Technology & Marketing Law Blog: Trademark Archives

Technology & Marketing Law Blog

May 21, 2013

Google Crushes Home Decor Center’s Trademark Challenge to AdWords

By Eric Goldman

Home Decor Center, Inc. v. Google, Inc., 2:12-cv-05706-GW-SH (C.D. Cal. May 9, 2013)

Home Decor Center sued Google in the wake of the Fourth Circuit's Rosetta Stone ruling. The lawsuit did not go well for it. Recently, the court granted Google’s summary judgment motion on two grounds. The trademark challenges were dismissed because the court held that “Home Decor Center” was generic and therefore ineligible for trademark protection. All of the non-trademark claims were dismissed per 47 USC 230. Thus, not only has Home Decor Center’s lawsuit died, so has its trademark. The only thing that could be worse is if the court orders Home Decor Center to pay Google’s legal fees (I imagine Google will ask). Perhaps Home Decor Center will appeal the ruling—at this point, it has nothing to lose in the case other than more legal fees.

Purists will be disappointed that yet another court sidestepped the conceptually interesting question of when Google could be liable for selling trademarks as keyword ad triggers—a question that still has not been definitively resolved in court after more than a decade of legal battles, and now appears that it may never be answered. Google recently settled the CYBERsitter lawsuit, so Google has whittled its AdWords trademark litigation docket down to just two pending lawsuits: Parts.com and Ison. Parts.com will almost certainly end like this one did—a complete plaintiff loss on the merits plus a finding that the putative trademark Parts.com is generic—and Ison has already lost at the lower court and has zero chance on appeal. Thus, with just a little mop-up work remaining, Google has effectively cleared its AdWords trademark docket, reinforcing that Google has won the trademark battles over AdWords. It will be interesting to see if any future trademark owners make the sucker’s bet of challenging the Mighty Google.

Home Decor Center is Generic

The Home Decor Center lawsuit baffled me generally, but perhaps the most baffling fact is that it only had a trademark registration on the Supplemental Register, not the Principal Register. The Supplemental Register is only for descriptive trademarks that haven’t achieved secondary meaning, so the registration is usually worthless in court. Indeed, though the PTO makes a finding that the term is a descriptive trademark and not generic as part of granting a supplemental registration, courts don’t need to defer to the PTO’s determination, and this court didn't.

To help crush the trademark, Google conducted at least two consumer surveys, while Home Decor Center apparently didn’t conduct any. Trademark defendants don’t typically do their own consumer surveys about the plaintiff's trademark, but Google's surveys proved devastating to Home Decor Center’s case. I don’t know how much money Google spent on its consumer surveys, but I doubt the price tag was less than a quarter-million dollars. Thus, Google was willing to invest in a nuclear flyswatter to destroy a lawsuit it was likely to win even without the surveys. In a similar vein, Google did a consumer survey in the Ison case, which was an even weaker lawsuit. Google's willingness to vastly outspend its opponents provides a good cautionary tale for the next plaintiff who thinks it can challenge Adwords “on the cheap.”

The court summarized its discussion on genericness:

Combining the words "home decor" with "center" does not primarily denote a specific origin or source. Rather, it merely identifies the "type of product" sold by Plaintiff, answering the consumer's "what are you" question with the response, a "center" that provides "home decor."

Overall, I’ve previously argued that the term “[noun] Store” is categorically generic for a retailer selling [noun]. This ruling is similar; using “center” rather than “store” doesn't really change the analysis. As Parts.com will soon find out, “[noun].com” is also generic for an online retailer of [noun].

The Section 230 Analysis

The court says that Home Decor Center's state law claims are all derivative of its trademark claims. Thus, when the trademark died, so did the derivative claims. But even if that wasn't true, the court says the derivative claims are preempted by 47 USC 230. This is because Home Depot, the AdWords advertiser who purchased the allegedly problematic ads, used Google's tool to dynamically insert the search query (in other words, the purported trademark) into the ad copy. When the advertiser uses Google's dynamic keyword insertion feature, Google doesn't "create or develop" the ads in question (with cites to Jurin and Goddard). Home Decor Center presented some evidence that Google's sales rep discussed the ad copy with Home Depot, but ultimately it appears Home Depot wrote all of the ad copy itself. Compare the murky Section 230 discussion in the CYBERsitter case, now effectively orphaned by settlement of that case.
___

For more on this topic, see my recent blog posts on trademark infringement and keyword advertising:

* Suing Over Keyword Advertising Is A Bad Business Decision For Trademark Owners
* Florida Proposes to Ban Competitive Keyword Advertising by Lawyers
* More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide
* Google's Search Suggestions Don't Violate Wisconsin Publicity Rights Law
* Amazon's Merchandising of Its Search Results Doesn't Violate Trademark Law
* Buying Keyword Ads on People's Names Doesn't Violate Their Publicity Rights
* With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally
* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid--Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

[Photo Credit: Give Pests The Flick With An Isolated Hand Flicking A Huge Dead Fly // ShutterStock]

Posted by Eric at 09:44 AM | Derivative Liability , Search Engines , Trademark | TrackBack

May 20, 2013

Suing Over Keyword Advertising Is A Bad Business Decision For Trademark Owners--General Steel v. Chumley (Forbes Cross-Post)

By Eric Goldman

General Steel Domestic Sales, LLC v. Chumley, 2013 WL 1900562 (D. Colo. May 7, 2013)

Trademark owners rarely win keyword advertising lawsuits in court. Reinforcing this conclusion, another trademark owner lost a trial over competitive keyword advertising despite a number of key facts in its favor. Given how often trademark owners lose keyword advertising lawsuits, why do they keep wasting their time and money?

The Lawsuit

General Steel Corporation and Armstrong Steel Corporation compete in the "prefabricated steel building business." Chumley, a former employee of General Steel, launched Armstrong Steel and ran Google ($GOOG) AdWords ads on the keyword "General Steel" with ad copy such as:

General Steel Buildings www.ArmstrongSteelBuildings.com Price Your Building Online Or Let Us Do It. Guaranteed Lowest Prices!

and

General Steel Buildings Price an Armstrong Steel Building Online in Minutes Or Let Us Do It. www.ArmstrongSteelBuildings.com.

(As usual, the court doesn't discuss whether Armstrong Steel broad-matched the word "steel").

Eventually, Armstrong Steel made its ad campaign more clearly comparative, buying the keyword “General steel buildings” to display ad copy such as:

Don’t Buy General Steel Without Pricing Armstrong First. Price a Steel Building in Minutes! www.ArmstrongSteelBuildings.com

In addition to the keyword advertising campaign, Chumley (or an employee of his) issued press releases that contained false claims and were attributed to a fictitious employee, and the defendant's website made additional false claims. Chumley further falsely published Internet postings in the name of General Steel's CEO. Rebecca Tushnet discusses the false advertising angles of the case.

General Steel sued Armstrong Steel and Chumley for false advertising and trademark infringement. After a bench trial, the judge ruled for General Steel on the false advertising claims and for the defendants on the trademark claims.

Regarding keyword advertising, General Steel's trademark claims failed because it couldn't show actionable consumer confusion. The court says it "suspects" that some searchers clicked on Armstrong Steel's ads believing it would take them to General Steel's website. However, that wasn't enough to win the case (especially after a key Ninth Circuit 2011 ruling on keyword advertising) because "[o]ther than its suspicions, plaintiff offered no evidence at trial of actual confusion," and because steel buildings are complex purchases that buyers will research carefully. The court concludes:

While Armstrong was using the term to refer to plaintiff’s company, the Court does not find the record supports the finding that such use was likely to cause confusion among consumers in light of all of the surrounding information that identified Armstrong Steel as the source of the website and distinguished Armstrong Steel from General Steel.

The court also rejects a common argument by trademark owners that "potential customers entering the term 'general steel' into a search engine are searching exclusively for that company, as opposed to executing a broader search for all companies selling similar products." (See the uncited study by Franklyn and Hyman supporting this analysis). The court instead says "the connection between the search term entered and the appearance of an advertisement is too attenuated to suggest an actual affiliation between the two."

Implications

This is a really a devastating loss for the plaintiff--and for trademark owners generally. On its face, this case looked like a sure win for the trademark owner. After all, the ad copy referenced the trademark in a non-comparative way--usually thought to be a "no-no"--plus the advertiser engaged in false advertising elsewhere. If a trademark owner can't win a case with those attributes, when can it win a competitive keyword advertising case?

As it turns out, the answer is "rarely." Though not a lot of cases have reached the final merits of trademark claims over keyword advertising, the rulings (summarized below) demonstrate why trademark owners should think carefully before suing over competitive keyword advertising:

* plaintiff got injunction: CJ Products v. Snuggly Plushez (2011); InternetShops v. Six C (2011) (note: defendant admitted trademark liability, so the opinion only deals with remedies).

* plaintiff won summary judgment: Storus v. Aroa (2008).

* plaintiff won at trial: Binder v. Disability Group (2011). This case was decided before the Ninth Circuit ruling in Network Automation, and I believe it’s no longer good law.

* defendant won summary judgment: J.G. Wentworth v. Settlement Funding (2007); Designer Skin v. S&L Vitamins (2008); 1-800 Contacts v. Lens.com (2010); Montana Camo v. Cabela’s (2011); Jurin v. Google (2012) (note: unlike the other cases, in Jurin the defendant was Google, not the advertiser); CollegeSource v. AcademyOne (2012).

* defendant won at trial: Fair Isaac v. Experian (2009) (technically, the final win came in a post-trial ruling after a jury trial); College Network v. Moore (jury ruling in 2009; affirmed on appeal in 2010); Consumerinfo v. One Techs. (2011) (jury trial); General Steel v. Chumley (bench trial).

For more on this topic, see my recent blog posts on trademark infringement and keyword advertising:

[Photo Credit: Closed Road // ShutterStock]

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

May 08, 2013

Suing Like It's 2009: Parts.com Sues Google and Yahoo for Keyword Advertising

By Eric Goldman

Parts.com v. Google, 3:13-cv-01074-JLS-WMC (S.D. Cal. complaint filed May 6, 2013); and
Parts.com v. Yahoo, 3:13-cv-01078-AJB-JMA (S.D. Cal. complaint filed May 6, 2013)
_____

In the immediate wake of the Second Circuit's Rescuecom ruling in 2009, about a dozen trademark owners sued Google for selling keyword ads. Google resolved each and every one of those cases, and a couple more since then, without suffering a final adverse ruling in any of them. Following its important settlement with Rosetta Stone, I believe Google now has only three pending trademark lawsuits over keyword advertising, all of which seemed doomed to me: the CYBERsitter and Home Decor Center cases, both filed in 2012 in the wake of the Fourth Circuit's Rosetta Stone ruling, and the quixotic Carla Ison case in state court.

Earlier this week, Parts.com joined this dubious plaintiff-vs.-Google club (and it sued Yahoo for good measure). There's nothing fancy or creative about Parts.com's lawsuit--it's a direct, and probably futile, frontal assault on Google's AdWords cash cow that generates around $40B a year. Some of the interesting angles to this lawsuit:

* Parts.com is a terrible trademark, about as protectable as Pets.com (which trademark lawyers often use as a prime example of a completely untrademarkable phrase). Indeed, there's good reason to believe Parts.com is generic following the Advertising.com, Hotels.com and Mattress.com rulings. If Parts.com doesn't voluntarily drop this lawsuit (a surprisingly common outcome for AdWords challengers), I predict Parts.com ends this lawsuit with an invalidated trademark; similar to how American Blinds ended its Google lawsuit with fewer trademarks. I really don't understand the business rationale for investing dollars in litigation where a likely outcome is having a judge conclude that your assets are worthless, but more than one trademark owner has asked Google to help it achieve this dubious outcome.

This lawsuit fits a trend that I've mentioned before: trademark owners with crappy trademarks are often unusually pugnacious about enforcing their purported trademark rights. 1-800 Contacts is my premier example of that phenomenon. Some of the "trademark" owners that have challenged Google include Home Decor Center, American Blinds, and now Parts.com. See the trend?

* Parts.com says it first contacted Google in 2007 to complain about its keyword ad sales. Trademark doesn't have a statute of limitations, but six years is a mighty long time for this issue to fester, so I could see a strong laches defense. See, e.g., the Southern Grouts v. 3M case, where laches barred a five year delay in enforcement.

Especially perplexing is that Parts.com got its trademark registration in Sept. 2008, so if it waited four more months, its trademark should have become incontestable. Incontestability wouldn't overcome the serious genericism problem it faces; but if you're going to wait six years to bring a suit, why not wait a few more months to get the limited benefits of incontestability....before poking at giants who will deploy massive resources to destroy the trademark?

[I emailed Parts.com's counsel about both of these issues but didn't get a response.]

* I am unclear if Google broad-matches the noun in a "[noun].com" query. So, in this case, does Google deliver ad results based on just the keyword "parts" if someone does a search for "parts.com"? I've asked a few folks but haven't got a reliable answer yet. If Google broad-matches this way, then Parts.com has even less to complain about. (I don't know Yahoo's broad-matching policy, but I'd welcome input on that too).

One final oddity: this is the second time that Google has been sued by an online parts retailer for trademark infringement due to keyword advertising (PartsGeek was the first). Selling parts online must be a pretty ugly business if suing Google is a good business decision. Parts.com claims it can prove losses of $2M due to infringing keyword advertising, but I'm calling BS on that. Based on the numbers we've seen in other cases, my guess is that the total value of "diverted" clicks--if any exist at all--is more properly measured by pennies, not millions.

____

Pending roster of AdWords trademark lawsuits against Google:

* Parts.com v. Google
* CYBERsitter v. Google [Latest post]
* Home Decor Center v. Google
* Carla Ison v. Google [the appellate docket]

____

My recent Tertium Quid blog posts on keyword advertising lawsuits:

* Florida Proposes to Ban Competitive Keyword Advertising by Lawyers
* More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide
* Google's Search Suggestions Don't Violate Wisconsin Publicity Rights Law
* Amazon's Merchandising of Its Search Results Doesn't Violate Trademark Law
* Buying Keyword Ads on People's Names Doesn't Violate Their Publicity Rights
* With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally
* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid--Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

[Photo credit: New year's odometer // ShutterStock]

Posted by Eric at 08:48 AM | Derivative Liability , Search Engines , Trademark | TrackBack

April 29, 2013

Differences Between Consumer Surveys for Trademark Cases and False Advertising Cases

By Eric Goldman

In February, I spoke about the differences between consumer surveys in trademark cases compared with false advertising cases. My talk notes:

Overall, the similarities between consumer survey in the two types of cases outweigh the differences. So some of these differences are necessarily exaggerated.

Structural Differences. Lanham Act false advertising cases always involve competitors. Trademark litigation can involve a broader range of defendants, not just competitors. Two examples of consumer surveys in non-competitive trademark cases: dilution surveys; and establishing secondary meaning in non-competitive cases such as, say, parodies. I don't know that this structural difference translates into a lot of meaningful differences in the surveys, but it changes the cases' complexion and may affect how the litigants approach the surveys.

A second possible structural difference. Consumer surveys are effectively mandatory in implied falsity cases. In contrast, although surveys are important for establishing secondary meaning, many successful trademark cases never include a consumer survey.

Range of Inquiry. In both false advertising and trademark surveys, consumers are surveyed about what meaning they derive from the specified stimuli. However, false advertising has a broader range of possible meanings that a consumer could ascribe. In trademarks, consumers are often asked if they recognize a mark or if the mark is similar to or associated with another mark. These questions are basically binary yes/no questions.

False advertising doctrine is interested in what message(s) consumers received. A single claim could have a multiplicity of meanings to consumers--consumers bring heterogeneous perspectives to the claim, and words and images have numerous possible meanings.

The result is that false advertising survey questions tend to be more open-ended and require multiple iterative questions (progressively becoming more close-ended) to ferret out the consumer's interpretation of the claim.

Furthermore, a single product may appeal to multiple consumer segments, so more expensive tests may be required to distinguish each segment and determine what message(s) they received.

Testing Environment. A false advertising survey typically seeks to determine what decision consumers will make in the marketplace in response to the claims at issue. Thus, every little fact about the testing environment matters. This is true with trademarks as well, but false advertising claims evaluation typically draws on a wider range of potentially relevant facts. In false advertising, there may be multiple versions of ad copy or claims that need to be tested together. The tester wants to replicate the buying environment as closely as possible, though a testing environment typically is stylized. The tester also wants to present controls that differ only with respect to the claims at issue. This can be a challenge; it may be difficult to manufacture an appropriately controlled ad copy or control specimen.

[Photo Credit: brand awareness survey // ShutterStock]

Posted by Eric at 09:57 AM | Marketing , Trademark | TrackBack

April 27, 2013

Typosquatting Claims Against Security Researcher Are Legally Complicated – Gioconda v. Kenzie

[Post by Venkat Balasubramani]

Gioconda Law Group v. Kenzie, 2012 US Dist LEXIS 187801 (S.D.N.Y. Apr. 23, 2013)

Kenzie is a security researcher who has registered numerous domain names that are typographic errors of well-known trademarks (e.g., rnastercard, rncdonalds, nevvscorp, rncafee, macvvorld, rnonster, pcvvorld). He points the domain names to the actual sites in question (e.g., rncdonalds points to mcdonalds.com), but he is looking to demonstrate how these typo domains are used for “social engineering” attacks.

Kenzie did not offer the domain names for sale, did not read the emails intended for the subject organization, and generally kept his whole scheme out of the public eye. Upon demand, he also offered to transfer the domain names to the organizations in question.

Nevertheless he was sued by Gioconda Law Group for registering Giocondolaw.com (with "o" instead of "a"). In response to Gioconda’s complaint, Kenzie, proceeding pro se, asserted a variety of defenses, including a critique of American privacy law. Gioconda moved for judgment on the pleadings.

The court struggles with the application of the Anticybersquatting Consumer Protection Act (ACPA) factors to this case. On the one hand, this is clearly not a case where the registrant is trying to profit by selling back the domain name. On the other hand, the court says, all non-commercial uses are not necessarily exempt from the ACPA. [Not a particularly speech friendly position.]

Ultimately, the court says that it’s not a case that can be resolved on the pleadings:

Defendants’s alleged ideological, scholarly, and personal motives for squatting on the [domain name], while perhaps idiosyncratic, do not fall within the sphere of conduct targeted by the ACPA’s bad faith requirement, If anything, given that defendant aims to both influence plaintiff’s behavior and shape public understanding of what he perceives to be an important vulnerability in cyber security systems, this case arguably falls closer to cases involving parody and consumer complaint sites designated to draw public attention to various social, political, or economic issue.

It’s possible plaintiff can prevail, but it would have do to so under a more fact-specific totality of the circumstances inquiry.

This is an interesting case that highlights the problems faced by security researchers generally. While the risk of liability here is less than what security researchers generally face (e.g., liability under the Computer Fraud and Abuse Act), it still shows a judge reluctant to grant the researcher’s conduct full protection as a non-commercial, First Amendment-protected venture.

[image credit: Shutterstock / alphaspirit: "businessman looking for a virus"]

Posted by Venkat at 09:17 AM | Domain Names , Trademark

April 11, 2013

Competitive Keyword Advertising Lawsuit Survives Motion to Dismiss--Elcometer v. TCQ-USA

By Eric Goldman

Elcometer, Inc. v. TQC-USA, Inc., 2013 WL 1433388 (E.D. Mich. April 9, 2013)

There are so many competitive keyword advertising lawsuits that I can't track them systematically, but I'll still blog them when I see them.

The parties compete in the "thickness gauge" industry. The defendants sell the brand "Paintmeter." Defendants allegedly bought the AdWord keyword on the rival brand "Elcometer" and ran the following ad:

Elcometer Meters & Rentals * Paintmeter.com
www.paintmeter.com/
Call 18009742492 We Sell PaintMeters & Rent Coating Inspection Equipment

The plaintiff alleges that potential customers who clicked on the link or called the 800 number were given more information that perpetuated possible confusion about the relationship between Elcometer and Paintmeter.

The court says that the plaintiff properly pled trademark infringement, Lanham Act false advertising and a violation of the Michigan Consumer Protection Act, and therefore it denied a motion to dismiss. The court also rejected the manufacturer's effort to avoid responsibility for its distributors' conduct.

This case reminded me a little of Promatek v. Equitrac and the Network Automation case. In Promatek v. Equitrac, the court dealt with a situation where the defendant both sold its own equipment and provided servicing for its rival's equipment. The court screwed up the ruling, but to me, it's perfectly legitimate to advertise the plaintiff's trademark if the defendant services its equipment. Similarly here, if the defendant vended both its own equipment and its rival's equipment, the ad copy could be fine.

In Network Automation, the case involved a situation where the customers may have fully understood the relationship between the defendant's and plaintiff's respective brands. It's possible that thickness-gauge customers are well-versed about these brands and their relationships. However, unlike Network Automation, the defendants used the trademark in the ad copy, and that may make this case harder to defend.

April 03, 2013

Product Review Website Defeats Trademark Claims--Boarding School Review v. Delta Career Education

By Eric Goldman

Boarding School Review, LLC v. Delta Career Education Corp., 1:11-cv-08921-DAB (SDNY March 29, 2013)

This case involves Community College Review, with the tagline "find the right community college for you." It publishes information about various community colleges and provides a navigation wizard. The community college pages include advertising and a lead generation form that allegedly forwards leads to competitive colleges. The trademark owners in this case operate private colleges offering associate degrees. The colleges sued CCR for trademark and copyright infringement.

The colleges objected to statements on CCR website saying “Get info / application from [name of trademarked college]” when those statements allegedly generated leads that were sent to competitors. This claim fails because the colleges merely alleged CCR forwarded the leads to competitors without any further factual support. This failed the Iqbal pleading standard.

The remaining trademark claims failed--on a motion to dismiss--for lack of consumer confusion. The court says the site headline (referencing "Community College Review"), domain names and "header and navigational menu clearly and quickly communicate to site visitors that BSR’s website is an omnibus review site profiling community colleges, not a website affiliated with or sponsored by the schools profiled." The court also notes the sophistication of prospective college students (accord the CollegeSource ruling) and the industry differences between college operator and a review website.

The federal trademark dilution claim fails because of a lack of fame (FWIW, I hadn't heard of the trademark owners or their colleges before) despite the allegations that:

Defendants own at least fourteen educational institutions, provide educational services to at least 16,000 people, have one subsidiary that has operated for more than 100 years, have invested “enormous” sums of money in marketing, provide services that are “highly sought after,” and have experienced “extraordinary and longstanding sales success”

The state trademark dilution claim fails because there wasn't a plausible allegation that the colleges "will lose their ability to serve as a unique identifier of Defendants’ educational institutions." The court doesn't use the term nominative use, but basically the court says that CCR's nominative use can't create blurring, and there wasn't any tarnishment because CCR didn't link the trademarks with shoddy products (I didn't fully understand the court here).

The colleges also alleged copyright infringement, but the allegedly infringing activity all occurred before the copyright registrations, so the court denies statutory damages and attorneys' fees. There might still be actual damages worth pursuing; if not, the lack of juicy damages might de facto end the copyright claim.

The court allows the colleges to amend the complaint with respect to the “Get info / application from" language. Otherwise, the trademark claims were dismissed with prejudice.

This case didn't involve consumer reviews, so 47 USC 230 wasn't implicated. Still, the colleges' tactics were similar to the efforts we've seen from other attempts to work around Section 230, such as the PissedConsumer line of cases. Basically, the colleges tried to use trademark law to shut down the review website from building product pages in an ad-supported website. These efforts to depopulate a product catalog's taxonomy pose a serious threat to the integrity of review websites, and it's great to see the court reject the effort. I also discuss this issue in my Online Word of Mouth and Regulating Reputational Information papers.

This case is the latest trademark case in the increasingly rough-and-tumble world of marketing educational services. Other cases in this line include CollegeSource v. AcademyOne and Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc. (from Canada).

[Photo Credit: Young woman having trouble studying // ShutterStock]

Posted by Eric at 09:02 AM | Copyright , Marketing , Trademark | TrackBack

April 02, 2013

More Confirmation That Google Has Won the AdWords Trademark Battles Worldwide (Forbes Cross-Post)

By Eric Goldman

I've repeatedly asserted that the trademark battles over keyword advertising are near the end. As further evidence of that, recently Google ($GOOG) liberalized its international trademark policy for advertising via AdWords. Previously, Google allowed trademark owners to block advertisers from bidding on their trademarks in Australia, Brazil, China, Hong Kong, Macau, New Zealand, South Korea, and Taiwan. Now, Google has reversed its policy in those countries, meaning that (as Google told me) "Google will no longer restrict advertisers from bidding against trademark keywords, worldwide." (Google had previously liberalized its trademark policy in most other countries in 2010). Google will maintain regional differences in restrictions on when trademark owners can block their trademarks from appearing in the ad copy.

I don't systematically track international AdWords trademark cases, but I'm not aware of any major Google victories in trademark cases in the affected countries. (Google did recently get a favorable AdWords-related ruling in Australia, although it wasn't specifically about trademarks). As a result, I don't think Google's policy change is supported by increased legal clarity in those countries. Google told me that it's "making this change so we can have a uniform policy on keyword advertising worldwide so users everywhere can get the most useful and relevant information in response to their searches." That sounds great, but do you really believe that?

While I'm sure Google's employees and lawyers will enjoy the simplicity of a more uniform worldwide policy, an obvious implication: the liberalized policy makes Google more money. I don't know how much new money Google will see under the new policy, and Google declined to answer my question about it. I doubt the incremental new revenues will be more than a rounding error on Google's $50B of annual revenues. Still, Google has been progressively liberalizing its trademark policy over the years, and each time Google reported strong year-over-year earnings growth. Coincidence?

Meanwhile, Google's policy change without clear legal support in the remaining jurisdictions strongly indicates that Google thinks the trademark risks no longer pose a major threat to it anywhere in the world. Once Google settled the Rosetta Stone litigation, Google effectively resolved all of the serious challenges to its trademark policy. Google's most recent policy change demonstrates its legal confidence that trademark owners can't make it block keywords. Kudos to Google for navigating this difficult issue over the past decade and reaching such a favorable (if expensive-to-achieve) outcome.

March 25, 2013

Minnesota’s Proposed Anti-Trademark Bullying Statute Misses the Mark (Guest Blog Post)

By Guest Blogger Leah Chan Grinvald

Last April, Minnesota became the first state in the U.S. to introduce anti-trademark bullying legislation with the proposal of H.F. 2996. The proposed “Small Business Trademark Protection Act” had a whole host of problems, in particular a mandatory alternative dispute resolution mechanism if one party opted to request it, as discussed by Steve Baird over at DuetsBlog. Perhaps this explains why the bill went nowhere after its introduction, and why Representative Peppin’s recently proposed HF 1116 does not include this dispute resolution mechanism.

Although I applaud Minnesota’s attempts at addressing the very serious issue of trademark bullying, and I am generally in agreement that we need some sort of statutory answer to trademark bullying, neither versions of the proposed laws quite hit the mark. The current version provides a fee-shifting provision:

The court in exceptional cases may also award reasonable attorney fees to the prevailing party. Exceptional cases include cases where a party brings suit for harassment, malicious, fraudulent, or willful purposes, including trademark bullying.

The proposed law also defines “trademark bullying” for the purposes of this fee-shifting provision: “the practice of a trademark holder using litigation tactics in an attempt to enforce trademark rights beyond a reasonable interpretation of the scope of the rights granted to the trademark holder.”

While I am all for educating the public about what is and what is not trademark bullying, I don’t think that the term “trademark bullying” is actually needed in this fee-shifting provision. I think that fee-shifting is generally a good idea overall, and I worry that labeling the activity with the controversial term will produce another stalemate on the legislation. I’m also not particularly a fan of the proposed definition in part because “litigation tactics” seems so unclear (and in the interests of full disclosure I have proposed my own definition of trademark bullying). In addition, the use of the term “prevailing party” probably duplicates the problems with obtaining attorney’s fees under Section 34(a) of the Lanham Act, especially in cases where the trademark bully decides to voluntarily dismiss the case – with or without prejudice.

But more importantly, the scaled-back version of this anti-trademark bullying law doesn’t reach the true problem of trademark bullying: the lack of access to cheap (or free) legal resources that small businesses and individuals who are victims of trademark bullying need. I have argued elsewhere that victims of trademark bullying need a “groundless threats” cause of action so that they could perhaps find attorneys willing to help on a contingency fee basis. In addition, I support instituting a small claims IP court where these types of cases could be heard quickly and cheaply.

Overall, bravo to Representative Peppin and Minnesota for continuing the fight against trademark bullies, but I am doubtful that this new version will go anywhere, especially as Steve Baird reported on DuetsBlog that no hearings on the bill will be scheduled until next year.

[Photo Credit: A chalkboard with the chalk letters bully free zone // ShutterStock]

Posted by Eric at 09:00 AM | Trademark | TrackBack

March 22, 2013

N.Y. Yankees Block Clothing Manufacturer's "Baseball's Evil Empire" Trademark Registration (Catch-Up Post)

By Jake McGowan [writings][LinkedIn]

New York Yankees Partnership v. Evil Enterprises, Inc., TTAB Opposition No. 91192764 (TTAB Feb. 8, 2013)

With nagging injuries to several key starters, it looks like the New York Yankees are in for a long season. Off the field, however, it seems the marketing department has already chalked up a win.

Last month, the New York Yankees Partnership found itself in front of the Trademark Trial and Appeal Board, fighting to block a clothing company from registering the trademark “Baseball’s Evil Empire.” On February 8, the Board sided with the Yankees, sustaining the team’s opposition for likelihood of confusion and false suggestion of a connection.

Background

In 2002, sought-after Cuban pitcher Jose Contreras chose the Yankees over the Red Sox, prompting Red Sox president Larry Lucchino’s now famous remark:

The evil empire extends its tentacles even into Latin America.

The Board noted that since then, the team has “implicitly embraced” the nickname, even going so far as to “[play] ominous music from the soundtrack of the STAR WARS movies at baseball games.”

On July 7, 2008, Evil Enterprises filed a trademark application for the mark “Baseball’s Evil Empire” for various clothing.

The Yankees opposed the mark on three grounds: (1) likelihood of confusion; (2) false suggestion of a connection; and (3) disparagement.

Board Agrees with Yankees that the Mark is Likely to Confuse Consumers

Right off the bat (sorry), the Board reminds that the Yankees don’t necessarily have to use the mark to oppose; it’s enough that the public associates a mark with the goods or services of the opposing party.

The Yankees’ counsel provided hundreds of such examples, including news articles, stories, and blog entries all using “Evil Empire” to describe the team, such as:

“We love it that baseball has an Evil Empire, a team to beat, the perpetual villain in the New York Yankees.”

“the Red Sox finally defeated the Evil Empire (the Yankees) en route to their first World Series win in ages.”

“Yankees 6 Red Sox 5! The Evil Empire lives!"

Even applicant Evil Enterprises admitted that the term had been used in connection with the Yankees. Instead, the company argued that that the Evil Empire nickname has been thrown around for other teams as well (I can think of at least one that’s currently trying to fit the mould).

But the Board denied that the nickname had stuck for any other team:

[A]pplicant’s evidence shows only that these other teams aspire to be in the position of the Yankees, i.e., spending more on salaries and winning more championships. In short, the record shows that there is only one EVIL EMPIRE in baseball and it is the New York Yankees.

Based on the abundance of evidence, the Board decided that the Evil Empire mark was famous and thus afforded a broader scope of protection. It also noted that t-shirt shopping entails a low standard of purchasing care, which thereby increases the risk of confusion. Weighing these factors, the Board sided with the Yankees and sustained likelihood of confusion as a ground for blocking registration of the mark.

Board Views Evil Enterprises as Purposely Suggesting a Connection With the Yankees

Here’s language taken from Evil Enterprises’ own web page:

The official home of Baseballs Evil Empire. The one source for all the latest tee-shirts and hats for all the Yankee Fans around the world. Be seen in our Yankee apparel and help us in our message that the Yankees are truly “Baseballs Evil Empire” . . . “Thank you, for being a Yankee Fan” (emphasis added)

Reasoning that the whole purpose of the clothing line was to target Yankees fans, the Board had no trouble deciding that consumers would likely assume that the clothing line was connected with the baseball franchise.

“Implicit Embrace” of Evil Empire Persona Undermines Yankees’ Disparagement Argument

The Board noted that a growing number of Yankees fans have adopted the nickname as a “badge of honor,” as it brings to mind the ire and jealousy of rival fans (and by extension, the team’s 27 world championships).

Given this developing positive connotation, the Board declined to block the registration on grounds that the mark disparaged the baseball club:

[H]aving succumbed to the lure of the dark side, opposer will not now be heard to complain about the judgment of those who prefer the comfort of the light.

_________

It's worth noting that the Yankees partnership was able to block this registration without creating the trademark or even using it at all. Instead, the baseball community created the "evil empire" nickname and the TTAB ultimately granted the Yankees private rights in the mark. In that regard, this situation is consistent with the "Bug" line of cases, where courts allowed Volkswagen to block others from using the "bug" mark because the public had come to associate the term with VW Beetles. In the end, the origins of such publicly-coined nicknames may not change the outcomes of these cases. But they still raise interesting questions about the theoretical bases for granting private rights in certain trademarks.

This is also a good example of a marketing department protecting each nuance of a brand, including those that might seem unwanted at first glance. When this story first broke, it gained national attention partly because it might have seemed strange to a casual observer that the team would want to associate with a “negative” nickname. But when a fan develops a positive association with a negative nickname, the name acquires value to the franchise and takes its place alongside any other in the team’s lore.

Throughout sports and entertainment, embracing the “bad-guy” persona is nothing new (See: the Oakland Raiders, WWE wrestling, LeBron James circa 2011, Rap music, etc.). In this case, the Yankees fought to protect “Evil Empire” just like they would for “The Bronx Bombers” or “The Yanks.”

Photo Credit: Anthony Correia / Shutterstock.com

Posted by JakeMcGowan at 09:10 AM | Trademark | TrackBack

March 20, 2013

Book Recommendation: "Trademark and Deceptive Advertising Surveys"

By Eric Goldman

I read only a couple of books per year. As very long-form scholarship, books usually require big blocks of time to read (and I rarely have such blocks), and I typically find the payoff isn't worth the time investment. As a result, it's rare that I read a book, rarer when I like a book, and exceptionally rare when I think a book is worth recommending to you.

Yet, I can hardly contain my enthusiasm for the 2012 book, "Trademark and Deceptive Advertising Surveys: Law, Science and Design," edited by Shari Seidman Diamond and Jerre B. Swann and published by the ABA's IP Section. It may be the best book I've read in years.

Why do I like this book so much? It's the *perfect* legal resource guide. The chapters are written by the leading experts in the field--names you most likely recognize, including William Barber, Jerre Swann, Bruce Keller, Shari Seidman Diamond, Itamar Simonson, Jacob Jacoby and many more. In each chapter, an expert explains how he/she handles an aspect of the consumer survey process and why he/she makes certain professional judgments. It's like having am initial consultation with, or some private coaching from, the leaders in the consumer survey field, except that they aren't billing you by the hour and they give you citations for your deeper investigation if you want. I know I'm a hardcore geek, so my experience may not be representative, but I found this book a page-turner that I couldn't put down. Every page was packed with a golden nugget or two of insight, page after page, chapter after chapter. I'm not exaggerating at all when I say that I found the book gripping.

Of course, you won't be able to do consumers surveys on your own just by reading the book (you'll still need to hire an expert), but you'll be able to have a more intelligent discussion with your expert and evaluate and supervise their professional choices better. After reading the book, you should be able to save thousands of dollars in the costs of a consumer survey and increase the likelihood that the $100k+ you invest in a consumer survey will yield useful results.

If you deal with consumer surveys in the trademark or advertising context--which means pretty much every trademark and advertising law professional--this book is a must-have. Unfortunately, the book is priced for professional purchases, not the consumer market. Right now Amazon [affiliate link] lists it for $280 (though that price fluctuates), but it's "only" $180 at the ABA website and even cheaper if you're an ABA IP Section member. The book will more than pay for itself after your first consumer survey using it.

Posted by Eric at 02:49 PM | Marketing , Trademark | TrackBack

March 18, 2013

It's Legally Okay if Google Thinks Your Name and Erectile Dysfunction Drugs Have Something to Do With Each Other (Forbes Cross-Post)

By Eric Goldman

Stayart v. Google Inc., 2013 WL 811793 (7th Cir. March 6, 2013).

Would you be upset if people searching for your name are prompted to search for your name plus the name of an erectile dysfunction drug like Viagra or Cialis? For example, if you search for "Eric Goldman," a search engine might suggest that you search for "Eric Goldman Viagra." I suspect many of us would never discover that the search engines were doing this, and those who did would find it perplexing but amusing.

(The reasons why a search engine might make this suggestion aren't complicated or nefarious. "Sploggers" build web pages that remix content from legitimate web pages as search engine "bait" to attract searchers to pages that advertise or link to illicit goods such as pharmaceuticals that require a prescription. As a practical matter, splogged pages don't show up well in search results, but they may influence the search engine's suggestion algorithms anyway).

As it turns out, this scenario isn't hypothetical. Google suggested that searchers on "Bev Stayart" (a/k/a Beverly Stayart) search for "bev stayart levitra" (Levitra is an erectile dysfunction drug). See the recent screen shot on the right. Many of us would shrug this off; in contrast, this situation has launched Bev Stayart into a multi-year, multi-lawsuit campaign against Google and Yahoo (see this page for my chronicle of her lawsuits and related suits).

None of her lawsuits have made any progress at all. Last week, she notched yet another loss in court. The Seventh Circuit Court of Appeals dismissed her lawsuit--again--in a brief and unceremonious opinion befitting the lawsuit's lack of merit.

Stayart argued that Google's suggestions using her name violated her publicity rights under Wisconsin's publicity rights statute. There are probably a dozen reasons why this claim should fail, but the court explores only two.

First, Wisconsin's law permits the commercial use of a person's name when it's newsworthy or in the public interest. The court says that exception applies to Stayart because her ongoing litigation crusade has caused her name to be associated with erectile dysfunction drugs, and people have a legitimate right to search for court records related to her case. The fact that Bev Stayart's vanity search results now suggest erectile dysfunction pills is a predictable Streisand Effect of her litigation, but the court is uncomfortably "punishing" a plaintiff for enforcing his/her rights. Further, the court's rationale is specific to Stayart, and thus may not apply to other cases.

Second, the Wisconsin statute requires that the commercial use be "substantial" and not "incidental." In a terse and unenlightening paragraph, the court says that Stayart didn't convince the judges that Google's search results made more than an incidental commercial use of Stayart's name.

Rather than rely on these technicalities, the court should have looked to the Wisconsin Court of Appeals, which just issued an opinion in Habush v. Cannon (not cited by the 7th Circuit) that buying keyword ads on a person's name doesn't constitute a commercial "use" of the name under Wisconsin's publicity rights statute. While the Habush opinion partially relied on the invisible nature of the keyword triggering, I think its logic should broadly apply to all organic search activity. In contrast, because of the Stayart court's narrow rationales, it's unclear how the opinion will apply to other cases.

Still, I think a favorable macro-trend is emerging for Google, Yahoo, Bing and other search engines. Putting aside the legal machinations of how they get there, courts are not receptive to legal attacks on organic search operations, whether the claim is based on defamation (see, e.g., the futile lawsuit by Dr. Hingston), trademark law or publicity rights. Thus, the Stayart ruling is philosophically consistent with the recent opinion in Multi-Time Machine v. Amazon, which rejected a trademark lawsuit over Amazon's search results merchandising of other vendors' goods. These rulings reinforce that plaintiffs suing to force changes to organic search results--or the search engine's suggestions of alternatives--are almost certainly doomed to fail in court, one way or another.

[Photo Credit: Sean Nel / Shutterstock.com]

Posted by Eric at 09:55 AM | Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

March 01, 2013

Amazon's Merchandising of Its Search Results Doesn't Violate Trademark Law (Forbes Cross-Post)

By Eric Goldman

Multi Time Machine, Inc. v. Amazon.com, 2013 WL 638888 (C.D. Cal. Feb. 20, 2013). The complaint.

No retailer does a better job of cross-selling to its customers than Amazon.com ($AMZN). Amazon is quite effective at exposing customers to complementary—and competitive—goods along with the products a customer initially considers. Many of us have had the experience of going to Amazon to buy one thing but checking out with a huge shopping cart of items that we didn’t initially seek—or even know were available. Amazon’s merchandising often benefits Amazon’s customers, but trademark owners who lose sales to their competition due to it aren’t as thrilled. Fortunately for Amazon, a California federal court recently upheld Amazon’s merchandising practices in its internal search results.

The Case

The plaintiff is Multi Time Machine (MTM), which makes expensive "military and tactical" watches and tightly controls its distribution channel to prevent resales on Amazon. When Amazon customers searched within Amazon’s internal search engine for “mtm special ops” (the name of one of MTM’s watches), Amazon’s search results page didn’t contain any results for MTM watches due to MTM’s distribution control (see screen shot). Instead, the court says, “all of the watches retrieved by Amazon belong to MTM’s competitors, in particular Luminox and Chase-Durer.”

In other words, Amazon merchandises its customers. In this case, because it doesn’t carry the products requested by customers, it suggests alternative options. We could analogize Amazon’s search results to a retailer’s store shelves. Following this analogy, when a customer walks into Amazon's store and asks where MTM watches might be found, the only thing they find on the store shelves are watches that Amazon thinks are comparable to MTM watches.

MTM sued Amazon for trademark infringement. Note that this is not a typical trademark lawsuit, where a trademark owner sues a competitor for copying its trademark too closely. Instead, this is a trademark owner-vs.-retailer lawsuit for merchandising competitors' items. Trademark law wasn’t built to handle lawsuits like this, and the typical multi-factor test courts use to evaluate consumer confusion doesn't make sense when applied to litigants at different levels of a distribution chain.

As I explain in my Brand Spillovers paper, we almost never see merchandising-related trademark owner-vs.-retailer lawsuit in the offline world, even though offline retailers engage in such activities frequently, such as:

* retailers often adopt vendor-submitted shelf design plans (a planogram) that shows the relative position of both the vendor's products and its competitors’ products;

* retailers charge vendors "slotting fees" to place their products on store shelves next to the competitors’ products;

* Catalina Marketing’s competitive couponing system monitors customers' buying activities and triggers competitors' coupons at the checkout stand.

In my research, I could find few—if any—lawsuits where trademark owners challenged these practices in the offline world. Yet, we regularly see legal challenges like this in the online world. Why the difference? In my Brand Spillovers paper, I argue it’s due to Internet exceptionalism.

Fortunately for Amazon and other online merchandisers, MTM’s lawsuit goes nowhere. The court sidesteps the thorny “use in commerce” question (compare Habush v. Cannon, which I blogged about yesterday) and instead rules that Amazon doesn’t create a likelihood of consumer confusion about the watches' source. The court hews closely to the Ninth Circuit’s important 2011 ruling in Network Automation v. Advanced Systems Concepts, another example of how that case has helped defendants.

The court’s central point is that Amazon’s search results page clearly explains what it’s doing to consumers. These labels and disclosures reduce the likelihood that consumers are confused when reviewing the results page. The court provides an illustrative analogy:

the instant situation does not appear to be a case of palming off in the traditional sense. It is akin to the consumer asking for a Coca-Cola and receiving a tray with unopened, labeled, authentic cans of Pepsi-Cola, RC Cola, Blue Sky Cola, Dr. Pepper, and Sprecher Root Beer, and a copy of Coca Kola: The Baddest Chick, by Nisa Santiago. This is a substitution, but given the context it is not infringing because it is not likely to confuse.

Implications

Because the opinion only deals with Amazon’s internal search engine, the court doesn’t explicitly address search results pages at general-purpose search engines like Google ($GOOG) or Bing. Still, this opinion probably applies to those pages as well. Google, Bing and other search engines routinely merchandise their customers by automatically reinterpreting search queries, suggesting other useful search terms (like a “Did you mean….?” prompt), displaying links to sister properties, and displaying sponsored links/ads such as Google AdWords. This case suggests that so long as viewers understand the relationship between their search query and the search results page, search engines should not suffer actionable trademark infringement based on those pages. Over the past decade, Google has largely achieved that legal conclusion via its many court battles, but this ruling will help if Google has to defend the likelihood of consumer confusion question again.

While trademark owners may be frustrated by the exposure their competitors get when retailers and other intermediaries merchandise their prospective customers to alternative offerings, we as consumers want—and expect—online intermediaries like Amazon and Google do such merchandising to help us achieve our goals. Although the court doesn’t get into the pro-consumer and pro-competition benefits of its ruling, undoubtedly the ruling is a win for both.

Posted by Eric at 07:38 AM | E-Commerce , Search Engines , Trademark | TrackBack

February 28, 2013

Buying Keyword Ads on People's Names Doesn't Violate Their Publicity Rights--Habush v. Cannon (Forbes Cross-Post)

By Eric Goldman

Habush v. Cannon, 2013 WL 627251 (Wisc. App. Ct. Feb. 21, 2013)

Can you imagine someone buying Google ($GOOG) AdWords keyword advertising triggered by your name? Most of us wouldn't dream of it, usually because our names just aren’t valuable enough for anyone to bother. In contrast, some professional service providers, such as lawyers and doctors, tout their names in expensive advertising campaigns to consumers—and have competitors who would love to piggyback on that advertising to reach the same consumers. In a novel and persuasive ruling, a Wisconsin appellate court recent rejected a professional service provider’s attempt to use publicity rights to shut down a competitive keyword advertiser.

Case Background

The case involves two high-profile personal injury law firms in Wisconsin. The defendant, Cannon & Dunphy, bought keyword advertising on the words “Habush” and “Rottier,” presumably referring to the partners at its rival law firm Habush, Habush & Rottier. As a result, searchers looking for the law firm Habush Habush & Rottier or its eponymous partners might see ads for Cannon & Dunphy.

Normally, a lawsuit like this would be brought under trademark law. Lawyers can develop trademark rights in their name, and the firm name Habush Habush & Rottier should be a trademark. However, it’s less clear if the individual partner names have achieved trademark protection, or if any trademark protection would extend to the use of just their last names.

Either way, Habush and Rottier chose to sue under Wisconsin's publicity rights law instead of trademark law. Publicity rights law protect a person’s name, image and other attributes from commercial use. The most obvious example is a commercial endorsement. An advertiser can’t use a person’s name or face in their advertising without permission.

Habush and Rottier sued Cannon & Dunphy (and some of its individual partners) in late 2009. In June 2011, the trial court rejected the claim in a messy opinion where the judge appeared overwhelmed by the case's legal and technological complexity. Because two very successful and determined litigation firms were squaring off, the judge also knew that the losing side would appeal no matter what.

In June 2012, the Wisconsin appellate court first addressed the case. In an odd ruling, the panel certified the case to the Wisconsin Supreme Court--basically, punting the case upstairs. In September 2012, the Supreme Court denied certification, effectively telling the appeals court to try again. The Wisconsin appeals court has now issued a ruling that sets up the inevitable appeal to the Wisconsin Supreme Court.

The Ruling

Interpreting the Wisconsin publicity rights statute, the court said the keyword advertiser didn’t make an actionable “use” of the names Habush or Rottier by using the names as “invisible” ad triggers. The court analogized the defendants’ keyword advertising to buying a physical-space billboard physically adjacent to the plaintiff’s offices, saying that such proximity would not constitute a “use” of the plaintiff’s personality. While normally I am troubled by physical-space analogies to online activity, I thoroughly explored—and defended—this analogy in my Brand Spillovers paper, sadly (for me) not cited by the court. Thus, because the plaintiffs failed to establish the statutory violation, Cannon & Dunphy wins.

In contrast, if the ad copy had displayed the name, this court probably would treat that as a publicity rights “use” and the defendant would have to find other grounds to defeat the lawsuit. The court also indicates that invisible uses in contexts other than keyword advertising could constitute a publicity rights “use.”

The plaintiffs correctly argued that the court’s conclusion on publicity rights “use” diverges from trademark law’s treatment of the issue. Most courts have held that buying keyword ads on a trademark constitute trademark “use” even if the trademark doesn’t appear in the ad copy, with the Second Circuit’s 2009 Rescuecom decision basically cementing that legal conclusion. (In my Deregulating Relevancy and Online Word of Mouth papers, I argued why disposing of keyword advertising cases on trademark use grounds would be a better result, but those arguments haven't carried the day). The Wisconsin appeals court says simply that the Wisconsin publicity rights statute means something different by the word “use” than trademark law does, so Rescuecom and related trademark precedents aren’t binding.

[Note: unlike Google's detailed trademark policy, Google's policy towards personal names is murky. It says in total: "We do not monitor the use of proper names in AdWords ads or keywords. Users interested in removing an advertiser's use of proper names in ads should contact our Consumer Complaints team via our complaint form."]

Implications

This is an interesting case in part due to its novelty. We’ve seen other plaintiffs unsuccessfully attempt to use the Wisconsin publicity rights statute to control Internet advertising (most obviously, the repeat litigant Bev Stayart), but this case provides the cleanest opinion to squarely address a publicity rights challenge to keyword advertising.

Three implications of this ruling:

Keyword Advertising Lawsuits Aren’t Economically Rational. These lawyers are spending a lot of time and money fighting each other in court. I hate to repeat myself, but keyword advertising lawsuits aren’t economically justified, even if the plaintiff wins. See this recap post. Then again, given how well these firms—and lawyers—know each other and how fiercely they compete, I doubt the plaintiffs brought this lawsuit solely to maximize their profits.

Keyword Advertising and Competition. The trial court opinion in this case expressly acknowledged the competitive concerns associated with keyword advertising. It’s easy to see why. Imagine an injured victim needs a personal injury lawyer and has seen Habush Habush & Rottier’s advertising. During the consumer's keyword search to find the firm, Cannon & Dunphy presents itself to the victim as a competitive alternative. This encourages the victim to investigate multiple law firms, and those firms will work harder to meet the victim’s legal needs. This is a win for the consumer, and a win for competition. The appellate court expressly sidestepped these public policy issues, but its ruling nicely advances those interests.

Why a Plaintiff Win Could Be Disastrous. I read a lot of crackpot lawsuits, often pro se, basically complaining that someone published the plaintiff’s name online (one recent example). Can you imagine what would happen if those plaintiffs can claim that any keyword advertising triggered on their last names violated their publicity rights?

Take my last name for example, Goldman. There are plenty of other Goldmans in the world, most obviously the big investment bank Goldman Sachs. How would we determine if a keyword advertiser on the word “Goldman” was advertising to compete with Goldman Sachs or violating my publicity rights? We might impose some requirement of direct competition to distinguish the Habush situation from the Eric Goldman situation, but that competitive limitation isn’t in the Wisconsin publicity rights statute, and it won’t always be easy to decide who “competes” with me.

So even if you feel some mild sympathy towards Habush Habush & Rottier because its rival is engaging in ambush marketing, recognize that subsequent publicity rights plaintiffs won’t look so sympathetic.

[Photo credit: Portrait of an invisible Man with sunglasses in business suit // ShutterStock]

Posted by Eric at 08:52 AM | Marketing , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

February 19, 2013

With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally (Forbes Cross-Post)

By Eric Goldman

Google's ($GOOG) keyword advertising program, AdWords, has been subject to constant legal challenges for the past decade. After an initial period of legal uncertainty, AdWords' legal fortunes recently have brightened in the United States and Europe. Earlier this month, AdWords notched another strong win in court, this time in Australia. Considering these developments as a whole, Google has effectively gotten a clean legal bill of health for its AdWords service around the globe. Google's impressive accomplishment also provides a useful cautionary tale about overregulating technological innovations.

Google's Australia Win

Six years ago, the Australian Competition & Consumer Commission (ACCC) sued Google for false advertising. The ACCC complained that AdWords advertisers bought keyword advertising on competitors' trademarks and displayed those trademarks in their ad copy, which alleged confused consumers. The ACCC sought to hold Google responsible for publishing these allegedly deceptive ads.

The High Court of Australia rejected the ACCC's arguments and ruled in favor of Google. The court says:

The technology which lies behind the display of a sponsored link merely assembles information provided by others for the purpose of displaying advertisements directed to users of the Google search engine in their capacity as consumers of products and services. In this sense, Google is not relevantly different from other intermediaries, such as newspaper publishers (whether in print or online) or broadcasters (whether radio, television or online), who publish, display or broadcast the advertisements of others....To the extent that it displays sponsored links, the Google search engine is only a means of communication between advertisers and consumers.

There are two non-standard aspects of this ruling. First, the plaintiff was a government agency suing for false advertising, not the more typical situation of an unhappy trademark owner suing for trademark infringement. Second, the High Court interpreted a specific Australian statute regarding secondary liability. Still, despite these quirks, I think the ruling has broader implications. In the allocation of legal responsibility between Google and its advertisers, the High Court treats the advertisers as the legally significant decision-makers and treats Google as a tool for advertisers, i.e., a technology platform that advertisers use to publish their own ads. Once a court embraces that division of responsibility, the case resolution is obvious.

Global Acceptance of AdWords

Google's emphatic Australian complements recent developments in Europe and the United States. In the European Union, Google won a strategic victory at the European Court of Justice in 2010 based on the same paradigm adopted by the Australian High Court, i.e., AdWords is a tool, and the advertisers bear responsibility for how they use it. Although the ECJ opinion didn't completely resolve all of the open issues, the ruling has effectively ended European AdWords-related trademark litigation against Google.

In the United States, trademark owners have sued Google for AdWords many times (over 2 dozen times by my count). While Google has occasionally gotten dismissals in court, Google hasn't yet set broad precedent like the ECJ ruling. At the same time, despite Google's occasional preliminary losses against trademark owners, no trademark owner has won a final court judgment against Google. Google recently settled the Rosetta Stone lawsuit, which ended the last major legal challenge against AdWords in the United States. Only a couple of minor pending lawsuits are remaining to mop up. In other words, after the Rosetta Stone settlement, Google tacitly secured the legality of AdWords under U.S. trademark law.

The Development of Cyberlaw

"Cyberspace exceptionalism" is the approach of regulating the Internet differently than other media. In some cases, the Internet actually has bona fide technological differences that support different regulatory treatment; but more often, the differences between the Internet and other media are exaggerated or imagined.

With respect to keyword advertising, in 2009 I wrote:

Keyword triggering seems especially susceptible to cyberspace exceptionalism. After all, the triggering process is unfamiliar and poorly understood, which naturally leads to suspicion. Over time, consumers and judges will better understand keyword triggering technologies...

I think we've arrived at this destination. After a decade of legal battles, Google's campaign to legitimize AdWords--now nearly complete--has been a complete success.

How did Google triumph over the initial impulses to regulate keyword advertising? I'll point to three factors:

1) Efficacy. Keyword advertising has numerous advantages over other advertising options. It provides good ad targeting to advertisers, consumers often find keyword ads relevant to their interests, and (as I explain here) cost-per-click (CPC) keyword advertising nicely shares the risks of ad performance between advertisers and publishers. So one reason for the eventual acceptance of keyword advertising is that it is a better option than the advertising alternatives.

2) Venerability. Over the course of years, consumers--and judges--increasingly have had first-hand positive experiences with keyword advertising. Keyword advertising has evolved from an Internet novelty into an integral part of our daily lives.

3) Money. AdWords achieved venerability only because Google had the financial resources and fortitude to fight--and defeat--numerous and expensive legal battles across the globe.

To me, AdWords' evolution provides a good cautionary tale for regulators and judges dealing with emerging technologies. We should not overrespond to any initial negative emotional reactions to new technology. Instead, we should regulate emerging technologies (if at all) anticipating that consumer perceptions--and the technology itself--will evolve and improve over time.

In particular, regulators and judges should recognize that AdWords' venerability is an exceptional story, not the norm. Many other innovators and entrepreneurs won't have Google's financial staying power, meaning those innovations are vulnerable to being permanently damaged or killed by unchecked regulatory impulses before the innovation takes root.

Case Citation: Google Inc v. Australian Competition and Consumer Commission, [2013] HCA 1, S175/2012 (High Court of Australia Feb. 6, 2013). The case appeal page. Blog post on the intermediate court ruling.

[Photo credit: The Australian High Court building // ShutterStock]

Posted by Eric at 09:32 AM | Derivative Liability , Internet History , Marketing , Search Engines , Trademark | TrackBack

February 18, 2013

Another Google AdWords Advertiser Avoids Trademark Liability--Whipple v. Brigman

By Eric Goldman

Whipple v. Brigman, 2013 WL 566817 (W.D. N.C. Feb. 13, 2013)

I've repeatedly said that trademark lawsuits over Google AdWords advertising rarely make financial sense. This case would clearly support that proposition, except both parties proceeded pro se. Instead, the lawsuit was just a big waste of time and judicial resources.

The plaintiff runs a tour service in Charlotte, NC called "Queen City Tours of Charlotte," and it has a registered trademark in "Queen City Tours" (registration #3536057). In researching this post, I learned that "Queen City" is Charlotte's nickname. I'd be curious to see the plaintiff's evidence of secondary meaning for such a highly descriptive name. It's the equivalent of "Big Apple Tour" for Manhattan.

The defendant runs a tour service called "C-Charlotte Tours." The defendant bought AdWords on, and used the metatags, “queen city,” “tours of charlotte nc,” “Charlotte NC tour,” “tour of charlotte,” “Charlotte NC sightseeing,” “Queen Charlotte Tours,” and “nascar shuttle.” The plaintiff took the position that the defendant's combination of the following phrases collectively added up to trademark infringement: “tour,” “queen city,” “nascar shuttle,” and “Charlotte NC tour.”

The court responds poorly to the plaintiff's arguments, saying that the plaintiff overclaims its trademark ownership (1) by asserting rights in the NASCAR mark and (2) because the plaintiff doesn't have any trademark rights in the words "tour" and "queen city." Indeed, the phrases "tour" and "Charlotte NC tours" are generic. Because the plaintiff was pro se, the court rejected Rule 11 sanctions, but the court admonishes the plaintiff "to refrain from filing any further pleadings claiming ownership over generic terms or terms held by third parties."

No big insights here; or at least, nothing we haven't seen before: The owner of a weak trademark overreached. A pro-competitive AdWords campaign survived another legal challenge. Lawsuits over keyword advertising are, at best ill-advised and are often a financial waste.

One last twist: we've seen other aggressive trademark lawsuits in the tour industry. See, e.g., San Francisco Comprehensive Tours, LLC v. Groupon and Boston Duck Tours LP v. Super Duck Tours LLC. Tough business.

Some related posts:

* With Its Australian Court Victory, Google Moves Closer to Legitimizing Keyword Advertising Globally
* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid–Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

[Photo credit: Downtown Charlotte, North Carolina, USA skyline // ShutterStock]

Posted by Eric at 07:24 AM | Marketing , Search Engines , Trademark | TrackBack

February 15, 2013

Revisiting the Ninth Circuit's 1979 AMF v. Sleekcraft Case Post-Remand (Guest Blog Post)

By Guest Blogger Sruli Yellin

[Eric's note: like many IP professors, I've taught the 1979 9th Circuit ruling in AMF v. Sleekcraft for years. It's the flagship Ninth Circuit opinion on the likelihood of consumer confusion factors, and it's one of the nation's top 2 cases on that topic. (The Second Circuit's Polaroid case is the other).

The Sleekcraft opinion itself is remarkably nuanced. Most multi-factor analyses engage in what Barton Beebe calls "factor stampeding," where the judge manipulates his/her analysis of the factors so they all support the eventual winner. In contrast, the Sleekcraft opinion exhibits a degree of care and balance we rarely see in multi-factor analyses.

Especially remarkable is the opinion's denouement:

we conclude that a limited mandatory injunction is warranted. Upon remand the district court should consider the above interests in structuring appropriate relief. At minimum, the logo should appear in all advertisements, signs, and promotional materials prepared either by appellee or by his retail dealers, and on all appellee's business forms except those intended for strictly internal use. A specific disclaimer of any association with AMF or the Slickcraft line seems unnecessary, nor do we think it necessary to enjoin Nescher from expanding his product line. In its discretion the district judge may allow appellee sufficient time to consume supplies at hand and to add the logo to more permanent assets, such as business signs.

This made me curious--what relief did the district court actually order on remand? My RA Sruli Yellin picks up the story from here:]

AMF v. Sleekcraft, 599 F. 2d 341 (9th Cir. 1979), is famous for the 9th Circuit’s articulation of the likelihood of confusion multi-factor test. The test prescribes that a court look to: (1) strength of the mark; (2) proximity of the goods; (3) similarity of the marks; (4) evidence of confusion; (5) marketing channels; (6) types of goods and customer care; (7) intent; and (8) likelihood of expansion. After applying this analysis, the court found that there was a likelihood of confusion between the Slickcraft and Sleekcraft marks and remanded to the District Court for entry of an injunction.

But what happened on remand? Which party ultimately prevailed? Did the parties settle or was an injunction entered? I couldn’t find the answer anywhere. So, I decided to reach out to one of the two attorneys listed on the 9th Circuit pleadings, Mr. Robert Lyon, to see if I could find the answer.

Raised in a family of patent lawyers – his father and grandfather were both patent attorneys who started the eponymous firm Lyon & Lyon – Mr. Lyon has been practicing IP law for more than 60 years. The Lyon & Lyon firm represented AMF on a number of trademark cases, and AMF v. Sleekcraft was Mr. Lyons first case.

I couldn’t get Sleekcraft’s side of the story, but Mr. Lyon had lots of interesting things to say. A little history of AMF as well as the circumstances leading up to the District Court case provides helpful context for the denouement.

(For more on AMF’s history, see Wikipedia and this article hosted by Harvard Business School).

AMF

American Machine and Foundry (later AMF), was founded in 1900 by Rufus L. Patterson, inventor of an automated cigarette-making machine. (US Patent 829,288). AMF took off in the 1950s when it began manufacturing pinsetters for bowling alleys. In the 1960s and early 70s, AMF bought numerous sporting equipment companies to leverage their manufacturing abilities, including Roadmaster bicycles, Harley-Davidson motorcycles, Head skis, Voit balls, and, in 1969, Slickcraft boats.

By the end of the 1970s, however, AMFs market dominance – and profits – began to shrink. According to Mr. Lyon, policing of trademarks became a substantial part of AMFs plan to regain market share, and Lyon & Lyon handled a number of those cases.

Enter Sleekcraft – a manufacturer of high-end racing boats, founded in 1968 by Bruce Nescher. In just a few years, Sleekcraft went from the new kid on the block to a serious AMF competitor. Sleekcraft managed to increase its sales about 20-fold, reaching annual sales of $6M by 1975, on par with AMFs average sales of $5.5M per year. If policing trademarks was AMFs primary objective, Sleekcraft probably looked like a ripe target. AMF registered the Slickcraft mark and sued Sleekcraft.

The District Court Case

AMF – a veritable megacorporation – had just two attorneys, one associate and one partner, representing them throughout the entire Sleekcraft case. The two Lyon & Lyon attorneys even handed the appeal to the 9th Circuit! You rarely see that kind of litigation staffing these days. The District Court case was Mr. Lyon’s first trial, and he says he tried the entire case on his own. As he remembers it, the partner whose name appears on the pleadings was managing the case only in title, per firm policy forbidding associates from trying cases.

The entire bench trial lasted one day, and Judge Curtis ruled that there was no likelihood of confusion. Mr. Lyon reports that the cards were stacked against him from the beginning. The District Judge, Judge Jesse Curtis, disliked IP cases. Confounding the problem, apparently the Judge and opposing counsel were both boat enthusiasts. To them, the case was clear: No one in their right mind could possibly mistake a Sleekcraft for a Slickcraft.

Here are some images of SleekCrafts and Slickcraft boats. Do you think there is a likelihood of consumer confusion?

Sleekcraft Boats

1977 Sleek Craft Rebel image
1977 SleekCraft Rebel

1976 Sleek Craft Ambassador image
1976 SleekCraft Ambassador

Late 70's/80's Sleek Craft Ambassador image
Late 70's/80's SleekCraft Ambassador

Slickcraft Boats

1971 Slickcraftimage
1971 Slickcraft

1975 Slickcraft SS-204 image
1975 Slickcraft SS-204

1967 Slickcraft SS-195 image
1967 Slickcraft SS-195

1959 Slick Craft image
1959 Slickcraft

Remand to District Court

After finding a likelihood of confusion, the 9th Circuit remanded the case back to district court for entry of an injunction. Judge Curtis entered an injunction preventing Nescher from using the Sleekcraft logo alone/on its own – it had to be combined with something else, e.g., “Boats by Nescher”. Mr. Lyon made a big point about this, saying that the Nescher logo was highly stylized and really different from AMF’s, insinuating that no one could possibly mistake the two. If avoiding confusion was the genuine motivation for AMFs suit, then that’s a pretty good result. But Nescher had already begun to use the distinctive logo on its boats and in much of its advertising. Perhaps the parties could have reached an amicable result to avoid brand confusion without litigation.

Was this a good outcome for AMF? That depends on its motive. As recounted in the appellate decision with respect to the intent of the parties, the parties were “genuinely interested in avoiding confusion.” In fact, the claims for money damages were dropped on appeal. It’s hard to believe, however, that the parties were genuinely interested in avoiding confusion when in reality Sleekcraft had increased its sales 20 times over in just five years, reaching sales figures of $6M a year, on par with Slickcraft’s $5.5M average annual sales. All in all, I think this was a Pyrrhic victory for AMF.

Here are several exemplars of the pre- and post-injunction logos that I managed to track down so you can decide whether the court got it right for yourself:

Side by side image of Slickcraft and SleekCraft’s Pre-Injunction, after voluntary adoption of the "boats by nescher" subscript

Pre-injunction logo with “S C” lettering as it appears on a 1978 model Sleekcraft

Pre-Injunction SleekCraft Logo (this is an Autocad drawing made by an enthusiast who wanted the retro logo on a plaque). This same logo appears on old advertising and boats.

Post-Injunction, stylized SleekCraft logo with "S C" lettering

Post-Injunction SlickCraft logo without "S C" lettering.

What Happened to the SlickCraft Mark?

As mentioned above, AMF started to show signs of instability in the late 1970s. Sales across AMF’s subsidiaries dropped sharply for a number of reasons. AMFs problems of the late 1970s continued into the 1980s when Minstar, Inc. acquired it in a hostile takeover. Minstar sold off many of the subsidiaries. In 1985, the Slickcraft mark was expressly abandoned, and AMF reportedly took a tax write off for the loss. Mr. Lyon believes that the injunction is still on the books to this day. [Eric's note: a search in TESS indicates there have been a couple of more recent attempts to resurrect the trademark registration].

Today, AMF is a publicly-held corporation primarily involved in the bowling industry. Though Wikipedia attributes AMFs problems of the 1980s to shaky leadership and dropping sales, something makes me think it had something to do with poor IP strategy.

Posted by Eric at 09:13 AM | Trademark | TrackBack

January 29, 2013

Google and Yahoo Defeat Trademark Lawsuit Over Keyword Ads--Clara Ison v. Google

By Eric Goldman

Clara Ison v. Google, 1-10-CV-163032 (Cal. Superior Ct. January 22, 2013), The fourth amended complaint. The case docket.

I try to track every trademark lawsuit regarding Google AdWords. Thus, I am embarrassed to admit that I just learned about a trademark lawsuit filed in 2010 that flew completely under my radar. In my (limited) defense, the lawsuit was in state court, where I can't track cases nearly as easily as I can track them in federal court.

The plaintiff is a California psychologist. She sued Google and Yahoo for selling her name as triggers for keyword advertising and, I believe, for other issues (her complaint isn't a model of clarity). She only made state law claims, which helped keep the case out of federal court. Her complaint was cloned from the American Airlines v. Google complaint (I recognize the false drama in Para. 36, the claim that the "Plaintiff does not bring this lawsuit lightly"). Somehow, she got to a fourth amended complaint, but the court rejected her request to file a fifth amended complaint.

Earlier this month, the court granted Google and Yahoo's motion for summary judgment because Ison didn't show secondary meaning in her name. Apparently, expert Hal Poret did a survey showing the lack of secondary meaning among the target consumers, and Ison didn't have enough counter-evidence to create a triable issue.

For reasons that aren't clear from the papers I saw, Ison apparently didn't allege a publicity rights violation. I don't think selling keyword advertising on a person's name should constitute a publicity rights violation, but that issue has completely vexed Wisconsin judges in the Habush v. Cannon lawsuit. At minimum, publicity rights claims don't need secondary meaning, so it would have avoided the most immediate problem that scuttled her lawsuit.

Some related posts:

* Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid–Louisiana Pacific v. James Hardie
* Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit
* With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue
* Google Defeats Trademark Challenge to Its AdWords Service
* Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown

The two other pending AdWords trademark lawsuits (that I know about!):

* CYBERsitter v. Google [Latest post]
* Home Decor Center v. Google

[Photo Credit: satellite dish antennas under sky // ShutterStock]

Posted by Eric at 11:37 AM | Derivative Liability , Search Engines , Trademark | TrackBack

January 24, 2013

Are Google Search Results Good Proxies for Secondary Meaning in Trademark Law?

By Eric Goldman

I want to call your attention to "The Google Shortcut to Trademark Law" by Lisa Larrimore Ouellette, a post-doc at Yale ISP. You might not be familiar with Lisa's work because to date she's mostly focused on patents.

The paper asserts that courts can assess the secondary meaning of trademarks as well or better than current techniques by evaluating Google's search results rankings. This argument is crazy. There's simply no way we could base an essential doctrine of trademark law on the proprietary black-box algorithmic decisions of a for-profit company...could we?

Yet, the paper provides persuasive empirical evidence that Google search results correlate highly with judicial determinations of secondary meaning, and she explains the deviations by arguing that Google gets it right more than the court does. And before we start feeling nostalgic for the "tried-and-true" methods of determining secondary meaning, let's be honest that those methods suck. Sometimes judges just "wing it" using their intuition, but more frequently the parties proffer hired-gun experts whose incredibly expensive surveys usually get little weight after the counter-experts attack the methodology. The parties can easily spend $100k+ each on experts to prove/disprove secondary meaning with uncertain accuracy. If instead we could achieve the same or better accuracy from a few Google searches, costing basically $0, why wouldn't we do that?

In fact, I see this paper as an example of how we might use online evidence to support or disprove secondary meaning and other trademark questions that turn on consumer perceptions. In the old world, we used unreliable "proxy" metrics like how much money the trademark owner spent promoting its brand. In the new world, we can now easily measure *actual* consumer interest in brands using a variety of data sources: eBay feedback ratings, Facebook likes, Twitter followers, Pinterest followers, Alexa ratings, YouTube pageviews, etc. I'm not sure how many of these data sources are credible, but before you discount them too heavily, consider if you prefer hired-gun experts (or judicial intuition) as the putatively "more credible" alternative.

Although I think Lisa is onto something important, I did pose some challenges to her, some of which she has responded to in the most recent draft:

1) Right now, her theory only works for word marks, not other types of marks such as logos or trade dress.
2) I also asked about personal names as marks, and she's hedged the application of her arguments there (see FN147)
3) I raised a concern that Google search results placements can change frequently. To her credit, she reran her results, and she concluded that the changes during the interim weren't significant. See page 56.
4) I noted Google-bombing/anchor-text attacks as a way that trademark owners can boost their results placements without any change in consumer perceptions. As Lisa notes, Google-bombing has become harder (page 58) but it remains a possible weakness of the measurement.

Overall, a fun paper. Check it out!
____

The abstract:

The strength of a trademark — the extent to which consumers view the mark as identifying a particular source — is difficult to evaluate in practice. Assessments of “inherent distinctiveness” are highly subjective, survey evidence is expensive and unreliable, and other “commercial strength” factors such as advertising spending are poor proxies for consumer perceptions. Courts often fall back on heuristics and intuition rather than precise logical analysis.

But there is a simpler way to determine whether, when people look for a mark, they mean to find a certain product: Google. Google dominates the web search market by correctly predicting what people think of when they type a word or phrase, and Google results thus can increase the predictability and accuracy of the subjective tests in trademark law. Courts have generally given online search results little weight in offline trademark disputes. But the key factual questions in these cases depend on the wisdom of the crowds rather than expert judgment, making Google’s “algorithmic authority” highly probative.

Through a study of federal trademark cases and contemporaneous search results, I argue that Google can generally capture both prongs of the test for trademark strength: if a mark is strong — either inherently distinctive or commercially strong—then many top search results for that mark relate to the source it identifies. The extent of results overlap between searches for two different marks can also be relevant for assessing the likelihood of confusion of those marks. In the cases where Google and the court disagree, I argue that Google more accurately reflects how consumers view a given mark.

[Photo Credit: A search engine browser window shows your website as the top result // ShutterStock]

Posted by Eric at 11:04 AM | Search Engines , Trademark | TrackBack

January 17, 2013

"Social Media and Trademarks" Presentation at AALS

By Eric Goldman

Earlier this month, I spoke at the AALS IP Section meeting in New Orleans on the topic of "trademarks and social media." My slides. Though I've written in this area (see, e.g., my Online Word of Mouth paper from 2007), I didn't have any new academic research to report. As a result, I decided to take an anthropological approach to the subject material by recounting some of the interesting things I see in social media from a trademark perspective:

* Instabrands. Brands that, like the mayfly, are born, live and die within a matter of days. I gave the example of the @FiredBigBird Twitter account. Trademark law isn't well-equipped to deal with such evanescent brands.

* Large-scale non-commercial activity. Trademark law tries to distingtuish between commercial and non-commercial activity (like many other areas of law), but it doesn't really contemplate that non-commercial defendants can be using third-party brands at a commercial scale. I gave the example of @BPGlobalPR Twitter account as an example of massive non-commercial activity where the investment and distribution costs are zero and the labor is provided on a purely voluntary basis--although this isn't an ideal example as the BPGlobalPR operators does sell T-shirts, and trademark law does know how to deal with that.

* Brand Self-Sabotage. Brand managers are so used to having their conversation filtered through third party editors and gatekeepers that they can make embarrassing gaffes when they actually talk directly to their consumers. I gave the infamous Kenneth Cole/Arab Spring tweet as an example, but there are many in this genre.

* Bashtags. Brands also aren't used to having their consumers able to talk to each other directly. Brands are even less prepared for the fact that they can't steer those conversations. Bashtags are an example, where malcontents and vandals can coopt a conversation between brands and their loyal customers. I gave the #McDStories hashtag as the example.

* Followers as "Goodwill." Trademark law protects goodwill, which is defined as customers' propensity to keep transacting with a satisfactory vendor. But traditionally goodwill is just a probability that customers will return. In contrast, social media followers are a much "purer" form of goodwill--these are people who voluntarily sign up to communicate with the brand because they voluntarily want to know more about the brand. Trademark law is not well-prepared to deal with legal fights over social media followers because it doesn't know how to conceptualize those individuals' interest as goodwill. I gave the example of Dr. Linda Eagle, but there are numerous other examples, though many of them don't involve trademark claims.

* Para-trademark laws. Trademark-style laws are proliferating, such as California's e-personation law and California's political cyberfraud law.

* Private ordering. With the proliferation of private namespaces online, we're also seeing the proliferation of private adjudications over disputes in those namespaces. As a result, trademark law--as codified in the statutes and interpreted by common law--is being usurped by the private adjudication rules established by private namespace operators. The UDRP is the premier example of online-related private law usurping public trademark law. Similarly, in the social media context, Facebook's and Twitter's trademark policies may be more important to trademark owners than actual trademark law.

There prompts a couple of key points: (1) Facebook's and Twitter's rules partially reflect, and are certainly influenced by, the statute and common law, but they diverge in noticeable respects, meaning that their interpretations of trademark law may better reflect trademark law "on the ground" than actual trademark law; and (2) these private trademarkish disputes are being resolved by employees of the namespace operator, and these employees probably have no training in trademark law, may have little training in the law at all, and often have no training in adjudication theory.

I don't have any broad takeaways from these anthropological observations, but I'm game for further discussion if you think we can distill some wisdom from these data points.

[Photo Credit: Mayfly // ShutterStock]

Posted by Eric at 11:52 AM | Trademark | TrackBack

January 11, 2013

Top Ten Internet Law Developments of 2012 (Forbes Cross-Post)

By Eric Goldman

I'm pleased to share my list of top 10 developments of 2012:

#10: The Push Towards Anti-Class Action Arbitration Clauses. In 2011, the U.S. Supreme Court ruled in AT&T Mobility v. Concepcion that businesses may be able to adopt mandatory arbitration clauses that ban customer class-action lawsuits. The ruling was hardly crystal-clear, but in its wake, many websites adopted such clauses. Nevertheless, as the Zappos decision points out, these clauses must be adopted according to the laws governing contract formation and amendment, or they will fail in court.

#9: General Patraeus/Paula Broadwell Imbroglio. On the surface, it's just your typical Washington DC sex scandal. However, it had several interesting cyberlaw angles, including the attempts to hide digital conversations and Ms. Broadwell's alleged cyberharassment of Jill Kelley. My biggest takeaway: If the CIA Director can't keep the FBI from reading his email, what chance do you or I have?

#8: Do-Not-Track Meltdown. Everyone hoped that industry would come up with a do-not-track (DNT) standard rather than kicking the issue to Congress or the FTC. Then, it all went to heck. Microsoft announced it would turn on DNT by default in its browser, which prompted Internet publishers to threaten to ignore Microsoft's DNT signal. Meanwhile, Internet publishers and others adopted a narrow definition of "do-not-track," arguing it meant no-tracking for advertising purposes, but tracking for other purposes was still OK. The effort then devolved into acrimonious recriminations and left open the possibility that government regulators will fill the gap--to everyone's detriment. (For what it's worth, I take a very dim view of technological do-not-track efforts for reasons I explain here).

#7: Social Media Exceptionalism. In 2012, regulators eagerly sought to "fix" social media through regulation, but their efforts will fail because no one can precisely define social media as a subset of Internet activity. For example, California's recent attempt to curb employers' attempts to obtain employees' social media passwords led to the astounding definition that "social media" means all digital data, whether online or off.

#6: Megaupload. The US government proudly touted its takedown of Megaupload as a victory for Internet copyright enforcement. Unfortunately, it appears that takedown involved an enforcement action where it appears the US government repeatedly ignored or broke the law.

#5: Software Patents/Smartphone Wars. The smartphone industry has ushered in a glorious era of innovation, but it's also highlighted how patents can hinder, not spur, innovation. Smartphone players have spent (wasted?) billions of dollars on patents with the hope that they can operate without restriction from other players' patents, and many tens of millions of dollars have been spent (wasted?) on legal fees as the players sue each other for patent infringement and defend against interlopers with weak/bogus patents hoping for a little taste of the action. See my essay on software patents:

#4: Europe Hates Silicon Valley. I'm surprised whenever I read about a new European ruling that's adverse to a Silicon Valley company, because at this point I assume that everything Silicon Valley companies do in Europe is already illegal. Google, Facebook and other Silicon Valley players are under constant legal attack in Europe on countless fronts. Everyone might be happier if the Silicon Valley players just got out of Europe altogether.

#3: Google and Antitrust. The FTC largely dropped its antitrust investigation against Google, and dropped it completely with respect to Google's search engine practices. (Technically the denouement rolled out on January 3, 2013, but I'm still counting it as a 2012 development). This is an important development for several reasons. First, the FTC--which makes its living by bringing enforcement actions--admitted it had no reason to complain about Google's search engine practices. Second, the scuttlebutt all throughout the investigated suggested that the FTC was committed to busting Google, and Google turned that situation around 180 degrees. Third, not intervening into the operation of Google's search algorithm is a logical decision, but one still worth celebrating. This was a great resolution for Google, a complete rejection of the concerns raised by Microsoft and other Google-haters, and due to the FTC's non-involvement, ultimately a big win for Google's users.

#2: ITU/WCIT's Attempted Internet Takeover. I really didn't understand what happened in Dubai at the ITU/WCIT meeting. All I know is that nothing good could have happened there, so preserving the status quo is a win, as ironic as that sounds.

However, there has been some teeth-gnashing that the meeting exposed looming fault lines between pro-censorship and anti-censorship governments. I don't understand that angst for at least two reasons. First, all governments are pro-censorship, and that certainly includes the United States. Indeed, the US has exhibited some awkward duality as it rails against foreign attempts to censor the Internet even as both Congress and the Obama Administration exhibit a never-ending pursuit of controlling the Internet themselves.

Second, the Internet has already fractured into multiple "Internets." The Internet in the United States increasingly bears little resemblance to the Internet in foreign countries, both because local regulators simply block certain websites and because websites localize their services to accommodate local regulation. Plus, it's been proven that countries can simply "unplug" from the Internet. Thus, we don't have a single unified Internet; we have many partially-overlapping Internets. I will say more about this in a future post.

#1: SOPA's Failure. The failure of SOPA/PIPA is not the watershed event for our republican democracy that we wished it would be. Citizen-driven rejection of special-interest Internet legislation will not happen very often. But as a David-and-Goliath story--the uncoordinated and oft-ignored Internet user community rising up against a well-oiled and undefeated copyright lobby--it doesn't get any bigger than SOPA. Also, we learned something really important: American voters will acquiesce to a lot of bad and self-interested decisions by their elected officials, but voters will grab the torches and pitchforks if they think the Internet is threatened.

Honorable Mentions

Some other developments of note:

* despite the Fourth Circuit's rekindling of the Rosetta Stone case before it settled, the decade-long keyword advertising litigation battles against Google are basically over with a big win for Google and other keyword advertising vendors. I also think we'll see trademark owner-vs-advertiser lawsuits tapering off too.

* app cloning is a big business, and we're seeing increasing lawsuits in the area, including the EA v. Zynga and TripleTown cases.

* the application of the Computer Fraud & Abuse Act is being dialed back in the employment context (see the Nosal and WEC cases).

* Oracle v. Google gave us one of the cleanest rulings to date that software APIs are not copyrightable. The case was also interesting for the judge's investigation into the paid advocacy efforts of both Oracle and Google.

* the images of Marilyn Monroe and Albert Einstein are moving closer to the public domain.

* the IB v. Facebook ruling could be a watershed decision in spurring class action lawyers to make a buck in the name of "protecting the kids" in court.

* Web publishers can improve their defamation defenses by hyperlinking to original sources.

Most Interesting Cases

I read a lot of cases in 2012, and some of the most interesting cases I saw this year:

* Erickson v. Blake. Music composers can create copyrightable compositions by equating the digits of the number "pi" (π) to musical notes, but they can't stop others from creating their own musical compositions based on pi's digits.

* Bland v. Roberts. Two government employees "liked" their boss' opponent in an upcoming election; after the boss won reelection, the employees allegedly got fired for their divided loyalties. The court (mistakenly, in my opinion) said that "liking" an item on Facebook isn't constitutionally protected speech.

* Scott v. WorldStarHipHop. A classmate posted a video of Scott fighting with an ex-girlfriend. Scott obtained the copyright to the video from his classmate and, as the new copyright owner, sent copyright takedown notices in an effort to scrub the video from the Internet. This copyright acquisition scheme basically converts copyright law into a "right to forget." In 2013, expect to see even more plaintiffs acquire copyright ownership as a way to suppress/control unflattering content about them.

* In re Heartland Payment Systems. This is a settlement of a data security breach class action lawsuit with 130M class members. The parties spent $1.5M to encourage class members to tender damage claims and another $270k to process the tendered claims. A total of 290 claims were tendered, of which 11 were valid, with a maximum payout per valid claim of $175. So the parties incurred $1.75M in transaction costs to award about $2k in damages. Interesting.

* Augstein v. Leslie. If you post a YouTube video promising $1M for the return of your laptop, you could actually owe $1M if someone returns your laptop.

* Olson v. LaBrie. Facebook should bring families closer together, but in one family, photo tagging plus a snarky comment prompted a lawsuit for a restraining order.

Lists from Previous Years

Previous top 10 lists from 2011, 2010, 2009, 2008, 2007 and 2006. Before that, John Ottaviani and I put together a list of top Internet IP cases for 2005, 2004 and 2003.

[Photo Credit: Top Ten Key // ShutterStock]

Posted by Eric at 07:25 AM | Content Regulation , Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Patents , Privacy/Security , Publicity/Privacy Rights , Search Engines , Trademark , Trespass to Chattels | TrackBack

January 08, 2013

Q4 2012 Quick Links, Part 1 (IP Edition)

By Eric Goldman

Copyright

* Author’s Guild v. HathiTrust, 1:11-cv-06351-HB (SDNY Oct. 10, 2012). James Grimmelmann's take.

* Hillicon Valley: ‘Shell-shocked’ lawmakers shy away from online piracy in new Congress

* Ars Technica: Voters boot three SOPA-sponsoring Hollywood allies from Congress

* Triple Town/Yeti Town cloned game app lawsuit settles. Prior blog post.

* Righthaven, LLC v. DiBiase, 2012 WL 5868154 (D. Nev. November 16, 2012). Shawn Mangano is substituted out as counsel in this case, replaced by Michael Mushkin. Bold move by Mushkin to walk into this shitstorm.

* Ricchio v. Amazon.com Inc., No. 12-332 (E.D. Wis. Oct. 12, 2012): "I find plaintiff has failed to state a claim for copyright infringement. He alleges defendant is again allowing third-parties to sell copies of his book without plaintiff’s authorization, but he does not claim that any of the books being sold on defendant’s website are counterfeit copies. Plaintiff claims only that defendant is allowing third parties to re-sell copies of his book without compensating him. However, under the “first sale” doctrine, plaintiff is not entitled to profit from the resale of his book."

* TorrentFreak: Google Removed 50 Million “Pirate” Search Results This Year

* PeerMusic, III, Ltd. v LiveUniverse, Inc., 2:09-cv-06160-GW -PLA (C.D. Cal Oct. 9, 2012). Awarding $12,500 per song in a default judgment against lyrics website, for a total of $6.6M.

* Time: How Microsoft’s Copyright Claim Went Awry

Trademark

* Split ruling on Google’s motion to dismiss in Home Decor Center v Google. Prior blog post.

* John Crane Production Solutions, Inc. v. R2R and D, LLC, 861 F.Supp.2d 792 (N.D. Tex. March 21, 2012):

JCPS is essentially concerned about initial interest confusion. A claim for trademark infringement can be based not only on whether purchasers are confused as to the source of the product at the time of the sale, but also based on “confusion that creates initial consumer interest, even though no actual sale is finally completed as a result of the confusion.” Elvis Presley Enters., 141 F.3d at 204 (internal quotation marks and citations omitted). Some courts have concluded that the fact that purchasers are sophisticated does not foreclose a finding of initial interest confusion if products and marks are sufficiently similar. Others have held that the character of a given market, including the sophistication of potential purchasers, is enough to overcome a likelihood of initial interest confusion. Compare Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 260 (2d Cir.1987) (holding there was likelihood of initial interest confusion “even though defendant's business is transacted in large quantities only with sophisticated oil traders”) with Checkpoint Sys., 269 F.3d at 285 (holding no likelihood of initial interest confusion, in part because purchasers were sophisticated and exercised high degree of care) and Rust Env't & Infrastructure, 131 F.3d at 1217 (holding no likelihood of initial interest confusion, in part because purchasers were sophisticated and market was small). Because even a sophisticated purchaser can be subject to initial interest confusion, the court will weigh this digit and the potential for initial interest confusion along with the other digits in determining whether a likelihood of confusion exists.

Yet, the plaintiff still lost the case. Why not just give up the "initial interest confusion" charade?

* Paramount Farms Intern. LLC v. Keenan Farms Inc., 2012 WL 5974169 (C.D. Cal. November 28, 2012): "Ms. Hodari testified that the Wonderful Pistachios brand has a Facebook page with almost 300,000 “likes.” While the Facebook recognition of the brand does not conclusively demonstrate actual recognition of the associated trade dress, it lends credence to the other evidence that the trade dress has become famous. Accordingly, the Court finds there remains a triable issue whether the Claimed Trade Dress is famous."

* Google's algorithmic changes are curtailing demand for domain names.

* Robert G. Bone, Taking The Confusion Out Of “Likelihood Of Confusion”: Toward A More Sensible Approach To Trademark Infringement, 106 Nw. U. L. Rev. 1307 (2012).

* Latest round in Nextdoor.com and Raj Abhyanker.

* Stipulated contempt finding in the North Face v. South Butt case.

Patents/Trade Secrets

* Project DisCo: One In Six Active U.S. Patents Pertain To The Smartphone

* NDSL, Inc. v. Patnoude, 2012 WL 6096584 (W.D. Mich. December 7, 2012): "Patnoude's November 12, 2012, generic LinkedIn invitation is not sufficient to establish that Patnoude has solicited NDSL Customers in violation of subparagraph 9.a(2). NDSL has not established that Patnoude has solicited any NDSL Customer."

* Skyhook Wireless, Inc. v. Google Inc., 2012 WL 5309755 (Mass. Superior Ct. Sept. 28, 2012). Granting summary judgment to Google.

Posted by Eric at 12:06 PM | Copyright , Domain Names , Patents , Trade Secrets , Trademark | TrackBack

Let's Stop Using the Term “Soft IP”

By Eric Goldman

You may have heard--or even used--the phrase “soft IP.” I'm not a fan of it, and I think we should retire the term.

The term "soft IP" is inherently ambiguous. Sometimes, people use "soft IP" to refer to “copyrights and trademarks;” other times, the term is intended to cover all IP other than patents--presumably publicity rights, trade secrets, etc. I especially cringe when I hear students tell me they are looking for a "soft IP" job. Typically, that's a reliable tipoff that the students don't know what kind of IP job they want; they just know they don't want to be (or aren't eligible to become) a patent prosecutor. That lack of clarity in the student's mind is rarely an asset to their job search.

I've had difficulty tracing the term's etymology. I searched several online databases looking for early uses and I found published references as far back as 1998, but my vague recollection (corroborated by others) is that the term goes back well before then.

As a term establishing a classification of IP, “soft IP” implies an antonym--presumably, “hard IP.” I don’t hear people use the term "hard IP," but given that soft IP always excludes patents, presumably patents are part of the antonym.

I can think of a few explanations for a hard/soft distinction among intellectual properties. First, patents often cover physical devices, so they often have a physical tangibility, while copyrights, trademarks and other IPs may be more intangible by comparison (even though patents protect "ideas," which is as intangible as they come).

Second, the hard/soft distinction might imply some difference in the degree of the practice's difficulty, i.e., the perception that patent law, and any associated technology, are complicated and “hard,” while other IPs are relatively easy and "soft" by comparison. People rarely articulate this relative value judgment explicitly, but I'm sure some patent practitioners believe that what they do is more challenging than the work of other IP practitioners; and I'm even more confident (because I've seen it repeatedly) that some patent practitioners feel comfortable "dabbling" in other IPs on the grounds that if they can do patents, they are well-qualified to handle other IPs.

It's true that patent prosecution requires passage of a separate bar exam, which in turn requires a technical background, so in that sense becoming a patent practitioner is "harder" than becoming an IP practitioner generally. Still, there is a certain implicit arrogance in this line of thinking.

Although I concede that patent law has plenty of arcane and baffling rules, I think patent practice is demonstrably not “harder” than other IP practices. I invite any patent practitioner--or, for that matter, any lawyer--who thinks that non-patent IP is "easy" to: walk me through 17 USC 114 (the music streaming provisions); calculate a pre-1976 copyright term duration; tell me what the term "use in commerce" means in trademark law; or walk me through the multitudinous ICANN procedures for objecting to or challenging gTLDs. And while historically the biggest bucks were in patent litigation, we're seeing big bucks across the IP spectrum, such as Oracle's $1.3B copyright damages award in the SAP case and Google's $100M+ defense costs in Viacom v. YouTube. (As I explain to my Internet Law class, $100M of legal fees is like the cost of *twenty* typical patent lawsuits!) And patent cases don't have a monopoly on hard technological questions; think about the technological sophistication to resolve Oracle v. Google, the Cablevision case or the Goforit case (just to pick three examples off the top of my head). Not only would it be condescending to say or imply that non-patent IP is "easy" or fluffy, I don't think it's remotely supportable factually.

A third hard/soft distinction is in the phrase “hard sciences,” although we rarely hear the antonym "soft sciences" (presumably social sciences). Because a technical background is required for patent prosecution, perhaps “hard IP” implicitly cross-references “hard sciences.” The thing is, there are several paths to qualify for the patent bar that don't require a “hard” science background, so that linkage would be odd.

In conclusion, I see at least three problems with the term “soft IP”:

1) It has at least two different definitions, making the term ambiguous.
2) It establishes an implicit hierarchy between different IP practices, which is potentially condescending and factually unsupportable.
3) It might imply an linkage with “hard sciences” that isn't necessarily true.

OK, so what should we use instead of the term "soft IP"? I don't have a great answer. The reality is that the IPs being lumped together under the "soft IP" appellation don't have enough commonalities to support the linkages--other than that they aren't patents. So we could use the term "non-patent IP" as the antonym to a patent practice. You probably like the term "non-patent IP" as much as I do (i.e., not much). My only other suggestion is to skip any effort to combine IPs in a single term and instead specify which IPs you are referring to. For example, if you're using "soft IP" to copyrights and trademarks, just say "copyrights and trademarks."

[I'm deliberately sidestepping the broader debate about the legitimacy of the term "IP"/"intellectual property," although I think that topic deserves additional discussion given some people's intrinsic absolutism towards "property" rights.]

Precise nomenclature is especially crucial for students in their job searches. If you aren't interested in a patent career, that's fine; but it's not a strong sales pitch to tell employers what you're *not* interested in, and the requirements and expectations of a trademark practice are quite different than a copyright practice (and different still from other IP niche practices). In reality, the best thing to students can do is to match their search criteria with the way employers structure the jobs. Few employers recruit for a "copyright" lawyer; typically, they are looking for a software licensing attorney or an entertainment attorney or an IP litigator knowledgeable in copyright law. My recommendation to students: figure out what employers are looking for, assess how the requirements of the job match against your skills and interests, and proceed accordingly. If you haven't gotten to the point where you can avoid the term "soft IP," your job search process probably still needs more cultivation, no matter how much effort you've invested in it to date.

[Photo credit: illustration depicting a sign post with directional arrows containing a choices concept // ShutterStock]

Posted by Eric at 08:51 AM | Copyright , Patents , Publicity/Privacy Rights , Trade Secrets , Trademark | TrackBack

January 02, 2013

Section 230 Still Keeping the Pro Se Plaintiffs at Bay--Klayman v. Facebook, and More

By Eric Goldman

I'm personally committed to blogging every Section 230 case I see, but I fell off the wagon in the second half of 2012. So what better way to usher out 2012 and ring in the new year than to recap some Section 230 wins from the past 6 months? The following four cases all involve pro se litigants whose unmeritorous cases got unceremoniously swept out of court, just like Baby New Year walks Father Time out the door. In 2013, I resolve to give continued thanks to Section 230 for keeping the court system relatively free of junk lawsuits like these:

Klayman v. Zuckerberg, 2012 WL 6725588 (D.D.C. December 28, 2012). Klayman is a lawyer-plaintiff. For reasons that are unclear to me, pro se lawyer-plaintiffs fail in court at about the same rate (or worse) as the typical pro se. I find this hard to comprehend; after all, shouldn't lawyers have a better sense which legal claims are worth pursuing than the average individual litigant? Presumably, the only more knowledgeable litigants are judge-plaintiffs; I don't see many of those cases, but these usually also fail in a pretty embarrassing way. This sounds like a good area for further research.

Larry Klayman is notorious enough to have his own Wikipedia page. I'm not sure how to gauge his accomplishments because the Wikipedia page only highlights his failed lawsuits--the word "unsuccessful" shows up four times on the page, not including this lawsuit.

The case involves a user-created Facebook page titled 'Third Palestinian Intifada.'" It's not clear from the opinion how this page harmed Klayman, but I guess it doesn't take much to provoke a lawyer to sue. While typing the complaint, Klayman's finger apparently got stuck on the "zero" key. He demanded $1,000,000,000.00--that's right, $1 billion--because Facebook didn't take down the page fast enough.

The court runs through the typical three-factor Section 230 analysis:

1) ICS? Facebook provides an interactive computer service because it maintains "a website that gives its users the ability to create, upload, and share various types of information, potentially with hundreds of millions of other users."

2) Publisher/Speaker Claim? Klaynan sued Facebook for assault (!) and negligence. The court says:

the defendants' alleged conduct ascribed to them the status of publishers of information, whether by "using" the website to post certain content (i.e., publishing), id. ¶ 17, "allow[ing]" certain content to be posted to the website (i.e., deciding whether to publish), id. ¶¶ 17, 19, or by "refus[ing] . . . to remove these postings," id. ¶ 19. The defendants' potential liability is thus "derive[d] from [their] status or conduct as a publisher or speaker."

Klayman belatedly attempted the Barnes promise-based workaround to Section 230 and gets mocked:

It begs credulity that the plaintiff, a "highly visible and well known lawyer," Compl. ¶ 11, would not have included a claim for breach of contract if he contemplated such a claim as a viable possibility.

3) Were the defendants the ICPs? [note: normally this is phrased as whether the content came from third party content providers, but I think this restyling is OK in this case.] The court says:

Nowhere in his complaint or in his opposition brief does the plaintiff allege that the defendants contributed to the content of the Facebook page at issue. Rather, as described above, the plaintiff focuses on the role that the defendants played in publishing the Facebook page. [FN3] The plaintiff's own allegations are inconsistent with a finding that the defendants acted as information content providers with respect to the offensive material at issue.

FN3 is interesting. Klayman argued that Facebook collects data about its users and then personalizes their site views based on this data. The court says that even if that's true, it would just represent another form of editorial control immunized by Section 230.

Having satisfied the three elements of a successful Section 230 immunity, the court grants Facebook's motion to dismiss. This is a good outcome for Facebook, but I'm not clear why Facebook didn't make an anti-SLAPP motion under D.C.'s anti-SLAPP law. That way, Klayman would have to write Facebook a tuition check for his Section 230 schooling. Even without anti-SLAPP protection, I hope Facebook seeks Rule 11 sanctions against Klayman. We haven't seen too many courts grant Rule 11 motions in Section 230 cases (I wish they did) but Klayman's lawsuit broke absolutely no new legal ground and was doomed from inception.

A Facebook spokesperson told me: "We are pleased with the court's ruling dismissing all claims with prejudice."

Merritt v. Lexis Nexis, 2012 WL 6725882 (E.D. Mich. October 23, 2012). Merritt claimed Lexis-Nexis published false information about him. The court never explicitly says the information comes from third parties, but that's the logical inference given Lexis-Nexis' business model. The court says that Lexis-Nexis qualifies for Section 230's immunity (citing the memorable Gaston case). The court then says Merritt's claims fall "squarely" in Section 230's immunity.

Nieman v. Versuslaw, Inc., 2012 WL 3201931 (C.D.Ill. August 3, 2012). See also the magistrate's report, 2012 WL 3201935 (C.D.Ill. June 13, 2012). I've held off blogging this case because the University and I have received threats from Nieman (lucky us!). So just the facts on this one.

The court summarizes Nieman's arguments:

Between January 2009 and the date of filing this action, Plaintiff applied for one or more positions of employment. Plaintiff believes that the potential employers have performed Internet browser searches by way of Google.com, Yahoo.com, or Bing.com, and found documents related to litigation against his former employer Nationwide. Plaintiff also believes that the potential employers have used this information to disqualify him from candidacy for the applied position or have shared this information with others who have done so. In other words, Plaintiff alleges he “has been effectively ‘blacklisted’ as to employment opportunities due to the ease at which these references appear pursuant to a simple name search, and due to the unlawful acts of third parties who then use such information to unlawfully disqualify” his candidacy.

He sued Microsoft, Versuslaw, Yahoo!, Google, and Joseph W. Acton for, among other claims:

* violations of Illinois' human rights law. The court rejects the claim, saying the complaint only alleged "Defendants provided access to public information that potential employers used to deny Plaintiff employment," and that doesn't suffice.

* publicity rights. The court says:

First, the exemption from liability for using a person's identity for a non-commercial purpose, including in a news or public affairs account is applicable here. Plaintiff's prior litigation is a matter of public record and public interest. Moreover, Plaintiff's identity is not being used for a “commercial purpose” as defined by the Right of Publicity Act because his name is used only to find documents related to his case, which are part of the public record. His name is not being held out or used to entice anyone to buy a product. Under Plaintiff's theory, every person who is involved in litigation who has public court documents that can be accessed for a fee on the Internet by doing a browser search or found by using Westlaw, Lexis, Versuslaw, or any other legal research site can state a claim under the Right of Publicity Act. This cannot be the case.

* 42 USC 1981. The court says he didn't allege any discrimination on improper bases.

* Lanham Act. Nieman alleged "Defendants Versuslaw and Acton are attempting to associate Plaintiff with their for-profit website. Plaintiff accuses Defendants Google, Yahoo, and Microsoft of actively participating in “these unlawful acts ... by way of their paid search ranking and/or AdWords mechanisms.”"

Citing Stayart v. Yahoo, the court says Nieman doesn't have standing because he lacks the requisite commercial interest in his name.

* Unjust enrichment. "Defendants are not “retaining a benefit” to Plaintiff's detriment just because they are selling electronic access to public information and Plaintiff does not like the information contained in those public documents."

The court also grants Microsoft and Yahoo's First Amendment and 47 USC 230 defenses. Regarding the First Amendment, the court says "all of Plaintiff's allegations rest on the premise that Defendants' websites provide links to information that is in the public record. Plaintiff cannot show he is plausibly entitled to relief." Regarding 47 USC 230, the court says that it agrees with the magistrate report that Section 230 applies, but the judge expresses uncertainty about the immunity for the trademark and publicity rights claims because they are IP claims; and also about the RICO claim as a federal crime (the court doesn't cite the several cases rejecting its line of reasoning on that point).

Getachew v. Google, Inc., 2012 WL 3217611 (10th Cir. August 9, 2012). This case is quite similar to the Nieman case. The court recaps:

Mr. Getachew alleges that when all or part of his name is entered into Google's Internet search engine, the search results yield negative information about him. For example, Mr. Getachew was previously a plaintiff in an employment action, and he alleges that the summary judgment order in that case is available when part of his name is entered into Google's search engine. He also alleges that another Google search result links his name to a "[g]raduate position available in evolutionary systems biology."

All of this, he alleges, hurt his employment prospects. The district court said that his discrimination and Title VII claims were "frivolous" and his state law claims against Google were immunized by 47 USC 230. The appeals court upholds these conclusions. With respect to 47 USC 230, the court says "Google is immune from Mr. Getachew's state-law claims under 47 U.S.C. § 230(c)(1). Under that provision, Google cannot be held liable for search results that yield content created by a third party."

[Photo Credit: Dust Bunny // ShutterStock]

Posted by Eric at 07:38 AM | Content Regulation , Derivative Liability , Privacy/Security , Publicity/Privacy Rights , Search Engines , Trademark | TrackBack

December 06, 2012

Useful Article on the First Sale Doctrine in Trademark Law (Guest Blog Post)

By Guest Blogger Yvette Joy Liebesman

[Eric's Note: We've repeatedly blogged on first sale/exhaustion principles on the blog, usually lamenting how easily circumscribed they are (see, e.g,. the posts about Mary Kay v. Weber and the Beltronics case) and the potential deleterious implications for e-commerce marketplaces like eBay. You may even recall the 2010 conference we had on the topic at SCU. Prof. Liebesman, who has guest-blogged here before a couple of times, put together a helpful article on this key topic. The article recounts and rationalizes the loose doctrinal threads contributing to the confusion over trademark exhaustion/first sale. This blog post helps explain why you should check out the entire article.]

Yvette Joy Liebesman and Benjamin Wilson, The Mark of a Resold Good, 20 George Mason L. Rev. 157 (2012)

Our article, recently published in the George Mason Law Review, concerns mark owners’ attempts at stifling the online resale of their goods. Over the past ten years, casual resellers have migrated from garage sales, swap meets and consignment stores to online sites such as eBay and Craigslist. What were once minor side hobbies have, in many instances, become lucrative businesses. Today, there are hundreds of books available about selling goods online, every month 30 million new ads are posted on Craigslist, and every day six million new listings are published on eBay. These goods—when genuine― should be protected by the first sale doctrine, a well-known defense to infringement claims that applies across patent, copyright, and trademark law. Simply stated, once a manufacturer sells a product, it may not interfere with future sales of that particular good.

As one can imagine, this explosive growth of online resales has negatively affected the market for new goods, leading manufacturers to try to stifle independent resellers. Encouraged by expansion of trademark protection in the courts, mark owners have become increasingly aggressive in policing their marks, often relying on spurious claims of trademark infringement. Specifically, mark owners will claim that the reseller is causing initial source or sponsorship confusion based on the distribution channel, even though there is no confusion as to the source of the genuine good. They have also taken their fight to Internet service providers and online auction sites, alleging contributory infringement based on resellers’ use of these sites to advertise the goods. Courts have aided manufacturers by ignoring the lack of confusion as to a good’s source and finding that online initial interest confusion as to sponsorship or affiliation of the distribution channel constitutes infringement. These courts’ reasoning is even contradicted by strong evidence showing that many consumers visit sites like eBay and Craigslist for the purpose of finding genuine goods at lower costs than they would find buying directly from the mark owner or authorized retailer, and are therefore not confused as to affiliation regarding distribution channel. Small resellers, however, are faced with either defending themselves in court (where a successful defense is becoming increasingly uncertain) or ceasing operations.

Marks can be inextricably bound to the goods to which they are attached. For example, when one buys a Waterford crystal vase, the Waterford mark remains associated with the vase. No matter how many times that vase is sold, traded, gifted, regifted, or bequeathed, it forever is identified as a Waterford vase, which is one of trademark law’s chief functions: identifying the source of the vase. A claim of confusion based on this unbreakable association is neither the goal nor the intention of trademark protection. Merely because the Waterford mark remains linked to its vases as a source indicator does not and should not allow Waterford to control sales of their goods that take place outside their own distribution chains. Such an outcome would eviscerate the very purpose of the first sale doctrine.

In our article, Mr. Wilson and I argue that, in the context of the Internet secondary market, whether the distributor is affiliated with the manufacturer is irrelevant as long as the goods are genuine. Courts should apply a presumption of no affiliation between the reseller and the manufacturer, and for any successful Lanham Act claim, actual deception regarding this affiliation should be required. We also propose the elimination of initial interest confusion as a cause of action under the Lanham Act, as well as legislatively strengthening trademark first sale and nominative fair use doctrines, so that making use of those defenses does not create a higher bar to scale when the resale occurs online versus in a brick-and-mortar setting.

Our call for an end to spurious claims of confusion is in accord with the work of other scholars regarding irrelevant confusion, the weak state of trademark fair use, and the inadequacy of trademark defenses. As with those arguments, our article contends that mark owners’ attempts to increase the scope of their control over distribution channels thwart competition while doing little to protect consumers from deception. Our suggestions would protect the lawful sale of goods in the secondary market while allowing manufacturers to prevent counterfeit products from being sold online. These proposals would provide resellers and auction websites guidance in navigating the minefield of rights and duties with regard to Internet secondary-market sales.

Policies that advance the mark owner’s ability to control all distribution channels would harm consumers and disincentivize competition; manufacturers would have less motivation to innovate and improve their product when they control all distribution of goods beyond their first sale. Conversely, protecting the resale market increases consumer choice and spurs mark owners to innovate and develop new and improved products.

[Photo Credit: "e-commerce concept. hand reaches out of a laptop with a shopping cart" // ShutterStock]

Posted by Eric at 10:20 AM | E-Commerce , Trademark | TrackBack

December 05, 2012

Amazon Not Liable for Affiliates' Allegedly Bad Acts--Routt v. Amazon

By Eric Goldman

Routt v. Amazon.com, Inc., C12-1307JLR (W.D. Wash. Nov. 30, 2012)

Sandy Routt is an artist (check out SandysBeachGifts.com if you care). She claims that Amazon affiliates (called "associates" in Amazon's vernacular) displayed her copyrighted photos (product shots) of her products on their websites and then bait-and-switched potentially interested buyers to alternative offerings. Instead of suing the affiliates, Routt sues Amazon.com for the affiliates' behavior, alleging copyright infringement, trademark infringement and violations of the state consumer protection law (the CPA). Amazon defeated the claims on a 12(b)(6) motion to dismiss, though the court gives Routt a chance to replead.

Vicarious Liability. The court dismissed her various vicarious liability claims because, in all cases, Routt didn't adequately allege that Amazon had sufficient control over its affiliates' activities. The court cites Amazon's self-protective language in its affiliate agreement and Routt's overall too-general pleadings. Routt argued that Amazon's contract requires affiliates to comply with IP law and says it can terminate affiliates who violate that provision. However, the Ninth Circuit rejected the salience of those facts to vicarious liability claims in Perfect 10 v. Amazon. The court also says it's persuaded by the analogous Sellify v. Amazon ruling, also rejecting Amazon's liability for its affiliates' conduct.

Direct Copyright Infringement. The court says Routt only alleged copying by affiliates, not by Amazon.

CPA. Routt claimed that Amazon was part of a far-reaching "scam" whereby its affiliates would engage in bait-and-switch and Amazon would profit. The court says that Routt didn't marshal adequate facts in the complaint to support this theory.

Contributory Infringement. The court says that Routt's pleadings were too conclusory.

Implications. Over the years, we've seen aggressive legal arguments from plaintiffs--usually exhorted with the utmost conviction of their veracity--that advertisers should be accountable for their affiliates' actions. Among the worst offenders are the FTC and state AGs' offices, but plenty of plaintiffs have breathed fire on this theory too. However, when those theories have been tested in court, they have generally failed miserably. I don't know why it's so hard to understand that an advertiser shouldn't be liable for the conduct of its independent contractors, but the overreaching legal arguments just won't quit. How many advertiser wins in court will it take to convince plaintiffs to move on?

* FTC Online Endorsement Guidelines Strike Again - FTC Dings Legacy Learning Over Allegedly Misleading Affiliate Reviews
* Important Ninth Circuit Ruling on Keyword Advertising, Plus Recaps of the Past 4 Months of Keyword Ad Decisions
* Amazon Isn't Liable for Rogue Affiliate's Keyword Ad Buys--Sellify v. Amazon
* Affiliate Liability Talk Notes from SMX West
* Affiliate Liability Extravaganza

and see the many cases cited in these last two posts

[Photo credit: "a circle of fingers point to the center" // Shutterstock]

Posted by Eric at 12:04 PM | Copyright , Derivative Liability , Trademark | TrackBack

December 04, 2012

Employee/Ex-Employer Lawsuit Over Twitter Account Settles – Phonedog v. Kravitz

[Post by Venkat Balasubramani]

PhoneDog v. Kravitz, No. C 11-03474 MEJ (N.D. Cal.)

This is one of the first cases where employee and employee (in this case contractor) battled over a Twitter account. Noah Kravitz worked for PhoneDog as a contractor.
He left and took the account with him. The parties dispute the sequence of events, but he says he changed the @PhoneDog_Noah username to "@noahkravitz" with PhoneDog's blessing. PhoneDog sued, asserting claims for conversion, misappropriation of trade secrets, and interference with economic relationships. Although they didn’t necessarily seem on solid legal ground, the court ultimately allowed these claims to proceed. (Kravitz predictably asserted counterclaims.) (Here are previous posts on the case: "Courts Says Employer's Lawsuit Against Ex-Employee Over Retention and Use of Twitter Account can Proceed"; "Court Denies Kravitz’s Motion to Dismiss PhoneDog’s Amended Claims"; and "An Update on PhoneDog v. Kravitz, the Employee Twitter Account Case".)

The lawsuit was originally filed in July 2011, and as Mashable initially reported has been finally resolved by agreement of the parties: “Writer Sued for his Twitter Followers Settles Case.” Terms of the settlement agreement do not appear to be public, but at a minimum it looks like Kravitz will be holding on to the Twitter account.

Employment disputes by nature can be emotional affairs, and when you add a social media component to it, I can see emotions running high, and decisions being made based on emotion rather than reason. It’s interesting that the parties decided to settle the case almost a year and a half after it was filed, with no significant litigation activity other than the initial denial of Kravitz’s motion to dismiss. You wonder why they didn’t resolve things easier. (This is often easier said than done, and the pure attrition of time and expenses can work wonders for the parties’ willingness to settle.)

Any useful takeaways from the dispute? The obvious is to have a written agreement in place governing employee social media accounts. The other is that social media accounts often mix the personal and the professional, so from a practical standpoint making a clean break may not be possible. In this vein, recently enacted social media legislation may also fall short of providing a clean solution. (See "Big Problems in California's New Law Restricting Employers' Access to Employees' Online Accounts"; see also the earlier point: a contractual solution is preferable.)

When all is said and done, I really wonder about the economics of the litigation. Was it worth it for PhoneDog to really chase after the account after Kravitz had removed any branding from the account. On the flip side, what would have happened if Kravitz had just abandoned the account and started fresh? Either scenario would not have been the end of the world. Ultimately, the parties were battling over "followers," who can be fickle, unpredictable, and certainly tough to place a value on.

[image credit: Shutterstock:zozian greetings .. "bluebird sticker"]

Posted by Venkat at 08:07 AM | Licensing/Contracts , Publicity/Privacy Rights , Trademark

November 29, 2012

Yet Another Ruling That Competitive Keyword Ad Lawsuits Are Stupid--Louisiana Pacific v. James Hardie (Forbes Cross-Post)

By Eric Goldman

Louisiana Pacific Corp. v. James Hardie Building Products, Inc., 2012 U.S. Dist. LEXIS 162980 (N.D. Cal. Nov. 14, 2012). The initial complaint. The amended complaint filed after this ruling.

It's been surreal watching plaintiff-side trademark lawyers lament that the Rosetta Stone v. Google settlement means we won't get clearer legal precedent from the case. See, e.g., this paywalled BNA article, Attorneys Lament Lost Chance for Clarity On Lawfulness of Marks' Sale as Keywords. Those lawyers and I are living in parallel universes. The Rosetta Stone case's unenlightening denouement simply supplemented the overwhelming evidence that most keyword advertising lawsuits are stupid--and that fact hasn't changed one bit in the past decade. Plaintiffs' lawyers might enjoy chowing down on the litigation gravy train, but clients might as well flush wads of cash down the toilet.

The dumbest keyword advertising lawsuits assume that trademark owners "own" potential customers who conduct keyword searches using their trademarks. This fallacy needs to be permanently retired ASAP. As I mentioned in this post, consumer surveys suggest that consumers conduct do those keyword search for a variety of reasons that may have nothing to do with finding the trademark owner (a point I also stressed in my 2005 Deregulating Relevancy article). Treating these searchers as the trademark owner's property is in no one's interest--except, of course, the trademark owner hoping to avoid competition.

Fortunately, judges are recognizing that trademark owners don't own searchers. In today's case, the trademark owner alleged that the competitive keyword advertiser committed the tort of interference with economic advantage by disrupting their ownership of searchers. The court pithily trashes the claim:

Plaintiff's argument lacks merit as it is premised on the unfounded assumption that a person forms a business relationship with Plaintiff when he or she enters particular terms in Google's search engine. There is a possibility that consumers who search for Plaintiff through Google will choose to purchase Plaintiff's goods or services at some point in the future; however, such consumers do not have an existing business relationship with Plaintiff merely because they perform an internet search.

Hey trademark owners, want to "own" those consumers? Tough, you can't. However, you can nevertheless win their fickle dollars by consistently delivering good value to consumers. Pouring shovelfuls of cash into meritless litigation doesn't really advance that goal. Meanwhile, ten years from now, we're going to look back at the keyword advertising lawsuits being brought today--knowing all that we already know RIGHT NOW--and scoff at the futility and waste.

[Photo credit: Flushing one hundred dollars down the toilet // ShutterStock]

Posted by Eric at 07:28 AM | Marketing , Search Engines , Trademark | TrackBack

November 19, 2012

AmeriGas Gives Up Its Lawsuit Against PissedConsumer

By Eric Goldman

AmeriGas and Opinion Corp. (PissedConsumer) have settled their case. Law360 report. My prior blog post on a preliminary ruling in this case.

I blog about settlements only occasionally, but I thought this settlement was interesting for two reasons. First, this is one of the bad 47 USC 230 rulings where judges hyper-conservatively reject motions to dismiss. As it turns out, the overly cautious ruling was inconsequential.

Second, I have some additional information about the settlement that hasn't been reported elsewhere. I think sometimes potential future plaintiffs interpret settlements as a win for the prior plaintiff, but the plaintiff in this case simply gave up. Ron Coleman, PissedConsumer's counsel, emailed me the following statement:

"There is no confidential settlement or agreement (or even a confidentiality agreement) other than the "stipulation" of dismissal. No money changed hands. No changes were made to content on PissedConsumer.com in any way, manner or form. The "terms" are as stated in the stipulation: The parties bear their own fees and costs and agree to cease litigating."

This might be helpful information for future plaintiffs trying to decide whether or not to sue consumer review websites.

[Photo Credit: Hand waving with a white flag to surrender // Shutterstock]

Posted by Eric at 03:15 PM | Derivative Liability , Trademark | TrackBack

November 13, 2012

Another Google AdWords Advertiser Defeats Trademark Infringement Lawsuit--CollegeSource v. AcademyOne (Forbes Cross-Post)

By Eric Goldman

CollegeSource, Inc. v. AcademyOne, Inc., 2012 WL 5269213 (E.D. Pa. October 25, 2012)

Over the last dozen years, there have been countless trademark lawsuits over competitive keyword advertising (i.e., when a company buys its competitor's trademark to display keyword-triggered advertising). However, only a few of those cases--about a dozen, by my count--have reached a final outcome in a United States court, as opposed to out-of-court resolutions like a settlement. Of those, trademark owners rarely win, as demonstrated by a recent ruling.

The Recent Ruling

The lawsuit involves two competing web services that help college students research options for transferring to other colleges. CollegeSource sued AcademyOne for a long laundry list of perceived wrongs, including competitive keyword advertising.

CollegeSource owns the trademarks “CollegeSource” and “Career Guidance Foundation.” AcademyOne purchased the keywords “college,” “college source,” “career guidance,” and “career guidance foundation” in Google AdWords. Its ad copy displayed the titles “College Transfer Help” or “Find Transfer Information” and the domain name “collegetransfer.net,” but didn't include CollegeSource's trademarks. The court granted AcademyOne's summary judgment motion because, among other reasons:

* CollegeSource presented "sparse" evidence of actual consumer confusion given that AcademyOne got only 65 clicks on its ads in one month.
* AcademyOne's ads were clearly presented to consumers in light of "the entire context of the advertisement’s appearance, especially the clearly differentiated [Sponsored Link] text boxes and the fact that CollegeSource’s name does not appear within the language of the advertisement."
* Internet users are becoming more careful searchers generally, and the complexity and expense of college transfer decisions means that students will be especially careful.

Implications

Trademark Owners Rarely Win AdWords Cases When Challenged. I've put together this census of final U.S. court resolutions in trademark lawsuits over competitive keyword advertising, excluding false advertising cases such as Tiffany v. eBay:

* plaintiff got injunction: CJ Products v. Snuggly Plushez (2011); InternetShops v. Six C (2011) (note: defendant admitted trademark liability, so the opinion only deals with remedies).

* plaintiff won summary judgment: Storus v. Aroa (2008).

* plaintiff won at trial: Binder v. Disability Group (2011). This case was decided before the Ninth Circuit ruling in Network Automation, and I believe it's no longer good law.

* defendant won summary judgment: J.G. Wentworth v. Settlement Funding (2007); Designer Skin v. S&L Vitamins (2008); 1-800 Contacts v. Lens.com (2010); Montana Camo v. Cabela's (2011); Jurin v. Google (2012) (note: unlike the other cases, in Jurin the defendant was Google, not the advertiser). Now add CollegeSource v. AcademyOne to this list.

* defendant won at trial (all jury trials): Fair Isaac v. Experian (2009) (technically, the final win came in a post-trial ruling); College Network v. Moore (jury ruling in 2009; affirmed on appeal in 2010); Consumerinfo v. One Techs. (2011). Note the College Network case also involved rival publishers of education-related materials.

This census is surely incomplete, so please pass along additions or corrections. I excluded the GEICO v. Google case because the trial didn't fully resolve the case. I also excluded the Rosetta Stone v. Google district court ruling for Google because it was reversed on appeal.

I haven't tried to catalog the multitudinous foreign lawsuits over competitive keyword advertising. However, one case of special interest is Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc., a British Columbia case from 2011, where the court ruled at trial for the defendant. That case also involved marketing to college students. What a rough-and-tumble market that must be to spur so many competitive keyword advertising lawsuits.

Although the census dataset is small and each case has its own quirks, it's hard not to notice that the trademark owners' batting average (4 wins out of 13 final court resolutions) isn't great. Furthermore, I am aware of only three U.S. cases where a jury opined on competitive keyword advertising, and all three juries favored the defense. This is consistent with a recent empirical study that consumers aren't confused by competitive keyword advertising.

The Economic Irrationality of Suing Over Competitive Keyword Advertising.

Irrespective of their legal merits, competitive keyword advertising lawsuits often involve trivial amounts of clicks and revenues. For example, in the CollegeSource case, the advertiser got a whopping total of 65 clicks in one month. With such de minimis activity, the incremental expenses CollegeSource expended litigating the trademark issue could not possibly be justified by the economic impact of AcademyOne's keyword ads.

Other examples where the trademark owner surely was wasting its money by suing over competitive keyword ads (previously noted in this post):

* Storus v. Aroa: the defendant advertiser got 1,374 clicks over 11 months. Based on the low cost of the goods at issue, I estimate each click was worth about $1--making the lawsuit's value less than $1,400.

* King v. ZymoGenetics: the defendant advertiser got 84 clicks.

* Sellify v. Amazon: the defendant got 1,000 impressions and 61 clicks.

* 800-JR Cigar v. GoTo.com: the search engine defendant generated $345 in revenue (not profit, just revenue) from the litigated terms.

* 1-800 Contacts v. Lens.com: Lens.com made $20 of profit from competitive keyword ads. 1-800 Contacts unsuccessfully tried to hold Lens.com responsible for affiliate ad buys which generated about 1,800 clicks, which under the most favorable computations were worth about $40,000. 1-800 Contacts spent no less than $650k (and was willing to spend $1.1M) on its lawyers in this case.

* InternetShopsInc.com v. Six C, the defendant got 1,319 impressions, 35 clicks and zero sales.

Between the long odds in court, the low/trivial financial stakes at issue and the improbability that consumers are being misled, there are several good reasons for trademark owners not to bring lawsuits over competitive keyword advertising.

Posted by Eric at 08:58 AM | Marketing , Search Engines , Trademark | TrackBack

November 12, 2012

Intellectual Property on the Internet: A Brief Comparison of the Current Situation in Europe and the United States (Guest Blog Post)

by Guest Blogger Pablo García Mexía, J.D., Ph.D
[Visiting Professor of Internet Law, The College of William & Mary. English translation by Morgan G. Fletcher, B.A. Cornell, William & Mary Law School, Class of 2014. The original Spanish version of this article was published in the weekly column La Ley en la Red, that the author writes for Spain´s newspaper ABC.es. I wish to thank Professor Eric Goldman for his kind invitation to write this guest post in his excellent blog.]

[Eric's note: I thought this was an interesting response to my hot topics presentation from a European perspective, so I'm delighted to share it here.]

The situation in the United States regarding intellectual property on the Internet provides a magnificent perspective to evaluate the schools of thought currently evolving in both Europe and Spain.

Thanks to the generosity of Eric Goldman of Santa Clara University in California, I have had the opportunity to immerse myself in this action. Goldman is one of the foremost authorities on Internet law in the United States, and he typically delivers an annual lecture discussing the primary developments and occurrences in the area that have transpired in the preceding months. Its text is available on the Internet.

For our purposes, the main points of his work can be categorized into two overarching themes.

The first refers to what Goldman describes as "perennial questions," which is in turn divided into three categories: the utilization of keywords in online publications (for example, the Adwords system on Google); the liability of intermediaries, such as Amazon, for the commercialization of products on its platform that infringe on intellectual property rights; and the liability of intermediaries that store content (e.g., YouTube).

In response to the matter of keywords, Goldman suggests a liberal approach that allows the use of keywords in trademarks and registered, commercial trade names, citing as support both recent doctrine and case law proffered in the May 2012 Trademark Trial and Appeal Board decision of STK v. BackRack. The main reasoning lies in the fact that, although the majority of Internet users search for a keyword that contains a registered trademark, or the registered product itself (i.e., "Kleenex," without going any further), a lot of other users would like to be shown similar products on an equal basis. In spite of all of this, Goldman does highlight the reality that there are several unresolved important cases on this subject, four of which pertain to Google and another which is currently being reviewed by the Supreme Court of Wisconsin.

With regards to Amazon, Professor Goldman cited a 2012 ruling from the California Court of Appeals that absolved a company of liability for third party commercialization of counterfeit goods, even though they had received notification of this alleged infraction from the trademark holder. Rightly, Goldman draws the conclusion that simple notification on the part of the intellectual property rights owner is not sufficient to convey liability to sites such as Amazon; however, the ruling also introduces the possibility that companies such as Amazon may reject abusive claims from the holders of such rights.

Finally, with respect to content storage, Goldman highlights an August 2012 ruling from a federal court that excludes the viewing of videos embedded in hyperlinks from consideration as copyright infringement, effectively ruling out all liability for the owners of the site in question.

Eric Goldman refers to the aforementioned second section as "Post-SOPA Battlefields." Three points stand out from this section: the criminal prosecution of the founders of MegaUpload by the U.S. Department of Justice; the seizure of domain names by the U.S. Immigration and Customs Enforcement (as was the case with Spain´s Rojadirecta); and international treaties such as ACTA. The first two fully address a critical issue in Internet law: the downloading of protected content, specifically through hyperlinks that make it possible to access such content without having to download or save them to your own server. The third, regarding ACTA, is a theme that has already been addressed in other installments of La Ley en la Red, to which I now refer.

From the presentation, I have distilled my own thoughts about three conclusions from--and for--Europe.

The first arises from the fact that the "perennial questions" to which Goldman alludes all commonly reference intermediaries in the information society, whether they are access providers or content providers; in other words, whether they are Movistar or Facebook. What confirms this is that, in the U.S., the issue of intermediaries plays a crucial role among legal questions relating to the Internet, particularly in all matters concerning potential liability for allegedly illegal acts committed by their users.

One of the main conclusions that after years studying these themes I have been able to extract is that this same thing happens in Europe, in the sense that intermediary liability is one of the undisputed "star themes" of European Internet law, especially if one takes into account its absolute uniqueness; regardless of the peer principles utilized in such dispute resolution--which have a more or less general anchor--the underlying conflicts here arise and develop only on the Internet.

The second big conclusion can be drawn from the liberal trend, expressed by Goldman, pertaining to the use of keywords for online advertising, the activities of e-commerce platforms such as Amazon, and the legality of streaming videos through embedded links. In the U.S., thanks to the liberal interpretation of applicable regulations, a growing openness with respect to online business activities is being achieved.

It is interesting to observe this increasingly open interpretation, which has also been picked up in Europe with respect to one of the same issues--that of keywords. Judgments of the European Court of Justice released in March 2010, specifically the Louis Vuitton and Viaticum et Luteciel cases, point in the direction of excluding strict liability for Google under circumstances similar to the aforementioned American cases, and instead subjecting that company to general guidelines of electronic commerce liability provided by European legislation.

This begs the question as to why such a propensity for openness in Europe does not extend to the commercial activities of Amazon or other similar websites. One already dated judgment from the District Court of Rotterdam, Netwise v. NTS (Dec., 2002), reaches the opposite result in similar facts regarding eBay, as the Court urged the copyright holder to act against the popular online auction site.

However, those more recent and authoritative cases adjudicated by the European Court of Justice could easily assert their influence over these assumptions because, as also argued by the said Court, it is not Amazon or Google who, as entities, to infringe on intellectual property, but instead those users who utilize protected names or trademarks without authorization.

More questionable is the assumption relating to embedded links. In Europe, the use of these by third linking websites has always been considered, especially by legal doctrine, as a breach of copyright, because, by definition, with this type of link it is not possible to dispel any confusion over the authorship of the content. In this sense, the jurisprudence cited by Goldman is certainly groundbreaking, even, I dare say, if it were to catch on in his own country.

The third and final conclusion pertains to the United States' involvement in multiple, some international, judicial fronts to combat Internet piracy. One battle scene that Goldman opines to be of little use is SOPA, characterizing it as the failed Stop Online Piracy Act that tried to push through some members of the American legislature and that, in his own view, “will happen without any legislation”.

This criteria offered by the professor from Santa Clara seems more concordant with the European point of view. In this vein, it is enough to cite the ruling of the European Court of Justice in Promusicae v. Telefonica (Jan. 2008). Not to mention ACTA, whose ratification on the part of the European Union and its member states is now more than in doubt, for these same reasons.

After all, even though the European Union and its Member States have also become "entangled" on multiple judicial antipiracy fronts, it is certain that for the most part, the views that have been taken have always been more moderate in their defense of intellectual property, especially when it conflicts with fundamental rights such as privacy and freedom of expression.

Posted by Eric at 09:25 AM | Copyright , Derivative Liability , Trademark | TrackBack

November 05, 2012

With Rosetta Stone Settlement, Google Gets Closer to Legitimizing Billions of AdWords Revenue (Forbes Cross-Post)

By Eric Goldman

After 3+ years of litigation, Google ($GOOG) and Rosetta Stone ($RST) settled Rosetta Stone's trademark lawsuit over Google AdWords. The settlement terms are confidential, but a joint statement published in Reuters says that the parties will "meaningfully collaborate to combat online ads for counterfeit goods and prevent the misuse and abuse of trademarks on the Internet." This does not clarify if Google will do anything more than it's currently doing, or if Google will do something special for Rosetta Stone. It's possible neither happened. The statement also doesn't indicate if money changed hands.

As a result, it's hard to determine who "won" this litigation. But even if the settlement terms favored Rosetta Stone (and I wonder about that), I would be surprised if those results justified three years of litigation costs. Rosetta Stone might have cash to burn, but most litigants who threaten Google's cash cow will not. I continue to believe that trademark lawsuits against Google for AdWords is categorically a losing proposition for the plaintiff. Trademark owners, beware.

Irrespective of the specific settlement terms, ending this case is a strategic win for Google because it takes out the last "major" US trademark owner challenger to AdWords. Combined with the recent dismissal of the Jurin lawsuit, Google is now down to two pending US trademark lawsuits over AdWords: CYBERsitter and Home Decor Center. Despite CYBERsitter's recent intermediate "win," I don't think either of the two remaining lawsuits are dangerous to Google. As a result, Google is tantalizingly close to successfully running the table on all of the US trademark challenges to its AdWords practices. When this happens, Google will have legitimized the billions of dollars of revenues it makes by selling trademarked keywords in AdWords.

Otherwise, with this case ending by settlement, the Rosetta Stone lawsuit did little to shape trademark law. The district court's opinion was a complete win for Google, but the Fourth Circuit reversed the district court on several key points but didn't provide much useful precedent. Most of the key legal issues remain unresolved, but if Google knocks out the CYBERsitter and Home Decor Center lawsuits, no one else may emerge to test Google's practices.

The case library (see also the Joint Appendix material):

Posted by Eric at 09:02 AM | Derivative Liability , Search Engines , Trademark | TrackBack

October 26, 2012

Google Gets Unwanted Ruling in AdWords Trademark Lawsuit--CYBERsitter v. Google

By Eric Goldman

CYBERsitter LLC v. Google, Inc., 2012 WL 5873650 (C.D. Cal. Oct. 24, 2012)

This is one of three remaining trademark lawsuits against Google for AdWords. The other two pending suits are Rosetta Stone and Home Decor Center; Google just won the Jurin case. In this ruling, Google suffers a preliminary loss in the CYBERsitter case on a couple of key points. I still think Google will eventually win this case one way or another, but it's still a bummer ruling for Google. It also is a signal that Google may have an uphill battle with this judge.

Venue Selection Clause

CYBERsitter had been an AdWords advertiser until 2010. Google invoked the venue selection clause in its AdWords agreement to pull the case from Los Angeles to the Silicon Valley. The court rejects Google's request, saying that a trademark owner's lawsuit against Google is outside the AdWords agreement's scope, i.e., a trademark lawsuit has nothing to do with the basic ad network-advertiser relationship. While I see the court's point, this ruling does conflict with the uncited Flowbee and Parts Geek decisions and possibly others, like the uncited TradeComet decision.

47 USC 230

Google tried to clean up some of CYBERsitter's claims via 47 USC 230. Being generous to the judge, the opinion here is garbled. Here's what I think happened:

* the state false advertising claim survived because Google might have "developed" the ad.
* the state law claims for "trademark infringement, contributory infringement, unfair competition, and unjust enrichment" are struck down "to the extent that Plaintiff’s state law claims attempt to hold Defendant liable for infringing content of the advertisements at issue" because CYBERsitter didn't plead that Google made a "material contribution" to the ads. I don't really understand how Google might have "developed" the ads for false advertising purposes but failed to make a "material contribution." I don't understand why the judge uses different vernacular for these claims, either.
* the state trademark claim nevertheless survives to the extent that it tries to treat Google as a direct infringer for selling trademarked keywords.
* the contributory infringement also survives for reasons I don't understand, given that some of it appears to be based on the ad content, which the court had already said Section 230 preempted.
* the 17200 claim survives predicated on the trademark and false advertising claims.

I wonder how many of these rulings would survive on appeal. The court is right that Section 230 applies to third party content and not first party actions, but I'm not sure the court fully understood how to apply that distinction. At minimum, the judge seemed to bend over backwards to preserve the plaintiff's claim. It also matters that Google sought a 12(b)(6) motion to dismiss, so all inferences had to be against Google. I'm keeping my fingers crossed that the judge will modulate his scrutiny of the plaintiff's arguments at the summary judgment stage.

Posted by Eric at 08:45 AM | Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack

October 25, 2012

Google Defeats Trademark Challenge to Its AdWords Service--Jurin v. Google (Forbes Cross-Post)

By Eric Goldman

Jurin v. Google, Inc., 2012 WL 5011007 (E.D. Cal. October 17, 2012).

Google ($GOOG) makes billions of dollars a year selling AdWords ads triggered by third party trademarks. Over the past decade, trademark owners have brought about 20 lawsuits against Google challenging these ad sales. These lawsuits have ranged from high-stakes class action lawsuits (the FPX lawsuit) to well-funded challenges by big trademark owners (e.g., the Rosetta Stone ($RST) and American Airlines lawsuits) to poorly funded lawsuits by no-name trademark owners like the case I discuss in this post. In a remarkable litigation tour-de-force, Google has never definitively lost any of these cases in court (though it has occasionally lost intermediate rulings). At the same time, Google hasn't definitively won any of its cases in court either. This makes Google's recent wi in an AdWords trademark case noteworthy.

Daniel Jurin owns the trademark "Styrotrim" for building materials. The first time he sued Google, he lost his lawyer and voluntarily dismissed the lawsuit, which led to a $6,000 sanction against him. Jurin found a new attorney and tried again, and even got a surprising intermediate win on his "false association" claim. However, Jurin lost his second lawyer--and his litigation mojo. As a result, Jurin didn't contest Google's summary judgment motion, giving Google an easy courtroom win. With minimal analysis, the court says that Jurin didn't provide any evidence of actionable consumer confusion, false advertising or sufficient fame to support a trademark dilution claim.

It's hard to get too excited about a Google win where the opponent stopped showing up. Still, for Google, this is a rare final ruling in its favor. Google got a partial win in the GEICO case in 2005, leading to a settlement. Google also got a complete win in the Rosetta Stone case at the district court, but the appellate court reversed that win. Assuming Jurin won't appeal this ruling (after all, he effectively abandoned the case), this may be the first time Google won an final judicial decision upholding the legitimacy of its AdWords trademarked keyword ads sales.

Jurin's fizzling out also reminds us that suing Google for trademark infringement remains a bad business decision. Google will spend whatever it takes to defend its cash cow--far more than it's worth to any individual trademark owner, especially a small player like Styrotrim, to sue Google. Recently, we've seen a couple of ill-advised new trademark lawsuits by other small-time players (CYBERsitter and Home Decor Center). Google will win those cases, probably because those plaintiffs will give up--just like many other trademark owners (including American Blinds, Ascentive, Ezzo, Rescuecom, Parts Geek, Soaring Helmet and others) have voluntarily done after tangling with Google.

The most dangerous pending AdWords-related trademark lawsuit is the Rosetta Stone case. Despite the Fourth Circuit's revitalization of the case, I believe Google will win that lawsuit (or settle on favorable terms). As a result, I predict that Google will soon finish the job of establishing a clean bill-of-health on the legitimacy of selling third party trademarks to trigger keyword advertisements. Microsoft ($MSFT), Yahoo ($YHOO) and other sellers of trademark-keyed ads (such as Twitter) should all benefit from that outcome too.

For more on the policy considerations underlying trademark challenges to AdWords, see my papers Deregulating Relevancy in Internet Trademark Law and Brand Spillovers. Also see my recent Forbes post, Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown.

Posted by Eric at 03:48 PM | Derivative Liability , Internet History , Search Engines , Trademark | TrackBack

October 08, 2012

Q3 2012 Quick Links, Part 1 (Trademarks/Domain Names, Patents, Trade Secrets)

By Eric Goldman and Jake McGowan

Trademarks/Domain Names

* AdAge: “Consumers Don’t Really Know Who Sponsors the Olympics.” This reminds us that trying to protect against "sponsorship confusion" is futile. For example: 16% believed Google sponsors the Olympics; and of those, 60% feel more positively towards Google because of that (factually faulty) perceived sponsorship.

* Suntree Technologies, Inc. v. Ecosense Intern., Inc., 2012 WL 3832458 (11th Cir. Sept. 5, 2012):

"Because Suntree failed to present evidence of an intent to mislead or confuse, or of actual confusion, we need not reach the question whether initial interest confusion is actionable in the Eleventh Circuit"

You know where I stand on that question!

* Diller v. Barry Driller, Inc. 2012 WL 4044732 (C.D. Cal. Sept. 10, 2012):

Defendants have not successfully parodied Plaintiff and they cannot defeat likelihood of confusion on that basis. First, nothing on Defendants' website itself sets up the “clear distinction” required by Dr. Seuss between Plaintiff on the one hand and “Barry Driller” on the other to convey to the reasonable viewer that the use of “Barry Driller” is a parody of Plaintiff. Second, even if a parody of Plaintiff, Defendants are using “Barry Driller” purely commercially as a source identifier to sell their internet-streaming television service, and their use therefore falls within the Lanham Act, as in White. Finally, as in Doughney, when a visitor initially sees the “barrydriller.com” domain name, he or she does not see any other information to suggest that the website might be a parody of Plaintiff."

* Teachbook gives up against Facebook and renames itself TeachQuest. Prior blog post.

* Lens.com v. 1-800 Contacts (Fed. Cir. Aug. 3, 2012):

"LENS mark is used only in connection with the sale and transportation of contact lenses via the Internet. Although the ordering service is facilitated through software, the record does not indicate that consumers have any reason to be aware of any connection between the LENS mark and Lens.com’s software."

Prior blog post.

* If you're selling domain names that have been blocked by Google, you really ought to disclose that. Then again, if you’re buying domain names, you really should ask about that.

* More Congressional questions about ICE’s domain name seizures.

* The Saudi government objects to numerous new gTLD proposals on moral grounds.

Patents and Trade Secrets

* Judge Posner: Why There Are Too Many Patents in America

* The proposed SHIELD Act, Saving High-tech Innovators from Egregious Legal Disputes. It’s a proposal to monkey around with fee-shifting in patent law to suppress trolling. One of the many topics at our November conference, Solutions to the Software Patent Problem.

* American Chemical Society v. Leadscope: Ohio Supreme Court Affirms $26.5 Million Award [to the Defendant] for Malicious Trade Secret Litigation.

* Bloomberg BNA (BNA paywall): "A review and analysis of the more than 120 [Economic Espionage Act] prosecutions suggests that neither government, nor industry is doing enough to protect against the theft of trade secrets by foreign entities and unscrupulous competitors. The Department of Justice must substantially increase the number of EEA prosecutions if the EEA is to truly serve as a deterrent against thefts."

* Protecting American Trade Secrets and Innovation Act of 2012. A proposal to create a federal civil cause of action for trade secret misappropriation, including a provision for ex parte seizures. I don't know who's advocating for something as ridiculous as this, but we need vigilantly guard against unneeded and dangerous expansions of trade secret law.

* Solicitor General decides not to file appeal in United States v. Nosal. Prior blog post.

* Wired: Incompetent or Shrewd? 7 Tech Companies That Leaked Their Own Secrets

Posted by JakeMcGowan at 02:13 PM | Domain Names , Patents , Trade Secrets , Trademark | TrackBack

October 07, 2012

Battle Over LinkedIn Account Between Employer and Employee Largely Gutted--Eagle v. Morgan

[Post by Venkat Balasubramani, with comments from Eric]

Eagle v. Morgan, 2012 WL 4739436 (E.D. Pa.; Oct. 4, 2012)

We’ve repeatedly posted about employer-employee (or ex-employee) disputes involving social media accounts (PhoneDog; Maremont; Kremer; Insynq). Eagle v. Morgan is in the same line, this time involving a LinkedIn account. Here’s our prior post on this case, where the court dismissed some claims but allowed others to proceed: Another Set of Parties Duel Over Social Media Contacts -- Eagle v. Sawabeh.

As relevant to the resolution of the latest round of motions, here's the court’s description of the LinkedIn account at issue:

Eagle used her account to promote Edcomm’s banking education services; foster her reputation as a businesswoman; reconnect with family, friends, and colleagues; and build social and professional relationships. [Another employee] assisted Eagle in maintaining her LinkedIn account and had access to Dr. Eagle’s password.

After Edcomm got acquired, the new owner eventually terminated Dr. Eagle. The company immediately took over her LinkedIn account, changing the account's login credentials and substituting in the name and photo of Dr. Eagle's replacement. Unfortunately for Dr. Eagle, the court grants defendants’ motion to dismiss her federal claims based on the Computer Fraud and Abuse Act and the Lanham Act.

CFAA: On the CFAA claims Eagle alleged damages due to opportunities she missed out on because she did not have access to her LinkedIn account. The court says this type of loss isn't sufficient to satisfy the jurisdictional threshold under the CFAA. I sympathize with Morgan and her pro se status, but her evidence that she missed out contacts with people who in the past had offered “$100,000+ business opportunit[ies]” seemed flimsy at best. (Who among us hasn't received messages--on social media--that promise a $100,000+ opportunity!)

Lanham Act: Eagle’s Lanham Act claim failed because the court found that, when Edcomm terminated Eagle, it switched out Eagle’s name and photograph (which was “completely deleted” from the account).

State law claims: Defendants also asked the court to decline jurisdiction over the state law claims and dismiss those, but the court declines (and declines defendants’ summary arguments to have them dismissed on the merits). Eagle's glimmer of hope is that she still has a conversion claim which the court says will proceed to trial.

Yikes. I’m not sure where to start with this one. As with all social media disputes, I really wonder how much is at stake in terms of real dollars and cents. Interestingly, Eagle was represented by multiple lawyers, but they both exited the picture, so she’s now proceeding pro se.

So, on to the million dollar question: is the LinkedIn account a corporate asset or a personal asset? My understanding from the record was that this was a personal LinkedIn account and not a “company account”. So I’m struggling to see how it should get treated as a company account. For Dr. Eagle, it’s more like a resume. Sure, the company included declarations that said it switched out the picture and name from the account after terminating Eagle, but does this really make any sense? People are going to try to connect with a particular person, and instead they will be directed to the LinkedIn profile of someone else? (I'm surprised the court did not delve into the details of what type of account is at issue, but courts seem to have this habit.)

As with all of these disputes, control over the account itself should be separated from access to contact information or ongoing ability to contact customers, which is what the employer really cares about. I'm not suggesting she should win based on a Lanham Act claim, and don't mean to set off Eric's "initial interest confusion" radar, but it doesn't make sense from the standpoint of expectations to have the company take over someone's personal account.

There were two unusual facts in this case. First, the company said that as a matter of practice, the LinkedIn account was maintained for the company's benefit, and after employees left, the company took control over the accounts of ex-employees. Second, the employer had access to the account and the password. (In this case, it was under the auspices of helping Dr. Eagle “maintain” the account, but still.)

This leads to the second million dollar question: how would this case have fared under California’s new social media privacy law? It depends on whether this account is a “personal” account or a “business-related” account? Like most other social media accounts, this one is a mix of the two. I’m also not sure whether that law—which was intended to provide for employee privacy—could inadvertently affect ownership disputes such as this one. (See Eric’s post on the statute and its problems.)

Although the court correctly resolves the CFAA and Lanham Act claims, I lean away from letting an employer take control over Eagle's LinkedIn account if it was just her personal account. To the extent there were trade secrets at play or other legitimate competitive restrictions, it makes sense for the court to impose to restrictions and include social media contacts in any such restrictions, but it’s a bizarre result that would allow the company/employer to control her personal LinkedIn account.

Employers and employees: we appreciate the blog fodder, but for your sakes, please spell out in writing in advance who owns what accounts. It will save you a lot of hassle and lawyers’ fees.

[Image credit: Shutterstock]

_________

Eric's Comments

1) Social media services offer multiple types of accounts. On Facebook, there are personal profiles and business pages. On LinkedIn, there are completely personal accounts, accounts that might be attached to one person but really are used as corporate accounts by that person (I'm thinking of corporate recruiters with a pro account, for example), and group pages. It may not make a difference to the legal analysis, but it's crucial for courts to distinguish between the different types of accounts.

2) Even social media accounts that start out as "personal" accounts can migrate into corporate accounts by how they are used.

3) If you use your account for both company and personal uses and your employer has your social media login credentials, chances are it's become a corporate account in practice. If Dr. Eagle's account really was Edcomm's legally, kudos to them for getting the login credentials before Dr. Eagle walked out the door.

4) The fact that social media accounts come in different flavors, and they can change their character over time, reinforces how completely stupid it is that California tried to cleave "personal" social media accounts from the universe of social media accounts without expressly addressing these different scenarios. Under the statute, was Edcomm wrong for asking for Dr. Eagle's login credentials initially? I have no clue. Being unable to answer that question in a test case that comes out merely days after a newly minted law (and was ongoing while the legislature was doing its work) reminds us that the legislature did a crappy job.

5) Venkat said it, but we can't reinforce it enough: multi-round legal battles over social media accounts are a war of attrition that neither side can ever win.

Posted by Venkat at 10:52 AM | Publicity/Privacy Rights , Trademark , Trespass to Chattels

September 24, 2012

Latest "Hot Topics in Internet Law" Talk Slides

By Eric Goldman

Earlier this month, I spoke at the "IP and the Internet" conference sponsored by the California State Bar's IP Section on the perennial favorite topic, "Hot Topics in Internet Law." My talk slides. Given the conference's theme, I focused the talk on cyberlaw IP-related topics rather than the broader universe of cyberlaw topics.

Some related posts:

* "Hot Topics in Internet Law" Talk Slides (June 2012, to SFIPLA)
* "Recent and Future Developments in Trademark Law" Talk Slides (July 2011, to SVIPLA)
* "Hot Topics in UGC Liability" Talk Slides (June 2011, SCU event)
* "Trends in Internet Law" Talk Slides (Nov. 2010, to the IP Institute by the CA State Bar's IP Section)

Posted by Eric at 01:11 PM | Copyright , Derivative Liability , Trademark | TrackBack

September 21, 2012

Cafepress Suffers Potentially Significant Trademark Loss for Users' Uploaded Designs (Forbes Cross-Post)

Cafepress.com ($PRSS) provides a popular user-to-user marketplace websites that allows users to upload logos or slogans and sell items bearing those logos or slogans, which Cafepress.com manufactures on demand (a so-called “print-on-demand” service). Like any other user-generated content website, there’s always a chance that users will upload material that infringes third party copyrights and trademarks. A recent adverse court ruling against Cafepress.com raises some troublesome questions about Cafepress.com’s--and other print-on-demand vendors'--potential trademark liability exposure for its users’ uploads.

The case involves a trademark for the word phrase “Born to Rock,” which the plaintiff initially registered for electric guitars and subsequently registered for T-shirts. These trademark registrations (especially the latter) may be problematic. First, many other folks have used the phrase "Born to Rock" for quite some time (including Cafepress.com users), so the plaintiff may have problems showing that it is the first commercial user of the phrase or that consumers associate the phrase only with it. Second, the phrase is capable of many different meanings that have nothing to do with electric guitars or the plaintiff. For example, take a look at some of the T-shirt designs the plaintiff complained about:

It's quite a reach for the plaintiff to think its trademark registrations should apply to "Born to be a rock star" or "Born to Rock" associated with rocking chairs.

Background to the Litigation

The plaintiff repeatedly sent trademark takedown demands to Cafepress.com. To Cafepress.com’s credit, it did not simply accede to the plaintiff’s overreaching demands. While Cafepress.com removed some users’ items in response to the plaintiff’s complaints, it refused the takedown demands for other items. Unsatisfied with Cafepress.com’s response, the plaintiff sued for trademark infringement.

Cafepress.com moved for summary judgment on two grounds: (1) it didn’t make a “use in commerce” of the plaintiff’s trademark, and (2) the “descriptive fair use” doctrine. In doing so, Cafepress.com didn’t press two other potentially strong arguments: (a) that the plaintiff’s trademark was invalid, and (b) consumers weren’t confused in the marketplace. Cafepress.com should be able to raise these arguments later. The opinion doesn’t reference another possible trademark defense for Cafepress.com, the “innocent printer” defense (15 U.S.C. 1114(2)(A)), though that may be a stretch due to the other marketplace services (such as payment processing) that Cafepress.com provides to its users.

“Use in Commerce”

The court rejected Cafepress.com’s argument that it doesn’t make a “use in commerce” as required by the trademark statute. This is not a particularly surprising result. After the 2009 Second Circuit ruling in the Rescuecom case, almost all online activity that has some commerciality to it qualifies as a “use in commerce.” In this case, the judge thought Cafepress.com made a use in commerce (emphatically so, calling Cafepress.com's argument “facetious”) because Cafepress.com manufactures and delivers the purchased items containing the allegedly infringing designs.

Descriptive Fair Use

Cafepress.com argued that the T-shirt references to “Born to Rock” weren’t intended to communicate a relationship with the trademark owner, and thus were not being used “as a trademark.” Normally this argument would apply to the trademark owner’s threshold right to sue at all, but “non-trademark use” is also an element of the defense of descriptive fair use (which allows the reuse of descriptive phrases for their lexical meaning). The court says that it cannot categorically declare merchandised items referencing “Born to Rock” as not making a trademark use, because a jury may find some of the T-shirts—such as those with guitar depictions—are plausibly associated with the trademark owner.

(Many trademark geeks will gnash their teeth about the obvious doctrinal problems with the judge’s ruling, including the fact that a plaintiff can’t satisfy its prima facie elements with a true non-trademark use, the shifted burden of proof between the prima facie case and an affirmative defense, and the judge’s introduction of consumer confusion into the descriptive fair use question).

Implications of the Ruling

Lack of a “Fast Lane” Defense. Trademark law often lacks a “fast lane” for ending unmeritorious trademark cases. In these situations, trademark defendants with winning cases validate their decisions only after incurring substantial time and expense. In my opinion, the lack of a fast lane is a defect of trademark law that ought to be fixed. For more on this, see this essay.

Here, Cafepress.com sought a relatively quick win on two legal theories. The court rejected that effort, saying that at minimum the case needs to go before a jury. That means that even if Cafepress.com wins this case (which I think it should), Cafepress.com will spend a lot of money to do so—much more than the profits it has made and will make from “Born to Rock” items.

Further, because the “use in commerce” and “non-trademark use” fast-lanes didn't work, Cafepress.com likely can’t quickly and cheaply defeat future claims by other trademark owners. This may have some bearing on its policies going forward (see below).

Contrast With Tre Milano v. Amazon.com. I recently blogged about a California appeals court case, Tre Milano v. Amazon.com ($AMZN), where Amazon defeated trademark claims based on user-vended items because Amazon was a “transactional intermediary.” Although Cafepress.com is also a “marketplace” for user-to-user sales, Cafepress.com differs from Amazon in a key respect: Cafepress.com manufactures the items on demand. This factual difference means Cafepress.com faces potentially greater trademark liability than Amazon.

What Will Cafepress.com Do?

Even if Cafepress.com ultimately wins this case, this ruling puts Cafepress.com—and all other websites in the print-on-demand space, such as Zazzle—in an awkward position. This ruling treats Cafepress.com as directly liable for user-caused trademark infringement. If that's the law, then Cafepress.com can’t simply intervene only when it receives trademark takedown notices; it could be liable even if it never receives a takedown notice. Plus, even if Cafepress.com defeats that liability with respect to specific trademark owners (because, for example, their trademarks turn out to be invalid), Cafepress.com may not be able to vindicate its decisions cost-effectively. Thus, Cafepress.com's legal defense costs may be going up.

Despite this ruling, Cafepress.com could still wait for, and then respond more aggressively to, trademark takedown notices. For example, in respond to this plaintiff's demands, it could have categorically wiped out all of the "Born to Rock" designs, even those that probably weren't infringing. While more aggressive takedowns would placate most trademark owners in most circumstances, it's not clear this would completely solve the legal problem (it depends on whether takedown notices are a precondition to Cafepress.com's liability), and overinclusive takedown responses would reduce Cafepress.com's revenues.

A third alternative would be to more aggressively pre-screen users' items for trademark concerns. This is also unattractive. Aggressive pre-screening is costly and not scalable; it’s error-prone (likely to find false positives and false negatives); Cafepress.com sellers won't like the delays and false positives; and it could exacerbate Cafepress.com’s legal liability for the false negatives. Thus, from my perspective, this ruling leaves Cafepress.com with all-around bad options.

I approached Cafepress.com for an official statement, and they sent the following:

CafePress recognizes that the court believes that there are factual disputes that precluded summary judgment in CafePress' favor. CafePress is confident that when the court and the jury hear the full record that they will see that there is no infringing content in this case, and will find in CafePress' favor. CafePress is a print on demand site where its users create all of the content that they or their purchasers select to be placed on items of merchandise. CafePress does not create the content or select the products on which the content is applied. CafePress stands up for the rights of its users to make lawful, non-infringing and fair uses of material and engage in free speech and express. CafePress intends to vigorously defend its position and its users' right of free speech in their content posted on the CafePress website.

Case cite: Born to Rock Design Inc. v. CaféPress.com, Inc., 2012 WL 3954518 (S.D.N.Y. Sept. 7, 2012). Also see Born to Rock Design's initial complaint.

My prior legal coverage of Cafepress.com-related litigation:

* Angie's List's Telephone and Fax Information Services May Be Immunized by Section 230--Courtney v. Vereb (2012)

* Online Booksellers Get 47 USC 230 Immunity for Publisher-Supplied Marketing Collateral--Parisi v. Sinclair (2011)

* Life May Be "Rad," But This Trademark Lawsuit Isn't--Williams v. CafePress.com (2010). This case held that Cafepress.com didn't face liability for taking down a user's design in response to a trademark takedown demand. The case also illustrates that Cafepress.com continues to struggle with (unreasonable?) trademark demands over thin trademarks--in that case, "Life's Rad."

* Print-on-Demand "Publisher" Isn't Liable for Book Contents--Sandler v. Calcagni (2008)

* Connecticut Blogger Not Subject to Texas Jurisdiction--Healix Infusion v. Helix Health (2008)

* Griper Selling Anti-Walmart Items Through CafePress Doesn't Infringe or Dilute--Smith v. Wal-Mart (2008)

* CaféPress Denied 230 Motion to Dismiss--Curran v. Amazon (2008)

My 2007 IP Survey course exam used a problem involving Zazzle and personalized postage stamps. See the exam and sample answer.

Posted by Eric at 08:48 AM | Derivative Liability , E-Commerce , Trademark | TrackBack

September 19, 2012

Newly Released Consumer Survey Indicates that Legal Concerns About Competitive Keyword Advertising Are Overblown (Forbes Cross-Post)

By Eric Goldman

Competitive keyword advertising—buying ads triggered by a keyword search for a competitor’s trademarks at venues like Google AdWords, Yahoo and Microsoft’s Bing—has generated enormous legal angst over the past decade, including hundreds of law review articles, occasional legislative proposals and countless lawsuits. Despite this, many commentators (including me) have questioned how competitive keyword advertising harms consumers. A new independent consumer survey gives further reason for skepticism. The survey finds little evidence of consumer harm, and it prompts questions about the economic wisdom of bringing lawsuits over competitive keyword advertising.

Although competitive keyword advertising generates billions of dollars a year in revenue, only a few publicly available consumer surveys have evaluated its effects on consumers, such as whether consumers suffer legally recognizable confusion from the ads. Most of the publicly available consumer surveys were prepared by litigants in the course of their litigation, and not surprisingly their outcomes reflect the financial interests of their sponsors:

With this kind of "research," we desperately needed an independent survey that wasn't financially sponsored by a litigant. To our rescue comes Profs. David Franklyn (USF) and David Hyman (Illinois), who conducted three independent consumer surveys and now present the results in their newly posted article, Trademarks as Keywords: Much Ado About Something? I encourage you to read the article in its entirety (and form your own opinions about the credibility of its methodology). In this post, I'll highlight two of their findings.

Consumers May Use Brands as Search Terms, But That Doesn't Mean They Are Searching Only for the Brand. The article says:

“although a majority of consumers use trademarks to search for the trademarked product only, sizeable minorities use trademarks to search for the trademarked product along with similar competing products sold by other companies.”

Many brand owners believe the opposite: consumers who use their brands as search keywords must want their brands--and only their brands, not their competitors' offerings. But consumers deploy many search strategies, including using a well-known brand as a "proxy" for the class of goods. Imagine this: what synonyms would you use to search for goods similar to "The Clapper" or "Slinky"? When there aren't good synonyms, using the brand as a proxy search term makes sense. But even when there are obvious generic synonyms, consumers still might choose a branded search term. For example, if you already know you like the Nikon Coolpix p510, you might choose to search on that term, rather than searching on generic keywords like "digital camera," as the fastest way to find the model's close competitors. I explore this issue in some detail in my 2005 article, Deregulating Relevancy in Internet Trademark Law.

With this in mind, giving brand owners the legal power to control search results isn't in the consumers' best interests. Instead, brand owners' efforts to suppress competitive keyword advertising raise anti-competitive concerns. Many consumers want to see competitive options in their search results (as the article says, “a majority of consumers use brand names to search primarily for the branded goods, but most consumers are open to purchase competing products"), but that's exactly what brand owners don't want them to have.

Brand Owners May Not Be Suffering Much Competitive Diversion from Competitive Keyword Advertising. Many brand owners feel that competitors who engage in keyword advertising on their brands are "diverting"--i.e., stealing--their consumers. For example, in 2007, one (clueless) state senator argued that consumers seeing competitive keyword advertising were being “shanghaied by a pirate.”

The article says:

“the actual probability of diversion turns out to be quite modest….the task of differentiating diversion from ordinary search behavior is going to be challenging.”

We can corroborate the article's empirical finding by looking at the amount of money that brand owners have lost from competitive keyword advertising (as shown in official court records). Some examples of financially dubious lawsuits by brand owners that I've seen over the years:

In Storus v. Aroa, the defendant advertiser got 1,374 clicks over 11 months. Based on the low cost of the goods at issue, I estimate each click was worth about $1--making the lawsuit's value less than $1,400.
In King v. ZymoGenetics, the defendant advertiser got 84 clicks.
In Sellify v. Amazon, the defendant got 1,000 impressions and 61 clicks.
In 800-JR Cigar v. GoTo.com, the search engine defendant generated $345 in revenue (not profit, just revenue) from the litigated terms.
In 1-800 Contacts v. Lens.com, Lens.com made $20 of profit from competitive keyword ads. 1-800 Contacts unsuccessfully tried to hold Lens.com responsible for affiliate ad buys which generated about 1,800 clicks, which under the most favorable computations were worth about $40,000. 1-800 Contacts spent no less than $650k (and was willing to spend $1.1M) on its lawyers in this case.
Finally, in InternetShopsInc.com v. Six C, the defendant got 1,319 impressions, 35 clicks and zero sales.

To me, the lessons are clear. Brand owners usually are wasting money--often, a LOT of money--bringing lawsuits over purportedly lost business attributable to competitive keyword advertising. In fact, there's good reason to believe that brand owners lose little, if any, profits from the practice; and even if they do, the costs of the law vastly exceed those lost profits, making the litigation unprofitable. This article gives brand owners more reasons to question the cost-benefit of litigation over keyword advertising.

[Note: I've written extensively on the keyword advertising topic. In addition to my Deregulating Relevancy article, you may be interested in my articles on Brand Spillovers and Online Word of Mouth.]

Posted by Eric at 07:40 AM | Search Engines , Trademark | TrackBack

August 26, 2012

Amazon.com's Anti-Counterfeiting Efforts Blessed by California Appellate Court (Forbes Cross-Post)

By Eric Goldman

A California appellate court has blessed Amazon.com's ($AMZN) efforts to police counterfeit goods sold by its third party merchants. This is especially good news for Amazon because the leading precedent on the topic had blessed eBay's ($EBAY) more aggressive anti-counterfeiting efforts, so it wasn't clear Amazon would be equally protected even if it had less aggressive practices. Nevertheless, the news is not all good for Amazon. The opinion indicates that Amazon is having some difficulty keeping counterfeits off its site. If Amazon can't fix that, it could face both continued legal hassles and a consumer backlash.

The opinion tells a poignant story about a manufacturer's problems with counterfeiting. The manufacturer, Tre Milano, makes the "InStyler Rotating Hot Iron Hair Straightener." Tre Milano claims that the item has been a marketplace success, and that it's a popular item to counterfeit. Putting aside the lost revenues to Tre Milano, counterfeit versions of the InStyler can create other problems: they pose significant safety hazards to consumers, and unwitting buyers of the defective or poorly constructed counterfeit items are unfairly panning InStyler in consumer reviews.

Tre Milano has an active anti-counterfeiting program that includes buying goods to check if they are counterfeit and sending takedown notices to eBay and Amazon. It had an ongoing dialogue with Amazon. For example, the court says "From May 1, 2010 to April 28, 2011, Tre Milano sent 311 NOCI’s to Amazon." (NOCIs are "notices of claimed infringement," a type of takedown notice). To Tre Milano's chagrin, Amazon sometimes didn't honor its takedown notices when Tre Milano didn't confirm that it had done a test buy.

In this sense, Tre Milano and Amazon reached a typical impasse. Tre Milano has incentives to send takedown notices when sellers are setting low prices--maybe because they are counterfeiters, or maybe because they are overly aggressive discounters of legitimate goods or selling legitimate used goods. Either way, Tre Milano is fine with kicking those legitimate sellers out of the market as a collateral consequence of chasing counterfeiters. Meanwhile, Amazon doesn't want to kick legitimate merchants off its network simply based on self-interested allegations of bad behavior; this would sour its merchant relations and cost Amazon its cut of their sales. So Tre Milano doesn't care too much if its takedown notices are accurate, while Amazon cares a lot about the notice's accuracy.

The legal rules matter a lot to who bears the risk of errors in Tre Milano's takedown notices. If the law says Amazon has to assume Tre Milano's takedown notices are accurate (or bear liability for getting that wrong), then Tre Milano can send notices freely and Amazon will toss a lot of legitimate3 merchants overboard. In contrast, if the law says that Tre Milano has to verify the counterfeiting allegations before Amazon has to honor its takedown notices, then Tre Milano has to do more prep work and some counterfeit sellers will avoid the ax.

The court concludes that Amazon can ignore Tre Milano's unverified takedown notices because Amazon is a "transactional intermediary," not the actual seller of counterfeit goods. The court applies the same legal standards set by the Second Circuit in Tiffany v. eBay, even though (1) Amazon may have done less to police against counterfeits than eBay's practices endorsed by the Second Circuit, (2) Amazon acted as the payment service provider for its merchant sales, a service eBay didn't provide, and (3) Amazon didn't always remove items in response to takedown notices (in contrast, eBay always acted on Tiffany's takedown notices; the lawsuit was over Tiffany's demand that eBay should be even more proactive).

Obviously this ruling is good news for Amazon, but I think it's also good news for other e-commerce websites enabling third-party merchants to sell to consumers. Manufacturers routinely make unreasonable demands on e-commerce websites to do more to police against counterfeits. Here, the court rejected Tre Milano's demands on Amazon, and those demands were not nearly as unreasonable as many other demands that manufacturers make. Thus, this opinion sends a strong signal to manufacturers that they should tone down their anti-counterfeiting demands on e-commerce websites; and it gives some encouragement to e-commerce websites to stand up to overly aggressive manufacturer demands.

Even so, e-commerce websites can't simply ignore counterfeit sales on their websites, even if made by third party sellers. Doing too little anti-counterfeiting work can result in low judicial sympathy if challenged in court, and worse, it can undermine buyers' trust in the e-commerce site. In some cases, buyers are completely OK with counterfeit goods (such as luxury branded goods, where consumers may like the design or status and don't need an authentic good to achieve that goal), but buyers are not likely to be OK with counterfeit electronic goods like the InStyler due to the safety and quality issues. Even though Amazon may have dodged the legal bullet here, it's hardly comforting for Amazon consumers to know that Amazon hasn't figured out a reliable way to screen out sales of counterfeit InStylers.

Case cite: Tre Milano, LLC v. Amazon.com, Inc., 2012 WL 3594380 (Cal. App. Ct. August 22, 2012). Like so many California appellate court opinions, this was designed "not published" for no good reason, so it is not citable or binding precedent. For legal geeks: this opinion never explains why the lawsuit remained in state court despite Tre Milano's allegations of a Lanham Act violation.

Posted by Eric at 08:04 AM | Derivative Liability , E-Commerce , Trademark | TrackBack

August 15, 2012

Six-Month Retrospective of SOPA's Demise [Forbes Cross-Post, A Month Late!] + SOPA/PROTECT-IP/OPEN Linkwrap #3

By Eric Goldman

[This post is composed of three parts. The first part, all 2,700 words of it, is a cross-post from Forbes last month assessing where we stood 6 months after January 18, 2012. Sorry it's taken me so long to repost it. The second part is my third (and possibly final) linkwrap of SOPA/PIPA/OPEN links. I collected most of these links in January and have been slowly accreting more over the past 7 months. As you can imagine, a linkwrap doesn't improve with age. At this point, they are mostly for historical value, but you might enjoy the stroll down memory lane nonetheless. The third part is a comprehensive index of our SOPA-related posts on the blog.]
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Part 1: Celebrating (?) the Six-Month Anniversary of SOPA's Demise (Forbes Cross-Post)

Six months ago--January 18, 2012--was a major day in the Internet's history. Some of the most heavily trafficked websites went dark or rallied their users against proposed legislation called the Stop Online Piracy Act (SOPA) and its sister bill the Protect IP Act (PIPA). The resulting outcry effectively killed the legislation that day. But with 6 months of perspective, plus plenty of new developments, it's clear there may not be much to celebrate about the developments of January 18.

What Happened on January 18

January 18 witnessed some unprecedented political developments. In response to massive voter feedback to Congress, a remarkable 19 United States Senators (nearly 20% of all senators) either changed their position on PIPA (from supporting to opposing) or newly announced a position on PIPA by coming out opposed to it. I'm not aware of any other single day in American history when so many senators publicly changed their opinion on a pending bill in response to voter advocacy.

Even more remarkably, this meant consumers had squarely defeated a determined copyright owner lobby led by the MPAA, although they were hardly alone. (Trademark owners also supported the proposals, but they were less visible in the process). For decades, individual consumers have had virtually no voice in American copyright policy. Generally the process has been:

1) Copyright owners give lots of money to members of Congress.

2) Copyright owners then redeem this patronage by getting broad Congressional support for their legislative wish-lists.

3) The technology community, and other repeat-player groups that depend on third party copyrighted materials (like libraries), fight vigorously to make minor changes to the copyright owners' wish-list.

4) Congress passes the lightly modified proposal and then, feel self-satisfied, pats itself on the back for having engaged all of the relevant constituencies in a vigorous multi-stakeholder legislative process.

This cycle has played itself out a few dozen times over the decades, and SOPA/PIPA were well on their way to following this pattern--until January 18.

And then, an upset outcome. David defeated Goliath. The amateur boxer knocked out the undefeated heavyweight boxing champion. Copyright owners had never outright lost a legislative battle they choose to fight. Yet, on January 18, they did. And they lost that battle to consumers--the constituency who isn't even at the bargaining table. In the words of Vizzini from the Princess Bride: "Inconceivable!"

How January 18 Was a Turning Point

The defeat of SOPA/PIPA immediately shook the corridors of power and continues to ripple through policy circles. Two examples:

ACTA's Demise. The Anti-Counterfeiting Trade Agreement (ACTA) is a trade agreement putatively designed to encourage trans-border cooperation to fight counterfeiting. Unfortunately, ACTA did more than that, potentially upsetting existing delicate balances between IP owners and consumers. Worse, ACTA was negotiated virtually entirely out of the public eye. While industry insiders (such as the copyright lobby) had prominent seats at the table, consumers got very limited disclosures of the drafts and no meaningful opportunity to comment on the proposals. Thus, for consumers, ACTA had potentially unacceptable substantive terms and was developed via an unquestionably unacceptable process.

President Obama signed the agreement without getting Congressional approval, despite significant protests. Other countries started signing ACTA. ACTA looked like a fait accompli.

salajean / Shutterstock.com

Then, partially inspired by the SOPA/PIPA protests in the United States, European consumers started protesting ACTA. Their voices were heard. The European Parliament overwhelmingly rejected ACTA, which most likely takes all of Europe out of ACTA--which, in turn, largely moots ACTA. There are still wranglings and shenanigans involving ACTA, so it's too early to declare it dead. Still, the most likely outcome is that European consumers' protests scuttled an otherwise unstoppable international trade agreement on IP issues--just like US consumers derailed SOPA/PIPA. Could SOPA have been the first spark to ignite effective consumer input into future IP policy-making worldwide?

No Legislator Wants to Be "SOPAed." Back in the United States, politicians are walking on eggshells. Multiple Washington DC insiders have told me that no legislator wants to be "SOPAed," presumably a verb for having massive consumer protests melting the legislator's phones. To avoid the risk of being SOPAed, I'm hearing that some legislators are changing their proposals--presumably to tone them down--before they even are introduced. So even without lifting another finger, consumers may be beneficially influencing the legislative process.

How January 18 Didn't Make a Difference at All

For all of that good news, I believe the better analysis is that the events of January 18 made no real difference. Some examples supporting my conclusion:

SOPA's Death = Status Quo. I can imagine some backroom Hollywood strategist shaking his head, thinking to himself/herself, "Those [insert pejorative expletive] shut down the Internet and melted the phone lines in Washington DC, and what did they get? NOTHING." For all of the work that went into the anti-SOPA/PIPA campaign, the reality is that its demise just preserved the status quo. As the maxim goes, it's a lot easier to kill legislation than to get it passed. And it's hardly easy to kill proposed copyright legislation; it took a favorable confluence of multiple things going right just to kill SOPA/PIPA. But in the end, all of that enormous effort didn't change anything.

Congress Is Making the Same Systematic Mistakes. Procedurally, the advocates of SOPA/PIPA made several mistakes. First, the substantive proposals massively overreached. Legislators' fear of being SOPAed reduces the chance that error will recur, at least in the short run.

Second, SOPA/PIPA would have created some serious technical problems that the legislators simply did not understand. In response to this glaring lack of knowledge, Rep. Chaffetz suggested that Congress should "bring in the nerds" to advise Congress on the technical implications of its proposals. Despite that suggestion, Congress continues to regulate the Internet without adequate guidance from "the nerds." For example, despite protests from many expert technologists, the House passed a cyber-security bill (CISPA).

Third, SOPA/PIPA were drafted largely in secret by a few legislators and a coterie of industry lobbyists who have bought access to the legislative process; once this cabal was satisfied, the bills were introduced and then fast-tracked for passage. Yet, amazingly, Rep. Lamar Smith--a key figure in the SOPA battles--announced he was introducing a bill (the IP Attache Act) resurrecting a small part of SOPA after preparing the bill behind closed doors, and then intended to fast-track the bill. (The amount of overlap between SOPA and the IP Attache Act is complicated;this BNA report tries to unpack the issue). As Techdirt's Mike Masnick asked rhetorically, "Dear Lamar Smith & House Judiciary: Have You Learned Nothing from SOPA?" So for all of the whispertalk that legislators are running scared of being SOPAed, at least some legislators still think it's OK to procedurally navigate controversial bills in a way that (deliberately?) suppresses the public's ability to participate in the process.

Plaintiffs Are Getting SOPA's Remedies (or Better) in Court. As I indicated, SOPA/PIPA's demise preserved the status quo--but the status quo isn't so great for consumers. Without any new legislation, IP owners are already getting extraordinary remedies in court that compare favorably to the remedies contemplated by SOPA/PIPA. My co-blogger Venkat Balasubramani and I have cataloged some of these cases. Typically these cases involve foreign defendants who don't show up, meaning that the court only hears one side of the story (the plaintiff's) and basically gives the plaintiffs whatever they ask for. In many cases, this includes court orders that purport to bind third party service providers (who also aren't in court to defend their interests), even though Federal Rules of Civil Procedure Rule 65 doesn't allow judges to tell non-litigants what to do.

In my "favorite" example, involving a Chinese website allegedly selling counterfeit cigarettes, the court ordered Western Union (who wasn't in court and wasn't a defendant) to interdict all money buyers were sending to the website and put it into a special account for an unspecified period of time. In other words, buyers--who may not have realized they were buying counterfeit goods--weren't getting their ordered cigarettes but also weren't getting their money back. Compare an alternative approach, where the court could have told Western Union to reject the payments and simply return the money to the buyers. Without buyers or Western Union appearing in court to defend their interests, the court overly catered to the plaintiffs' interests. So much for due process.

Until judges start pushing back on plaintiff demands in these cases where defendants no-show, and until judges become more circumspect about their ability to reach non-litigants under Rule 65, who needs SOPA/PIPA? IP owners can synthetically achieve the same or better results without a new statute.

The Obama Administration is Implementing SOPA Even Though Congress Didn't Approve It. Even though Congress did not approve SOPA/PIPA, the Obama administration repeatedly has been tone-deaf to consumer concerns about SOPA and its underlying policies. Three examples of the Obama administration's efforts to create SOPA-like outcomes through its executive branch powers:

* Megaupload prosecution. On January 19, the day after SOPA/PIPA melted down and the copyright lobby was publicly grumbling that their years of campaign contributions weren't buying the patronage they expected, the Obama administration's Department of Justice loudly announced the criminal prosecution of a foreign cyberlocker--one of the types of websites that SOPA/PIPA nominally targeted. In effect, copyright owners convinced the US government (at taxpayer expense!) to enforce SOPA-like remedies even without SOPA on the books. Worse, as we've seen in the past 6 months, the Megaupload prosecution is deeply troubled, and the DOJ has not looked good at any step in the prosecution. Personally, I believe that the prosecution was lawless from inception, a point I explained more fully on my blog.

* Domain name seizures. For a couple of years, the Department of Homeland Security's Immigration and Customs Enforcement (ICE) division has been seizing (without any judicial oversight) hundreds and hundreds of domain names it thinks are used for infringing conduct. The bad news: ICE's legal authority for such domain name grabs is dubious at best. (PIPA and SOPA would have codified the government authority for these ex parte domain name seizures). Worse news: ICE has been acting on unverified claims from self-interested copyright owners. We learned, for example, that ICE seized Dajaz1's domain name based on an unverified report from the RIAA; and when ICE asked for supporting verification (after it had already seized the domain name), the RIAA didn't produce anything for an entire year--at which point ICE simply gave Dajaz1 its domain name back, without an apology or an explanation. The worst news: ICE's Dajaz1-related court proceedings were conducted in secret, meaning Dajaz1 could not see the court file or respond to it because, as near as we can, the file sat in a clerk's desk drawer rather than in the normal place where files are stored. Secret judicial proceedings where the defendant has no ability to see the charges or respond to them? That sounds more like a Kafka book than the country I know and love.

* "Voluntary" industry initiatives. Obama's "IP Czar," Victoria Espinel, has been actively negotiating "voluntary" industry agreements that replicate some of SOPA's key features.

First, Espinel helped broker a "voluntary" agreement where Internet access providers agreed to implement a "graduated response" program. Effectively, the access providers will build a system to process copyright owners' claims (which usually will be automatically generated) of copyright infringement via peer-to-peer file sharing. Each notice against a user will count as a "strike." When users get too many strikes, the Internet access provider will progressively subject the user to more stringent discipline, including potentially terminating the user's Internet access account completely. Users can protest the strikes, but only via a kangaroo court which is not designed to let users win. Corynne McSherry and I previously explained the anti-consumer aspects of the graduated response deal.

The fact that Internet access providers agreed to this deal is fascinating. They were already legally immunized from copyright infringement liability for users' conduct in 17 U.S.C. Sec. 512(a); they agreed to implement a technical system at a not-inconsiderable expense to them; and the ultimate remedy of firing their customers will cost them money too. One has to wonder just how hard the Obama administration leaned on Internet access providers to do something so clearly contrary to their interests; and one further has to wonder why the Obama administration would favor something designed to stack the deck against consumers. Perhaps not including adequate consumer representation at the table had something to do with that.

Second, Espinel brokered a deal where advertiser and ad agency industry groups "voluntarily" encouraged their members to adopt policies against displaying ads on websites that facilitate infringement--another key component of SOPA. This was a little easier sale than the graduated response deal. One of the recommended policy terms is that advertisers shouldn't pay publishers who run their ads alongside infringing content. Well, naturally, the advertisers weren't opposed to anything that would let them get advertising they don't have to pay for. More troubling is the apparent intent to develop a blacklist of allegedly infringing websites that advertisers should cut off. It remains to be seen if the private blacklist will offer an appropriate level of public accountability, transparency and due process.

In a related development, Espinel is also pressuring Yahoo, Google, AOL, and Microsoft to cut off allegedly infringing websites from their ad networks.

The graduated response system hasn't come online yet, and it remains to be seen just how vigorously advertisers will undertake their implied promise to police publishers who are engaged in infringing activity. So it's not clear if these government-brokered voluntary agreements will amount to much. But the fact that the Obama administration is going around to industry groups asking them to do what SOPA would have required or coerced them to do is a good sign that the Obama administration plans to implement SOPA if Congress won't.

One more data point showing that the Obama administration hasn't internalized the messages of January 18. Its trade reps, especially US Trade Representative Ron Kirk, have mishandled the latest trade agreement negotiations for the Trans-Pacific Partnership (TPP), committing the same sins that poisoned ACTA. Just like ACTA, all of the negotiations have taken place in backrooms, with no consumer representation but plenty of industry lobbyists around the table. Furthermore, the process has been not transparent at all (despite Kirk's twisted insistence otherwise, using a "day is night" definition of transparency). Drafts have not been made available to the public, so outsiders can only speculate what's even being discussed. As the EFF asked, "Is the TPP--Framed as a '21st Century Agreement'--the Best Way to Build a 21st Century Society?" More than anything, January 18 was about consumers rejecting backroom policy-making designed to bypass democratic governance. Yet, that's exactly what the Obama administration keeps doing, over and over again.

Conclusion

Franklin D. Roosevelt once said:

[L]et us never forget that government is ourselves and not an alien power over us. The ultimate rulers of our democracy are not a President and Senators and Congressmen and Government officials but the voters of this country.

For one day, on January 18, we reminded our government of this fact. But the burden is on us--the voters--to make our voices heard again and again. One day isn't enough. If you don't like what you see from the system we have, you do have the power--and, I would argue, the responsibility--to remind your elected officials of your displeasure. In response to my unhappiness with some of my elected representatives' stances on SOPA and copyright issues, I've changed my votes in June--and my vote for President is up-for-grabs in November based in part on the candidates' stances on IP (an especially salient issue given how many times the Obama administration has sold out consumers on IP issues). If you believe the system needs fixing, I hope you'll send that message to the folks who are supposed to be working for you.

If You Want More

In April, I gave a talk that amplifies these themes. Watch the 75 minute video. The associated PowerPoint slides.

UPDATE: In July, I gave another version of the talk at a bar association event in Wisconsin. Stream or download.
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Part 2: Linkwrap

Problems with SOPA/PIPA

* Pinterest is a good example of an important new start-up that would never survive under SOPA/PIPA because a single copyright owner could shut down its service providers. (FWIW, Pintererst is also a good example of how the social networking space remains dynamic and competitive despite Facebook’s headstart).

* Techdirt: Website Censored By Feds Takes Up Lamar Smith's Challenge: Here's Your 'Hypothetical'

* Sen. Wyden: "If members of Congress better understood the central role that the Internet plays in their constituents’ lives – the hub through which Americans work, communicate, share, learn, create and enjoy entertainment – they would understand why their constituents fought so hard to protect it."

* Jack Balkin explains the freedom-of-speech problems with SOPA

* Gartner: Collective Punishment: SOPA and Protect-IP are Threats to NSTIC and Federated Identity

* Techdirt: The Sky is Rising.

What Happened and Lessons Learned

* Eriq Gardner: Why Hollywood Is Losing the Public Relations War on Piracy. He cites three mistakes:

Mistake #1: Much of the legislation was negotiated behind closed doors.
Mistake #2: The legislation has been defended on broad generalities and dubious statistics.
Mistake #3: Hollywood has ceded the high ground on being an innovator and defender of speech.

* The Wrap: Sunk! How Hollywood Lost the PR Battle Over SOPA

* Talking Points Memo: a timeline of how the opposition against SOPA/PIPA succeeded

* Hollywood Reporter: The SOPA War: A Frantic Call, an Aborted Summit, and Dramatic New Details on How Hollywood Lost

* News.com: How Republican opposition derailed SOPA and Protect IP

* EFF recaps some of the consequences of January 18, the Great Internet Blackout, a historical day in many ways.

* Larry Downes: Who Really Stopped SOPA, and Why?:

to imagine that the millions of Internet users who took to the virtual streets over the last few months were simply responding to the clarion call of technology companies misses the real point–dangerously so....The bitroots movement wasn’t led by Google. It wasn’t led by anyone. Even to look for its leaders is to miss the point.... it’s already clear that the losers in the PIPA/SOPA fight have learned nothing from the profound activation of Internet users....The only place to really engage your new adversaries is where the live—online, in chat rooms and user forums and social networks, on Twitter and Facebook and Tumblr and Reddit and whatever comes next. If you want to understand what went so horribly wrong with your business-as-usual efforts, you’ll need to take up residence in the digital realm and learn its new rules of engagement.

* Macworld: Who was really behind the SOPA protests?

* HBR: The Real SOPA Battle: Innovators vs. Goliath

* Yochai Benkler: Seven Lessons from SOPA/PIPA/Megaupload and Four Proposals on Where We Go From Here

* Lesley Harris' lessons from the SOPA experience:

1) the online revolt against SOPA and PIPA was not a command and control operation
2) The dramatic online mobilization carries lasting implications for Internet policy.
3) A more cautious approach requires a more open process.
4) Ignorance about how the Internet works is no longer an option. [Eric's comments: I miss the Office of Technology Assessment]
5) Overreaching Internet related legislation is no longer a successful strategy.
6) The Internet community is borderless, and the whole world will be watching.

* Guardian: The online copyright war: the day the internet hit back at big media

* Chris Dodd of MPAA talks about his lessons learned--none of which involve actually improving the products and services offered to consumers.

* Hollywood Reporter: Sundance 2012: MPAA's Chris Dodd Calls Piracy Defeat a 'Watershed Event'

* NY Times: Hollywood is running scared. Snippets:
- “The grass roots they can generate is, frankly, concerning,” Cary Sherman, chairman and chief executive of the Recording Industry Association of America, said of the Internet community.
- the Web’s anti-SOPA message is “sexier” than the facts offered up by Hollywood.
- “Downloading stuff on the Internet for free is cool,” said a person close to Viacom, who spoke on the condition of anonymity so as not to jeopardize his relationship with the company. “Our message isn’t cool.”

Related: Politico: Hollywood to make over piracy message for D.C.

* Nice post by Sen. McCaskill about rethinking PIPA.

Related: A politician actually read the law professor letter against PIPA (which 100 law professors, including me, signed)--and was actually persuaded!

Other Angles

* Content owners are cutting off their donations to Obama over SOPA/PIPA. One Hollywood insider said "he and his fellow moguls won’t give any more money if they keep getting taken for granted," i.e., if Obama takes the money and doesn't deliver the results Hollywood demands.

Related: MPAA's Dodd threatens Obama's financial support due to SOPA. But where can Hollywood turn? All of the Republican presidential candidates opposed SOPA too. It must be unsettling for Hollywood to feel like it has no friends in Washington DC. Now they know how we've felt for decades!

* What reaches more people: a Wikipedia blackout, or a tweet from Kim Kardashian?

* EFF: Dear Hollywood: An Open Letter to the Hardworking Men and Women in the Entertainment Industries

* NY Times: On TV, Antipiracy Coverage May Include a Disclosure

* Hollywood is apparently telling DC lobby firms to drop Facebook as a client.

* In realpolitik terms, the OPEN Act is also dead.

What’s Next

* David Post on SOPA and the future.

* Eriq Gardner: SOPA Defeat Is Not the End Of Hollywood's Ramped-Up Fight Against Piracy

Related: Crazy Cary Sherman NYT Editorial on SOPA. Techdirt response. Ars Technica response.

Also related: Boing Boing on Hollywood's unwillingness to let SOPA go.

More related: Hollywood Reporter: MPAA Chief Christopher Dodd Says SOPA War Isn't Over

* EFF: No more back room deals -- Users must have a voice in governing the Internet.

My take: it's not enough to bring the tech companies to the negotiating table (although that must happen too). Tech companies might inadvertently advance the interests of the Internet user community, but at best that's a happy coincidence. Policymakers need to hear from Internet users--the ones whose content will be removed; or the legitimate Megaupload users who had their data destroyed as a collateral damage of clumsily seizing the assets of a tech company.

* Ars Technica previews the rightsowners' policy wishlist. The only thing missing is a new pony. "Despite a reputation for working in smoke-filled rooms, rightsholders have generally been quite upfront about their enforcement goals. For a few years it involved suing everyone in sight, then it moved to graduated response, and now it means roping in all key Internet players."

* Mark McKenna: Don’t Stop at SOPA

* News.com: White House calls for new law targeting 'offshore' Web sites

* Techdirt: Congress Keeps Pushing Bad Copyright Bills: Senator Stabenow Wants To Expand Treasury/ICE To Go After 'Pirates'

* Reuters: "the Justice Department asked Congress for $5 million to hire 14 new employees, including nine attorneys, to focus on intellectual property crimes"

* Wired: Uncle Sam: If It Ends in .Com, It’s .Seizable

* Operation in Our Sites strikes again, this type cracking down on sites to stream the Super Bowl.

* ICANN: “Thought Paper on Domain Seizures and Takedowns”

* Press release: "ANA, 4A’s Provide Best Practices to Prevent Marketers’ Ads from Appearing on ‘Rogue’ Sites that Infringe Intellectual Property Rights." More: "Addressing online piracy and counterfeiting has been a strong priority for both the White House Office of the Intellectual Property Enforcement Coordinator (IPEC) and the Congressional International Anti-Piracy Caucus. They have urged ANA, the 4A’s, IAB and other industry groups to play an active role in this fight"

Adweek discusses efforts to build a private blacklist that could also be used by domain name registrars and payment service providers. Is that better, or worse, than a government-operated blacklist???

More on this point: Some ad networks plan to use technology to block ads from showing up on sites dedicated to infringement.

* News.com: White House pressures AOL, Google over pirate sites

* Ars Technica: Did the Secret Service take down JotForm because of a user-generated form? Techdirt’s coverage.

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Part 3: Index of Prior Posts

* Can Korean Copyright Owners Sue Australian Defendants in California? Judges Disagree--DFSB Kollective v. Bourne
* Trademark Trolling by SEO Consultant Provides Cautionary Anti-SOPA Tale (and Other Lessons)--Premier Pool Management v. Lusk
* Hermès Obtains (Ex Parte) $100M Award Against Alleged Counterfeiters--Hermès v. Does
* Comments on the Megaupload Prosecution (a Long-Delayed Linkwrap)
* Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont
* SOPA/PROTECT-IP/OPEN Linkwrap #2
* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 12:53 PM | Copyright , Derivative Liability , Trademark | TrackBack

August 14, 2012

No Liability for Takedown Notice that Results in Termination of Facebook Page -- Lown Cos. v. Piggy Paint

[Post by Venkat Balasubramani, with comments from Eric]

Lown Companies v. Piggy Paint, LLC, 1:11-cv-911 (W.D. Mich.; Aug. 9, 2012)

Lown and Piggy Paint are squabbling over “piggy paint” trademarks. Lown has a registration for “PIGGY POLISH,” and alleges that defendants’ “PIGGY PAINT NATURAL AS MUD” brand infringes on Lown’s mark. The court doesn’t explain the reasons for this, but the marks in question are for nail polish products. Pigs and nail polish don’t have a natural association in my mind from a branding standpoint, but I’m no branding expert. [Eric's observation: I'm not sure Venkat is an expert in nail polish, either.]

In response to the trademark infringement claims asserted by Lown, Piggy Paint asserted counterclaims based on Lown’s complaint to Facebook that apparently resulted in the “removal” of Piggy Paint’s Facebook page. Interestingly, Piggy Paint’s Facebook page had some 19,000 fans. The court describes Lown’s complaint as having requested removal of Piggy Paint’s page on the grounds of “copyright infringement.”

Tortious Interference: The court says that Piggy Paint’s counterclaim allegations do not state a tortious interference claim:

Piggy Paint has not shown any valid business expectancy. Although Piggy Paint alleges that it had 19,000 fans of the page, Piggy Paint has not and cannot show that the removal of the facebook page – which did not offer any means of placing orders or doing business – resulted in the loss of any business.

The court also says that there’s no malice on the part of Lown because it acted with “a desire to protect its own mark.”

Conversion: The court also says that there’s no conversion claim. Piggy Paint’s conversion argument was convoluted, and based on the theory that Lown wrongfully “exercised control over [Piggy Paint’s] mark . . . by removing [Piggy Paint’s] page from Facebook.” The obvious problem with this argument is that Facebook and not Lown was the one who removed the page.
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Not to belittle the products or brands involved, but how in the heck did Piggy Paint amass 19,000 Facebook fans? Anyway, this dispute is a great reminder that brand pages and anything similar on a third party platform are not assets you should ever (ever) bank on. (Twitter caused a media dustup when it suspended then reinstated the account of a British reporter based on a complaint from NBC.) Facebook has its own processes for when and how it responds to complaints, but regardless of whether its reaction was over protective or under protective of rights, it is insulated and can’t be held liable. (See the Complexions case, among others.)

It’s not easy to hold the party who sends the takedown notice liable, either. The court rightly treats the Facebook page as something that doesn’t support a tortious interference claim. The Phonedog case, which is still pending, came to a different conclusion, although the facts were slightly different and the case dealt with Twitter followers. (A part of the ongoing struggle in the courts as to how to treat social media assets. See also Eagle v. Morgan, Maremont v. SF Design Group, and the OMGFacts case.)

Interestingly, the court notes that Lown sent a "copyright" takedown notice. This raises the question of whether Piggy Paint could have asserted a claim under Section 512(f) for sending a wrongful takedown notice. Even assuming that Piggy Paint could have argued that the takedown notice should be covered under Section 512(f), given the high bar for liability under Section 512(f), a mistaken takedown notice would be unlikely to support liability.

In any event, damages would likely be difficult to prove, and plaintiffs don't often win these types of cases. See the Ground Zero museum case, the Pandora jewelry case, among others linked below. Ordonez v. Icon Sky is a rare case where damages were awarded for a takedown request that disrupted someone's web presence. This case and Ordonez may have reached different results because this case was contested and did not involve a default judgment. Another possibility is that the judge gave short shrift to the potential for commerce on a Facebook "fan" page as opposed to a more traditional web presence; or that the Ordonez case involved a model, whose web presence would ostensibly be more important to booking gigs and generating revenue. Either way, this case's result is probably in the mainstream and the Ordonez result seems like an outlier regarding damages for disruption of a web presence.

Other coverage:

Tom O'Toole: Court Says Facebook 'Fans' Don't Translate Into Protected Expectation of Business

Eric's Comments

This is a breezy opinion that isn't likely to persuade other judges. However, the core ruling on the tortious interference claim goes right to the heart of the battle over social media accounts. As Venkat notes, the judge says:

Although Piggy Paint alleges that it had 19,000 "fans" of the page, Piggy Paint has not and cannot show that the removal of the facebook page — which did not offer any means of placing orders or doing business — resulted in the loss of any business

Let's assume this is true and Piggy Paint can't prove any actual lost sales from the page's takedown. Even so, the Facebook page was clearly a major part of Piggy Paint's relationship with its customer base, and the page takedown unquestionably disrupts that relationship and Piggy Paint's ability to keep in touch with its audience. At minimum, the judge was quite tone-deaf to the practical implications of this page's takedown. But if disrupting a communication channel between a business and its fans isn't a legal problem, then a lot of the other social media account battles should fail as well. For example, this thinking moots the Phonedog case because the continued patronage of the account's followers is the only real asset at issue.

Venkat is also right that businesses are constantly at peril that their cyberspace presence on third party websites will simply vanish. For more on this, see my article on 47 USC 230(c)(2) and online account termination. In particular, I'm nervous about all of the businesses heavily investing in their Facebook pages. Don't go crying to the lawyers if those pages go POOF.

Posted by Venkat at 10:51 AM | Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Trademark

August 03, 2012

What Are Trademark Defendants' Obligations to Clean Up the Internet After a Trademark Injunction?

By Eric Goldman

We're continuing to get cases interpreting a defendant's obligation after a court has issued an injunction against continuing to use a trademark. (The same basic issue arises after a settlement agreement). I don't know that we have any clear legal principles to draw yet, other than the defendant's good faith effort to comply with the injunction/settlement agreement clearly makes a difference. Three cases on the topic from the past few months:

M. Cohen & Sons, Inc. v. Cohen Iron Works, LLC, 2012 U.S. Dist. LEXIS 57104 (E.D. Pa. April 24, 2012)

After the court issued an injunction against using the name “Cohen Iron Works,” the defendant was in contempt by maintaining a YouTube account “cohenironworks” and a Twitter account @cohenironworks and by reclaiming and maintaining a Manta.com page for “Cohen Iron Works.”

Medi-Weightloss Franchising USA, LLC v. Medi-Weightloss Cline of Boca Raton, LLC, 2012 WL 2505930 (M.D. Fla. May 24, 2012)

Plaintiffs claim the Defendants have defied the preliminary injunction by failing to de-identify and disassociate VIP Wellington from Medi on various web sites. In their opposition memorandum and during the hearing before me, Defendants explained their diligent efforts to de-identify and disassociate their new business from Medi, including Defendants' efforts to contact third parties such as Angie's List, Yelp, Linked In, and Google. Moreover, Defendants explained that the “we are moving” status on Facebook was made after Medi Boca had closed and VIP had opened, in order to comply with the injunction order's requirements. And, Defendants stated that they have removed the photograph from VIP's Facebook page that included the reflection of Medi's slogan “The One that Works!” and have also removed Medi's logo from the protein bar packaging seen on their Facebook page. Accordingly, I find the Defendants have made reasonably diligent efforts to de-identify and disassociate their new business from Medi, and the Plaintiffs have failed to show by clear and convincing evidence that the Defendants have violated the injunction order in this regard.

SunEarth, Inc. v. Sun Earth Solar Power Co., Ltd., 2012 WL 2344081 (N.D. Cal. June 20, 2012)

As to the Sun-Earth.com/web, SunEarthPower.com/web, and SunEarthPower.net/web pages, Defendants contend that these were not encompassed within a literal reading of the modified preliminary injunction, which refers only to Sun-Earth.com, SunEarthPower.com, and SunEarthPower.net in paragraph seven….However, this is an unreasonably limited reading of the injunction, which clearly encompasses all subpages within those domain names.

Posted by Eric at 10:22 AM | Trademark | TrackBack

July 18, 2012

Why Defensive Domain Name Registrations Aren’t a Good Deal for Small Businesses (Forbes Cross-Post)

By Eric Goldman

[Introductory note: every article has a backstory, but some backstories are more complicated than others. Earlier this year, I was commissioned by a well-known publication to participate in a point/counterpoint regarding registering domain names in new TLDs. The publication wanted me to argue against small businesses registering domain names in new TLDs, and my piece was to be companioned with a counterpoint piece arguing in favor of registering in new TLDs. After several drafts by me, the publication felt my article (presented below) wasn't extreme enough; they wanted me to argue that small businesses NEVER should register in a new TLD under any circumstance. Because I couldn't argue that in good conscience, the publication paid me a nominal "kill fee" and cut me loose. I'll be interested to see if you think my position wasn't extreme enough--or perhaps too extreme already! (Feel free to comment at the Forbes cross-post). In any case, I wished the publication good luck finding a credible non-shill who would espouse such a hard line and put this draft into the blog queue for the requisite embargo period. That's now over, so I'm delighted to share with you what they paid me to write:]

Conventional wisdom says businesses should preemptively buy domain names to keep them out of the hands of competitors, griping customers, pornographers or other malefactors. This process is sometimes called “defensive” domain name registration.

In theory, defensive registrations save money. For a relatively low upfront cost (a single .com domain name costs about $10 a year), a business avoids spending thousands or even hundreds of thousands of dollars trying to get the name back from a malefactor—if it’s possible to get the name back at all.

This conventional wisdom plays on the worst fears of small businesses: If you don’t buy lots of domain names right now, you will forever lose control of your brand, and then you will lose your customers. Your business will be destroyed because you were too cheap to spend a few extra bucks buying just one more low-cost domain name.

Don’t fall for these scare tactics. They are part of a cynical sales pitch from domain name vendors hoping to get your hard-earned money by manufacturing new opportunities for mischievous domain name registrations—and then making you pay to prevent that possibility.

It’s easy for businesses, especially small businesses, to overspend on domain names. [For an example, see the story of Nuts.com.] A small business' domain name portfolio should consist of one, or at most a handful, of domain names for each brand it uses. A well-chosen domain name, tied to each brand you have, will reinforce your customers’ brand perceptions of you and make it easy for your customers to find you. If you have that, you’ve got what you need. For most small businesses, other domain names are a waste of money.

Think about how your customers will find you. Most customers will find you via search engines or through social media. Some will type in your domain name into their browsers; of those, some folks will mistype your domain name, but often their browser will prompt them to correct the error. No one guesses domain names any more.

So if you control a domain name where your customers can find you, congratulations…and mission accomplished! Does it really matter what other people do at other domain names? These domain name registrations out of your control might be frustrating, but they are typically inconsequential to your goal of maximizing your profits. You’ll only really want to respond when domain names use your trademarks to confuse your customers, and only then when enforcing your trademarks is cost-benefit justified.

Indeed, no matter what you do, malefactors will be able to register variations of your brand as domain names if they want. There are simply too many domain name registration possibilities for you to preempt them all. There are hundreds of top-level domains; plus obvious variations of the brand name (i.e., “brandsucks.TLD” or variations with dashes or hyphens); plus typographical errors of the brand. All of that adds up to hundreds or thousands of possible domain name purchases for each brand you have. And as new top-level domain names keep rolling out, each time you'll be cajoled to buy more.

Most businesses, especially small businesses, do not get good value from a big portfolio of stockpiled domain names being held “just in case.” You’re spending money to procure and maintain assets that you aren’t using and may never use. For most small businesses, these unused assets produce a poor return-on-investment (ROI).

So what should small businesses do as top-level domains keep expanding? You should treat domain name purchases as another marketing expense and, as usual, invest your marketing dollars to yield the highest ROI.

You’ll usually get better investment returns from ensuring existing and new customers can find you than in investing in unused domain name assets. Take the dollars you might spend on domain names and invest in improving your website’s search engine rankings (i.e., search engine optimization), buying search engine advertising to reach new customers (i.e., search engine marketing) and running social media promotions. After all, search engines and social media are where most of your customers will find you.

You should also invest your marketing dollars into improving your goods or services. In the end, the single best way to compete is to deliver more value to your customers than your competitors deliver. In the Internet age, if you have something unique to offer, your customers will evangelize you. Give them more reasons to sing your praises.

With the launch of each new top-level domain, the marketers will tempt—or scare—small businesses into wasting their money on new domains. Resist that urge. Instead, develop a sound plan for spending your marketing dollars, stick with it, and have no regrets.

Posted by Eric at 09:32 AM | Domain Names , Marketing , Trademark | TrackBack

July 17, 2012

PissedConsumer Defeats Trademark Claim...On a Motion to Dismiss!?--deVere v. Opinion Corp.

By Eric Goldman

deVere Group GmbH v. Opinion Corp., 2012 WL 2884986 (E.D.N.Y. July 13, 2012)

Here's something you don't see every day: a trademark infringement lawsuit defeated for lack of consumer confusion--on a 12b6 motion to dismiss. For several years, trademark academics have been discussing ways to create a "fast lane" for unmeritorious trademark cases. I don't recall ever discussing the possibility of adjudicating likelihood of consumer confusion on a motion to dismiss (where the legal standard requires the judge to treat the plaintiffs' allegations as true) because that was just too crazy--even though it does provide the desired "fast lane" without resorting to murky statutory issues like the "trademark use in commerce" requirement. Still, I can't imagine this fast lane will survive appellate review, so we shouldn't get too excited yet.

The plaintiff is a Swiss financial consulting company. The defendant in this case is PissedConsumer, a gripe site for consumer complaints. PissedConsumer has superseded Ripoff Report as the leading gripe site defendant, as I've blogged three other PissedConsumer cases in the past 7 months (Ascentive, Vo and Amerigas).

In the recent Amerigas ruling (not cited in this opinion), the court denied PissedConsumer's 12b6 motion to dismiss the trademark claim. This court reaches the opposite conclusion. The uncited Vo ruling similarly granted PissedConsumer's motion to dismiss for the trademark claim, but unlike this ruling, that was in state court and the trademark ruling was overshadowed by other aspects of the case (which is part of the reason I didn't put 2+2 together when blogging that opinion). However, like the Vo court, the state court judge effectively gave no deference to the plaintiff's allegations, which seems like it could be a problem if subsequently challenged.

Back to the deVere opinion. Running through a truncated likelihood of consumer confusion mutli-factor analysis, the court says PissedConsumer isn't deVere's competitor, there's no chance PissedConsumer will "bridge the gap" to become a competitor, deVere didn't allege bad faith and deVere didn't allege actual consumer confusion. The court bypasses the remaining factors, something an appeals court probably won't do. Instead, the court says that judicial precedent has held that gripe sites don't create consumer confusion. Pointing to the Ascentive case, the court says:

there is no likelihood that a consumer visiting PissedConsumer.com would mistakenly believe that deVere sponsored or approved the contents of that website. The term “pissed” in the website name is clearly negative, as is the commentary on the website about deVere’s services – terms like “stole,” “WARNING,” “fraudsters,” and “scams” figure prominently.

To overcome this, the plaintiffs invoked the doctrinal crutch of initial interest confusion. The court doesn't want to hear it:

The doctrine is not applicable here. PissedConsumer.com does not divert Internet users away from deVere’s website because deVere does not have a website that competes for business with PissedConsumer.com; Opinion Corp. provides a forum for customer criticism of businesses, while deVere provides financial services....Initial interest confusion does not arise “in circumstances where the products in question are used for substantially different purposes and therefore the merchants are not in close competitive proximity.” Big Star Entertainment, Inc. v. Next Big Star, Inc., 105 F. Supp. 2d 185, 209-10 (S.D.N.Y. 2000). Accordingly, deVere’s allegations “do not create any plausible inference of intentional deception”; there is no risk that a customer seeking deVere financial services would mistakenly visit and divert their business to PissedConsumer.com. Cintas, 601 F. Supp. 2d at 579.

On the one hand, deVere may have just failed to marshal the right allegations into its complaint, a fairly easy thing to correct. On the other hand, everything the court says is 100% correct, and kudos for this judge pulling the trigger early rather than letting a bogus trademark case fester at significant expense to both parties. In my opinion, this result is what should be happening. Sadly, I fear an appellate panel will unwind this judge's bold move.

UPDATE: Rebecca sent some other recent examples of trademark claims failing on a motion to dismiss, including The Hangover II case, Forest River v. Heartland RV and Architectural Mailboxes v. Epoch.

Posted by Eric at 11:22 AM | Trademark | TrackBack

July 09, 2012

Google Sued Again for AdWords Trademark Infringement--Home Decor Center v. Google

By Eric Goldman

Home Decor Center v. Google, CV12-05706 (C.D. Cal. notice of removal filed July 2, 2012)

After the 4th Circuit's Rosetta Stone v. Google ruling, I wrote:

Just like Google got hit with over a dozen lawsuits in the wake of Google's Second Circuit "loss" in the Rescuecom case, I imagine a bunch of low-merit suits will follow this ruling too.

The floodgates haven't opened yet, but we're seeing more litigation against Google now than we did in the year prior to the Rosetta Stone ruling.

This lawsuit initially was filed in California state court in late May but just showed up on my radar when Google and Home Depot removed it to federal court. As with several other recent keyword lawsuits against Google, the plaintiff's real beef is with its competitor--in this case, Home Depot, who allegedly ran confusing ads promoting "HomeDecorators.com" but referencing "Home Decor Center" in its ad copy.

The complaint allegations aren't very clear (typical), but Exhibit A (especially pages 18-19 of the PDF) does show some oddities. For example, page 19 indicates that a search for "homedecorcentet.com" (note the typo) triggered an ad with a title of "HomeDecorCenter.com" and the remaining ad copy references and links to HomeDecorator.com. Page 18 is harder to read but shows a similar result. Especially given the typo, this type of ad probably isn't the result of some odd algorithmic ad generator, so I'm curious to learn more about how this happened. I believe the plaintiff could have stopped these ad copy references by filing a trademark complaint with Google, so I'm also curious how Google addressed the plaintiff's cease-and-desist (the complaint says nothing changed).

Of course, "Home Decor Center" is a very descriptive trademark. Indeed, just this January, they filed for trademark registration on the supplemental register. So even if all of the plaintiffs' allegations are true, among the many possibilities is that Home Depot and Google concluded that the plaintiff hasn't achieved secondary meaning or that descriptive fair use applies. As I've commented before, the trademark owners with the most marginal trademarks are often the most highly litigious. (See, e.g., one of my poster children for ridiculous trademark lawsuits, 1-800 Contacts).

Are more lawsuits like this in the works for Google? Almost certainly. Will lawsuits like this pose a problem for Google? No. I think both the CYBERsitter and Home Decor Center fit the "low merit" categorization I initially projected. In fact, it wouldn't surprise me if both plaintiffs voluntarily drop Google so they can conserve their resources to fight their real target, their competitor.

Minor personnel note: Gary Bostwick is handling this case for Google instead of Google's typical AdWords defense attorney, Margret Caruso.

Roster of pending AdWords trademark suits against Google:

* Jurin v. Google. [latest post]
* Rosetta Stone v. Google [latest post]
* CYBERsitter v. Google
* Home Decor Center v. Google

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

July 04, 2012

H1 2012 Quick Links, Part 1 (Trademarks/Domain Names, Patents, Trade Secrets, IP)

By Eric Goldman

[Eric's note: I had an incredibly busy travel schedule since late March. My destinations included Akron, NYC, Seattle, Concord (NH), Boston, Chicago, Vancouver, the California Channel Islands (a blog post is coming later this week about that trip on my Goldman's Observations blog), San Diego, Houston, Belgium (a blog post is coming about that trip too, eventually), Lansing (MI), Healdsburg (CA), Napa, Berkeley and Northridge. It's been great for my frequent flier miles and lousy for my ability to maintain my "quick links," which ballooned to hundreds of items over the past 4 months. As a result, I'm going to be posting the backlog over the next few days and then reassessing how I approach blogging these second-tier items to develop a more sustainable system. As always, thanks for reading.]

Trademarks/Domain Names

* Another trademark case turns on relative search engine placement: Hasbro, Inc. v. Asus Computer International, Inc., CV 11-10437 PSG (C.D. Cal. March 23, 2012):

Hasbro points to the fact that a Google search for “optimus prime tablet” picks up Asus’s “Transformer Prime” tablet, a search for “Transformer prime” causes Amazon to search its own site for “Asus transformer prime,” and that a search for “transformers prime” returns “several Asus hits and Transformers Prime hits.”…According to Hasbro, this “overlap in search results is bound to cause confusion.”…The Court disagrees. First, for the most part, the Google search for “Transformer Prime” returns results related to Asus’s products, while the results generated by the “Transformers Prime” search relate to Hasbro’s animated series…. Second, although the “Transformers Prime” Google search results offered by Hasbro show hits relating to the Transformers Prime animated series and the Eee Pad Transformer Prime tablet, Hasbro makes no argument that these products are related…. Furthermore, any concern that a consumer using Hasbro’s mark to search for Hasbro’s product might be confused by a results page that shows both Hasbro’s and Asus’s product is ameliorated when the sources of the respective products are clearly identified…. The nature of Asus’s product also supports this finding, as buyers of high-end computer products are even less likely to be flummoxed by search engine results than the general population.

* John Crane Production Solutions, Inc. v. R2R and D, LLC, 2012 WL 951723 (N.D. Tex. March 21, 2012): "even a sophisticated purchaser can be subject to initial interest confusion...The court finds that the purchasers of fiberglass sucker rods exercise a high degree of care and sophistication in making their purchases. This factor weighs heavily in favor of a finding of no likelihood of confusion." Another example of IIC’s irrelevancy to a case's ultimate outcome.

* Fancaster, Inc. v. Comcast Corp., 2012 WL 815124 (D.N.J. March 9, 2012). Abandoning a trademark doesn’t divest the trademark owner of ACPA standing for past statutory damages. Prior blog post.

* Two Plus Two Pub., LLC v. Boyd, 2012 WL 724678 (D. Nev. March 1, 2012). The domain name twoplustwopoker.com constituted an ACPA violation of plaintiff's "Two Plus Two" trademark in publishing poker-related materials. Prior blog post.

* Ron Paul drops unmasking effort. Prior blog post.

* Bogoni v Gomez, 2011 WL 6957599 (S.D.N.Y. Dec. 28, 2011) and Bogoni v. Gomez, 2012 WL 745548 (S.D.N.Y. Jan. 6, 2012). Man wins cybersquatting claim against a “friend” who registered his name as a domain name and then tried to sell it back to him. NY Times coverage.

* John Ottaviani reports on a lawsuits against JC Penney for buying keyword ads triggered by brand name of goods it didn’t sell.

* Update on the Lens.com v. 1-800 Contacts antitrust lawsuit. Prior blog post.

* Spanish keyword advertising ruling goes against the defendant.

* Facebook is now claiming trademark rights in "Face" and "Book" in its Statement of Rights and Responsibilities (SRR).

* Facebook’s lawsuit against Faceporn dismissed for lack of jurisdiction. Prior blog post.

* NY Times: Nutsonline.com switched to Nuts.com at a very high price, yet traffic and sales plummet for months.

* Gibson v. Bordelon, 2011 WL 7763787 (N.D. Tex. October 31, 2011). A para-trademark case. A Texas statute prevents usage of a combination of the word “Texas” in conjunction with the words “Workers' Compensation” or “Workers' Comp.” This may prevent a lawyer from running a website/blog at the domain name “texasworkerscomplaw.com.”

Patents

* Washington Post: “In the smartphone market alone, $15-20 billion has already been spent by technology companies on building defenses, says Stanford Law School professor Mark Lemley…. Lemley estimates that more than $500 million has been squandered on legal fees.”

* Twitter's Innovator's Patent Agreement. WSJ coverage. An interesting idea. I see this as much more about recruiting new engineers than about reforming the entire patent ecosystem. As such, it’s a potentially very effective differentiator, even if Twitter never actually files for patents under the scheme.

Note the alternative: Twitter could simply not file for the patents at all. The fact that Twitter will still seek patents, while voluntarily defanging them, is a damning indictment of the patent system. Twitter clearly doesn't want the patents to restrict competitive imitation, but it's still spending tens of thousands of dollars per patent on the hope that the patents might help it achieve freedom to operate. This phenomenon is one of the reasons we're holding our "Solutions to the Software Patent Problem" conference at SCU in Fall (registration now open!).

* Wired takes a look at how the Nortel patents have been deployed for trolling.

* Brad Burnham: The Freedom to Innovate

* Patent “troll” is going after city bus systems. Who pays for this? Taxpayers.

* TechCrunch: Facebook countersues Yahoo for patent infringement using a patent by an employee now at Yahoo.

* Inside Higher Ed: Universities don’t want to talk about their relationships with Intellectual Ventures.

* Hollywood Reporter: U.S. Patent Examiner Cites Borat's Famous Swimsuit in Rejecting Claimed Invention

Intellectual Property and Trade Secrets

* Bill Gallagher, Trademark and Copyright Enforcement in the Shadow of IP Law. An interesting ethnographic study of how IP lawyers ply their craft.

* Everything you need to know about the Trans-Pacific Partnership (TPP) and IP

* From the USPTO: Intellectual Property and the U.S. Economy: Industries in Focus

* From the White House: IPEC 2011 Annual Report on Intellectual Property Enforcement

* Trade Secret Litigator: Non-compete restricting on-air radio personalities from working at other nearby radio stations doesn’t restrict them from broadcasting via Internet radio.

* WSJ: Litigation battles over the Pepsi cola formula.

Posted by Eric at 10:03 AM | Patents , Trade Secrets , Trademark | TrackBack

June 22, 2012

Another Bad Ruling for PissedConsumer on Trademark and 47 USC 230 Claims--Amerigas v. Opinion Corp.

By Eric Goldman

Amerigas Propane, LP v. Opinion Corp., 2012 WL 2327788 (E.D. Pa. June 19, 2012)

You may recall PissedConsumer, the site that solicits user gripes, SEOs the crud out of them, and then offers the griped business pay-to-play to downgrade the visibility of those reviews. Its litigation docket is heating up, and I've recently blogged on two prior rulings (Ascentive and Vo).

In a thoughtful but perhaps overly cautious opinion by Judge Buckwalter (a celebrated name in cyberlaw for his pro-free speech 1990s opinions in the CDA and COPA lawsuits), PissedConsumer couldn't get a motion to dismiss on Amerigas' trademark claims, and it couldn't get dismissal of other claims on 47 USC 230 grounds. The judge signals that Amerigas is likely to lose its claims later, but it gives both parties the opportunity to lavish money on their lawyers before the judge reaches the obvious denouement.

Trademark Claims

PissedConsumer makes a number of references to the trademarks of the businesses it reviews, including using the trademark in as a third level domain (i.e., a subdomain), including the trademark in its metatags and showing keyword-triggered ads. In its motion to dismiss, PissedConsumer took a number of whacks at the trademark claims:

Trademark use. The court says Amerigas properly alleged trademark use because "the Complaint alleges that Defendant uses Plaintiff’s “AMERIGAS” trademark in its website’s text, subdomain name, and metadata in connection with the sale of advertisements to Plaintiff’s competitors" and "for a fee, Defendant will allow businesses to address the complaints posted about them on the website."

I think this is a correct synthesis of current precedent (especially after Rescuecom), but it misses the broader context that we're talking about a review site selling ads to support its editorial content. I hammer this point in my Online Word of Mouth paper, where I argue that a more aggressive policing of the trademark use doctrine would create necessary breathing room for online word of mouth. Sadly, post-Rescuecom, we've seen little judicial interest in tightening the trademark use doctrine, creating the risk that review websites have to work much harder to fend off trademark attacks.

Nominative Fair Use. Unlike some of my trademark scholar peers, I'm not a big fan of nominative fair use as a protection for review websites because it's so hard to win on motions to dismiss (and isn't guaranteed on summary judgment, either). This case illustrates that point nicely. The judge says that it would be "premature" to rule on nominative fair use on a motion to dismiss. The judge wants to see more about the likelihood of consumer confusion; and while it's likely a "gripe site" (in the court's words) would prove that it had to use the plaintiff's trademarks in order to refer to the plaintiff, the court wants to see more about whether PissedConsumer took only what was necessary and accurately reflected the relationship between Amerigas and PissedConsumer.

Likelihood of Consumer Confusion. PissedConsumer won the Ascentive case in part for lack of consumer confusion. However, that was in response to Ascentive's preliminary injunction motion (when the burden is higher for the TM owner), not on a motion to dismiss. As a result, the judge says that he needs to give the plaintiff the opportunity for discovery. Even so, the judge says the Ascentive opinion was "well-written and very persuasive" and the judge expresses skepticism about Amerigas' chances of success:

This Court also finds it difficult to believe that a person searching online for Plaintiff’s products would be confused into thinking that a site called “PissedConsumer”—which contains an abundance negative reviews, offers no propane products of its own, and links to the websites of Plaintiff’s competitors—was in some way affiliated with or endorsed by Plaintiff

And later the judge says "Plaintiff may face a tall task in demonstrating that Defendant’s use of its mark is confusing."

Based on the judge's statements plus the Ascentive precedent, it seems pretty clear that Amerigas isn't going to win the trademark claim. This is exactly why a defense or doctrinal limit that succeeds on a motion to dismiss is so important. The judge has basically ordered the parties to spend tens or hundreds of thousands of dollars on discovery, all with the strong possibility of reaching the conclusion that Amerigas isn't going to win--a conclusion that's pretty clear right now. I'm sorry to keep rehashing the trademark use debate, but the trademark use doctrine could have given the judge an easy way of saving everyone a lot of time, money and heartache.

Along the way, the judge makes an odd statement: "If the unhappy purchasers of Plaintiff’s products are posting complaints on http://amerigas.pissedconsumer.com, Plaintiff’s competitors may be more likely to advertise on Defendant’s website, and Plaintiff may be more inclined to pay for Defendant’s reputation management services.

This is essentially an empirical claim, and I've never seen any empirical evidence supporting it (or, for that matter, refuting it). I'd be grateful for any thoughts.

Initial Interest Confusion. I keep trying to declare the initial interest confusion doctrine dead, but judges aren't cooperating! The judge says that initial interest confusion is still a viable theory in the Third Circuit (he's correct as a matter of precedent), and thus Amerigas can keep arguing it. Unfortunately, like the likelihood of consumer confusion, the judge does hint that it's probably going to fail later; the judge says "it may ultimately be difficult to establish initial interest confusion in this case." Once again, lots of wasted time and money ahead!

Contributory Infringement. In a small piece of good news for PissedConsumer, the judge says Amerigas properly failed to allege that advertisers were actually committing trademark infringement or that PissedConsumer knew of their infringing activity. Thus, Amerigas hadn't stated a proper claim for contributory infringement.

Along the way, the judge makes the following odd but interesting statement: "Plaintiff has not cited to—and the Court is unable to locate—any authority to support the proposition that use of a trademark in a hyperlink constitutes per se infringement."

47 USC 230

PissedConsumer asserted Section 230 against claims of unfair competition, tortious interference and unjust enrichment. To some extent, those state law claims just extend the trademark claim, e.g., Amerigas argued that it was unfair competition for PissedConsumer to merchandise the trademark as part of PissedConsumer's overall scheme. However, the court rejects the Section 230 immunity based on two alleged facts: that PissedConsumer allegedly authored some of the reviews in question, and that PissedConsumer allegedly controlled the ads on its site. The latter fact should be entirely irrelevant for Section 230 purposes, and it's almost certainly not true as a factual matter if PissedConsumer is a Google AdSense publisher. The former fact is just like the uncited Vo case, where the court similarly accepted the plaintiff's unsupported claim that PissedConsumer wrote the reviews to survive the motion to dismiss. I explained why that's not a good result in my blog post on the Vo case.

The judge says that PissedConsumer may reassert the Section 230 immunity later in the case, but a Section 230 immunity post-discovery is way less valuable than a Section 230 immunity on a motion to dismiss.

Implications

Judge Buckwalter's opinion is solidly constructed in the sense that it fairly applies existing law to the alleged facts. As taxpayers, we got our money's worth from this opinion. Nevertheless, it's clear Judge Buckwalter and other judges lack inadequate doctrinal tools to kill doomed cases early. In the end, this case is really about Amerigas trying to shut down negative reviews of its business. I don't like PissedConsumer's business model any more than you do, and they are not the best "face" for free speech online, but PissedConsumer is a platform for letting consumers have their say, and opinions that expose them to legal risk jeopardize important social values. See my Regulation of Reputational Information essay. In this respect, I could imagine other judges finding more doctrinal flexibilities to address the realpolitik of this situation. I can't blame Judge Buckwalter for failing to do so, but the result is unfortunate nevertheless.

Posted by Eric at 10:03 AM | Derivative Liability , Trademark | TrackBack

June 20, 2012

CYBERsitter Sues Google for AdWords Trademark Infringement

By Eric Goldman

CYBERsitter LLC v. Google, Inc., CV12-5293 (C.D. Cal. complaint filed June 18, 2012)

CYBERsitter competes with Net Nanny and ContentWatch (apparently both owned by the same entity, ContentWatch) in the Internet filtering software niche. CYBERsitter claims ContentWatch ran keyword ads triggered on its trademark with ad copy like:

CYBERsitter | Net Nanny.com
Protect Your Children with #1 rated CYBERsitter Software. Just $29.99

The complaint version I saw didn't include any screenshots of the ads in question, so we're missing some key info. Most obviously, the complaint implies, but doesn't specify, that the ads linked to netnanny.com. The complaint does alllege that netnanny.com doesn't sell CYBERsitter's competitive product.

Without the linked URLs, we can't assess the likelihood that these ads were placed by ContentWatch's affiliates instead of ContentWatch itself. I have a hunch these are affiliate-placed ads. That would make a big difference because ContentWatch probably isn't liable for ad buys by its affiliates. See 1-800 Contacts v. Lens.com.

Either way, I suspect CYBERsitter and ContentWatch can work out their differences. As I've documented many, many times, the money at issue in these competitive keyword ad buys usually comes nowhere close to the costs of litigation (just one of many examples), so the most economically rational thing for both parties to do is strike a settlement (even if imperfect) rather than shoveling cash over to the lawyers.

Now, about CYBERsitter naming Google as a defendant. This is the first time Google has been sued for trademark infringement over its AdWords product in over a year, so it's the first such lawsuit since the Fourth Circuit's Rosetta Stone v. Google opinion. Frankly, I expected more lawsuits would be filed against Google after the Rosetta Stone opinion, just like the Rescuecom opinion opened up the floodgates in 2009. Perhaps this filing is just the leading edge of a litigation tsunami, but I'm not feeling that way. This complaint doesn't explicitly make any gestures towards the Rosetta Stone opinion, and it felt to me like an idiosyncratic one-off.

Indeed, from my vantage, the Google piece doesn't look very well-prepared. CYBERsitter doesn't allege that it filed a trademark complaint with Google, which would have automatically blocked the CYBERsitter references in the ad copy it's complaining about, nor does CYBERsitter claim that it gave Google notice of the problem in any other way (C&D, etc.). Based solely on the complaint's allegations, CYBERsitter can't show that Google knew there was a problem at all. If CYBERsitter didn't give Google a chance to fix the problem pre-litigation, I doubt a judge will be very supportive of CYBERsitter.

Furthermore, while ContentWatch might be pliable, especially if its affiliates went rogue on it, Google will fight this case with everything it has. I've never understood why plaintiffs choose to bring into their lawsuits a Big Dog that mints money when their beef is just with a competitor. The Wealthy Big Dog will fight to the death and has the resources and determination to overwhelm the little guy, or at least wound the little guy seriously (like leaving CYBERsitter with fewer trademarks than it started the litigation with--see, e.g., American Blinds). Given the sheer irrationality of bringing Google into a garden-variety competitor dispute, I'm laying odds that CYBERsitter will simply drop Google from the lawsuit without getting any concessions from Google--just like Rescuecom and American Blinds and Parts Geek and numerous other challengers have done.

Process note: while preparing the post, earlier today, I emailed both CYBERsitter's lawyer and ContentWatch's PR person for comments about this lawsuit. I haven't gotten a response from either, but I'll update the post if I do.

[Update: CYBERsitter's lawyer declined comment to me but provided some perspectives to the National Law Journal.]

Related suits: The roster of currently pending trademark lawsuits against Google regarding AdWords (I am resetting this roster to eliminate all of the post-Rescuecom cases that Google has resolved):

* Jurin v. Google. Jurin appears to be proceeding pro se again, so his odds of success keep going down.
* Rosetta Stone v. Google [latest post]
* CYBERsitter v. Google

Note #1: the FPX class action lawsuit voluntarily dismissed with prejudice shortly after Google defeated class certification.
Note #2: Google and Yahoo were dismissed from the Pathak case May 25, 2011 for Pathak's failure to serve them.
Note #3: for now, it looks like Google is out of the Groupion v. Groupon lawsuit because Groupion lost its substantive case against Groupon.

Posted by Eric at 03:06 PM | Derivative Liability , Search Engines , Trademark | TrackBack

June 18, 2012

Recap of the Fourth Trademark Scholars Roundtable at DePaul University

By Eric Goldman

In April, Graeme Dinwoodie and Mark Janis once again convened a roundtable of trademark law scholars to geek it out on trademark law. Group photo. This year’s theme was “trademark boundaries,” i.e., how trademark law abuts against other legal doctrines (such as copyright, patent or publicity rights) or no doctrines at all (a legally unregulated zone). As usual, Mark Lemley provided a helpful recap of our discussion:

* as a group, we principally interpreted “boundaries” as limits to trademark’s doctrines rather than as frontiers with other doctrines.

* we discussed how often trademark law gives way to conflicts with patent or copyright doctrine. Mark observed that not many of us questioned the supremacy of copyright/patent over trademarks in those conflicting cases. Mark spun through a series of hypotheses why we routinely view trademark law as subordinate to copyright or patent:

- the constitution. Patent and copyright have a Constitutional clause authorizing Congress to protect them. Trademark law exists only under Congress’ general commerce clause powers.

- venerability. Patents can be traced back a half-millennium; copyrights have a history of 300+ years; trademarks are a comparative newcomer, as they are principally a product of the 19th century.

- timing in product development. Copyrights and patent are often part of the thing being sold and are thus part of the discussion from the beginning of the product development cycle, while trademarks become relevant later in the product development cycle.

- public domain concerns. Copyright and patent have clearer paths to the public domain, and thus to enable free copying, than trademark law. Mark didn’t mention it explicitly, but one reason we subordinate trademarks to copyright and patent doctrine is that trademark protection is potentially perpetual, while copyrights and patents aren’t. The Qualitex case expressly referenced this consideration.

Mark noted that none of these explanations are fully satisfactory. As a result, we should reexamine why we denigrate trademarks’ status relative to copyrights and patents.

* where they conflict, we presume trademark law preempts state doctrines. This may be a subset of general federal/state supremacy issues.

* the group spent as lot of time discussing functionality, especially aesthetic functionality. Mark asked if we need two separate functionality doctrines. He thinks perhaps we could develop a unified doctrine, which may have the collateral benefit of keeping the doctrine from being treated like a stepchild. We spent substantial time wondering about the role of aesthetic functionality, which is at the border of trademark law and both copyrights and design patents. Perhaps the term “functionality” throws us off; Stacey Dogan offered the alternative terminology of “aesthetic utility,” which may be a more accurate descriptor.

* there was near-consensus that we should overcome any tendency to feel like “there must be some applicable law” to every situation. One way to counterbalance this impulse is by extolling the virtues of “freedom to copy” or the right to compete, a value that isn’t expressly in the Constitution even though it’s a linchpin of our economy and our system of governance. Previously, Mark observed that competition is what’s left over when there’s not an applicable intellectual property. When IP doctrines grow, competition recedes. Or as Mark McKenna observed, all IP is about unfair competition; competition norms inform IP boundaries. Somehow, we’ve flipped the presumptions and now make defendants prove why they are allowed to copy.

In my summary near the session’s end, I made two main points:

1) Compared to many of my peers, I hold a relatively absolutist position naturally informed by neo-classsical economics. I think trademark law should perform only one task, which is solely to correct specific types of marketplace defects in the marketplace that harm marketplace efficiency—the presentation of product source information that hinders consumers’ abilities to effectuate their preferences. That particular defect in the marketplace hurts society by interfering with the “invisible hand” mechanism.

This takes us to a point raised by Michael Grynberg about institutional competences for enforcement (i.e., the “who” of enforcement, as opposed to the “what”). Comparative institutional competency is a major topic in advertising law (I explored it a bit in my paper on privacy class action lawsuits), so it’s natural to revisit it in the trademark “corner” of advertising law. We rely on trademark owners to enforce their trademark rights, just like we only let competitors enforce Lanham Act false advertising claims. Competitor-initiated enforcement actions have their virtues; after all, no one has greater financial motivation to fix a marketplace defect than a competitor who is losing profits due to legal corner-cutting. But competitor-initiated enforcement has numerous downsides too, including the possibility that it’s motivated by anti-consumer impulses and the collusion risks (i.e., a competitor who lives in a glass house isn’t likely to throw stones at a competitor). Thus, we have a suite of other enforcement mechanisms for advertising law problems, including consumer lawsuits, government regulation, certification bodies, and non-legal recourse.

We don’t need trademark law to solve every problem because these other enforcement mechanisms can shoulder some of the load. In turn, we should resist the impulse to keep expanding trademark law to cover more border cases internally within trademark law, and instead trademark law should “outsource” any non-core problems to other doctrines enforced by other enforcement institutions. There’s a long list of para-trademark rights or other doctrines (ranging from defamation to antitrust law) that can handle legal concerns without expanding trademark law to cover them as well. (Rebecca gave the example of dilution as “defamation-lite,” a point often overlooked in the discussions about dilution's "merit").

2) In contextualizing the boundary problem, Bob Bone noted the possibility of both cumulation of doctrines and conflicts of doctrines. I am much more troubled by doctrinal cumulation/overlap than many of my peers. Bill McGeveran and I sparred with each other on this point all weekend; Bill observed that we shouldn’t care about doctrinal tidiness for its own sake, although I in fact would love a lot more doctrinal tidiness. Bill teaches civil procedure and I loath civil procedure (no disrespect intended!), so maybe we just start from different places.

My main objection to overlapping doctrines is that they produce two types of transaction costs. First, when in court, overlapping doctrines impose greater litigation/adjudication costs on all players. This is especially true when different doctrines are resolved at different stages of litigation, i.e., doctrines A-C can be resolved on motions to dismiss and doctrine D requires litigation through summary judgment or even fact adjudication. In those circumstances, when doctrine D isn’t meritorious, the litigants and the court bear additional costs for no extra social payoff.

Second, and more importantly, overlapping doctrines impose substantial extra costs on companies trying to bring products to market. Each doctrine requires its own research/clearance; indeed, my perspective from my in-house counsel days is that these costs grow logarithmically with each new doctrine, not arithmetically. In effect, cumulative doctrines are similar to “IP rights thickets” we lament elsewhere. Clearance costs can dramatically suppress innovation.

Jeremy Sheff rightly noted an internal tension in my two points. He observed that overlap in institutional enforcement scope creates transaction costs just like the transaction costs in doctrinal overlaps that I lamented. I responded that (in theory) we can design the enforcement institutions, and their substantive enforcement portfolios, such that they sit next to each other and don’t overlap. This is probably untrue in practice, especially, as Mark Lemley pointed out, given that regulators tend to regulate and thereby expand their portfolio of responsibilities.

Dastar came up frequently in our discussion, but there was widespread consensus that none of us feel like we understand it. Barton Beebe described Dastar as “so heavy,” which really does sum it up nicely.

Prior years' recaps:
* First
* Second
* Third

Rebecca's characteristic quasi-transcription of the discussion:
* Part 1
* Part 2
* Part 3

Posted by Eric at 09:33 AM | Marketing , Trademark | TrackBack

June 15, 2012

More Evidence That the Initial Interest Confusion Doctrine is Dying--Dwyer v. Sensocon

By Eric Goldman

Dwyer Instruments, Inc. v. Sensocon, Inc., 2012 WL 2049921 (N.D. Ind. June 5, 2012)

Earlier this year, I blogged about some research I had done suggesting the declining fortunes of the initial interest confusion doctrine. I anticipated turning the research into an article declaring the death of the initial interest confusion doctrine, and I had some pseudo-empirical evidence supporting that...and then 2011 happened, and a few too many cases embraced the initial interest confusion doctrine (such as the crappy Facebook v. Teachbook case), screwed up my empirics and effectively scuttled the article. I've put the article on hiatus while I let more evidence accrue that the initial interest confusion doctrine is waning and washes away 2011's blip.

While I wait, I continue to read every case discussing the initial interest confusion doctrine. I thought this overlong opinion, resolving a mildly interesting trademark dispute in the "differential pressure gauge" industry regarding comparative advertising, provided a nice snapshot of the modern era's judicial hostility to the plaintiffs' overclaiming of initial interest confusion. The court says:

The Plaintiff submits, without any legal analysis, that the Defendants' rampant use of its Mark is for the purposes of increasing the Defendants' webpage search results for Magnehelic. This reference to Internet advertising implicates the discussion in Promatek Industries, Ltd. v. Equitrac Corp., 300 F.3d 808 (7th Cir.2002), regarding initial interest confusion. In Promatek, the defendant placed the plaintiff's trademark in its metatag, thereby diverting web consumers to the defendant's website. Id. at 812. The court held that this was a misappropriation of the plaintiff's goodwill even if the consumers were no longer misled once they reached the defendant's website. Id. (“[T]hat confusion as to the source of a product or service is eventually dispelled does not eliminate the trademark infringement which has already occurred.”) (quoting Forum Corp. of N. Am. v. Forum, Ltd., 903 F.2d 434, 442 n. 2 (7th Cir.1990)); see also Dorr–Oliver, Inc. v. Fluid–Quip, Inc., 94 F.3d 376, 382 (7th Cir.1996) (explaining that initial interest confusion is actionable under the Lanham Act and occurs when a competitor gets its foot in the door by confusing consumers with the similarity of the mark, even if the customer realizes the true source of the goods before the sale is consummated). The Promatek court explained that using another's trademark in metatags was much like posting a sign with another's trademark in front of a store. Id. at 813 (“Customers believing they are entering the first store rather than the second are still likely to mill around before they leave.”) (citing Brookfield Comm'ns, Inc. v. W. Coast Entm't Corp., 174 F.3d 1036, 1064 (9th Cir.1999)); cf. Eli Lilly & Co., 233 F.3d at 465 (noting that the defendant's references to the plaintiff's trademark (PROZAC®) in its website source codes was evidence of wrongful intent to divert Internet users searching for information on PROZAC® to the defendant's website). The court found that the danger of initial interest confusion that applied to terms used in metatags also applied to terms used on websites. 300 F.3d at 813.FN5

FN5. Additionally, as one district court noted, “modern search engines make little if any use of metatags.” Standard Process, Inc. v. Banks, 554 F.Supp.2d 866, 871 (E.D.Wis.2008) (quoting 4 McCarthy on Trademarks & Unfair Competition § 25:69 (4th ed.2003)). Instead of relying on keywords manipulated by webmasters, which became an increasingly poor indicator of relevancy, search engines now primarily use algorithms that rank a website by the number of other sites that link or point to it. 554 F.Supp.2d at 871 (citing 4 McCarthy on Trademarks § 25:69).

Initial customer confusion could thus exist if the Defendants' repeated use of the Magnehelic® Mark on websites selling Sensocon products caused consumers who were looking for the Plaintiff's product to visit the Defendants' website under the mistaken impression that it was a site where Magnehelic® gauges were offered for sale—even if these potential buyers then saw Sensocon's attempt to define its product as an alternative to the Plaintiff's Magnehelic® and realized that the Plaintiff did not sponsor or endorse the Defendants' product. However, in an infringement action, the Plaintiff bears the burden of proving likelihood of confusion, and the Plaintiff has not presented any evidence to suggest that, even if the Defendants intended to increase Sensocon's Internet traffic through search results for Magnehelic, any such purpose was successful achieved. For example, the Plaintiff has not designated any evidence that individuals who conduct website searches containing the word Magnehelic have been or will be directed to websites offering the Defendants' products instead of to the Plaintiff's website or authorized dealer websites. “A genuine issue of material fact arises only if sufficient evidence favoring the nonmoving party exists to permit a jury to return a verdict for that party.” Faas v. Sears, Roebuck & Co., 532 F.3d 633, 640–41 (7th Cir.2008) (quotation marks omitted). Here, there is no evidence from which a reasonably jury could find that the Defendants' use of the Magnehlic® Mark on the Sensocon website created customer confusion, initial or otherwise.

Notice what the court did here (overlook the stupid suggestion that comparative advertising could still create initial interest confusion). It required the plaintiff to provide some hard evidence of initial interest confusion, not just vague hypothetical assertions. Specifically, the court asks to see how any searchers actually saw any search results or other information that might have impacted their decision. The plaintiff had no such evidence, nor is any trademark owner likely to be able to generate such evidence because it's so hard to rank in organic search for a competitor's trademark.

This reinforces that initial interest confusion is a relic doctrine designed to redress really weak consumer search processes like guessing domain names or search engines rankings influenced by inaccurate metatags. I don't think we needed the initial interest confusion doctrine even back in the day, but I'm confident we don't need it in the modern search engine era. I discuss both the importance of judges requiring plaintiffs to demonstrate actual harm to support an initial interest confusion claim, and the likelihood that technological evolution would moot the problems that the initial interest confusion doctrine was designed to address, in my 2005 Deregulating Relevancy article.

Even though this opinion lays out a sensible evidentiary hurdle for trademark owners to overcome if they are going to whine about initial interest confusion, it would have been even better if the judge had taken the logical next step and just declared the initial interest confusion doctrine dead. The fact that judges can't bring themselves to do this, and instead engage in doctrinal twists and contortions to effectuate a de facto evisceration of the doctrine, provides some interesting insights into the so-called flexibility of the common law and the dangers of common law experiments. When I write my paper about the death of the initial interest confusion doctrine a decade from now, I'll amplify that point too.

Posted by Eric at 09:38 AM | Search Engines , Trademark | TrackBack

June 14, 2012

University of Alabama Can't Stop Paintings of Famous Crimson Tide Football Moments--University of Alabama v. New Life Art

By guest blogger Deborah Gerhardt

[Eric's introduction: Deborah Gerhardt is a law professor at University of North Carolina. She is part of the 3G team (including myself and Leah Chan Grinvald) working on the trademark policing article I mentioned last week. Deborah helped with an amicus brief in this case. I also signed onto that brief.]

The University of Alabama Board of Trustees v. New Life Art, Inc., No. 09-16412 (11th Cir. June 11, 2012)

Summary: On June 11, 2012, the Eleventh Circuit Court of Appeals elevated Daniel Moore to the rank of art law hero. In 2005, the University of Alabama sued him for breach of contract and trademark infringement. His offense? Daniel Moore had the audacity to include the team uniforms and colors in his paintings depicting famous moments from Alabama football games. The Eleventh Circuit concluded that Moore may continue creating his art without the University’s permission. The opinion states that Daniel Moore has a First Amendment right to include the crimson and white uniforms in his paintings of famous football moments and that this right trumps any trademark rights the team has in its colors.

Background: Since 1979, Daniel Moore has been painting photorealistic scenes of historic moments from Alabama football games. He sometimes spends months drawing, planning and painting a single canvas. Because of the amount of time invested in each work, the originals are only available to fans who can afford to spend thousands of dollars. Moore gives a much wider audience access to his works by selling prints, mugs, t-shirts, and calendars.

Moore is revered among Alabama fans. When I flew from Raleigh to Atlanta to help Moore’s team prepare for the oral argument, the woman sitting next to me on the plane saw the caption on the brief I was reading. She leaned in to share that she and her brothers bought an original Moore for their father. “It hangs behind him in his study—it is his favorite thing.” At a time when most fine art is not celebratory or even representational, Moore gives his fans a unique opportunity to display love for art, the beauty of the human form and University loyalty.

After years of encouraging Moore to paint and sell his work to appreciative Alabama fans, the University decided to claim exclusive trademark rights in the colors crimson and white, even though many other schools--including Harvard, University of Oklahoma and the University of Utah--use the same color combination. In 2002, The University of Alabama told Moore he must have their permission if he wanted to continue illustrating the team colors in his paintings. Moore believed he had a right to keep painting these historic moments accurately, and would not agree to subjugate his artistic freedom to the state university. Since then, Alabama has reportedly spent well over $1.5 million suing this artist. Not surprisingly, the case has been a public relations disaster for Alabama officials, but they continue to pursue it anyway.

Moore had multiple opportunities to settle this case, but he believes that as an artist in the United States, he should have the right to paint subjects that are meaningful to him. He persevered, and undoubtedly paid a fortune to litigate the dispute. The emotional toll should not be discounted either. Moore studied art at Alabama. His wife and children are also Alabama alumni. For years, he was welcomed onto the sidelines at football games so he could take photos that he would use as raw material for his work. The suit must have been a painful experience for his entire family. Still, Moore continued to defend himself and his principles.

For a long time, it seemed that no judge would have the courage to decide the case. The 11th Circuit noted that the case had been assigned to “seven different district court judges.” Many of them seemed intent on forcing a result through repeated rounds of alternative dispute resolution. Finally, District Judge Robert B. Propst split the baby, granting partial summary judgment allowing Moore to continue selling paintings and prints. In the findings of fact, the Court stated that “It is highly unlikely that a purchaser would not know that Moore is the moving force behind the paintings . . . [if trademarks] answer the question `who made it?’. . .the answer is clearly `Moore.’” Despite this finding, in its conclusion of law, the District Court found that “the paintings may create a likelihood of confusion with regard to plaintiff’s said mark.” The Court granted summary judgment to the University on the merchandise, prohibiting Moore from selling reproductions of his art on items typically seen in a museum gift shop, like smaller prints, calendars and mugs.

Eleventh Circuit Oral Argument: Both the University and Moore appealed. The Eleventh Circuit heard oral argument on February 2, 2012. Moore’s counsel, Stephen D. Heninger, is a veteran trial lawyer. He described Daniel Moore as “the Norman Rockwell of college football.” Then, Heninger held up a Sports Illustrated cover to demonstrate the importance of the issue before the court. If the University wins, what prevents it from requiring news organizations to get permission every time they want to take a photo or mention the name of a team?

Heninger wisely ceded five minutes of his argument to Notre Dame Law professor Mark McKenna [Eric's note: Mark has guest blogged here as well]. The Court bombarded him with questions, extending its time with him. McKenna emphasized the importance of applying the Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) test in which First Amendment interests are balanced against trademark claims. He also explained that trademark law makes it OK to show a brand when the use is to express an idea or create art and not to designate the source for the work. The Eleventh Circuit opinion makes it clear that Mark McKenna’s law professor amicus brief (to which I contributed) and his oral argument were helpful to the Court in sorting through the issues.

Eleventh Circuit Opinion: In a thoughtful opinion written by Circuit Judge Anderson and issued on June 11, 2012, the Court of Appeals handed Daniel Moore a significant victory.

Breach of Contract Claim: Over several years, Moore had agreed to several license agreements with the University of Alabama for specially sponsored items that were sold with a University seal on the frame or packaging. Each of these agreements required Moore to get permission before using a long list of University “indicia” “upon or in connection with” any product. These University agreements read like they were created for T-shirts and caps, not art. Perhaps for this reason, the team colors were on the list of indicia, but the uniforms were not. The University claimed that by signing these agreements, Moore gave up any rights he may have had to use the University symbols in his art without its consent. The District Court had held that Moore did not breach these agreements because “uniforms” did not appear on the long list of indicia. The University appealed this finding because although the uniforms were not on the list, the colors were listed, and the colors did appear in Moore’s paintings.

The University thought it had a strong breach of contract claim. It urged the Eleventh Circuit to decide the entire case based on the language in the form contracts, asserting that the Court did not need to reach its trademark claims. Here, it made a huge tactical error. The University overreached in arguing that the contracts applied to all of Moore’s work, not just the ones subject to the license agreements. Such a reading was possible from the language of the contracts, but it made no sense in the broader context of the dispute. The Eleventh Circuit astutely suggested that the University’s reading of the contract might have made it void on public policy grounds. According to the Alabama interpretation, Moore would have “effectively indentured himself to the University, in that he would need to perpetually obtain permission to paint any historically accurate scenes from Alabama football games.” Being perpetually indentured sounds at worst like slavery—and at best like a covenant not to compete that never ends. Under either scenario, the contract would of course be void on public policy grounds.

The Eleventh Circuit rejected the University’s contract interpretation. It found the language of the license ambiguous. On one hand, the contract suggested that Moore needed permission for any use of the indicia, and other provisions seemed to suggest that that permission was required for branding on a product package but not in the content of a painting, print or calendar. Because the license agreements were ambiguous, the Court looked to how Moore and the University worked together in the days before the dispute to discern the true agreement between the parties. It found that even while the license agreements were in place, Daniel Moore continued to sell other artwork featuring Alabama subjects wearing the crimson tide uniforms. The University proudly displayed many of these unlicensed works on campus. Even though Moore’s work was widely known and admired in the Alabama community, the University never objected to these unlicensed works until 2002. The facts did not reflect the story the Alabama lawyers told the court. Based on the conduct of the parties, the Court concluded that the parties did not intend that Moore would seek permission every time he wanted to include Alabama uniforms in his art. He had painted them too many times with the University’s enthusiastic consent.

Trademark Claim: The opinion also gave Daniel Moore and all artists seeking to show brands in their work a big victory on the trademark claim. The result came as a pleasant surprise. The district court opinion was nearly incoherent, and the Eleventh Circuit could easily have remanded the case for a trial on whether Moore’s use of the marks created a likelihood of confusion among consumers.

Also, Moore’s lawyers had to confront some spectacularly bad precedent-- Boston Hockey v. Dallas Cap & Emblem, 510 F.2d 1004 (5th Cir. 1975), which was binding in the Eleventh Circuit. Instead of applying the typical likelihood of confusion standard for trademark liability, Boston Hockey states that any use of a trademark that “triggers a sale” should result in liability. In the law professor brief, we explained that this precedent means that there could be trademark liability every time a newspaper makes more sales because it uses a team name to report the results of a big game. (I analyze Boston Hockey’s potential chilling of such uses in more detail in my article, Social Media Amplify Consumer Investment in Trademarks). Trademark liability was not meant to be so broad. Still, the Boston Hockey case remains valid precedent in this Circuit, and the panel of judges knew it well. The Boston Hockey case itself (involving use of counterfeit team logos) may have been decided correctly, but the broad standard it articulated goes against the weight of trademark authority, and could have sunk Moore. The subject of the paintings is something that appealed to Moore’s audience.

The University again overreached. It asserted that Boston Hockey was dispositive. Their strategy failed to account for the artistic context. At oral argument, Judge Anderson asked the University’s counsel if his client’s trademarks trumped Daniel Moore’s First Amendment right to paint scenes from football games. The lawyer had no response. This question turned out to be of vital importance. In the opinion, Judge Anderson framed the central issue in the case as follows: “we must decide whether Moore’s First Amendment rights will give way to the University’s trademark rights.”

Even though the tempting simplicity of the Boston Hockey precedent was available, the Eleventh Circuit acknowledged that depicting a trademark in a work of art has First Amendment expressive value that must be balanced against the University’s trademark rights. Daniel Moore makes it very clear that he is the source of his art. Because Moore used the university symbols, such as the uniforms, to “memorialize and enhance a particular play or event in the university’s football history,” the Court found that such use does not violate the Lanham Act. At oral argument, Stephen Heninger and Mark McKenna clarified to the court that showing a brand inside a frame as art is expressive and should be protected by the First Amendment. These uses are very different from uses on a frame or package for art.

The Court noted that there was no evidence Moore made that kind of unauthorized use. After citing Rogers v. Grimaldi, 875 F.2d 994 (2d Cir. 1989) and ETW v. Jireh Publishing Inc. 332 F.3d 915 (6th Cir. 2003), the Eleventh Circuit disregarded Boston Hockey and balanced the artist’s First Amendment rights against the University’s trademark claims. The Court concluded that “the First Amendment interest in artistic expression so clearly outweighs whatever consumer confusion that might exist on these facts that we must necessarily conclude that there has been no violation of the Lanham Act.” It affirmed the District Court’s conclusion that Moore may continue to sell his paintings and prints without the University’s permission. The Eleventh Circuit reversed the trial court’s injunction on the calendars.

The Court reluctantly found that Moore had waived his first amendment and fair use claims by not clearly indicating that these arguments applied to his merchandise (for which he was the appellant) and not merely on his paintings (for which he was the appellee). It remanded this small piece of the case back to the District Court for a factual determination of whether the University acquiesced to Moore’s sales of these items. Perhaps this litigation will continue. The University could also appeal for en banc consideration.

This round elevated Daniel Moore to the status of First Amendment and Art Law hero. It is rare for a private citizen to have the perseverance, resources and courage to fight this kind of battle for a principle that will pave the way for many others. It would have been easy for him to turn away and paint other subjects. By fighting this litigation for nearly a decade, Daniel Moore has preserved his personal freedom to paint the subject that is most meaningful to him. He also prompted the Eleventh Circuit to validate that right in a way that will create a legacy of artistic freedom for others who enrich our lives through art that strengthens our sense of community with shared cultural symbols.

Posted by Eric at 09:14 AM | Licensing/Contracts , Trademark | TrackBack

June 07, 2012

Trademark Registrant Isn't Required to Shut Down Competitive Keyword Advertisers--STK v. Backrack

By Eric Goldman

STK LLC v. Backrack, Inc., Cancellation No. 92049332, 2012 WL 2024459 (TTAB May 21, 2012). The TTAB designated this opinion "non-precedential," which they do with the vast majority of their opinions.

Deborah Gerhardt, Leah Chan Grinvald and I are writing two companion articles on trademark policing doctrines. Our basic thesis is that the trademark policing "duty" is grossly overstated in ways that have pernicious effects on everyone--other than trademark lawyers who extract extra cash from clients due to the ambiguities. You'll be hearing more about this project as we make more progress (i.e., when I actually write the portions I promised to write).

This opinion illustrates an unsuccessful attempt to overstate the trademark policing "duty." I believe it's also the first opinion that expressly addresses what, if any, obligations a trademark owner has to shut down competitive keyword advertising. Consistent with our belief that trademark policing obligations are overstated, the opinion tells trademark owners that they don't necessarily have to go after competitive keyword advertisers as a precondition to maintaining their trademark rights.

Before I get to the opinion, a note about the TTAB. The TTAB is an administrative adjudication system (not a "court") within the USPTO that resolves disputes about trademark registrations. TTAB proceedings can be fiercely contested and often are equivalent to judicial proceedings in both scope and cost. In this case, STK sought to cancel Backrack's trademark registration on the grounds that Backrack for "pick-up truck racks" is generic. Although Backrack is a weak mark, STK had an uphill battle proving genericide.

To support its claims, STK argued that Backrack had not adequately policed against third parties purchasing "backrack" as the trigger for keyword advertising. The TTAB panel rejects the argument for several reasons, including that trademark law's applicability to keyword advertising is legally unsettled:

In view of the evolving status of the case law in this area, respondent's failure to pursue purchasers of "backrack" as a keyword is not evidence of failure to police its mark.

Further, the panel says that advertisers may be purchasing the keyword precisely because it is a competitor's trademark, which would undercut the argument that the term has become generic. Indeed, the panel found that competitors were advertising a variety of analogous goods (not just truck racks) in the ads triggered by "backrack," and the panel says this reinforces that the term isn't generic. The panel doesn't cite Rosetta Stone on this point, but the 4th Circuit's Rosetta Stone opinion mentions nominative use several times--a doctrine that can apply only if the advertisers use the keyword trigger for its referential meaning. I provide much more support for this legal interpretation in my Deregulating Relevancy article.

While a non-precedential TTAB ruling is hardly the most authoritative source on this topic, this opinion reaches a sound result and provides some helpful insights for trademark owners wondering if they must chase off competitive keyword advertisers to satisfy their trademark policing "duty." I would argue the answer has always been "no," and this opinion gives additional legal support for that conclusion. Now, I recognize trademark owners might have other reasons to "protect" their trademarks as keyword ad triggers, but I hope they won't spend the time and money on the misperception that they have to do so. As usual, that time and money would be better spent competing on the merits than on trying to suppress information available to consumers.

UPDATE: Comments on the case from:

* John Welch/TTABlog
* Rebecca Tushnet

Posted by Eric at 01:37 PM | Marketing , Search Engines , Trademark | TrackBack

June 04, 2012

"Hot Topics in Internet Law" Talk Slides

By Eric Goldman

This weekend I presented on "Hot Topics in Internet Law" at the San Francisco IP Law Association's Spring Seminar in Healdsburg. My talk slides. A few photos from the trip. As I've mentioned before, I find "hot topics" talks unusually challenging to prepare--they take much more time than normal talks, they are hard to organize, and they have a high risk of preemption by prior speakers. In addition to quick coverage of a number of topics, I focused on 5 broader topics (I only addressed 3 in the time I had):

* intermediary deputization
* consumer reviews
* social media account disputes
* trolling
* new gTLDs

Posted by Eric at 02:24 PM | Copyright , Derivative Liability , Domain Names , Publicity/Privacy Rights , Trade Secrets , Trademark | TrackBack

June 01, 2012

PissedConsumer Denied Section 230 Immunity and Can’t Shake Extortion Claim—Vo v. Opinion Corp.

By Eric Goldman

Vo Group v. Opinion Corp., 8758/11 (N.Y. Sup. Ct. May 22, 2012)

PissedConsumer is a consumer review site occupying the same market niche as Ripoff Report. It only wants negative consumer reviews of businesses (as signaled by its name), and its basic business model is to rank the negative consumer reviews highly in Google search results and then charge the businesses money to take the edge off that indexing. Vo Group claims it got snared in PissedConsumer’s scheme and allegedly chose not to pony up the requested cash ($5k) to PissedConsumer. Instead it sued PissedConsumer for a potpourri of claims. PissedConsumer moved to dismiss the lawsuit, and the resulting opinion is a mixed bag. Some highlights:

Defamation. Regarding Vo’s defamation claims, PissedConsumer defended on 47 USC 230. In one of the most important cyberlaw rulings of 2011, PissedConsumer won a 230 defense in the analogous Ascentive case, but the court doesn’t reach the same conclusion here:

at this stage of the litigation before any discovery has been conducted there are certainly allegations whether the initial defamatory content posted on the pissedconsumer website was attributed to the defendants themselves….Therefore the motion seeking to dismiss the initial statements is denied.

This adds to a long-simmering split in Section 230 jurisprudence: can a plaintiff defeat a motion to dismiss simply by alleging that the review website wrote the review in question? Some cases have said or implied yes (see, e.g., Children of America v. Magedson; Whitney v. Xcentric; HyCite v Badbusinessbureau; and I'm sure I'm forgetting others), while others have said no (see, e.g., Levitt v. Yelp). And of course, there was the Roommates.com train wreck on this very issue. If the answer is yes, the Section 230 immunity becomes substantially less effective; at minimum, it means the cases run longer, and plaintiffs can take expensive and disruptive discovery, even if the Section 230 immunity ultimately applies. In fact, given some courts’ wishy-washiness about Section 230 motions to dismiss, several experienced Section 230 litigators have told me that they sometimes skip a 230-based motion to dismiss and just push instead for a quick summary judgment.

Because it’s trivially easy for the plaintiff to allege that the review website wrote the review and therefore defeat an otherwise appropriate early Section 230 dismissal, I think courts need to screen the plaintiff’s allegations much more aggressively than this court did. See, e.g., Nemet Chevrolet v ConsumerAffairs, which didn't rely on 47 USC 230 but still rejected the unsupported assertion that the review site fabricated reviews. First, I think Twombly/Iqbal require the plaintiff to allege more than just the bare assertion that the website wrote the review. The plaintiff should have to provide concrete allegations of facts uncovered in its research supporting the claim, and it should not be enough simply to have a hunch. Compare Frontier Van Lines v. Valley Solutions, which said that the bare assertion of review website authorship didn't clear Iqbal, but the court didn't grant the motion to dismiss either. Second, courts should more aggressively police plaintiffs’ Rule 11 investigation obligation. In my opinion, if plaintiffs are just making up facts and defeating motions to dismiss based on these fictions, they should have to pay for the defendants’ resulting expenses.

We’ll find out if Vo has any juice behind its assertion later in the litigation. Perhaps the Section 230 motion will work better on summary judgment.

Bribery/Extortion. The court rejects the plaintiff’s commercial bribery claim, but it survives a RICO claim predicated on alleged extortion. The court says:

if PissedConsumer had the legal right to engage in the activities it was doing, then to request money in return for desisting from such activities cannot be considered extortion. [Eric’s note: the court doesn’t cite Coase, but this is quintessentially Coasean!] Since it has already been determined that some of PissedConsumer’s posts were possibly defamatory and hence fully unlawful, the $5,000 request cannot be viewed as merely nothing more than “hard bargaining” [Eric’s note: the court’s double negative makes that a hard sentence to parse]

In other words, just like the allegation that PissedConsumer authored the defamatory review defeated the Section 230 dismissal, it also helps the extortion-based RICO claim survive. This only reinforces how important is it/was for the court to gatekeep the plaintiff’s allegation that PissedConsumer wrote the review. Extortion charges are often leveled at Ripoff Report as well. Although I doubt Vo’s extortion claim will succeed in the end, I imagine other plaintiffs suing Ripoff Report and PissedConsumer will start sniffing around this RICO ruling for ways to keep their cases in court a little longer.

Trademark On the plus side, just like the Ascentive case, the court dismisses the trademark claims because the name PissedConsumer makes it clear to consumers what they are going to get. This extends the precedent that a trademark workaround to Section 230’s immunity for review websites may not exist.

Posted by Eric at 10:11 AM | Content Regulation , Derivative Liability , Trademark | TrackBack

May 24, 2012

LLC Members in Online Store Venture Bound by Partnership Fiduciary Duties -- Health and Body Store v. Justbrand Limited

[Post by Venkat Balasubramani]

Health and Body Store, LLC v. Justbrand Limited, 11-4132 (3d Cir.; May 11, 2012)

*Sigh.* Another group of people attempt a web venture with zero documentation and end up in court. One of the many perennial themes of this blog is that people must spell out the terms of any web venture in advance. This includes everything from a joint blogging arrangement to a jointly operated online store or a simple web development agreement. It’s not optimal to leave the documentation for later. You say you will deal with it later, but time flies, and as the value of the venture or the priorities or expectations of the parties shift, it becomes increasingly difficult to calibrate the arrangement from even ground. (In the extreme case, such as between Eric and I, a simple email or phone conversation may suffice, but I’d strongly advise against it. Reminder to Eric: if the big buyout materializes, all bets are off!)

Anyway, this is what happened here. Silverman and Singer worked for Hotheadz as sales trainees. While they worked for Hotheadz, and with Hotheadz’s permission, Silverman and Singer began to operate an independent online business; the bulk of the products sold by this business were purchased from Hotheadz. In 2007, Silverman and Singer registered [healthandbodystore.com] and [warmingstore.com] and put “substantial effort” into developing the underlying websites. These sites experienced moderate sales in 2007, but sales grew in 2008 and 2009 (from $60K to $150K and $170K, respectively).

In 2008, the CEO of Hotheadz became concerned that Silverman and Singer’s independent activities were interfering with their duties at Hotheadz. He gave them several options: (1) contribute the websites into Hotheadz; (2) leave Hotheadz and operate their ventures independently; or (3) form a joint venture. The parties exchanged a letter of intent, but this was never finalized. According to Silverman, they did not address the essential terms that he would expect to see in such an agreement.

In 2010, Hotheadz formed Health and Body Store as an LLC. The LLC had two members: Hotheadz, and Justbrand, which was an LLC operated by Silverman and Singer. Silverman and Singer continued to operate the websites, but did so allegedly with the support of Hotheadz. Among other things, Hotheadz provided warehousing, customer service, and other infrastructure. In 2011, Hotheadz sent a draft operating agreement (for HBS) to Silverman and Singer. The draft LLC agreement required payment of a “management fee” of $20,000 per month to Hotheadz and required Silverman and Singer to transfer the domain names to HBS. Silverman and Singer were less than enthused with the proposed arrangement, so they made arrangements to break off the relationship. They stockpiled inventory (ordering it from Hotheadz through an entity called “Novell Brands”). Ultimately, they resigned from Hotheadz, changed all of the passwords, and went off on their own.

District Court Proceedings: Hotheadz filed a complaint, along with a request for a preliminary injunction. The complaint asserted a variety of claims, including claims under the Computer Fraud and Abuse Act and the Lanham Act. The district court initially granted Hotheadz’s request for preliminary relief, but at a later hearing found that there was no meeting of the minds as to the essential terms of the HBS venture, and thus, no basis to impose fiduciary duties on Silverman and Singer. The court also rejected Hotheadz’s Lanham Act claim because Silverman and Singer agreed to remove any Hotheadz trademarks from the websites.

The Third Circuit Ruling: The Third Circuit reverses the district court on the fiduciary duty question. It finds that Silverman and Singer (through their entity) “cooperated with Hotheadz in the formation of HBS.” Since the parties never executed the LLC agreement, the default partnership law provisions applied and gave rise to a fiduciary relationship between the partners. This meant that in operating the websites, Silverman and Singer “were obligated to operate the Websites in a manner consistent with [their] fiduciary obligations to Hotheadz and to HBS.” The court finds that Sliverman and Singer owe fiduciary obligations through their ownership interest in Justbrand (which was a member of the LLC, along with Hotheadz) but potentially in their individual capacities as well. Silverman represented at times that he was a “partner,” “owner,” “president,” or “vice president” of HBS and to the extent he held any of those positions, this may be sufficient to independently impose fiduciary duties on Silverman and Singer.

The court passes on the Lanham Act claims, noting they overlap with the fiduciary duty claims and there is insufficient evidence in the record to determine who had the valid and legally protectable interest in the appearance of the websites. (Hotheadz’s Lanham Act claim seems to span alleged misuses of its Hotheadz marks, as well as goodwill that HBS may have had in the appearance of the websites.)

Finally, the court footnotes the fact that it's leaving the appropriate relief for the district court to decide in the first instance, hinting that no relief at the injunction stage may be appropriate:

[i]t is possible, of course, that no remedy at all should be given, even if there has been a breach, since the balance of equities may make a preliminary injunction inadvisable.

Eric has posted on a slew of cases that deal with online "divorces" where joint site operators split up with each other. Mikhlyn v. Bove is the paradigmatic example: "Cautionary Tale of Website Co-Ownership--Mikhlyn v. Bove." The most recent involved parties squabbling over a Tea Party-related Google Group: “Tea Partiers Wage War Against Each Other Over a Google Groups Account--Kremer v. Tea Party Patriots.” Based on how often we see these disputes, parties can't be reminded of the necessity for clear documentation often enough.

Hotheadz's trademark claims based on the "Hotheadz" marks were muddled and the court does not address them, but they seemed tenuous at best. As a reseller, HBS (or Singer and Silverman) should have the right to refer to Hotheadz to accurately describe the products sold by HBS. As to any claim based on the "Health and Body Store" mark, these overlapped with the fiduciary duty claim and it made sense to focus on the fiduciary duty claim. These types of disputes often spur claims under the Computer Fraud and Abuse Act or theories of conversion, but these claims really piggyback on the underlying ownership claim.

It was unfortunate for Silverman and Singer to have agreed to form the LLC and consented to filing the formation papers, without having ironed out the details of the underlying relationship. The court's opinion is unclear on to what extent they "cooperated" with Hotheadz in this process. It could have been as menial as counsel for Hotheadz filing the certificate of formation and obtaining email confirmation from Silverman and Singer. Something like this shouldn't sign Silverman and Singer up for fiduciary duties, but this is yet another pitfall of online marriages. If you form an entity with another person, you may sign up for a lot more in the way of duties than you intended to. Half-papering the arrangement may be just as bad as not having any contracts in place at all. It certainly put Silverman and Singer in a worse off position here. Interestingly, the court notes that Hotheadz helped Silverman and Singer and provided support for the business, but the court's order wasn't overly detailed on this point.

Eric's essay on co-blogging:

Co-blogging Law

Posted by Venkat at 03:41 PM | E-Commerce , Trademark

May 17, 2012

Trademark Trolling by SEO Consultant Provides Cautionary Anti-SOPA Tale (and Other Lessons)--Premier Pool Management v. Lusk

By Eric Goldman

Premier Pool Management Corp. v. Lusk, 2012 WL 1593206 (E.D. Cal. May 4, 2012)

Have I mentioned recently how much I hate SOPA? Today's case is a textbook example of why SOPA--and the things it stood for--were so objectionable to so many people. For SOPA proponents, especially those who falsely (or delusionally) argued that SOPA's tools would only be used by good guys to target bad guys, this case should be mandatory reading.

(This is a default judgment, so the judge relayed the unrebutted facts from the plaintiff's complaint, which I am further relaying here).

Premier Pool Management Corp (PPMC) provides lead generation services for the pool construction industry under the Premier name (the court doesn't use either the terms "lead generation" or "franchising," and I wasn't certain which one best described PPMC). Either way, as a trademark licensor, PPMC provides a variety of services to its licensees, including website management, SEO and other marketing services. PPMC tried to register its trademark but was blocked by a registration held by PPCI, a local Florida pool construction company operating under the Premier mark as well. The trademark registration at issue. In 2011, PPMC and PPCI negotiated a deal allowing PPMC to buy out PPCI's registration for $5k. The relatively low price reflected some doubts about whether PPCI ever made interstate use in commerce of the mark. Then, at the last minute, PPCI bailed out because an undisclosed higher bidder emerged.

Separately, PPMC retained SmartPro, run by the Lusk brothers Dean and Jason, as SEO consultants. I infer PPMC regrets this choice. During SmartPro's research on PPMC's SEO status, Dean discovered PPCI's trademark registration--and became the undisclosed higher bidder! They bought the PPCI registration for $140k with a "business plan" (if you can call it that) of asserting the trademark registration to extract cash from PPMC and 30 other pool construction companies nationwide using the Premier brand. Dean and his "partner" Leonard explained to PPMC how things were going to go:

* PPMC could help get its licensees to pay the Lusks and Leonard exhorbitant royalties to continue using the name "premier"; or
* PPMC could pay an "astronomical sum" to buy the trademark; or
* the Lusks and Leonard would go to the search engines and web hosting companies and shut down PPMC and its licensees.

(Cue the Godfather music and Marlon Brando slurring the words "offer he can't refuse." I half-expected to see references to a severed horse's head.)

PPMC declined this generous offer, and Dean made good on the promise/threat, sending a trademark cutoff notice to PPMC's web host Rackspace, which performed on cue and pulled the plug on PPMC's website. PPMC was able to get up-and-running with another web host, but I assume there was some scrambling and angst (not to mention costs/losses) associated with the transition.

PPMC sued the Lusks, who defaulted. Thus, the judge basically rules for PPMC across-the-board. The most interesting conclusion (again, on default) is that sending a cutoff notice to Rackspace constituted tortious interference with contract, a claim that has been rejected before in other circumstances (see, e.g., the Pandora dispute). The court also cancels the PPCI trademark registration (for lack of interstate commerce use), issues an injunction and awards attorneys' fees and costs.

Where to begin with a case like this? So many things went wrong, it's hard to keep them all straight.

Trademark in Laudatory Terms. At the root of it all is the trademarkability of a laudatory term like "premier." I think we'd be better off if we simply treated [laudatory term] [generic noun] as categorically unprotectable. Otherwise, we get junky trademarks like "Premier Pool Management" with dozens or hundreds of independent users throughout the country. Take a look at the Google search results for "premier pool" and see what a disaster that is. At minimum, I think laudatory trademarks should require secondary meaning, and I wonder how PPCI with its regional and declining customer base showed that. If we took secondary meaning seriously, it's probable that no one could trademark "premier pool management" on a nationwide basis.

Note: if you're looking for a paper topic, a thoughtful analysis of the protection for laudatory trademarks might be fruitful.

SEO Consultants Gone Rogue. This case fuels our fears that SEO consultants are just as likely to be foes as friends. SEO consultants often seem quite sketchy; they keep their cards close to the vest so they don't give any information away for free...plus, customers can't always tell which SEO consultants use black-hat practices. Here, PPMC's story goes far beyond just hooking up with a black-hat SEO consultant. The consultant actively went rogue on its customer--once the SEO consultant got a good look at the customer's business, it could quickly spot the customer's vulnerability and attempt to exploit the vulnerability for its own financial gain. This is the kind of nightmare so many customers fear when hiring SEO consultants!

If you're retaining an SEO consultant, this situation is a great reminder that you need to diligence your SEO consultant THOROUGHLY before retaining them--get referrals, check out any customer reviews, check their own SEOing skills (I couldn't conclusively find the SmartPro website in a quick Google search--not exactly a good sign), and do a background check! You'll be handling over the keys to your business and tons of confidential information to your SEO consultant, so double-confirm they deserve that trust.

Trademark Trolling. As described in the opinion, the Lusks were a classic trademark troll--they bought up weak trademark rights from a third party to build a "licensing"/enforcement business around extracting undeserved value from legitimate existing businesses using the term. The Lusks' trolling business is now kaput because the court canceled the trademark, but before the judicial intervention, the Lusks could cause plenty of mischief. Sadly, I doubt other trademark troll entrepreneurs will find anything in this case to deter them; a trademark's murky boundaries leave plenty of room for trollers to make mischief.

In general, buying up IP assets for the sole "benefit" of asserting them against others is a sketchy business. Trademark law is supposed to suppress such activity by requiring trademark sellers to transfer the goodwill with the trademark; but because this has become a lightly enforced formality, trademark trolling is possible. Even if judges don't enforce the goodwill transfer requirement, they should make all inferences against trademark speculators who buy-and-assert someone else's trademark. That's not what trademark law was designed to do, and it's easy to see how such over-assertions can wreak havoc on an industry.

Pam Chestek has more to say on the trademark problems underlying this case.

Web Host Pliability. The Lusks flashed a trademark at Rackspace, and Rackspace crumbled. It's hard to blame Rackspace given the de facto notice-and-takedown scheme that's emerged in secondary online trademark law (see, e.g., the Akanoc case), but Rackspace's pliability shows the agency problems inherent in a hoster-hostee relationship. The Lusks buy up a questionable trademark and make highly questionable assertions, but it's not worth it to Rackspace to defend its customers' interests. If anything, this situation shows how easy it is to use trademarks to disrupt legitimate customer-vendor relationships.

More importantly, the fact that Rackspace abandoned its customer in the face of a weak purchased trademark exposes several holes in the entire SOPA scheme. SOPA was built on the premise that legitimate IP owners would target illegitimate businesses. But here, an IP owner--using dubious rights it acquired for the sole purpose of legal showdowns--targeted a legitimate business and got the same results. SOPA's enhanced powers to IP owners, plus the cutoff-first/ask questions-second incentives for intermediaries built into SOPA, would only exacerbate that effect. As this case illustrates, we have plenty of problems to fix with the existing law; codifying and extending the IP owners' powers via SOPA would make the situation that much worse.

Posted by Eric at 09:00 AM | Derivative Liability , Trademark | TrackBack

May 16, 2012

Groupon Defeats Trademark Challenge--Groupion v. Groupon

By Eric Goldman

Groupion, LLC v. Groupon, Inc., 2012 WL 1655728 (N.D. Cal. May 8, 2012).

Groupion makes CRM software. Groupon is the leading online daily deals provider. A year ago, Groupion sued Groupon for trademark infringement. Last Fall, the judge denied Groupion's preliminary injunction request, signalling that Groupon could win with a summary judgment motion. Groupon followed through with the motion, which the judge granted, easily rejecting all of Groupion's contentions. The judge also rejected Groupion's cancellation request and independently ruled that Groupion wouldn't be entitled to monetary relief even if it won.

The opinion doesn't break a lot of new ground from the preliminary injunction dismissal. The court reinforces the linguistic differences between Groupion and Groupon, The court also rejects the similarity between the companies' offerings, even though Groupon added some tools (Groupon Rewards and Groupon Scheduler) that have some CRM-esque aspects. The court says "Despite the fact that Groupon now provides its business customers some information about the consumers who purchase its products through Groupon, and provides a calendaring program, the Court finds that this small potential overlap of services does not render Groupon's and Groupion's products to be related to the point that consumers would be confused as to their source."

In a footnote, the court says it's irrelevant that Google auto-corrects Groupion into Groupon:

Groupion, again without any citation to supporting evidence, argues that because searches on the Google search engine for “Groupion” produce results from “Groupon,” the companies share similar marketing channels. This argument does not assist Groupion. In addition to Groupion's fatal failure to cite to supporting evidence, the fact that a third party might suggest an alternative search based on the similarity of the spelling of Groupion and Groupon does not show that the two companies use similar means of marketing their products and services.

I defended this point about the irrelevancy of third party associations in my 2005 Deregulating Relevancy article.

It's hard to draw big lessons from a case like this, especially when there was a whiff of trademark trolling in Groupion's efforts. I have a more insightful lesson from trademark trolling coming in an imminent blog post.

Posted by Eric at 08:48 AM | Trademark | TrackBack

May 05, 2012

Franchisor Really, Really Unhappy With Franchisee's Co-Promotion With a Topless Bar--Capriotti's v Taylor

By Eric Goldman

Capriotti's Sandwich Shop, Inc. v. Taylor Family Holdings, Inc., 2012 WL 1448514 (D. Del. April 25, 2012). The complaint and exhibits A-D, E-H and I-O. Some background.

Capriotti's is a franchised fast-food sandwich chain, with its signature sandwich being "the Bobbie" with roasted turkey, cranberry sauce and stuffing. I've never been to the chain and it doesn't sound like my kind of place, but they do have a comparatively well-developed (for a fast-food sandwich place) vegetarian menu.

In 2003, Taylor became a Capriotti's franchisee in Las Vegas. The franchise agreement contained standard provisions requiring franchisor pre-approval of any franchisee ad copy.

You'd think that Thanksgiving-in-a-roll would sell itself, but Taylor sought a marketing edge in Las Vegas by appealing to local sensibilities. And what sells better in Vegas than sex appeal? So Taylor hooked up with a local topless bar ("Crazy Horse III") to offer a happy hour special of a sandwich and beer for $5. The ad copy displayed the franchisor's trademarked logo; though the parties disputed if Taylor authorized that or not. Several local publications and blogs shared the promotion with their audiences, such as this post:

“Hey, you like boobs, don't you? Of course you do. You like sandwiches too, right? Now why not put them together.... Apparently Crazy Horse III is teaming up with Capriotti's to offer lap dance enthusiasts six-inch-subs with a beer for five bucks during happy hour from 1 to 7 p.m. daily....”

Capriotti's learned that Taylor had allegedly cooperated with the topless bar on the promotion and sent a breach notice with a 5 day cure period. Feeling that Taylor didn't adequately remedy the situation, Capriotti's then sent a notice to terminate the franchise agreement. Taylor continued operating the franchise without change (although at some point the topless bar stopped the promotion), so Capriotti's sued Taylor in Delaware, and Taylor countersued.

The court doesn't understand why the parties sued in Delaware when both litigants are based in Nevada, so it transfers the case back to Nevada. The court also denies the plaintiff's preliminary injunction request because of the parties' factual disagreements and the unavailability of a key witness (the topless bar manager). These parties should settle, but they'll probably spend hundreds of thousands of dollars on attorneys' fees fighting over the implications of associating sub sandwiches with naked breasts instead.

What remains puzzling to me is why Capriotti's thinks it's worth suing to get Taylor out. Perhaps the association with a topless bar is so irreparably distasteful to Capriotti's that it's worth killing the relationship. The opinion also indicates that other franchisees in the local area were unhappy (jealous?) about the promotion. More likely, there's a backstory that makes the franchisor's litigiousness more explainable. Many franchisors would have gladly looked the other way or simply counseled the franchisee about its behavior going forward. After all, even if Taylor authorized the ad copy without permission, it was in the service of moving more Bobbies.

From the franchisee's perspective, this case is a good reminder that franchisors can be unduly sensitive about lascivious associations. Plus, franchisees shouldn't forget that franchisors may be delighted to have a pretextual excuse to shut down a longtime franchisee. The franchise agreement is the foundational document for the franchisee's business; it needs to be respected at all costs.

Posted by Eric at 08:12 AM | Licensing/Contracts , Marketing , Trademark | TrackBack

May 02, 2012

Hermès Obtains (Ex Parte) $100M Award Against Alleged Counterfeiters--Hermès v. Does

[Post by Venkat Balasubramani, with comments from Eric]

Hermès v. Does, 12-civ-1623 (S.D.N.Y.; Apr. 30, 2012)

We’ve blogged repeatedly about trademark owners obtaining ex parte orders that provide extraordinarily broad relief, ranging from domain name seizures to orders directing search engines and social networks to “delist” or “deindex” certain websites. In the run-up to SOPA’s introduction and consideration, it seemed relevant to keep track of what relief courts were willing to order under current law that overlapped with SOPA. Hermès recently initiated a similar case. In a breathtakingly short amount of time, Hermès filed its complaint, obtained a temporary restraining order and then an injunction, and finally obtained a judgment . . . in the amount of one hundred million dollars. (!!)

I’ve linked the relevant case documents below:

• TRO
• Preliminary Injunction
• Legal Memorandum in Support of Default Judgment
• Declaration in Support of Default Judgment
• Order to Show Cause for Entry of Default Judgment
• Judgment & Injunction

The case follows a similar trajectory to the other cases we’ve blogged about. Most importantly, the court grants broad relief, including domain name seizures on an ex parte basis. The court allows service of the lawsuit papers via email and then issues an injunction when the defendant does not respond. The court also orders injunctive relief directed at third parties, such as registrars, search engines and social networks, that are not before the court.

What’s most striking about this case is how the court grants astronomical damages without any supporting evidence of actual damages. Usually when someone asks for damages, even in a default judgment setting, the court has a prove-up hearing and requires the party put forth some evidence in support of their claim for damages. Granted, the evidence may not be subject to the rigorous examination of an adversarial proceeding, but the court is still supposed to take an independent look at the request for damages and make sure it’s kosher. (See, for example the Seventh Circuit's decision in e360 v. Spamhaus: "Spamhaus off the hook for $11 million judgment.") Here, there was no evidence of damages whatsoever. A party's failure to "participate in litigation" or comply with court orders is sometimes used as a basis for a harsh award in the form of sanctions, but a court will almost always give someone a chance and warn them before coming down on them. A party's failure to respond to lawsuit documents that were emailed to them--particularly where there's no proof even that the documents have been received by the defendants--is not the type of scenario where courts typically smack defendants for frustrating the judicial process.

Hermès filed a brief arguing that counterfeiting is a serious problem, and that defendants infringed willfully, failed to participate in the litigation, and frustrated Hermès’s efforts to obtain the necessary information that would otherwise support a number for default judgment purposes. There was no discussion whatsoever of numbers of products that defendants allegedly sold—even by estimation. There wasn't any details on the alleged relationship between the various defendants (if any).

I don’t really know what to say. It’s crazy to see judges sign off on these types of orders. Interestingly, as the memo filed by Hermès shows, this isn’t the first time. Cases brought by brands in the last year have resulted in laughably high damages awards against alleged “sprawling online counterfeit networks”: True Religion ($8,150,000); Tory Burch ($164,000,000); Burberry ($60,000); North Face ($78,000,000). (See also “Uggs Wins $686 Million Judgment in Counterfeit Cases Against Over 3,000 Knock Off Sites”.)

It remains to be seen whether these judgments are merely part of a PR push, somewhat similar to those pursued by ISPs against spammers, or whether the brands will do more than levy against the PayPal funds to collect. Either way, judges have shown a surprising willingness to sign off on whatever these types of trademark plaintiffs put in front of them. As anyone who has any experience in federal courts can attest, federal judges tend to be prickly about the orders they sign. I keep thinking one of these days a judge will issue a blockbuster order saying that while it's appropriate for brands to pursue relief against infringers and counterfeiters, courts won't rubber stamp their proposed orders.

(h/t Fashionista (Leah Chernikoff): “Hermès Wins $100 Million Judgment in Counterfeit Case; 34 Knock Off Websites Are Forced To Shutter”)
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Eric's Comments

Raise your hand if you think Hermès actually lost $100M of profits to this group of online foreign defendants. Anyone?

Raise your hand if you think it's possible that Hermès could lose $100M in profits to the entire collection of online counterfeiters throughout the world. Think about the market size in total and the mixed empirical results about counterfeiting as beneficial marketing/price discrimination. Anyone?

Raise your hand if you think Hermès will collect more than $1 in cash from any defendant in this case (other than seizing cash in the hands of third party payment service providers). Anyone?

OK, so Hermès gets a big, empirically indefensible, uncollectable damages award ex parte. Um...yay...?

Can someone please explain to me how an award like this does any good for anyone? If anything, I think outcomes like this breed disrespect for trademark owners and for the judicial system. Trademark owners look like greedy SOBs making such pie-in-the-sky demands using procedural shortcuts that almost certainly negate any possibility of opposition. (Anyone who wants to justify the award by saying "well, the judge signed off on it, so it must be OK" is cordially invited to stuff it because...). As we've protested before, ex parte judicial review is much more analogous to NO judicial review than to bona fide due process. When judges rubber-stamp BS requests like this, it makes me question the legitimacy of our judicial system. But because I actually think our judges really do try to do the best they can, outcomes like this are a warning sign we shouldn't be asking them to make ex parte decisions. Screening ex parte demands doesn't play to judges' strengths.

Meanwhile, some of the other relief authorized by the judge is disgusting. Sorry, I can't think of a more appropriate word. The judge orders:

* service provider cutoff: "domain name registry or other third party providers, including without limitation registrars, Internet Service Providers ("ISP"), back-end service providers, web designers, sponsored search engine or ad-word providers, merchant account providers, third party processors and other payment processing services, or shippers who receive actual notice of the terms of this Permanent Injunction, immediately and permanently cease rendering any services to the Defendants in connection with any of the Infringing Websites and Infringing Domain Names owned or operated by the Defendants"
* future de-indexing if the judge finds that the defendants register any additional infringing domain names: "upon giving actual notice of such an Order to any Internet search engines including, but not limited to, Google, Bing, and Yahoo, and any social media websites including, but not limited to, Facebook, Google+, and Twitter, (collectively "Internet Search and Social Media Websites"), such Internet Search and Social Media Websites shall de-index and remove from any search results pages any Additional Infringing Domain Names and websites connected thereto, unless otherwise instructed by this Court or by the Plaintiffs that any such domain name is authorized to be reinstated, at which time it shall be reinstated to its former status within each search engine index from which it was removed" [so now the court will be telling search engines that they must reinstate content too? See my post about the virtual horses/bunnies dispute in Second Life]

These requests reflect an impressive tour de force by the lawyers. They obviously read SOPA and basically recycled the worst ideas from the proposed statute into their requested relief. At least they are staying current with the news.

Now, maybe these service providers will refuse to comply with this order. I wouldn't bet on it. As we've discussed ad nauseum with SOPA, the incentives for these service providers are misaligned--especially once they are presented with a court order, even if it's not binding on them. Odds are the service providers will quietly comply with the requests, irrespective of the requests' legitimacy.

I'm sorry if I'm a Johnny One-Note, but I can't stress it enough. Scuttling SOPA/PIPA was only part of the solution. We need to proactively fix what's taking place in the courts. If we don't affirmatively restrict the relief judges order in ex parte proceedings and teach judges to remember the potential abuses of the ex parte system, we are going to see more junky outcomes like this. And that, in turn, will breed greater social distrust in our judicial system.

Prior blog posts on this topic:

* Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont
* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

Posted by Venkat at 10:11 AM | Domain Names , Trademark

April 24, 2012

Internet Intermediary Law Slides from Stanford Guest Lecture

By Eric Goldman

I recently guest-lectured at an Internet Law course at Stanford, run by Jennifer Granick and Richard Salgado. My slides.

Jennifer asked me to cover 47 USC 230 and 17 USC 512 in a single session. I know other Internet Law professors combine the topics, but I normally don't in my Internet Law course. When I cover online copyright liability, I discuss Section 512 as a defense to secondary copyright infringement. Later, I talk about publication torts, including defamation, and then talk about Section 230 as an Internet exceptionalist approach to publication torts based on third party content. I do have a wrapup slide at the end of my Section 230 (included in the slides linked up) that contrasts Sections 512 and 230, but I have never taught them together. I thought it worked out nicely, and it gave me a chance to show different ways plaintiffs are attacking UGC websites. Check it out.

Posted by Eric at 03:27 PM | Content Regulation , Copyright , Derivative Liability , Trademark | TrackBack

April 20, 2012

Cautionary Tale for Settling Trademark Cases--Tormented Souls v. Tormented Souls Motorcycle Club

By Eric Goldman

Tormented Souls Inc. v. Tormented Souls Motorcycle Club Inc., 2012 WL 1314128 (E.D.N.Y. April 17, 2012)

The parties settled a trademark litigation. The settlement agreement required the defendants to "take all the steps necessary to remove all advertisements, promotional publications, internet website, and other media wherein the public would encounter or view the use of the 'Tormented Soul' mark." I believe this is pretty standard language for trademark settlement agreements.

The trademark owner protested that it could subsequently find a MySpace profile (those still exist???) named "Tormented Souls MC" that contained seven photos of the "Tormented Souls" name and mark. The defendants' principal explained that his webhost set up the page for them, and the host hadn't given the password to the principal despite repeated requests. The court says that the principal's effort didn't satisfy the requirement to take "all the steps necessary to remove" the trademark references, and therefore the judge sanctioned the defendants for breaching the settlement agreement. The court only fines the defendants $500 (apparently liquidated in the settlement agreement) and doesn't award any extra attorneys' fees, so it turns out to be a relatively inexpensive mistake.

The court also excuses two other remaining trademark references because the plaintiff didn't show that the defendants controlled, or had the ability to remove posts from, the sites. The court further excuses the defendants from not putting a disclaimer on their current site because it was operating under a new domain name, and the settlement agreement applied only to the sites in the defendants' possession at the time of the settlement agreement.

Although the requirement that the defendants "take all the steps necessary to remove all advertisements, promotional publications, internet website, and other media wherein the public would encounter or view the use of the 'Tormented Soul' mark" may be standard for trademark settlement agreements, defendants should think carefully about committing to such an unbounded promise. Preferably, the defendants would represent exactly which sites they own and control and commit only to fix those and no others. If that's not possible, defendants should enumerate situations where they can't take down content, either because they can't access it or because the website prevents editing/deleting (e.g., Ripoff Report). In other words, defendants should not rubber-stamp this particular settlement agreement "boilerplate."

Posted by Eric at 03:46 PM | Trademark | TrackBack

April 16, 2012

Terminating an NFL Player's Endorsement Agreement for Polemic Tweets May Be Contract Breach--Mendenhall v. Hanes

[Post by Venkat Balasubramani, with comments from Eric]

Mendenhall v. Hanesbrands, 2012 WL 1230743 (M.D.N.C.; Apr. 12, 2012)

This case has it all: Twitter, a pro football player, terrorism, Osama bin Laden and contract law geekiness!

Background: Rashard Mendenhall plays professional football as a running back for the Pittsburgh Steelers. Mendenhall entered into an endorsement contract with Hanesbrands, which owns the Champion brand. The agreement between Hanesbrands and Mendenhall had a “morals clause,” which originally said that Hanesbrands could terminate the agreement if Mendenhall was arrested, charged with, or indicted for a felony or a crime involving moral turpitude. This clause was later amended to provide that Hanesbrands could terminate the agreement if, in addition to being charged with or indicted for a crime, Mendenhall:

[Became] involved in any situation or occurrence . . . tending to bring Mendenhall into public disrepute, contempt, scandal, or ridicule, or tending to shock, insult, or offend the majority of the consuming public . . . . [Hanesbrands’] decision on all matters arising under [this section] shall be conclusive.

Mendenhall’s Tweets: Mendenhall is an avid user of Twitter (@R_Mendenhall) and describes himself as a “Conversationalist and Professional Athlete.” [Eric's note: sadly, the conversation stopped pretty much right after Mendelhall sued Hanes; his last post is from July.] In the wake of President Obama’s announcement of Osama bin Laden’s assassination, Mendenhall posted a series of Tweets decrying the joy that people expressed about this incident (a link to the first tweet in the series):

What kind of person celebrates death? It’s amazing how people can HATE a man they never even heard speak. We’ve only heard one side . . .

I only believe in God. I believe we’re ALL his children. And I believe HE is the ONE and ONLY judge.

Those who judge others, will also be judged themselves.

For those of you who said we want to see Bin Laden burn in hell and piss on his ashes, I ask how would God feel about your heart.

There is not an ignorant bone in my body. I just encourage you to #think [nice touch on the hashtag here]

Not surprisingly, Mendenhall’s tweets generated a negative reaction. Mendenhall issued an explanation, saying that he was encouraging people to think; his tweets were meant to “generate conversation.”

Hanesbrands issued a public statement to ESPN distancing itself from Mendenhall’s statements and saying that his statements were inconsistent with the Champion brand. It said it was terminating the endorsement contract. Mendenhall sued, asserting that Hanesbrands’ termination was a breach.

The Court’s analysis: Hanesbrands says the contract vested it with discretion to terminate the agreement, and this decision shouldn’t be second guessed by the court. The court disagrees and says that this discretion is constrained by Hanesbrand’s duty of good faith and fair dealing. (The court doesn’t explicitly say that the contract would suffer from illusoriness if Hanesbrand could terminate it for any reason, but this is the same reasoning we’ve seen in other agreements that give one party a free hand to alter the terms.)

Does Mendenhall get past the good faith hurdle—can he show that Hanesbrands’ actions were unreasonable or in bad faith? At the pleading stage, the court says yes: and points to Hanesbrands initial public statement said that it “disagreed” with Mendenhall’s statements. In contrast, the agreement requires that Mendenhall make a statement that brings him into disrepute or shocks the majority of consuming public.

Hanesbrands responded that there was no dispute Mendenhall’s statements caused a public outcry and this backlash justified its termination of the agreement. The court says there is a factual dispute about the extent of the backlash. Mendenhall submitted evidence that although many people freaked out, he received supportive tweets and some people even changed their minds, thanking Mendenhall for making them think about the situation.

Celebrities and athletes getting into hot water over incendiary tweets that are sent in the heat of the moment. Sound familiar?

I do think there’s more to the story here, though. I don’t deal with morals clauses with much frequency, but it’s interesting to see that even a morals clause has to be constrained by some standard. If the brand reserves for itself the right to freely terminate the contract any time the endorser says something the brand disagrees with, this raises the problem of the contract being illusory.

Unlike the government, which has to comply with First Amendment constraints, private employers and brands can freely restrict the speech of their employees or endorsers. (Employers have to deal with NLRB guidelines, but those were not implicated here.) The challenge is to come up with a standard that doesn’t tie the hands of the brand but at the same time provides some metric that is not totally subjective and does not give the brand unbridled discretion.

Mendenhall’s path to victory will not be an easy one. He has a pretty tough hurdle to prove that either (1) Hanesbrands tolerated his own previous statements and this established some sort of course-of-dealing, or (2) Hanesbrands tolerated similar statements of other endorsers. As to the underlying issue of whether his tweets were offensive to a large segment of the population, the parties will probably both present competing evidence, but Hanesbrands probably has a lot to drawn on from an evidentiary standpoint here. (It's unclear as to whether use of the term "majority" in the agreement will come back to haunt Hanesbrands.)

In the meantime, Tweeters beware. We don't need another cautionary tale to remind us that the ability to instantly publish our often emotional reactions to the current goings on is a double edged sword, but regardless of how it plays out, this case serves that purpose.
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Eric's Comments

I love love LOVE this case! It's an instant Contract Law classic. I could see the opinion, or its facts, appearing in Contract Law casebooks and courses throughout the country. In addition to the star power/pro sports angle, it's a rich springboard for intellectual pursuits:

* the value of endorsement contracts. There is significant literature questioning whether endorsement contracts are profitable for advertisers. See, e.g., AdAge, Celebrities in Advertising Are Almost Always a Big Waste of Money. When the endorsement arrangement does work out financially, I wonder if being controversial subtracts, or enhances, the endorser's value? It brings to mind the maxim "there's no such thing as bad press." Did Mendenhall's endorsement become less financially valuable after all of the press coverage he got--or more?

In Tiger Woods' case, it could be argued that Tiger Woods' brand fell so hard so fast that it instantly tainted any other brands it touched. Perhaps that's true, but his case was exceptional because he had manufactured a strong "good guy" brand before the ugly dirt got publicized. Here, I wonder if Rashard had such a strong brand that he had as far to fall...and if not, if the enhanced public recognition he got from the controversy outweighed any negative associations in consumers' minds.

* how to negotiate a morals clause in the Twitter age. When I taught 1L Contracts in 2005, I gave students a three-part skills exercise involving negotiating a morals clause. (See this page for links to the exercises and my writeups). My hypothetical was based on Tiger Woods before we learned about his sexual predilections. Tiger's ultimate fall from grace really closed the circle for those students. Thanks for the extra help with the pedagogy, Tiger!

I thought the skills exercise was effective for a number of reasons, including the fact it required students to think about how to describe normal social interactions in words. Students soon realized how our everyday foibles could have massive financial impact in the context of an endorsement agreement. I hope this lesson served them well as lawyers, because the financial downsides of our foibles applies even to us non-celebrities.

The Twitter overlay puts even more pressure on drafters of morals clauses. I love Twitter, but one of its downsides is that very smart people make ill-advised posts in the heat of the moment. (I'm not saying Rashard's posts were ill-advised--see below).

Recall, for example, how Aflac terminated Gilbert Gottfried for his tweets about the Japanese tsunami--his jokes were insensitive but timely, perhaps the most toxic brew (i.e., the same jokes told a few months later might have been less controversial, but partially because they would be divorced from the context). Or recall Ashton Kutcher's ill-timed and ill-informed remarks about the Penn State sexual abuse scandal, that were enough to temporarily kibosh Kutcher's otherwise irrepressible tweeting and induce him to get a spokesperson to handle tweeting for him.

Inevitably, celebrities' tweeting in near-real-time on current events will result in train wrecks. Without a buffer/editor to insulate the celebrity, the celebrity's direct access to his/her audience + Twitter's low-friction posting + working at Internet speed = trouble. Attorneys representing celebrities negotiating morals clauses should incorporate a "Twitter exception" to the clauses, i.e., give the celebrities a free pass for being themselves on Twitter, because that's what's going to happen no matter what the contract says. This may sound like a clause advertisers would strenuously resist, but perhaps they shouldn't. Twitter is often a big part of the celebrity's flywheel of public visibility and the value the celebrity brings to the contract, so advertisers need to give celebrities breathing room to keep tweeting to keep that flywheel turning and deliver the value sought by the advertiser.

* can endorsement contracts draft around the "implied covenant of good faith and fair dealing"? Recall that the contract clause says "[Hanesbrands’] decision on all matters arising under [this section] shall be conclusive." This raises the issue of whether the implied covenant of good faith and fair dealing can be contractually waived. (Ken Adams has covered that issue several times, somewhat inconclusively: see, e.g., 1, 2, 3). Hanes surely thought it had been waived. If Hanes lacked that unilateral discretion, the contract clause (almost certainly the product of spirited negotiation) raises some interesting evidentiary questions--most obviously, how either party could prove/disprove that Mendenhall did something "tending to shock, insult, or offend the majority of the consuming public." (Emphasis added). Does a party need to do some kind of large-scale sampling survey to establish the "majority" threshold? That sounds expensive.

[UPDATE: Frank Snyder has more to say about the lack of doctrinal novelty in this case.]

* political orthodoxy and terrorism. At the core of this case--superficially about pro football players and sports jerseys--is one of the most burning political and philosophical questions of this decade: was the United States' killing of Osama bin Laden legitimate and ethical? The government's PR machine did a wonderful job of demonizing bin Laden for a decade, so perhaps not surprisingly a consensus/orthodoxy emerged: of course it was justifiable to kill bin Laden because he was the face of evil.

To Mendenhall's credit, he challenged this orthodoxy and prompted some hard questions about the US government's own conduct and our own emotional response to bin Laden's death. One way of reading the court's opinion is that it wanted to know more about Hanes' condemnation of Mendenhall for asking tough and probing questions, however contrarian they may be.

I think it's this extra layer that makes it an especially wonderful teaching case. Getting students to question their assumptions about bin Laden's death, and its implications for an otherwise garden-variety commercial dispute, could yield some powerful pedagogical payoffs.
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Venkat's Follow-up Comments

As always, Eric's comments raise a bunch of interesting questions.

The suggestion to build in a "Twitter exception" to a morals clause is a good one, but is sure to encounter stiff resistance from any advertiser or brand. In fact, even raising the issue could send up red-flags and result in pushback. The whole point of a morals clause is for the brand to make the call when things take a short or long-term turn for the worse.

As Eric notes, Mendenhall raised questions about the orthodoxy, and did so in a pretty even-keeled way. Should he take a financial hit because people reacted negatively? For better or worse, this is what being a brand spokesperson is all about. You no longer get to weigh in freely on current affairs and have to be careful about what you say. Everyone pretty much agrees there was strong negative reaction to the tweets. I don't know that it makes much sense to have either side quantify this or conduct an expensive survey. I also don't know whether it makes sense for Hanesbrands to have to meet some numerical threshold to make its case. The tie should go to the brand, and not the athlete or celebrity. (It's worth noting that the data is readily available and it would be fairly easy to categorize every single online reaction to Mendenhall's tweets.)

Unless the trial is scheduled to take place in Berkeley (California), Mendenhall is unlikely to receive any help in front of the jury, who will be colored by their own views in determining whether Mendenhall's tweets were "shocking, insulting, or offensive to a majority of the consuming public."

I wonder what the prospects are for the parties to make up. How likely is it that we see an act of contrition on Mendenhall's part after which the parties resume their relationship? This assumes that Mendenhall is open to this, and it's quite possible that he's not willing to publicly apologize or retract his statements. Judging from his statement in the wake of the controversy, the answer may well be no. On the other hand, maybe Hanesbrands does not need a public apology. Perhaps our memories are, like our attention spans, getting shorter. It's possible that the public may have already forgotten about this incident.

Posted by Venkat at 09:09 AM | Licensing/Contracts , Marketing , Publicity/Privacy Rights , Trademark

April 13, 2012

"Social Media and Trademark Law" Talk Notes

By Eric Goldman

Today, I gave a talk at Suffolk University's event "Social Networking Sites: Law, Policy and Practical Strategies" on Social Media and Trademark Law. My talk notes:
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1. Overview

A. Trademark doctrine is inherently elastic
* Schizophrenia about consumer protection vs. producer protection
* Hard to legally model consumer mental processes
* Trademark law relies on commercial/non-commercial distinction, and that model breaks down on the Internet

B. TM doctrine becomes more incoherent as it gets further away from product counterfeiting
* Little value to marching through doctrinal analyses in other circumstances

C. Internet technologies permit TM uses completely unrelated to product counterfeiting
* Pressure on TM law
- And SNSs feel pressure to do private ordering, although their efforts are often kludgy and inconsistent
* Pressure for new or expanded para-trademark rights
- ACPA
- False advertising/false designation of origin
- Defamation
- Publicity/privacy rights
- Identity theft/E-personation (“knowingly and without consent credibly impersonates another actual person through or on an Internet Web site or by other electronic means for purposes of harming, intimidating, threatening, or defrauding another person”)
- CFAA, trade secret, etc.

2. Namespace Disputes

A. Usernames are scarce and valuable
* Namespace proliferation with every new social media
* Leads to username squatting

B. Value + emotion = messy divorces
* Co-venturers (Tea Partiers, OMGFacts)
* Employee/contractor (Maremont, PhoneDog)

C. Doctrinal Ambiguities
* Does using a username create trademark rights? i.e., is it a qualifying “use in commerce”?
* Can a username, on its own, infringe trademark rights? Analogies to domain names
* Must the namespace operator adjudicate complaints to manage its liability? Even if not required, will the operator adopt a private ordering system that is dispositive in practice?

D. Username litigation is rarely cost-justified!

3. Content Source Confusion

A. Taxonomy of types of Content Source Confusion
* Competitive Injury. Ex: Ron Paul (YouTube video)
* Griper. Ex: Iacovelli (fake posts in doctor’s name)
* Parody. Ex: LaRussa, Coventry, BPGlobalPR

B. TM law isn’t designed to protect against content source confusion, but sometimes courts do it anyway

C. Enforcement raises Streisand Effect risk and is rarely cost-justified

4. Brands Can't Control Social Media

A. Social media gives brands unprecedented engagement with customers, but things can go wrong

B. Companies can self-injure their brands with ill-timed/ill-advised posts
* Kenneth Cole: “Millions are in uproar in #Cairo. Rumor is they heard our new spring collection is now available online at http://bit.ly/KCairo -KC”
* Entemann’s: “Who’s #notguilty about eating all the tasty treats they want?!” on same day as Casey Anthony’s verdict
* Ketchum exec James Andrew tweet “True confession but i'm in one of those towns where I scratch my head and say "I would die if I had to live here!“” while on way to client, FedEx.

C. Users control brands; brands don’t control users
* Nestle: Nestle took down Greenpeace’s critical video from YouTube, users complained on Nestle’s FB page, Nestle chided them for their behavior, users went crazy
* McDonalds: hashtag #McDStories became a “bashtag”
* For more, see my Online Word of Mouth article

Posted by Eric at 01:13 PM | Derivative Liability , Domain Names , Marketing , Trademark | TrackBack

April 10, 2012

Fourth Circuit's Rosetta Stone v. Google Opinion Pushes Back Resolution of Keyword Advertising Legality Another 5-10 Years

By Eric Goldman

Rosetta Stone Ltd. v. Google, Inc.,, 2012 WL 1155143 (4th Cir. April 9, 2012). I'm listed in the caption as a limited intervenor in the efforts led by Paul Levy to crack open the redacted material from the Joint Appendix. Paul Levy's explanation of that effort.

Overview

Lawsuits over the sales of keyword advertising seem so...2005. In an era where everyone is freaking out about behavioral advertising, lawsuits over the comparatively innocuous practices of triggering ads based on search terms feel archaic at best. After the district court opinion in the Rosetta Stone v. Google case, which slammed the door hard on the most determined plaintiff still suing Google for its keyword ad sales, I thought most trademark owners had moved on to other worries.

Sadly, this ruling--giving Rosetta Stone another chance in court--will undoubtedly revive the trademark plaintiff bar's interest in suing Google for its keyword ad practices. Just like Google got hit with over a dozen lawsuits in the wake of Google's Second Circuit "loss" in the Rescuecom case, I imagine a bunch of low-merit suits will follow this ruling too. (I put Google's "loss" in quotes because ultimately Rescuecom just gave up its lawsuit). Google will almost certainly win all of the incoming cases, just like it destroyed most of the cases filed post-Rescuecom, but it will have to spend a lot more money in legal fees to get there. Worse, it will take a while for these cases to work through the system, meaning that we aren't going to reach the inevitable final equilibrium--that keyword ad sales don't violate trademark law--for another 5-10 years. In this sense, the opinion reminded me of last week's Viacom v. YouTube ruling--both opinions were soulless omnibus rulings that give superficial (but ultimately false) hope to plaintiffs while remanding the case to an almost certain defense win (just at a much higher cost).

Also like Viacom v. YouTube, the appeals court reversed because the district court's opinion cut too many corners. I noted that when I blogged the district court's ruling:

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.

Nevertheless, I'd hoped the appeals court would get to the right result based on the big-picture normative conclusion that keyword ad sales shouldn't violate trademark law. The district court got the big picture right. The appellate ruling, in contrast, is so focused on correcting the doctrinal details that it completely misses the big picture. This is why the plaintiffs' bar will be unable to resist probing the opinion's interstices, even though those lawsuits will all eventually fail. If the court had more sensitivity to the big picture, it would have written an opinion that fixed the lower court's doctrinal errors but better communicated to plaintiffs not to bother suing.

Specific Doctrinal Points

Direct TM Infringement. This is probably the most obvious place where the opinion mechanically marched through the doctrinal elements without acknowledging the big picture. It's really makes no sense to hold that Google *directly* liable for trademark infringement for keyword ad sales, because Google's products/services or marketing do not confuse consumers about the source and origin of marketplace offerings. If any consumer confusion takes place, it's caused by the advertisers, and Google is at most secondarily liable for that. But the opinion is tone deaf about this key point.

On the plus side, the opinion correctly notes that the standard multi-factor likelihood of consumer confusion (LOCC) test doesn't work in nominative use situations. This is interesting on two fronts. First, I have made this point numerous times, most recently in my post on AR Pillow v. Cottrell. I hope other courts similarly rethink the multi-factor LOCC test in nominative use cases. It really don't work at all.

Second, the court implies--without saying--that Google's activities could be nominative use. This is a point I made back in 2005 in my Deregulating Relevancy article . I hope courts take a closer look at the interplay between keyword advertising and nominative use, but Google (as opposed to its advertisers) isn't referring to the plaintiff's products so much as the class of those products (what I called "associative use" in my article), so a classic nominative use argument probably still fails. Courts should think more broadly about the semantic import of keyword triggering.

On the minus side, the opinion warns lower courts not to engage in a "robotic application of each and every factor in a case involving a referential, nontrademark use." Well, that's true, but if it's truly a "nontrademark use," then what the hell is everyone fighting about??? The lack of a clear concept of what constitutes a "trademark use in commerce," and how that affects a direct trademark infringement analysis, is a key flaw in the opinion's architecture.

On the LOCC's intent factor, the court says that a jury could find Google had bad intent. The only evidence the appellate court discusses is that, in 2004, "internal studies performed by Google at this time suggested that there was significant source confusion among Internet searchers when trademarks were included in the title or body of the advertisements" and in 2009 Google liberalized its trademark policy to let more parties display third-party trademarks in the ad copy. I don't see how that provides any evidence to support a *direct* trademark infringement because Google doesn't put the trademarks in the ad copy (advertisers do).

On the LOCC's actual confusion factor, the opinion says that a variety of evidence--Rosetta Stone's deposition of five confused purchasers, evidence of other complaints Rosetta Stone received, Google's 2004 study, Google's in-house lawyers' inability to review search results to determine if they were legit and Rosetta Stone's expert report--all should have helped Rosetta Stone defeat summary judgment.

On the LOCC's sophisticated purchaser factor, the opinion says that the district court's inferences against Rosetta Stone weren't appropriate for summary judgment. The court notes some evidence--the buyers who bought counterfeit software and Google's study--could be counted against purchaser sophistication.

The Functionality Defense. One of the district court's goofiest rulings was that keyword triggering qualified for trademark law's functionality defense. Keywords do act as inputs into Google's software, so in the colloquial sense they are "functional." However, trademark law's functionality defense is narrower than that, and in practice it really only should act as a defense to trade dress claims The appellate court unsurprisingly reverses the district court's approval of a functionality defense emphatically. Among other things, the opinion says "it is irrelevant whether Google’s computer program functions better by use of Rosetta Stone’s nonfunctional mark." Many trademark geeks and commentators have already rejoiced that the appellate court fixed this issue.

Contributory Infringement. The opinion defines the applicable legal standard:

It is not enough to have general knowledge that some percentage of the purchasers of a product or service is using it to engage in infringing activities; rather, the defendant must supply its product or service to "identified individuals" that it knows or has reason to know are engaging in trademark infringement.

This is an OK standard but it is slightly different from other recent articulations of contributory trademark infringement, and I'm not sure why this panel felt the need to re-express the test in its own words. The opinion says that the district court's reliance on Tiffany v. eBay was misplaced because that ruling came after a bench trial and therefore couldn't help on summary judgment. Unfortunately, the opinion gives short shrift to what evidence from Rosetta Stone could support contributory infringement. The only evidence cited by this opinion is the fact that Rosetta Stone identified some ads from rogue sellers and Google didn't block other unidentified ads from those sellers. If that's Rosetta Stone's best argument for contributory infringement, I think it will lose the contributory claim handily.

Dilution. Characterizing keyword ad sales as dilution is unprecedented and virtually unsupportable doctrinally. This opinion doesn't address that. It simply points out minor doctrinal errors in the lower court's opinion (not surprising, as I said the lower court's "rejection of the dilution claim was bizarre"), but misses the big picture that there's absolutely nothing Google does that could dilute or tarnish Rosetta Stone's marks. (The court also doesn't discuss contributory dilution, but almost all courts have said it doesn't exist, so if the advertisers are diluting Rosetta Stone's marks but Google itself isn't, Rosetta Stone still loses this point).

The opinion says the lower court misallocated the burden about any fair use exclusion to dilution; the burden is on the defendant to show the defense, and the lower court should have held the issue past summary judgment. The appellate court's implication that keyword ad sales might be nominative use looms large here, but nominative use would be a complete defense to the dilution claim. The opinion also says the lower court truncated its analysis on the likelihood of dilution. Finally, the opinion tells the lower court to reexamine the dates on which Google commenced use of Rosetta Stone's trademark and when Rosetta Stone's trademark became famous. I don't see any way for Rosetta Stone to win the dilution claim, and nothing in the appellate court's doctrinal nitpicking changes my assessment.

Other. The court dismisses the vicarious trademark claim because Rosetta Stone didn't provide evidence that "Google acts jointly with any of the advertisers to control the counterfeit ROSETTA STONE products." The court also dismisses the unjust enrichment claim because "Rosetta Stone failed to allege facts showing that it "conferred a benefit" on Google for which Google "should reasonably have expected" to repay." The district court partially relied on 47 USC 230 to dismiss the unjust enrichment claim; the opinion expressly leaves the 230 point unresolved.

Case Library

Bonus: with the help of an RA, we scanned and posted the material from the Joint Appendix in this case. Some day I hope to blog on some of the more interesting findings (but nothing earth-shattering).

The case library (see also the Joint Appendix material):

Posted by Eric at 07:58 AM | Trademark | TrackBack

April 04, 2012

Tough Mudder Gets Its Hands Dirty in Trade Dress Fight (Guest Blog Post)

By Guest Blogger Tsan Abrahamson of Cobalt Law

[Eric's introduction: Tsan and I go back two decades to when we were both JD/MBA students at UCLA; then we worked together at Cooley in the second half of the 1990s before we both left to go in-house. Tsan is now one of the nation's leading experts on contests and sweepstakes; she's also an expert in trademark law and marketing law, especially kids' marketing. And she's a vegan chef and a hardcore skiier. On top of all that, Tsan has completed Tough Mudder events before, so when I saw this ruling, I immediately thought of her. I've been trying to get Tsan to guest-blog for years now, so I'm pleased to share this guest post from her.]

Tough Mudder, LLC v. Mad Cap Events, LLC, 2012 WL 760887 (M.D. Fla. March 7, 2012)

Participants in the Tough Mudder endurance race take an oath before they begin which includes the words, “I do not whine. Kids whine.” And apparently, Tough Mudder whines.

Tough Mudder recently got pissy when Mad Cap Ventures offered its own endurance race, the “Savage Race,” using colors, fonts, and images on its website that Tough Mudder believed similar to its overall trade dress. On those grounds, Tough Mudder sought a restraining order to enjoin the actual race from taking place.

In its denial, the court made quick work of Tough Mudder’s request, finding Tough Mudder had not met its burden under the legal standard required to issue a TRO. It’s difficult to find a lot of juicy bits in a 4 page denial, but the judge gives us enough to suggest Tough Mudder’s attorneys were not worthy of the orange headband the Mudder gives to those who have to mettle to cross the finish line. Alive.

The court never reached the merits of the case, seizing on the fact that Mudder hadn’t properly set forth its arguments. Whether Savage Run’s trade dress was confusingly similar to Tough Mudder’s was never actually addressed, suggesting both form and function play equally important roles in a successful motion.

Mudder’s attorneys alleged harm on the grounds that the Savage Race was an inferior race, a point not necessary for a trade dress claim where tarnishment isn’t alleged, but one where if raised, must be proved. The court seized on the fact that the claim was made without an offer of any evidence that the Savage Race in fact was inferior.

Mudder’s attorneys also failed to convince the court that its knowledge of the Savage Race was recent. The judge noted Tough Mudder’s own pleadings made clear it knew of the event at least 5 months prior to the race date, and thus viewed as dubious the sudden need to shut down the whole shebang.

The court did throw Mudder a bone at the end, however, converting the motion to “one for a preliminary injunction[.]” Perhaps while he was tapping out a procedural denial, he took an actual gander at the websites in question (or better, was himself a Mudder, and member of that small band of whack-jobs that endures scaling 15 foot walls, belly-slithering through mud, crawling into drainpipes half submerged, jumping 20 feet into freezing water, swimming under barbed wire, and running through live electrical wires, all for the prize of saying you did it; and that elusive orange headband).

The Tough Mudder website is characterized by shades of orange, gray, and black. Across the top, a horizontal screen showcases participants of the race covered in mud, water, sweat, and smiles. The liner notes use a sans-serif font, while the headers – including the logo itself – use a font designed to look like crumbling blocks. The Tough Mudder site reminds you that this is not your average mud run. Words like “kickass,” “stamina,” and “endurance” pepper the site. If you finish the race, you’re greeted with an orange headband and a beer.

The Savage Race website is characterized by shades of orange, grey, and black. Across the top, a horizontal screen showcases participants of the race covered in mud, water, sweat, and smiles. The liner notes use a sans-serif font, while the headers – including the logo itself – use a font designed to look like crumbling blocks. The Savage Run site reminds you that this is not your average mud run Words like “kickass,” “stamina,” and “endurance” pepper the site. If you finish the race, you’re greeted with a medal and a beer.

Had Mudder sought a TRO to take down Mad Cap’s site back when Mudder was actually made aware of the event, it likely would have been successful in forcing the organization to change its overall look-and-feel. The sites are highly similar – from the fonts displayed to the language used – and the similarities are clearly not coincidental. Mad Cap clearly meant to capitalize on the military style look-and-feel that Tough Mudder made popular. But Mudder got greedy, strategically trying to shut down the Savage Race altogether. Even if Mudder had properly shown the harm caused by the nearly identical website, it was – in this Mudder’s opinion – too late: the sales had already been made, the money collected. Running the course wasn’t going to change things.

Tough Mudder’s unspoken motto is “no risk, no reward.” It invites its runners to push the limits of their own boundaries and reach beyond what they thought logically possible. Applying this tactic to the law, however, was not the best strategy.

Posted by Eric at 10:46 AM | Trademark | TrackBack

April 02, 2012

Brief Brand Reference in TV Ad Constitutes Trademark Dilution--Louis Vuitton v. Hyundai

By Eric Goldman

Louis Vuitton Malletier, S.A. v. Hyundai Motor America, 2012 WL 1022247 (S.D.N.Y., March 22, 2012). The ad in question (also embedded below). The first amended complaint.

Introduction

Back in 2007, we held a major academic symposium on the trademark dilution doctrine at SCU. My main goal was to see if two dozen leading trademark academics could find some justification--ANY justification--for the trademark dilution doctrine. We struck out, of course. The trademark dilution doctrine is an elegant intellectual exercise with intuitive appeal, but it has the fatal flaw that absolutely no social science supports that intuition.

Fortunately, we don't see too many egregious trademark dilution "wins" in court. Barton Beebe showed that trademark dilution and infringement are highly correlated, so it's rare that a court finds trademark dilution standing alone. Furthermore, we've recently had a pretty good string of defense wins in dilution cases, highlighted by the Chewy Vuiton (also a Louis Vuitton case) and Charbucks rulings, among others.

And then we have an opinion like this--where the court finds trademark dilution without finding infringement (not resolved yet) and in a situation where EVERYONE can immediately tell there was zero harm to the brand owner. Rulings like this make trademark academics shudder in fear that trademark dilution will swallow up all of trademark law and confer rights-in-gross to trademark owners. While I don't share those fears for reasons I'll explain in a bit, unquestionably this is a bad ruling.

The case involves a TV ad for Hyundai Sonata. Watch the ad:

Hyundai's goal was to show that it brings luxury to the masses, so it depicts a few fictional examples of what it might look like if luxury items were widely available. One of the examples shows four seconds of a group of men playing street basketball using a basketball covered with a lightly modified version of the famous Louis Vuitton "toile monogram" pattern (yes, the same one at issue with Louis Vuitton's ill-advised enforcement against a student-organized fashion law event at University of Pennsylvania). In particular, the ad shows a close-up of the basketball for about one second. Hyundai didn't seek permission from Louis Vuitton for use of the modified design (an ad agency rep said the modified design "came out of somebody's imagination, so there was nobody to go seek permission from"), but Hyundai unsuccessfully sought permission from thirteen luxury brands--including Louis Vuitton--for other possible vignettes in the ad.

Undoubtedly, if Louis Vuitton were to offer a basketball with its design, the crowds would go wild. (The opinion cites several Twitter comments coveting the fake basketball). They should be thanking (not suing) Hyundai for showing them the enthusiastic market demand for such an item. But Louis Vuitton doesn't roll that way, preferring to sue anyone who depicts the logo in unexpected contexts. Sigh.

Meanwhile, the ad was a failure for Hyundai. Still widely seen as the purveyor of cheap Korean cars, its latest attempt to try to move upscale didn't go anywhere, and Hyundai pulled the ad after 5 showings. Yes, this means that Louis Vuitton is making (and winning!) a federal case over five seconds of human history. SIGH.

The Court's Doctrinal Discussion.

Blurring. On the key question of how Hyundai's use blurred Louis Vuitton's trademark rights, the court follows the Lanham Act's 6 factor statutory test rather tendentiously, which kind of misses the big picture. By evoking the logo, Hyundai didn't introduce a new definition of the logo--and the court repeatedly notes that the depiction went past so quickly that consumers couldn't recognize the differences. Nor did Hyundai introduce a new product into the marketplace; the basketball was fictional. So to the extent "blurring" is a proxy for harm to Louis Vuitton's brand, there was no harm at all. Yet, the court mechanically breezes past this crucial point. In my opinion, it's a pretty damning indictment of the six factors as a screen for blurring.

From my perspective, Louis Vuitton's strongest evidence of "harm" is that "[a]ccording to Louis Vuitton's expert, among those who recognized the Louis Vuitton mark, sixty-two percent believed the ad was approved by Louis Vuitton." Taking this at face value, this "harm" sounds in confusion, though, not dilution. Furthermore, this type of sponsorship confusion is highly problematic; it's a one-way rights escalator as we move towards a "permission culture," and it still doesn't show how either Louis Vuitton or consumers suffered any harm (let alone a harm cognizable under dilution law) from thinking Louis Vuitton approved the ad.

Nowhere does the court connect the dots to explain how Hyundai's usage "impaired the distinctiveness" of Louis Vuitton's mark. Instead, the court condemns Hyundai for its intentional evocation of Louis Vuitton's brand without permission. For that reason alone, I think this opinion could be vulnerable to an appeal.

The court separately finds blurring under New York's state dilution law.

Willfulness. Even if Louis Vuitton establishes its prima facie case, getting an injunction isn't all that valuable because Hyundai already scuttled the ad. To get damages under dilution, Louis Vuitton has to show that Hyundai “willfully intended to trade on the recognition of the famous mark.” Generally, we've assumed this statutory language applied only when the defendant was actually selling goods bearing the brand. Here, the court finds the requisite willfulness because:

* Hyundai asked for permission for other luxury brand usages (yet another reminder that judges often punish defendants who ask for permission rather than forgiveness)
* Hyundai continued running the ads after getting Louis Vuitton's C&D
* Hyundai modified the logo so that it would still evoke Louis Vuitton's logo

Does this evidence a willful intent to trade on Louis Vuitton's reputation? No, and it's not even close. Hyundai intended to evoke Louis Vuitton, but there's no trading taking place because of that evocation. This ruling also could be vulnerable on appeal.

Fair Use. The federal dilution law expressly has a fair use defense. Hyundai fails to get it because it admitted its brand evocation was satire (a commentary on society's standards of luxury), not a parody (a commentary about Louis Vuitton's brand). Indeed, Hyundai admitted that it could have substituted other luxury brands to achieve an identical effect. Hyundai's related claim that it was making a noncommercial use of the mark failed because the subject material was an advertisement.

Consumer Confusion. The court denies Hyundai's summary judgment on the infringement claim.

Implications

If the case goes to trial, it will be interesting to see what damages a jury awards. There is no intellectually defensible way to compute damages to Louis Vuitton's brand from Hyundai's ad. They can't even value it at a hypothetical licensing fee because Hyundai only asked for free licenses and Louis Vuitton wouldn't have licensed this usage anyway. As a result, any damages computation will be purely fictional. Ideally, the jury would come back with zero damages, because that's really the appropriate way to signal the complete lack of harm here.

However, I'm hoping Hyundai will appeal this ruling. There are a number of points where the court got it wrong, fairly clearly IMO, so there are good grounds for a reversal. If it pursues the appeal, Hyundai probably ought to try new appellate counsel. The opinion bristles with hostility to Hyundai's arguments, making me think defense counsel miscalculated its pitch to this judge.

Even if Hyundai ends up losing the case at the end, I'm not sure this would signal the sky is falling due to the dilution doctrine. Although the judge never says it outright, much of the opinion is based on the fact that Hyundai referenced a third party brand in its own ad. In my Advertising Law course, I teach that when the advertiser references an individual in its ad without the individual's permission, the advertiser loses the publicity rights lawsuit. (All of the publicity rights cases in our Advertising Law casebook are defense losses). Maybe this case stands for nothing more than that a non-competitor can't reference a famous third-party brand in its ad copy without permission (a competitor may qualify for the comparative advertising exception to dilution law). While that shouldn't be the law, that legal conclusion nevertheless wouldn't be the end of advertising or of trademark law.

Posted by Eric at 08:55 AM | Marketing , Trademark | TrackBack

March 21, 2012

Trademark Lawsuit Over Website Text Comparing Products Baffles the Judge--AR Pillow v. Cottrell

By Eric Goldman

AR Pillow Inc. v. Cottrell, 2012 WL 868109 (W.D.Wash. March 13, 2012). The complaint.

Every time I read an opinion like this, a little piece of me dies. This is a ridiculously easy case, yet somehow it got all tangled up.

The litigants are rival vendors of similar products to combat baby acid reflux. For a slightly similar dispute involving trademark fights over baby products, see BabyAge v. Leachco.

The plaintiff is largely complaining about text on the defendant's website explaining why the plaintiff's product isn't as good as the defendant's. From my perspective, the explanation doesn't constitute a trademark "use" at all because the trademark is being used as a referent. See, e.g., Naked Cowboy v. CBS, 2012 WL 592539 (S.D.N.Y. Feb 23, 2012). Thus, the court should dismiss the trademark claim for non-trademark use. But if the court doesn't do that, at least it should dismiss as a nominative use. See, e.g., 1 800 GET THIN v. Hiltzik. There is absolutely no question that the defendant's reference qualifies as a nominative use under Ninth Circuit law. Yet, and here's where a piece of me dies, the opinion doesn't discuss nominative use AT ALL. What???

Instead of addressing the two most obvious grounds, the court engages in doctrinal contortions to fit this case into a standard likelihood of consumer confusion analysis. As I've explained elsewhere, the multi-factor LOCC test simply makes no sense when a third party is using the trademark editorially as a referent. My paradigmatic example is the Ballysucks case, where the LOCC analysis is ridiculous because the court is trying to compare a vendor with a griper who registered a "sucks" domain. The LOCC test doesn't work any better here. The judge almost seems to know that the LOCC test isn't the right test, but he doesn't seem to know what else to do.

Fortunately, the judge overcomes his shaky analysis by reaching the right result, concluding that there's insufficient evidence of consumer confusion. Yay for good outcomes. But we need to find better ways to make it clear trademark law should not play a role in situations like this. For more on that, see my Online Word of Mouth paper.

One more point: the court's technological discussions are a mixed bag. On the plus side, citing Network Automation and Matt Cutts' blog post/video, the judge rejects the plaintiff's claims over keyword metatags because Google ignores them. But then the judge launches these groaners:

"there is no evidence in the record that use of the term AR Pillow in Google or other search engine currently leads to defendant's website"

and later

"Consumers who search for AR Pillow today are not presented with defendant's website in the rankings"

Oh god, not this again. Please, let's kill this meme RIGHT NOW. Relative placement of search engine results is a HORRIBLE way to evaluate trademark disputes. First, as I explain here, the junior user doesn't control placements--the search engines do. Second, in my post on the Bitchen Kitchen litigation, I explain technological reasons why this is a terrible idea, including search results personalization, the fact that results change minute-by-minute, and the fact that different search engines rank their results differently. Judges, I beg you, please don't go down this wormhole.

Posted by Eric at 10:00 AM | E-Commerce , Trademark | TrackBack

March 15, 2012

Facebook Faces Jurisdictional Hurdle in its Trademark Lawsuit Against Faceporn--Facebook v. Pedersen

[Post by Venkat Balasubramani]

Facebook v. Pedersen, 10-Cv-04673 (N.D. Cal.; March 2, 2012)

Facebook sued Pedersen, a resident of Norway, alleging that Pedersen's use of the "Faceporn" mark infringed on and diluted Facebook's trademarks. After the complaint was filed, Pedersen transferred ownership of the Faceporn website to Retro Invent, a Norwegian entity. The defendants were served via the Hague Convention, and when they failed to timely respond, Facebook moved for a default judgment. The court issued a show cause order directing Facebook to demonstrate that assertion of personal jurisdiction over Pedersen and Retro Invent was proper. (Here is my blog post flagging this order: "Facebook's Trademark Enforcement Effort Against 'Faceporn' Hits Jurisdictional Snag.") The magistrate judge finds that Facebook's response to the show cause order was insufficient, and he recommends that the lawsuit be dismissed for lack of personal jurisdiction.

Facebook relied on a broad argument that Faceporn intended to target Facebook and competed with Facebook for customers; therefore, under Calder's effects test, personal jurisdiction was proper. The subtext of Facebook's arguments is that "Facebook has a world famous mark and someone who infringes on Facebook's trademark even in a foreign jurisdiction must know that they are harming a California corporation." The court says that there is one problem with this argument: there is no evidence that Facebook and Faceporn compete in any way. As the court notes:

Facebook has not alleged any facts that support the notion that defendants have garnered any revenue from their operation of Faceporn at Facebook's expense or that Faceporn has diverted any of Facebook's potential customers. Instead, Facebook states conclusorily that defendants operate Faceporn "with a bad faith intent to profit" from Facebook's marks, but it alleges no facts to suggest that Faceporn has profited at all at Facebook's expense.

Ouch.

Facebook has been pretty active on the trademark front, suing among other sites Lamebook ("Lamebook Faces Down Facebook") and Teachbook ("Facebook's Trademark Suit Against Teachbook Survives Motion to Dismiss"). Interestingly, in both of these cases, Facebook was unsuccessful in having the dispute heard on its home turf. It lost a motion to transfer the Lamebook case (this lawsuit settled) and lost a jurisdictional motion in the Teachbook case (Facebook refiled that lawsuit in Illinois and the Illinois court rejected Teachbook's motion to dismiss).

Personal jurisdiction decisions are so idiosyncratic that they're not worth spending much time on. But it's interesting that the Mavrix case (where the Ninth Circuit held that locally targeted advertising can support the assertion of jurisdiction) has been cited at least a couple of times in orders granting motions to dismiss. It's also interesting that the court raises the personal jurisdiction issue in this case sua sponte. Maybe the Northern District of California judges are starting to see a pattern of overzealous enforcement efforts on Facebook's part?

Previous posts:

"Facebook's Trademark Suit Against Teachbook Survives Motion to Dismiss"
"Facebook's Trademark Enforcement Effort Against 'Faceporn' Hits Jurisdictional Snag."
"The 9th Circuit Tackles a Pair of Internet Jurisdiction Cases" (discussing Mavrix Photo)

Posted by Venkat at 11:09 AM | Trademark

March 10, 2012

Justin.tv Mostly Eliminates Zuffa's Trademark and Communications Act Claims Over User-to-User Live Video Streaming

By Eric Goldman

Zuffa LLC v. Justin.tv, Inc., 2012 WL 764424 (D. Nev. March 8, 2012). The complaint.

[Note: I've worked with Justin.tv on related issues, but I'm speaking for myself in this post]

Justin.tv allows user-to-user live video streaming. Zuffa runs the Ultimate Fighting Championship, which broadcasts pay-per-view fights. This lawsuit relates to the UFC 121 Lesnar v. Velasquez pay-per-view fight from October 2010, which Justin.tv users rebroadcast. Zuffa sued Justin.tv for a variety of claims. In this ruling, Justin.tv successfully dismisses most of the trademark claims and all of the Communications Act claims.

Trademark. Justin.tv argued that Zuffa's trademark claims were Dastar-ed. The court partially disagrees because Zuffa wasn't claiming reverse passing off. Nevertheless, Dastar wipes out Zuffa's claims about any trademarks actually embedded in the video stream, such as Zuffa's trademarked Octagon fighting ring, because trademarks would allow Zuffa to control the copyrighted material even after the copyright term expired. Instead, "the Court limits Zuffa’s trademark claims only to the display of Zuffa’s trademarkswhich are not an inherent part of the video broadcast." Whatever that means...! In a footnote, the court also "expresses extreme doubt" about Zuffa's trademark inducement claim.

Communications Act. Zuffa's claims relate to the "stealing cable" provisions. Justin.tv claimed that 47 USC 230 applies, a pretty logical argument given that Zuffa is bringing a non-IP claim against Justin.tv for third party content. However, the court sidesteps the Section 230 issue, saying it's never been applied to the Communications Act (true) and that the court couldn't find any analogous "stealing cable" claim against websites, and it didn't want to touch this "novel" issue.

Instead, the court dismisses the "stealing cable" claim on its elements. The court says:

In essence, Zuffa alleges that Justin.tv’s users copied Zuffa’s UFC event and then rebroadcast the UFC event over the internet. This is not the type of conduct properly addressed by the Communications Act, but by copyright law (and, potentially, trademark law) because Justin.tv had no relationship with the original cable or satellite signal: by the allegations, Justin.tv did not receive or intercept any actual cable or satellite signal or broadcast. The Court finds no evidence in the statutory language, other cases, or legislative history that the Communications Act addresses this type of conduct or was meant to bolster or act as a separate type of copyright claim.

In a footnote, the court notes the troubling implications of Zuffa's argument:

if the Court were to allow claims such as these, it would have to allow similar Communications Act claims against scores of “cloud computing” service providers such as Microsoft, Apple, Google, Amazon.com, Dropbox, Box.net, and others because Jusint.tv’s [sic] particular streaming service would be irrelevant. As an example, say a person took a snippet (or longer) of video of a UFC match being broadcast on their television with their iPhone, Windows Phone, etc. The iPhone then automatically uploads that video to one of dozens of cloud storage systems such as Apple’s iCloud. The Court refuses to find that Apple (or Microsoft, etc.) would be liable under the Communications Act for merely receiving and storing this data under the Communications Act. Yet, Zuffa arguesfor exactly this result when it argues that Justin.tv’s mere receipt of this video stream makes Justin.tv liable. In passing the Communications Act, Congress did not intend such a result, and this Court will not broaden the effect of the statute in this manner.

Amen!

At its core, the lawsuit is about copyright infringement, and Justin.tv didn't attempt to dismiss that claim. So the case hasn't gotten to the real meaty claim yet. It's my (presumably biased) position that Justin.tv should clearly qualify for the 512(c) safe harbor.

Posted by Eric at 10:52 AM | Copyright , Derivative Liability , Trademark | TrackBack

March 09, 2012

Fake Political Attack Video Doesn't Violate Lanham Act--Ron Paul v. Does

By Eric Goldman

Ron Paul 2012 Presidential Campaign Committee, Inc. v. Does, 3:12-cv-00240-MEJ (N.D. Cal. March 8, 2012)

The Doe Defendants registered the alias “NHLiberty4Paul" at YouTube and Twitter and posted a YouTube video attacking Jon Huntsman. The video ends "American Values and Liberty – Vote Ron Paul." The Does acted without Paul's permission--so much so that Paul sued them for violations of the Lanham Act and defamation. After filing the lawsuit, Paul sought to unmask the Does.

The court denies the unmasking request because Paul's Lanham Act claims weren't valid. (By doing so, the court sidesteps a battle over which of several different legal standard should govern the unmasking request). The federal court then declines to exercise supplemental jurisdiction over the state-law defamation claim.

The lawsuit's subject matter is a fake political video. It's "selling" a candidate (or, more accurately, trying to improve the competitive posture of candidate A by degrading the attractiveness of rival candidate B), but it's not selling anything commercial. Rebecca explained this when the complaint was first filed. Because the Lanham Act governs commercial activity, not political activity, it's clearly inapplicable to this situation.

To try to salvage the situation, Paul tries two mockable arguments. First, he argues that YouTube and Twitter are commercial sites, and that gives the dispute enough commerciality. The court rightly points out that the inquiry is about the defendant's conduct, not the websites where it took place, and notes the argument's illogic would mean non-commercial activity on any commercial website would be governed by the Lanham Act. In a footnote, the court adds that "using another company’s commercial website to post a comment or video is just far 'too attenuated' to result in an individual’s own conduct automatically meeting the Lanham Act’s commercial use requirement."

Second, Paul argues that "the video was intended to frustrate Plaintiff’s fundraising efforts and increase the amount of money contributed to Presidential nominees other than Ron Paul." The court says the Lanham Act is predicated on the defendant trying to improve its competitive status, and these defendants had no competing services; and the video on its face didn't try to solicit any donations.

In this case, it seems likely that the Does would suffer extra-judicial punishment if their identity gets revealed, irrespective of the case's merits. Kudos to the judge for aggressively gatekeeping the unmasking request rather than just rubber-stamping it. (Venkat emailed me: "I wonder if N.D. Cal. Judges are savvier at screening out these types of issues since they must deal with so many request to unmask.").

This case also reinforces that the Lanham Act is not designed to regulate fake content or consumer confusion about the source of content injected into the information ecosystem. But that makes me wonder if other reputation-protective legal doctrines might apply better, including defamation (kicked to the state court) or perhaps California's recent e-personation statute.

Some related posts:

* Reputation Management Lawsuit Is Shot Down--Bernard v. Donat
* Court Smacks Down Koch Industries' Attempt to Shut Down Satirical Website -- Koch Industries v. Does
* Griping Patient Goes Too Far Posting Fake Content in Doctor's Name--Eppley v. Iacovelli

Posted by Eric at 08:20 AM | Content Regulation , Marketing , Trademark | TrackBack

March 08, 2012

Jan.-Feb. 2012 Quick Links, Part 2 (Trademarks, Patents, Trade Secrets, Innovation Edition)

By Eric Goldman

Trademarks

* Naked Cowboy v. CBS, 2012 WL 592539 (S.D.N.Y. Feb 23, 2012). The court rejects the trademark claim for CBS buying "Naked Cowboy" keyword advertising to promote the YouTube video for lack of use in commerce, citing Merck v. Mediaplan, which I thought was dead after Rescuecom. CBS's reference to "Naked Cowboy" in its YouTube video title was a non-trademark use. Rebecca's coverage.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC, 2012 WL 379930 (D. Neb. Feb. 6, 2012). Lovely Skin sued Livelyskin for trademark infringement. Livelyskin claimed unclean hands because Lovely Skin bought Livelyskin as keyword ad triggers. The court refuses summary judgment and holds the issue over for trial.

* Neeley v. NameMedia, Inc., 2012 WL 470155 (8th Cir. February 15, 2012). Affirming dismissal of this odd case.

* Paul Keating rips a UDRP ruling over hardwareresources.org.

* Louis Vuitton sent an ill-advised and condescending cease & desist letter to University of Pennsylvania's IP students for using a parody LVMH logo to promote their fashion law conference. UPenn told LVMH to pound sand. Law.com coverage. Jonathan Pink’s analysis (with a funny Star Wars reference).

* TechCrunch: New Trademarkia Feature Exposes Biggest Trademark Bullies; Apple, Zynga Among Top Five

* Trademark Reporter published my remarks about trademark law's past/future. Prior blog post.

Patents

* Who's most excited about Facebook's IPO? Patent lawyers!

* Is Microsoft laying down its patent weapons?

* We've just hired a new patent professor at SCU, Brian Love. In an op-ed, he explains why university patent portfolios are a bad deal for everyone--including the university!

Trade Secrets

* Aqua Connect, Inc. v. Code Rebel LLC, No. 2:11-cv-05764-RSWL-MAN (C.D. Cal. Feb. 15, 2012). User downloaded trial software and agreed to a EULA restricting reverse engineering. The user reversed engineered anyway. The court dismissed the trade secret misappropriation claim, but the breach of contract claim remains.

* SocialApps, LLC v. Zynga, Inc., 2012 WL 381216 (N.D. Cal. February 6, 2012). Lawsuit that Zynga ripped off app developer mostly survives a motion to dismiss.

* All Things D: Raj Abhyanker (of Trademarkia infamy) dropped his idea theft suit against Nextdoor.

* Salon: The Internet makes magic disappear.

Innovation

* My colleague Kyle Graham has posted a really interesting article on how tort law responds to technological innovations: "Of Frightened Horses and Autonomous Vehicles: Tort Law and its Assimilation of Innovations"

* NYT: Apple's success has translated into manufacturing jobs overseas. As Steve Jobs answered to Pres. Obama when asked about getting those jobs into the US, “Those jobs aren’t coming back.” Instead, as we transition to a knowledge economy, the US has to develop a skilled labor force that can add enough value to justify the high cost-of-living here.

* William M. Fischer, The Utah Bioprospecting Act of 2010: (Unintentional) State-Level Implementation of the United Nations Convention on Biodiversity, Journal on Telecommunications & High Technology Law, Winter 2012. Prior blog post.

* NYT: Bell Labs as an exemplar of the value of "slow" development cycles. Some of its strengths: face-to-face interactions of cross-disciplinary teams of experts, a building designed to get people to encounter each other, an emphasis on applied research, physical proximity of researchers to the manufacturing facilities to facilitate two-way learning, and sufficiently long innovation timelines.

* WSJ: Target is trying to fight showrooming by having manufacturers create Target-specific brands, a technique that has worked to curb price comparisons in some categories, like mattresses and tires. Will Target's move lead to product proliferation? Or will some entrepreneur simply help link the retailer-specific items so that they can be easily price-compared? FWIW, I rarely worry about price comparison at Trader Joe's, even with respect to private-labeled goods, because they have repeatedly proven to me that they give me good value. If Target isn't working to ensure good value for consumers from product differentiation, I don't see how their move will help.

Posted by Eric at 09:36 AM | Patents , Trade Secrets , Trademark | TrackBack

March 02, 2012

Tea Partiers Wage War Against Each Other Over a Google Groups Account--Kremer v. Tea Party Patriots

By Eric Goldman

Kremer v. Tea Party Patriots, Inc., 2012 WL 639134 (Ga. App. Ct. Feb. 29, 2012). The docket.

I'm going to exercise extraordinary restraint and not crack any jokes about the Tea Party movement or its adherents.

Kremer created the Tea Party Patriots (TPP) Google Group in early 2009. Later in 2009, Kremer had a falling out with TPP. See Kremer's side of the story. (FWIW, it looks like the internal acrimony has continued after she left). Litigation over Kremer's departure ensued, including a scramble for the trademark and "the Websites identified in the Complaint (i .e., www.teapartypatriots.org, (both the website and the domain name); the Tea Party Patriots Ning social networking site; accounts with Google Groups, Blogtalkradio, YouTube, and Ustream; and other associated websites and Internet accounts that carry on TPP's activities)." The parties temporarily resolved their dispute with a consent order in 2009 that restricted Kremer's ability to control the various web accounts. TPP alleged that Kremer violated the consent order and brought a contempt proceeding in 2011. The trial court found Kremer in contempt. In this ruling, the appellate court affirms.

One of the main points of contention relates to the TPP Google Group (this one?). Kremer created the group, so Google recognized her as the group's "owner" and gave her super-user administrative powers. Mysteriously, after the consent order, Dooley (a TPP director) was blocked from logging into the group, and the group was renamed to "Patriotville" (which "resulted in confusion and resulted in TPP receiving criticism on its own site"). TPP claimed Kremer did it.

The court was persuaded:

The message Dooley received in January 2011 indicated that "the owner" had blocked her access to the site, and it is undisputed that Google considers Kremer to be the owner. Moreover, Kremer admitted that she had blocked another individual from the site. This evidence supports the trial court's finding that Kremer had intentionally violated the Consent Order.

The first point seems like a non-sequitur. Is it possible that Google characterizes more than one person as the account "owner"? At minimum, the court appears to overweight the wording of a form email that probably wasn't written by a lawyer. Then again, good lawyering could have easily made this a contestable point--if there was something to contest.

Kremer was also ordered to turn over the Google Group for the Georgia chapter of TPP based on the order's reference to "associated websites and Internet accounts that carry on TPP activities." Kremer further violated the consent order by not dissociating herself from TPP more clearly in her biographies.

Two brief observations about this situation:

1) This is another reminder that it's crucial for newly formed organizations to definitively address the ownership of trademarks and other virtual assets from day 1, when everyone still loves each other. We've blogged on this issue many times; my paradigmatic example is Mikhlyn v. Bove. When the ownership issue comes up later, it's usually because the principals are locked in a death-match and are beyond the point of reaching sensible compromises.

2) In further support of that principle, a lawsuit over a Google Group that requires a week-long trial, followed by an appeal to a state appellate court, with at least three spin-off lawsuits related to statements/conduct in the initial lawsuit, cannot be cost-benefit justified. Then again, for folks who aren't impressed with the Tea Party movement, there may be some salutary side-effects to having Tea Partiers spend their energy and money fighting each other.

Posted by Eric at 09:35 AM | Domain Names , General , Trademark | TrackBack

February 14, 2012

Talk Notes: Death of the Initial Interest Confusion Doctrine?

By Eric Goldman

As you may know, the IP professor community is blessed to have a number of "work-in-progress" events where we share our research-in-process with, and get early feedback from, our peers. Last weekend, I attended one of those events, WIPIP, at the University of Houston.

I presented a talk entitled "Death of the Initial Interest Confusion Doctrine?" My presentation slides. The talk traces its roots to my ad hoc observations, starting in 2010, that:

1) courts were citing the initial interest confusion doctrine with noticeably less frequency,
2) when they did reference the doctrine, many opinions just made a cursory non-substantive reference, and
3) plaintiffs were rarely getting any traction with their IIC arguments.

2011 undermined these observations some, especially the Teachbook and Pillow Pet cases. So now I'm trying to figure out where to take this research project.

Posted by Eric at 01:33 PM | Trademark | TrackBack

February 03, 2012

Are You Kinning Me? Microsoft Beats Trademark Lawsuit Over Kinect--Kinbook v. Microsoft

By Eric Goldman

Kinbook LLC v. Microsoft Corp., 2012 U.S. Dist. LEXIS 8570 (E.D. Pa. Jan. 25, 2012)

Microsoft makes the Kinect motion controller for Xbox, and for a while tried out a mobile phone named Kin. Kinbook makes a Facebook app (is this it?) that is intended to capture and organize family memories. Kinbook discovered Facebook's overzealous position that it owns the -book suffix, so Kinbook changed its product name to Kinbox. It alleged that Microsoft's branding of Kinect for the Xbox infringed the Kinbook/Kinbox trademark.

It's hard to tell how successful the Kinbook app is. Microsoft says it had 14 active users in May 2011. Kinbook claims closer to 17,000. Either way, Kinbook is hardly setting the world on fire. The court explains:

"Kinbook credits the arrival of the Kinect for XBOX 360 and Microsoft's accompanying marketing blitz with the poor start of its "Kinbox" Facebook application"

Stop right there. How could that be true? Assuming for a moment that "Kinbox" and "Kinect for the Xbox" are so overlapping that they could confuse consumers (a proposition I don't believe), wouldn't Microsoft's massive marketing blitz increase interest in Kinbox's offerings? So this should have produced a tidal wave of folks looking for Kinbox. Even if some of those users suffer disappointed expectations (they came because they wanted something other than what Kinbook provided), those users will turn over but won't affect the organic interest in Kinbook. Microsoft's promotion could only help Kinbook. Passing the blame to Microsoft isn't very credible.

Instead, the court finds the following:

* Kinbook has never generated any revenues
* they intended to build a website and mobile app but never did
* they intended to spend a quarter-million dollars on marketing but have only invested "a few thousand" dollars instead. Indeed, "Kinbook acknowledges that it has not dedicated any significant time, money, or effort to advertise, promote, or market its marks or services."

It sounds like any alleged trademark troubles with Microsoft are just the tip of the iceberg. Instead of fixing those core issues with their business, they invested their valuable resources in court proceedings.

The court reaches the entirely sensible conclusion that there's no likelihood of consumer confusion and tosses the claims. Among other reasons, the court points out multitudinous other users of the "kin" prefix:

"Kincafe," an online social network for families to connect; "Kin Valley," a secure online social network for the family; "Kinzin," an online social publishing service to allow groups to privately share photos; "Kinnect.Us," an online social networking service to stay connected with family and friends; "Kinector," an online service to help users stay connected with relatives through a private web site where family can share information; "Connect 2 Kin," an online service for families to stay in touch and share photos, share documents, schedule events, etc.; "Kindle," an e-book reader with social networking capabilities; and many others.

The plaintiff admitted that none of these other examples were confusing. Yet, somehow Kinect for the Xbox was. Hmm.

Kinbook also tried to argue that Xbox appeals to 5 year olds, so they should be the paradigmatic "consumer" whose confusion is measured. The court mocks this argument:

No matter what else the ever-remarkable current-day precocious 5 year-old can accomplish, this Court cannot fathom a 5 year-old with either the faculties or the financial means to independently purchase a retail item costing hundreds of dollars. Second, even the hypothetical precocious 5 year-old dispatched by indulgent parents (or grandparents) to make her or his own selections of amusement would likely be able to distinguish between a free software application, and a $150 piece of gaming hardware.

This lawsuit has all the indicia of a small trademark owner trying to squeeze a big company for a nuisance settlement. After all, Microsoft spent $100M promoting Kinect; if Kinbook could get only a 5% taste of the action, that would still be quite tasty. This ruling reminded me a little of the recent Fancaster ruling, which also involved a trademark plaintiff who hadn't really invested much in building a business before running to court. In the Fancaster case, there was some evidence that Comcast may have muscled into the plaintiff's sphere knowing the potential pitfalls, but there's no hint of that on Microsoft's part here (the case indicates that Kinbook didn't show up in Microsoft's trademark search). Instead, I'm just left with the suspicion that the plaintiff thought that a low-merit trademark lawsuit would be a faster path to revenues than building a business. If that's your idea of entrepreneurship, as a LOLcat might say, ur doin it wrong.

Posted by Eric at 08:52 AM | Trademark | TrackBack

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

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

Countdown: My Top 5 List of Developments in 2011

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

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

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

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

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

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

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

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

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

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

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

Other Interesting Developments.

Some other interesting developments this year:

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

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

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

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

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

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

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

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

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

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

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

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

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

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

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

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

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

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

Lists of Yore

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

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

January 19, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

January 17, 2012

Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont

[Post by Venkat Balasubramani, with comments from Eric]

Deckers v. Liyanghua, 11-cv-07970 (N.D. Ill.; Dec. 15, 2011) (report and recommendation)

Deckers proceeds against a slew of domain names in Illinois. The case was originally sealed, but in granting a preliminary injunction, the court unseals it. The court's November 15, 2011 (now-unsealed) order provides for the following relief:

- an injunction against defendants
- An order requiring the registries and/or registrars to “prevent the . . . domain names from connecting to corresponding” websites and prevent the registration or transfer of new domain names
- an order directed at search engines, web hosts, registrars and registries to cease facilitating access to any websites through which defendants conduct business
- expedited discovery (Deckers emails a subpoena to banks and service providers who now have to turn over documents)
- authorizing notice via email . . . but “[a] ruling on permissible service of process methods is held in abeyance until Deckers has obtained discovery responses from third parties” [this is significant -- there has not yet been service of process]
- an asset transfer restriction

The preliminary injunction similarly includes a broad injunction against defendants. It also orders the registries to change the registrar of record for the domain names to a registrar of Decker’s choosing. There’s a broad injunction against those "in privity" with defendants, including search engines, web hosts, registrars and registries. The court orders broad discovery, and an asset freeze.

The one interesting thing is that the court makes Deckers post a $150,000 bond. Deckers contested this but the court didn't budge on this issue.

Richemont Int’l v. Montesol OU, 11-cv-09322 (S.D.N.Y.; Jan. 3, 2012)

In this case, the court enters a TRO on Dec. 21, 2011. The TRO broadly enjoins defendants from infringing on the marks and contains an asset freeze. It also purports to enjoin websites, online search engines, online shopping price comparison services and other businesses and publications from advertising, promoting, or marketing the websites or products in question. A similar prohibition is directed to website hosts, ISPs “or any other business supporting, hosting, or providing e-commerce services to defendants’ websites.” The order also directs registries or registrars to “delete all existing DNS entries” for the domain names and to enter the registrar’s default DNS address for the domain names, and orders a slew of service providers to "temporarily disable service to" the domain names.

On January 3, 2011, the court enters a preliminary injunction. The order notes that defendants were served with the papers on December 23 and, as of January 3, 2012, they did not submit any papers in objection. The injunction is similar in scope to the TRO. It contains a broad account freeze directed at third parties. It enjoins service providers from providing support to the websites. It tells the registries/registrars to delete all existing DNS entries and enter the registrar's default DNS address.
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Venkat's Comments

This activity in the courts is crucially relevant to the SOPA/PIPA discussions taking place right now. Congress should take a look at what is going on in courts--if for no other reason than to figure out what relief judges think is authorized under current law (or what relief plaintiffs seem to obtain) and what potential abuses (if any) may occur, and also to explain how exactly SOPA/PIPA changes existing law. Obviously, just because a court authorizes a certain type of relief does not mean that there is always a proper basis for it. There are a lot of cites to "the court's inherent equitable power" in these orders. That's judicial code for: "there is no express basis for it, but I think certain relief is appropriate and I'm going to grant it."

It may not be easy to engender much sympathy for these defendants, but that's not the point. The system has certain procedural safeguards in place, and those should not go out the window just because you're dealing with a foreign online infringer. The relief that is being granted in these cases is extraordinary and is frequently being done with no notice or minimal notice. There is no way much of this will fly against a domestic litigant. In some cases, the initial papers are filed under seal, so defendants cannot determine what the allegations are against them until the preliminary relief--in the form of a shutdown--is awarded. Plaintiffs seem to be required to do nothing more than to present a declaration from their investigative team alleging that (1) defendants infringe, (2) defendants are located abroad, and (3) perhaps the defendants will evade or frustrate the court's relief.

Based on this, the court typically shuts off the defendant's website and also orders relief directed at third parties who may or may not be subject to the court's jurisdiction. These third parties are not before the court and have no chance to contest the scope of the relief being sought. I'm curious as to how they react when they are presented with the order. Do registrars routinely transfer domain names to a friendly registrar of the plaintiff's choosing? Is DNS deletion or revision routinely implemented in response to these orders?

It's interesting to compare the approach Deckers took in this case to the approach it took against alleged infringers who was selling counterfeit UGG boots out of a house (located in Illinois). See Deckers v. Migliore, 11-cv-06836 (N.D. Ill.; Nov. 15, 2011). Deckers didn't obtain any ex parte relief; they moved for a default after effecting service. Is this because a court was less likely to order the total shutdown of the point of sale of the infringing goods (in this case, a house), or because Deckers views infringement occurring on the internet as somehow different?

All of these ex parte shutdown cases (and there are probably many more out there) warrant a *close* look. It's disappointing to see so many of these orders sail through without any significant objection from the judges who sign them. Of course, they offer a preview of how rightsowners will proceed under SOPA. Many have highlighted the potential for abuse under SOPA. There's little doubt that rightsowners will push the envelope. They are already doing so under current law.
_______

Eric's Comments

Ex parte orders regarding foreign alleged infringers are out-of-control. Without sufficient regulation and without any adversarial pushback, rightsowners have learned that they can ask for ridiculous relief on an ex parte basis and get a judge to sign off on most or all of it. It's clear that rightsowners are asking for way more than the law allows, but judges seem to acquiesce. The results are two-fold:

1) the rightsowners are taking control over third party domain names on an ex parte basis and with questionable notice given to the domain name registrants
2) worse (IMO), judges are issuing orders that purport to bind third party non-litigants, such as domain name registrars, search engines and shopbots. The Federal Rules of Civil Procedure purport to limit such orders against non-litigants, but litigants and judges apparently interpret phrases like "acting in concert" incredibly broadly. The result is that these third party service providers--who aren't in court protecting their interests when the orders are being signed--are presented with a court order that imposes costs on them no matter what they do. They can take the action required in the court order...at some cost. Or they can contest the order...at some cost. Or they can ignore the order and risk being found in contempt. Naturally, these third parties will take whatever path is cheapest--which is usually to honor the order regardless of its legal legitimacy. (This is especially true in the case of domain name registrars, who typically make only a buck or two of profit a year off any particular domain name). So when the judge doesn't tightly control the ex parte requests being imposed on third parties, the judges are usually ensuring that the third party won't contest even an illegitimate order.

Rightsowners don't look so good in this process, but who can blame them for overreaching? If judges are freely handing out lollipops, why not ask for a lollipop! Plus, lawyers view themselves as zealous advocates, so anything that they can get a judge to sign must, by definition, be OK.

This means the real breakdown is occurring with judges. They are supposed to be the safeguards to prevent abuses, but judges are so dependent on adversarial proceedings that they are surprisingly flexible when only one side bends their ears. It looks we need some urgent judicial education about the issues raised by rogue website enforcements.

As Venkat points out, some members of Congress and their rightsowner patrons are also looking pretty silly right now. They keep insisting, with the straightest face imaginable, that rightsowners lack the current ability to bring effective enforcement actions against foreign rogue websites, and this is just FLAT-OUT WRONG. So either these folks are ignorant about what's happening in the courts or lying about it (or possibly both). Now, the entire legislative process is routinely detached from actual facts, so this is nothing unusual, but it's hardly a credit to those who are looking increasingly foolish as rightsowners in court keep getting what lobbying rightsowners and members of Congress keep insisting isn't possible to get. Get your story straight, please.

For the critics of SOPA and PIPA who have decided this legislation is the place to draw the line in the sand: I'm with you, brothers and sisters, but defeating the legislation doesn't end the problem. Until we fix what's taking place in the courts with rightsowners running hog-wild in ex parte proceedings, any legislative successes will be hollow. After we wipe out SOPA and PIPA completely, we need to proactively seek out at least two additional policy solutions:

1) We need to develop educational programs for judges about dealing with ex parte orders, especially when it comes to third party non-litigants.
2) We may need to fix or clarify the portions of the Federal Rules of Civil Procedures so that ordinary service providers aren't bound by ex parte orders against them. The rules should be clear enough that service providers don't have to spend their money to correct judicial errors. Maybe an automatic fee-shift if a plaintiff gets a judge to sign off on an overbroad order that a third party non-litigant successfully contests?

If you have any other suggestions about proactive steps we should take to fix the abuses we're seeing in court, please send them along.

Prior blog coverage of these topics:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

UPDATE FROM ERIC: A reader reminded us of the UDRP Sec. 3, which says: "We [registrars] will cancel, transfer or otherwise make changes to domain name registrations under the following circumstances...b. our receipt of an order from a court or arbitral tribunal, in each case of competent jurisdiction, requiring such action." So when a judge issues an ex parte order against a registrar, the registrar's hands may be tied. All the more reason for the judge to get it right and not rely on ex post pushback from the non-litigant third party. This also creates the possibility of abuse of ex parte orders, just like I discussed in this blog post. If we were to redraft the UDRP, we probably would not make it mandatory for registrars to honor ex parte orders.

Posted by Venkat at 11:49 AM | Copyright , Domain Names , Trademark | TrackBack

January 15, 2012

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

By Eric Goldman

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

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

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

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

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

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

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

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

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

47 USC 230

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

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

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

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

Implications

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

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

Paul Levy's comments on the ruling.

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

January 07, 2012

Trademark Owner Can't Hold GoDaddy Liable for Domain Name Forwarding -- Berhad v. GoDaddy

[Post by Venkat Balasubramani]

Berhad v. GoDaddy, C 09-5939 PJH (N.D. Cal.; Jan. 3, 2012)

Plaintiff, Petroliam Nasional Berhad (Petronas), a government owned entity, owns the Petronas Towers in Malaysia. It’s trying to enforce its trademark rights against two domain names (petronastowers.net and petronastower.net). In mid-2010, it quickly obtained relief against both domain names, via in rem actions. These aren’t the disputes before the court. Prior to obtaining in rem relief against the domain names, Petronas urged GoDaddy to disable the website and domain names (the domain names were registered to GoDaddy and GoDaddy provided forwarding services, which pointed the domain names to porn sites). GoDaddy demurred, stating that as the registrar, it could not adjudicate Petronas’s cybersquatting claim and since it did not host the underlying sites, it couldn’t process Petronas’s trademark infringement claim. Petronas is trying to hold GoDaddy liable for not ‘disabling’ the domain name and website at Petronas’s urging. It asserted claims for cybersquatting and contributory cybersquatting against GoDaddy. Its hook for trying to hold GoDaddy liable? GoDaddy “used” the domain names by providing forwarding services for its customers.

Cybersquatting claim: GoDaddy argued that it was covered by the ACPA’s safe harbor. It also argued that two of the three ACPA elements ((1) use; (2) confusingly similar domain name; (3) bad faith intent to profit) were not satisfied. The court does not rule on the safe harbor issue but agrees with GoDaddy that Petronas's claims cannot withstand summary judgment.

The court finds that GoDaddy’s forwarding service does not amount to “use” of the domain names: “GoDaddy simply provided the infrastructure to the registrant to route the [domain names] to the website of his choosing.” It was a free service that GoDaddy provided to its domain name registration customers. Additionally, under the cybersquatting statute, only the registrant or its representative can “use” the domain name and potentially incur liability. Second, there was no evidence that GoDaddy harbored a bad faith intent to profit by providing forwarding services. It also did not charge for the service so it did not profit from the forwarding in any way.

Contributory Cybersquatting: As the court acknowledges, it’s unclear whether courts even recognize claims for contributory cybersquatting. (I blogged about a Western District of Washington case whre Judge Martinez allowed the claim to go forward at the early stages: “Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward”; see also Eric’s post about SolidHost v. NameCheap: “Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?”). The court analyzes the contributory cybersquatting claim under Perfect 10 and Lockheed and says that Petronas has to show that GoDaddy had knowledge and directly contributed to or induced the infringement. When the defendant provides a service the defendant can be held liable where it exercises “direct control and monitoring of the instrumentality” used to infringe. The court says that there is no evidence that GoDaddy exercised any type of control over the registrant’s use of the forwarding services. The court also says that Petronas has not shown that there is any bad faith by the registrant (the person who utilized GoDaddy’s forwarding services). According to the court, the registrant could have used the forwarding to “create mischief” or “annoy the owner of the Petronas mark” – he didn’t necessarily use the forwarding to “profit.” [This was a strange conclusion. I would have thought that the disposition of the in rem actions would conclusively establish bad faith intent to profit by the underlying registrant.]

Cancellation of Petronas’s Mark: GoDaddy asserted counterclaims and sought to cancel Petronas’s mark. Petronas argued that GoDaddy lacked standing to assert the claim for cancellation but the court rejects this: “GoDaddy has standing to seek cancellation because Petronas is using the registration as a sword against GoDaddy.” With respect to the merits of GoDaddy’s claim, the court says that factual issues preclude the grant of summary judgment. [Ouch. Petronas tries to hold GoDaddy liable, but all that's left of the lawsuit at this point is GoDaddy's claim for cancellation of Petronas's mark.]
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The recently much-maligned GoDaddy may deserve a star for not caving to Petronas’s takedown notice, even at the risk of liability to GoDaddy. The court’s discussion alludes to the fact that registrars play a central role in the functioning of the internet as we know it. This just highlights the effect of GoDaddy’s conduct in other cases (e.g., the ex parte takedown cases Eric and I have blogged about). Of course, there’s also GoDaddy’s SOPA-support debacle, which resulted in a drain of domain names (including this one) away from GoDaddy. It’s unclear exactly what GoDaddy did in response to Petronas’s claims. While it did not cancel the forwarding, it did “assist Petronas in seeking a transfer order, and [locked] each domain.” In any event, GoDaddy deserves kudos for not summarily killing the forwarding that the registrant had in place.

The court’s treatment of Petronas’s direct infringement claim for cybersquatting spans many pages. The court ultimately concludes that GoDaddy provided services to the registrant in the nature of “infrastructure,” but still declines to consider GoDaddy’s claim that it was protected under the safe harbor. This is unfortunate because GoDaddy was forced to expend resources dealing with discovery and summary judgment; this may well influence GoDaddy's future dealings with others who are similarly situated to Petronas. ACPA's relevant registrar immunity provision (for damages) provides:

A domain name registrar, a domain name registry, or other domain name registration authority shall not be liable for damages under this section for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.

GoDaddy’s forwarding services arguably fall under “maintenance” of a domain name, but there’s not much discussion of GoDaddy’s immunity argument at all in the court’s order. The text of the immunity provision also leaves room for a damages claim where the plaintiff shows a “bad faith intent to profit.” This looks like unfortunate drafting that makes it tough for courts to grant immunity without consideration of fact-specific issues that are germane to the overall cybersquatting analysis. It would be nice for the immunity to distinguish between when the registrar is acting as a registrar and when it’s arguably trying to monetize domain names (e.g., through parking). (See: "Film Academy Targets GoDaddy Founder As Legal Fight Heats Up.") Registrar immunity rulings are rare, but if there was ever a candidate for when it is appropriate, this was it. A scenario where registrars routinely comply with rightsholder requests and disable forwarding or DNS resolution would break the internet. The court recognizes as much in its background discussion of the case (“If registrars stopped performing the function of taking name server information and providing it to registries, the Internet would not function.”) Unfortunately, the court does not take the route of providing immunity. [The routing point is relevant to the overall SOPA discussion.]

The court analyzes the contributory claim under Lockheed’s test for contributory trademark infringement. Courts continue to assume the viability of a claim for contributory cybersquatting, but they rarely dig in. Courts also don’t seem to discuss the contours of a cause of action against the backdrop of registrar immunity. A broad cause of action for contributory cybersquatting against registrars is a work-around of the registrar immunity provisions. (As GoDaddy pointed out, it was precluded by the ICANN/UDRP rules from disabling the site pending resolution of Petronas's claims, which were properly directed to a UDRP forum or a court.) I’m surprised the court did not take a much more critical look at Petronas’s claims here. Trying to hold GoDaddy liable for routing and pointing to DNS servers is a short step away from arguing that GoDaddy should be liable for forwarding. What’s next? Will Petronas sue Al Gore for its injuries because he invented the internet?

Petronas obtained the relief it sought: control or cancellation of the infringing domain names. It tried to hold GoDaddy liable because GoDaddy did not in effect disable access to the domain names. The court correctly rejects GoDaddy’s claims, but does not take the shortest possible route in doing so. The court should be cognizant of how its resolution of claims against GoDaddy will affect how GoDaddy reacts in the future to notices from rightsowners. The current trademark liability rules have resulted in a system where trademark owners can send takedown notices, typically to sites themselves. Rightsowners have pushed the envelope and through rulings such as Akanoc, are likely extending this to hosts as well. Petronas's claims tried to take it one step further, and broaden this to the registrar level. The court rejects its attempt, albeit in a long-winded way.

Posted by Venkat at 11:20 AM | Derivative Liability , Domain Names , Trademark

January 05, 2012

SOPA/PROTECT-IP/OPEN Linkwrap #2

By Eric Goldman

It's been a busy time for news related to SOPA (the Stop Online Piracy Act, not the Stop Online Privacy Act, although that could be an unintended result!), PROTECT-IP/PIPA, and the OPEN Act. In a bit, I'll recap some links. First, though, some general thoughts about the last month.

As I predicted, SOPA has been incredibly divisive. It has largely boiled down to Hollywood in support vs. the rest of the world against, with an emerging "with me or against me" attitude. What a shame. We get much better results when the tech and entertainment community collaborate rather than play zero-sum games.

Naturally, I think Hollywood has made several strategic miscalculations here. First, the outrageousness of its proposals has mobilized the tech community. It's been fascinating watching companies and politicians scramble to disavow themselves from SOPA when targeted by the anti-SOPA advocates. That NEVER happens when it comes to a Congressional proposal to regulate technology. Perhaps this mobilization will be a flash in the pan, or perhaps Hollywood has poked a sleeping tiger once too often.

Second, Hollywood's credibility with its financially-sponsored politicians may be wearing thin. Politicians will happily take its money, but they don't enjoy looking like fools--and many SOPA supporters have, in fact, looked pretty silly while being left twisting in the wind by their Hollywood patrons. Money will buy a lot of politician patience, but the goodwill reservoir is not bottomless.

Third, even if Hollywood can succeed in passing something like SOPA or even PIPA, I believe it would be counterproductive to its long-term interests. As I've mentioned before, we all benefit from having larger common markets (see, e.g., NAFTA or the EEC), and the Internet has emerged as the largest common market of all. A Balkanized Internet will devolve into disparate smaller markets that represent less value for everyone.

A final counterproductive point, although Hollywood may not care. SOPA/PIPA absolutely will drive US dollars--and jobs--overseas. For example, I ditched GoDaddy as my domain name registrar and took my business to a foreign registrar who won't be subject to SOPA/PIPA. If other folks make the same calculations I did, collectively it will be a boon for foreign service providers and a net loss for US service providers. At best, SOPA/PIPA preserve some jobs at the expense of others; my guess is that our economy will suffer a net reduction in jobs. Just what we need during this protracted economic downturn.

The amazing thing is: despite the complete lack of credible empirical evidence supporting SOPA/PIPA, and despite a groundswell of grassroots opposition to it, and despite companies and politicians dropping their support of SOPA/PIPA when the spotlight is cast on them, Hollywood might still be able to succeed in this rent-seeking endeavor. It's evidence of just how well Hollywood has embedded itself into Congress' psyche (and wallets).

Some news items since my last linkwrap:

* OPEN has been introduced in the Senate as S.2029.

* CDT's list of opponents. As you know, I am on it.

* Mike Masnick broke a huge story about Dajaz1.com, showing how our government repeatedly broke the law in falsely pursuing a so-called rogue website. The conduct of the government is chilling--things like this aren't supposed to happen in our democracy!--and if heads don't roll for the coverup, it will be another nail in the coffin of our republic.

* The government also lost the Rojadirecta case. Also, an in-depth look at the Operation in Our Sites bust of Ninja Video, where the government continues to make questionable interpretations of criminal copyright law.

* Constitional Law scholar extraordinare Laurence Tribe and advocate Marvin Ammori both explained how SOPA violates the First Amendment. Marvin followed up with a First Amendment assessment of the manager’s amendment. Corynne McSherry’s thoughts.

* Why aren't members of Congress listening to the opposition? Maybe it has something to do with the revolving door between government and industry. See this article: SOPA revolvers: Sixteen former Judiciary staffers lobby on online copyright issues.

* Wikimedia’s General Counsel Geoff Brigham explains “How SOPA will hurt the free web and Wikipedia”

* One of the many unanswered questions: who is a rogue website and how many are there? CNET News.com suggests that SOPA is all about taking out just one website--The Pirate Bay. Seriously, we're going to break the Internet because of The Pirate Bay? Talk about collateral consequences for something that could be handled with incredibly narrow legislative fixes—or better yet, with precise transborder enforcement cooperation.

* EFF on the good and bad in the OPEN Act.

* Mike Masnick completely destroys Lamar Smith’s so-called statement of facts in support of SOPA. Reading articles like this remind us that support for SOPA/PROTECT-IP is hardly about "the facts."

* More "fact" debunking, this time by Julian Sanchez.

* Speaking of "the facts" or the lack thereof, it appears that the House Judiciary Committee is massively overclaiming who supports SOPA. Misleading the American public apparently is just business as usual in DC.

* Meanwhile, companies are realizing that being listed as a SOPA supporter isn't necessarily good for business. SOPA opponents targeted GoDaddy, who instantly declared their lack of support for SOPA but remains completely untrustworthy and hypocritical.

* Meanwhile, SOPA is turning into an election-year issue, and politicians are beginning to learn the power of Reddit.

* If you want to speak up, check out SOPA Track and find out where your legislators stand. My Congresswoman, Anna Eshoo, has been firm in her opposition to SOPA, but the California senators are both PIPA co-sponsors because they too deeply in bed with Hollywood to listen to other constituents. So fair warning to Sen. Boxer and Feinstein--I plan to vote for your opponents, whoever they are, in the next election cycle.

* Great article about how SOPA will become a Trojan horse for all types of online content censorship, not just the suppression of rogue websites.

* Opposition to SOPA is bipartisan: “I suggest the left and right unite and pledge to defeat in primaries every person named as a sponsor on H.R. 3261, the Stop Online Piracy Act.”

Just a reminder because everyone knows SOPA is so ridiculously extreme: PROTECT-IP is NOT an acceptable "compromise" to SOPA. PROTECT-IP is also extreme. As I indicated previously, if we're going to have any legislative discussions about rogue websites, we should start with the OPEN Act and iterate from there. In light of the action in the courts (see the links below), any legislative solution should be coupled with increased immunities for Internet intermediaries so that they don't just coddle the rightsowners irrespective of the legislation.

FWIW, I have called Rep. Eshoo to thank her for her opposition to SOPA, and I've contacted Sens. Feinstein and Boxer to let them know that I disagree with their positions on PROTECT-IP. Have you contacted your legislators to tell them how you feel? If you don't speak up, they won't know where you stand.

Prior blog coverage of SOPA/PROTECT-IP/OPEN:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 09:15 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

January 04, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

January 03, 2012

Nov.-Dec. 2011 Quick Links, Part 2 (Extended IP Edition)

By Eric Goldman

Copyright

* Costco v. Omega (E.D. Cal. Nov. 9, 2011). On remand after the disappointing non-result from the Supreme Court in this case, the district court gives Costco a decisive win, holding that Omega engaged in copyright misuse:

Omega concedes that a purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.

The net effect is that Costco violated copyright law's importation clause but Omega's copyright misuse makes the importation not actionable. This is one of the most significant copyright misuse decisions we've seen. Assuming it goes to the Ninth Circuit again, it will be interesting to see what they do with it. If this latest ruling stands, Omega's legal hack will be decisively shut down; and other manufacturers trying to use copyright to control their channels for non-copyrightable articles will want to reevaluate their approach.

* The Righthaven debacle continues to wind towards its messy but inevitable conclusion. Some of the items from the last couple months that caught my attention:

- Every time Righthaven's lawyers whine about opponents' unfair litigation tactics, I'm dumbstruck by the duplicity.

- Stephens Media dropped its efforts to contest that Democratic Underground made a fair use by republishing a newspaper article excerpt.

- Righthaven v. Wolf: "The Court admonishes Mr. Mangano regarding his lack of civility. The motion for reasonable attorney's fees in the amount of $32,147.50 and costs of $1,000.85 is GRANTED."

- Righthaven LLC v. Newsblaze LLC, 2011 WL 5373785 (D. Nev. Nov. 4, 2011). Yet another dismissal for lack of standing.

- the auction for Righthaven.com is going on right now. Current high bid is $1,900.

* C-70/10, Scarlet Extended SA v. Societe Belge des auteurs, compositeurs et editeurs (SABAM) (ECJ Nov. 24, 2011). Some interesting quotes from an ECJ opinion:
- "EU law precludes the imposition of an injunction by a national court which requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files"
- "The filtering system would also be liable to infringe the fundamental rights of its (Scarlet's) customers, namely their right to protection of their personal data and their right to receive or impart information"
- “E.U. law precludes an injunction made against an Internet service provider requiring it to install a system for filtering all electronic communications passing via its services, which applies indiscriminately to all its customers, as a preventive measure, exclusively at its expense, and for an unlimited period”

* Brownmark Films LLC v. Comedy Partners, 2011 WL 6002961 (E.D. Wis. Nov. 30, 2011): In awarding a fee shift to defendants, "the Court finds that Brownmark's legal positions were also objectively unreasonable, and thus their position was frivolous. To this Court, there is little that could justify the plaintiff's stated view that the South Park version was not parody....given the transformative nature of the use and the lampooning Brownmark's original received, there is ample reason to believe that South Park's use would have greater spurred the market for the original. In the internet era, with information freely and quickly accessible, viewers interested in South Park's version could turn to the internet to find a copy of the original. And any confusion over which version was the original could be supplied to online viewers through a statement at the video's web page. For all of these reasons, the Court finds that Brownmark was objectively unreasonable in its position that South Park's use was not fair." Wendy Davis' writeup.

* Carolyn Wright, a/k/a PhotoAttorney, who helps photographers enforce their copyrights, got side-swiped in a misguided enforcement action and had her photo site mistakenly taken offline by a DMCA takedown notice (not surprisingly, GoDaddy was in the middle of this).

* UC Berkeley revamps its policies about student note-taking and recordings of classes. It seems a little odd to encourage faculty members to be sending 512(c)(3) takedown notices freely. James Grimmelmann has more criticisms.

* Gibson v. Amazon (C.D. Cal. Sept. 8, 2011). The court rejected a copyright infringement case against Amazon, Urban Dictionary and others. Gibson is appealing to the Ninth Circuit.

* RIAA is in pre-litigation enforcement mode against ReDigi for reselling digital files.

* The Zynga-Vostu litigation settled.

* Ars Technica: Warner Bros: we issued takedowns for files we never saw, didn't own copyright to

* Megaupload brought a 512(f) suit against UMG for wrongfully taking down a promotional video. The complaint. The contract. James Grimmelmann's comments.

* The economics of the record label-online music site deals look very, very bad for the music sites.

* Techdirt: Congressional Research Service Shows Hollywood Is Thriving

* David v. CBS complaint. Tertiary infringement re-redux: Download.com sued again for secondary copyright infringement for distributing LimeWire and BitTorrent clients.

* A Singapore newspaper sued Yahoo News for copyright infringement.

* An analysis of the Trans Pacific Partnership (TPP).

Trademark

* 1-800 Contacts, Inc. v. Lens.com, Inc., 2011 WL 5403368 (D. Utah Nov. 4, 2011). The court denies 1-800 Contacts' motion for post-judgment relief based on newly discovered evidence. This case could be a textbook case of trademark bullying--remember, 1-800 Contacts has spent well over $650k on this case and Lens.com made $20 (not a typo) of profit directly from its keyword ads based on 1-800 Contacts' trademarks. Prior blog post.

* Speaking of trademark bullying, does an "Eat More Kale" t-shirt infringe any IP rights that Chik-fil-A has in "Eat Mor Chikin"? See the 2011 C&D letter, the 2006 C&D letter and the 2006 C&D response. I assume most kale eaters don't overlap with Chik-fil-A consumers. But, Paul Levy explains why there should be a pox on both parties' houses.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC., 2011 WL 6055489 (D. Neb. Dec. 6, 2011). In a trademark lawsuit, the defendant asked for:

REQUEST NO. 32: All documents referring or relating to purchasing of keywords, “Ad Words,” “sponsored links,” or other advertisements for search engines and any efforts to achieve search prominence on search engines, including but not limited to Your purchase, or consideration to purchase, the name “Lively Skin” or the URL www.livelyskin.com.

REQUEST NO. 37: Documents referring or relating to communications with Google to purchase “lively skin” and “livelyskin.com” as keywords or “Adwords.”

The court says (cites omitted):

In support of its motion to compel, Ishtar states that Lovely Skin's production of documents in response to these requests are “deficient for two reasons.” First, the Google information lacks the dates that the keywords were used, which are necessary to establish “(1) whether Lovely Skin's marks had achieved secondary meaning when Ishtar entered the market; and (2) the extent of Lovely Skin's inequitable use of the term “livelyskin” in its keyword advertising campaigns.” Second, Ishtar claims that as a result of its recent Internet searches, Ishtar has learned that “Lovely Skin possesses additional information regarding keyword purchases made by Lovely Skin through other search engines.” The Court finds that the information sought by Ishtar is relevant to its affirmative defenses of the claims made against it by Lovely Skin.

* Partners for Health and Home, L.P. v. Seung Wee Yang, 2011 WL 5387075 (C.D. Cal. Oct. 28, 2011):

Defendants have infringed Plaintiff's Perma–Life trademark by each of the following acts, taken either individually or as a whole:

a. Registering the domain www.perma-life.co.kr and using it to promote their competing Pearl Life cookware;

b. Applying the metatags “perma life” and “permalife” to the website at www.perma-life.co.kr through which they sold their competing Pearl Life cookware;

c. Applying the term “permalife” as visible video tags (indexes) on videos promoting Pearl Life cookware which they posted on the Internet at video sharing websites YouTube (www.youtube.com) and Tag Story (www.tagstory.com), and on the “blog” site Daum (www .daum.net).

d. Purchasing the term “permalife” as an Internet search engine advertising keyword to direct Internet users to their website at www.pearllife.com at which they advertised their Pearl Life cookware.

* Foreword Magazine Inc. v. Overdrive Inc., No. 10-1144 (W.D. Mich. Oct. 31, 2011). Offering to sell a domain name after getting a C&D can't be introduced as evidence of bad faith in the resulting ACPA suit.

* Weather Underground v. Navigation Catalyst (E.D. Mich. Nov. 9, 2011). Typosquatters' liability for ACPA violations must be evaluated on a domain name-by-domain name basis, not based on the defendant's entire portfolio; and ACPA bad faith cannot be established on a "willful blindness" standard.

* iYogi Holding Pvt. Ltd. v. Secure Remote Support, Inc., 2011 WL 6291793 (N.D.Cal. Oct. 25, 2011). A default judgment against a competitor who created fake reviews bashing the plaintiff.

* Fordham sent a trademark demand letter to Texas Wesleyan for using the acronym "CLIP" to describe its IP center, which garnered derision from many other IP professors. The demand letter (currently set to private; I'm trying to fix that).

* Multi-Time Machine v. Amazon complaint. A watch manufacturer sues Amazon for trademark infringement based on Amazon's internal search engine's results.

* Night Owl Games v. Zynga complaint. Another game developer seeks a declaratory judgment against Zynga over the -ville trademark, this time "Dungeonville."

* Harvard spikes a Yale t-shirt making fun of it.

* Rebecca provides three updates on Southern Snow Manufacturing Co. v. Sno Wizard Holdings, Inc. (see my prior blog post on the case): insurer had duty to defend, a baffling battle over false trademark marking, and a further rejection that metatags matter.

Patents/Trade Secrets

* The Trade Secret Litigator: The America Invents Act: What Will the Impact of the New Patent Law's "Prior Commercial Use" Defense Have on Trade Secret Protection?

* Coca-Cola turns the vault for its secret formula into a tourist attraction.

* The producers of the Bachelor/Bachelorette sued Reality Steve for inducing show participants to leak spoilers. Reality Steve’s response.

* Are strict limits on e-discovery coming for patent cases?

* All Things D reports on Abhyanker v. Benchmark Capital, an idea theft lawsuit against a VC fund involving the entrepreneur who also is behind Trademarkia.

Posted by Eric at 01:05 PM | Copyright , Domain Names , Evidence/Discovery , Patents , Trade Secrets , Trademark | TrackBack

I'm Not a Fan of this Craptastic Trademark Lawsuit--Fancaster v. Comcast

By Eric Goldman

Fancaster, Inc. v. Comcast Corp., 2011 WL 6426292 (D.N.J. Dec. 22, 2011).

We've seen some pathetic trademark lawsuits this year (SUE MOAR KALE, anyone?), but I'll nominate this long-running litigation money-sink (going over 3.5 years) as the saddest trademark case of 2011.

Fancaster registered its mark in 1989 for broadcasting services, and over the years it's been used in connection with a range of services, "including selling Fancaster branded radios, charging customers to watch closedcircuit boxing matches, producing karaoke shows, transmitting sponsored news messages to wireless pagers and cell phones, and conducting live demonstrations of FANCASTER broadcast services" (cites omitted).

In 2006, it launched Fancaster.com to broadcast short sport-related video clips. It hopes to cover such must-see events "as La Tomatina in Spain, Ostrich racing in Arizona, the Westminster Kennel Club Dog Show and the annual Nathan's Hot Dog Eating Contest." Rather than advertise the website on the Internet (you know, where people who enjoy content online might already be), instead they are seeking out untapped Internet enthusiasts by "marketing the website at sporting events, bars, on local television channels in Sioux Falls, South Dakota and Sioux City, Iowa, on radio stations in Charleston, South Carolina, and via flyers and handbills."

Meanwhile, in 2008 Comcast rolled out a service called fancast.com "that allowed users to watch full-length premium mainstream media over the Internet." The service was a debacle, losing $80M in less that 2 years due to “the unexpectedly high cost of distributing video content on the internet.” (Even though Comcast acquired bandwidth at wholesale rather than retail costs...how much it would have cost non-carriers to launch competitive services?). In March 2011, Comcast shut down the Fancast service and rolled the domain name over to XfinityTV.

With the overlap between the Fancaster and Fancast names, one possibility is that Comcast blatantly ripped off the name of a small startup who wouldn't want to tangle with a giant, thereby creating "reverse confusion" where everyone thinks first-mover Fancaster infringes second-comer Comcast. But another story equally fits this facts: Fancaster is doing a little trademark trolling, seeking to increase Comcast's $80M of losses by grabbing some gravy for itself. (Some gravy indeed: Fancaster's damages expert thought it would take $73M of corrective advertising to fix Comcast's damage to a brand that has no market awareness outside of Sioux City.)

It's a sad commentary on our milieu when we can't tell which litigant is bullying the other. Maybe *both* parties are equally imbibing the bullying elixir. Fancast initially unleashed the litigation hounds, but Comcast responded with a hailstorm of countermoves, including an ACPA counterclaim for a slew of "fancast" domain names Fancaster registered after learning about Comcast's upcoming launch. A lot of lawyers appear to have satisfied their billable hour goals using this case. Yay for free-spending deep-pocketed clients!

Trademark Infringement

The court resoundingly thumps Fancaster's core argument about consumer confusion, miraculously finding a way to twist all of the factors to Comcast's favor. The judge may have cut some analytical corners, but that says the judge simply didn't accept Fancaster's narrative.

The court specifically rejected the possibility of initial interest confusion, citing 3rd Circuit precedent that basically limited IIC to competitors, and the parties didn't directly compete. The court also dismisses Fancaster's efforts to show overlaps in search engine results, saying "the confusion one encounters on an Internet search engine is a twenty-first century version of that experienced when searching the phone book." I am going to be doing some work this quarter to show that the initial interest confusion doctrine almost never succeeds in court any more, and therefore it imposes costs on both litigants for no gain. This case is just one example of that.

The court also scoffed at Fancaster's request for $73M for corrective advertising:

There is not a shred of evidence of any damage to the fancaster mark caused by Comcast. The only loss to Fancaster that Mr. Krueger could testify to was that resulting from pursuing the instant litigation against Comcast.

Evidentiary Issues

Comcast had survey expert Hal Poret do two surveys. The court tosses the first one because it didn't adequately replicate market conditions by not presenting consumers with a navigable website:

use of a printout and static screenshots, instead of live websites, provide ample grounds on which to exclude the March 2009 survey. For one, it is difficult to fathom how presenting a respondent with a paper printout of the FANCAST homepage in anyway replicates how an Internet user would encounter and perceive the FANCAST website in the marketplace. Websites, particularly those that offer video content, are meant to be viewed on a computer and allow consumers to browse and interact with them via hyperlinks. The FANCAST printout offered none of these aspects. Similarly, although viewed on a computer, the static screenshots of the fancaster and control website homepages did not allow respondents to interact with them as they ordinarily would in the marketplace.

I haven't researched this issue, but this ruling may tell us something important about the requirements for consumer surveys when websites are involved.

JUST FOR LAW PROFESSOR READERS: Our colleague Greg Lastowka (a longtime friend) gets toasted by the judge for his expert report, which the judge repeatedly called "totally inappropriate" and says "wanders far from the proper scope of an expert's opinion." For example, Greg's report says the judge can award between $1k-$100k for an ACPA violation (a true statement of the law), to which the judge sarcastically responds "Lastowka's generosity gives the Court at least a modest role." Later, the judge blasts Greg for narrating the requirements of an ACPA claim, saying "A jury should not be receiving instructions on the law from two sources, and however erudite and accurate they may be, Mr. Lastowka's instructions will not be allowed to compete with the Court's instructions." The judge also tosses Greg's report on why Fancaster engaged in ACPA bad faith, saying "the expert assumes the role of the fact finder and is therefore not performing the role of an expert." This is a good reminder that when we're called for potential expert gigs, we have to clarify exactly what we're being asked to opine upon and whether it's appropriate for expert testimony. This judge clearly didn't respond well to any line-blurring about expert testimony.

For what it's worth, the court similarly shreds Gary Krugman's expert report for Comcast about PTO practices (part of Comcast's counterclaim for fraud on the PTO), part of which the judge says "inappropriately usurps the role of the fact finder."

Conclusion

This ruling eviscerated Fancaster's case, making it a strong win for Comcast, but it left a few residual legal issues open. Yet, the legal battle has been mooted by the passage of time. Comcast already stopped using Fancast as a brand, and Fancaster still hasn't shown a lot of movement towards developing a real business or even a revenue model. Are the parties really going to spend more money on a pointless lawsuit? We all know what the answer should be; let's see what they actually answer.

For more on the case, see Rebecca's post.

Posted by Eric at 09:00 AM | Domain Names , Evidence/Discovery , Trademark | TrackBack

December 23, 2011

Academic Literature Recap, Q4 2011

By Eric Goldman

I'm mired in grading heck, slogging my way through 146 exams. As a result, blogging has taken a back seat. I have several key items to blog, including the UMG v. Shelter Capital and Ascentive v. Opinion Corp. rulings. I'll get to these and other topics soon.

In the interim, just in time for the holidays, let me call your attention to some recent academic articles that caught my eye this quarter. They may be worth checking out during your holidays. Happy reading!
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Bevin Ashenmiller and Catherine Shelley Norman, Measuring the Impact of Anti-SLAPP Legislation on Monitoring and Enforcement, The B.E. Journal of Economic Analysis & Policy: Vol. 11: Iss. 1 (Topics), Article 67 (2011). The abstract:

We examine changes in environmental monitoring and enforcement activity in the presence of state legislation prohibiting Strategic Lawsuits Against Public Participation (anti-SLAPP laws). Using data on the Clean Air Act from the Environmental Protection Agency’s ECHO database, we find evidence that state inspections increase by almost 50% after a state passes anti-SLAPP legislation. In addition, we find strong evidence that the ratio of findings of noncompliance to inspections more than doubles in the presence of anti-SLAPP legislation.

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danah boyd, Eszter Hargittai, Jason Schultz & John Palfrey, Why parents help their children lie to Facebook about age: Unintended consequences of the ‘Children’s Online Privacy Protection Act’, First Monday, Volume 16, Number 11 - 7 November 2011. The abstract:

Facebook, like many communication services and social media sites, uses its Terms of Service (ToS) to forbid children under the age of 13 from creating an account. Such prohibitions are not uncommon in response to the Children’s Online Privacy Protection Act (COPPA), which seeks to empower parents by requiring commercial Web site operators to obtain parental consent before collecting data from children under 13. Given economic costs, social concerns, and technical issues, most general–purpose sites opt to restrict underage access through their ToS. Yet in spite of such restrictions, research suggests that millions of underage users circumvent this rule and sign up for accounts on Facebook. Given strong evidence of parental concern about children’s online activity, this raises questions of whether or not parents understand ToS restrictions for children, how they view children’s practices of circumventing age restrictions, and how they feel about children’s access being regulated. In this paper, we provide survey data that show that many parents know that their underage children are on Facebook in violation of the site’s restrictions and that they are often complicit in helping their children join the site. Our data suggest that, by creating a context in which companies choose to restrict access to children, COPPA inadvertently undermines parents’ ability to make choices and protect their children’s data. Our data have significant implications for policy–makers, particularly in light of ongoing discussions surrounding COPPA and other age–based privacy laws.

This article stirred up a fair amount of discussion. See, e.g., the CNET coverage.

Some notes about this article:

* no one looks good here: not the kids, parents, Facebook or Congress.
- Parents teach children how to lie to get what they want online
- Gilmore’s law that the Internet interprets censorship as damage and routes around it. COPPA has been a success at getting websites to shun kids 12 and under, but it’s been a complete failure at protecting kids online.
- all of the lying kids are presumptively engaged in criminal activity

* when kids are asked to represent themselves as older than they actually are, do they inadvertently put themselves in more adult situations than they can handle? See my post on mistake of age defenses.

* the policy implications of this report cut in both directions. Pro-regulation: the only way to keep kids off Facebook is to do mandatory age authentication that parents can’t game; or do comprehensive privacy regulation. Anti-regulation: COPPA was a bust, so we should repeal it or structurally modify it.
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Felix T. Wu, Collateral Censorship and the Limits of Intermediary Immunity, 87 Notre Dame L. Rev. 101 (2011). We don't have too many law professor papers really grokking 47 USC 230, which makes this paper instantly noteworthy. Felix presented this paper at our 47 USC 230 fiesta earlier this year. His conclusion:

Intermediary immunity can and should play an important role in protecting speech on the Internet. Immunity prevents the application of laws targeted at original speakers to intermediaries that lack the incentives of original speakers to speak. Immunity can thus be used to avoid the collateral censorship of lawful, socially desirable speech that poses a real or perceived risk of liability to intermediaries. At the same time, immunity can and should be limited. When intermediaries are actually original speakers, and have the incentives of original speakers, immunity is no longer appropriate. Similarly, immunity as to causes of action that are specifically targeted at intermediaries inappropriately prejudges the reasonableness of such liability.

Even ardent supporters of intermediary immunity would be well-served to recognize its limits. When immunity becomes unbounded, it begins to seem increasingly unfair, stimulating calls to cut back on the immunity, or even eliminate it entirely. The framework developed here demonstrates how, without any need to amend current law, we can limit the immunity, while still serving its core purposes.

James Grimmelmann's comments about the paper.
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Sandra L. Rierson, The Myth and Reality of Dilution, 2012 Duke Law & Tech. Rev. ___ (forthcoming 2012). From the introduction:

This Article advances three claims. First, statutory dilution erroneously assumes that the source-identifying function of a trademark is a rivalrous good and one that is dissipated by use. This assumption lacks empirical support, and is assuredly not categorically true despite the contrary principle that underlies the federal dilution statute. If marks are nonrivalrous, as they often are, no cause of action for dilution should exist.

Second, even were particular marks indeed rivalrous, the social and transaction costs imposed by the federal dilution statute would still outweigh the supposed harm to trademark holders. Dilution claims inflict profound anticompetitive burdens, preclude beneficial comparative advertising, and entrench dominant (often oligopolist) firms at the expense of market entrants. Dilution has serious non-economic costs as well and prohibits protected First Amendment speech without justification. For these reasons and others, the federal dilution statute imposes substantially more harm than it (allegedly) prevents.

Finally, the true foundation for the federal dilution statute lies not in alleged economic harms, but rather results from an entirely misplaced fiction of corporate personality. We do not require trademark holders to prove actual economic injury in the context of a dilution claim because, in truth, there is none. Instead, we have granted the holders of famous trademarks the equivalent of a “moral” right to these marks: an extension of the rights granted to a creator of an expressive work in the copyright context. Trademark owners feel vested in their brands, many of which are deliberately anthropomorphized, and the dilution statute reifies and protects these rights as a matter of federal law.

Stacey Dogan's cogent critique of the article. You may recall that in 2007, SCU convened a major academic conference on trademark dilution.
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Lydia Pallas Loren, Deterring Abuse of the Copyright Takedown Regime by Taking Misrepresentation Claims Seriously, 46 Wake Forest L. Rev. ___ (forthcoming 2011). A nice in-depth look into one of my favorite topics, 17 USC 512(f), by one of my favorite authors. The conclusion:

The takedown provisions of the Copyright Act are a powerful tool that copyright owners may use to obtain prompt removal of infringing material from the Internet without judicial assessment of the assertion of infringement. Congress provided a mechanism to deter abuse of this extrajudicial enforcement mechanism in the form of a new cause of action for material misrepresentation. Courts should interpret the requirements for prevailing on a claim of misrepresentation with an eye toward fulfilling Congressional intent. This means using a standard that would hold copyright owners liable not only when they had actual knowledge that the material targeted for takedown was not infringing, but also when the copyright owner should have known if it acted with reasonable care or diligence that the material was lawful. It also means interpreting the injury requirement broadly and awarding attorney’s fees to prevailing plaintiffs. Taking the claims of misrepresentation seriously will shape the behavior of copyright owners who seek removal of material through takedown notices.

Posted by Eric at 07:55 AM | Content Regulation , Copyright , Derivative Liability , Privacy/Security , Trademark | TrackBack

December 18, 2011

More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names

By Eric Goldman

I got the following email regarding our prior three posts on ex parte cutoffs of foreign "rogue" websites in the Chanel, True Religion and Philip Morris cases (I'm republishing the email with permission):
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All of the court papers in the Chanel case were been posted to http://servingnotice.com/sdv/. Similarly, the court papers in the Philip Morris case are at http://servingnotice.com/jiang/index.html.

A little exploration of the site reveals that a Fort Lauderdale lawyer named Stephen Gaffigan (who seems to be a sole practitioner) has brought a bunch of these cases. In the Chanel case, "service" on the vast majority of the defendants was achieved by posting the complaint at http://servingnotice.com/sdv/ and getting a TRO ordering the registrar of defendants' domains to redirect the accused domain names to http://servingnotice.com/sdv/. Reading the court papers, it turns out that the purported authority cited by Mr Gaffigan in his memorandum supporting Chanel's motion is a collection of orders and default judgments in other uncontested cases brought by the same lawyer, according to the same template. (See http://www.servingnotice.com/ofn/index.html; http://servingnotice.com/pan/index.html; http://servingnotice.com/off/index.html; http://servingnotice.com/oft/index.html; http://servingnotice.com/li2/index.html; http://servingnotice.com/qi/index.html; http://servingnotice.com/wu/index.html; http://servingnotice.com/ling/index.html).

Gaffigan's method seems to be to rely on default judgments. Nobody has showed up in any of these cases to contest his motions in court. (The docket sheet in the Chanel case shows the voluntary dismissal of a couple of defendants, so I assume those individuals showed up and either settled out of court or got off without settling to avoid an in-court contest.) So, there has been nobody to make the argument to district courts that no US statute authorizes the remedies Gaffigan seeks, and nobody to appeal the judgments to a court of appeals, and no opportunity for a court to assess the appropriateness of the remedy in a contested proceeding.
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Eric's comments: This email helps to answer some of my prior questions, such as how many similar cases are out there (many) and whether these cases will multiply (it appears the True Religion case was brought by an unrelated law firm, Greenberg Traurig). Yet, it leaves open my most basic question, which is what can be done proactively to educate judges about the potential abuses of the ex parte process, joinder, notice to defendants and orders purportedly binding non-litigant third parties. It also leaves open the implicit question of whether attorneys who seek overreaching ex parte requests will be subject to discipline or sanction for any possible abuses of the process.

Prior coverage:

* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 11:17 AM | Domain Names , Trademark | TrackBack

December 16, 2011

Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang

[Post by Venkat Balasubramani, with comments from Eric]

Philip Morris USA, Inc. v. Jiang, 11-cv-24049 (S.D. Fla.) (TRO entered on Nov. 16, 2011) (Prelim. Injunction Entered on Dec. 12, 2011)

This is yet another case where a court orders broad remedies to a rightsowner who alleged that various foreign domain names were selling infringing products. See our recent blog posts on the Chanel and True Religion cases.

The plaintiff in this case is Philip Morris, who alleges that an investigator purchased products from various websites. The investigator forwarded the products to a Philip Morris representative, who alleged that "what appeared to be Marlboro cigarettes were in fact counterfeit." Additionally, the representative

reviewed and visually inspected the internet websites operating under each of the subject domain names, as well as pictures of items bearing the Philip Morris USA Marks offered for sale on the internet websites, and determined that the products were not genuine and/or authorized Philip Morris USA products.

The court issues a TRO that is similar in scope to the Chanel TRO. (The same lawyer was involved in both cases on the plaintiff's side, so this is probably more of a function of the fact that Chanel and Philip Morris sought similar relief.) The TRO contains the following:

- Defendants are enjoined from using any Philip Morris marks, in websites, domain name extensions, links to other websites, search engine databases.
- The domain name registrars are directed to transfer the domain name certificates to plaintiff (for deposit with the court).
- The registrars are directed to transfer the domain names to GoDaddy, who will "hold the registrations for the . . . domain names in trust . . . during the pendency of [the] action."
- GoDaddy shall also update the DNS data so it points to a copy of the complaint, summons, and court documents (<http://servingnotice.com/jiang/index.html>).
- Finally, Western Union is directed to "divert" transfers made by US consumers to three named individuals

The court later extends the TRO and enters a preliminary injunction with substantially similar terms. The orders in this case don't order any sites de-listed, but are still pretty extraordinary in scope. The fact that the court orders the complete disabling of websites and orders registrars to transfer domain names to GoDaddy based solely on the strength of the declarations Philip Morris's investigator and representative is really surprising. Of course, ordering (on an ex parte basis) the diversion of funds transmitted through Western Union is extreme.

As with the Chanel and True Religion cases, the same questions remain. Is there a relationship between the various defendants and the domain names? What type of notice of the lawsuit did defendants actually receive? Was there actually infringement or counterfeiting? The plaintiffs in these cases end up convincing the court of a key fact: immediate, ex parte relief is necessary because defendants will hide assets and shift operations. Courts seem to take this allegation at face value. (The court does authorize service via alternate means and Philip Morris filed affidavits of service in accordance with the court's directive, but this seemed like an afterthought.)

Yesterday's SOPA hearings caused many observers to cringe (see, e.g., Mike Masnick's horrifying recap). I think it's worth revisiting the question of how courts appear already open to remedies people think are objectionable in legislative proposals that are being considered.

Eric's Comments

In our True Religion post, I asked just how many similar cases are in the system. Unfortunately, there's not an easy way to quantify the litigation activity. For example. in the True Religion case, the entire action was sealed for a couple of weeks. Even without the seal, I don't know how to find these ex parte rightsowner enforcement cases against foreign rogue websites other than laboriously reviewing every federal filing, having readers tip us off or serendipity.

However, with today's case representing the third foreign rogue website enforcement case we've found in the past month, I'm going to guess that more enforcement actions are out there today or are coming imminently. This seems to suggest that rightsowners have figured out a way to work with the current system without any additional legislation.

The fact that rightsowners are making progress on their own without help seems quite relevant to the debates about SOPA taking place right now in the House Judiciary Committee. Unfortunately, those debates are so ungrounded from reliable fact-based deliberation that the unpersuadable committee members wouldn't care if we found a million of these cases. In contrast, if they were willing to consider the facts on the ground, the possibility that courts are giving rightsowners what they want is a strong indication that SOPA doesn't need to be slammed home on the fast track without proper deliberation.

From my perspective, the three cases demonstrate the problems with ex parte judicial oversight. Only hearing one side of the story isn't enough to trigger the kind of draconian remedies the courts are granting. In particular, in this case, interdicting money being sent via Western Union is quite troubling. Basically, the court says that money being sent by customers who may have done nothing wrong goes into a holding tank--the customers don't get their money back now (and maybe never?) even if the transaction didn't consummate. It seems like rejecting the money transfers, rather than interdicting the money, would have a lot fairer to the buyers caught in the middle. But they aren't in court to defend their interests, and no one else is speaking up on their behalf, so the rightsowner can make a pure cash grab from potentially innocent buyers. That kind of result wouldn't happen with real due process.

Instead of insulting each other on Twitter or reading the sports pages, what the House Judiciary Committee should be doing is putting the existing legislative proposal to the side, taking a close look at what's going on in these cases, figuring out how much relief rightsowners are getting today from the courts, and then deciding if any incremental legislation is necessary to fill any gaps or--equally importantly--curb any rightsowners' abuses of the ex parte process. Instead, sadly, the House Judiciary Committee will continue its bizarre form of political theater until the rightsowners get what they paid for.

Meanwhile, I would be interested in trying to curb the ex parte abuses in court, but I don't know how. We are finding out about these orders after-the-fact, and I don't know how to get ahead of the curve. If the affected domain name owners aren't complaining after-the-fact, perhaps that's a sign that the rightsowners are truly hitting only the bad guys. On the other hand, if the process remains ex parte, inevitably rightsowners will make some serious mistakes that will have terrible consequences for legitimate players. I wish I could figure out a way to sensitize the judges about those risks before they rotely accede to the rightsowners' requests.

Posted by Venkat at 09:46 AM | Domain Names , E-Commerce , Trademark

December 14, 2011

If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei

[Post by Venkat Balasubramani, with comments from Eric]

True Religion v. Xiaokang Lei (S.D.N.Y.) (TRO; Nov. 18, 2011) (Prelim. Injunction; Dec. 2, 2011). The initial complaint.

We recently blogged about a case where Chanel obtained surprisingly broad remedies against domain names associated with foreign "rogue" websites which allegedly sold counterfeit Chanel items. Much of the relief Chanel sought and obtained in that case overlapped with relief that the proposed SOPA law would provide to rightsowners.

True Religion, a company which manufactures jeans, brought a similar enforcement action against foreign "rogue" websites in the Southern District of New York. It first obtained a temporary restraining order, which the court converted into a preliminary injunction. The relief obtained by True Religion is similarly broad as, and presents the same due process concerns raised by, the Chanel case.

True Religion filed a lawsuit in the Southern District of New York. As in the Chanel case, it went after numerous domain names in a single lawsuit, and it presented declarations from its investigators that they bought counterfeit goods from those domain names. True Religion also presented evidence that defendants undertook efforts to conceal their true identities (primarily by supplying 'purposely-deceptive contact information' to registrars), and that if defendants were provided notice, they would "likely destroy, move, hide or otherwise make [the domain names, products in question, accounts, and records] inaccessible to the Court." True Religion filed its lawsuit on November 15, and the court issued an ex parte TRO three days later. The TRO broadly enjoined the conducts of defendants and third parties, authorized service via email, and set a hearing for November 30, 2011. Defendants were required to show cause on or before the hearing date as to why the court should not issue a preliminary injunction. True Religion filed two sealed declarations and an unsealed declaration. No defendant appeared or filed any pleadings. On December 2, 2011, the court issued the preliminary injunction.

The TRO: The TRO finds that True Religion established a likelihood of succeeding on the merits of its claims that defendants sold products which infringed on True Religion's trademarks and copyrights and that defendants' conduct will cause irreparable injury to True Religion. The TRO also finds that defendants undertook efforts to conceal their identity and that if "True Religion were to proceed on notice to defendants," defendants would shift their operations. Pending the court's ruling on True Religion's request for an injunction, the court issues the TRO, which contains the following provisions:

- defendants and any third parties acting in concert with them, including ISPs, registrars or third party selling platforms are restrained from selling allegedly infringing items;
- True Religion is entitled to broad financial discovery and discovery from various service providers (MasterCard, Visa, PayPal, back-end service providers, web designers, third-party selling platforms, registrars, registries, ad-word providers, etc.);
- third party payment processors and financial institutions are ordered to freeze any of defendants' funds;
- domain name registries (VeriSign, Neustar, Public Interest Registry) and registrars are orderd to "temporarily disable" the domain names referenced in the TRO, "through a registry hold or otherwise";
- third party service providers are ordered to cease providing service to defendants.

The Preliminary Injunction:

The order largely tracks the TRO, but adds a approximately 24 new domain names. As with the TRO, the preliminary injunction broadly enjoins defendants from exploiting True Religion's copyrights and trademarks. In addition, it contains the following provisions:

- third party service providers who are provided notice are enjoined from providing services to defendants in conjunction with any of the acts which defendants are enjoined from doing;
- a broad asset freeze, directed at banks, payment processors, PayPal and other payment services providers;
- continuing right to conduct discovery for True Religion;
- domain name registries and registrars are directed to continue disabling and lock the domain names, including the new domain names;
- third party service providers, including ISPs, back-end service providers, affiliate program providers, web designers, sponsored search engine or ad-word providers are ordered to "disable service" to the defendant websites; and
- an authorization to serve process via "registered electronic mail" pursuant to rule 4.

This is a slightly different flavor from the Chanel orders, but it raises similar due process concerns. The initial order (the TRO) is issued on an ex parte basis without notice, and it contains extraordinary relief--it's essentially a kill switch for the websites in question. There are a variety of reasons why this has the potential to run roughshod over the rights of defendants or third parties; among other things, there could be some mistake as to the underlying domain name or website. There's no assurance that the site as a whole (as opposed to one or two products) is infringing. Also, after bona fide adversarial proceedings, True Religion's copyrights or trademarks may not turn out to be as enforceable as they seem at first blush. But on the strength of True Religion's unchallenged assertions, the court orders various third parties, including registrars, registries, payment processors, ad-word providers and others, to cut off the defendants. (The court did require True Religion to post a bond of $10,000--a laughably nominal amount.)

Regardless of whether the court has the authority to issue an injunction binding third parties who are not before the court, and who may not even be subject to the court's jurisdiction, many service providers will just follow the court order anyway. They may have no interest in expending resources to fight for a third party's due process rights. Indeed, in its declaration filed after the TRO was issued, True Religion indicated that the registries (VeriSign, Affilias, Public Interest Registry, Nominet UK) disabled many of the domain names in question upon receiving notice of the court order. PayPal also froze the funds in 84 different PayPal accounts.

It's unclear how much business defendants conducted in the United States. If their business activities in the US were nominal, this looks like an extraterritorial enforcement by a US rightsowner in a US court. It's tough to tell, given that the process hasn't been adversarial or even designed to facilitate bona fide participation by the defendants.

I know there are some tweaks in pending SOPA/PIPA legislation that surely would be even more helpful to plaintiffs, but courts today seem willing to grant broad remedies to rightsholders without any legislative change at all. It seems that today, rightsowners are able to go to court and, quickly and at low cost, take down domain names and get an order directing third parties, including service providers, ad networks, and payment processors, not to provide services to various websites. That's a pretty good deal if you are a rightsholder. They may even prefer that to the ITC proceedings proposed in OPEN.

_______

Eric's Comments

This case raises so many unanswered questions for me:

1) Just how many rightsowner vs foreign rogue website lawsuits are already in the court system? Are the Chanel and True Religion cases unique, or are dozens or hundreds of similar cases percolating through the system?

2) Did so much of this case really need to be done under the cloak of secrecy, and even if the answer is yes, why is so much of the case history still sealed?

3) Just how far can rightsowners go in suing dozens or hundreds of unrelated defendants in a single lawsuit? We've seen some pushback against copyright trolls. Are trademark owners similarly overreaching?

4) Just how far can rightsowners go in forcing third party service providers, like domain name registrars, ad networks, payment service providers and others, to honor rulings where the service providers aren't litigants? We dealt with this issue a bit in the 47 USC 230 context in the Blockowicz case. In that case, the Seventh Circuit set some important limits on the reach of Rule 65. Without an adversarial process, were the Chanel and True Religion courts perhaps a little lax in their reading of Rule 65?

5) If rightsowners can already get in court so much of the remedies that SOPA would provide, then why are they pushing so hard for SOPA?

6) Then again, if rightsowners can already get SOPA-like remedies in court, why are we fighting so hard against SOPA? This reminds me a little of the public outcry against UCITA a decade ago--much of the angst was about the parts where UCITA merely restated then-current contract law. Similarly, perhaps SOPA is more of a mirror on present reality than a bona fide change in the law. At minimum, it suggests SOPA may be distracting us from other real problems. If we object to the remedies in SOPA, not only do we need to kill SOPA, but we need to proactively seek new statutes that prevent the outcomes Chanel and True Religion are getting in court.

I plan to continue my personal efforts against SOPA, but it's clear that killing SOPA isn't enough to end the fight. Perhaps OPEN would help by giving rightsowners an easier path to attacking illegitimate foreign websites and thereby alleviate the pressure that rightsowners are putting on doctrines not specifically designed to deal with that problem. That would be a good reason to support OPEN, but it's now 100% clear to me that OPEN also needs more immunities, safe harbors and other limitations on rightsowner powers. If rightsowners get a shiny new enforcement toy via OPEN, they should have to give up some of their overreaching elsewhere.

Posted by Venkat at 11:54 AM | Copyright , Domain Names , Trademark

December 10, 2011

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

By Eric Goldman

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

Before I get further into substance, two process notes:

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

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

An Overview

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

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

What's Good

Substantively, some of the things I liked about OPEN:

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

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

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

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

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

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

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

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

What's Not Good

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

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

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

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

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

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

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

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

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

Why I’m Not Enthusiastic About OPEN

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

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

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

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

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

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

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

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

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

December 08, 2011

Employee's Claims Against Employer for Unauthorized Use of Social Media Accounts Move Forward--Maremont v. SF Design Group

[Post by Venkat Balasubramani]

Maremont v. Susan Fredman Design Group, Ltd., et al., 10 C 7811 (N.D. Ill.; Dec. 7, 2011)

I blogged about a case earlier this year where a plaintiff sued her former employer for improperly accessing the plaintiff's social media accounts. (Here's my earlier post on the case: "Employee's Twitter and Facebook Impersonation Claims Against Employer Move Forward.") I thought the case was dismissed due to plaintiff's inaction, but it looks like the case is still trudging along.

The basic facts: Susan Maremont worked for the Susan Fredman Design Group as the director of marketing. Maremont created a blog and Facebook account for SFGD. She also created Facebook and Twitter accounts that the court says are undisputedly her personal accounts. Maremont suffered an accident. While she was in the hospital, SFDG continued to access and post from Maremont's accounts. (The court is never 100% clear on which of the two Facebook accounts SFDG posted from.) Maremont returned to work briefly on a part-time basis, and during this time she thanked her temporary replacements "for their amazing posts on [the blog] in [her] absence." Subsequently, Maremont apparently changed her mind and sued for alleged misuse of her personal accounts. [The order says that Maremont stored her account access info on the SFDG server, although the folder in which she stored this info was ‘locked’ and she never gave authority to anyone to access it. This was Maremont’s version of the facts. The order does not say exactly how SFDG got access to the passwords (SFDG could have obtained the passwords through accessing the folder on the SFDG server, or it's possible that the computer Maremont used to create the accounts--which were SFDG computers--remembered them).]

SFDG brings a motion for summary judgment, which the court largely punts for lack of evidence on damages.

Lanham Act claim: Maremont's Lanham Act claim requires her to show that she had an intent to commercialize her identity. The court says that she satisfies this requirement, noting that "it is undisputed that Maremont created a personal following on Twitter and Facebook for her own economic benefit . . . " However, Maremont also must show that she was somehow damaged by her unauthorized affiliation with SFDG. The court gives Maremont additional time to marshal evidence as to how she was damaged. Maremont tells the court that she will bring an expert to testify as to the damages issue.

Stored Communications Act claim: As to the Stored Communications Act claim (which Maremont added later on in the lawsuit) there is no dispute that SFDG accessed Maremont's accounts:

there is undisputed evidence in the record that Defendants accessed Maremont's personal Facebook account and accepted friend requests at least five times from September 23, 2009 through November 24, 2009. Moreover, evidence in the record reveals that Defendants posted seventeen Tweets to Maremont's personal Twitter account during the relevant time period.

This probably amounts to unauthorized access of "a facility through which an electronic communication service is provided." However, the court says that in order to be entitled to statutory damages under the SCA, Maremont has to show that she suffered some "actual damages." (See Van Alstyne v. Electronic Scriptorium.) Because of the dearth of evidence on the damages issue, the court declines to grant summary judgment at this juncture. (Although the court's discussion of whether the SCA requires actual damages as a prerequisite to relief is not extensive--and as Van Alstyne acknowledges, there is mixed authority on the issue--the ruling is significant in this regard.)

Right of Publicity claim: The right of publicity claim fails because SFDG did not pass itself off as Maremont, even though it posted tweets through Maremont's Twitter account. The first of the objectionable tweets explained Maremont's absence and linked to a blog post by Susan Fredman. Additionally, upon returning to work on a part-time basis, Maremont "thanked" SFDG's guest editors for their efforts. Thus, the court concludes that SFDG did not misappropriate Maremont's likeness.

Common Law Privacy claim: Maremont also brought a common law privacy claim, which appeared to be based on the "intrusion of seclusion" tort. The court says that she has to show that defendants intruded into a matter that was private and which the plaintiff attempted to keep private. The court says that Maremont cannot satisfy these elements:

there is no dispute [that] . . . the matters discussed in Maremont's Facebook and Twitter posts were not private and that Maremont did not try to keep any such facts private. In short, Maremont fails to point to any private information upon which Defendants intruded.

Cf. Moreno v. Hanford Sentinel.
__

This is a messy dispute, and some of the facts don't seem clearly developed by either the court or the parties. For example, there were two Facebook accounts involved (one for SFDG and one which Maremont uses personally), but later in the discussion, the court doesn't specify which Facebook account it is talking about. Second, the court notes that "there is no evidence in the record concerning the actual Facebook postings and their content." This is a strange evidentiary omission by the plaintiff.

Then there's the issue of actual damages. Maremont has a Herculean task in proving that her affiliation with SFDG as a result of a smattering of social media posts somehow had a negative financial effect on her. How exactly was she damaged by this association? It's not as if SFDG said anything negative about her. Maremont's claim is that while she was in the hospital, SFDG continued to post and make it look (to the untrained eye) that Maremont continued to handle SFDG's social media efforts. Would a prospective client really refuse to hire Maremont because of these posts? Did this somehow diminish Maremont's earning capacity? I'm not sure what Maremont's expert is going to say, but he or she better come up with something good.

The court's analysis of the invasion of privacy issue also threw me for a loop. The court concludes that the information contained in the posts were public, so there's no violation by SFDG when it posted to Maremont's accounts, but this didn't seem to be the crux of Maremont's invasion of privacy claims. Maremont should be arguing that when SFDG accessed Maremont's accounts, SFDG could also have accessed private facts stored in the account, such as private messages, DMs, photos, and other information in the Twitter/Facebook accounts that were not public. The court's analysis makes me think that the court didn't understand that Twitter or Facebook accounts can contain other information than what's actually publicly "posted" through the account. (Of course, Maremont would have faced a challenge when it comes to damages. She may not have had a standing problem, but she would have to show that she suffered damage as a result of the intrusion, and it's fair to presume from the court's dismissal of her claim that she failed to put forth adequate evidence on this issue.)

This case, along with the PhoneDog case (and Ardis Health) highlight the inherent ambiguity in ownership over social media accounts. Property-wise, it's tough to slot the accounts in a particular box. There also seems to be differing expectations on the part of the employer and employee. The employee obviously wants to take the account with her when she leaves, but the employer would like to continue to take advantage of the goodwill built by the account. There is a solution, and that's to have a written policy in place! A policy is not a cure-all, and I think it's equally important to have a discussion up front about whose account this is and what happens when the relationship terminates. (This is a mini-version of the "blog ownership question" that Eric has harped on.)

As with the PhoneDog case, this is another dispute where the attorney's fees expended could eclipse the value of the case. If the facts as alleged are true, SFDG stepped way over the line in accessing Maremont's accounts, but Maremont's damages are probably minimal. (Ironically, I would think the invasion of privacy claim would be one of the strongest, but the court kicks this claim.)

As a final note, it's worth comparing the result in this case to In re Rolando S., the case where a California appeals court found that a juvenile violated California's identity theft statute when he took someone's Facebook account for a joyride. Here, SFDG gets dangerously close to this line, although it was not clear that the posts in question purported to be from Maremont. As I mentioned in my initial post on the case, depending on what jurisdiction you are in, meddling with someone's social media account in this context could result in e-personation liability.

Posted by Venkat at 03:45 PM | Privacy/Security , Publicity/Privacy Rights , Trademark

December 07, 2011

I Don't Heart SOPA or PROTECT-IP: A Linkwrap

By Eric Goldman

Venkat and I have been covering SOPA and related topics. In case you missed our posts:

* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

Next week, SOPA is supposed to go to committee markup. In anticipation of that, some of the SOPA-related links from the past few weeks that have caught my attention:

* Bose v. Ejaz (D. Mass Nov. 7, 2011). Paypal cut off funds transfers to an International eBay merchant at the request of Bose, a rightsholder. The court rejects the merchant's tortious interference claim.

* Techdirt: The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas

* Politico: Shootout at the digital corral. The entertainment industry spent $91M this year on lobbying. Tech industry spent $15M. Guess who wins that battle?

* Op-eds against SOPA from NYT, LA Times and the Economist.

* EFF: What's On the Blacklist? Three Sites That SOPA Could Put at Risk

* Public Knowledge explains why PROTECT-IP isn’t an acceptable compromise to SOPA. Both "solutions" are off-the-charts extreme.

* Wired: Analysis: Internet Blacklist Bill Is Roadmap to ‘the End’ of the Internet.

* WaPo: SOPA opposition goes viral. Partially related: interesting stats about SOPA's lack of popularity.

* DHS/ICE seize another 150 domain names. Who needs SOPA? Reuters’ coverage.

* Hollywood Esq.: How Controversial Antipiracy Laws Could Be Enacted Even Without Congress.

* Nazerali v. Mitchell, 2011 BCSC 1581 (B.C. Sup. Ct. Oct. 19, 2011): A Canadian court ordered Google and other support providers to cut off the domain name of an allegedly defamatory website.

* EFF: Free Speech is Only as Strong as the Weakest Link. Check out their new resource, www.globalchokepoints.org.

* The RIAA wrote a letter to the editor headlined “RIAA largely succeeds in goal of bringing piracy under control.” Yet, they insist that SOPA is needed?

* Amusingly misguided: The $500,000,000 Cost of Google’s Five Million DMCA Notices. Partially related: Techdirt: As We Complain About SOPA & PIPA, Don't Forget The DMCA Already Has Significant Problems

Posted by Eric at 08:48 AM | Copyright , Derivative Liability , Trademark | TrackBack

December 06, 2011

Trademark Lawsuit Against Groupon Isn't Going Well--Groupion v. Groupon

By Eric Goldman

Groupion LLC v. Groupon, Inc., 2011 WL 5913992 (N.D. Cal. Nov. 28, 2011)

Groupion provides CRM software as a service (SaaS). Groupon distributes "deal of the day" offers that are typically unprofitable for advertisers and often have the extra "benefit" of causing the advertisers to get trashed on Yelp. Groupion sued Groupon for trademark infringement. I previously blogged on the complaint.

The court denies Groupion's various motions. The court runs through a typical multi-factor likelihood of consumer confusion analysis:

* mark similarity. Calling this factor "critical," the court concludes that consumers can keep the marks separate. The visual depictions of the logos are different, Groupion has one more syllable, and the words are portmaneaus from different inspirations ("coupon" + "group" vs. "groupware" + "companion").
* product similarity. "The parties' products are used for different functions and purposes, and are purchased by different classes of consumers."
* marketing channels. The Internet's commonality is discounted (cite to Network Automation), and the rest of the parties' channels are disparate as you would expect when one company is B2B and the other B2C.
* mark strength. The court says "Groupion" is weak because others are using similar marks in its field and Groupion didn't show evidence of the mark's commercial strength.
* intent. Groupion asserted that Groupon must have selected the mark knowing about it, but Groupion didn't provide any evidence to that effect. Groupon's failure to stop after Groupion's C&D was irrelevant.
* evidence of actual confusion. None of Groupion's evidence "demonstrates instances of actual confusion by its customers regarding the source of its products."
* likelihood of expansion. Groupon bought a mobile apps business, but the court says it will use that to distribute deals, not for intracompany groupware.
* purchaser care. B2B software buyers are careful, as are advertisers.

Thus, the factors point against Groupion's likelihood of success, so the court denies the preliminary injunction, Groupion's motion for summary judgment and motion to cancel Groupion's registered mark. I assume Groupon will view this as an invitation to bring its own summary judgment motion and kill this case. The judge's tone was unmistakable.

Posted by Eric at 08:49 AM | Trademark | TrackBack

December 03, 2011

Facebook's Trademark Enforcement Effort Against "Faceporn" Hits Jurisdictional Snag -- Facebook v. Pedersen

[Post by Venkat Balasubramani]

Facebook, Inc. v. Pedersen, et al., 10-cv-04673 (N.D. Cal.; Nov. 29, 2011)

Facebook sued Pedersen and Retro Invent, who are based in Norway and run the "Faceporn" site. "Faceporn" is a website which features pornographic content and "allows its users to create profiles, join groups, upload photos and video, and conduct live chats." Facebook served Retro Invent using the Hague Convention, and moved for default judgment.

The court, on its own motion, raises the issue of personal jurisdiction, and orders Facebook to show cause why the lawsuit should not be dismissed for lack of personal jurisdiction. Facebook argued in its filings that Faceporn targets a United States audience by using a ".com" address, and by virtue of the fact that Faceporn is an interactive website with 250 users in California and 1000 users in the United States. The court says that these allegations alone are not sufficient to satisfy the standard for personal jurisdiction:

not all material placed on the Internet is, solely by virtue of its universal accessibility, expressly aimed at every state in which it is accessed.

(citing Mavrix Photo, Inc. v. Brand Techs., Inc.).

Given the numerous foreign regulators who are taking aim at Facebook, it seems foolhardy for Facebook to argue that use of a TLD along with local registered users confers jurisdiction in a foreign country. Perhaps this argument won't directly tag Facebook because it is already subject to jurisdiction in every country where it uses the TLD, but it's not a great precedent for other internet companies. I'm somewhat surprised Facebook made this argument. Clearly, it's not an internet start-up any more.

Posted by Venkat at 10:32 AM | Domain Names , Trademark

November 28, 2011

Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

[Post by Venkat Balasubramani]

Chanel, Inc. v. Does, et al., 11-cv-01508-KJD-PAL (D. Nev.) (Sept. 26, 2011 Order) (Oct. 11, 2011 Order) (Nov. 14, 2011 Order)

Luxury brand Chanel has engaged in a fierce campaign against counterfeit websites in federal court in Nevada. It has seized approximately six hundred domain names in the last few months.

The basic facts alleged by Chanel are nearly identical. It identifies domain names which are used to "advertise, promote, offer for sale or sell" Chanel goods, including "handbags, wallets, shoes, boots, sunglasses, tee shirts, watches, and costume jewelry." Chanel's investigative team orders goods from the sites. When the goods arrive, they identify the goods as counterfeit (i.e., they bear Chanel marks but are "non-genuine Chanel products"). Chanel also argues that the defendant websites can "transfer registrations, change registration data and content, change hosts, and redirect traffic," thus thwarting Chanel's ability to have effective recourse against the defendants.

Based on these allegations, the court first enters a TRO against approximately 400 domain names, followed by a preliminary injunction (the September 26 and October 11 orders). The second time around, the court enters a temporary restraining order and preliminary injunction aimed at approximately 200 domain names (the November 14 order).

The relief granted by the court is extraordinary in its scope, and includes:

- an injunction against the defendants prohibiting them from using any Chanel marks or selling any Chanel products;

- an injunction against the top-level domain name registry, directing it to change the registrar of record for the domain names to GoDaddy (!);

- an injunction telling GoDaddy to change the DNS data for the domain names so the domain names resolve to a site where a copy of the case documents are hosted (servingnotice.com/sdv/index.html);

- authorization for Chanel to enter the domain names into "Google's Webmaster Tools" and cancel any redirection of the domain names;

- an order requiring Google, Bing, Yahoo, Facebook, Google+, and Twitter to "de-index and/or remove [the domain names] from any search results pages."

Chanel is required to post a bond in the amount of $20,000.
__

Wow.

I'm sympathetic to the "whack-a-mole" problem rights owners face, but this relief is just extraordinarily broad and is on shaky procedural grounds.

First, I did not get a clear sense that this is an enforcement action against a single defendant. If there's no credible allegation of a conspiracy or an arrangement between whomever is behind these domain names, it strikes me as problematic for Chanel to file a placeholder lawsuit and then add or remove defendants at its convenience.

Second, it was not entirely clear why the lawsuit was in Nevada. The domain names are not registered to a registrar that is based in Nevada, and there's no clear basis for in rem jurisdiction. It's possible that plaintiff picked this jurisdiction as a matter of convenience, but there's no apparent relationship between the alleged counterfeiting activities and the State of Nevada.

Then there's the matter that some of the court's relief is directed at a variety of entities that are not parties to the dispute (including the registrars, the registry, Facebook, Twitter, Google, etc.). I'm not sure how this court can direct a registry to change a domain name's registrar of record or Google to de-list a site, but the court does so anyway. This is probably the most problematic aspect of the court's orders. [Interesting that GoDaddy was chosen as the registrar that the domain names would be transferred to.]

Finally, there's no clear basis to authorize a transfer of a defendant's property pending resolution of a lawsuit to the plaintiff. (See Bosh v. Zavala.) I don't see this as particularly problematic in this case because Chanel is not looking to liquidate the domain names, but it certainly raises due process red flags, given that this is all done with minimal (or no) notice to defendants.

On a loosely related note, TorrentFreak has a post about the latest seizure action by ICE/DOJ: "Feds Seize 130+ Domain Names in Mass Crackdown," where the feds seized a bunch of domain names that were allegedly used to sell or promote "counterfeit clothing." I'm always stumped by the timing, motivation, choice of targets, and other aspects of the DOJ's intellectual property enforcement efforts, but particularly in this context, I'm unclear as to why the DOJ puts energy towards enforcements that private parties seem to be able to accomplish on their own. (I'm sure they have their reasons, but they're never obvious to me.)

It's also worth viewing this case within the broader context of SOPA and thinking about which of the remedies obtained by Chanel in this case are ones that SOPA provides (and which have resulted in a hue and cry). (See, e.g., Eric's post: "Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act"; Techdirt: "The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas.") An injunction requiring Google to "de-list" sites is one remedy which SOPA expressly makes available, and ordering the registry to transfer domain names to GoDaddy and ordering GoDaddy to update the DNS records is in effect achieving another remedy which SOPA creates. The fight against SOPA may be a red herring in some ways, since IP plaintiffs are fashioning very similar remedies in court irrespective of the legislation. Thus, even if SOPA is defeated, it may turn out to be a Pyrrhic victory--opponents may win the battle but may not have gained much as a result.

Posted by Venkat at 11:21 AM | Domain Names , Trademark

November 22, 2011

Court Awards Damages for Wrongful Disruption of Web Presence -- Ordonez v. Icon Sky Holdings

[Post by Venkat Balasubramani]

Ordonez v. Icon Sky Holdings LLC, 10-cv-60156-PAS (S.D. Fla. Aug. 30, 2011)

This was another dispute involving two parties who jockeyed for control of an online presence. I guess you could say that one “jacked” the other’s presence.

Elizabeth Ordonez is a dancer, model, actress, choreographer (etc.) and is known by her fans as “Elizabeth Sky.” She sued Nisha Elizabeth George and her entity Icon Sky Holdings alleging that Icon Sky wrongly obtained a trademark registration for “ELIZABETH SKY” and went on a campaign to disrupt Ordonez’s web presence. George allegedly sent letters to ModelMayhem, Twitter, MySpace, and Facebook, all of whom took down Ordonez’s content, account, or forced Ordonez to change her name.

Ownership of the mark: As far as which of the two parties should be entitled to use the ELIZABETH SKY mark, the facts were pretty unfavorable to George and Icon Sky. Ordonez had been using Elizabeth Sky as a stage name for many years, and the court described some pretty serious irregularities in George’s procurement of the trademark. George was aware of that Ordonez was the senior user, and submitted a specimen that wasn’t really a specimen (it was the exact same specimen which George submitted for another trademark application, but appeard to have been “graphically edited”).

Athough it was a default case, the court easily disposes of the trademark issue. The court finds that George was the junior user and used the ELIZABETH SKY mark in connection wich similar goods and services. This is sufficient for the court to find for plaintiff on her Lanham Act and state law unfair competition claims and this entitles Ordonez to injunctive relief as to George’s use of the ELIZABETH SKY mark.

Tortious interference: Plaintiff also prevailed on her tortious interference claims, which were premised on George’s interference with the contractual relationships between plaintiff and various social networks. The court found that (1) there was a contractual relationship, (2) George knew about this relationship (since she signed up for the services, she was aware of the applicable terms of use), (3) an intentional and unjustified interference, (4) which caused damage. In addition to the social networks, George also demanded that other website take down content which plaintiff had put up. The court found that Ordonez was damaged because her business contacts “discontinued showcasing plaintiff on their websites for fear of being sued,” and many entertainment industry professionals “stopped requesting plaintiff for jobs.”

Libel per se: Finally, plaintiff made out a claim for libel because George falsely accused plaintiff of identity theft. Since identify theft is an “infamous crime,” the court says that plaintiff satisfied the elements of libel per se and did not need to prove damages from George’s statements.

Relief: The court grants plaintiff injunctive relief with respect to the trademark issue and enjoins defendants from continuing to use the mark. Plaintiff also asked to freeze certain of George’s domain names but the court denies this relief since the complaint did not specifically allege a cause of action under the ACPA. Finally, the court awards $81,000 in damages. The bulk of the damages were for plaintiff’s tortious interference claim, and plaintiff put forth evidence that it cost her $78,000 to build her “online presence” – ten hours per week at $50 per hour (over a period of three years). She sought $243,000 in damages for performances that plaintiff’s booking company refused to book because of George’s actions, but the court found the evidence flimsy on this point (and duplicative of the $78,000 in damages it already awarded). The court awards $3000 for lost booking.
__

Eric has blogged a bunch about brands dueling on social networks via takedowns. The Complexions spa case: “Business Sues Facebook to Restore Its Fan Page” and the Ozimals case “Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices” are two recent examples. In both of those cases, the networks ended up embroiled in the dispute whereas here Ordonez went after the alleged wrongdoer directly. A user can be enjoined from sending improper takedown notices, but it’s legally questionable as to whether a court can force a network to put someone’s webpage back online (both from a First Amendment and section 230 filtering standpoint, the network should be able to keep content off-line). This particular case is a trademark case, but in the copyright context, section 512 provides some applicable rules: Wrongful takedowns can result in money damages (Lenz), Someone can be enjoined from sending bogus takedown notices (Design Furnishings v. Zen Path), and an intermediary can be enjoined from providing access to a piece of content (section 512(j)).

The interesting thing about this dispute is how the networks in question readily took down plaintiff’s webpages and content. It’s unclear as to whether George went to Facebook, Twitter, and YouTube and waved around the trademark registration—from the court’s recitation of the facts, it did not seem like George was armed with a registration when she complained to the various networks. It’s tough to draw any conclusions from this case, but my instinct is that networks are more than willing to honor takedown notices without closely scrutinizing them, although at times it seems like networks have their own (sometimes maddening) administrative mazes in place.

This is a rare ruling awarding damages to a plaintiff who is claiming tortious interference based on a wrongful takedown. Where the takedown is based on copyright ownership, there may be a preemption issue, so it’s not easy to assert a tortious interference claim based on a copyright takedown notice. (See the Ozimals ruling, “17 USC 512(f) Preempts State Law Claims Over Bogus Copyright Takedown Notices” but see the Smith v. Summit Entertainment case: “17 USC 512(f) Claim Against 'Twilight' Studio Survives Motion to Dismiss” and Rossi v. MPAA. Where a copyright takedown is involved, a plaintiff is better off proceeding under section 512(f).)

Since this case was resolved on a default motion, it’s unclear as to whether in a contested case damages are viable. At any rate, this is one additional datapoint that people who submit takedowns want to keep mind. You can be liable under section 512 if you send a wrongful DMCA takedown, but you may also face liability for tortious interference for causing a network to take someone’s web presence off-line.

Posted by Venkat at 09:39 AM | Publicity/Privacy Rights , Trademark

November 15, 2011

Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

By Eric Goldman

[Note: I've been working on this post for about 2 weeks, so my apologies if my comments are duplicative of the intervening discussion about the bill]

The DMCA online safe harbors have worked pretty well over the past 13 years. I don't know that anyone loves the compromise, but everyone seems to have done OK. We've seen an explosion of UGC websites fueled by the safe harbor, and content owners as an industry have done pretty well for themselves financially and have developed a working relationship with most major UGC sites.

The Stop Online Piracy Act, with its ridiculously named subpart the "E-PARASITE Act," doesn't expressly modify 17 USC 512. Nevertheless, it is a full-fledged assault on the safe harbor's scheme. It employs the same basic notice-and-takedown structure of 512, but it applies the cutoff obligations to payment processors and ad networks (thus effectively reversing Perfect 10 v. ccBill and Perfect 10 v. Visa), expands--for the first time--the takedown obligations to trademarks (thus embracing and expanding Gucci v. Frontline), expands the takedown obligations to cover anti-circumvention in addition to the 17 USC 106 rights, expands the reasons why a rightsowner can complain, and does not give the governed intermediaries any business incentive to stand up for user content. On the latter point, because SOPA is designed to cut off the cash, each and every UGC item potentially jeopardizes its entire economic enterprise of a website hosting it. In other words, if the website goes offline because of cash flow problems caused by the cutoff attributable to a single UGC content item, all of the UGC on that website goes dark because of a single content item. Talk about collateral damage.

Thus, among other adverse consequences, if SOPA passed, it effectively repeals 17 USC 512 by shifting most of the action to the notice-and-takedown process in SOPA. In doing so, SOPA radically changes the balance between content owners and UGC websites. Despite the FUD from the content industry and other bill supporters about the supposedly serious problems caused by "rogue" websites and the supposedly fine-grained targeting of this bill, make no mistake--this law mortally threatens the entire UGC community.

There are a lot of other serious problems with the law and I'll discuss a few in a moment, but let me step back for a moment. Some legislative proposals, even if everyone knows they won't pass, are nevertheless useful for sparking healthy conversation among disparate communities. SOPA is not such a law. It doesn't seek to engender productive conversations. Instead, it goes out of its way to pit Silicon Valley v. Hollywood. This fosters unhealthy and antagonistic conversations, and the ongoing battle between the two diverts valuable resources that could be used to enrich both communities. See, e.g., the $100M+ that Google has spent fighting Viacom in the YouTube lawsuit--a huge amount of money that could have been instead invested in new services that benefit consumers, help rightsowners make more money and generally improve society.

Further, this law represents the worst kind of rent-seeking we see from incumbent industries. One approach to drafting legislation is to put so many objectionable concepts into a single bill that the opponents feel like they won if they clean up 50% of the problems, but that still leaves the other 50% of nasties to get through the system. I find it dispiriting that we must spend a lot of resources just to preserve the status quo from this type of industry overreaching. I support democracy for the reasons articulated by Winston Churchill, but I wished I lived in a democracy where attempts at legislative manipulation like SOPA were obviously DOA and led to its proponents suffering appropriately adverse consequences for their overreach.

In addition to the trumping of the 512 notice-and-takedown provisions, other major structural deficiencies of the law include:

* attempting to reinstantiate geographic borders on the Internet. Perhaps rebordering the Internet is inevitable, but it's bad policy for the United States to be cutting off transborder data flows, even for the putatively noble purpose of suppressing copyright infringement. Basically, the law provides a roadmap to foreign governments on how to reinstantiate geographic borders over their Internet connections, and they won't limit their censorship to copyright infringement. Instead, they'll go for the whole enchilada to restrict every type of foreign content the governments object to. (It seems virtually inevitable that we'll do the same in the US too, but that's a separate post). It will be hard for us to criticize those foreign governments' efforts because we taught them how to do it. The retort that we only deemed border reinstantiation worthy for copyright infringement and no other content type will ring hollow. When the Internet balkanizes into the US Internet, which looks nothing like the Egypt Internet, we'll have no one to blame but ourselves. I encourage the act's proponents to think very carefully whether such a Balkanized Internet will make them less money in the long run.

* The imposition of cutoff obligations on a wide variety of intermediaries, including Internet access providers and search engines in addition to the payment processors and ad networks I discussed above.

* Terms that don't lend themselves to precise statutory definitions, including "Internet advertising service," "Internet search engine," and "Internet site." All of these definitions are broad, ambiguous and based on assumptions about current technology. They don't make sense today and will look even sillier 10 years from now.

* the complete absence of empirical evidence supporting the need for any changes, or that the proposed changes fix any important problem. The collateral consequences would be unacceptable even if this evidence existed; without it, it's hard to interpret this law as a good faith effort to improve society.

While most of the discussion has been justifiably focused on the cutoff provisions, I also want to call your attention to Section 205 of SOPA. The way I read it, it proposes to build a huge bureaucracy of foreign diplomats whose sole job is to advance the interests of US IP owners in foreign countries. We already have problems with USTRs being IP maximalists, but this section would dramatically expand the number of IP maximalists in the US diplomatic corps. I'm not sure I have a good handle on all of the implications, but it seems like (1) we'll have more opportunities for the revolving door from IP owners to government and back, (2) this will further inculcate the agenda of legacy/incumbent IP industries into our government policy, and (3) we will have more boots on the ground to push the US IP maximalist agenda on other countries as part of our doctrinal imperialism.

There has been a lot of commentary about the bills. Some links worth exploring:

EFF Coverage

SOPA: Hollywood Finally Gets A Chance to Break the Internet (an excellent single-stop resource to begin your research)

Proposed Copyright Bill Threatens Whistleblowing and Human Rights

Techdirt

[I know you're already reading Techdirt, but no one is doing a better job of chronicling the day-to-day SOPA developments than Mike Masnick.]

E-PARASITE Bill: 'The End Of The Internet As We Know It'

MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized [a must-read article of how content owners who should know better nevertheless mistakenly accuse legitimate businesses of infringing activity and, using the power of law enforcement, shut down legitimate businesses and cost Americans jobs]

Go Daddy Supports E-PARASITE Legislation Even Though Its Own Site Is Dedicated To Theft Of Property Under Terms Of The Bill

Viacom Exec: 'Everyone Knows A Rogue Site When They See One'… Except He Doesn't

Others

Larry Downes, News.com, SOPA: Hollywood's latest effort to turn back time

Future of Music Coalition, Coming Clean on SOPA

Rebecca MacKinnon, New York Times, Stop the Great Firewall of America

Public Knowledge, SOPA and Section 1201: A Frightening Combination

James Temple, San Francisco Chronicle, Stop Online Piracy Act would stop online innovation

What You Can Do

If your member of Congress is supporting the law, remember that fact come election time. Before then, some things you can do today:

Contact your legislator

Sign the petition at Whitehouse.gov

Sign the petition at Avaaz

If you qualify, sign the Educators' Letter to Congress

Posted by Eric at 08:16 PM | Copyright , Derivative Liability , Trademark | TrackBack

November 08, 2011

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

By Guest Blogger Mark Bender, with some comments by Eric

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

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

History

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

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

Facts

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

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

Kloster Ford

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

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

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

The Case

The ACCC's case was comprised of two parts.

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

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

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

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

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

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

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

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

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

The Use of Competitors’ Names in the Headlines

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

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

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

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

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

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

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

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

Outcome

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

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

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

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

Appeal

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

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

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

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

Eric’s Comments

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

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

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

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

October 20, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

October 12, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

October 11, 2011

Q3 2011 Quick Links, Part 2 (Trademarks/Domain Names Edition)

By Eric Goldman

* In the Betty Boop case (Fleischer Studios v. AVELA), the Ninth Circuit stepped back from some of its perplexing language about aesthetic functionality and the Dastar opinion, but the revised opinion remains confusing. Rebecca's coverage.

* Car-Freshner Corp. v. Getty Images, Inc., 2011 WL 4527782 (N.D.N.Y. Sept. 28, 2011). In rejecting a motion to dismiss, the court say that selling photos of trademarked items can be trademark use in commerce and may not qualify as trademark fair use; and Getty could be contributorily liable for third party photographs. Terrible decision! Marty’s coverage.

* Rebecca recaps the latest ruling in Fair Isaac Corp. v. Experian Information Solutions, Inc., 2011 WL 3586429 (8th Cir. 2011). Prior blog post.

* Firefly Digital Inc. v. Google Inc., 2011 WL 4454909 (W.D. La. Sept. 23, 2011):

Firefly's Marks, GADGET and WEBSITE GADGET, are generic and/or descriptive without distinction or secondary meaning. Accordingly, the Motion for Summary Judgment filed by Google will be granted and Firefly's claims for trademark infringement under the Lanham Act, federal unfair competition, LUPTA and federal and state dilution will be dismissed. Finding that all the requirements for cancellation of Firefly's federal marks have been met, the Court will order that Federal Registration Numbers 3,711,998 and 3,730,874 are cancelled, and will direct the Clerk of Court to provide a certified copy of the judgment that will issue pursuant to this ruling, to the Director of the U.S. Patent and Trademark Office pursuant 15 U.S.C. § 1119 for appropriate cancellation of the foregoing federal registration numbers. Further, the Court will order that the Louisiana Secretary of State cancel from the state registry Firefly's mark, WEBSITE GADGET, pursuant to La. Rev. Stat. 51:219.

Yet another trademark owner ends a trademark lawsuit against Google with fewer trademarks than they started with.

* IPKat provides a very useful explanation of what happened (and didn't happen) with the L'Oreal v. eBay ECJ ruling.

* LimoStars Inc. v. New Jersey Car & Limo, 2:10-cv-02179-LOA (D. Ariz. Aug. 8, 2011). In a default judgment, the court wrote “the mere existence of the www.nylimostars.com website likely adversely impacted Plaintiff’s ranking of www.limostars.com in the listings of Google and other popular online search engines.” Really…? Compare the Bitchen Kitchen case. Also interesting: the court said that the trademark plaintiff could sue the defendant in Arizona based on the defendant’s registration of a domain name with GoDaddy, citing the GoDaddy-registrant agreement’s venue selection clause. I wonder if that contract also has a “no third party beneficiary” clause…?

* Adaptive Marketing LLC v. Girard Gibbs LLP, 2009 WL 8464168 (C.D. Cal. Oct. 9, 2009). I don’t remember seeing this case before, and it just showed up in my Westlaw alerts after 2 years. Keyword advertising defendants may find this case useful. The defendant was a law firm seeking clients who had been allegedly victimized by the plaintiff. The defendant bought the plaintiff’s trademark as an ad trigger and then used the trademark in the ad copy. The court says that the ad buy didn’t constitute initial interest confusion or dilution because the advertiser made a nominative use; and also there was no initial interest confusion because the litigants were not competitors. This outcome is so logical that it should be unremarkable, but defense wins are rare when the keyword ad copy includes the third party trademark.

* Suntree Technologies, Inc. v. Ecosense Intern., Inc., 2011 WL 2893623 (M.D. Fla. July 20, 2011): "Suntree alleges initial interest confusion, which is not actionable confusion in the Eleventh Circuit." Rebecca has more on this case, which reminded me a little of the classic Jacob & Young v. Kent case.

* Mirina Corp. v. Marina Biotech, 770 F. Supp. 2d 1153 (W.D. Wash. March 7, 2011): "in this case, Plaintiff does not argue that Defendant lures its customers away: it argues instead that Plaintiff has a harder time making business contacts because the contacts believe the Plaintiff is the Defendant. Thus, this case is distinguishable from cases where the court has applied an 'initial interest confusion' theory."

* QVC Inc. v. Your Vitamins Inc., No. 10-4587 (3d Cir. July 14, 2011). A corporate-authored blog post about a competitor's products didn't support a false advertising preliminary injunction. The court rejected user-authored comments to the blog post as evidence of consumer confusion (cites omitted):

Comments left on blog posts can be very difficult to authenticate. The use of false identities in Internet forums is now a well-known tactic for attacking corporate rivals. Even if a poster is "legitimate," doubts will often remain as to the sincerity of the comment. And, finally, even if a poster is genuine and making a comment in good faith, whether he or she would fall in to the universe of consumers whose opinions are relevant (i.e., those who are or potentially might be purchasers of the products in question) often cannot be known. Given these considerations, it was especially appropriate for the District Court to give the blog comments only limited weight.

Rebecca's blog post on the case.

* Z Productions, Inc. v. SNR Productions, Inc., 2011 WL 3754693 (M.D. Fla. Aug. 18, 2011). Trademark battle over the mark “cam guys.”

* Coventry First lawsuit dismissed. Prior blog post.

* Sex spray settles Sears "Die Hard" trademark lawsuit.

* Rosetta Stone v. Google oral arguments. A recap (perhaps a little biased).

* Coke Zero’s latest “joke” about overexpansive trademark rights (remember their "joke" about "taste infringement"?) is that it claims it owns the word “and.” That would be funny, except that it’s more of a sad commentary on the state of trademark law--expanded significantly by big trademark owners...like Coca-Cola--that I wouldn’t rule anything out. Yuck yuck yuck.

* Mark McKenna, Probabilistic Knowledge of Third-Party Trademark Infringement, Stanford Technology Law Review (2011). Part of the abstract:

This essay argues that the Supreme Court’s Inwood decision [requires] knowledge that particular actors are likely to infringe as a condition of secondary trademark liability. If, however, courts were inclined to take the analogy to tort law more seriously, then cases involving probabilistic harm would be viewed as negligence cases rather than trademark infringement cases. Liability in these cases would turn on an evaluation of the reasonableness of the defendant’s conduct in preventing harm, taking into account the full cost of alternative precautions. It would also turn on the trademark owner’s ability to prove causation – both in-fact and proximate – concepts that generally are completely absent from trademark cases.

* Tucows.Com Co. v. Lojas Renner S.A., No. 11-C52972 (Ontario App. Ct. of App. Aug. 5, 2011). Ontario court says domain names are property.

* Humorous critique of ICANN's new TLDs.

Posted by Eric at 08:57 AM | Domain Names , Trademark | TrackBack

October 03, 2011

Re-registration of Domain Name is not a "Registration" Under the ACPA -- GoPets Ltd. v. Hise

[Post by Venkat Balasubramani]

GoPets Ltd. v. Hise, 08-56110; 08-56112 (9th Cir. Sept. 22, 2011)

Although Eric is not a big fan of them, the Ninth Circuit has produced a slew of domain name opinions this year. GoPets Ltd. v. Hise is one to add to the list.

Background: Hise registered gopets.com in 1999. Hise and his brother and their entity are experienced domainers; they registered more than 1,300 domain names in the past decade. In 2004, Eric Bethke founded GoPets Ltd., a Korean company that developed a game involving "virtual pets that move between the computers of registered users." GoPets filed an application to register the "GoPets" mark in 2004 and the registration issued in 2006. Starting in 2004, Bethke made several attempts to purchase the gopets.com domain name from Hise. The parties went back and forth but never consummated a sale of the domain name.

In 2006, GoPets filed a UDRP action against Wise. The arbitrator ruled in favor of Hise, finding that since Hise registered gopets.com before GoPets Ltd. started using the mark, there could be no bad faith. After the UDRP ruling, the Hise brothers registered a slew of other gopets domain names, including gopet.biz, gopet.org, egopets.com, gopetz.bz, gopets.ws, gopet.tv, gopet.ws, gopet.bz, gopet.de, gopet.eu, and gopet.name. Meanwhile, Bethke again tried to purchase the domain name, and offered up to $40,000 for gopets.com. The Hises demurred and instead sent a letter to the investors of GoPets, offering to sell the domain name for $5 million. After receiving the offer to sell the domain name for $5 million, GoPets Ltd. filed a complaint for cybersquatting, and for claims under the ACPA, and Lanham Act.

The district court granted GoPets Ltd.'s motion for summary judgment on its ACPA and Lanham Act claims with respect to all of the domain names. The court also granted GoPets Ltd. its attorney's fees.

Re-registration of gopets.com: Hise transferred the gopets.com domain name to Digital Overture, an entity owned by him and his brother. Digital Overture re-registered the domain in 2006. The question is whether the 2006 re-registration violated the ACPA. GoPets argued that since its mark was distinctive in 2006 when the domain was re-registered, this is sufficient to state a claim under the ACPA. According to the court, the key question is whether the initial registration was done in bad faith--subsequent renewals or even transfers are irrelevant:

we conclude that Congress meant "registration" to refer only to the initial registration. It is undisputed that . . . Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name. We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.

The court finds that although the re-registration or transfer of gopets.com was not in bad faith, there was ample support for the factual conclusion that Hise's registration of the remaining domain names were done in bad faith. Hise tried to argue that he thought that registration of these domain names was proper based on his UDRP victory, but not surprisingly, the court rejects this defense.

Damages: The trial court awarded $100,000 in damages for Hise's registration of gopets.com and $1,000 in damages for the remaining domain names. The Ninth Circuit vacates the $100,000 award based on gopets.com but affirms the remaining damage award.

The ACPA allows for a plaintiff to elect statutory damages: "in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just." Hise argued (relying on Feltner v. Columbia Pictures Television) that the statutory damage award should have been decided by a jury and not a judge, and having a judge rather than jury determine statutory damages violated his Seventh Amendment right to a jury trial. The court says that this may be a viable argument, but not in this case, since the court awarded the minimum statutory amount. Hise could not have achieved a better result in front of a jury since the jury would have had to award the minimum as well. (See the similar BMG v. Gonzalez ruling in the copyright context). This issue will have to be hashed out in another case.
__

If I'm reading the court's opinion correctly, it means that any time someone registers a domain name before a mark has become distinctive or famous, that domain name gets a free pass, regardless of any transfers or changed use of the domain name? Or is the court's decision based on the fact that the basis for the ACPA claim was based on "registration" (as opposed to "trafficking" or "use"), and therefore the renewal or transfer does not create ACPA liability? If GoPets had stronger facts around Hise's use of the domain name, would it have made a difference?

I'm guessing the opinion just speaks to registration. Other decisions have held that the determination of the lawfulness of a domain name registration is not fixed--it may change over time, depending on the defendant's conduct and use of the domain name. (Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 385 (2d Cir. N.Y. 2003) ("Congress intended the cybersquatting statute to make rights to a domain-name registration contingent on ongoing conduct rather than to make them fixed at the time of registration".) It's useful to contrast the result for gopets.com with Newport News Holding Co v. Virtual City Vision (4th Cir. April 18, 2011) [pdf]. As Eric wrote in May, the registrant of newportnews.com won a UDRP proceeding, but ten years later, was the subject of an adverse ruling on ACPA claims against it. What went wrong?

[I]n making changes to its website in 2007, VCV [the registrant of newportnews.com] shifted its focus away from the legitimate service of providing information related to the city of Newport News and became instead a website devoted primarily to women’s fashion....VCV cannot escape the consequences of its deliberate metamorphosis....newportnews.com went from being a website about a city that happened to have some apparel advertisements to a website about women’s apparel that happened to include minimal references to the city of Newport News.

Thus, the court awarded $80k in damages, $10k in sanctions and attorneys' fees against VCV (the registrant of newportnews.com). It would not be prudent to read the Ninth Circuit's Gopets.com opinion as giving registrants a free pass for the life of the domain name. I doubt that's what the court meant, but I was surprised the court was not clearer about it, and surprised that the facts around the Hises' use of the domain name did not factor at all into the legal analysis.

UPDATE: Ryan Gile says "The lesson here is two-fold. Failing to negotiate in good faith can lead to unnecessary lawsuits and lawsuits often last longer than internet companies or their brands."

Posted by Venkat at 01:22 PM | Domain Names , Trademark

October 01, 2011

Facebook's Trademark Suit Against Teachbook Survives Motion to Dismiss

by Eric Goldman

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

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

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

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

Evidentiary Issues

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

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

Is the "Book" Suffix Generic?

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

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

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

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

Trademark Dilution

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

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

Conclusion

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

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

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

September 29, 2011

Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account -- Deck v. Spartz, Inc.

[Post by Venkat Balasubramani]

Deck v. Spartz, Inc., 11-Cv-1123 (E.D. CA.; Sept. 27, 2011)

I posted about the lawsuit involving the @OMGFacts Twitter account some time ago. ("Thoughts on the Lawsuit Over the @OMGFacts Twitter Account.") The account was created by Adorian Deck, who at the time was a minor. Deck signed an agreement with Spartz to commercialize the brand, and the parties ended up in a dispute over the agreement and who could control the "@OMGFacts" brand. As the court notes, Deck had an "OMG-moment," and decided to bail out on the agreement. He sued in California to disaffirm the agreement and Spartz, an Indiana corporation, moved to dismiss or transfer the case to Indiana. The court denies Spartz's motion and allows Deck to proceed.

Personal jurisdiction: Spartz's argument that it is not properly subject to personal jurisdiction in California does not go very far with the court. At the time the parties entered into the agreement, Spartz knew that Deck was a California resident, and the court finds this dispositive. It does not matter that the parties conducted their negotiations over the internet:

It is immaterial that the primary method of communication between the parties was electronic and that Adorian Deck's performance was to occur online. The Internet is not a place, and Adorian Deck was to complete his performance in California, his place of residence. The fact that he was to send the resulting materials to [Spartz] via the Internet does not change the nature of the parties' relationship.

Nothing too earthshattering there. Spartz also pointed to the forum selection clause in the agreement that required disputes to be resolved in Indiana. The court says that if Deck is entitled to disaffirm the agreement (and the court finds that he is), the forum selection clause goes out the window.

Disaffirmance: With respect to the disaffirmance issue, Spartz argued that Deck was trying to have it both ways: on the one hand, Deck was trying to disaffirm the agreement and on the other hand he was suing for breach. The court disagrees and says that dispute is over the remedies Deck is entitled to if he gets to disaffirm the agreement. Spartz also argued that Deck could not disaffirm unless he returned the consideration he received under the agreement, but the court says that there is case law support for the proposition that disaffirmation before the minor reaches the age of majority does not require the return of consideration, and the current version of the statute (Section 6710) "no longer requires restoration of consideration for any disaffirmed contract." Deck filed the lawsuit when he was still a minor and this reflects a clear intent to disaffirm the agreement. The fact that he did not restore any consideration he received is immaterial.

Trademark claims: Deck brought common law trademark claims against Spartz, and Spartz's principal defense was that the contract is still valid and Deck thus cannot claim unauthorized use. The court says that since Deck is entitled to disaffirm the agreement and expressed an intent to do so and because Deck revoked any permission granted to Spartz to use the mark, Deck states a valid claim for infringement.

Ouch. This is a rough result for Spartz. It's going to have to continue to litigate the dispute in California. The court pretty much nukes the agreement, and this does not put Spartz in a great position in the dispute. It looks like control over the @OMGFacts brand will revert to Deck, and the parties will probably resolve this dispute in short order.

Posted by Venkat at 01:13 PM | Trademark

September 13, 2011

Ninth Circuit Upholds Web Host's Liability for Counterfeiting Retailers--Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., No. 10-15909 (9th Cir. Sept. 12, 2011). Prior blog posts:
* Another Bad Ruling in Louis Vuitton v. Akanoc
* Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host
* Web Host Faces Potential Contributory Trademark Liability

This cases involves a US web host, Akanoc, that hosted Chinese retailers selling counterfeit Louis Vuitton goods. The web host apparently ignored numerous takedown notices from Louis Vuitton. Louis Vuitton sued for contributory copyright and trademark infringement, and the result has been a string of troubling rulings. For a sample of those, consider the trial court's rulings that individuals directly infringe copyrights when browsing a photo of a counterfeit good, and a 512 agent for service of notice could be personally liable for any infringements. Ugh. The coup de grace was a massive $32+M jury verdict against the defendants for willful infringement.

On appeal to the Ninth Circuit, the court issued a characteristic "omnibus" opinion that resolves lots of contentions in relatively short order. Opinions like this rarely become major precedents, which is fine by me given the results. Overall, the court rejects all of the defendants' arguments except one, but that one saves the defense over $10M.

Some of the more interesting points:

* MSG leased equipment to Akanoc. The jury held MSG liable, but the trial court reversed that. On appeal, the Ninth Circuit agreed that MSG wasn't liable for the retailer counterfeiting because "Louis Vuitton presented no evidence that MSG had reasonable means to withdraw services to the direct infringers."

* the defendants argued that its customers' websites were the "means" of trademark infringement, not the hosting services to them. The court rejected the argument as irrelevant:

websites are not ethereal; while they exist, virtually, in cyberspace, they would not exist at all without physical roots in servers and internet services....Appellants had control over the services and servers provided to the websites. Stated another way, Appellants had direct control over the “master switch” that kept the websites online and available.

This seems to resolve one of the open issues from the Ninth Circuit's 1999 Lockheed v. NSI case, which is the circuit's benchmark opinion on contributory trademark infringement online. That case said NSI as a domain name registrar wasn't responsible for an infringing domain name, but it implied that vendors closer to the infringement--such as web hosts--could be. This ruling confirms our assumption that web hosts have more affirmative obligations to intervene against trademark infringement than domain name registrars do.

* "providing direct infringers with server space" qualifies as a material contribution for contributory copyright infringement.

* the court touched on the required scienter for both contributory trademark and copyright infringement, but this discussion goes nowhere given that the jury found willful infringement.

Even though the defendants did not prevail on its doctrinal arguments, the appeal was partially successful because the court reduced the damages award over $10M (the jury had awarded $32+M against three defendants; the judge post-ruling had dismissed MSG, which cut the award to about $21M; this panel reduces it further to $10.8M). The trial court judge's jury instructions allowed the jury to cumulate awards against each defendant for the same infringements, rather than forcing them to make a single award joint-and-several. The appeals court fixed that perplexing error.

Even so, the lesson remains that any web host that fails to promptly honor takedown notices--copyright or trademark--does so at extreme peril. We don't have an express notice-and-takedown scheme for trademarks, but we've gotten there on a de facto basis.

Posted by Eric at 09:05 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

September 08, 2011

Blogger Can Display County Seal in Blog Posts--Rothamel v. Fluvanna County

By Eric Goldman

Rothamel v. Fluvanna County, Va., 2011 WL 3878313 (W.D. Va. Sept. 2, 2011)

I don't use images on this blog, but many bloggers include images to help illustrate their posts. It's not uncommon, then, for bloggers to include government seals or other insignia in posts discussing the government. I've never seen an empirical study of readers' perceptions when presented with such displays, but I find it hard to believe that readers are confused in the slightest.

In Fluvanna County, Virginia (part of the Charlottesville metro area), Bryan Rothamel (a blogger at http://flucoblog.com) included the county seal when blogging about county stories. The county Board of Supervisors deserve mad props for apparently having solved all of the major problems facing them, because Rothamel's seal usage quickly emerged on their priority list ahead of other, obviously more trivial, issues. In response, the county passed an ordinance with the following restriction:

Sec. 2–7–2. Seal Deemed Property of the County; Unauthorized Use Prohibited.

The seal of Fluvanna County shall be deemed the property of the County; and no person shall exhibit, display, or in any manner utilize the seal or any facsimile or representation of the seal of Fluvanna County for non-governmental purposes unless such use is specifically authorized by law. (Ord. 9–15–10; Ord. 2–16–11)

Violations were punishable by up to 30 days in jail, a $100 fine or both.

Rothamel brought a First Amendment challenge to the statute, which the court grants. The court notes that the statute restricts speech and can't survive even intermediate scrutiny because it's not narrowly tailored. The court notes: "This sweeping prohibition encompasses a substantial number of uses of the seal that would not suggest government endorsement, such as the display on a website of an exact copy of an official County news release that contains the image of the seal next to the text, or the publication in a newspaper of a photograph of a County official delivering a speech from a podium upon which the County seal is attached and visible."

The court compares this regulation with the regulations governing federal seals and related logos, noting that they restrict uses that might communicate sponsorship or endorsement. This statute wasn't so targeted, and I don't think anyone truly believes that readers will think a blog post was sponsored or endorsed by the county because the post displays the seal. The state of Virginia intervened in this lawsuit because its seal restriction is similar to the county's; it appears Virginia's seal restrictions would not survive a challenge either. Similarly, this case brought to mind the FBI's ridiculous position that Wikipedia couldn't display the FBI seal. The Wikipedia entry recaps the situation, including then-Wikimedia GC Mike Godwin's withering response. This case suggests that the FBI's position indeed wasn't defensible.

The court also rejects the county's self-serving designation of the seal as "county property." I'm not sure exactly what that's supposed to mean. Perhaps such designations matter when dealing with tangible assets. When applied to intangible assets, it is just another way of restricting speech.

The net effect is that, under the First Amendment, bloggers should be free to display government seals or insignia in their blog posts about the government agency. With my newly confirmed freedom, I'm now displaying the seal of Fluvanna County, Va., which, as county seals go, is actually quite pretty (those are persimmons at the top):

God bless America!

Posted by Eric at 09:51 AM | Content Regulation , Trademark | TrackBack

September 06, 2011

Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion

[Post by Venkat Balasubramani with additional comments by guest blogger Laura Heymann and Eric]

[Eric's note: this may be our first post with *three* different bloggers covering the same case! Venkat starts us off:]

In re Robert Edward Forchion, Jr., 2011 WL 3834929 (Ca. Ct. App. Aug 31, 2011)

Robert Edward Forchion, Jr. filed a petition to have his name changed legally to "NJWeedman.com." The trial court denied the request, and the appeals court affirms.

Background: As the court describes him, Forchion:

is a resident of New Jersey. Since 2009, he has managed a Rastafarian temple in Los Angeles and has operated a medical marijuana dispensary that he claims is lawful under the Compassion Use Act of 1996. . . . He has devoted his adult life to promoting the legalization of marijuana and, in 2000, was convicted in New Jersey of marijuana offenses. Forchion is currently facing trial in New Jersey on marijuana charges arising out of an arrest on April 1, 2010. He is free on bail.

Forchion has a national reputation as a marijuana advocate and is popularly known as NJweedman. He operates a Web site, "NJweedman.com," which discusses his efforts to legalize the drug. In 2001, Forchion unsuccesfully petitioned the New Jersey state courts to change his name to "NJWeedman.com."

Discussion:

Forchion's life: The court spends approximately 20 pages recounting the details of Forchion's life, including his protests, and brushes with the law. (These facts were apparently taken from Forchion's website.) For example, the court notes that he "smoked his first marijuana cigarette and 'was immediately impressed by its medical healing powers, in regard to his asthma' . . . . [b]y age 18 he was a regular user . . . and dismissed the Surgeon General's claims of its harms as 'propaganda and Christian superstitions.'" He enlisted in the United States Marine Corps where he continued to use marijuana, despite the government's prohibition. He became a coast-to-coast trucker in 1994. In 1995 he "became a practicing Rastafarian."

In 2008, he apparently fled to California, "seeking asylum, leaving the garden state for the pot friendly environs of Los Angeles." In 2009 he opened a "Rastafarian Temple" on Hollywood Boulevard. The temple was named "Liberty Temple II, after a series of protests he held at the Liberty Bell in Philadelphia." He then became a "Hollywood persona," and opened a "party promotions company called "NJweedmanPromotions." In 2010, he penned his biography, which was titled "Public Enemy #420." None of this is particularly relevant to Forchion's name change petition, but the court walks through the facts in some detail and they were strangely interesting. (All of this just gets to page 6 of the court's recitation of facts.)

Name changes generally: The court notes that people who wish to change their names have two different options. They can take the route of a "common law change of name," and simply start referring to themselves as something else (as long as their purpose is not to "defraud or intentionally confuse"). They can also formally change their names pursuant to statute. The statutory route offers certain advantages, namely the change of name is "definitely and specifically established and easily proved." In contrast:

[a] common law name change . . . carries with it no mandate to those with whom one comes in contact to accept at face value the nexus between the new name and the individual who assumes it.

In any event, the court concludes that while there must be a "substantial" reason for denial of a request to change one's name, the trial court is vested with discretion in ruling on a name change petition and the reasons offered in case law for refusing a name change request are not exhaustive.

Can Forchion change his name to a domain name?: The court turns to the key issue of whether Forchion can change his name to a domain name. This turns on whether Forchion is guaranteed to be able to use the NJWeedman.com domain name indefinitely. The court notes that although domain name registrants "appear to possess all [of] the component rights" of property owners, on closer examination, "it becomes apparent that a domain name is not property." The court concludes that a domain name is merely the product of an agreement for services between the registrant and the registrar. The agreement--pursuant to which a registrant secures a domain name--is not guaranteed to continue indefinitely. The registrar places numerous limitations on the registrant's use of a domain name and if the registrant breaches the domain name registration agreement in any number of ways (e.g., fails to pay fees, allows the domain name registration to lapse, uses the domain name in violation of the law), the registrar can cease providing the registration services. The court sees this as problematic because if Forchion's name change is approved, his name would "permanently" become "NJWeedman.com," but if he loses the domain name a subsequent user could end up with the rights to NJWeedman.com. In the court's eyes, the "dual use might create confusion, depending in part on what the new registrant did with NJweedman.com."

The court also notes that even if Forchion continued to pay the registration fees in perpetuity, his use of the domain name may run into problems due to a conflict with third party trademark rights. If a third party is able to assert trademark rights and successfully force Forchion to change his website or discontinue his use of the NJweedman domain name, the court says that his continued use of NJweedman.com as a personal name would be problematic. The court says it's not aware of any procedure pursuant to which a third party could force NJweedman.com (f/k/a Forchion) to change his personal name. The court says that these types of trademark considerations are not ones that the trial court should be forced to consider, when ruling on a name change. [Strangely enough, the court relies on those considerations in making its decision.] At the end of the day, the court says that domain names and personal names should remain in separate realms and the streams should not be crossed:

In sum, personal names and domain names should not overlap; they belong in distinct realms. Domain names were created for use on the Internet and should be limited to assisting a user in finding a desired Web site. By the same token, we should not treat a person as part of a domain.

As an added bonus, the court also points out that Forchion's website encourages others to break the law and is on thin legal ice. The website provides instructions on how to grow marijuana. It urges individuals to call New Jersey law enforcement and "provide false reports about the use of marijuana, hoping to send the police on wild goose chases and squander valuable resources." The court also closes the 37 page (!) order with a nod to comity principles. The court notes that while courts are "divided over res judicata applies to name changes . . . the principles that underlie the application of that doctrine are present here."

The court's opinion borders on entertaining and covers a lot of different ground. In particular, the discussion of the two types of name changes was interesting. At 37 pages, it felt a bit excessive, but I can't say I was disappointed after reading it.

I was surprised to see the court treat the domain name registration rights as a contract right, rather than a property right, given that numerous cases have discussed the issue since Kremen v. Cohen and have concluded that (at least for conversion and creditor remedies purposes) domain names are considered property and not a contract right. (See, for example: Eysoldt v. ProScan and CRS Recovery, Inc. v. Laxton.) As Eric points out, the fact that the domain name registration agreement could lapse or be terminated wasn’t a particularly persuasive basis to deny Forchion’s name change request.

I hadn't given any thought to the interplay between trademarks and personal name changes, but a quick Google search led me to a Yahoo! answers question titled "Can i legally change my name to Krispy Kreme," which in turn led to a New York Times article about a 1995 lawsuit between Coca Cola and Fredrick Koch, who wanted to change his name to "Coke-is-It." (See "Coke Settles With 'Coke-is-it.'") It looks like Coca Cola settled with Mr. Coke-is-it based in part on his agreement to not use his name commercially. To the extent the court should have even raised the issue on its own, the trademark versus personal name conflict was unrealistic in this case, given the name chosen by Forchion. I guess a lawn maintenance company in New Jersey could have a similar name and grumble, but really?

I wasn't particularly persuaded by the court's reasoning that a person should not share a personal name with a website because of the possibility of confusion between the two. Is there a realistic possibility that someone would look at Forchion post-name change and equate him with a website found on the internet? Even to the extent there is confusion, would this really result from the addition of .com to NJweedman? Courts and the PTO have long recognized the lack of trademark significance of a .com, and the court's conclusion seems to presume that Forchion's use of a dot com for his personal name would somehow be the basis for confusion.

I didn't have any immediate plans to change my name to balasubramani.com, but at least in California it looks like this wouldn't fly.

Other coverage:

"Court won’t let marijuana activist change his legal name to njweedman.com" (Evan Brown)

______________

Laura Heymann's Comments

[Eric's introduction: I'm pleased to include the following thoughts from Laura Heymann, the Class of 2014 Professor of Law at William & Mary Law School. Laura has been doing some excellent and thought-provoking work on the regulation of naming, and this case squarely implicates the issues she has been thinking about deeply.]

In In re Robert Edward Forchion, the California Court of Appeal affirmed a lower court decision denying Forchion the right to change his name to NJweedman.com, which also happens to be the URL for his website. Forchion is not the first individual to attempt to change his name to a URL. In 2003, animal rights activist Karin Robertson legally changed her name to GoVeg.com, the website of her employer, the People for the Ethical Treatment of Animals, in order to spark discussions about vegetarianism and animal rights; she reverted to her birth name three years later.

Forchion has apparently long advocated in favor of the legalization of marijuana, and both his advocacy and his personal experience with the drug have been the cause of a number of run-ins with the law, all of which is detailed at his website. (As Venkat notes, the California appellate court, taking “judicial notice of the content of [Forchion’s] Web site and any other Web site to which it provides a link,” quoted extensively from the website in rendering its decision.) While he was incarcerated in New Jersey, his home state, Forchion unsuccessfully petitioned the New Jersey state courts to change his name to NJWeedman.com. Forchion subsequently moved to California, where he continued his advocacy (and also operated an allegedly lawful medical marijuana dispensary). In California, Forchion tried again, petitioning a lower court to change his name to NJweedman.com, and was similarly rebuffed both there and on appeal.

As Forchion’s choice of moniker demonstrates, and as I have discussed in a recent article (Naming, Identity, and Trademark Law), personal names have at least three functions. A name is denotative, in that it refers to or identifies a person, allowing us to talk about an individual when he or she isn’t present. A name is also connotative, in that it often suggests or brings to mind a set of characteristics or attributes relating to the person to whom the name is connected. Parents typically have connotation in mind when they decide what to name their children, particularly when choosing a name that signifies a connection to a religious or ethnic heritage. And a name also has an associative function in that it signals a connection to a group or family. Indeed, the decision of Eric and his wife, Lisa, to take on a new shared surname upon their marriage is an example of, as he once wrote, establishing a “new common identity which is uniquely [theirs] as a couple.”

Our personal names also function, in a sense, like trademarks. When we write or speak or otherwise share our creativity with the world, our name is what tells people who is responsible for those thoughts and what allows us to build our reputations. And, like trademarks, we may well want to choose a name for our efforts that is itself creative – that expresses something about ourselves that our given names do not. Indeed, each time we participate in an online environment – a social network, a virtual world, a blog, or even sending e-mail – we choose a name through which we will present ourselves to the world.

Many naming choices are made informally – we ask friends and relatives to call us by a nickname or choose a pseudonym when we decide to comment on a blog post. But in an increasingly administrative world, some choose to make names “official” by petitioning the courts for a change in name. Despite the claim by many jurisdictions that this process is ministerial – simply to create an official record of the exercise of the right we have under the common law to change our name – courts will, from time to time, deny such requests on the grounds that the requested name was chosen for fraudulent or deceptive reasons, is offensive or obscene, or is otherwise objectionable. California’s name change statute has been interpreted as granting the courts discretion in deciding whether to grant a name change petition but also as providing that petitions should not be denied without some “substantial reason.” Indeed, the California courts’ own website suggests that the “main reasons” for denying a name change petition in the state are a finding that the petitioner is changing his name to commit fraud, hide from authorities, or for some other illegal reason.

So why was Forchion’s petition to change his name to NJweedman.com denied? The California appellate court offered four reasons, all of which seem somewhat curious. First, the court held that allowing Forchion to change his name to NJweedman.com ran the risk of confusing others. For example, the court noted, if Forchion ever lost the domain name for his website and someone else were to pick it up, there would now be two entities out there sharing the name NJweedman.com: Forchion and the now unrelated website. This, the court held, was untenable because “if both parties used that name to conduct business, confusion might result.” Second, even if Forchion did maintain the website, the court held, “the name might be so similar to another Web site name or trademark that the multiple usage would create confusion.” Third, the court held that the name change would encourage those who encountered Forchion to view his website, which, the court concluded, encouraged illegal activity. And, finally, the court held that given Forchion’s failed attempt to request a similar name change in New Jersey, his home state, principles of comity militated in favor of denying relief in California.

The idea that changing one’s name to that of an existing URL would create a level of confusion warranting the denial of the name change – either as between that URL or another URL or trademark – seems implausible. Naming is always contextual, and it is the rare name that isn’t also being used by someone else. We all like to think of our names as unique, but a quick Google search will often reveal at least one other person who shares our first name/last name combination. [Eric's note: recall our mockery of Bev Stayart on this point]. It’s also not uncommon for a personal name to be identical to a common word in the English (or another) language, such as the first names Hope, Faith, Hunter, and Clay. None of this presents a considerable difficulty either for the named or for those who refer to them; context will typically tell us whether the sentence “Faith is important to me” is being uttered by a congregant or by Faith’s partner. Although it has communicative components to it, a URL is ultimately an address. “Montana,” for example, has ranked among the top 1,000 girls’ names in the United States in recent years [you can do a search for Montana in NameVoyager], but no one would suggest that the existence of hundreds of little Montanas running around is going to cause travelers to have problems finding the state on a map. Nor is the potential similarity to an existing trademark problematic. A quick Internet search reveals more than fifty individuals with the given name John Deere, but it is unlikely that anyone negotiating with any of these men has been confused into thinking that they are dealing with the farm equipment manufacturer.

Comity also seems to be a curious basis for denying a name change petition. Given the mobility of individuals today and evolving family situations, it’s possible that an individual might change one’s surname upon marriage, change it back to one’s birth name upon divorce, change it again upon remarriage, and change it again for professional reasons. It would be odd to suggest that the ruling of any one state on one of these petitions would affect in any way the ability of another state to make a subsequent ruling. There may be statutory limitations on a court’s ability to render such a judgment, in that a particular state statute might require that the petitioner be a resident of the state in order to file a petition (as the appellate court suggested here). But comity doesn’t seem to be the reason to bar such requests, particularly if part of the basis for deferring to a sister state is, as the court stated here, that “the first two letters of the requested name — NJ — are not only the home state’s abbreviation but are intended to refer to that state.”

And so we come to what seems to be the primary motivation for the denial: the content of Forchion’s website. The court did not conclude that the name “NJweedman.com” was itself offensive; indeed, it noted that several New Jersey residents bear the surname Weedman. And while courts have rejected petitions to change one’s name to words that are, on their face, offensive or obscene, on the ground that the court should not be seen as stamping its imprimatur on the name choice, the name “NJweedman.com” does not seem to rise to that level. Nor should the fact that the name request is unusual be dispositive. Courts have approved name changes to single words, such as “Variable,” and to names that include punctuation marks, such as exclamation points. Not all courts have followed this path; a Pennsylvania court in 2000 affirmed a lower court’s rejection of a woman’s request to change her surname to the letter R on the ground that such a surname was “bizarre” and would therefore arouse suspicion. But even the New Jersey appellate court hearing Forchion’s previous petition noted, in its 2004 ruling, that “the name is not so bizarre as to call for denial of the request on that basis.”

But denying a name change petition on the ground that it may lead others to read about the petitioner’s views on controversial matters – even if those views can be characterized as supporting illegal activity – seems to create difficult boundary problems. A name change inspired by a reclaiming of one’s heritage, for example, may connect that individual to new or additional communities, but it would be problematic to suggest that a court’s view of that community should be the basis for rejecting the change. The fact that Forchion’s requested name change is also the URL of the site may well inspire a few who encounter Forchion to visit the site. But given Forchion’s own self-promotion efforts – and the media stories that have resulted, many of which use Forchion’s adopted name in any event – any such effect seems to be a thin justification for deeming the name change improper. Indeed, the fact that the court stated that the URL “should not also serve as Forchion’s personal name as long as he uses the Web site to encourage others to violate the law,” thus suggesting that the name would be appropriate were the content of the website to change, raises interesting First Amendment implications.

Here, the words of an Ohio appellate court seem relevant, when, in 2005, it granted a petitioner’s request to change his name to “Sacco Vandal,” after the anarchist Nicola Sacco and the Germanic tribe. “It’s a free country,” the court wrote. “The applicant is a grownup. He can change his name to anything he wants so long as the new name is not clearly improper or unreasonable . . . . If the applicant is using the name change to make a statement to society – and most applicants do – it is a subtle one.” The statement that Forchion is making by calling himself NJweedman.com may be considerably less subtle, but that does not mean it is without expressive content.
___________

Eric's comments

I agree with Laura's comments that the court's rationales for rejecting the name change are indefensible. It seems that the court implicitly--and improperly--shifted the burden onto Forchion to have a good reason for the name change, instead of retaining the burden to provide a good reason why the name change was problematic.

I was especially unpersuaded about the possibility that the NJWeedman.com domain name would end up in someone else's hands. If this is the court's concern, Forchion could have prepaid the domain name registration for the maximum length permissible, which I believe is at least a decade. That wouldn't have changed the fact that Forchion could still lose the domain name due to a breach of the registration agreement, but I believe those interventions are exceedingly rare. So the "permanence" of a domain name registration could be largely addressed through cash, and the court cut an analytical corner by treating a domain name registration as impermanent.

I'm also scratching my head because Forchion can still effectuate a common law name change, which will give him 90% of the website publicity traffic he seeks. So it's not clear how the court actually advances its policy concerns by denying the official name change.

More generally, despite Laura's scholarly work, state policies governing name spaces remain undertheorized and under-scrutinized. For example, as I blogged on my personal blog, California went decades with a facially illegal distinction in its marriage license, letting the woman take the man's name but not letting the man take the woman's name. California finally fixed this problem with a statute in 2007. For more discussion on government policies towards personal names, see these articles on marriage names and baby names). Another government-operated namespace that doesn't get much attention are vanity automobile license plates; we've seen a variety of questionable government policies emerge there without much pushback.

FWIW, because I changed my name to Eric Goldman from Eric Schlachter, the name Eric Schlachter is freely available for other takers (although, I should point out, there are a few other Eric Schlachters currently using the name). As I mentioned in this blog post, anyone else is free to adopt "Eric Goldman" too, but I plan to defend my favorable search engine placement vigorously!

Posted by Venkat at 08:41 AM | Domain Names , Publicity/Privacy Rights , Trademark

August 31, 2011

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

By Eric Goldman

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

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

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

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

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

and

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

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

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

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

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

Rebecca also blogged this ruling.

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

August 29, 2011

Levi Strauss's Trademark and Domain Name Claims May Block Unauthorized Resales -- Levi Strauss v. Papikian

[Post by Venkat Balasubramani]

Levi Strauss & Co v. Papikian Enterprises, C 10-05051 JSW (N.D. Cal.; Aug. 24, 2011) [pdf]

Facts: Levi Strauss owns trademarks for "Levi's," "501" and other terms. It sells its products directly and to authorized retailers but does not sell through "distributors, wholesalers or jobbers." Retailers are contractually restricted from reselling "first quality merchandise." Papikian registered several domain names (501USA.com, 550jeans.com, 517jeans.com) through which he offered Levi Strauss products for sale. Levi Strauss grumbled about his use of various Levi Strauss trademarks and how Papikian sold goods to EU residents. The parties engaged in settlement discussions which were not fruitful, and ultimately Levi Strauss brought suit, alleging trademark and cybersquatting claims. Levi Strauss alleged that in response to some of Levi Strauss's complaints, Papikian made some changes to his website, but at some point along the way, these changes reverted, and Papikian's website "looked more professional, offered [Levi Strauss] products exclusively, and make more extensive use of [Levi Strauss] trademarks."

Papikian brought a motion for summary judgment, which the court denies.

Discussion:

First sale defense: Papikian argued that his sales of Levi Strauss products was protected under the first sale doctrine. Similar to the first sale doctrine in copyright, courts have held that "the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product." (One big difference is that unlike copyright law, trademark law does not allow trademark owners to control importation of trademarked goods, other than counterfeits.) However, resellers who wish to take advantage of the first sale rule have to carefully tread the line between a retailer merely carrying/selling the goods and "suggesting affiliation" with the trademark owner. While the court doesn't describe the actual evidence put forth by Levi Strauss, it finds that Levi Strauss put forth sufficient evidence to create a factual question on the issue of whether Papikian crossed the line.

Nominative fair use: Papikian argued that his use of Levi Strauss trademarks was protected under the nominative fair use defense. Once a defendant shows that it is using the trademark to refer to the trademarked good, the burden shifts to the plaintiff to show a likelihood of confusion. The court finds that Levi Strauss sufficiently created a factual dispute on this point; again, the court looks to the changes to Papikian's website and the fact that it had disclaimers at one point but no longer does. The court also cited to Toyota Motor Sports v. Tabari and noted that Papkian's domain names were the types of domain names that the Ninth Circuit hinted could suggest sponsorship or endorsement.

Cybersquatting: The court also denies Papikian's request for summary judgment on Levi Strauss's ACPA claim. The court says that there are "material facts in dispute with regard to Papikian's intent." The court notes that Papikian's fair use defense remains unresolved. Additionally, Levi Strauss presented evidence of an adverse WIPO decision against Papikian. The order does not contain any discussion of the ACPA's safe harbor provision, which protects registrants who "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful."

European law: The order thus far has been bad news for Papikian, but there is one ray of light. Levi Strauss asserted claims under EU trademark law against Papikian. It argued that Papikian's importation of products into the EU without Levi Strauss's consent violated "Articles 5 and 7 of the First Council Directive 89/104/EEC of 21 December 1988, to approximate the laws of the Member States relating to trademarks, as amended by the Agreement on the European Union of 2 May 1992." The court declines to exercise jurisdiction over this claim out of comity. The relevant treaties provide for the "independence" of various member countries, and having tribunals in one country adjudicate the rights under the trademarks of another country would undermine the "spirit of cooperation" that underlies the comity doctrine. The court says that while it declines to exercise supplemental jurisdiction over Levi Strauss's claims in this case, this does not mean that it would decline supplemental jurisdiction "over every case involving foreign trademarks."

[The court also rejects Papikian's request for summary judgment on the dilution claims, finding that Papikian failed to demonstrate the absence of factual disputes with respect to these claims.]
___

The court's refusal to entertain Levi Strauss's claims under EU law is noteworthy. Allowing it to proceed with those claims would allow Levi Strauss to enforce an importation ban into the EU based on EU trademark law, something that it clearly could not do under US trademark law. The court did not discuss it in those terms, but it would be an end run around the fact that trademark law does not permit the trademark owner to control exportation or importation to allow the trademark owner to enforce a foreign ban on importation without consent. It would have also sharply limited the first sale defense.

Once the EU claims are taken out of the picture, you're left with claims by a trademark owner against a re-seller, who is legitimately selling the trademark owner's goods. The re-seller should have some amount of leeway to use the trademark owner's mark in order to refer to the trademarked goods and in the re-seller's domain name, but the court's order doesn't cut the re-seller much slack. The repeated tweaks to Papikian's site, along with the removal of the disclaimer and Levi Strauss's vague allegations that Papikian used more than Levi Strauss's marks than was necessary, is enough to get past summary judgment. As prior posts demonstrate, courts readily seem to find a hook to deny summary judgment to a reseller-defendant who raises first sale and nominative fair use defenses. (See "eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine--Beltronics v. Midwest" (alleged warranty misstatements);"Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber" ("expired" cosmetics that plaintiff argued were materially different)). One takeaway here is that trademark first sale and nominative fair use defenses remain murky and fact-specific.

Previous related posts:

eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine--Beltronics v. Midwest
Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber

Posted by Venkat at 09:07 PM | Domain Names , Trademark

August 03, 2011

Newspaper's Discussion About Trademark Owner Protected as Nominative Use--1 800 GET THIN v. Hiltzik

By Eric Goldman

1 800 GET THIN v. Hiltzik, 2:11-cv-00505-ODW -E (C.D. Cal. July 25, 2011)

I'm sure any trademark experts reading this post are scratching their heads at the blog post title. Newspapers discussing a trademarked product qualify for the nominative use defense. Well, duh. Why is that even a question that needs to be answered?

Well, because sometimes trademark owners bring asinine lawsuits. In particular, this case may be part of an emerging trend in the surgical procedure industry to misuse trademark law as a weapon against unwanted criticism. See, e.g., the Lifestyle Lift cases (1, 2).

This case involves the Lap Band surgical procedure. 1 800 GET THIN is a marketing agent for the procedure. The LA Times has repeatedly criticized the Lap Band. In one passage, it arguably implied that 1 800 GET THIN provided the procedure rather than just marketed it. Even against a pushover defendant, this is a weak point to gripe about. But against a well-regarded journalistic institution like the LA Times, there's simply no point in tangling in court.

Yet, 1 800 GET THIN still cranked up the machinery of justice. Predictably, the court expends few words in tossing the false designation of origin claim on nominative use grounds. The court also tosses the Lanham Act false advertising claim because the news article was editorial content, not advertising. Rebecca digs into the doctrinal details.

This outcome was so predictable that most trademark litigators probably would have advised 1 800 GET THIN that it had no chance of winning and it should not even try. In fact, the LA Times may very well extract some cash out of 1 800 GET THIN for bringing such a weak case. The case doesn't mention an anti-SLAPP motion, but this case seems tailor-made for anti-SLAPP protection. Otherwise, it's a strong candidate for a Lanham Act fee shift and perhaps Rule 11 sanctions.

Despite the "sun rising in the East" nature of this case's legal outcome, I still wanted to highlight it because it reminds us that trademark law's overexpansive sweep creates several problem. (I discuss these concerns in more detail in my paper, Online Word of Mouth and its Implications for Trademark Law). First, to the extent such a thing exists, this was an example of trademark bullying. The LA Times isn't an easy target for bullying, but smaller defendants will just capitulate in the face of 1 800 GET THIN's trademark threats.

Second, the LA Times didn't make a trademark "use" at all. We should have never reached the nominative use defense because there was no trademark use in the first place. The fact that courts aren't gatekeeping at that level lets weak trademark cases get further than they should. In this situation, relying on the nominative use defense works fine in the Ninth Circuit but is dicey in other circuits that don't cleanly recognize a nominative use defense.

Third, if the LA Times doesn't get 100% compensation from 1 800 GET THIN, then a travesty still occurred even though the LA Times prevailed in court.

A final thought. Having seen so many such lawsuits, I must admit that I become more suspicious of any trademark owner who resorts to completely meritless trademark litigation. It makes me wonder what they are trying to hide. In this case, the fact that the Lap Band and 1 800 GET THIN desperately grasped at legal straws makes me more skeptical of the legitimacy of their offerings.

Posted by Eric at 09:37 AM | Content Regulation , Marketing , Trademark | TrackBack

July 20, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

July 13, 2011

Coventry First Withdraws Twittersquatting Lawsuit Against @Coventryfirst -- Coventry First, LLC v. Does

[Post by Venkat Balasubramani]

Coventry First, LLC v. Does, 11-cv-03700-JS (voluntarily dismissed)

I previously posted about Coventry First's lawsuit against the operator of the @coventryfirst Twitter account. ("Trademark Owner Sues Over Alleged Twittersquatting--Coventry First, LLC v. Does.") I did not expect the plaintiff to prevail. Perhaps not surprisingly, then, Paul Levy of Public Citizen, who represented Doe, sends word that Coventry First voluntarily dismissed the lawsuit. (See "Coventry First’s Abuse of Trademark Law to Suppress Criticism Falls Apart.")

The dismissal of the lawsuit was precipitated by a procedural gaffe on Coventry First's part. In order to proceed with the lawsuit, it had to identify the Doe defendant, and jump through a few hoops before it sent a subpoena. Coventry First did not jump through the right hoops, and sent a deficient subpoena to Twitter. Twitter, to its credit, did not blindly comply with the subpoena; it passed the subpoena on to Doe's lawyer, Paul Levy. Paul prepared a hammer down motion to quash, and upon being advised of the grounds for the motion, Coventry First withdrew its lawsuit. Even if Coventry First had complied with the rules governing subpoenas, it's unclear that it would have been unable to unmask Doe because this requires some sort of showing that Coventry First had colorable claims.

Paul's post mentions that the @CoventryFirst account was pushing the envelope on Twitter's guidelines for parody and fan accounts, which do not allow for exact matches. In order to bring itself into compliance with Twitter's policy, the account-holder (Doe) added disclaimers, and also added "in" to the username, so the account is now @coventryfirstin.

With more and more companies establishing and relying on a presence on Twitter or Facebook, many of these types of disputes will be resolved by the likes of Twitter or Facebook rather than by the courts. Given that they face risk of secondary liability for trademark claims from brand owners, Twitter and Facebook will probably end up adopting a policy and making decisions that are more favorable to trademark and brand owners. Paul notes that Twitter's policy has a slight brand-owner bias, but it looks fairly nuanced. The fact that Twitter adopted a parody/fan account policy is in itself a win. Also, as mentioned above, Twitter took steps in this case to notify Doe of the subpoena, and this reflects a thoughtful approach on its part.

In any event, it looks like we will have to wait for another case to come along and resolve "the interesting issue of whether the many cases authorizing the use of trademarks in the domain names, titles and meta tags of non-commercial commentary web sites apply equally to Twitter account names." In the meantime, at least you now know who Coventry First is.

Other coverage:

Coventry First’s Abuse of Trademark Law to Suppress Criticism Falls Apart (Public Citizen)

Posted by Venkat at 11:25 AM | Trademark

"Recent and Future Developments in Trademark Law" Talk Slides

By Eric Goldman

Last month, I spoke with Mark Lemley and Peter Menell at a Silicon Valley IP Law Association dinner event designed to be a "year-in-review" of IP. I spoke on trademark law. My talk slides. To avoid the inherent limitations of a talk built around seriatim case highlights, I converted the year-in-review into a "hot topics" type presentation highlighting 5 key developments. These types of talks are much more time-consuming to prepare than my typical talk, so I don't expect to do them very often!

Posted by Eric at 09:13 AM | Trademark | TrackBack

July 09, 2011

"App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon

By Eric Goldman

Apple, Inc. v. Amazon.com Inc., 2011 WL 2638191 (N.D. Cal. July 6, 2011)

Apple's enforcement campaign over the term "App Store" is ridiculous. Apple is trying to prop up a farcically weak trademark claim--and to what end? To prevent its competitors from using the only logical term to describe their venue? Apple's efforts to control the term seem to be anti-consumer because Apple wants to make consumers think harder to figure out the relationships between various vendors. I'm glad Microsoft and Amazon are fighting Apple's overzealousness.

The judge apparently didn't think much of this dispute either, because she almost certainly had a law clerk do the heavy lifting on this opinion. The opinion doesn't start its analysis until page 11 (of 18); the prior material being an uninsightful summary of the parties' contentions. I can read the contentions in the parties' briefs if I really care, thank you very much.

When the opinion actually starts cooking, it breezily dismisses Amazon's claim that "app store" is generic:

The court does not agree with Amazon that the mark is purely generic, for the reasons argued by Apple

Okay...

The opinion next concludes that Amazon didn't create a likelihood of consumer confusion by offering an "appstore." The LOCC factors:

* "App Store" isn't a strong mark.
* even though the parties' services are related (both are app stores using that term in the proper generic sense), Amazon's apps only run on Android, not iPhones.
* the terms are identical in sight/sound/meaning, but the opinion again notes the Android/iPhone divide.
* no evidence of actual confusion.
* the point on marketing channels was incoherent and irresolute.
* the parties' arguments on purchaser care were too speculative.
* the intent factor favors Amazon because it believes the term is generic.
* the product line expansion point was also irresolute. The court says Amazon would like to offer iPhone apps but needs Apple's permission to do so.

Here's how the court summarizes the LOCC analysis:

Thus, two of the eight factors somewhat favor Apple, and three factors somewhat favor Amazon. The remaining three factors are neutral, or do not clearly favor either side. Accordingly, under this analysis, the court finds that Apple has not established that it is likely to prevail on the “confusion” element of its infringement claim.

This is what happens when you use the LOCC test to adjudicate a generic term. The LOCC test isn't insightful in that case, and some of the factors will weigh in favor of the plaintiff because the defendant is just trying to use the dictionary term for its dictionary meaning. Microsoft is still fighting Apple's trademark registration application in the TTAB, and I'm hoping the TTAB's expertise with trademarks will help it do what this judge seemed afraid to do: call the term generic.

The opinion allocates another 5 pages to a dilution analysis, although most of those pages are also a recap of the parties' contentions. The court's complete analysis of dilution issue:

The court finds that Apple has not established a likelihood of success on its dilution claim. First, Apple has not established that its “App Store” mark is famous, in the sense of being “prominent” and “renowned.” The evidence does show that Apple has spent a great deal of money on advertising and publicity, and has sold/provided/furnished a large number of apps from its AppStore, and the evidence also reflects actual recognition of the “App Store” mark. However, there is also evidence that the term “app store” is used by other companies as a descriptive term for a place to obtain software applications for mobile devices.

With regard to the statutory “blurring” factors, the marks are similar, but “App Store” is more descriptive than it is distinctive. Apple did have substantially exclusive use of “App Store” when it launched its service a little over three years ago, but the term appears to have been used more widely by other companies as time has passed. The mark does appear to enjoy widespread recognition, but it is not clear from the evidence whether it is recognition as a trademark or recognition as a descriptive term. Moreover, there is no evidence that Amazon intended to create an association between its Android apps and Apple’s apps, and there is no evidence of actual association.

With regard to tarnishment, there is no evidence to support a likelihood of success on this part of the claim. Apple speculates that Amazon's App Store will allow inappropriate content, viruses, or malware to enter the market, but it is not clear how that will harm Apple's reputation, since Amazon does not offer apps for Apple devices.

This discussion is so garbled, I'm not even sure where to begin. Let's drill down on the blurring discussion. In the LOCC analysis, the court assumed without deciding that "App Store" had achieved secondary meaning. Here, the court apparently undercuts that assumption by implying (saying?) that the mark isn't "distinctive"--in other words, lacking secondary meaning.

If the court intended to conclude that App Store had secondary meaning, then stacking up new definitions for the term is exactly what blurring is supposed to prevent, so the court should allow Apple to shut down Amazon and all of the other parties who are adding those new definitions. Or, if the court is saying that the term was once "distinctive" but now isn't, that's genericide. I don't know of a way for a descriptive term to obtain secondary meaning and then lose it without that term becoming generic for trademark purposes.

We all know what really happened--the term was generic from the moment Apple started using it, and the term has been proliferating through the English language as new useful dictionary terms tend to do. The court's timidness in reaching that conclusion forces it to contort the rest of its doctrinal analysis.

Despite the doctrinal mush, one thing seems pretty clear to me. Apple may have delayed the genericide death of its App Store trademark claim, but I don't see any situations where Apple can enforce its mark currently. I read this opinion as saying that so long as the term isn't being used in connection with a store for iPhone apps, there won't be any consumer confusion or dilution. But my understanding is that Apple isn't letting other stores offer iPhone apps, so the defendant pool should be a nullset. So whether it's because of genericism or the impossibility of consumer confusion, this opinion signals to Apple that it's wasting everyone's time and money trying to protect the App Store term.

Posted by Eric at 12:47 PM | E-Commerce , Trademark | TrackBack

July 03, 2011

By Eric Goldman

Copyright

* Good news: the US government is funding alternative networks that dissidents can use to communicate when the Internet is censored by repressive regimes. Bad news: the US government is teaching the rest of the world how to censor the Internet through DHS domain name seizures and COICA/PROTECT IP Act. Maybe the US-funded alternative networks will help out those censored by the US government?

* Speaking of which, the EFF and Mark Lemley are fighting back against the DHS ICE domain name seizures. The EFF has more on the topic.

* Warner Bros. settled the Hangover 2/Mike Tyson tattoo lawsuit. Prior blog post.

* We don't have too many publicly announced settlement amounts for Righthaven. The latest: Righthaven settled with the US Marijuana Party for $1k. It's hard to see a profitable business model in that.

* Righthaven's dwindling inventory of cases: it filed 25 in March, 2 in April, 9 in May and ZERO in June.

* Are major US IAPs about to voluntarily implement a graduated response program?

* Murphy v. Millennium Radio (3rd Circuit June 14, 2011). Cropping the "gutter credit" from a photo violates 17 USC 1202.

* Friedman v. Guetta. Photographer gets summary judgment against an artist who copied photos from the Internet and remixed them.

* Jonathan Basamanowicz and Martin Bouchard, Overcoming the Warez Paradox: Online Piracy Groups and Situational Crime Prevention, Policy & Internet, Vol. 3, Iss. 2, Article 5 (2011). Abstract:

US federal law enforcement operations occurring between 2001 and 2005 attempted to disrupt the online piracy scene, targeting copyright piracy rings known as 'warez groups'. Previous work on warez groups has demonstrated a paradoxical situation where attempts to curtail warez group activities through policing and advancements in DRM only further encourage such groups to crack and distribute content. This study collected data on 93 convictions from these policing operations to construct a crime script of these groups' motivations and modus operandi in the release process. The results confirm previous findings that attempts to disrupt the activities of warez groups are counterproductive. To avoid the paradox, this study suggests that industry account for the motivations and modus operandi of these groups by creating DRM technologies which allow un-cracked content to seep through the testing step of the script, thereby placing a group's ability to obtain prestige at risk. Law enforcement should focus on apprehending crackers, as they are the most significant step in the release process.

See my complementary article, The Challenges of Regulating Warez Trading, from 2005.

Trademarks and Domain Names

* I'm not 100% sure what happened when ICANN approved the rollout of new gTLDs, but I'm pretty sure a lot of lawyers are going to find it lucrative for them.

* Scooter Store, Inc. v. Spinlife.com, LLC, 2011 WL 2160462 (S.D. Ohio June 1, 2011). Court allows a litigant to obtain discovery on its opponent's keyword ad buys. As I blogged in 2007, I'm surprised we don't see those discovery requests more frequently.

* Best Buy is chasing lots of folks to enforce its "Geek Squad" trademark. A prior blog post on other trademark litigation involving "geek."

* GoForIt Entertainment, LLC v. DigiMedia.com L.P., 2011 WL 2516163 (N.D. Tex. Jun 23, 2011). Plaintiff's theory that third-level domains were "domain names" for ACPA purposes did not justify awarding attorneys' fees as an "exceptional" case. Prior blog post.

* Lens.com v. 1-800 Contacts complaint. An antitrust lawsuit predicated on 1-800 Contacts' overzealous TM enforcement efforts (what some might call trademark bullying). Wendy Davis' writeup. Prior blog posts on the 1-800 Contacts v. Lens.com litigation (1, 2).

* ISystems v. Spark Networks, Ltd., 2011 WL 2342523 (5th Cir. June 13, 2011). The dating website Jdate's efforts to obtain jdate.net through a UDRP was not reverse domain name hijacking.

* Video from the March STLR Symposium panel on Emerging Issues of Secondary Liability in Trademark Law.

* Evan Williams: Five Reasons Domains Are Getting Less Important.

Posted by Eric at 06:49 AM | Copyright , Domain Names , Trademark | TrackBack

June 17, 2011

A Century of Trademark Law: Looking Back and Looking Forward (Notes from my INTA Annual Meeting Talk)

By Eric Goldman

At the INTA Annual Meeting in San Francisco in May, I spoke on a panel with Miles Alexander of Kilpatrick Townsend and The Rt Hon. Professor Sir Robin Jacob, now a professor at University College London. The panel was moderated by the esteemed Tom McCarthy. Nominally, the panel theme was celebrating 100 years of the Trademark Reporter, but in practice this theme allowed us to riff on the past and future of trademark law. We had a huge audience of over 300 folks. Photos of the panelists and the audience. Audio recordings are available presumably for a fee (you have to navigate this baffling website--no deep linking allowed there!).

I made 3.5 points during my remarks. The first two-and-a-half points relate to what has changed in trademark law; the last point relates to the future.

Point #1: Rise of Online Word of Mouth/Fall of Brand Control. In the old days, brand owners has pretty clear rules of engagement for reaching consumers. Following the 4Ps of marketing, brand owners who wanted to shape consumer perceptions could exercise tight control over distribution channels and could woo mass media gatekeepers. Consumer word of mouth was important, but it was slow, low-scale (in that any individual consumer could reach a relatively bounded universe of other consumers) and steerable through mass media exposure. Now, consumer word of mouth is lightening fast, can have the same reach as the traditional mass media, and is extremely difficult to control because of its fractured and democratized nature. I explore this point more in my paper, Online Word of Mouth and its Implications for Trademark Law.

Point #2: Crumbling of Commercial/Non-Commercial Distinction. Many legal doctrines are predicated on distinguishing commercial from non-commercial activity. None of them are prepared for the collapse of that distinction. Certainly trademark law isn't prepared. Commerciality is a Constitutional imperative for trademark law. Perhaps more importantly, most trademark doctrines are designed to correct a specific type of defect in the marketplace.

Trademark law has proven ill-equipped to handle non-commercial activity. The doctrinal boundaries are simply too plastic to work well when applied to fundamentally non-commercial activity. In the past, trademark law struggled with fundamentally non-commercial parodies like Air Pirates or the Screw Magazine depiction of the Pillsbury Doughboy that had relatively small reach. Now, a similarly non-commercial parody can generate 100M views on YouTube or a million Twitter followers (think BPGlobalPR)--thus having the reach, but not the intent or effect, of activity that used to be limited only to commercial actors.

Point #2.5: Emergence of Private Namespaces. One specific application of the rise of online word of mouth and the incoherence of the commercial/non-commercial distinction arises with the development of new private namespaces. Historically, any private non-trademark namespaces typically were limited in reach. But this changed with the rise of 1-800 vanity numbers, then domain names, then usernames on online services (especially social media). Now, each private namespace creates a new opportunity for third parties to register a trademark owner's brand and reach the world under that brand. Yet, we don't have consistent rules for the application of trademark law to private namespaces, and it seems like we have to invent the rules anew each time.

Point #3: Trademarks and Scientific Understanding of Consumers. A tension for the future: how much will trademark doctrine integrate scientific learnings about consumer behavior? Most of basic trademark doctrine was built decades ago, and our understanding of consumer psychology and behavior has improved substantially in the intervening years. Yet trademark doctrine hasn't really changed to reflect any of those learnings. In fact, we have weak or zero scientific support for the doctrinal contours of things like the multi-factor likelihood of consumer confusion test or trademark dilution.

At some point, we might just acknowledge that trademark law is the product of trademark owner rent-seeking rather than anything that tries to reflect actual consumer behavior. This is why the courts may be more useful than legislatures when it comes to improving trademark law. For example, the courts could unilaterally change the elements of the multi-factor likelihood of consumer confusion test because it's purely common law, although it will be hard for any single judge to reshape the test nationally. Nevertheless, as trademark doctrine further deviates from consumer behavior, trademark owners will encounter more friction in courts and society will have less respect for trademark law.

IP Kat/AmeriKat's recap of the panel. Managing IP's coverage of the talk.

Functionality Talk. Separately at the annual meeting, I also spoke on a panel with Mark Lemley and Dan Burk on the functionality doctrine, especially as applied to Rosetta Stone. A photo of the panelists. Managing IP's coverage of the talk.

Posted by Eric at 07:40 AM | Trademark | TrackBack

June 14, 2011

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

By Eric Goldman

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

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

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

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

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

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

June 09, 2011

Trademark Owner Sues Over Alleged Twittersquatting--Coventry First, LLC v. Does

[Post by Venkat Balasubramani]

Coventry First, LLC v. Does, 11-cv-03700-JS (complaint filed June 7, 2011)

The last big tussle over twittersquatting, and infringement through use of a trademark or name in a twitter handle was between Tony La Russa and the person who operated a fake account in La Russa's name. La Russa sued Twitter but his lawsuit ended in a whimper, when he dropped the complaint. ("This Time, Tony La Russa Drops Twitter Case for Real.")

A couple of days ago, Coventry First, "a leading company in the life settlement industry" brought suit against unnamed defendants over the @coventryfirst twitter account. It has not named Twitter and looks like it's going after the person(s) behind the account. You can access a copy of the complaint here, and Exhibit A, which contains a screenshot of the account here. You don't see many lawsuits of this nature so this one surprised me.

The part that shocked me is that the twitter account was recently established and had 14 tweets and 5 followers at the time the complaint was filed (and now has 3 followers). The account has minimal activity and likely no effect whatsoever on Coventry First's business and affairs. It probably comes up when you do a search for "Coventry First," but it doesn't look like it's garnered much interest. There's also no indication from the complaint that Coventry First tried to utilize Twitter's complaint mechanism or otherwise brought up any issues it had with the person who runs the @coventryfirst Twitter account.

Coventry First's complaint suffers from many of the failings as La Russa's or any other complaint against a squatter or infringer on Twitter--there is no indication that the allegedly infringing Twitter account is being used for any commercial purpose. @coventryfirst is not selling or promoting any products or services. It's tough to see how this can amount to trademark infringement or unfair competition under the Lanham Act. In addition to trademark claims, Coventry First also asserts a claim for unjust enrichment. It's entirely unclear how anything @coventryfirst does amounts to unjust enrichment. Twitter accounts aren't exactly moneymakers on their own, and if anything, the person behind @coventryfirst has spent a few hours setting up the account and has generated zero dollars from it.

Coventry First also included a claim under the cybersquatting statute (the ACPA), but the ACPA only applies to second level domain names, and a user-name assigned by Twitter clearly does not fall into this category since Twitter is not a domain name registrar. The ACPA claim is a non-starter. (See Professor Goldman's post on Goforit v. Digimedia: "Wildcarding Subdomains Is OK; Reverse Domain Name Hijacking Isn't.")

This leaves Coventry First's claim for dilution or tarnishment. To bring a claim for dilution or tarnishment, Coventry First would have to show that its mark is "famous" (and distinctive). I wish them good luck wi

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