberration or an appropriate reaction to the defendants’ poor choices. Either way, it is possible that more “legitimate” websites may change their behavior to minimize their exposure based on the legal precedents in this case. If they do, this case could have a major impact on UGC websites.

#6: Lori Drew’s acquittal. Megan Maier’s suicide remains a heartbreaking tragedy, but unfortunately, overzealous prosecutors compounded the tragedy by prosecuting Lori Drew using bogus legal doctrines. The tragic facts got a jury to convict Drew of some misdemeanor crimes. Fortunately, the judge recognized the legal errors of the prosecution’s theory and the jury’s conclusions and granted Drew an acquittal despite the jury findings. The judge finally got to the right result as a matter of Cyberlaw, but the case remains a chilling testament to prosecutorial power.

#5: Harris v. Blockbuster. The rule is really clear. Service providers can't amend online user agreements in the provider’s sole discretion without notice. As the Ninth Circuit informed us in 2007, those contracts don’t fare well in court. So although these provisions are in just about every online user agreement, they don’t work--as Blockbuster found out the hard way.

As part of the litigation detritus from the Facebook Beacon experiment, users sued Blockbuster for sharing their rental transactions with Facebook and all of their friends, allegedly in violation of the Video Privacy Protection Act. Blockbuster tried to bust the class action by invoking the contract’s arbitration clause. Instead, because Blockbuster had the impermissible amendment provision in its user agreement, the court said the contract was illusory and refused to send the case to arbitration.

This case should signal the end of the ridiculous amendment clauses. We’ll see how long it takes the lawyers to give the provisions up.

#4: Battles Over the First Sale Doctrine. We have seen numerous legal battles this year over the First Sale defenses in both copyright and trademark law.

Copyright owners try to engage in price discrimination by carving up the world into geographic territories with different prices for the same product. If they can use copyright law to keep the cheap products from entering the other geographic market, this keeps the product from effectively price-competing with itself.

This year, two cases involved European textbooks which were functionally equivalent to the textbooks being sold in the United States at higher prices. Entrepreneurs were buying the cheap European texts, shipping them to the US and then selling them online. The entrepreneurs invoked the First Sale doctrine, which says that copyright law can’t prohibit the legitimate purchaser of a tangible copyrighted item from reselling the item to whomever they want at whatever price they want.

However, copyright law has another provision that allows copyright owners to block the importation of copyrighted works into the United States. In the 1998 Quality King case, the US Supreme Court said that the First Sale doctrine trumped the importation right when the goods were manufactured in the US, sold overseas, and then imported back to the US. However, in Pearson v. Liu and John Wiley & Sons v. Kirtsaeng, the judges said that the importation right trumps the First Sale doctrine when the goods were initially manufactured overseas. This issue is ripe for further adjudication, though. A similar importation case, Costco v. Omega, is pending before the US Supreme Court, which is deciding whether or not it wants to hear the case. If it does, we may get clearer instructions about the interplay between the First Sale doctrine and the copyright importation right.

Copyright’s First Sale doctrine was also at issue in Vernor v. Autodesk, where the purchaser of a software disk wanted to resell the disk on eBay despite restrictions in the software licensing agreement barring such resales. The court held that the First Sale doctrine applied and allowed the resale. There are other cases percolating through the court system involving the resale of tangible media contained copyrighted material despite contractual restrictions on resale, so this issue remains a hot one.

Trademark owners also try to prevent competition with their products that leak out of their official channels of distribution. eBay has been the site of a couple battles over the First Sale doctrine in trademark law. In Mary Kay v. Weber, the court held that the trademark First Sale doctrine may not permit the eBay resale of expired cosmetics by a Mary Kay independent beauty consultant. In Beltronics v. Midwest, a trademark owner shut down the eBay resale of radar detectors that had leaked out of the manufacturer’s channel and were being sold (at a cheaper price) without the manufacturer’s warranty.

Clearly, the First Sale doctrine matters a lot to eBay and other consumer-to-consumer e-commerce websites. With a possible pending Supreme Court case and lots of IP owners looking to stifle competition from goods they have already profited from, expect the First Sale doctrines to get lots of attention in 2010.

#3: 47 USC 230. In my opinion, 47 USC 230 is the most important Cyberlaw statute, so new 230 developments will make my top 10 list for the foreseeable future. This year, there were three federal appellate court rulings interpreting 47 USC 230(c)(1):

* in Barnes v. Yahoo, the Ninth Circuit held that 230 protected a website’s negligent delay in removing user content. However, if the website had promised removal to the user, the user could have a viable claim for promissory estoppel that would not be preempted by 230.
* in FTC v. Accusearch, the Tenth Circuit held that a website’s resale of pretexted phone records—even if those records were supplied by third party suppliers—did not qualify for 47 USC 230 protection because of their illegality.
* in Nemet Chevrolet v. ConsumerAffairs.com, the Fourth Circuit held that a consumer review website was not liable for user-supplied reviews, even when the website worked with the user to submit the review, and despite the plaintiff’s unsubstantiated claims that the website had fabricated the reviews itself.

Really, the big 47 USC 230 news in 2009 is the absence of big news. Specifically, 2009 reinforced that the Ninth Circuit’s 2008 Roommates.com decision—one of the most significant defense losses under 47 USC 230—did not rip open a major hole in the statutory protection of websites. Of the 13 cases that I have seen that have cited the Roommates.com en banc opinion, eleven have cited the case in favor of the defense. (See the list here). The two exceptions are the Accusearch case, mentioned above, and the New England Patriots’ lawsuit against StubHub over season ticket resales, an odd opinion that may not have much influence. Therefore, despite our fears about Roommates.com, the 47 USC 230 immunity remained healthy and vibrant in 2009. For more on this topic, see my special recap of 47 USC 230's year-in-review for 2009.

#2: Keyword Advertising Battles. Keyword advertising battles are another perennial topic on these year-in-review lists. A multi-billion dollar a year industry has sprung up around the sale of keyword-triggered advertising, including some keywords that may be third party trademarks, and trademark owners don’t like it at all. This has led to a multi-front battle between trademark owners, keyword advertising sellers (such as Google), and keyword advertising buyers.

One of the biggest Cyberlaw cases of the year was the Second Circuit’s ruling in Rescuecom v. Google. In the district court in 2006, Google won an easy victory against a trademark owner because the court said that Google did not make the requisite “use in commerce” of the trademark. The Second Circuit reversed the district court, sending the case back for further proceedings. The reversal does not ensure Google’s defeat; Google will now litigate other legal doctrines and might very well win on one of those. However, the Second Circuit’s opinion largely spells the end of any “use in commerce” defense by either keyword advertising sellers or buyers.

Because of the “use in commerce” defense’s demise, keyword advertising cases will now likely turn on whether the advertisements create a likelihood of consumer confusion. One case, Hearts on Fire v. Blue Nile, offered up a new and complicated test for gauging consumer confusion. If other courts adopt this test, keyword advertising cases will get even more expensive and complicated—highlighting how important it was that the Rescuecom case eliminated an easy way to end these lawsuits early.

Meanwhile, despite the fact that keyword advertising battles have been taking place for at least a decade, we have not heard what a jury thinks about the practice—until the November jury ruling in Fair Isaac v. Experian. In that case, the jury found for the defense that the keyword-triggered ads did not create the requisite likelihood of consumer confusion. It remains to be seen if other juries reach the same conclusion. If they do, keyword advertising lawsuits should slowly fade away over time because the trademark owners can’t win in the end.

As for now, keyword litigation is going strong and hardly fading away. In Spring, Google made two changes to its trademark policies where it voluntarily agrees to take down certain types of ads at the trademark owner’s request. In May, Google extended its more liberal US-based policy to nearly 200 other countries, replacing the more restrictive policies it had in place there. Shortly thereafter, Google modified its US policy to do less for trademark owners in situations involving product resales, review websites and sales of complementary/replacement parts. Trademark owners were none too pleased with these changes. In response to these changes and the door opened by the Second Circuit Rescuecom decision, Google got hit with about a dozen new lawsuits, including some class action lawsuits, of which I believe 10 are currently still active.

Finally, all of the wrangling in court and over voluntary trademark policies could be mooted by legislative action, and for the third time, the Utah state legislature considered resolving the keyword advertising issue itself. A law regulating keyword advertising passed the Utah house but died in the Utah senate. Expect the pro-regulatory forces to round up the troops for a fourth try in 2010.

#1: FTC Endorsement Guidelines for Bloggers. The Obama administration has breathed new life into a pro-regulatory FTC, and the FTC sure is interested in all things Internet. The FTC has been nosing around Internet privacy and Internet marketing practices pretty carefully, and I expect 2010 to bring more FTC pronouncements designed to tackle the Internet.

But nothing stirred up a hornet’s nest of confusion and anger in 2009 like the FTC’s Endorsement and Testimonials Guidelines. I think it’s fair to say that the FTC’s guidelines rollout was a complete failure. As usual, the FTC’s guidelines were mealy-mouthed and filled with conditional statements (the FTC hates to lay out bright line rules that might constrain their future discretion). However, the FTC’s general gist was clear: bloggers should disclose when they receive financial or other consideration for their blog posts.

Unfortunately, this general principle leaves open some fairly fundamental questions, like when is disclosure required in situations less clear than straight cash-for-posting, and where should disclosure be made, especially in space-constrained media like Twitter. Needless to say, unhappy bloggers can be very noisy, so blogger response to the FTC’s announcement was loud and vituperative. The FTC tried to backpedal a little by saying that it did not intend to pursue individual bloggers, but this announcement only reinforced that bloggers do not understand what the FTC wants from them.

Meanwhile, the FTC’s proposed guidelines also took an interesting position about an advertiser’s liability for rogue blogger’s posts. This position is generally consistent with government enforcement agencies’ views that commercial players can be legally responsible for content they endorse or link to (see, e.g., my comments on the SEC’s liability-for-linking policy), but this position runs directly contrary to 47 USC 230’s provisions that say A isn’t liable for B’s online content. As a result, I believe that part of the FTC’s proposed guidelines violate 47 USC 230 and would not survive a court challenge.

Overall, the firestorm over the FTC’s Endorsement and Testimonials guidelines is a small part of a larger effort to regulatorily separate advertising from content. The Internet has collapsed those distinctions, perhaps irreparably, so regulators may be trying to accomplish the impossible. Nevertheless, the FTC seems determined to prop up the distinction, and I expect 2010 will bring more FTC efforts on this front.

* * * * *

While that concludes my top 10 list, there were a number of other interesting developments in 2009 that are worth a brief note:

* Moreno v. Hanford Sentinel. A woman trashed her hometown in an obscure but public MySpace posting and learned there is no “do-over” for Internet content publication. My vote for the most factually interesting Cyberlaw case of 2009.

* Google’s keyword metatag announcement. Courts generally treat the inclusion of third party trademarks in keyword metatags as per se trademark infringement. But Google has confirmed that it ignores keyword metatags. Will courts get the message?

* Google Book Search settlement. If the Google Book Search settlement ever gets approved, it may reshape the book industry, redefine libraries, and make all kinds of other socially significant changes. But the list of opponents to the settlement is long and growing. Professor James Grimmelmann of New York Law School is our community’s maven for all things “GBS.”

* Kindle book deletion. The Kindle store sold e-books it didn’t have the right to sell, so it took them back. Users learned of a key factual difference between physical books and e-books—the vendor can remotely make e-books go poof.

* States’ efforts to impose sales tax efforts based on marketing affiliates. For years, states have been looking for ways to make online retailers collect sales tax for them. They are generally stopped by Supreme Court precedent, but in 2008 New York finally figured out a workaround. The New York statute said that marketing affiliates were like traveling salespeople and thus created the physical nexus required for a state to impose sales tax collection obligations. The New York statute survived its first legal challenge, which opened the floodgates of other states passing similar laws hoping to get their piece of the action. Meanwhile, online retailers aren’t just rolling over; instead, they are threatening to cut off (or actually cutting off) marketing affiliates in states that enact these laws—thus potentially costing the states income tax from the marketing affiliates’ revenue, and creating the potential for the entire affiliate industry to be torn apart.

* Maine kids privacy law. Maine thought it could pass a law banning marketing to kids. It was wrong. The state had to withdraw the law and go back to the drawing board.

* UMG v. Veoh. Veoh won another nice DMCA online safe harbor victory.

* US v. Kilbride. The Ninth Circuit says that online obscenity prosecutions need to evaluate national attitudes towards obscene content, not local community standards.

* Kentucky domain name seizure. Kentucky tried to grab 141 domain names that enabled Kentucky residents to engage in illegal gambling. But those domain names also serviced customers for whom the gambling was completely legal, so the Kentucky courts are rethinking the grab.

* FTC v. Sears. As another example of the new pro-regulatory winds blowing through the FTC, the FTC cracked down on Sears for installing spyware on users’ computers that looked at the users’ hard drives, even though Sears paid the users for the installation and disclosed the spyware’s snooping in the user agreement (though in an inconspicuous manner). This case has made a lot of lawyers concerned that adverse disclosures in user agreements won’t satisfy the FTC.

* Facebook the Drama Queen. Ah, Facebook. Love it. Hate it. Facebook is a pretty nifty site and part of my daily routine, but boy, they sure do have a knack for stirring up trouble.

- In February, they made a relatively modest change to their user agreement that caused people to freak out.
- In response to this, Facebook took the provocative step towards user self-governance. Facebook let users vote on some choices and promised to be bound by the results, but with an asterisk: Facebook decided what options users could vote on, and Facebook would honor those choices only if a prohibitively large number of users exercised their franchise. Still, it was a nice gesture towards cyberspace community self-governance.
- In summer, they tried to settle their Beacon litigation, but that also reminded folks of how much Beacon irritated them in the first place.
- Summer also brought allegations of click fraud on Facebook, and lawsuits followed.
- Finally, in Thanksgiving, Facebook rolled out some changes to its privacy options that it pitched as giving users more choices, but it also took away some choices and defaulted users into some options that surprised them.

Given this track record, is it unrealistic to expect more Facebook drama in 2010?

* Estavillo v. Sony. Speaking of self-governance, virtual world enthusiasts would love to establish the legal proposition that virtual worlds are legally equivalent to governments and therefore obligated to restrain their actions just like governments are. One virtual world enthusiast sued Sony for kicking him off the network, claiming that Sony was legally governed as a “company town” and therefore lacked the discretion to kick him off. WRONG (and it wasn’t even close).

* Wikipedia's policy change. In August, the English-language Wikipedia announced that it was going to tighten up its editorial policies, and people Freaked Out. (In fact, I have predicted that Wikipedia cannot avoid increased editorial restrictions over time, so this change should not have been surprising). However, it turns out that everyone got it wrong, and Wikipedia’s editorial changes are far less dramatic (and consequential) than initially reported. I will post a separate recap on Wikipedia shortly.

If you would like a stroll down memory lane, you can see my previous top 10 lists from 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 10:46 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Internet History , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Spam , Trademark , Virtual Worlds | TrackBack

December 28, 2009

Pharma Company Avoids Injunction By Dropping Competitive Keyword Ads--King v. ZymoGenetics

By Eric Goldman

King Pharmaceuticals, Inc., v ZymoGenetics, Inc., 2009 WL 4931238 (E.D. Tenn. Dec. 10, 2009). Seattle Trademark Lawyer has some background.

This case involves the cutthroat (sorry) world of blood clotting drugs. King Pharmaceuticals sells bovine (cow) thrombin, a clotting agent. ZymoGenetics sells thrombin made from hamster ovaries and snake venom. ZymoGenetics' version has been making inroads on the thrombin market, and King isn't too pleased about that. King claims that its dropping market share is due to several bad acts on ZymoGenetics's part, including ZymoGenetics' AdWords campaign that included the King trademark "Thrombin-JM" as a keyword.

Blaming illegitimate AdWords for King's dropping market share seemed particularly implausible for two reasons. First, the product is purely B2B and has no consumer-facing side. It's used for post-surgery recuperation, so doctors/hospitals are the target customers--and for professional and liability reasons, they are pretty careful about what they prescribe to patients. So if the AdWords ads have helped facilitate doctor switching, it's more likely due to doctors learning of a new drug that doesn't have some of cow thrombin's negative side effects than any marketplace mistake over brands or other "unfair" diversion.

Second, the AdWords ads produced a trivial number of clicks. ZymoGenetics reports that it got 84 clicks on "Thrombin-JM" (and only 803 on the generic term "thrombin"). The court doesn't expressly guffaw at King for fighting over 84 clicks, but I can hear a snicker or two in the opinion. Not surprisingly given the minuscule volume of clicks, ZymoGenetics voluntarily dropped the competitive keyword purchase when it learned of King's lawsuit (it wasn't giving up much), and it agreed not to buy the keyword again. King pressed for a preliminary injunction to forcibly hold ZymoGenetics to its word, which many courts will issue in these situations, but this court decides that ZymoGenetics' promise is good enough and denied the preliminary injunction.

Now, King was going to court to redress ZymoGenetics' perceived transgressions no matter what, so it would be a little unfair to beat up on them for litigating over 84 clicks. However, this case is yet another example of how competitive AdWord lawsuits often are ridiculous overkill given the economic value at issue. (Related examples are 1-800 JR Cigar, which involved $345 of revenue, and Storus, which involved 1,374 clicks over an 11 month period). It's a good reminder to trademark owners to be smart with their litigation dollars!

Posted by Eric at 05:29 PM | Marketing , Trademark | TrackBack

December 26, 2009

November-December 2009 Quick Links, Part 1

By Eric Goldman

Trademarks/Domain Names

* Yahoo and Mary Kay settled Mary Kay's trademark lawsuit over Yahoo's email shortcuts.

* uBID Inc. v. The GoDaddy Group Inc., No. 09-cv-2123 (N.D. Ill. Nov. 5, 2009). uBid’s anti-domain name parking lawsuit failed on jurisdictional grounds. Tom O'Toole explains why this is an unusual jurisdictional ruling.

* Trademark Blog: “Sellify, operator of ONEQUALITY.COM, sues Amazon over Amazon affiliates' alleged misuse of ONEQUALITY.COM as Google keywords.”

* In an unenlightening memo opinion, Second Circuit affirms the Cintas v. Unite Here opinion involving union activists’ web activities using a target company’s trademark. My initial blog post on the case.

* Bloomberg: Buyers of counterfeit luxury goods understand they are getting counterfeits, and many of them upgrade to the real thing eventually.

* Transamerica v. Moniker Online Services, 2009 WL 4715853 (S.D. Fla. Dec. 4, 2009). Domain name registrar does not qualify for ACPA's registrar safe harbor when: "Transamerica alleges that Oversee and the Moniker Defendants, together with the ostensible registrants-the John Doe Defendants-are the de facto registrants of the domain names in question. Transamerica claims that Moniker was not merely acting as a registrant in providing registration services to the John Doe Defendants for the infringing domain names, but instead was part of a scheme to profit from the use of the infringing names. As Transamerica points out, Moniker receives a fee each time an internet user clicks on one of the links attached to the infringing domain sites; such payment establishes at least partial ownership in the domain name." Troubling ruling.

* SafeWorks, LLC v. Spydercrane.com, LLC (W.D. Wash. Dec. 7, 2009). A trademark owner's preemptive registration of domain names containing typographical errors of the registrant's trademarks does not infringe a third party trademarks.

Marketing and Advertising

* In re Gemtronics (FTC ALJ decision Sept 16, 2009). A dietary supplement seller wasn't liable for comments on a website that it didn't own or control but (among other things) it had linked to. While this is great, I still believe the FTC needs to rethink its entire liability scheme of online content endorsement or adoption due to 47 USC 230. See 1, 2.

* Avvo settles Florida bar lawsuit and gets Florida to admit that client testimonials on Avvo aren't lawyer advertising. Rebecca explains why an analogous South Carolina regulation violates 47 USC 230.

* After the FDA spooked pharmaceutical companies to stop engaging in search advertising, the FDA held hearings on Internet pharmaceutical marketing. The Arnold & Porter recap. Ironically, BusinessWeek ran a story wondering if pharmaceutical ads reduce consumer demand.

* The FTC cracks down on online negative option/"continuity plan" offerings.

* In re Miva Inc. Securities Litigation, 2009 WL 3821146 (M.D. Fla. Nov. 16, 2009). The court dismissed a securities class action lawsuit over Miva's/FindWhat's investor disclosures relating to click fraud and spyware. My initial blog post on the case.

* NYT: False advertising litigation is a growth industry.

Search Engines

* A Milwaukee lawyer has alleged that another lawyer buying keyword advertising triggered by his name violates his publicity rights. I’ve posted the complaint to Scribd.

* Google is now personalizing search results for everyone, not just logged-in users. In 2006, I wrote about how universal personalization would affect SEO and concerns about search engine bias. Danny Sullivan believes Google’s change deserves "extraordinary attention."

* Google took out an ad from itself to explain why its image search results for Michelle Obama contained an offensive result. This is after it first tried to remove the image on the pretext that the website was hosting malware.

* Danny Sullivan asks some good questions about Google's integration of Twitter into its search database.

* BusinessWeek: Matt Cutts, Google’s search engine anti-spam superstar, talks about his job. He doesn't sound like the most fun person to travel with

* Rose Hagan, Google's chief trademark counsel, is retiring after 7 years at Google. She leaves behind big shoes to fill.

Posted by Eric at 02:59 PM | Adware/Spyware , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 18, 2009

Top Cyberlaw Developments of 2009

By John E. Ottaviani

(Thanks to Eric for letting me post this list here!)

[Eric's note: some of you may recall John, a regular blog guest contributor from 2005-07. It's great to have another contribution from him.]

Eric will post his own list later, but I thought we could start off the holiday season with one person’s view of the top Cyberlaw developments of 2009. It was an interesting year. While intellectual property issues continue to dominate, and we continue to see plaintiffs and their attorneys running smack into Section 230 of the Communications Decency Act, we’ve also seen developments in the areas of Constitutional law, criminal law, and state and federal regulation. So, let’s recap 2009. Unlike David Letterman’s lists, this list is in no particular order of importance.

1. File Sharing Decisions.

After years of lawsuits against file sharers, we finally have two trial decisions. Both held against the peer-to-peer file sharers. Jammie Thomas managed to turn a 2007 verdict of $222,000 (which was later thrown out due to a mistrial) into a 2009 verdict of $1.29 Million. Her motion to reduce the award is pending.

Joel Tenenbaum received more favorable treatment and was subjected to only a $675,000 jury verdict after he admitted liability and his fair use defense was rejected by Judge Gertner. His motion to appeal/reduce the award is due to be filed in early January. Judge Gertner wrote a compelling decision urging Congress to modify the strict liability consequences of new technologies such as peer-to -peer file sharing. In her decision rejecting the fair use defense, Judge Gertner implored Congress “to amend the [Copyright Act] to reflect the realities of file sharing. There is something wrong with a law that routinely threatens teenagers and students with astronomical penalties for an activity whose implications they may not have fully understood. The injury to the copyright holder may be real, and even substantial, but, under the statute, the record companies do not even have to prove actual damages.” We’ll see if Congress listens.

2. Rise of Copyright First Sale Doctrine.

There were several decisions that turned on applications of the copyright “first sale” doctrine to new online situations. Section 209(a) of the Copyright Act permits the owner of a lawfully made copy of a work to sell or dispose of that copy without the consent of the copyright owner.

First, the held that resales of the AutoCAD software were permitted under the first sale limitations in Section 109(a). The court found that although the underlying documents were styled as “licenses,” the fact that the licensee was entitled to perpetual possession of the copies was the key fact.

We also had two cases (John Wiley & Sons; Pearson Education v. Liu) dealing with the importation of copyrighted works (mostly textbooks) printed abroad and then imported into the United States for sale. Two courts said these transactions are not protected by the first sale doctrine because of the importation provision in Section 602. The courts so far have been following dicta in the Supreme Court’s 1998 Quality King case that goods manufactured overseas and then imported are not protected by the first sale right, despite their reluctance to do so. We may get a resolution of this issue in 2010. The U.S. Supreme Court has invited the Solicitor General to file a brief in the Costco Wholesale Corporation v. Omega, which is on a petition for certiorari to the Ninth Circuit Court of Appeals.

A third entry is Apple v. Psystar. Psystar specialized in creating copies of Apple’s Macintosh OS-X operating System and loading them onto Mac “clones.” The court rejected the first-sale doctrine defense because Psystar’s copies of the Macintosh OS-X operating system were not “lawfully made” within the meaning of Section 109. The parties subsequently settled all claims except for copyright infringement, and Apple obtained a permanent injunction against Psystar.

3. Demise of “Use in Commerce” Defense in Keyword Cases.

In Rescuecom v. Google, the Second Circuit reversed the district court and said that Google’s sale of trademarked keywords as ad triggers constitute a “use in commerce.” This probably is the end of the “use in commerce” defense in keyword advertising cases, which will now turn more on likelihood of confusion (or initial interest confusion) factors.

4. Internet Gambling.

Internet gambling continues to be regulated by a tangle of federal laws ill-adapted for the purpose. Some of the laws date back to the 1961 adoption of the federal Wire Act. This is an areas where Congress should really clean things up, especially with criminal liability sometimes at stake.

Proponents of online gambling took a couple of hits in 2009. In Interactive Media Entertainment and Gaming Association v. Holder, the Third Circuit upheld challenges to the Unlawful Intent Gambling Enforcement Act (UIGEA) on Constitutional grounds. The UIGEA does not prohibit Internet gambling, but does prohibit gambling businesses from accepting financial payments in connection with bets that are illegal under any federal or state law. (This Act has effectively forced legitimate offshore gambling sites to stop taking bets from the United States). The Third Circuit held that the phrase “unlawful Internet gambling” is not vague, and that there is no Constitutionally protected privacy right to gamble in one’s home.

Earlier in the year, the Department of Justice ordered four banks to freeze over $34 million in payments owed to about 27,000 poker players. Although the legality of online poker in the United States is a gray area, the DOJ takes the position that online poker games are prohibited by the federal Wire Act. The DOJ position runs counter to several court decisions that have refused to apply the Wire Act to non-sports related Internet gambling. After the funds were seized, the affected poker sites reportedly reimbursed the players the money that was seized.

5. State Attempts to Regulate the Internet.

This trend, a favorite target of Eric’s ire, continued in 2009. Some more notable attempts include Maine’s passage of a little COPPA Act, banning the use of personal information about minors for marketing purposes (which the Maine Attorney General then refused to enforce), Kentucky’s seizing of domain names associated with alleged gambling websites (the legality of which is pending before the Kentucky Supreme Court), and Utah and other state’s attempts to put sex offender information online or require sex offenders to register websites to which they belong and their passwords.

6. Attempts to Criminalize Breaches of Terms of Use.

Lori Drew created a fake MySpace profile to humiliate a 13-year-old neighbor girl and was subsequently blamed for the girl’s suicide death. Drew was convicted of three misdemeanor counts of unauthorized access to computers under the federal Computer Fraud and Abuse Act for violating MySpace’s terms of service. In United States v. Drew, the court dismissed Lori Drew’s conviction, concluding that MySpace’s terms of service were Constitutionally vague. The result is not surprising, because terms of service are not generally written with criminal prosecution in mind. The MySpace terms at issue prohibited a wide variety of conduct but did not explain what activities would make a user’s access “unauthorized”. The user’s conduct was reprehensible, but not criminal.

7. Online Endorsements.

In October, for the first time since 1980, the Federal Trade commission updated its guidelines for advertisers on how to keep their endorsements and testimonial advertisements in line with the FTC laws. The new guidelines explicitly target online endorsements by bloggers and others who receive cash or in-kind payments to review a product. Bloggers who make an endorsement must disclose the material connections they share with the seller of the product or service. While the new guidelines caused a stir among bloggers, they seem to be a reasonable extension of the FTC’s disclosure guidelines in other contexts

8. DMCA Take-Down Notices.

In UMG Recordings v. Veoh Networks, we received some further guidance on what constitutes a proper take-down notice. Here, the court said the copyright owner has the burden of identifying “potentially infringing materials.” A letter merely listing recording artists whose works were allegedly infringing did not give the Internet Service Provider actual knowledge of infringement because the letter does not comply with the DMCA requirements. The court also said that the ISP was not on general notice of copyright infringement just because the website allows users to post music files, which are frequently infringing content.

9. Section 230 of the Communications Decency Act.

There are too many cases to list here, and I am sure Eric has done (or will do) his own exhaustive compilation. The courts clearly expanded the scope of the Section 230 defense in various Craigslist cases (no liability for advertisements for guns or prostitution).

Barnes v. Yahoo showed us that service providers should not make statements and then not follow though. In that case, the plaintiff’s ex-boyfirend created fake personal ads for her on Yahoo and impersonated her in various online forums. She asked Yahoo to take the information down,. A Yahoo employee told her that Yahoo would take the profile down, but Yahoo did not do so until after the complaint was filed.. The Ninth Circuit upheld Yahoo’s Section 230 defenses for claims that Yahoo had an obligation to take the fake profiles down, and that Yahoo did not try to remove some objectionable material. But the court did permit the plaintiff’s claim to go forward that Yahoo had breached its oral contract with her to take the material down, which the Court held amounted to a modification of the “baseline” Section 230 rule.

10. Right to Privacy.

When someone publishes something on a MySpace website without her full name, and then deletes the post, does she have an expectation of privacy? In Moreno v. Hanford Sentinel, Inc., the California Court of Appeals said no. Here, the plaintiff posted an essay that was derogatory of her home town on her MySpace page and then deleted it six days later. In the meantime, the principal at the local high school saw the posting and submitted the poem to a local paper, where the editor (a friend of the principal) published the poem in the Letters to the Editor column and signed the plaintiff’s full name to it. The author and her family received death threats and her father had to close a 20-year old family business. However, the California Court of Appeals ruled that the principal did not invade the author’s privacy by handing the posting to the editor, and further held that the editor did not violate the author’s rights when it published her full name. (The case was remanded in order to address a claim of intentional infliction of emotional stress.)

Let’s hope 2010 brings even more exciting Cyberlaw developments. We have the potential for two Supreme Court rulings, in the Costco case (discussed above) and the Bilski case, which may address the validity of business method patents.

Posted by John Ottaviani at 07:04 AM | Content Regulation , Copyright , Derivative Liability , Domain Names , E-Commerce , Licensing/Contracts , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 14, 2009

Another Cautionary Tale of Joint Website Ownership--TEG v. Phelps [UPDATED]

By Eric Goldman

Third Education Group, Inc. v. Phelps, 675 F. Supp. 2d 916 (E.D. Wis. Nov. 25, 2009). Motion to amend denied January 19, 2010.

[UPDATE: In the initial version of this post, Richard Phelps’ story was part of a broader narrative about the potential problems of website co-ownership. However, his behavior in response to my post warrants its own discussion. Seeking to redress his perceived problems with my initial post, he has done all of the following:

* he emailed me multiple times
* he emailed my boss (the Dean) multiple times
* he emailed my colleagues multiple times
* he emailed an unrelated blogger at least two times
* he had his attorney call me to request changes to my post
* most recently, he has promised/threatened that he “will be filing a complaint about your behavior with California authorities and, for that matter, any others that might be available.”

All of this in response to a relatively obscure blog post that currently sees de minimis traffic. The stress of being uncertain about Phelps’ next moves to pressure me has literally kept me up at nights. As a result, I have decided to make changes to this post to respond to a detailed email that Phelps sent me on May 16. Normally I would post or extensively quote his May 16 email so you could read his words verbatim and form your own conclusions, but he asked me not to post it; nor can I characterize his views of the post’s deficiencies in my own words for fear of introducing new ambiguity that might generate further grist. Nevertheless, my hope is that the modifications below resolve Phelps’ concerns so that he will leave me alone. To facilitate that result, I sent him the following email:

“I am sorry for any aggravation my blog post has caused you. I have modified my blog post to acknowledge every point you raised in your May 16, 2010 email. Having done so, please do not contact me directly in the future by email, phone, letter, in person or otherwise. If, for some reason, you believe there is still something we need to discuss, please have your attorney or other representative contact me; I am willing to speak with him or her. Although my colleagues have not mentioned your emails to me (other than the Dean, who believes this is an academic freedom issue), I am sure they would be grateful if you did not contact them either.”

Most of Phelps’ concerns were based on my recap of the court’s opinion. I encourage you to read the opinion yourself so that you can decide if I mischaracterized the opinion or if Phelps seeks to relitigate factual points that the judge decided against him.]

Corporate divorces are ugly. They may lack the high-stakes drama associated with child custody disputes, but in all other respects they can be just as emotional and messy as spousal divorces. Fortunately, parties to a corporate marriage can avoid some heartache by forming proper "prenuptial agreements." Unfortunately, the courts are filled with examples of cases where this wasn't done (or wasn't done properly).

A year ago, I blogged on one such case, Mikhlyn v. Bove, a fine example of a web empire literally and perhaps irreparably split in two by a falling out of the principals. Today's case, Third Education Group v. Phelps, offers up another cautionary tale of corporate divorce along those lines. If you are jointly running a website or blog and you haven't properly documented your relationship with your compatriots, this post is for you.

In 2002, Phelps and Thompson decided to start an online publication focused on education policy called "Third Education Group." They effectively formed a "voluntary association" (I believe the Wisconsin equivalent of an implied partnership) to implement the journal. [UPDATE: Phelps disputes the italicized language. I was partially referring to the court’s factual finding: “In early 2002, after recognizing that they shared mutual interests and were concerned that current educational policy publications were generally devoted to the ideology of one of the two major political parties, Phelps and Thompson began discussing creating an online educational policy journal that would offer a different, middle perspective. Efforts were made, largely by Phelps, to first see if their idea for a journal could be affiliated with an existing entity, or to obtain sponsors or funding for their project.”]

In 2004, on behalf of the voluntary association, Phelps registered two domain names and applied for a trademark registration, both listing only himself as the owner. [UPDATE: Phelps disputes the italicized language. Regarding the domain names, I was partially referring to the court’s opinion: “The undisputed evidence demonstrates that the domain names thirdeducationgroup.org and thirdeducationgroup.net were registered for TEG and were not simply Phelps' personal website….Although registered in Phelps' name, at the time he registered these domain names, the evidence clearly established that he was doing so on behalf of TEG.” The court’s discussion about the trademark registration is a little more complicated but was implicit in the court’s finding that the corporation automatically obtained all of the assets (including the trademark registration) generated by the voluntary association. The court says: “The evidence demonstrates that Phelps and Thompson intended TEG, Inc. to succeed the unincorporated association; there is absolutely no evidence to permit the court to conclude that Phelps and Thompson intended the unincorporated association to coexist alongside the corporation and to retain control of the trademark or any other property. The evidence demonstrates that in every way, the parties intended TEG, Inc. to be the successor to the unincorporated association.”]

In 2005, Phelps and Thompson formed a 501(c)(3) non-profit corporation to succeed the voluntary association. Phelps was president and a director of the corporation. Phelps and Thompson did not sign any type of assignment agreement to move the voluntary association's assets into the corporation. [UPDATE: Phelps disputes the italicized language, pointing to an IRS Form 1023 that the relevant players signed. I was partially referring to the opinion’s language that: “the property of the association passed to the corporation, and the absence of an assignment does not affect TEG, Inc.'s right to the trademark.”]

In 2006, after an editorial dispute, the parties' relationship turned sour. In response, Phelps locked off the corporation's websites from further changes, and the corporation stripped him of his officer and director status. [UPDATE: Phelps disputes the italicized language. I was partially referring to the court’s language that: “The evidence demonstrates that by at least March 12, 2006, two days before the resolution and thus a time when it is undisputed that Phelps was both a director and president of TEG, Inc., he blocked Thompson (and anyone else associated with the corporation) from making changes to the corporation's website.”]

Phelps pointed the domain names to his new venture, also called "Third Educational Group, Inc." Meanwhile, locked out of its websites, the corporation registered new domain names, copied its old articles from the old website and then reposted them on its new website. [UPDATE: Phelps disputes the italicized language. I was partially referring to the court’s findings of fact: “After being locked out of its own websites, the Wisconsin corporation copied much of its website content from the sites now controlled by Phelps, and reposted it under the domain name tegr.org.”] Phelps then sent 512(c)(3) takedown notices to the new website host, which successfully put the new website offline. Cross-lawsuits ensued.

[UPDATE: In my prior post, I included a reference and link to a litigation recap from Thompson’s perspective. When Phelps’ attorney contacted me, his only request was that I remove the link. The attorney did not mention any concerns about other factual characterizations. If you would like to see Thompson’s perspectives about the litigation, you can find them through a search. Meanwhile, with the hopes that the link was, in fact, Phelps’ main irritant, and given its relatively inconsequential contribution to the post’s narrative, I have removed it.]

For aficionados of disputes over jointly developed online properties, you may recognize some common elements:

* the person who controls the domain name registrations has de facto control over the empire. [UPDATE: Phelps disputes the italicized inference for reasons I did not understand.] Yet another reminder to keep domain name registration contacts up to date.

* when a business relationship turns sour, it's not unusual for one aggrieved participant to fight the other participant in every Internet venue where the other tries to resurrect the joint effort.

* it is almost impossible to imagine that the venture produces enough cash to economically justify the type of death spiral litigation it spawned. Instead, the litigation is usually about settling personal scores--typically the most expensive litigation around.

* courts often issue a "split the baby" ruling in these cases, rarely giving one side a clean victory over the other.

This case has a classic split-the-baby result. The court concludes:

* the corporation succeeded to the legal rights in the trademark "Third Education Group." Phelps had argued that the trademark rights remained with the voluntary association, which would have given Phelps joint rights to the trademark.

* Phelps violated his fiduciary duties as an officer and director when he locked everyone else out of the company's website. [UPDATE: Phelps disputes the italicized language. I was partially referring to the opinion’s language that: “it is the conclusion of this court that Phelps breached a fiduciary duty owed to TEG, Inc. by asserting and retaining personal control over the corporation's domain names.”]

* Phelps' 512(c)(3) takedown notices did not give rise to a 512(f) claim for misrepresented takedown notices because, for several reasons, Phelps had a subjective good faith belief in their legitimacy.

* although Phelps infringed the corporation's trademark rights in "Third Education Group" and violated his fiduciary duties, the corporation could not show any damages from Phelps' behavior and therefore did not get any damage awards. The court specifically rejected any claim under the Lanham Act's fee-shifting clause for exceptional cases.

* the court also rejected the corporation's emotionally punitive injunction requests and will take a closer look at the appropriate scope of injunctive relief.

So who won this ruling? Nominally, Third Education Group did because it won on the trademark and fiduciary duty claims, but it's not that satisfying of a victory without any damages or a punitive injunction. As usual, then, the only possible winner in messy litigation is the lawyers, and even then only if they get paid.

For another recent example of a well-meaning but under-documented collaboration that devolved into bitter litigation, see LunaTrex v. Cafasso, 2009 WL 4506321 (S.D. Ind. Dec. 1, 2009), involving a team that came together chasing the $20M Google Lunar X prize but didn't dot the is and cross the ts well enough to avoid a messy battle. As the court says:

After a lengthy discussion of numerous ideas that evolved, the group eventually chose the name LunaTrex. (As will be seen, with the benefit of hindsight it is clear that the group also should have spent some more time talking about organization, structure, ownership, and other legal formalities.)

I've written more about messy online divorces in my 2006 Co-Blogging Law article. I think the Third Education Group court did a good job being sensitive to the unintended consequences of a voluntary relationship going south. For example, the court says

Phelps had much more than a mere good faith belief that he was entitled to use the mark. This was not a case of an individual, for example, mistakenly believing he had a license. Rather, in the present case, the objective evidence was on Phelps' side. He was the one who undisputedly came up with the mark. He was the one who paid to register the mark. He was the one in whose name the mark was registered. And he was the one primarily responsible for establishing the use of the mark. He did this, not as one person in a large organization, but rather as an individual who had joined with another collaborator and in doing so, likely without an understanding of the legal ramifications, formed an unincorporated association. (emphasis added)

This is consistent with the hope I expressed in my Co-Blogging article:

the common law typically can handle the idiosyncrasies of blogging in a sensible and contextually sensitive manner. In that respect, judges evaluating blogs should recognize that unexpected or counterintuitive rulings could significantly destabilize the blogging community. Fortunately, many of the legal doctrines discussed in this essay, including partnership and employment law, are naturally flexible. Judges should use that flexibility to balance the many considerations around blogging

[UPDATE: In Third Education Group, Inc. v. Phelps, 2009 WL 5216988 (E.D. Wis.
December 30, 2009), the court had more to say about this litigation. I quote a portion of the court’s opinion (rather than provide a summary that might prompt a further response from Phelps):

“Phelps should not derive any benefit from the use of the thirdeducationgroup domain names. To do so would run afoul of this court's order. Phelps acknowledges as much and agrees to be enjoined from use, but contends that he should be permitted to retain possession of the domain names, leaving them inactive. Phelps contends that he should be permitted to retain possession because he was the one who undertook and financed the initial registration; he paid for the registration and it is his name alone on the registration. Cynically, but based on the history between the parties, one might suspect that Phelps is motivated less by notions of principle and maybe seeks to retain the domain efforts as one last ditch effort to frustrate TEG, Inc.

On the other hand, perhaps there is a good reason why the relevant domain names should be left blank. When Phelps split with TEG, Inc., TEG, Inc. went on to establish itself at tegr.org while Phelps continued to operate the thirdeducationgroup websites (at least until the court determined that the trademark did not belong to him, at which point the websites appear to have gone blank). If TEG, Inc. were to suddenly reappear on the thirdeducationgroup websites, individuals who may have previously understood that these websites were under the control of Phelps might be confused and believe that it is Phelps behind the sites rather than TEG, Inc. A primary purpose of federal trademark law is to prevent consumer confusion and ordering Phelps to surrender the domain names to TEG, Inc. might only exacerbate these problems. But this is only speculation by the court.

Principles of equity warrant that TEG, Inc. control the domain names. Thereafter, it will be the decision of TEG, Inc. as to what action to take, if any, in regard to these names. It is the conclusion of the court that the thirdeducationgroup domain names are the lawful property of TEG, Inc. As the court previously noted,

The undisputed evidence demonstrates that the domain names thirdeducationgroup.org and thirdeducationgroup.net were registered for TEG and were not simply Phelps' personal website. Although registered in Phelps' name, at the time he registered these domain names, the evidence clearly established that he was doing so on behalf of TEG. As such, the domain names belonged to TEG.

(Docket No. 138 at 13 (citations omitted).)

In failing to provide access to these websites to TEG, Inc., Phelps breached the fiduciary duty he owed to TEG, Inc. Returning these domain names to the control of TEG, Inc. is required to remedy Phelps' breach of fiduciary duty. Accordingly, the court shall order Phelps to take all necessary actions to transfer or assign any interest in and control over the thirdeducationgroup domain names to TEG, Inc.

IT IS HEREBY ORDERED that for the reasons stated herein and stated in the court's prior decision, (Docket No. 138), the court enters a permanent injunction, which is affixed hereto, containing the following provisions:

1. Richard Phelps is permanently enjoined and restrained from using “Third Education Group” or any confusingly similar term as a name or mark for any goods, services, internet domain names, websites, or organization or other entity regarding education research, policy, or theory.

2. Richard Phelps is permanently enjoined and restrained from diluting the distinctive quality of the name and mark “Third Education Group.”

3. Richard Phelps is permanently enjoined and restrained from representing that he retains or has had any affiliation with Third Education Group, Inc. during the period of this injunction.

4. Richard Phelps shall take all necessary steps to transfer all rights and interest he has in any domain name containing the terms Third Education Group acquired prior to March 14, 2006 to Third Education Group, Inc.

5. In accordance with 15 U.S.C. § 1119, the Director of the Patent and Trademark Office shall rectify the register with respect to the registration of any party to this action so as to identify Third Education Group, Inc. as the Owner / Registrant of the mark “Third Education Group.””]

Posted by Eric at 07:33 AM | Copyright , Domain Names , Internet History , Trademark | TrackBack

December 10, 2009

Keyword Advertising Lawsuit Survives Motion to Dismiss on Genericness Grounds--FragranceNet v. Les Parfums

By Eric Goldman

FragranceNet.com, Inc. v. Les Parfums, Inc., 2009 WL 4609268 (E.D.N.Y. Dec. 8, 2009)

In 2007, FragranceNet suffered a stinging loss when it sued a competitor, FragranceX.com, for buying its trademarks as advertising keywords. Interpreting the 1-800 Contacts precedent before that was gutted by the Second Circuit's 2009 Rescuecom decision, the district court judge decisively concluded that buying trademarked keywords did not constitute a use in commerce, ending FragranceNet's lawsuit on a 12(b)(6) motion to dismiss.

Perhaps emboldened by Rescuecom's holding that selling trademarked keywords is a trademark use in commerce. FragranceNet is back in court trying to stop another competitor from advertising on its trademarks. This time the competitors tried for an early dismissal by arguing that the term "FragranceNet" is generic and therefore not eligible for trademark protection. The court says (correctly, IMO) that genericness determinations usually aren't appropriate grounds for 12(b)(6) motions to dismiss (where the court must accept the plaintiff's assertions as true), so the case survives the motion to dismiss. The defendants could try the genericness argument again via summary judgment or possibly trial.

I'm intrigued by the genericness argument because the standards for descriptive marks are pretty lax, and trademark law normally would legally distinguish the single word "FragranceNet" from the clearly generic term "Fragrance." However, two recent Federal Circuit cases, the Hotels.com and Mattress.com cases, have held that the terms "hotels.com" for a hotel retailing website and "mattress.com" for a mattress retailing website were generic because the ".com" portion is ignored and the remainder is the generic word for the retailed items. I assume the same would be true for "fragrance.net" for an online perfume retailer, but would the same analysis apply to "fragrancenet" without the dot? I'm not sure, but it seems like a question worth asking in light of the Hotels.com and Mattress.com opinions.

Even if fragrancenet isn't generic, IMO it is at best descriptive and thus requires secondary meaning to be an enforceable trademark. FragranceNet has registered trademarks, which provide some evidence that it has achieved secondary meaning, but I suspect the defendants will attack the trademarks on secondary meaning grounds as well.

The defendants' counterattack reinforces one of the risks that putative trademark owners face when bringing enforcement actions. Defendants can always attack the validity of their opponent's trademarks, creating the possibility that a court will declare the trademarks invalid and leave the plaintiff with fewer assets than it thought it had when it initiated the legal fracas. We've already seen this outcome in a few online trademark cases that I've covered (e.g., American Blinds and Philbrick), and it's a non-trivial risk in this case as well despite the court's refusal to grant the 12(b)(6).

Posted by Eric at 04:19 AM | Marketing , Trademark | TrackBack

December 03, 2009

Competitive Keyword Advertiser Wins at Trial--Fair Isaac v. Experian

By Eric Goldman

Fair Isaac Corp. v. Experian Information Solutions Inc., 2009 WL 4263699 (D. Minn. Nov. 25, 2009)

This is an interesting and complicated lawsuit that hasn't gotten the attention it deserves. Fair Isaac produces the ubiquitous "FICO" credit score, which is heavily used in the financial industry to assess borrower creditworthiness. Fair Isaac launched a litigation campaign to suppress competition by rival producers of credit scores. In July, Fair Isaac mostly lost a bunch of its arguments in a complex ruling. Read Rebecca's excellent recap of that ruling. The July ruling left a few issues open for trial, which ended late last month with Fair Isaac's jury loss. See the (uninsightful) jury verdict form and this article from the St. Paul Business Journal.

Normally with a jury verdict, we don't get a lot of legal insight. However, the jury verdict led to a short post-trial ruling by the judge.

First, Fair Isaac tried to claim that its score range from "300-850" was a protectable trademark as a way of trying to thwart its competitors' range of 501-990. I've always wondered why credit scores start at 300 instead of 0, just like the SATs start at 200 or LSAT scores now start at 120. This case finally gave me a new hypothesis: maybe these services think they can claim a trademark in their score ranges...? (As Rebecca also observed, I suspect not wanting to tell people they are a "zero" is also a relevant consideration).

In any case, Fair Isaac's bid to trademark the score range "300-850" failed. As the judge recaps, "the jury returned a verdict finding that the alleged '300-850' mark was not a valid, protectable trademark because the term '300-850”'has not acquired secondary meaning." Once again, a putative trademark owner goes to court only to find out that it has fewer trademarked assets than it thought.

Second, the court rejected Fair Isaac's trademark claim over competitive keyword advertising based on insufficient proof of consumer confusion. The court recaps:

To the extent that Fair Isaac bases its keyword advertising claims on the alleged “300-850” mark, such a claim fails in light the jury's finding that “300-850” is not a valid mark. To the extent that the keyword advertising claims are based on the “Fair Isaac” and “FICO” marks, the Court finds that the weight of the evidence adduced at trial does not support a credible inference that Experian's and Trans Union's purchases of Fair Isaac's trademarks as keyword search terms was likely to confuse consumers. The only evidence adduced at trial in support of the assertion that the keyword advertising was likely to cause confusion-the opinion testimony of Fair Isaac's expert James Berger-lacks credibility. [emphasis added]

(Bummer for Fair Isaac to see the court toss aside its expert like a rag doll. I'm guessing the expert wasn't cheap).

This is one of only a few cases reaching a definitive "final" ruling about the legitimacy of competitive keyword advertising. Most cases settle or end on some other basis (like the plaintiff's lack of a protectable trademark, as the court ruled here for the "300-850" keyword purchases). The only other similar trial outcome was the old 2004/05 GEICO v. Google case, which concluded in a poorly reasoned and difficult-to-follow opinion after trial that Google was not liable for keyword triggered ads that didn't contain the trademark in the ad copy and potentially liable for the triggered ads that did. Other than the GEICO mess, we have only a few summary judgment rulings on consumer confusion due to competitive keyword advertising:

* Finding that referencing the trademarks in the ad copy creates a likelihood of consumer confusion: Storus

* Finding that merely using the trademark to trigger keyword advertising does not create a likelihood of consumer confusion: J.G. Wentworth and Designer Skin

In light of these limited precedents reaching a final outcome on keyword triggering, this ruling is significant because it's the strongest evidence yet that keyword advertising defendants do not create actionable consumer confusion and therefore will win at trial. This is one of the reasons why I favor finding doctrinal ways for defendants to end cases earlier in the process (and well before trial) if the defendants are going to win at trial anyway.

According to the St. Paul Business Journal article, Fair Isaac plans to appeal this ruling as well as their July loss. Better to fight in court than fight in the marketplace, I guess.

Posted by Eric at 01:20 PM | Marketing , Trademark | TrackBack

December 02, 2009

Case Western “Signifiers in Cyberspace” Conference Recap

By Eric Goldman

In mid-November, I attended a conference at Case Western Reserve University School of Law in Cleveland, Ohio entitled “Signifiers in Cyberspace: Domain Names & Online Trademarks.” My notes:

David Fewer spoke about Canada’s WHOIS policy. The old Canadian registry policy published registrant information without restriction. Then, the registry proposed a new policy not to publish personal information in the WHOIS database for individual registrants and for organizations that can show harm from publication. To reveal registrant information in those situations, a warrant would be required. That policy got amended to allow warrantless access for cybercrime enforcement, registered IP infringement and ID theft. Fewer argued that the amended policy violates Canadian privacy laws (PIPEDA) because consumers are not given adequate disclosures, the exclusions from the privacy policy are arbitrary, and consumers aren’t given the required option not to participate.

Corynne McSherry of EFF discussed how TM owners are bypassing direct challenges against gripers and instead putting pressure on domain name registrars. She focused on the Yes Man spoof website of the New York Times, which included a parody ad of the De Beers diamond manufacturer. Humorless De Beers sought relief from Joker.com, the parodist’s registrar. EFF has responded to De Beers that the parody is legitimate because it has no commercial aspect, it’s nominative use, and the First Amendment applies. The EFF is also encouraging Joker.com to ignore De Beers because it (as the registrar) can’t be liable for the registered domain name. So why is Joker.com even entertaining De Beers’ complaint? Corynne notes the registrar’s revenue from any single domain name registration is less than legal cost of investigating and responding. Corynne discussed how parodists and gripers can minimize their legal risk (I blogged on these recommendations in May).

I remain very interested in situations where domain name registrars apply their own takedown policies to their customers. For example, I’ve previously mentioned GoDaddy’s “itchy trigger finger” when it comes to intervening with its registrants. I suspect there is significant heterogeneity among registrars’ interventionist tendencies. I think this is an area worth exploring. If you have other examples of domain name registrar intervention in its customers' content, please share them.

Stacey Dogan spoke about the aftermath of the Rescuecom ruling. Stacey is disappointed that courts aren't adopting her arguments to use the “trademark use in commerce” doctrine to insulate intermediaries (she calls it her “biggest failure in life”). She described three post-Rescuecom uncertainties: (1) what acts by intermediaries constitute TM infringement? (2) on what doctrinal basis? (direct v. contributory), and (3) what remedies do the intermediaries face?

Stacey thinks courts need to be more precise about the nexus between defendant behavior and TM owner harm. This should lead to better distinctions between direct and contributory infringement.

She offered a taxonomy of claims against intermediaries:

* General confusion = when the intermediary creates confusion through the blurring of ads and editorial content. Stacey thinks these aren’t TM issues. But if commingling is the problem, then the remedy should be an injunction requiring the intermediary to label the ads.

* Strict liability = when the search engine is automatically on the hook for its involvement with the ads. Stacey says courts should reject this approach due to the search engines' lack of proximate causation for consumer confusion. If a search engine faces any liability, it should be solely on the basis of contributory infringement (with its higher scienter bar).

* Failure to act = when the search engine fails to respond to TM owner’s takedown notice. She said we don’t see this in search engine cases [a point I disagree with given that the TM owner vs. search engine lawsuits all represent a failing of the search engines’ voluntary TM policies]; instead, she was thinking of the Tiffany case. Stacey thinks the failure of act prong is where the legal action should be. She wants courts to map out appropriate scienter levels. General knowledge of infringement isn’t enough, and courts should let defendants make reasonable judgments about whether the advertiser will qualify for any trademark defenses. If the advertiser is obviously infringing, and intermediary gets notice and fails to act, she thinks contributory liability could be appropriate.

Graeme Dinwoodie believes the ECJ will not follow the Advocate General’s opinion in the Google case. He explored two parallels between the AG’s opinion and Rescuecom: Both get away from trademark use of commerce, and both consider underlying policy values. Graeme thinks search engine defendants should move away from disputing the lack of harm to the trademark owner; instead, he thinks they will get more traction by showing the countervailing benefits of their advertising. For example, he thinks they should be showing how keyword advertising can facilitate investment and innovation.

Jeffrey Samuels shared his perspectives as a panelist in 200 UDRP proceedings. Since the UDRP’s implementation, there have been about 25,000 UDRP decisions. 40% are US registrations. 75% involve .com. 75% are defaults.

The UDRP isn’t designed to solve all domain name disputes. He gave an example of a domain name registration containing a celebrity child’s name. The UDRP isn't helpful because a 2 week old kid doesn’t have protectable trademark rights.

“The UDRP is hardly a model of clarity.” All cases are fact-dependent. If a UDRP proceeding has unusual facts, he recommends requesting a 3 member panel--these proceedings get more carefully evaluated opinions and minimize the effects of any one panelist’s idiosyncratic views.

Some issues that regularly arise in UDRP proceedings:

* What the TM owner has to do to establish its rights. The majority view is that a registration anywhere in the world suffices. Common law rights generally require presenting sufficient evidence validating the rights.
* There remains a split of authority on “sucks” sites.
* In the early days, panelists used to run through the multi-factor likelihood of confusion factors. That’s rarely done today. Now, most panelists just make sight and sound comparison.

Karl Auerbach discussed two interrelated issues: (1) ICANN lacks any political authority for its “Internet governance” role, and (2) technology does not require that ICANN monopolize DNS root services. He argues that we would benefit from competition among DNS root services. His argument reminds me a bit of the net neutrality debate. We can hypothesize many possible net neutrality problems, but most of them go away with vigorous competition. Similarly, ICANN’s often-ridiculous shenanigans would be less vexing in the face of bona fide competition for DNS root services.

Dan Hunter spoke about a new paper he’s writing with Mark McKenna. Their target is the fundamental trademark principle that trademark law protects against consumer confusion. They think consumer confusion is an imperfect proxy for our normative goal of protecting consumers. Some confusion is endemic in a complex society; and some methods of communication, like humor, require confusion to work. Therefore, they want to move away from trying to block consumer confusion and instead refocus trademark law on reducing errors in consumer decision-making. This seems like a fruitful endeavor, but they are also taking a swipe against the consumer search cost justification for trademark law, a move I didn't follow.

Bill McGeveran recapped his recent work on social networking sites and gave a preview of his next article. His target is fake online profiles such as the Tony La Russa fake Twitter account. He expects to see more pressure to create IP rights in personal identities.

I spoke about trademarks and behavioral targeting, and in particular the competition among marketers for consumer preference information. For example, I believe the anti-deep packet inspection pushback wasn’t based solely on privacy concerns. Instead, destination websites fear that an IAP will disintermediate them and use its prime access to consumer preference information to steer customers to competitors. (See this blog post for more on that point). My (very brief) slides.

Posted by Eric at 07:16 AM | Derivative Liability , Domain Names , Internet History , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

November 24, 2009

Teeth Whitening System Brings "Sue the World" Lawsuit Against Ad Agency, Competitor and Search Engines--Dazzlesmile v. Azoogle

By Eric Goldman

Dazzlesmile, LLC v. Epic Advertising, Inc., 2:09-cv-01043-PMW (D. Utah complaint filed Nov. 23, 2009)

Dazzlesmile sells a teeth whitening system. Presumably these systems generate fat profits, because Dazzlesmile has brought an expensive "sue-the-world" lawsuit against its ad agency, its competitor and the search engines.

Azoogle/Epic

The lawsuit against Azoogle/Epic is partially based on a miscalibrated cost-per-acquisition (CPA) deal. Azoogle sold Dazzlesmile on a CPA deal which pays Azoogle $43 for making a $4 sale with negative-option continuing revenue streams, i.e., the consumer has to cancel after the free trial period or he/she automatically gets shipped and charged for more whitening stuff. If the ongoing revenue stream is great enough, it can make sense to pay out big upfront commissions to get the sale. However, this payment structure creates lots of mischief possibilities.

In this case, Dazzlesmile alleges that its competitor engaged in "CPA fraud" by placing thousands of orders, coincidentally generating over $100k of commissions to Azoogle in one week. Dazzlesmile also complains that its products were being promoted by spam, fake blogs and other problematic ads in contravention to Azoogle's promises. Finally, Dazzlesmile complains that a rogue affiliate packaged two different systems into the same ad, causing consumers to order both products and then renege when they realized Dazzlesmile's terms.

The odd thing about this complaint is that Dazzlesmile tries to portray itself as the white-knight advertiser that wants to do right by consumers, while the evil Azoogle kept tempting Dazzlesmile to cut corners and take undeserved money from consumers. I understand the value of this positioning, but I find it a little hard to believe. You kind of know what to expect when you're dealing with Azoogle, and I'd be surprised if Dazzlesmile is a fully innocent naïf.

Competitor Lawsuits

Dazzlesmile also claims that its competitor slapped counterfeit "Dazzlesmile" labels on a different teeth whitening system. It further claims that Azoogle and the competitor conspired to use Dazzlesmile's advertising copy in Azoogle's network to direct teeth whitening customers to the competitor. It also claims these defendants used the Dazzlesmile trademark in a host of inappropriate ways, including in spam, as keyword ad triggers, in domain names, and in astroturfed content. Dazzlesmile claims it has received 10,000 misdirected customer support inquiries from duped customers.

Lawsuits Against the Search Engines

Dazzlesmile drags Google, Yahoo and Microsoft into the lawsuit for selling keyword advertisements despite Dazzlesmile's cease & desist letter to stop doing so. Oddly, the complaint pleads the search engine's liability as "vicarious liability," which should be DOA. Vicarious trademark infringement requires an agency relationship between the search engines and the advertisers, which the complaint doesn't (and can't) plead. If it's a non-IP form of vicarious liability, then it's preempted by 47 USC 230. So I predict Dazzlesmile will have to amend its complaint against the search engines to allege some other legal theory, or the search engines will exit this particular matter quickly.

Interestingly, the complaint alleges ripoffs of both its copyrightable ad copy and its trade secret protectable marketing plans, but the complaint does not allege either copyright infringement or trade secret misappropriation.

Conclusion

Dazzlesmile's complaint, if completely accurate, tells a story filled with legal wrongs, but I'm not sure I found it all that convincing. I will have to see the defendants' responses before I can begin to form any conclusions about its overall merit.

It does point out one troublesome spot as a good practice pointer. I know a lot of advertisers think they prefer CPA pricing over CPC or CPM pricing because they are more clearly paying for results, but this case provides a good illustration that a miscalibrated CPA price is no better at reducing unwanted spending than a miscalibrated CPC or CPM. At minimum, I’m surprised that Dazzlesmile apparently didn't include some provision in the CPA formula allowing it to avoid payment for chargebacks or immediately returned products. If you're an advertiser doing CPA deals, make sure you have robust enough exclusions to the CPA obligations so that you are truly paying for bona fide results.

AdWords Lawsuit Roster

The updated roster of pending AdWords cases:

* 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 (not initially a trademark case)
* 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts
* Dazzlesmile v. Epic

Posted by Eric at 06:05 PM | Derivative Liability , Marketing , Search Engines , Trademark | TrackBack

November 22, 2009

Keyword Advertising Lawsuit Survives Motion to Dismiss--Morningware v. Hearthware

By Eric Goldman

Morningware, Inc. v. Hearthware Home Products, Inc., 2009 WL 3878251 (N.D. Ill. Nov. 16, 2009)

I keep getting calls from reporters operating under the misimpression that trademark owner-vs.-search engine keyword advertising lawsuits are more common than trademark owner-vs.-keyword advertiser lawsuits. While the lawsuits against search engines certainly get way more press coverage, in reality they are relatively rare. I don't have an exact count of pending lawsuits, but only 10 immediately come to my mind (9 against Google and the AA v. Yahoo case). In contrast, trademark owner-vs.-advertiser lawsuits are so numerous that I don't blog on every complaint I see, and most trademark owners are wise enough to leave the search engines out of their litigation.

This is a fairly run-of-the-mill trademark owner-vs.-advertiser case. The parties compete in the "counter-top electric oven" market. The advertiser purchased the plaintiff's "Morningware" trademark as a keyword and displayed the following ad copy: "The Real NuWave ® Oven Pro Why Buy an Imitation? 90 Day Gty." NuWave is the advertiser's brand name.

The "why buy an imitation?" language (plus, perhaps the "real" earlier in the copy) creates the real friction because Morningware argues that the ad copy implies that Morningware's products are an imitation of (presumably) NuWave. Notice that the defendant didn't reference the plaintiff's brand in the ad copy, but IMO that contributes to the overall crypticness of the ad copy. Without both trademarks being referenced in the ad copy, searchers who are not already familiar with the various brands in the countertop electric oven space (like me) may not immediately figure out the relative (lack of) relationship between NuWave and Morningware. Because I don't know any of the electric oven brands, the ad presentation did not immediately communicate to me that NuWave competed with Morningware. However, because the advertiser didn't reference the plaintiff's trademark in the ad copy, Google will not do anything more for the trademark owner, meaning that the trademark owner must go to court to attack this ad.

(Note to plaintiff's counsel: please don't subpoena me to testify to my impressions of the ad copy. I have never shopped for countertop electric ovens and I don't expect I ever will, so I know nothing about the knowledge or expectations of a reasonable purchaser. If you think I'm being a Nervous Nellie with this note, see this post).

Moving onto the opinion, the court reached an irresolute outcome on the "use in commerce" prong of plaintiff's claim, correctly noting that (1) the Seventh Circuit has not ruled on "use in commerce" in keyword advertising, (2) the Second Circuit Rescuecom case did not involve a trademark owner-vs.-advertiser claim, and (3) "a review of case law outside of the Seventh Circuit reveals that a majority of courts have found that actions such as those taken by Hearthware in purchasing Morningware's trademark as a search term constitute a Lanham Act 'use.'" Noting the parallels to the Vulcan Golf case (also an N.D. Ill. case), collectively this was enough to reject the 12(b)(6) motion to dismiss.

The advertiser also argued for a 12(b)(6) motion to dismiss on lack of consumer confusion grounds. While I understand the advertiser's hope, I think it's hard to convince a judge that the trademark owner failed to allege sufficient confusion in the complaint. This is especially true when plaintiffs invoke the stupid "initial interest confusion" doctrine, which has no doctrinal contours and therefore is simply impossible for defendants to refute at the motion-to-dismiss stage (obligatory cite to my anti-initial interest confusion rant from 2005). Citing to the abysmal 2002 Promatek case, the court says the plaintiff alleged enough initial interest confusion to survive the 12(b)(6).

There is a little more interesting discussion in the opinion about the trademark owner's disparagement claims. In the end, the court completely rejects the advertiser's motion to dismiss. This doesn't ensure the trademark owner's ultimate litigation success, but chances are we won't reach a definitive and final court ruling either. As almost all trademark owner-vs.-advertiser lawsuits do, this case will probably settle because both parties are probably incurring litigation costs vastly in excess of any profits gained/lost from "diverted" customers.

Meanwhile, advertisers buying competitive keyword advertising should take note of the risks of implicitly calling your competitor an "imitation" without explaining the relative product positioning--which isn't possible due to the limited character count of a Google AdWords ad. Because the character limits prevent fully clarifying disclosures, advertisers should consider striking the phrase "why buy an imitation?" from their keyword advertising copy toolkit.

Posted by Eric at 07:36 AM | Marketing , Trademark | TrackBack

November 20, 2009

A Look at Twitter's Updated Privacy Policy (November 19, 2009)

[Post by Venkat]

As noted on Twitter's blog, Twitter refreshed its privacy policy yesterday. Given that virtually everything Twitter does is placed under the microscope, I'm sure the policy will be pored over in detail. (Here's a link to the updated policy and a link to the old policy.)

General thoughts on the policy: The policy is short, easy to understand, and in plain English. The thrust of the policy is that most users typically use Twitter to publicly disseminate information, and users should expect any of this information to be broadly disseminated. This includes dissemination by Twitter, third party applications, search engines, etc. To the extent you want to restrict use of this information, Twitter gives you the tools to do so in your profile settings.

Much of what's in the policy is very typical of what you would find in the privacy policy of any other website or social network. However, a few things are worth mentioning:

1. Geolocation: The policy provides that you can turn geolocation on and off, and if you have it turned on, your location information is obviously broadcast and also used by Twitter. Geolocation is opt-in and this makes sense.

2. Cookies: The policy also mentions that Twitter places cookies on your computer. Virtually all privacy policies contain this, since most websites use cookies. But for some reason this part of the privacy policy jumped out at me. I guess it's a reminder of the tremendous advertising power that Twitter could wield. Everyone who uses Twitter expresses their preferences through Twitter, by clicking on links, using applications, and just through general usage. Most people probably do more, such as expressing their food, drink, entertainment, political, and other preferences. (Some more than others.) By being able to identify the computer of someone who expresses those preferences, Twitter can build a valuable network that would be useful to advertisers. I'm not only talking about advertising on Twitter.com (the web client), but also advertising on other websites or networks as well. This is pretty common in the industry, and subject to attack by privacy advocates, some of whom are pushing for an opt-in system for this type of tracking. Thus far Twitter has been free of advertising, but this is likely to change, as indicated by Twitter's own statements. (See Scoble's link below.)

3. Metadata: Interestingly, the policy also treats tweet metadata as public information ("information you are asking us to make public"). This seems to create some grey area between information which you broadcast and is truly public, and information which is available to Twitter (but not to your followers) from your use of Twitter. Robert Scoble has a post with comments from Twitter's COO signaling Twitter's turn to advertising and possible use of metadata in this context. I didn't pick up on this at first, but I think this is significant.

4. Subpoenas: The part of the policy that talks about disclosing information in response to a subpoena provides plenty of wiggle room to either require law enforcement (or a civil litigant) to obtain a subpoena or for Twitter to respond to a "legal request" (presumably, this could be a letter from law enforcement). It's probably unreasonable to expect these types of companies to always take a stand and require a subpoena or fight for the privacy rights of users when a third party tries to unmask a commenter or user, but it would be nice from the user perspective to have some clarity. I'm guessing in practice Twitter provides notice when a third party seeks information from or about a user's account, but this doesn't seem to be required under the policy. (The social media dynamic is probably a strong check here.)

What Changed?: Other than the points mentioned above, I didn't notice any other significant changes to the policy (the cookie stuff was leftover from the old policy). The old policy made some statements regarding security measures implemented by Twitter which Twitter [wisely] removed from the current version. The provision that any transfer of information in connection with a sale of the business would be subject to the provisions of Twitter's privacy policy remains, although Twitter removed the notice provision.

It's worth mentioning that neither the old policy nor the new one clearly speak to whether Twitter or any third party can build a "profile" using information which you make publicly available. Twitter can crunch the data contained in someone's Twitter stream and obtain a wealth of information regarding a particular person. Anything ranging from their sleeping patterns, to their dietary habits and their political preferences. Of course, people make this information publicly available anyway, so they have no real argument as to why a third party should be prevented from using this information, but realistically, it would be tough to construct such a profile without access to Twitter's data and tools. Do users expect Twitter to use user information in this manner? Probably not at this juncture, but as a general matter there's nothing from a legal standpoint that would prevent this, and the privacy policy does not preclude it. These types of applications are not that far-fetched, given reports of tools to analyze someone's social network and assess their credit worthiness ("Rapleaf") or psychological profile ("TweetPsych"). Recently a story made the rounds about an insurer who denied an insurance claim based on the insured's photos posted on Facebook ("Depressed Woman Loses Benefits Over Facebook Photos"). (A host of specialized rules could come into play in this instance - ranging from rules governing financial privacy and fair credit to rules governing the employment relationship - so a privacy policy wouldn't necessarily provide a definitive answer to the question anyway.)

How Does it Compare to Facebook's Recently Revised Policy?: As far as volume, in comparison to Twitter's policy, Facebook's policy [link] reads like a (painful-to-read) epic saga. This is partially due to the fact that information sharing and interaction on Facebook is more complex, but Facebook's policy is simply impossible to read and digest in one sitting. The two policies are somewhat similar in their approach, although Facebook differs in that users don't make their Facebook data "public" in the same sense that Twitter users do. Of course, Facebook has a bit of a history of advertising initiatives and pitfalls that probably prompted the additional complexity. Facebook's policy has some interesting tweaks such as a "memoriam" for Facebook users where friends and relatives can post items about a deceased person. Also, Facebook has a deletion policy, which I didn't see in Twitter's privacy policy. (Deletion policies will become increasingly important as people try to obtain information (deleted by the user) from social networking sites in the context of litigation.)

***

The Trademark Guidelines: It's worth mentioning that Twitter also refreshed its trademark guidelines. They are pretty standard fare, but contain some rules that people pretty clearly are not following right now, for example: (1) use only the current Twitter logo to link to and promote your Twitter account ("40 cute free Twitter badges"); (2) don't use Twitter's logo on the cover of your book ("The Twitter Book"); (3) don't use screenshots of third party profiles or tweets without the third party's permission; (4) don't use Twitter marks on apparel or merchandise without Twitter's permission ("Sock Guy Socks"). The trademark guidelines also address some of the sore spots in the area of third party use of Twitter's trademarks (or terms which Twitter is trying to obtain trademark protection for): (1) "don't use Twitter in the name of your website or application;" (2) "don't register a domain name containing 'twitter';" and (3) "don't apply for a trademark with a name including Twitter or Tweet (or similar variations thereof)." Both Twitter and third party developers are trying to obtain trademark protection for the term "tweet," (see for example "CoTweet") and it's unclear as to how the battle between Twitter and these third party developers will play out. It's difficult to tell at this juncture whether Twitter's new trademark guidelines signal a true change in policy or whether it's business as usual. (See posts by Tom O'Toole here and Mike Masnick here for some discussion of Twitter's "laissez faire" attitude with respect to third party use of Twitter trademarks.)

[Edited: to add the point about disclosure in response to subpoenas or law enforcement requests. I should probably also note that I've been using Twitter for the past 15 months or so. I was going to say that I'm a "casual user," but at 5000+ updates, that's a tough claim to make!]

Posted by Venkat at 12:15 PM | Privacy/Security , Trademark

November 06, 2009

Google AdWords Litigation Keeps Rolling In--Parts Geek v. US Auto Parts

By Eric Goldman

Parts Geek LLC v. US Auto Parts Network Inc.,3:2009cv05578 (D.N.J. complaint filed Nov. 2, 2009) [warning: 3MB PDF]. The Justia page.

In my world, we have an honor code among geeks--thou shalt not harm other geeks. As you can imagine, then, I was a little sad to see geek-on-geek litigation like this one, where auto parts geeks are suing computer geeks. Can't we geeks all get along?

Parts Geek is an online retailer of auto parts. US Auto Parts Network is a competitor who has bought keyword ads triggered by Parts Geek's trademarks. (However, when I searched this morning for Parts Geek, I didn't see any US Auto Parts' ads). In response, Parts Geek is suing its competitor as well as Google for the keyword advertising.

With respect to Google's involvement, the complaint doesn't break any new ground. I'm pretty sure it's largely a rip of another complaint, but I can't remember which one(s). According to my count, this lawsuit brings Google back up to 9 AdWords lawsuits.

In contrast, there are a couple of interesting facets of the claims against US Auto Parts. First, Parts Geek alleges (para. 42) that US Auto Parts set up a blog entitled "Auto Parts Geek" to divert traffic. Can you imagine a more perfect descriptive fair use situation? I think this will become my new favorite example.

Second, Parts Geek makes a Computer Fraud & Abuse Act claim because US Auto Parts allegedly crawled Parts Geek's site to extract "proprietary data and pricing." The CFAA claim seemed like an afterthought tacked onto allegations that focused almost exclusively on the trademark issues, and it wasn't as fleshed out or robust as we normally see in anti-crawling lawsuits (i.e., no claims for breach of contract, trespass to chattels, copyright infringement or violations of a state computer crimes law). Nevertheless, I'm always interested in anti-crawling lawsuits, especially ones with anti-competitive angles like efforts to keep competitor A from learning competitor B's prices. Further, Parts Geek claims that US Auto Parts' access to its website was delimited by a "terms of use" which, from my limited review of the Parts Geek site, appears to be at best a very obscure "browsewrap." The CFAA is more tolerant of obscure disclosures than contract law is, and this CFAA claim is hardly unusual, but I'm nonetheless troubled by the implications of treating obscure browsewraps as effective anti-crawling mechanisms.

The roster of pending AdWords cases:

* 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 (not initially a trademark case)
* 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
* Flowbee v. Google
* Parts Geek v. US Auto Parts

Posted by Eric at 07:17 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 23, 2009

Google AdWords Litigation Updates--Google Adds One Lawsuit and Ends Another

By Eric Goldman

It's been a little quiet on the Google AdWords trademark litigation front in the past couple of months, so it's timely to check in on the situation.

Jurin v. Google, Inc., 2:09-at-01695 (E.D. Cal. complaint filed Oct. 22, 2009)

You may recall Daniel Jurin, who claims ownership in the trademark "styrotrim" (a type of building exterior covering). In June, he sued Google for trademark infringement and related claims as part of the spate of lawsuits filed after Google changed its trademark policies in May. Then, less than 2 months later, he voluntarily dismissed the lawsuit after having parting ways with his attorneys. I figured losing his attorney would spell the end of Jurin's quest, but no! Breaking a two month dry spell in new Google AdWords lawsuits (the last being Flowbee in mid-August), Jurin has found a new attorney, Paul Bartleson, and has decided to tangle with the tiger once again. Welcome back to the party!

It appears that Jurin had to cast a pretty wide net to find a substitute attorney. Paul's website says for the past 19 years he "has focused almost exclusively on Bankruptcy matters," and his LinkedIn page says he is "also an entrepreneur and business development consultant in a business that teachers leadership, values and relationship skills, while capitalizing on the wealth building potential of the internet." Huh? Not sure what that means, but could this lawsuit be an example of their "wealth building" prowess???

The complaint itself doesn't break any new ground. It's fairly internally redundant, and the narrative appears to conflate paid ads with organic listings fairly freely (while ironically complaining that Google confuses ads and organic results).

Soaring Helmet Corp. v. Bill Me Inc., 2:2009cv00789 (W.D. Wash. voluntarily dismissed Oct. 15, 2009)

In an unpublicized move, Soaring Helmet voluntarily dismissed Google from its trademark lawsuit against Bill Me last week. Even with Google out of the picture, the trademark owner v. advertiser lawsuit appears to be going strong. My initial blog post on that lawsuit.

Rosetta Stone v. Google

A month ago, Rosetta Stone's lawsuit largely survived Google's 12(b)(6) motion to dismiss. In a non-substantive opinion, the court tossed out the false endorsement and conspiracy claims but left the remainder intact.

Google v. John Beck Amazing Profits

In mid-September, Google voluntarily dismissed its declaratory judgment action trying to wrest the John Beck v. Google lawsuit venue out of Texas. This dismissal does not appear to have affected the original John Beck v. Google case, nor did it succeed in affecting venue.

The roster of pending AdWords cases:

* 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 (not initially a trademark case)
* 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
* Flowbee v. Google

Posted by Eric at 09:54 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 21, 2009

Domain Names as Property Subject to Creditor Claims--Bosh v. Zavala

[Post by Venkat]

Most people take it for granted that domain names are property. As such, there shouldn't be much dispute that domain names are subject to the claims of judgment creditors. But I've seen enough resistance to this position that I thought a recent case was worth a quick mention. This recent case (Bosh v. Zavala (08-CV-04851-FMC-MANx) (C.D. Cal. Sept. 24, 2009)) also raises some interesting questions about the mechanics of trying to use a domain name to satisfy a judgment. For more perspectives, see Marc Randazza's post on this case here; see also NYT; Domain Name News; Deadspin.

Background: One of the early and often-cited cases for the proposition that a judgment creditor cannot get a domain name is Network Solutions, Inc. v. Umbro Int’l, Inc., 259 Va. 759, 770 (Va. 2000). In Umbro, the Virginia Supreme Court held that "a domain name registrant acquires the contractual right to use a unique domain name for a specified period of time...[but this] contractual right is inextricably bound to the domain name services that [Network Solutions] provides." Umbro concluded that the domain name registration agreement was a "contract for services" (which was not subject to "garnishment") rather than property. (Umbro was preceded by the Eastern District of Virginia's decision in Dorel v. Arel where the court punted on the "issue of whether a domain name is personal property subject to [a lien]" because the judgment creditor could take advantage of an easier, practical solution: "the registrar's policies.")

Kremen v. Cohen: Enter Kremen v. Cohen, decided by the Ninth Circuit in 2003. Kremen cast a shadow over Umbro. Kremen involved an action for conversion where the underlying property was a domain name. One of the big questions in front of the court was whether a domain name was property which could support a claim for conversion. The court pretty definitively answered that a domain name was property and therefore could support a claim for conversion. Following Kremen, courts started to realize that since domain names are property, they should be subject to the claims of judgment creditors. (See Office Depot, Inc. v. Zuccarini, 621 F. Supp. 2d 773 (N.D. Cal. 2007).) More recently, in Bosh, Judge Florence Marie-Cooper of the Central District of California allowed Toronto Raptors basketball player Christopher Bosh to seize a slew of domain names held by Luis Zavala, based on a cybersquatting judgment obtained by Bosh.

The key conceptual question to resolve is whether domain names are freely transferable, or whether domain name registration services are contracts personal to the registrant. Given the emergence of the flourishing secondary domain name market, you would think there would be no dispute as a practical matter as to whether domain names are freely transferrable. But it's not as hard you may think to encounter people who argue that domain names are just personal contract rights. For example, in 2009, Network Solutions took this position in the Kentucky domain name case where the Kentucky AG tried to seize numerous domain names based on the fact that they were "gambling devices" used in contravention of Kentucky law. (See pages 7 through 11 of their amicus brief filed in Kentucky: [pdf].) The Kentucky AG's decision was on questionable legal grounds for a variety of reasons, but I was surprised to see Network Solutions' reliance in its amicus brief on Umbro.

From a practical standpoint, the big question is whether a judgment debtor has assets that can be sold to satisfy a judgment. If there are such assets (whether in the form of domain names or otherwise), most courts are going to find a way to let the judgment creditor get at them. There may be tweaks around whether the particular statute in question covers a certain type of property (see, e.g., Palacio Del Mar Homeowner's Association, Inc. v. McMahon, 174 Cal. App. 4th 1386 (2009) (domain names are not subject to "turnover order," coincidentally, the same type of order Bosh obtained)), but it's a mistake to see these cases as somehow rejecting the theory domain names are properly subject to the claims of creditors. One caveat: even if domain name registration services are not contracts personal to the registrant, not every domain name can be easily bought and sold. As discussed in a moment, certain types of domain names - including potentially those involved in Bosh - are tougher to monetize without stepping on the toes of third parties.

Process Questions: In Bosh, the domain names all related to the names of famous athletes and celebrities and were ordered "turned over" to Bosh. Bosh plans on distributing them to other athletes whose names the defendant was squatting on. (Bosh plays for the Toronto Raptors and the defendant squatted on the names of Bosh and many other athletes.) Bosh is somewhat atypical since Bosh didn't really care about satisfying the judgment he obtained and probably will not undertake further efforts to collect. But one of the problems with Bosh is that it doesn't set any sort of process to value the domain names. Is the defendant's judgment satisfied based on the turnover? Who is to say? A turnover to Bosh is sort of an awkward result, and seemingly precluded by the statute (see McMahon), but Zavala was not around to contest the issues, so it is what it is.

A related problem is that Bosh would have a tough time selling the domain names, given that there would be little guarantee that any purchaser would steer clear of engaging in the same conduct that the defendant did in Bosh. The court in Zuccarini alludes to this. (See Zuccarini, 621 F. Supp. 2d at 778, fn. 7.) It's unlikely a court would ever conclude this, but if Bosh decided to auction off the names that were turned over, would he be treading close to the cybersquatting line?

Back to the typical case. Some would argue there's some sort of non-infringing use for all domain names, and that it's up to the purchaser to figure out non-infringing uses. There are plenty of established auction houses that regularly deal in domain names (e.g., Moniker; Sedo). The best bet is to sell a domain name through a court-blessed third party auction. Theoretically, the market price at an auction will accurately reflect the assessment of purchasers as to how the domain name can be used. I guess a very rough analogy is that real property is freely exchangeable, but you can only use it without injuring the rights of your neighbors. No one argues based on the hypothetical nuisance claims of neighbors that real property is not freely exchangeable and therefore not subject to the rights of creditors.

At the end of the day, there are plenty of issues around the fringes, but domain names are likely not off limits for judgment debtors based on the theory that domain names are not "property". Most courts will find a way to let judgment creditors get at domain names. That's not to say that the process of seizing the names and disposing of them does not raise thorny issues.

Posted by Venkat at 10:02 AM | Domain Names , Licensing/Contracts , Publicity/Privacy Rights , Trademark

October 15, 2009

Q3 2009 Quick Links, Part 2

By Eric Goldman

Trademark

* Venkat: Twitter makes the dictionary.

* Federal Circuit says Hotels.com is generic.

* Steve Madden sues eBay for trademark infringement. Marty's coverage. Justia page. I found the fifth cause of action, "trademark delusion," a surprisingly apt malapropism.

* Yahoo! Inc. v. Ashantiplc Limited. Yahoo is suing over Flicker.com.

* Lots of action involving Mary Kay.

- Mary Kay sued Yahoo for its shortcuts being triggered by the Mary Kay trademark. The Justia page.

- Mary Kay brought another lawsuit to shut down aftermarket resales.

- The Mary Kay v. Weber case has reached a conclusion. See my initial blog post on the case. In March, Mary Kay won a jury verdict against Weber. In August, the district court judge denied Weber post-trial relief. Mary Kay v. Weber, 2009 WL 2569070 (N.D. Tex. Aug. 14, 2009). On Sept. 29, the judge awarded Mary Kay $1.1M, computed as “the defendants' pre-tax net profit for the years 2005 through 2008.”

* I hate greeting card IP cases...especially when they involve Paris Hilton. See the Ninth Circuit opinion.

* Rebecca on a complicated trademark and false advertising case involving cell phone reflashing.

* Third Educ. Group, Inc. v. Phelps, 2009 WL 2029758 (E.D. Wis. July 10, 2009). An oblique nod to a co-blogging situation:

It is possible to have a situation in which a voluntary association develops out of a preexisting creation of an individual (take, for example, a blog created, named, and operated entirely by a single individual that then expands into a voluntary association as it includes more collaborative members but continues to utilize the original name). Under such circumstances, the founding individual might register the name of the voluntary association as a trademark solely in his own name and then license it to the voluntary association because he has used the trademark separate from the voluntary association. However, that did not occur here.

* CollegeSource, Inc. v. AcademyOne, Inc., 2009 WL 2705426 (S.D. Cal. Aug. 24, 2009): "Plaintiff argues for personal jurisdiction on the grounds that Defendant purchased two of Plaintiff's trademarks from internet search engines, so that those engines would display Defendant's advertisements when Plaintiff's word marks were searched….Defendant's uncontroverted affidavit avers that its Adwords were selected by the search engines and were purchased before Defendant knew Plaintiff was located in California.…Accordingly, even if Defendant intentionally infringed Plaintiff's marks, there is no showing that act was “expressly aimed at the forum state” or that it caused “harm that the defendant knows is likely to be suffered in the forum state.”"

* GMA Accessories, Inc. v. BOP, 2009 WL 2634771 (S.D.N.Y. Aug. 25, 2009). A really interesting and confusing lawsuit that says (I think) that electronic usage of third party trademarks does not qualify as a use in commerce and may not constitute contributory trademark infringement, with obvious implications for the search engine keyword advertising cases:

Electric Wonderland's second alleged meritorious defense is that it did not use the CHARLOTTE or CHARLOTTE SOLNICKI marks....Electric Wonderland's President described its business as follows:

Electric Wonderland brokers and/or processes orders from wholesale purchasers for fulfillment by clients of Electric Wonderland. Electric Wonderland does not directly sell its clients [sic] products, does not fulfill orders, does not acquire or maintain any inventory for sale, and does not purchase products from its clients for resale. Electric Wonderland does receive commissions on sales it brokers....

According to the Flack Declaration, these were the services Electric Wonderland provided to Charlotte Solnicki. (Flack Decl. P 3.) "Electric Wonderland did not directly sell Charlotte Solnicki products, did not fulfill orders, did not acquire or maintain any inventory of such products for sale, and did not purchase such products from Charlotte Solnicki for resale." (Flack Decl. P 3.) If this were the extent of Electric Wonderland's role, a fact-finder could find that Electric Wonderland did not "use" the CHARLOTTE or CHARLOTTE SOLNICKI marks, because it did not place the marks on any goods. Likewise, a reasonable fact-finder could determine that Electric Wonderland never used the marks to sell or advertise any of the services Electric Wonderland rendered. Thus, Electric Wonderland would not be liable for direct trademark infringement.

...Electric Wonderland's president claims that "[a]t no time while Charlotte Solnicki was a client of Electric Wonderland was Electric Wonderland aware of GMA's 'Charlotte' products nor of any possibility that the Charlotte Solnicki products were potentially infringing any third party's trademark rights." (Flack Decl. P 5.) If true, a reasonable fact-finder could find that Electric Wonderland neither knew, nor had reason to know of the alleged infringement during the period in question.

In addition, the Second Circuit has not decided whether contributory infringement applies to entities like Electric Wonderland, which provide services instead of products....Thus, Electric Wonderland, as a matter of law, may have a complete defense to contributory infringement liability, a matter which this Court need not decide at this juncture.

* Dan Burk and Brett McDonnell, Trademarks and the Boundaries of the Firm. Interesting discussion (among other things) on how an entrepreneur's/employee's personal reputation and corporate reputation can be interlinked.

Domain Names

* The Eleventh Circuit affirmed the defense win in the domain name case of Southern Grouts & Mortars v. 3M, 2009 WL 2182605 (11th Cir. July 23, 2009). See my initial blog post on the case.

* John Levine: What are TLDs Good For? Bringing to mind the famous Edwin Starr song (I think the answer is the same!).

* ICANN claims it has killed domain name tasting.

Posted by Eric at 09:53 AM | Derivative Liability , Domain Names , E-Commerce , Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

September 22, 2009

Google Confirms That Keyword Metatags Don't Matter

By Eric Goldman

Few Internet technologies have horked cyberlaw as much as keyword metatags. Back in the 1990s, some search engines indexed keyword metatags, which encouraged some websites to stuff their keyword metatags as a way of gaming the rankings. Judges took a dim view of this practice, largely because the surreptitious nature of keyword metatags seemed inherently sinister, regardless of their efficacy. In the interim, search engines wizened up. Some search engines stopped indexing keyword metatags, and others greatly diminished the credit they assigned to keyword metatags. As a result, for the better part of this century, keyword metatags have had either zero or de minimis effect on search engine placement.

However, the anti-keyword metatag legal doctrines developed in the 1990s have persisted, even as the technology changed. Although occasionally judges have gotten it right (see, e.g., Standard Process v. Banks). most courts still treat the presence of a third party trademark in keyword metatags as essentially a per se trademark infringement--even if the keyword metatags didn't (and couldn't) change the search results ordering or any consumer's behavior. For a quick sense of the ridiculous state of keyword metatag jurisprudence, take a look at my recent blog posts on the topic.

The current state of nature has put keyword metatag defendants in a bind. On the one hand, the law treats the inclusion of third party trademarks as per se trademark infringement. On the other hand, everyone in the industry knows they are irrelevant but search engines have been less than forthcoming about the components of their search engine algorithms, leaving scanty citable material to support that proposition. And judges, deciding between the weight of a dozen years of anti-keyword metatag legal precedence and not-from-the-horse's-mouth assessments of keyword metatag efficacy, not surprisingly continue to stick with the outdated legal precedent.

This makes Google's announcement yesterday so exciting. Google's star techie Matt Cutts says in plain language that Google's core search algorithm ignores keyword metatags. This isn't news in the sense that we've known this about Google for years, but I believe this is Google's first public confirmation of keyword metatag's irrelevancy. Matt's short video clip goes so far to tell trademark owners to quit suing over keyword metatags. Amen!

I've long believed that trademark law shouldn't intervene even if search engines index keyword metatags because merely appearing in the search engine results for a third party trademark (without more) should be legally immaterial. Even if you don't agree with me on that proposition, I trust most everyone can agree that trademark law should ignore keyword metatags if search engines do. Now that we have confirmation that the dominant search engine disregards keyword metatags, let's hope judges do the same.

Posted by Eric at 10:02 AM | Internet History , Search Engines , Trademark | TrackBack

September 18, 2009

Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host--Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., 5:07-CV-03952 (N.D. Cal. jury verdict returned Aug. 28, 2009). My blog post of the December 2008 ruling on summary judgment motions in the case.

Last month, a jury returned a $32+ million verdict against a web host (and related parties) for contributing to trademark infringement committed by its customers. This ruling was breathtaking on a number of fronts, but two attributes stood out: the size of the verdict and the fact that a web host was contributorily liable. Online cases interpreting contributory trademark liability are rare, and the few cases we've seen--such as the 1999 Lockheed v. NSI case, which remains the flagship case on the topic, and the Tiffany v. eBay case--generally have been defense-favorable. Indeed, I can't think of a prior case where a web host lost a contributory trademark infringement ruling, although Lockheed v. NSI case dicta implicitly contemplates that a web host could have the requisite degree of "direct control and monitoring of the instrumentalities used to infringe" that NSI, as a domain name registrar, lacked in that case.

Because this case takes us into uncharted waters, the ruling looks significant on first blush. However, some things have been bothering me about the case. First, because we're working with a jury verdict, it's hard to identify and distill the key facts that led to Akanoc's loss. If nothing else, the jury verdict blunts the precedential impact of the case; there's no written opinion, there's nothing citable, and by definition the ruling is fact-dependent. Second, I have been having this nagging suspicion that Akanoc did something goofy that stood out from industry standards. In contrast, the December 2008 ruling in this case, though troubling, didn't raise huge red flags for me, so the result seemed like an unexpected odd turn.

As we post-mortem the case, two key facts are emerging. First, Akanoc's defense invoked a jurisdictional component that any infringing activity wasn't taking place in the US. I believe the basic argument is that Akanoc's web hosting customers are Chinese and marketing the allegedly infringing goods to Chinese customers. All that may be true, but it's not clear how well that jurisdictional argument works for a US-based company (Akanoc is located in Fremont, CA). Accordingly, I don't think I would have advanced this jurisdictional defense if it were my choice.

Second, and much more importantly, Louis Vuitton claims it sent 19 takedown notices to Akanoc and most were ignored. I haven't researched the case enough to see the exact wording of the takedown notices, and I'm often skeptical of such claims because IP owners routinely send ridiculously broad takedown notices or requests with unreasonable demands that deserve to be ignored (see, e.g., Tiffany's demands that eBay enforce rules that Tiffany made up). Nevertheless, if the jury decided that Louis Vuitton sent multiple proper takedown notices that were ignored, then this verdict wouldn't be all that surprising or, frankly, all that earth-shattering. Although there is no statutory notice-and-takedown regime for online trademark complaints, I think many web hosts (and other intermediaries) follow the DMCA notice-and-takedown regime--built for copyright complaints--for trademarks as well. If Akanoc's failure to honor Louis Vuitton's takedown notices was the dispositive fact for the jury, it's unlikely that many web hosts would find themselves in a similar position. In that case, then, this case is hardly as disconcerting as it appears on the surface.

Having said that, I think the entire web hosting industry would benefit from a clear rule that notice-and-takedown eliminates contributory trademark liability, as well as clarity about what constitutes a proper takedown notice. Due to the uncertainty of this lawsuit's result, if I ran a web hosting business, I would probably take down users in response to less clear or more expansive trademark take-down requests than I would in the copyright realm where 512(c)(3) spells out the specific requirements for a proper notice. In that respect, then, I think the likely consequence of this case is to make web hosting customers more vulnerable to losing service and going dark on the basis of bogus or questionable trademark take-down requests.

We haven't seen much movement towards a statutory solution to online contributory trademark infringement problems. Maybe it's time. Or, perhaps the Second Circuit's Tiffany v. eBay ruling will give us enough clarity to sort out the issues without statutory intervention.

More on this case:

* Louis Vuitton's chest-beating press release
* Joyce Cutler at BNA/Pike & Fischer (subscription required, unfortunately)
* Marc Randazza with links to several source documents

Posted by Eric at 02:52 PM | Derivative Liability , Trademark | TrackBack

September 16, 2009

Ninth Circuit Groaner About Metatags--Art Attacks v. MGA

By Eric Goldman

Art Attacks Ink LLC v. MGA Entertainment, Inc., CV-04-01035-RMB (9th Cir. Sept. 16, 2009)

What is it about metatags that cause legal folks to believe they have magical search powers? It's a meme that the legal community just can't seem to shake. To wit: In a case involving the alleged ripoff of a small-time local artist by "Bratz" manufacturer MGA, the Ninth Circuit had to determine if MGA would have ever learned of the plaintiff's "Spoiled Brats" art collection. In determining if MGA could have had "access" to the Spoiled Brats design (a prerequisite to copyright infringement), the court says:

"Art Attacks also maintained an internet website as of 1996, during the early years of widespread internet use. The website displayed images of various Art Attacks airbrush designs, including animals, celebrities, cars, animals, and the Spoiled Brats. The website took two minutes to load. Users could click through the main Art Attacks website to a linked Spoiled Brats-specific page to obtain a mail-in order form. The website also lacked Spoiled Brats “meta tags,” invisible pieces of data that are embedded in websites and act as flags to internet search engines....As a result, a potential viewer who typed “Spoiled Brats” into a search field would likely not encounter the Art Attacks page." (emphasis added)

What??? Putting aside the fact that the metatags were ignored by many of the search engines even at the relevant time (back in the late 1990s), this is a backwards way of assessing site visibility for the search term "Spoiled Brats." So what if the term Spoiled Brats wasn't in the metatags if the term was on the page? Yet another reason why I wouldn't rely on Ninth Circuit opinions for accurate descriptions of SEO practices.

One last point: although MGA beat this particular allegation that its Bratz dolls were ripoffs, the appellate victory is a little hollow because MGA wasn't so fortunate in its litigation with Mattel.

Posted by Eric at 03:44 PM | Copyright , Search Engines , Trademark | TrackBack

September 08, 2009

Yahoo's Search Results Snippets Aren't False Endorsement--Stayart v. Yahoo

By Eric Goldman

Stayart v. Yahoo! Inc., 2009 WL 2840478 (E.D. Wis. Aug. 28, 2009)

Earlier this year, I blogged about Beverly Stayart's quixotic lawsuit against Yahoo and others for showing search results snippets that contained her name adjacent to spammy porn and adult content links. Last month, the court efficiently dismissed her federal Lanham Act "false endorsement" claims and then dismissed the remainder of her lawsuit on procedural grounds, allowing Stayart to refile those claims in state court if she chooses. (She shouldn't but she probably will). The court rejected Stayart's Lanham Act false endorsement claim on three different grounds.

Commerciality

The court says that Stayart has not made adequate efforts to commercialize her name sufficient to give her standing for a Lanham Act claim. I agree with the court's factual assessment. Although Stayart alleged that she has been an active participant in online communities, she hasn't done anything to commercialize her name. Stated differently, if Stayart has standing under the Lanham Act's false endorsement provisions, then just about everyone in the world would.

Confusion

The court rejects any likelihood of consumer confusion. I don't particularly like the court's reasoning, which seems to be that since Stayart has lived a squeaky clean life, no one would believe that she could be associated with the seedier activity promoted in the spammy links. This reasoning seems completely inconsistent with the nature of gossip. Nevertheless, the court is completely right when it says "No one who accessed these [spammy] links could reasonably conclude that Bev Stayart endorsed the products at issue." I think this is true because the spammy links lack internal credibility enough for anyone to believe them at all.

With respect to Various, the defendant whose adult website was advertised at some of the spammy links, Stayart argued initial interest confusion because people interested in her might be induced to click on the spammy links. The court rejects the argument by saying "The type of person looking for information about Bev Stayart would not be fooled into using an online adult-oriented dating website." I'm not sure why the court thinks this is true; people have all sorts of “hidden interests.” Nevertheless, I'd like to think no prudent person would be fooled into clicking on spammy porn links in a search engine, even if it referenced Stayart's name.

47 USC 230

The court's discussion up to this point has some odd reasoning, but the 47 USC 230 discussion is quite bizarre. The court's conclusion is that "Yahoo! should be entitled to immunity because it acted as an interactive computer service, even though Stayart’s claims are nominal intellectual property claims....Immunizing Yahoo! from Stayart’s claims would not limit the laws pertaining to intellectual property because Stayart does not state a valid intellectual property claim."

What? Is the court saying that it doesn't need to discuss 230 because Stayart failed to state a valid IP claim, or is the court saying that Yahoo qualifies for the 230 immunity because doing so would be consistent with 230's policies--even if the court has to ignore 230's statutory exclusion for IP claims? The court could have found a role for 230 by concluding that the Lanham Act false endorsement claim wasn't really an IP claim at all, any more than a Lanham Act false advertising claim is an IP claim, but I don't think the court said that.

So I'm not sure what the 230 references means, and I personally think the court would have been better off not discussing 230 at all. (As Rebecca writes, the whole 230 digression was "obviously useless.") At minimum, I don’t think it would be accurate to say that this court found a 230 defense to a federal IP claim. As a result, I’m filing this case in the bucket of “not very interesting” 230 cases.

Note: we already knew that 230 protects search engines from liability for their search results snippets when IP claims aren’t involved. See, e.g., Maughan v. Google and Murawski v. Pataki. A British court also reached the same result on common law grounds. See the Metropolitan International Schools case.

Conclusion

The court denies Various' 230 defense because its association with the banner ad was unclear. Having dismissed the federal Lanham Act claims completely, the court then declines supplemental jurisdiction over the state law claims. The court also rejects Stayart's guffaw-inducing request for sanctions against the defendants for having the temerity of moving to dismiss her complaint.

I'm glad to see Stayart's lawsuit quickly dismissed. It was a ridiculous lawsuit from inception. At the same time, the court's corner-cutting leaves me lamenting the absence of better doctrines to deter junk lawsuits like this in the first place. It's actually can be tricky to say that any trademark complaint is "wrong" given how much doctrinal contortions some courts have indulged in--even when lawsuits like this are so clearly wrong.

More comments on the case: Rebecca Tushnet, Mike Masnick (who has had first-hand dealings with Stayart) and Ars Technica

Posted by Eric at 03:05 PM | Derivative Liability , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

August 26, 2009

Yahoo Subpoenas Expedia in American Airlines Lawsuit

By Eric Goldman

Yahoo and American Airlines are still tussling over Yahoo's sale of American Airlines' trademarks as keyword triggers (see background at 1, 2, 3). According to Yahoo, American Airlines is arguing that online travel agencies such as Expedia are directly infringing American Airlines' trademarks by buying keywords from Yahoo, which would make Yahoo a secondary infringer by facilitating Expedia's direct infringement.

From my perspective, American Airlines' direct infringement argument looks questionable because Expedia and others should be fully protected by the First Sale/trademark exhaustion doctrine for advertising that it sells American Airlines' branded services--just like any other retailer is free to advertise the trademarks of the manufacturers it vends. However, perhaps American Airlines restricts Expedia's advertising by contract and is taking the position that Expedia exceeded the contract and such a contract breach constitutes trademark infringement. American Airlines is also arguing that Yahoo is tortiously interfering with the American Airlines-Expedia contract, so that seems possible. Even then, it's not clear to me that if Expedia exceeds the contract by buying trademarked keywords