* Deleted the Perfect 10 v. ccBill and Perfect 10 v. Visa cases. I have been struggling with how to teach the Ninth Circuit's Perfect 10 troika of cases for the last couple of years. The troika was over 100 pages of reading that nevertheless left students befuddled after all that work. But I felt constrained because the troika is the most definitive statement of Ninth Circuit law, and it is insightful to see the cases evolve. Nevertheless, I decided that the Amazon case was the most doctrinally significant, so I kept that and ditched the other 2.

* Added Io v. Veoh. To make up for taking out the Perfect 10 cases, I've added this case, which I think is a very clear exposition of a DMCA online safe harbor case.

* Added Parker v. Yahoo. I think this will be a good case to tie together some copyright doctrinal threads as well as provide a nice compare/contrast with the Ticketmaster v. RMG case.

Trespass to Chattels

* Replaced the Computer Fraud & Abuse Act statute with the most recently amended version.

* Included a slide that synthesizes the various trespass to chattel doctrines into a summary format.

Contracts

* Added the Harris v. Blockbuster case. It's a short case that efficiently makes several powerful pedagogical points--including perhaps most importantly, the perils of robo-drafting by copying language from other people's agreements.

Blogs and Social Networking Sites

* Replaced my old materials on blog law and social networking sites law with my most recent talk on both from February.

* Added my Third Wave of Internet Exceptionalism article

* Added the Moreno v. Hanford Sentinel case as an end-of-the-semester review case. As I said when I first blogged on the case, I think "this is one of the most interesting cases I've seen in a while," and I'm really excited about teaching it. I think it will be an excellent issue-spotting opportunity for students as well as a powerful reminder of the power of published words (and how those words can unintentionally affect the people we love).

Change to the Grading Options

My other big change this year is that I am giving students the option to write a wiki entry on a cyberlaw topic as part of their grade. This was inspired by my forthcoming paper on Wikipedia (which you'll hear more about soon). In connection with that paper, I was researching alternative labor sources that could power Wikipedia, and students working as part of a class assignment was one option I explore in the paper (with some reservations). As part of "eating my own dog food" (a terrible idiom that seems to be prevalent in the Silicon Valley), I figured I should give it a try myself. As you can see, the wiki-drafting is optional, not mandatory, so I'll be interested to see how many students choose the option. I'll also be interested to see what happens when the students actually try to submit their work to Wikipedia. I have a mental image of a massive buzzsaw, but perhaps I'm being too cynical.

Posted by Eric at 09:36 AM | Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Search Engines , Trademark | TrackBack

August 03, 2009

Google Goes on Offensive in AdWords Trademark Lawsuit--Google v. John Beck Amazing Profits

By Eric Goldman

Google, Inc v. John Beck Amazing Profits, LLC, C09 03459 (N.D. Cal. complaint filed July 27, 2009). [Warning: 1.4MB file] The Justia page.

A couple of interesting developments in John Beck Amazing Profits v. Google, the putative nationwide trademark owner class action lawsuit against Google over AdWords.

First, as of last week, the plaintiff had not served the complaint on Google even though it's been on file for over 2 months. I'm not sure what's the hold-up, but in my limited experience, delays in serving an already-filed complaint are often a leading indicator of a troubled lawsuit.

Second, last week Google sued the individual named plaintiff in that case, John Beck Amazing Profits, for both a declaratory judgment that AdWords doesn't infringe plus a breach of contract claim that the lawsuit filing breached the AdWords contract provision requiring any AdWords-related lawsuit to be brought in California. Going on the offensive against a plaintiff is characteristic of Google's litigation strategy; Google often tries to turn the tables on its litigation opponents. In this case, a major goal for Google surely is to get the case out of the Eastern District of Texas, which has been a dangerous venue for patent defendants.

Although the declaratory judgment and counterclaim is consistent with Google’s standard practices, in this case Google is ripping a page out of Yahoo's playbook in its litigation with American Airlines. American Airlines sued Yahoo over selling trademarked keywords in a Texas federal court; Yahoo shot back with a in a California federal court to try to get the case in a more favorable venue. The “dueling lawsuits” have led to an ongoing jurisdictional tussle that has slowed down progress on the substantive merits of American Airlines' claim.

As I wrote in connection with Yahoo's efforts, it was not clear to me that a defendant can wrest jurisdictional control of a case through the declaratory judgment process. In Google's situation, it's even more complicated because John Beck Amazing Profits is just the named plaintiff in a class action lawsuit. The plaintiffs could easily replace John Beck Amazing Profits with another named plaintiff who isn't an AdWords advertiser and isn't subject to California jurisdiction. At that point, I'm not sure what happens to the class action. (And, even if Google succeeds in moving the nationwide case, it should have no bearing on the Firepond putative class action lawsuit, which only covers a class of Texas trademark owners). Moreover, even if Google wins the declaratory judgment, it would have no binding effect on other class members.

So other than a not-certain-to-work ploy to pull the nationwide class action out of a bad venue, the only other benefit I see from the litigation is to send a warning shot to any named plaintiff who might succeed John Beck Amazing Profits that Google will be coming after them too. Let's see how that message is received.

The current roster of pending AdWords cases:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google and now Google v. John Beck Amazing Profits
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 03:51 PM | Derivative Liability , Licensing/Contracts , Search Engines , Trademark | TrackBack

July 30, 2009

Google Down to 7 AdWords Lawsuits--Ascentive v. Google Voluntarily Dismissed

By Eric Goldman

Ascentive v. Google, Inc., 2:09-cv-02871 (E.D. Pa. voluntary dismissal July 30, 2009)

The litigation count on Google's keyword ad lawsuits has started trending downward. For the second time in a week, a plaintiff has voluntarily dismissed its trademark lawsuit over Google AdWords. Last week Jurin dismissed his lawsuit voluntarily because he had a falling out with his attorney. Today Ascentive voluntarily dismissed its lawsuit, although I don't know why. (As usual, the filing is silent). You may recall that Ascentive's lawsuits raised some interesting issues about organic search in addition to the AdWords issues; apparently those will have to wait.

Ascentive's dismissal leaves 7 pending cases against Google over AdWords:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 02:07 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 23, 2009

Google Down to 8 AdWords Lawsuits--Jurin v. Google Voluntarily Dismissed

By Eric Goldman

Jurin v. Google, Inc., 2:09-cv-03934-GHK-E (C.D. Cal. voluntarily dismissed July 23, 2009)

Google's AdWords litigation docket has reversed direction, at least temporarily, as Jurin has voluntarily dismissed his lawsuit against Google. This dismissal came shortly after Jurin had a falling-out with his attorneys, which prompted his attorneys to ask to withdraw from the case. The voluntary dismissal means that Jurin is free to pursue his case elsewhere if he chooses, but I am fairly confident that this case won't be coming back.

Jurin's dismissal leaves 8 pending AdWords lawsuits against Google:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google
* Rosetta Stone v. Google

Posted by Eric at 07:47 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 14, 2009

Republishing Third Party Ratings in Marketing Material Might Be Copyright/Trademark Infringement--Health Grades v. Robert Wood Johnson Univ. Hospital

By Eric Goldman

Health Grades, Inc. v. Robert Wood Johnson University Hospital, Inc., 06-CV-02351-JLK (D. Colo. June 19, 2009)

A Colorado judge has reached the remarkable conclusion that a hospital publicizing its star ratings and other recognition from a third party rating service in its marketing material might be committing copyright and trademark infringement. This is a little like saying that it could be copyright and trademark infringement for a law school to include its US News rankings in its marketing material or for a book publisher to issue a press release announcing its ranking on the New York Times bestseller list. CRAZY.

Although I suspect there are messier facts than were described in the opinion, the situation as described in the ruling is pretty straightforward. Health Grades [great TM, guys] publishes "objective" ratings of hospitals, doctors and other healthcare providers, including 1-3-5 star ratings and "provider awards." The ratings are published on Health Grades' website behind a clickthrough agreement. Health Grades earns revenues by licensing the ratings and awards to evaluated providers for their promotional use. This business model is rarely a recipe for credible ratings. RWJ University Hospital apparently liked its Health Grades' ratings and awards so much that it republished them in press releases and on its website without paying a licensing fee to Health Grades. Health Grades sued, and this ruling is a response to the hospital’s motion to dismiss.

(Note: In PACER, I saw Health Grades was a plaintiff in at least 5 other pending or closed lawsuits in Colorado federal court since 2004. I didn’t investigate these to see if they were IP enforcement claims like this lawsuit or something else altogether, but Health Grades is a more active plaintiff than I would have anticipated for a company I had never heard of).

Copyright

Let me start with a basic proposition. A single numerical value can never be copyrighted. Ever. I don't care what formula produced the value; I don't care how many digits the number has; I don't care what explanatory text is used to describe the value. I know cases occasionally have reached the absurd result that individual numerical values can be copyrighted, including one of my least favorite copyright cases of all time, the CDN v. Kapes Ninth Circuit case. They are wrong wrong WRONG.

Courts can reach this erroneous conclusion by treating a numerical output as a "compilation" of underlying data values. If you squint, you can almost see how this makes sense. The publisher chooses the underlying values to include, uses editorial judgment to build the algorithm crunching those values, and sometimes layers subjective judgments on top of the algorithm's output. However attractive this logic is, I think fundamentally misreads the copyright statute’s definition of "compile." Under the copyright act, a compilation must represent a "collection and assembling of preexisting materials or of data that are selected, coordinated, or arranged." When a single number distills but obscures the underlying numerical values, the single number cannot reflect a selection, coordination or arrangement of the underlying numbers. Thus, according to my argument, numerical values cannot be compiled unless the reader can see those underlying values directly.

In this case, the judge gets led astray by contemplating the idea/expression dichotomy as a spectrum with "discoveries" on one end and "expression" on the other. Because the ratings aren't discoveries, the court concludes they should qualify as expression. But the court’s dichotomy is fatally incomplete. Instead, the inquiry is whether a single numerical value can represent an original work of authorship because it expresses an idea. A single numerical value cannot express an idea any more than a single word ever could.

Even if one reaches the incredible conclusion that a single numerical value is an original work of authorship, then surely it is preempted from copyright coverage by the merger doctrine, which says that if there are a limited number of ways to express a fact or idea, then the idea and expression merge into a single uncopyrightable whole. It seems like the star ratings in a 1-3-5 star rating system would, by definition, be subject to merger. Sorry to state the obvious, but how many ways are there to express that someone is rated one star??? Nevertheless, this court distorts the merger doctrine by saying the idea being expressed here is the rankings of healthcare providers. This is too high a level of conceptual generality. If every judge used this level of abstraction, the merger doctrine always would be a null set.

The court doesn't rule on the fair use defense at this early stage of the lawsuit (this opinion just addresses the hospital's motion to dismiss), but any guess where this judge is going to come out on fair use?

Trademark

Having butchered copyright law, the judge then makes a mess of trademark law as well. The ratings provider claimed that referencing its name as the source of the ratings in the marketing material constitutes a trademark infringement. Again, the analogy is that saying "US News" when publicizing a US News rankings constitutes an infringement of US News' trademark.

There are many reasons why this argument should be clearly wrong, but on the motion to dismiss, the hospital emphasized the nominative use defense. That seems like as good a ground as any for the court to kick out the trademark claim. For example, in the Terri Welles case from 2002, the Ninth Circuit said that nominative use permitted Terri Welles to publicize that she was "Playboy Playmate of the Year 1981" when, in fact, Playboy had bestowed that title upon her.

Unfortunately for the hospital, it drew a judge who apparently HATES the Ninth Circuit's articulation of the nominative use defense. The court says that the "nominative fair use doctrine as stated and applied by the Ninth Circuit is…at odds with recent Supreme Court precedent" and that the "Ninth Circuit's 'nominative fair use' analysis has not been widely adopted. In fact, all of the circuit courts that have considered it to date have either rejected the Ninth Circuit's approach outright [cite to the 6th Circuit PACCAR decision]...or modified it in some fashion to allow likelihood of confusion to be determined based largely on the traditional multi-factor analysis of this element." Just to clarify the latter point, the nominative use defense doesn't really do anything useful if defendants already can show a lack of consumer confusion, nor does looping the nominative use defense back into the standard likelihood-of-consumer-confusion test help judges end unmeritorious cases quickly. But that's exactly what the court does here, reserving the nominative use inquiry as a question of fact to be evaluated in conjunction with the multi-factor test. As a small bone to the defendant, the judge says that the defendant has the burden to show likelihood of consumer confusion, which in turns means that the plaintiffs implicitly must overcome a nominative use claim.

However, I wouldn't be too excited about that the forthcoming review if I were the hospital. The court goes on to say "the very nature of Health Grades' product, its rankings of healthcare providers, carries with it at least the possibility that consumers will consider RWJ's use of the Health Grades' marks to communicate Health Grades' ratings and awards for RWJ an implied endorsement by Health Grades of RWJ and the services it provides." Well, yes. By definition every "objective" rating of third party goods and services communicate the rater's assessment of quality—that’s the whole point. But to assume an "endorsement" seems like a wholly different matter. That's kind of like saying that US News "endorses" law schools by ranking them. Thus, the judge made a major cognitive leap by equating a quantitative assessment with an endorsement, and this subtle shift seems to extend trademark law into places it should not go.

One more point. Some trademark wonks believe that we can rely on doctrines like nominative use to do a lot of the heavy doctrinal lifting of segregating meritorious from unmeritorious cases. To those folks, I say—read this opinion! After you see how this court mangles the nominative use doctrine to effectively eliminate it, let me know if you still think the nominative use doctrine is a reliable safety valve for socially beneficial speech.

Breach of Contract

After having laid waste to big chunks of copyright and trademark law, the judge still had one more doctrinal surprise up his sleeve. The court says that the rating service's contract, which restricted licensees' republication of ratings, was preempted by copyright law because it lacked an extra element from the copyright infringement claim. Now, I freely confess that copyright preemption befuddles me, and I think it befuddles a lot of other copyright geeks, so it's a little hard to say with confidence that any copyright preemption decision is clearly wrong. But this result certainly contravenes oodles of precedent that have held that copyright and breach of contract claims can co-exist harmoniously. In my opinion, the breach of contract claim seemed way more promising than either the copyright or trademark claims.

Conclusion

For those of you keeping score, you may have noticed that I think the results should have been exactly opposite to the judge's conclusions. The copyright and trademark claims should have been easy dismissals, and the breach of contract claim should have survived. Opinions like this make me question my knowledge sometimes.

Opinions like this also make my blood boil. At one level, the opinion is almost correct if you apply the most tendentious reading of legal doctrines at each and every decision-point. (Although, this opinion also expressly turned its nose up at significant amounts of adverse precedent). On the other hand, the opinion is so clearly incorrect if one steps back and looks at the problem from a holistic common sense standpoint. Asking the question as "Can IP law prevent a company from telling others how a third party service has rated it?," the answer should be clearly and unequivocally "no," and it shouldn't even be close.

Ironically, the court even tangentially acknowledges the value of product ratings as a tool to facilitate consumer decision-making. As the court says, "Health Grades' individual ratings and awards also advance learning by providing consumers with a more concise and accessible evaluation of these providers than the consumers could obtain by reviewing the underlying data sources themselves." Yet, somehow, the judge lost sight of the fact that regressive copyright and trademark protection for numerical ratings makes the ratings less accessible, thereby hindering their value to help consumers make good decisions in the marketplace. From that perspective, the judge really whiffed.

As a result, if other courts follow this judge's "logic," the potential for mischief from cases like this is enormous. Think of every reputational system that spits out a numerical assessment of the subjects it evaluates. Now, assume each and every one of those numbers is copyrighted. Individual eBay feedback scores? Individual FICO scores? Individual Billboard rankings of songs and albums? All possibly copyrighted and requiring the initial publisher's consent to republish. Add in potential trademark claims, and the crazy-o-meter goes off the charts.

UPDATE: Bill Patry has posted on this case as well.

Posted by Eric at 04:08 PM | Copyright , Licensing/Contracts , Trademark | TrackBack

July 10, 2009

Ninth Lawsuit Against Google Over AdWords--Rosetta Stone v. Google

By Eric Goldman

Rosetta Stone Ltd. v. Google, Inc., 1:09-cv-00736-GBL-JFA (E.D. Va. complaint filed July 10, 2009)

[Note: some of you may wonder how my litigation count reached #9 when my last blog post in this series was at #7. I subsequently realized that I had forgotten to include Ezzo v. Google, a doomed-to-failed pro se lawsuit filed pre-Rescuecom. Indeed, I remain unclear precisely how many lawsuits are pending; the number could be greater than 9].

Kudos to Rosetta Stone for its fine PR work. It was able to get a number of major media outlets to cover its lawsuit against Google alleging trademark infringement and related claims for Google's AdWords practices, even though by my count this is merely the 9th pending lawsuit and these lawsuits are becoming a near-daily routine.

Obviously, I'm suffering a little ennui on this topic. Another trademark owner doesn't like Google's AdWords practices and decided to sue in court. And in other breaking news, the sun rose in the east and set in the west today.

How routine has this become? Rosetta Stone's law firm is Gibson Dunn, which includes Terence Ross on the team. Terence lost some of the early WhenU keyword ad cases including the once-seminal 1-800 Contacts v. WhenU ruling. He also sued and procured a settlement from Google on behalf of American Airlines. Gibson Dunn's team also has a pending lawsuit against Yahoo on behalf of American Airlines. I haven't put all of Gibson Dunn's complaints side-by-side, but I have observed over the years that they have mastered the skill of cloning-and-revising--right down to recycling a stock phrase that might become Terence Ross' signature line (and perhaps his trademark some day?) that the plaintiff "does not bring this lawsuit lightly." (Para. 6 of the complaint; compare Para. 6 of the AA v. Google and AA v. Yahoo complaints). I'm glad Gibson Dunn's clients don't sue lightly. I wish all lawyers could say the same of their clients. Then again, at the lofty fees I suspect their clients are paying for the firm's services, this statement is probably the one assertion in the complaint that no one--not even Google or the judge--could possibly dispute.

As a partially cloned-and-revised complaint, it shouldn't surprise you that this complaint doesn't break much new ground. See my deconstruction of the American Airlines v. Google complaint--because many of the provisions were recycled, my commentary of that complaint applies almost in toto. However, a couple of small points that did jump out at me from this complaint:

* Rosetta Stone has some really, really weak trademarks. "Global Traveler"??? "Language Library"??? "The fastest way to learn a language. Guaranteed"??? Are you serious?

* Among the keyword advertisers that Rosetta Stone complains about are retailers who sell both Rosetta Stone and other language products. Whoa. I'll be interested to see how Rosetta Stone gets around the First Sale doctrine for those advertisers.

Two concluding thoughts

* Is it time for these 9+ lawsuits to be consolidated in a multi-district litigation yet? From my perspective, that seems inevitable, but I'm not much of an expert on the procedural aspects of MDLs.

* Any predictions on whether another trademark lawsuit over AdWords will be filed in the month of July?

The other eight lawsuits I'm tracking:

* Ezzo v. Google
* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (not initially a trademark case)
* Soaring Helmet v. Bill Me
* Ascentive v. Google
* Jurin v. Google

Posted by Eric at 01:10 PM | Derivative Liability , Search Engines , Trademark | TrackBack

July 09, 2009

"Keyword Advertising Law" Talk (New and Improved!)

By Eric Goldman

I recently spoke on the state of keyword advertising law, which prompted me to rewrite my PowerPoint slides from scratch in light of the many recent developments. So, now available for your enjoyment:

* my talk slides
* an 80 minute free audio recording of my June presentation of this slide deck (plus Q&A) to the IAB Legal Affairs Committee. You can listen in QuickTime or download from iTunesU (for free; go to item 26)
* the CLE written material, a compilation of recent blog posts on the many lawsuits against Google and Google's two trademark policy changes. I would now add the Ezzo, Ascentive and Jurin cases to the written materials.

If this isn't enough for you, I am participating in two expensive (overpriced?) webinars on keyword advertising law in July:

* On July 10 (tomorrow!), "Keyword Advertising Do's and Don'ts," a 1 hour PLI webinar co-presented with Marty Schwimmer of the Trademark Blog.

* On July 22, "Trademark-Based Keyword Advertising: Potential Liability and Avenues for Relief," a 90 minute Pike & Fischer webinar co-presented with Rose Hagan of Google, Elisabeth Escobar of Marriott and John Slafsky of Wilson Sonsini.

Posted by Eric at 10:37 AM | Derivative Liability , Search Engines , Trademark | TrackBack

July 06, 2009

June 2009 Quick Links, Part 1

By Eric Goldman

Just a reminder that I post some items to Twitter that don’t make it into these monthly recaps. If you want even more, you can track a superset of my online activities at Friendfeed.

Search Engines

* All Things Digital had an interesting 3 part series on the role of humans in configuring Google's algorithms: Scott Huffman; Matt Cutts; Amit Singhal. My initial 2005 blog post on the topic.

* More evidence of the deleterious consequences of latency on users' enjoyment of search results pages.

* Google is stumping in favor of its book search settlement deal and putting on the "charm offensive."

* Wired on niche search engines competing around the edges of Google.

* Google has dropped its feature that allowed quoted sources to reply in Google News.

* First, kosher phones. Now, kosher search engines.

Trademark

* Wendy Davis on a trademark lawsuit against Craigslist for allegedly infringing ad copy supplied by one of its users.

* Rookie mistake: Tony LaRussa publicly announced a settlement deal in his trademark lawsuit against Twitter before the papers were signed. Guess what....NO DEAL! UPDATE: A deal was struck subsequently.

* Speaking of which...the WSJ on Twittersquatting.

* WSJ: Europe's High Court Tries On a Bunny Suit Made of Chocolate. The EU struggles with trademarkability of chocolate bunnies.

* Productive People, LLC v. Ives Design (D. Ariz. May 29, 2009). TRO against a domainer.

* Oddee: 10 of the Worst Restaurant Names ever.

Copyright

* Supreme Court declined certiorari in the Cartoon Network v. CSC case.

* Arista Records LLC v. Usenet.com, Inc., 2009 WL 1873589 (S.D.N.Y. June 30, 2009). Usenet service provider committed (1) direct copyright infringement (because it “actively engaged in the process so as to satisfy the “volitional-conduct” requirement for direct infringement”) as well as contributory infringement, vicarious infringement and inducement of infringement. This case was colored by defendants’ evidence spoliation and the lack of a viable 512 defense; in situations like this, courts smack down defendants hard. The court’s analysis would be troubling for many online service providers if this case isn’t an outlier. Mike Masnick has more on the import (or lack thereof) of this case.

* Brave New Films 501(C)(4) v. Weiner, 2009 WL 1622385 (N.D. Cal. Jun 10, 2009). BNF was denied summary judgment on its declaratory judgment request because (a) Savage never threatened BNF directly, and (b) ORTN, which did threaten BNF directly, isn't the copyright owner. My previous coverage of this case.

User Agreements

* In the Matter of Sears Holdings Management Corporation. The FTC busted Sears for installing tracking software/spyware, even though Sears (1) asked all users to expressly opt-in, (2) paid users $10 to install the software, and (3) made full disclosure of the thorough tracking function of the spyware in the user agreement, albeit late in the installation process and in a buried fashion.

* Universal Grading Service v. eBay Inc., No. 08-CV-3557 (E.D.N.Y. June 10, 2009). eBay venue selection clause upheld.

* McMillan v. Wells Fargo, 2009 WL 1686431 (N.D. Cal. June 12, 2009). Wells Fargo asks some customers to agree to four different documents with differing governing law/venue selection clauses, leading to massive judicial confusion about how to determine governing law and venue.

* I’m using EFF's new "TOSBack" tool to track changes to major online services' user agreements. For my commentary on an article by Becher/Zarsky predicting the development of tools like this, see my writeup.

Posted by Eric at 04:54 PM | Adware/Spyware , Copyright , Derivative Liability , Domain Names , Licensing/Contracts , Marketing , Search Engines , Trademark | TrackBack

Seventh Lawsuit Over Google AdWords--Jurin v. Google

By Eric Goldman

Jurin v. Google, Inc., CV 09-03934 (C.D. Cal. complaint filed June 2, 2009)

Frankly, I don't know exactly how many lawsuits are pending against Google over its AdWords service. I know of seven, including this one, but I don't a high confidence that I've seen all of them. For example, I missed this lawsuit initially because PACER misidentified the defendant as Goggle, not Google. (PACER is notorious for sloppy typos). See the Justia page.

Even if the lawsuit count is currently "only" seven, Google is seeing plenty of litigation activity. Clearly, one or more factors have changed the plaintiffs' cost-benefit calculus sufficient to open the litigation floodgates. Now, I'm wondering when all of these lawsuits will be consolidated into a multi-district litigation (MDL) proceeding...?

Substantively, this complaint isn't materially different from the others. The plaintiff owns a trademark in the term "Styrotrim" for building materials, competitors are buying the term for competitive keyword ads, and Google is suggesting the purchase through its keyword suggestion tool. As with most of the other lawsuits, the plaintiff also alleges consumer confusion about the distinction between sponsored links and organic search results. The plaintiff's press release.

The six other AdWords-related lawsuits I'm tracking. If you think I've missed any, I'd be grateful for the reference.

* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)
* Soaring Helmet v. Bill Me
* Ascentive v. Google

UPDATE: As a good example of my imprecise counting, I had forgotten Ezzo v. Google, a doomed-to-fail pro se case filed before the Rescuecom case. So my count is now 8, not 7.

Posted by Eric at 09:06 AM | Derivative Liability , Marketing , Trademark | TrackBack

June 29, 2009

Sixth Lawsuit Filed Over Google AdWords, Plus an Assault on Google's Organic Search Results--Ascentive v. Google

By Eric Goldman

Ascentive, LLC v. Google, Inc., 2:09-cv-02871-JS (E.D. Pa. complaint filed June 25, 2009)

Guess who got sued again? Google now has 6 pending lawsuits challenging its AdWords service. The previous five are:

* Rescuecom v. Google
* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)
* Soaring Helmet v. Bill Me

The latest lawsuit has a different spin than the others. Ascentive makes software that it claims will improve the speed of its users' computers and combat spyware. Earlier this year, Ascentive had a run-in with StopBadware, which initially labeled Ascentive as a scamware-like offering that hyped the threats on users' computers to induce them to pay to upgrade their Ascentive software. (See the initial StopBadware alerts 1, 2). StopBadware has since reached a compromise with Ascentive and repealed its warning, a move that appears to have been fairly unpopular in some segments of the security community. (This post gives a sense of the sentiments towards Ascentive and StopBadware).

Around the same time, the Ascentive-Google relationship deteriorated, which Ascentive speculated was due to StopBadware's classification (Google's correspondence just cryptically cited "multiple policy disapprovals"). After Ascentive had spent over $645k as an AdWords customer in 2008, Google kicked Ascentive out of the AdWords program. A week later, Google completely dropped Ascentive's website from its search index. As a result, Ascentive was frozen out of both Google's organic search results and sponsored links, and not surprisingly, Ascentive suffered a "severe drop in online sales" from this double-whammy. Ascentive's entreaties to Google were rebuffed.

Ascentive makes two broad legal attacks on Google. First, as has become typical, Ascentive alleges that Google commits trademark infringement and related torts by selling competitive ads keyed to its trademark and by suggesting that advertisers buy Ascentive's trademarks in Google's keyword suggestion tool. Among other specific issues, Ascentive complains that Google didn't respond to its trademark appearing as a third-level domain in a competitor's ad copy or the inclusion of "Finally Fast" in ad copy (Ascentive's applicable trademark is "FinallyFast.com"). Overall, these complaints don't break much new ground compared to prior allegations against Google's AdWords program.

Second, Ascentive alleges a variety of legal violations because Google kicked Ascentive out of its organic search results index. This is a bit like KinderStart redux. The allegation that really caught my attention starts in Para. 83, which reads "Google's refusal to list Ascentive's website in its natural search result listings violates the Lanham Act" as a false designation of origin. Whoa! The complaint doesn't explain this allegation thoroughly, but the theory seems to be that consumers expect to see the trademark owner in organic search results for the trademark and therefore consumers will be actionably confused if the trademark owner doesn't appear there.

Framed that way, of course we know such a claim is DOA. Indeed, as exciting as it would be to see some meaty discussion on the topic of Google's liability (or lack thereof) for deciding who gets into its search index, I'm guessing Google will beat this prong of the complaint quickly and completely. One way Google could get there is through 47 USC 230(c)(2) (which I just blogged about last week), which completely protects Google's ranking decisions as a subspecies of filtering choices generally. However, to get there, a court will have to conclude that a false designation of origin claim isn't an "IP claim" which is excluded from 230's coverage. If it doesn't want to reach that doctrinal issue, the court has a wide smörgåsbord of other doctrinal choices to squash this claim.

Posted by Eric at 07:32 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 17, 2009

Twitter, Email and Brand Engagement

By Eric Goldman

Last week, in an interview with a reporter, I extolled the virtues of Twitter as a tool for brands to keep in touch with and engage their customers. The reporter responded by asking why brands would choose Twitter to engage customers instead of email, which companies have been using successfully for many years. I thought this question raised important issues about online marketing, so I thought it would be worth exploring the differences here.

Let's start with some basics. I am a big fan of email marketing. Like many of you, I have voluntarily signed up for numerous commercial email newsletters/announcement. I also get unrequested email from companies I've dealt with; I look at some of these, I ignore others, and occasionally I get so fed up that I blacklist the sender or report it as spam. I also get spam, LOTS of spam, but it doesn't bother me too much. Gmail has a good spam filter and it only takes a minute or two a day to sort, review and delete the spam.

However, as a recipient, email has some downsides. Most obviously, it is not always easy to unsubscribe. I remain amazed in this post-CAN-SPAM era by how often email unsubscriptions don't work. The link may be down, or my opt-out simply doesn't stick technologically, or the sender just ignores me. This is true even for senders who are involved in the legal industry and are spamming lawyers who love to bring lawsuits (never a wise move). If I were a litigious plaintiff, I would have no problem finding plenty of defendants.

Email also has the downside that the sender has my email address and may share it with others who are going to clutter up my in-box. With a good spam filter, this extra unwanted email isn't a huge problem, but the mere threat of subsequent email deluges can give me pause about whether or not I trust a website enough to give them my email address. (As you can appreciate, the website's privacy policy is a complete non-factor in my trust determination).

From the sender's standpoint, email is a huge pain. It is more heavily regulated than other marketing media, and complying with the regulations (such as providing a reliable opt-out mechanism) is costly and filled with litigation risks. Perhaps more importantly, email can be reported or killed as spam at several steps along the way, and the sender can be tagged as a spammer as well for all future messages. So, for example, a big website's email distribution of an announcement about a new user agreement or privacy policy--a completely legitimate communication between a site and its users--is almost certain to prompt a flurry of unsubscribes, emails from users who insist to their IAPs and email service providers that they are being spammed (even though they often just forgot about the relationship), and lots of bouncebacks from dead email addresses that may cause some IAPs/email service providers to blacklist the sender as a spammer. Plus, a bunch of users will never see the message at all because it goes into their spam folder. (Recall, for example, that AT&T spam-foldered its own contract amendment announcement). These are not exactly the hallmarks of an effective communication technology.

Contrast the user experience with Twitter. More than anything, Twitter is a no-risk opt-in communication tool for consumers to listen to marketers. I can follow a brand at Twitter any time, and more importantly, I can unfollow at any time too. Plus, there isn't any risk that the brand I'm following will ignore my unsubscribes or pass along my Twitter username to spammers. When I unfollow, the relationship is completely over on my terms.

From the brand's standpoint, Twitter has none of the baggage of email marketing. No spam folders to fear, no unsubscribes to manage, no CAN-SPAM. Sure, Twitter's tight character restriction mostly limits marketers to headlines, but frankly this isn't all that different from maximizing email subject lines to get email recipients to open the email.

Twitter has one other really important benefit for brands. Folks are often willing to retweet a message--even a commercial message--thereby sharing it to their entire follower base in ways that these same folks would never forward a commercial email to hundreds of their friends. And this type of word-of-mouth marketing is the holy grail of marketing because of the extra imprimatur of having the message validated by someone in the reader's social network. The retweeting phenomenon is a powerful traffic driver (I've been watching how it boosts my bit.ly stats), and marketers who aren't on Twitter are missing some upside. (Please, marketers, don't even consider shilling or astroturfing or any of those other silly stunts to generate faux word-of-mouth marketing; if you have a good offering, you really don't need to disrespect people that way).

I don't follow many commercial brands in Twitter, but I do want to mention three brands that have impressed me:

@LivingHarvest. I tried hempmilk for the first time recently, and I was fascinated to learn about the extensive anti-industrial hemp regulations that have hampered hempmilk from coming to market. LivingHarvest, a hempmilk manufacturer, is Twittering the status of various legislative efforts to enable industrial hemp farming. It's a fascinating political drama.

@UnitedAirlines. I am a frequent flyer on United Airlines, so I'm already on their email list. But they have totally gotten the point of Twitter. Not only have they been offering valuable freebies to their Twitter follower to boost their subscriber count (they are giving away discount certificates if you sign up before they hit 50,000 followers), but they also offer "Twares," blowout deals on remnant inventory. LOVE IT!

@AmazonMP3. Amazon offers one highly discounted MP3 download a day, and this Twitter account notifies me of the deal of the day. Great stuff. I've lost track of the number of times I've purchased albums this way.

Twitter practices like these build my trust as a loyal customer and pull cash out of my wallet in ways email marketing never did.

One final point: RSS offers many of the same benefits as Twitter in terms of reader empowerment, although it does not have the same retweeting upside. In particular, RSS is a true opt-in like Twitter. The website doesn't get my email address, and whenever I unsubscribe from the RSS feed in my RSS reader, it's over.

For example, as I recently mentioned, RSS is a great option for websites to allow users to learn about changes to user agreements and privacy policies on a true opt-in basis. In this respect, RSS is so much better than email. Consider, for example, DoubleClick's privacy policy, which offers users the opportunity to learn about privacy policy amendments by signing up to an email list. (DoubleClick will rarely have the email address already because it doesn't have direct privity with users). DoubleClick's option is a more enlightened practice than most similar web services, but still, no thanks. If I don't trust DoubleClick's privacy practices to begin with, I'm not going to give them my email address with the risk that they will spam the crap out of it and pass it along to others who will spam the crap out of it too. Of course DoubleClick promises not to do this, but the whole point is that those promises mean nothing to the people who don't trust DoubleClick to begin with. On the other hand, if DoubleClick offered an RSS feed to announce modifications to its privacy policy, then I could subscribe to its notifications with no spam risk at all.

I'm so enamored with RSS as a superior notification tool for announcing privacy policy and user agreement amendments that I will be recommending it to all of my clients as a supplement to other notification options. I hope you'll consider doing the same.

Posted by Eric at 07:03 AM | Marketing , Spam , Trademark | TrackBack

June 11, 2009

Google Sued Again for Trademark Infringement--Soaring Helmet v. Leatherup.com

By Eric Goldman

Soaring Helmet Corp. v. Bill Me Inc., 2:2009cv00789 (W.D. Wash. complaint filed June 9, 2009). The Justia page.

It's clearly open season on trademark infringement lawsuits against Google. The latest is a lawsuit by Soaring Helmet, manufacturers of "Vega" helmets. This case is similar to the recent Hearts on Fire v. Blue Nile case in that the manufacturer (Hearts on Fire/Soaring Helmet) complained that a retailer (Blue Nile/Leatherup.com) purchased the manufacturer's trademark and said/implied in its ad copy that it sold the manufacturer's goods even though it allegedly didn't carry the manufacturer's goods at all.

The main difference between this lawsuit and the Hearts on Fire lawsuit is that the manufacturer also dragged Google into the lawsuit--even though Google treated Soaring Helmet's initial cease-and-desist letter as a trademark opt-out and blocked subsequent references to Vega in Leatherup.com's ad copy. Thus, unless Soaring Helmet seeks to reach back to the ads displayed before its C&D, it appears Soaring Helmet is trying to hold both Google and Leatherup.com liability simply for showing ads triggered by Soaring Helmet's "Vega" trademark.

For those of you keeping score, this is the fourth time in a month that trademark owners have sued Google over its AdWords programs. The other three are:

* FPX v. Google
* John Beck Amazing Profits v. Google
* Stratton Faxon v. Google (this wasn't a trademark case last I checked)

A fifth pending AdWords trademark lawsuit is the Rescuecom case. I'm not aware of any others pending beyond these 5, but surely this action is making Google's outside counsel smile.

I note that the John Beck lawsuit is a putative class action covering all US trademark owners. I wonder if Google could consolidate this case with that...?

Posted by Eric at 07:16 AM | Derivative Liability , Search Engines , Trademark | TrackBack

June 08, 2009

May 2009 Quick Links Part 1

By Eric Goldman

Just a reminder that I'm posting some quick links exclusively to my Twitter account.

Trademarks

* Texas International Property Associates v. Hoerbiger Holding AG, 2009 U.S. Dist. LEXIS 40409 (N.D. Tex. May 12, 2009). Domainer loses ACPA claim over typosquatted domain name. The PPC advertising constituted bad faith intent to profit. Ryan Gile recaps the action.

* GunBroker.com LLC v. Heckler & Koch Inc., No. 09-cv-00051 (M.D. Ga. complaint filed May 14, 2009). Interesting lawsuit by an online auction site for guns seeking a declaratory relief action against a trademark owner who deployed an enforcement agency, Continental Enterprises, to send a driftnet takedown letter that apparently targeted used gun resales or compatible goods. Ryan Gile has more.

* Miranda v. Guerroro, 2009 WL 1381250 (S.D. Fla. May 14, 2009). Miranda is “Paola Morena,” a Latin singer. Her former manager convinced her to do some nude photo shoots in an effort to get a Playboy gig. The Playboy gig didn't materialize, and the manager stopped representing Miranda/Morena. After Morena's career took off, the manager then allegedly threatened to publicly post the photos unless she paid him $70k. Morena rebuffed the request, so the manager allegedly followed through with his threats by launching a website paolamorena.com [I got a nasty Google malware warning when I tried to visit the site], calling it her “official” site and posting some of the photos. The court enjoined the manager under trademark law. I'm a little confused how Morena had protectable trademark rights in her name. Did she make any use in commerce in the United States? Did her name achieve secondary meaning? This could be another case where trademark law is being stretched to stop bad behavior.

* Eric Menhart, the self-purported owner of a trademark in the term Cyberlaw, has gotten his very own personal gripe site.

Advertising and Marketing

* How much can Behavioral Targeting Help Online Advertising? HT Greg Linden

* Yingling v. eBay, 5:2009cv01733 (N.D. Cal. complaint filed April 21, 2009). A class action lawsuit alleging that eBay Motors overcharged merchants.

* IAB has issued its Click Measurement Guidelines designed to answer the Q “What is a Click?” See if their 28 page report actually answers the Q.

* A confusingly written LA Times article reports that 4 South Korean dissident bloggers are being criminally prosecuted for artificially inflating impression counts in order to game rankings of most popular pages.

* Perennially funny: unfortunate product names.

Copyright

* Solicitor General recommends against granting cert in Cartoon Network v. CSC.

* AV v. iParadigms, April 16, 2009. The Fourth Circuit says that the Turnitin system is fair use. My initial blog post on the district court ruling.

Security

* News.com: Interview with FBI cybercrime agent working undercover.

* Oddee: problematic CAPTCHAs. Funny.

Google

* Everyone wants to talk about whether Google is a monopolist
- In early May, I heard Susan Athey, Microsoft's Chief Economist, give a lunchtime attack speech on Google at a George Mason event
- Google is circulating a document explaining why it's good for competition
- Google is blanketing DC with lobbyists too.
- And Google says it's actually small potatoes.
- Wired: Will Wolfram Alpha forestall antitrust inquiry into Google? As I've argued before, we continue to see new entrants into the search business all the time—it’s just too big a market to ignore.
- NYT weighs in too. And the Washington Post discusses how Microsoft and others are complaining about how many Google folks are going into the Obama administration.

* Danny Sullivan: State Of Search: Google Will Stay Strong Despite Bing & Yahoo

* Wired: Secret of Googlenomics: Data-Fueled Recipe Brews Profitability

Posted by Eric at 04:03 PM | Copyright , Derivative Liability , E-Commerce , Licensing/Contracts , Marketing , Privacy/Security , Search Engines , Trademark | TrackBack

June 03, 2009

An Insider's Look at Utah's Failed HB 450

By Eric Goldman

Perry Clegg is a Utah IP attorney and the 2009 chair of the Utah State Bar's Cyberlaw Section. A few months ago, he wrote an article entitled "Insight on Utah Senate's Sedation of HB 450," which provides his assessment of why HB 450--Utah's latest legislative attack on online advertising--failed to pass the Utah Senate this year.

The article implies that HB 450 failed in part due to in-fighting among various influential folks in Utah, perhaps caused by some bruised feelings/egos. With slicker and more inclusive politicking in the future, these influencers are poised to rally behind a similar future regulation.

As a result, the article provides some support for why I think Utah will attack online advertising a fourth time. Indeed, the article quotes a third party as saying that "the bill’s opponents should either propose a compromise solution or expect some form of this bill to pass next year. Senate leadership apparently believed that there were not enough votes to pass it this year, but that they could gather the votes to pass it by next year."

What I find most amazing is that there appears to be broad insider consensus that some type of Utah regulation of online advertising makes sense. As the article says, "the Utah legislature is generally behind HB 450’s policy but want to make sure they do their homework so the policy is implemented using the right language." In most other places around in the country, most policy-makers recognize the illogic and futility of trying to reshape global online advertising to meet state specifications. The pro-regulatory Utahns seem to see the world differently, and many of us who don't live in Utah simply cannot understand why the Utah legislature keeps picking a fight that it's almost certain to lose in the courts, even if legislation passes. I have no rational explanation for this.

In any case, I will be closely watching the Utah legislature in February 2010 to see what shenanigans they might be trying anew.

Posted by Eric at 02:35 PM | Marketing , Search Engines , Trademark | TrackBack

May 29, 2009

Another Lawsuit Over Google AdWords--Stratton Faxon v. Google

By Eric Goldman

Stratton Faxon v. Google, Inc. (New Haven Superior Ct. complaint filed May 27, 2009)

Today's lawsuit combines two trends:

Trend #1: Lawyers-as-plaintiffs suing Google for their own account. I don’t have a complete inventory of these lawsuits, but other examples include the Field, Feldman, Person and Bradley lawsuits. Ironically, I believe all of these lawsuits were shot down in inglorious flames--lawyers-as-plaintiffs often seem to do even worse than other plaintiffs.

Trend #2: Lawsuits over Google AdWords, Heck, two were filed earlier this month (the Firepond and John Beck lawsuits).

This lawsuit is brought by a Connecticut plaintiff-side law firm that discovered a rival law firm was keying AdWords ads to the law firm name. Trademark owners faced with this situation might normally contact the rival and ask them to stop (which the rival firm claims to have done as soon as it heard of the lawsuit) and take advantage of Google's trademark policy. But, if you're a plaintiff's lawyer, it sure is tempting to sue first and ask questions later…

And this lawsuit does raise a lot of questions, including:

* why didn't the plaintiff sue for trademark infringement? The plaintiff claimed interference with business relations and unfair competition, but both claims fundamentally sound in trademark law and would be preempted if there was a robust trademark preemption doctrine. Perhaps a trademark claim is coming.

* why didn't the plaintiff sue the advertiser instead of Google? Among other things, the plaintiff complains that its rival firm is mimicking other offline marketing efforts. If the problem is with the rival firm, wouldn't they be the more appropriate target?

* why did the plaintiff seek a prejudgment $50,000 lien against Google instead of just filing a complaint? Maybe Connecticut law has some quirks that encourage or require this procedural step. Otherwise, is the firm concerned that Google won't have $50,000 to pay off the plaintiff if it wins?

* did the plaintiff really just discover that its competitors are advertising on its name? The plaintiff was quoted as saying that the Firepond lawsuit prompted him to check the search results for the first time. What is this, 2002?

All of these questions make me wonder if this lawsuit is really intended to get some publicity and maybe prompt some calls from potential plaintiffs to form a new class action suit. Otherwise, Connecticut law may differ from California law, but under CA law this lawsuit would almost certainly be DOA. For example, even without relying on 47 USC 230, under CA law I don't see any possibility that the plaintiff could establish the requisite scienter to make the interference with business relations claim stick. For a good analogous example of a failed misdirected attempt to smack a search engine for unwanted advertising, see the Heartbrand Beef case, where Yahoo was excused (without relying on 230) from a false designation of origin claim for selling trademarked keywords.

Stated differently, lawsuits like this--from lawyers who are clearly new to our community--simultaneously make me feel really smart and really stupid. Their allegations are so unmoored from our normal legal discussions that either the lawyers know something I don't, or they have no idea what they are doing. I'll let you to form your own conclusion about this lawsuit.

Clearly, this lawsuit isn't a clone of the Firepond lawsuit, but I think it's fairly characterized as a spawn of it in that the Firepond lawsuit helped educate another plaintiff lawyer about the desirability of suing Google. I expect other plaintiffs’ lawyers are getting the same message as we speak.

In theory, if the plaintiff firm really wanted to tweak its rival, it might also complain to the bar regulators about impermissible advertising under rules about lawyer advertising. This prompted me to wonder: have any bar association opinions on the permissibility of buying trademarked search keywords? I am not aware of any, but I may be forgetting something. Please let me know if you've seen such an opinion.

Posted by Eric at 10:15 AM | Marketing , Search Engines , Trademark | TrackBack

May 28, 2009

Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?--Solid Host v. NameCheap

By Eric Goldman

Solid Host, NL v. NameCheap, Inc., 2:08-cv-05414-MMM-E (C.D. Cal. May 19, 2009)

Facts

This case involves an alleged domain name theft. Solid Host is a web host and initial owner of the domain name solidhost.com, which it registered through eNom in 2004. Solid Host claims that in 2008, a security breach at eNom allowed an unknown interloper (Doe) to steal the domain name and move the registration to NameCheap. Doe also acquired NameCheap's "WhoisGuard" service, a domain name proxy service that masked Doe's contact information in the Whois database. Solid Host contacted Doe and sought the domain name; Doe asked for $12,000, and Solid Host took a pass. Instead, Solid Host demanded that NameCheap hand back the domain name and identify Doe, but Doe claimed that he had bought the domain name legitimately. NameCheap, apparently feeling like the cheese in a sandwich, demurred to Solid Host's requests. Solid Host then got a TRO ordering NameCheap to transfer the name and reveal Doe's identity, both of which occurred. For unclear reasons, Solid Host hasn't amended the complaint to name the Doe, but it is proceeding against NameCheap on various claims, including an Anti-Cybersquatting Consumer Protection Act (ACPA) claim.

The Opinion

Who is the Registrant?

My understanding of domain name proxy services is that the service acts as the legal registrant, thus supplying its contact information, but it registers the domain name for the benefit of its customer, making the customer the beneficial registrant. An analogy: a bank may take legal title of a property as part of securing a loan on the property, but the borrower retains beneficial title to the property.

So, for purposes of the ACPA, is the proxy service the “registrant” of the domain name? ICANN’s agreement with registrars seemingly contemplates this characterization in Section 3.7.7.3 of its Registrar Agreement, which says “A Registered Name Holder licensing use of a Registered Name according to this provision shall accept liability for harm caused by wrongful use of the Registered Name, unless it promptly discloses the identity of the licensee to a party providing the Registered Name Holder reasonable evidence of actionable harm.” However, it’s not clear to me that a proxy service “licenses” the domain name, especially if you accept my lender-borrower analogy above. Alternatively, if the proxy service is the “agent” of the customer, the licensing analogy also breaks down.

Whether the proxy service is the registrant matters a great deal to the legal outcome, and unfortunately, the court’s analysis of this important question was cursory, muddled, and possibly internally inconsistent.

In this case, the court’s inquiry is made more difficult by the fact that NameCheap acted as both the registrar and the proxy service provider. As a registrar, an ACPA claim against NameCheap should be squarely preempted by the domain name registry/registrar safe harbor enacted as part of the ACPA (15 U.S.C. §1114(2)(D)). For example, 1114(2)(D)(iii) says:

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

(This provision only moots damages, not an injunction, but since Solid Host has the domain name back in its possession, damages seem like the only remaining issue).

The court concludes that NameCheap is not eligible for the domain name registrar safe harbor because NameCheap is the domain name registrant. It says, "NameCheap is, by virtue of the anonymity service it provides, the registrant of a domain name that allegedly infringes Sold [sic] Host’s trademark." Thus, NameCheap is ineligible for the registrar safe harbor, which applies only when the registrar acts as a registrar.

But, having rejected the domain name registrar safe harbor because NameCheap was the domain name registrant, the court then inconsistently says that NameCheap is not the registrant for purposes of the prima facie ACPA claim. Instead, for ACPA purposes the court treats Doe as the registrant, leaving NameCheap exposed to a possible secondary ACPA liability claim. (The court acknowledges that NameCheap would defeat a direct ACPA claim because NameCheap did not have any bad faith intent to profit from the domain name. Offering the proxy service wasn't enough to qualify as a bad faith intent to profit).

Wait a minute—how can NameCheap simultaneously be both the registrant (no safe harbor) but not the registrant (thus, subjected to a secondary claim)? The court does not acknowledge or explain this apparent inconsistency.

Contributory Cybersquatting

Courts have rarely discussed a contributory ACPA claim. The only one cited by the court was a 2001 case (the Ford Motors vs. Greatdomains.com case) and I can’t think of any others. Perhaps this isn’t surprising because (1) as the Greatdomains.com case indicated, a contributory ACPA claim is available "in only exceptional circumstances," and (2) registrars are the most likely targets of a contributory ACPA claim, and the domain name registrar safe harbor effectively eliminates their contributory ACPA liability.

Adopting the analysis in the Greatdomains.com case, this court equates contributory ACPA liability with the Ninth Circuit’s 1999 Lockheed standard for online contributory trademark infringement (as opposed to ACPA liability), which requires that "a plaintiff must prove that the defendant had knowledge and ‘[d]irect control and monitoring of the instrumentality used by the third party to infringe the plaintiff’s mark.'"

So how did NameCheap have the requisite control over Doe's instrumentalities? Good question. The court tosses out this gem: NameCheap was "the “cyber-landlord” of the internet real estate stolen by Doe." WHAT??? The court continues:

NameCheap’s anonymity service was central to Doe’s cybersquatting scheme. If NameCheap had returned the domain name to Solid Host, Doe’s illegal activity would have ceased.

The second sentence is true with respect to NameCheap, but it is also true of every registrar for every domain name they register--and we know from the 1999 Lockheed case that registrars lack control over the instrumentalities of their registrants. So the proxy service seems to make a legal difference, but how does the proxy service evidence NameCheap's greater control over the registrant's instrumentalities? I think something is amiss here.

To complete the prima facie contributory ACPA claim, in addition to control, Solid Host must show that NameCheap has the requisite knowledge of Doe's ACPA violation. The court sets a high scienter bar--mere notice from an aggrieved party isn't enough--but the court conclusorily says that the complaint alleged enough knowledge to survive the motion to dismiss.

Why This is a Troubling Ruling

As I trust is clear, I think the court's analysis is questionable at best. I’m also troubled about the normative implications. Most obviously, this case could portend the demise of domain name proxy services. Read literally, every proxy service is exposed to potential contributory ACPA liability for every domain name it services. I can’t imagine proxy service providers will be excited about that liability exposure, and some may choose to exit the business.

If proxy services evaporate, domain name registrants will have a tougher time maintaining their privacy. This could affect at least two groups. First, businesses seeking to register domain names for unlaunched new brands often want to procure the new brand's domain names without publicly announcing their intentions through the Whois database. (Of course, some businesses register such domain name through agents or shell companies, but at a much greater expense than a proxy service). Second, gripers, whistleblowers, critics and others may want to use proxy services to make it harder for their targets to unmask their identities. This ruling jeopardizes the potential privacy options available to both groups.

I’m also troubled by this ruling’s narrow reading of the domain name registrar safe harbors. There haven’t been many cases interpreting those safe harbors, and this case might influence other courts to read them narrowly.

A Mini-Trend of Lawsuits Against Registrars

I’ve noticed a small but troubling increase in lawsuits against domain name registrars in the past few months. In addition to this case, see the Vulcan Golf v. Google lawsuit (which named some registrars as defendants), OnlineNIC cases, Philbrick v. eNom and uBid v. GoDaddy. Personally, I believe this litigation trend mirrors the expansion of new and legally untested non-registration services offered by registrars. I explored this issue with Elliot Noss of Tucows in the most recent installment of TWiL (worth listening to, IMO). Discussing the uBid lawsuit, Elliott explained how registrars monetize dropped domain names before being returned to the available pool of unregistered domain names. The delay is putatively for the benefit of customers who mistakenly let a registration lapse; but this also has the happy (?) by-product of letting registrars create new ad inventory that they are monetizing.

In the past, a lot of the legal attention regarding domain names has focused on trademark owners vs. registrants. From my perspective, those lawsuits are becoming passé. The real litigation growth industry appears to be trademark owner vs. registrar lawsuits over new registrar service offerings that trademark owners don't like. Rulings like this one, with a broad reading of contributory ACPA liability and a narrow reading of the domain name registrar safe harbor, raise the specter that registrars may find more legal trouble than they anticipated.

UPDATE: Commentary from Domain Name News

UPDATE 2: A call for registrars to exit the domain name proxy business.

Posted by Eric at 03:27 PM | Derivative Liability , Domain Names , Privacy/Security , Trademark | TrackBack

May 20, 2009

EFF's Guide to Griping, Plus Some Recommendations of My Own

By Eric Goldman

The EFF has posted "Avoiding Gripes About Your Gripe (or Parody) Site," which includes 6 prophylactic recommendations to prospective gripers:

1) Be noncommercial — no ads, no links to commercial sites, no affiliate links, no Café Press T-shirt sales, no fundraising if you can help it.

2) Don't use the target's name alone in the domain name — adding "sucks" is good, but you can be creative.

3) Have a prominent disclaimer that explains that your target is neither affiliated with nor endorses your site.

4) Find a service provider with backbone.

5) If you borrow from the target's own materials, such as text or images from the target's own websites, be selective.

6) If a mark-owner challenges your use of a mark in a domain name, don't offer to sell it to the mark-owner without the assistance of legal counsel.

All excellent advice. I'd like to add a few suggestions of my own (all standard disclaimers apply--this is not legal advice, and you should consult your own attorney):

7) I would modify #1 to say don't have any outlinks from your gripe site, period. Courts sometimes engage in bizarre link-counting exercises to determine commerciality, including in some cases considering sites two or more links away. Keep it simple and skip outlinks altogether if you can.

8) I would modify #5 to recommend against using the target's logo at all unless it is absolutely essential to the gripe. Otherwise, courts can get hung up on the logo display even when if other aspects of a trademark claim are weak. See, e.g., BidZirk v. Smith and SMJ v. Lafayette Restaurants.

9) I would also modify #5 to say that if you recycle any graphics or photos from the target, consider presenting them as a thumbnail (with a link to the original source if necessary) rather than presenting them full-size. The thumbnail sizing may help with a fair use defense.

10) Never EVER include the target's trademarks in the site's keyword metatags. Some courts lose all sense of perspective the moment they see a trademark in the keyword metatag. Plus, the keyword metatag offers very little or no SEO benefit, and there are much more effective ways to spread the word about your site. It should be OK to include the trademark in the description metatag if the site description clearly communicates the griping nature of the website, but even then, be careful. Courts don't know how to evaluate description metatags either.

11) Think carefully before buying the target's trademark as a keyword for sponsored ads to promote your gripe site, Some courts are suspicious of keyword advertising and may unduly fixate on the ad triggering and not the underlying message.

12) Make sure every fact you say is 100% accurate and everything else is couched as your opinion. Plaintiffs will carefully read every word on your site text looking for anything that they can argue is inaccurate.

Posted by Eric at 11:13 AM | Copyright , Domain Names , Marketing , Trademark | TrackBack

May 15, 2009

Google Liberalizes US Trademark Policy: "What, Me Worry?" Part 2

By Eric Goldman

In my Deregulating Relevancy article from a few years ago, I explained how trademark law was having pernicious consequences for online conversations. Among other unwanted effects, trademark law hinders online discussions about trademarks even when both conversationalists found the discussion relevant.

I don't think things have gotten better since I wrote the article in 2005. Perhaps we have a better understanding of trademark law's capacity for harm, but we continue to see misguided lawsuits from trademark owners and mixed results from judges.

While the courts do not automatically support online trademark-mediated discourse, the bigger practical threat to online trademark law comes from extrajudicial privately enforced trademark policies, such as the search engines' "voluntarily" adopted trademark policies. These policies minimize search engines' exposure to trademark liability for their ad sales, but they effectively resolve a huge percentage of trademark owners' "problems," almost always in the trademark owner's favor, without any judicial oversight at all.

Thus, I was delighted to see Google's announcement that it was liberalizing its trademark policy to allow a group of "special" advertisers to reference third party trademarks in the advertisers' ad copy, even if the trademark owner objects. See Google's official announcement. The "special advertisers" includes resellers, review sites, and sellers of compatible/complementary/replacement products.

In practice, this means that these advertisers and consumers can now use the same trademark to speak with each other. In contrast, today, the advertiser can purchase the trademark as the triggering keyword but can't use the trademark to explain why the consumer was seeing the ad. Personally, I had always thought the "blind" nature of the ad copy had the potential to confuse consumers, and Google has taken a big step forward in solving that apparent problem.

Having said that, I wish Google had gone further. There are two obvious groups of advertisers who should be able to reference the trademark in the ad copy but still will not be able to do so: (1) competitors making comparative claims, and (2) gripers who wish to complain about a trademark owner's practices. These two advertiser groups can still buy third party trademarks, but they will still be forced to speak in code in the ad copy to explain why they did so. Nevertheless, we shouldn't let these omissions detract from what is otherwise very good news from Google.

While I think the policy change is good news, I don't expect trademark owners will agree. Trademark owners already are wary of Google due to the widespread perception that Google's trademark policy is less trademark owner friendly than Microsoft or Yahoo. (Google will not disable a trademark as a keyword at the trademark owner's request; while Yahoo and Microsoft will do so in many circumstances). Google's move could antagonize trademark owners further.

Should the battle move into the courtroom, I think Google's move is legally defensible on two fronts: (1) The group of special advertisers generally should be protected by the nominative use doctrine, and (2) to the extent the ads are no longer "blind," there may be less consumer confusion about the ads than there has been in the past.

Even so, I expect trademark owners to be even more aggressive about suing Google. First, some trademark owners will bring trademark lawsuits to control their online channels (see, e.g., the Mary Kay case and the many cases I cite therein), so special advertisers like resellers are an irresistible target for trademark owners trying to reduce competition among their retailers. Second, the Rescuecom decision eliminated Google's ace-in-the-hole to eliminate trademark lawsuits early, so trademark owners may feel like their odds of success have gone up.

Indeed, in what I think is a completely unrelated move, this week a group of plaintiffs' lawyers initiated two class action trademark lawsuits against Google (1, 2). I would not be surprised to see other trademark owners decide they've had it with Google. I could also see trademark owners deciding to push legislative solutions, especially in Google-hating Utah. (Although, some of the special advertiser groups in Google's new policy would not have been able to take advantage of Utah HB 450, Utah's most recent foray in disrupting the online advertising business). It could take years for all of the legal shenanigans to shake out.

I think the biggest question is why Google is making this change now. After all, Google has not had any good news recently on the trademark front. If anything, the Rescuecom decision might have counseled Google to become more restrictive. not less. Further, it's clear from the Firepond lawsuits that trademark owners aren't afraid to sue Google over Google's multi-billion-dollar cash cow. And, although Google is now in line with Microsoft and Yahoo's policies with respect to their trademark policies as applied to the special advertiser groups, none of those voluntary trademark policies are successfully battle tested in court; Google has no precedent to confirm that it will win in court if challenged. Collectively, it's not like a cloud of doubt about the trademark law implications of Google's policy changes has magically lifted.

Indeed, the timing is interesting given last week's announcement that Google was liberalizing its trademark policies for 190 countries. On the surface, it looks like the two liberalized policy announcements may be connected because both could have the same effect of increasing Google's ad revenues. In other words, perhaps Google is feeling the effects of the market downturn and looking for easy sources of new revenues, and what is easier than taking cash from customers who are already asking to buy ads but Google is voluntarily refusing?

Personally, I don't think this is a cash grab by Google. If nothing else, if the policy change also leads to an increase in expensive lawsuits, the change may not be cash-flow positive for Google any time soon. (Though it should be immediately cash-flow positive for Google's outside trademark counsel!) Instead, I'm willing to accept Google's argument that the policy change is actually about allowing advertisers and consumers to speak the same language, which simultaneously improves the consumer experience and should lead to better ad performance for advertisers. And, in my opinion, that's exactly what trademark law should be about.

Other comments on this policy change:
* Danny Sullivan at Search Engine Land
* News.com (1, 2)
* Wendy Davis
* Miguel Helft at NYT
* Reuters
* Sherwin Siy

Posted by Eric at 03:56 PM | Search Engines , Trademark | TrackBack

Firepond "Copycat" Lawsuit Filed Against Google--John Beck Amazing Profits v. Google

By Eric Goldman

John Beck Amazing Profits, LLC v. Google Inc. 2:2009cv00151 (E.D. Tex. complaint filed May 14, 2009). The Justia page.

Earlier this week, a group of lawyers filed a class action lawsuit against Google and its distribution partners (FPX v. Google) alleging that Google's AdWords infringed the rights of Texas trademark owners. The same group of lawyers has now filed a second putative class action lawsuit against Google in the Eastern District of Texas.

I didn't do a word-for-word comparison, but two main differences were obvious. First, a smaller number of Google's distribution partners are targeted. Second, and more importantly, this complaint alleges a class comprised of all US trademark owners, instead of restricting the class just to Texas.

I don't fully understand why the same group of class action lawyers would file two separate class action complaints covering the same basic defendants and issues, but it's not the first time we've seen this tactic (the advertisers suing Yahoo over "syndication fraud" pulled the same stunt). I suspect it has something to do with trying to ensure lead dog position if/when a judge consolidates multiple copycat lawsuits from other plaintiffs' lawyers.

In any case, this lawsuit covering all US trademark owners now squarely offers Google the option to resolve and clean up any past trademark liability for past AdWord sales should it choose to accept this battle. In light of Google's liberalized AdWords trademark policy announced last night (which I'll blog shortly), it doesn't seem like Google is looking for an easy way out.

Posted by Eric at 07:21 AM | Search Engines , Trademark | TrackBack

May 11, 2009

Google Hit With Major Class Action Trademark Lawsuit Over Trademarked Keyword Ad Sales--FPX v. Google

By Eric Goldman

FPX, LLC v. Google, Inc., 2:2009cv00142 (E.D. Tex. complaint filed May 11, 2009)

In retrospect, it seems so obvious. Why were the lawyers for these chickenscratch plaintiffs (Rescuecom? Check 'n' Go?) suing Google over trademarked keyword ad sales on behalf of just one aggrieved trademark owner client when they could sue Google on behalf of thousands of trademark owners? GOBOGH! (Go big or go home). After all, even if Rescuecom wins an injunction on its own behalf, Google will just excise Rescuecom from the database without any real change, so Rescuecom's leverage over Google isn't huge. But if a plaintiff's lawyer could win an injunction on behalf of every trademark owner in the state of Texas, that could bring Google to its knees. Surely Google would be willing to write over a few billion dollars to prevent that from happening....

So a two-bit plaintiff, Firepond (who?), brought a trademark infringement lawsuit against Google and some of its distribution partners in Marshall, Texas (where?) alleging that Google's flagship (and only real) revenue generator, AdWords, infringes the trademark of all Texas trademark owners. (Note: I expect copycat lawsuits of this complaint will be filed by other plaintiffs' lawyers seeking some spoils for themselves, all of which should get consolidated into a single action). This is a well-structured lawsuit that squarely raises the long-contentious debate over the legitimacy of selling trademarked keywords. (I won't recap that debate here, but I still think this article of mine best explains why plaintiffs' whining about competitive diversion from search ads is fundamentally misguided). Should this lawsuit reach a final judgment on the merits, we will have a very important answer about what search engines and other keyword sellers can and can't do.

But, I don't think this lawsuit will give us that answer because the judge is very unlikely to certify the class. As we saw in the Vulcan Golf lawsuit, where the court denied class certification over Google's domain name parking program, trademark issues are just too complicated and individualized for class adjudication. Every trademark is different, the identity of each competitive (or other) advertiser is different, every AdWords ad copy is different, the informational needs of every trademark owner's customers are different (for more on this, see Hearts on Fire's complicated standard for evaluating consumer confusion), trademark defenses are idiosyncratic, etc. Perhaps the reason no one has sought a trademark class action over AdWords before is that it probably can't be done. (Although I realize a prediction like that just fans the flames of a plaintiff class action lawyer).

While on the surface this lawsuit sounds like bad news for Google, Google might look at it as an opportunity, not a threat. Similar to the way it got favorable solutions from the click fraud class action and the Google Book Search settlement, Google could decide it wants to form the class so that it can permanently end all trademark owners' beefs at once. If the class forms, then Google can either (a) make its stand in a single case, fight to the death and try to win the lawsuit outright, effectively eliminating further challenges, or (b) more likely, settle up by paying an amount that represents a pinprick to its financial well-being but makes a few lawyers in Marshall, Texas rich enough to buy more cow pasture than they can shake a rattlesnake at. The settlement would then bind all trademark owners governed by the class, eliminating their right to sue. This could be cheap one-stop shopping for Google.

The Marshall, Texas origins of this lawsuit are interesting for another reason. As most of you know, Marshall has become the patent litigation capital of the United States due to patent owners' perceptions that it has plaintiff-friendly judges and juries. However, I've been reading reports that the pace of new patent lawsuits in Marshall is slowing down. Could it be that the plaintiff's patent bar in Marshall now has a little extra time on their hands and is looking for a new revenue stream? Could Marshall, Texas become the new home of dubious class action trademark litigation by repurposed plaintiff patent lawyers?

UPDATE: Joe Mullin explores the "patent troll" ties to this lawsuit.

Posted by Eric at 09:05 PM | Search Engines , Trademark | TrackBack

May 05, 2009

Google's International Trademark Policy Change: "What, Me Worry?"

By Eric Goldman

I've had a number of discussions with folks about what Google would do in light of its adverse ruling in Rescuecom. Personally, I didn't expect them to do much of anything right now. I still think they have a good shot at winning the Rescuecom case in the end, and if they do, they probably won't feel any reason to change their practices. If they lose the Rescuecom case, then we'll have to see why the loss occurred before evaluating corrective changes.

Meanwhile, in a probably unrelated move that is nevertheless interesting especially due to its timing, Search Engine Land reports that Google has liberalized its trademark policy in 190 countries to conform to its current policy in the US, Canada, Ireland and the UK (the latter two may have been liberalized in response to the favorable UK Mr. Spicy case). Thus, in 190 additional countries, Google will no longer block the sales of trademarked keywords. Notorious litigation hot-spot France remains on the list of places where Google will block trademarked keyword sales.

I'm not sure what, if any, legal developments have changed in these 190 countries to give Google comfort on the trademark front. However, I am sure this move will be unpopular with trademark owners!

Posted by Eric at 09:55 PM | Search Engines , Trademark | TrackBack

May 03, 2009

April 2009 Quick Links

By Eric Goldman

[Just a reminder that I am posting some “quick links” exclusively to my Twitter account, so if you want to keep up with everything, follow me at Twitter or subscribe to the RSS feed.]

Marketing/Spam

* Zango is dead (and so is adware), Ken Smith, Zango's CTO, conducts a post mortem: What Zango Got Wrong and What Zango Got Right. Mike Masnick's post-mortem.

* The FDA's instructions about pharmaceutical search marketing have led to lots of confusion. See Search Engine Land and the NYT.

* NYT: "Never Mind What It Costs. Can I Get 70% Off?"

* Tsan Abrahamson on social media and marketing law.

* Asis Internet Servs. v. Consumerbargaingiveaways. A district court diverges from Mummagraphics and says CAN-SPAM does not preempt CA's anti-spam law even if there is no common law fraud.

* Jackson v. American Plaza Corp., No. 08-8980 (S.D.N.Y. April 28, 2009), A Craiglist advertiser isn't a third party beneficiary of Craigslist's contract for purposes of stopping another advertiser from breaching the contract (in this case, spamming the forum).

Defamation

* Gardner v. Martino (9th Cir. April 24, 2009). I'm not a fan of talk radio, and the 9th Circuit apparently isn't either. The court upheld an anti-SLAPP dismissal of a defamation claim against the radio talk show host because "The Tom Martino Show is a radio talk show program that contains many of the elements that would reduce the audience’s expectation of learning an objective fact: drama, hyperbolic language, an opinionated and arrogant host, and heated controversy." Accord DiMeo v. Max. As Marc Randazza notes, rulings like this pose a challenge for those who think contextually ridiculous statements should be treated as "cyberbullying" or "cyber-harassment." Cf. the Finkel v. Facebook case involving asinine but clearly meaningless chatter on a private Facebook page.

* Some big defamation losses reported by CMLP:
- Blogger hit with $1.8M damage award.
- $12.5M defamation judgment against a gripe site.

* CMLP has a page organizing all of its 47 USC 230 material.

Intellectual Property

* Publicly republishing a private email leads to a default judgment of copyright infringement.

* Bryant v. Europadisk, Ltd., 2009 WL 1059777 (S.D.N.Y. April 15, 2009). In 2000, musicians authorized distributors to distribute their [hard copy] recordings, which the defendants ultimately ripped and allowed Amazon and Rhapsody to deliver via downloading. The resulting lawsuit turned on the interpretation of the license agreement term “internet sites.” The court says the term "is not ambiguous and does not extend to websites selling digital copies of songs. At the time the parties entered into the agreements, The Orchard sold physical copies only. As its Vice President explained by affidavit testimony, digital downloads of music did not become a “viable business” until iTunes was launched in approximately April 2004, long after Media Right and Gloryvision entered into contract."

* Octomom is seeking trademark registrations.

Miscellaneous

* GeoCities is shutting down.

* eBay will referee customer disputes.

* Wilson Sonsini's VC financing term sheet generator.

* Oddee: 10 Most Bizarre [Online] Gaming Incidents

Posted by Eric at 06:31 AM | Adware/Spyware , Content Regulation , Copyright , Derivative Liability , E-Commerce , Internet History , Licensing/Contracts , Marketing , Spam , Trademark , Virtual Worlds | TrackBack

April 28, 2009

Promatek Redux: Software Consultant Enjoined from Metatag Usage and Other TM References--Deltek v. Iuvo

By Eric Goldman

Deltek, Inc. v. Iuvo Systems, Inc., 2009 WL 1073196 (E.D. Va. April 20, 2009). The Justia page.

Every year in Cyberlaw, I teach Promatek v. Equitrac, a Seventh Circuit metatags case from 2002 noteworthy for its multiple litigant and judicial errors typical of a cyberspace freakout case. Among the many mysteries of the case is how the court treats the fact that Equitrac advertised that it provided servicing of Promatek's equipment. The court says that Equitrac was free to say that, but it couldn't say it in the metatags...for reasons that I still don't understand.

Today's case raises similar issues to the Promatek case, and the resolution isn't much clearer. Deltek sells complex cost-accounting software. Iuvo includes three former Deltek employees who started a business providing consulting about Deltek software and other Deltek software-related services. Iuvo's websites advertise the fact that it provides servicing for Deltek software, but Deltek apparently doesn't like that or, apparently, the competition (not surprising because Iuvo was allegedly undercutting Deltek's price). Thus, Deltek launches a multi-prong attack on Iuvo, including claims that the site infringes its trademarks, the former employees misappropriated Deltek trade secrets, and the former employees violated their non-compete agreements.

With respect to the trademark claims, the defendants assert "fair use" (more precisely, nominative use). The court isn't convinced, in part because of the implied affiliation from Iuvo's references to Deltek's trademarks, even though the websites had an appropriate disclaimer of any relationship. Citing the doctrinally confused Axiom case, the court relies on the same implied-affiliation grounds for the metatags, saying "This use of Deltek's trademarks as metatags may cause a consumer to believe that Iuvo is affiliated or related to Deltek and may therefore constitute an improper attempt to trade on the commercial value associated with the marks." However, no one who understands metatags believes this statement is in the least bit credible.

Ultimately, the court crafts a split-the-baby injunction, restricting Iuvo:

from using in the "www.iuvosystems.com" website the phrases "Deltek Upgrade", "We Provide Deltek Solutions" and "Technology Consultants With Deltek Experience"; from using as metatags for any website associated with the Defendants' business activities any Deltek trademarks or trade names including, but not limited to, "Deltek Costpoint," "Deltek Time Collection," "Deltek Install," "Deltek Hosting" and "Deltek Consulting" and from using the web domain names "www.installdeltek.com" and "www.installdeltek.net."

Although the injunction is relatively narrow, it is still obviously problematic. First, the blanket restriction on including Deltek in the metatags makes no sense. See the Welles case. Second, I don't immediately see anything wrong with the phrase "installdeltek" in the domain name if Iuvo acts as a systems integrator and, in fact, installs Deltek software (a point I believe Deltek contested). Finally, I'm struggling to see what's wrong with the phrase "Technology Consultants with Deltek Experience," which seems completely accurate in describing both the former Deltek employees' experience as well as the company's accumulated experience.

Three observations about the case:

1) I hate metatag cases!

2) This is yet another example that the nominative use defense isn't very robust.

3) It's interesting that the court declined to issue an injunction based on the trade secret and non-compete claims, so Deltek's only victory came from its trademark claims. This is a good example of trademark's power to restrict competition, even when other anti-competition legal doctrines fail, and even when the competition may be in the consumers' best interest.

Posted by Eric at 09:31 AM | Trade Secrets , Trademark | TrackBack

April 27, 2009

Catching Up on Three Keyword Advertising Cases--Hearts on Fire, Romeo & Juliette, AAA

By Eric Goldman

Three trademark owner v. advertiser rulings from the past month:

Hearts on Fire Co. v Blue Nile, Inc., 2009 WL 794482 (D. Mass. March 27, 2009). The Justia page.

This is an interesting and potentially very important keyword advertising case.

The plaintiff is a diamond manufacturer which sells its products under the "Hearts on Fire" brand. The plaintiff does not sell its diamonds directly to consumers. The defendant is an Internet retailer that does not sell the "Hearts on Fire" brand of diamonds. The plaintiff alleges that Blue Nile bought the keyword "hearts on fire" at WebCrawler and then displayed an ad that included the words "hearts on fire" in the ad copy.

In this ruling, Blue Nile tries to dismiss the trademark claims for lack of use in commerce. The ruling came out before the Rescuecom case, but it doesn't matter. (The court did not feel bound by the First Circuit's Venture Tape case, which did not address use in commerce in a metatags case). After canvassing the statute and the precedent, the court says "there is little question that the purchase of a trademarked keyword to trigger sponsored links constitutes a "use" within the meaning of the Lanham Act." Post-Rescuecom, this is even more likely to be true.

The court also discussed consumer confusion. Noting that "there is no suggestion that diverted consumers inadvertently believed they were purchasing Hearts on Fire diamonds at Blue Nile's website," the sole possible basis of consumer confusion is initial interest confusion. In an understatement, the court notes that doctrine is a "somewhat ill-defined concept."

Unfortunately, the court proffers its own definition of initial interest confusion (one of dozens of different definitions), and its definition is a regressive throwback to 1990s legal conceptions of search processes:

[a] classic example [of IIC] is where a consumer sets out in search of one trademarked good, but is then sidetracked en route to his or her original destination by a competitor's advertisement or offering. He or she is never confused as to the source or origin of the product he eventually purchases, but he may have arrived there through either misdirection or mere redirection. In effect, initial interest confusion involves the diversion of the consumer's attention from one trademarked good to a competing good, even if he is not confused about the source of the products he ultimately considers or buys

As I've repeatedly explained, this definition (and its emphasis on attention diversion) is analytically corrupt because it overassumes a linear search process. How do we know when a consumer is "sidetracked" or, in fact, discovers more helpful information? And how can a court determine this?

Despite this odd and unfortunate construction of initial interest confusion, the court acknowledges an alternative story that searchers might be able to distinguish between competitive offerings, which would preempt any initial interest confusion. The court hypothesizes that some keyword advertising listings might be akin:

to a menu--one that offers a variety of distinct products, all keyed to the consumer's initial search. Sponsored linking may achieve precisely this result, depending on the specific product search and its context. When a consumer searches for a trademarked item, she receives a search results list that includes links to both the trademarked product's website and a competitor's website. Where the distinction between these vendors is clear, she now has a simple choice between products, each of which is as easily accessible as the next. If the consumer ultimately selects a competitor's product, she has been diverted to a more attractive offer but she has not been confused or misled

So where does Blue Nile fit on this spectrum between attention usurper and menu-option? The court isn't willing to let Blue Nile off the hook because it advertised on a trademark for a product it does not sell, saying a "consumer who had just entered a search for Hearts on Fire diamonds might easily believe that the Defendant was one such authorized retailer when presented with Blue Nile's sponsored link, even if the accompanying text did not contain the trademarked phrase."

As a result, the court reserves this case for a full multi-factor likelihood of consumer confusion analysis—but not the normal multi-factor analysis. Instead, the court plans to look at a bunch of additional factors beyond the normal ones:

under the circumstances here, the likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context. This content and context includes: (1) the overall mechanics of web-browsing and internet navigation, in which a consumer can easily reverse course; (2) the mechanics of the specific consumer search at issue; (3) the content of the search results webpage that was displayed, including the content of the sponsored link itself; (4) downstream content on the Defendant's linked website likely to compound any confusion; (5) the web-savvy and sophistication of the Plaintiff's potential customers; (6) the specific context of a consumer who has deliberately searched for trademarked diamonds only to find a sponsored link to a diamond retailer; and, in light of the foregoing factors, (7) the duration of any resulting confusion.

This is a good news/bad news development. The good news is that this is a very productive inquiry for courts to make. It does not matter what judges or plaintiffs intuitively think will confuse consumers; it only matters what consumers think and how they process the information presented to them. The bad news is that I have no idea how the parties will provide credible evidence to support this inquiry, and a new and even more complex multi-factor test is destined to compound the existing judicial difficulties with the multi-factor likelihood of consumer confusion test.

Some implications of this case:

1) In the past, some language in First Circuit cases implied that the First Circuit did not recognize the initial interest confusion doctrine. This case offers more evidence that the initial interest confusion doctrine, like a virulent weed, has taken root (in some form or another) everywhere.

2) A ruling like this shows how courts are analytically tortured by keyword advertising cases.

3) Assuming that Blue Nile falsely advertised that it sold "Hearts on Fire" diamonds, isn't this a paradigmatic bait-&-switch? In other words, do we really need to go through these doctrinal contortions? On the other hand, if the Blue Nile ad copy had a clearer exposition that it sold diamonds but not Hearts on Fire branded diamonds, wouldn't that also be an easy case? Thus, the only difficulty is when Blue Nile keys its ads to Hearts on Fire but doesn't reference the trademark in the ad copy at all (which, for example, would be the result in any Google ads if Hearts on Fire blocks its trademark). Personally, I would love to see some empirical evidence about how consumers evaluate ads without any reference to the triggering brand. Meanwhile, for you SEMs, if you are not already doing so, you should be running your ad copy by your lawyers. Clear ad copy ought to reduce or eliminate the risk of lawsuits like this.

4) I will be interested to see if other courts embrace the court’s addition of new factors to the multi-factor consumer confusion test. If so, this could make these cases much more complicated and expensive, but it could also prevent quick plaintiff wins by trademark owners who have no evidence of consumer confusion/initial interest confusion/whatever.

Other opinions on the case: Wendy Davis, Ryan Gile and David Kelly at Finnegan,

Romeo & Juliette Laser Hair Removal, Inc. v. Assara I LLC, 2009 WL 750195 (S.D.N.Y. March 20, 2009). The Justia page.

The litigants are competing laser hair removal vendors. The plaintiff alleges that the defendant ran the following ad:

Romeo And Juliette Laser
Unlimited Laser Hair Removal
$599/Month. Free Consultations.
www.assaralaser.com
New York, NY

Clicking on the URL took consumers to a website where the second line allegedly read "romeo juliette laser Unlimited Laser Hair Removal-$599/Month. Free Consultations."

The defendant alleges that the offending website was operated by a third party, ReachLocal. The court doesn't describe the Assara-ReachLocal relationship in detail, but it does say that ReachLocal is a "third party that Assara hired to manage its advertisements."

In any case, the defendant also seeks dismissal based on a lack of use in commerce. Although this ruling was also pre-Rescuecom, it doesn't matter because the plaintiff's trademark was referenced in both the ad copy and the linked website, which easily satisfies the use in commerce requirement. See, e.g., the Hamzik case.

Ron Coleman has more to say on this case.

The American Automobile Association v. Darba Enterprises, 2009 WL 1066506 (N.D. Cal. April 21, 2009). The Justia page.

Normally I stay away from jurisdictional rulings. However, occasionally keyword advertising plays a key role in the jurisdictional analysis (see, e.g., the Optihealth Products case), and those cases can be a little more interesting.

The defendants operate "several websites that purport to match consumers seeking auto insurance quotes with third-party insurers." AAA complains that the defendants "displayed the AAA Marks without authorization for the purpose of tricking internet users into believing that the site was affiliated with AAA," bought keyword ads triggered by AAA marks, and displayed AAA marks in the ad copy. Further, AAA complains that consumers submitted the lead generation form expecting AAA to be included but the form did not actually get submitted to AAA for a quote.

The court has little problem establishing jurisdiction over the defendant. The court deems the site "commercial" and "interactive" for purposes of the Zippo jurisdictional test. There were also 2 California consumer complaints against the defendants, and the lead generation form had a zip code field to indicate when consumers were from California. "Moreover, by utilizing pay-per-click advertisements to ensure that its name would come up when internet users searched for "AAA insurance," defendant intended to lure internet users to its website, including California residents."

It’s difficult for advertisers on third party trademarks to avoid jurisdictional responsibility in the trademark owner’s home court, so this ruling is not very surprising. However, as discussed with the Hearts on Fire case, I hope the court rethinks its perceptions about advertisers “luring” consumers.

Posted by Eric at 09:56 AM | E-Commerce , Marketing , Search Engines , Trademark | TrackBack

April 20, 2009

eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine--Beltronics v. Midwest

By Eric Goldman

Beltronics USA Inc. v. Midwest Inventory Distribution, No. 07-3340 (10th Cir. April 9, 2009)

This is yet another online channel leakage case (for my last visit to this topic, see the Mary Kay v. Weber case). Beltronics makes radar detectors. Some unnamed distributors bought radar detectors from Beltronics at wholesale prices but subject to a minimum resale price promise. The distributors removed Beltronics' unique identifiers from each detector and resold them to Midwest. Midwest then resold the detectors on eBay.

Removing the unique identifier made it difficult for Beltronics to identify the rogue distributors who were supplying Midwest. Without Beltronics' unique identifier, Beltronics also refused to provide warranty coverage (and some other minor post-sale services) to buyers. However, Midwest claimed that it offered buyers its own 1 year warranty and disclosed in the eBay auction listings that Beltronics would not provide any warranty coverage. Nevertheless, Midwest's claim didn't get much credit because Beltronics claimed that it received inquiries from Midwest buyers seeking warranty coverage, thus leading the courts to conclude that Midwest's disclosures weren't doing a very good job.

The district court concluded that the resales of the Beltronics radar detectors as "new" detectors when they lacked the manufacturer's warranty and other post-sale services created a likelihood of consumer confusion sufficient to support a preliminary injunction blocking Midwest from reselling Beltronics detectors without unique identifiers (which in practice cuts off Midwest's supply because now any rogue distributors can be caught). Midwest attacked the PI on the basis that its resales were protected by the trademark first sale doctrine. The 10th Circuit, heavily citing its atrocious Australian Gold v. Hatfield decision, held that the first sale doctrine didn't apply because Midwest sold a materially different good without the manufacturer's warranty and without adequate disclosures to buyers about the differences.

The net result then is that eBay buyers willing to pay a discount for an identical radar detector but with only Midwest's warranty instead of Beltronics' won't get that choice. Instead, they get the pleasure of buying at the minimum resale price set by Beltronics. However, the 10th Circuit implies, without saying, that it could have reached a different result if Midwest had done a better job with its disclosures. But, after anti-competition rulings like this and the Australian Gold case, I'm guessing Midwest isn't too excited about experimenting in the 10th Circuit.

Posted by Eric at 08:26 PM | E-Commerce , Trademark | TrackBack

April 15, 2009

Graeme Dinwoodie on Rescuecom v. Google

By Eric Goldman

[Eric's note: As I mentioned, I'm getting a lot of private emails about Rescuecom v. Google, including the email from Margreth Barrett that I blogged last week. Today, I got the following email from Graeme Dinwoodie, a law professor currently at Chicago-Kent Law and soon to be at Oxford. Like Margreth, Graeme has written on the trademark use in commerce doctrine and search engine liability. I've blogged on a few of Graeme's papers before as well; see his SSRN page. Graeme has graciously permitted me to share his email on the blog:]

I think that your bottom-line take on Rescuecom is largely right, though it will not surprise you that I do not regard the decision as “disappointing.” I think the Second Circuit largely accepted the arguments that Mark Janis and I have made in our articles, and so I am pleased with the outcome. I agree that there are some oddities in the reasoning, though these are in large part a product of (1) having to distinguish the very badly reasoned decision in 1-800 Contacts, and (2) the fact that the trademark use requirement does not map well to the concerns that should drive the scope of trademark protection. In fact, looking at where the court appears to want to go, I have to think that – if the 1-800-Contacts decision was not out there -- they would have concluded that there was no such thing as a trademark use requirement.

I think that the court largely accepts the critique that some of us have offered of the trademark use requirement: the court recognizes that there is no inevitable symmetry between use sufficient to create rights and use that causes likelihood of confusion; the court recognizes that uses by defendants that fall outside the strict scope of the section 45 definition could be “pernicious”; and the court thinks it important to adopt a rule that allows courts to hold defendants liable when confusion is created (footnote 4 clearly reflects the concern that courts should be able to police this activity).

Of course, because of 1-800-Contacts they could not simply say that Section 45’s definition did not apply to defendants’ uses, which would have been much cleaner. If one accepts, as they do, that the definitions only apply “unless the contrary is plainly apparent from the context,” one could simply have said that almost none of the section 45 definition is intended to constrain what type of activities by a defendant might be actionable. Instead, the appendix proffers a reading of the two sentences in the definition that is truly weird. (Indeed, under one reading, you might even say that they were endorsing -- in the last couple of pages -- a trademark use requirement linked to the affixation language in what the court called the second sentence of the definition.) But their having to do all this is simply a function of the fact that the Second Circuit had previously applied the second sentence to sections of the act of defining infringement in 1-800 contacts: see fn 12.

Likewise, some of the factual distinctions seem a bit odd (even though they were to some extent predictable given the dicta in 1-800-Contacts). The URL/mark distinction is inconsistent with typical infringement analysis that permits use of a term similar to the mark to be infringing and is functionally ridiculous given the prevalence of Mark.com URLs. I suppose the distinction between an ad triggered by a “product category” in 1-800 Contacts and one triggered by a mark as in Rescuecom (also a predictable distinction given the dicta in the earlier case) might reflect some vague notion of directness or frequency of harm, but the alleged harm that is experienced when the ad appears is surely pretty similar. (It reminds me of the link-counting analysis to determine commercial use?). See Dinwoodie and Janis, Confusion Over Use at 1635.

What I take from the decision is that they really would like to go back and rethink 1-800 Contacts. I agree though they have effectively undermined 1-800-Contacts. The bad news is that the messy way in which they have done it -- if they take seriously the details of their analysis rather than the message that they are sending -- might generate some silly litigation in the meantime. The good news is that, if courts focus on the message, we might now get greater judicial consideration of the central issues of what types of confusion -- if any -- are created by this type of advertising, and what types of confusion should be actionable (and I hope that those are separate inquiries). That this is the court’s preferred focus is evident from their alternative explanation for the outcome in I-800-Contacts (see p. 17), their analysis of the product placement analogy, and some of the factual distinctions that they draw between 1-800 Contacts and Rescuecom (at least at the 12(b)(6) stage). It does not seem inevitable to me that search engines or advertisers will lose on the confusion analysis in the cases to come (including this one). And at least I hope we will now have some judicial exploration of whether there is any confusion and whether that should be actionable. To be sure, there are some litigation and compliance costs associated with this, but even those may dissipate over time through accretion of case law. And I hope and expect that defendants will begin to explore the types of uses of marks in ads that might be immunized through defenses such as nominative fair use (we've had a couple of lower court cases beginning to move in that direction). The combination of all of this analysis will, I hope, be more helpful to search engines in formulating appropriate policies and responses to trademark owner requests -- something they have already given a tremendous amount of thought to – than debate about “trademark use”

In short, although there are some problems with the opinion, the outcome should at least start us talking about types of issues that I believe we should be talking about in this area. To put it (I hope not too) tendentiously, the Second Circuit has decided to opt for analysis of “confusion” over “use”, and has decided that we should litigate the scope of trademark law, with due regard for “context.” See Graeme B. Dinwoodie and Mark D. Janis, Confusion Over Use: Contextualism in Trademark Law, 92 Iowa L. Rev. 1597 (2007). Alternatively stated, I think the law that will be developed in the next few years in the wake of this decision will be heavily driven by factual particular rather than broad legal rules (though rules of sorts may accrue over time).

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

April 14, 2009

GoDaddy Sued for Cybersquatting for Parked Domain Names--uBid v. GoDaddy

By Eric Goldman

uBid, Inc. v. GoDaddy Group, Inc., 1:09-cv-02123 (N.D. Ill. complaint filed April 6, 2009)

Domain name parking programs have generated some lawsuits, including the Vulcan Golf v. Google lawsuit (plus several "me-too" lawsuits following in its footsteps) and the recent Philbrick v. eNom decision. Here, uBid (the online auction site) goes after GoDaddy for its parked domain name program when the domain names include a uBid trademark. In a mild surprise, uBid only claims an Anti-Cybersquatting Consumer Protection Act violation; it does not claim trademark infringement or the various junky unfair competition claims that often accompany a trademark claim. Maybe those claims are coming in an amended complaint. I'm also interested in the fact that uBid only sued GoDaddy and not the other providers of domain name parking services (of which I believe there are many)--what did GoDaddy do (or not do) to deserve special attention?

Tom O'Toole handicaps uBid's ACPA claim and raises some questions about the lawsuit.

From my perspective, I remain baffled by lawsuits over domain name parking programs and other programs to associate domain names with ads. First, although I understand that it's mostly a fight over cash, these lawsuits have always struck me as a manifestation of domain name exceptionalism in that the law treats domain names as having magical search powers compared to other keywords. If displaying ads triggered by the uBid marks in the domain name is so bothersome to uBid, shouldn't it also be chasing advertisers who buy its trademark for ad triggered at the search engines?

Second, as I explain my Deregulating Relevancy article, there has been a longstanding battle between domain name registries, domain name registrars, toolbar providers, computer manufacturers and others to control the ad inventory of inactive domain names. Even if GoDaddy "turns off" its parking program, others may try to fill the void and monetize the exact same domain names. As a result, I'm still not clear exactly what uBid hopes to accomplish with this lawsuit (other than to take some cash out of GoDaddy's pocket if it wins).

Posted by Eric at 07:25 AM | Domain Names , Marketing , Search Engines , Trademark | TrackBack

April 10, 2009

Q1 2009 Quick Links, Part 2

By Eric Goldman

Trademarks/Domain Names

* The ridiculous Jones Day v. BlockShopper case settled. The settlement agreement. The ABA Journal and Legal Blog Watch stories. Commentary from CMLP, Paul Levy, Tom O'Toole.

* The trial court denouement of the S&L Vitamins v. Australian Gold did not turn well for the defense--$6M jury award. The S&L Vitamins v. Australian Gold and Designer Skins v. S&L Vitamins cases subsequently settled. According to Ronald Coleman: "This settles, for our clients S&L Vitamins, Inc., the Australian Gold case and the related appeal in the Designer Skin case. All money judgments are vacated and parties bear their own fees. Our client agrees to move on to another line of work, however."

* Twelve Inches Around Corp. v. Cisco Systems, Inc., 2009 WL 928077 (S.D.N.Y. March 12, 2009). 17 USC 512(f) does not cover trademark takedown notices.

* Suarez Corp. v. Earthwise, 2008 U.S. Dist. LEXIS 92931 (W.D. Wash. Nov. 14, 2008). Including a competitor's name in a web page disclaimer creates initial interest confusion when the competitor's name is indexed by the search engines. Compare Promatek v. Equitrac, the 2002 7th Circuit case ordering the defendant to include the plaintiff's name on its web page as a cure for initial interest confusion.

* CRS Recovery v. Laxton, 2008 WL 4408001 (N.D. Cal. Sept. 26, 2008). Another California-based court says that domain names are property that can be converted. I'm amazed that these cases are still being brought.

* North American Bushman, Inc. v. Saari, 2009 WL 211932 (M.D. Pa. Jan. 27, 2009) The parties entered into a settlement agreement that "Plaintiffs further agree not to use, and in addition, to offer up or destroy, any material that includes, but is not limited to, the names, photos, images, embroideries, of likeness of [Defendant] James Saari and any of the a above named trade names and trademarks of Defendants." The court holds that this provision wasn't breached when third party users posted comments referencing the defendants in UGC areas of websites operated by the other party.

* Advice Co. v. Novak, 2009 WL 210503 (N.D. Cal. Jan. 23, 2009). Justia page. Stupid lawsuit alert! Attorneypages.com believes Attorneyyellowpages.com infringes its trademark. Case dismissed for lack of personal jurisdiction. Participating in Google AdSense doesn't automatically create jurisdiction in CA.

* DSW v. Zappos, which involved allegations of trademark infringement based on Zappo's affiliates, settled.

* An update on Google's AdWords woes in France.

* Kiva Kitchen & Bath Inc. v. Capital Distributing Inc., 2009 WL 890591 (5th Cir. April 2, 2009). The Fifth Circuit upholds enhanced damages under ACPA. Good discussion of the purpose of damages in the ACPA.

* Toys R Us buys the domain toys.com for over $5M. Is any domain name worth $5M any more?

* A 2007 interview with "Pokey" of Pokey.org fame. This is one of my favorite domain name disputes from the 1990s. A very smart cyberlawyer (Ian Ballon), on behalf of the trademark owners of Pokey & Gumby, unexpectedly got into a public tangle with a 12 year old kid nicknamed "Pokey" over the domain name pokey.org. Debating 12 year old kids in the press never turns out well.

Advertising/Marketing

* Some new material on behavioral advertising: an FTC report and a CRS report.

* Latest NYT article on human billboards. See my prior blog post.

* Privacy advocates are freaking out about Google Android and its ability to deliver location-based information and ads. But location-based information and ad targeting is inevitable...and a good thing.

* Action over mobile marketing: Mobile Messenger settled a false advertising suit with Florida for $1M, and another settlement. Google's response.

* The class in the "Vista Capable" lawsuit was decertified.

* Tsan's post on the latest FTC efforts to rein in testimonials on social networking sites and blogs. Unfortunately for the FTC, some of its efforts may be preempted by 47 USC 230.

* eBay v. Digital Point Solutions, 2009 WL 481269 (N.D. Cal. Feb. 24, 2009). eBay loses an intermediate round in its cookie stuffing lawsuit against Digital Point Solutions.

* e360, a serial defendant in spam cases, sued Choicepoint for selling it email addresses that led to the suits. Apparently neither e360 nor Choicepoint got the memo that the days of email list brokering are dead.

* 10 Creative Bathroom Ads.

Search Engines

* Study: Google's search lead not matched by loyalty. A critical response.

* Is Google giving big brands extra credit in its organic search results rankings? Compare: media giants complaining they don't get enough weighting in organic results.

* Sign of improving consumer search skills: search queries are getting longer.

* Yahoo reserves the right to "auto-optimize" advertiser accounts by changing ads and advertiser bids automatically. This is not a popular move.

* Wired: The Plot to Kill Google.

Posted by Eric at 10:20 AM | Domain Names , Internet History , Marketing , Search Engines , Spam , Trademark | TrackBack

April 09, 2009

Margreth Barrett on Rescuecom v. Google

By Eric Goldman

[Eric's note: my email in-box is bulging with emails trying to sort out last Friday's Second Circuit decision in Rescuecom v. Google. I got the email below from Margreth Barrett, a law professor at UC Hastings who has written a number of papers on online trademark issues (several of which I've blogged about before). See her SSRN page for a couple of those papers. With Margreth's permission, I'm reposting her email to me:]

It strikes me as weird to differentiate Google from the 1-800 case on the ground that the WhenU software didn't use the plaintiff's mark to trigger the pop-up--since when does a defendant have to use an exact mark before it can be deemed to have made an actionable use of the mark? Last time I checked, a defendant could infringe with a word or symbol that was confusingly similar to the plaintiff's mark, like, for example, 1-800 Contacts and 1800contacts.com (or whatever it was). I know that the 1-800 contacts court noted that the web address was not the mark, but I can't see why that should matter. At most the distinction says something about the defendant's intent, but the defendant's intent has not been a basis for declining to find infringement (unless it is considered in the context of a fair use defense, to excuse infringement). Does this decision mean that Google could use the mark owner's Mark.com web address to key a competitor's ad every time a search result listed the mark owner in the top two or three search results? If so, what has been accomplished?

And the court's technical application of the language of the section 45 definition of "use in commerce" is painful. It's basically saying that Google's display of the plaintiff's mark to competitors using the keyword suggestion tool brings Google within the definition. But shouldn't the display be to the people who are likely to be confused? Judge Leval is entirely disassociating the definition of use in commerce from the concept of trademark use. The folks who see Google's "display" of the mark are not going to rely on it for information about product or service source. And the folks who might rely on it for information about source never see it.

The opinion strikes me as moving toward the notion in Panavision [Panavision Int'l, LP v. Toeppen, 141 F.3d 1316 (9th Cir. 1998)] that "selling" a mark constitutes trademark use. Boston Professional Hockey strikes again! [Boston Pro. Hockey Assoc., Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004 (1975)]

1-800 Contacts was a reasonably good decision, and Judge Leval has completely dismantled it. So what constitutes trademark use after this? The real underlying problem that I see here is that the court is trying to use an internal software application of a mark to prohibit an allegedly confusing screen display, which is only tangentially related to the software application, at best. It would be far better to address the screen display issue as a non-trademark-related issue of passing off or "fraudulent marketing," as that term was defined in the Restatement of Torts. Tying to make liability for the screen display rest on the keying use of the mark just further distorts and extends mark owners' control over their words and symbols in digital contexts.

And finally, what was the Appendix on the section 45 definition of use in commerce all about? The court's account of the legislative history is sloppy and shockingly incomplete in a number of ways (for example, the court seems to be unaware that "affixation" and similar "trademark use" limitations were expressly built into the definition of technical trademark infringement both at common law and in all the prior federal trademark acts--language that looked a lot like the sec. 45 definition. And the court totally ignores the sequence in which things happened in the drafting process, which is extremely telling. See my full account of the legislative history of the sec. 45 "use in commerce" definition in my recent article at 43 Wake Forest L. Rev. 893) But aside from all that, what's the point? Is the Appendix simply a performance for the benefit of Congress?

I think it is ironic that Judge Leval wrote an earlier law journal article [Leval, Trademark: Champion of Free Speech, 27 Colum. J.L. & Arts 187 (2004)] in which he touted the trademark use limitation on infringement actions as an important tool in protecting First Amendment interests.

Posted by Eric at 03:36 PM | Search Engines , Trademark | TrackBack

April 03, 2009

Second Circuit Says Google's Keyword Ad Sales May Be Use in Commerce--Rescuecom v. Google

By Eric Goldman

Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. April 3, 2009)

The Second Circuit has issued its long-anticipated opinion in Rescuecom v. Google over Google's sale of trademarked keywords as ad triggers. In a disappointing but not surprising conclusion, the Second Circuit reversed the lower court and says that Rescuecom properly alleged that Google's keyword ad practices constituted a "use in commerce." This ruling merely reverses the 12b6 dismissal for Google, but it raises some important questions--including whether this ruling effectively eliminates any future "use in commerce" defense in keyword advertising cases and whether Google and other search engines could reform their practices so that they are no longer deemed uses in commerce.

1-800 Contacts v. WhenU Distinguished

The most interesting part of the opinion is how this panel distinguishes its 2005 1-800 Contacts v. WhenU precedent, which held that an adware vendor did not make a use in commerce through its keyword ad triggering processes. The court says that Google is different in two main respects:

"First, in contrast to 1-800, where we emphasized that the defendant made no use whatsoever of the plaintiff’s trademark, here what Google is recommending and selling to its advertisers is Rescuecom’s trademark. Second, in contrast with the facts of 1-800 where the defendant did not “use or display,” much less sell, trademarks as search terms to its advertisers, here Google displays, offers, and sells Rescuecom’s mark to Google’s advertising customers when selling its advertising services. In addition, Google encourages the purchase of Rescuecom’s mark through its Keyword Suggestion Tool."

The court appears to be making two distinctions. First, WhenU didn’t sell trademarked keywords directly but instead rolled up search queries into product categories that didn’t contain the trademark anywhere but in an internal database table, so there was an additional layer of abstraction away from trademarks built into WhenU's matching process. Second, the court clearly doesn't like Google's Keyword Suggestion Tool, which I think has also frustrated trademark owners and been repeatedly cited against Google in pleadings.

In theory, then, Google could eliminate its trademark use in commerce by adding a product category abstraction--although this may not be a good idea, as it would not work with long-tail queries--and by modifying or dropping the Keyword Suggestion Tool.

The case also discusses Google's "sponsored link" label and distinguishes it from WhenU's labeling of its pop-up ads. The court gives credence (as it must on a 12b6) to Rescuecom's allegations that Google's placement of ads above the organic results might confuse consumers into thinking those ads were organic. In contrast, in WhenU, the "pop-up ad appeared in a separate browser window from the website the user accessed, and the defendant’s brand was displayed in the window frame surrounding the ad, so that there was no confusion as to the nature of the pop-up as an advertisement, nor as to the fact that the defendant, not the trademark owner, was responsible for displaying the ad, in response to the particular term searched." Personally, I think Google’s interface is sufficiently clear to consumers, but this is a factual assertion not ready for judicial review in this case yet.

One oddity: the court repeatedly says that WhenU displayed ads "randomly" chosen in response to searcher behavior. I'm not sure what the court was trying to say, but the ads were hardly chosen at random, and this is a pretty significant factual error on the court's part.

Finally, the court discusses the analogies to shelf-space adjacency in the retail context. This is a topic of special interest because I've parsed this issue in gory detail in my Brand Spillovers paper. The court, without any citations, reaches the conclusion that

It is not by reason of absence of a use of a mark in commerce that benign product placement escapes liability; it escapes liability because it is a benign practice which does not cause a likelihood of consumer confusion. In contrast, if a retail seller were to be paid by an off-brand purveyor to arrange product display and delivery in such a way that customers seeking to purchase a famous brand would receive the off-brand, believing they had gotten the brand they were seeking, we see no reason to believe the practice would escape liability merely because it could claim the mantle of “product placement.”

Fair enough—if consumers purchase a passed-off good, that would be actionable. However, the court sidesteps all of the nuance in concluding that shelf-space adjacency is a "benign practice that does not cause...consumer confusion." Retailers are hardly “benign” in their practices; see my Brand Spillovers paper for more on that. Further, and perhaps more importantly, it's unclear how Google's ads misdirect anyone. The court had to accept Rescuecom's allegations of diversion as true, but I think those bear very close scrutiny on remand.

What Is a Use in Commerce?

The opinion also contains a scholarly appendix, expressly labeled as dicta, explaining its statutory analysis of the Lanham Act's use in commerce phrase. Not surprisingly, at the end of the appendix it says "It would be helpful for Congress to study and clear up this ambiguity." Although it is dicta, I expect many other courts will follow and embrace this appendix when discussing use in commerce. I also expect that this will put an end to the cottage industry of law review articles debating what the phrase means in the keyword context.

Implications of this Ruling

1) This opinion narrows the 1-800 Contacts v. WhenU opinion substantially to a very specific set of facts. I'm not sure how many courts will be favorably citing that precedent in the future.

2) This case jeopardizes the half-dozen or so district court cases (in Second Circuit-controlled jurisdictions) that have held that keyword advertising purchases aren't a trademark use in commerce. This case involves Google's sale of keyword advertising, not an advertiser's purchase of keyword advertising, but I think those cases are now very shaky precedent. (The court particularly says that the Merck and S&L Vitamins cases "overread" the 1-800 Contacts precedent). The Second Circuit still could find a way to distinguish ad buys from ad sales, but I would be surprised if it did so.

3) This case also jeopardizes the rulings in those cases that keyword metatags aren't a trademark use in commerce. The court says specifically "We did not imply in 1-800 that an alleged infringer’s use of a trademark in an internal software program insulates the alleged infringer from a charge of infringement, no matter how likely the use is to cause confusion in the marketplace." I'm not sure how this applies to keyword metatags, which can't cause consumer confusion under any circumstance. Nevertheless, if the keyword metatags don't have the layer of abstraction that WhenU used, I don't think the court would regard them favorably.

4) Although this is clearly a loss for Google because Google no longer has a reliable way to kick out cases on a 12b6, Google might still prevail in the case. Google had won on a 12b6, and the court merely said that Rescuecom alleged enough in its complaint to survive the 12b6. Google could still win on summary judgment or trial, or the parties might settle. Either way, Rescuecom merely lives to fight another day. (In theory, Google could also appeal this ruling to the Supreme Court; I would be surprised if they went that route or if the Supreme Court would take it).

5) Accordingly, I don't expect this ruling to do much for cases like American Airlines v. Yahoo. Indeed, perhaps anticipating this loss, Yahoo didn't try to get the case into the Second Circuit. I suspect that's because Yahoo had already decided not to expect the use in commerce defense to go in its favor.

6) I'm interested to see what this ruling will do to state efforts to attack keyword advertising, such as Utah's ill-fated forays in this area. In theory, this ruling might alleviate some of the pressure state legislators feel that they have to do something. However, I suspect state legislators are only mildly interested in legal proceedings elsewhere, so I doubt this will make state legislators second-guess their own brilliance.

7) As the court says, it would make a lot of sense for Congress to clean up the statutory drafting muddle over use in commerce in the Lanham Act. I don't think this is likely because of the political gridlock that would emerge over the topic. As I discuss in my Deregulating Relevancy paper, a more pragmatic approach would be for Congress to expressly provide a safe harbor for search engines selling keywords analogous to the safe harbor for domain name registrars selling domain names, but I doubt Google has the muscle for that either. As a result, I don't anticipate legislative intervention to overturn this ruling.

The case library:

* Commercial Referential Trademark Uses (Rescuecom v. Google Amicus Brief Outtakes)
* Rescuecom reply brief
* Law professors' brief by Stacey Dogan and me
* Electronic Frontier Foundation amicus brief by Jason Schultz, Corynne McSherry and Fred von Lohmann
* Public Citizen amicus brief by Paul Levy
* eBay/Yahoo/AOL amicus brief by Celia Goldwag Barenholtz, Janet Cullum and others of Cooley Godward Kronish [now mooted]
* Google's initial brief
* Rescuecom's initial brief
* District Court's opinion

Posted by Eric at 11:51 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 24, 2009

"Locate Plastic Surgeon" Trademark Registrant Brings Dubious Enforcement Action--Ezzo v. Google

By Eric Goldman

Ezzo v. Google, 2:09-CV-00159 (M.D. Fla. complaint filed March 17, 2009). The Justia page.

I'm suffering ennui about blogging pro se lawsuits against companies like Google. Most of them are completely unmeritorious and poorly expressed, so they don't warrant the time and legal risk associated with writing them up. Nevertheless, I decided this lawsuit is blog-worthy because it, combined with the Medical Justice no-talk waivers that I hope to blog about soon, appears to be part of a troubling trend of using IP to make it harder for consumers to find appropriate medical services.

Jamil Ezzo has a registered trademark on the Supplemental Register for the phrase "Locate Plastic Surgeon," which he apparently uses in connection with his website locateplasticsurgeon.com. Armed with this registration, in this lawsuit he sues Google and AOL (apparently for selling the trademark as an ad keyword) and a bunch of other folks in the plastic surgery business who apparently advertised on the keyword. (The complaint is so indecipherable that I'm not really sure what he's beefing about; this is my best guess).

Among other dubious aspects, he comes up with a claim for $90M in damages. He says that over 5 years, the competitive keyword advertising cost him 5,000 customers who would have paid $100/mo each. That's pretty powerful keyword advertising and a gravity-defying 100% margin business. Add in treble damages, and that produces $90M in damages. Nevertheless, the good faith in his computations is palpable because he kept the damages claim under 9 figures.

In any case, putting aside the indecipherability of the complaint, this lawsuit will be quickly crunched because (among other defects) I am extremely confident that "Locate Plastic Surgeons" is not a protectable trademark. Registration on the Supplemental Registry only confirms that the phrase could become a protectable trademark some day, but it's not necessarily protectable today. To make progress, he'll need to show secondary meaning in the phrase, and given the highly descriptive phrase plus the apparently low profile of the site, I think the chances of showing secondary meaning are near zero. Given this, I think this lawsuit is a good candidate for the court to award attorneys fees to the defendants (awardable in exceptional cases, which I think this is).

Even if this lawsuit is a little off-kilter, it still depresses me that anyone could think they can own a protectable trademark in the phrase "Locate Plastic Surgeon" for the process of locating plastic surgeons. It's dramatic evidence of the abysmal and overexpansive state of trademark doctrine today.

More on this lawsuit from Tom Seery of RealSelf.com.

Posted by Eric at 11:01 AM | Derivative Liability , Search Engines , Trademark | TrackBack

March 16, 2009

Union Organizers' Activist/Gripe Sites Don't Support Trademark Claims--Cintas v. Unite Here

By Eric Goldman

Cintas Corp. v. Unite Here, 2009 WL 604099 (S.D.N.Y. March 9, 2009). The Unite Here press release.

Cintas, a Fortune 500 company, manufactures uniforms. The defendants are unions and affiliated folks interested in unionizing Cintas' workforce. This article indicates that the litigants don't like each other.

To advance their objectives, the defendants set up several websites that critique/criticize Cintas, such as cintasexposed.org (targeting Cintas' customers), uniformjustice.org (targeting Cintas' employees) and notonmytrack.info (targeting NASCAR fans). The cintasexposed.org website contained a disclaimer and also linked (directly and indirectly) to some sites with commercial aspects.

Among other things, Cintas sued the defendants for trademark infringement, dilution and cybersquatting. the court grants the motion to dismiss all three claims.

For the trademark infringement claim, the court starts with a standard likelihood of confusion multi-factor analysis, but the factors just don't work in a nominative/referential use situation like this. Unfortunately, the court doesn't mention the nominative use doctrine, which would have facilitated an analytically clean dismissal. Nevertheless, the court gets on the referential track, saying "Defendants are not using the “CINTAS” mark as a “source identifier”, but rather solely to criticize Cintas's corporate practices," which negates any consumer confusion. The court dismisses the initial interest confusion argument because there was no evidence of intentional deception.

The trademark dilution claim fails for a lack of requisite use in commerce (this theory could have helped dismiss the trademark infringement claim too, but the court didn't connect the dots). The court rejects the plaintiff's efforts to do link-counting to linked websites where referred users might be able to transact, saying "The twice-removed links to a union “store” is at least one bridge too far and insufficient to establish the use of the CINTAS mark for profit." (I severely criticize link-counting exercises from prior Internet trademark cases in this article). The cybersquatting claim similarly fails for lack of profit motive.

Posted by Eric at 09:38 AM | Domain Names , Trademark | TrackBack

March 13, 2009

Utah HB 450 Dies in Utah Senate Without a Vote

By Eric Goldman

After barely passing the Utah House, Utah HB 450--Utah's third ill-fated attempt to regulate keyword advertising--died quietly last night when the Utah Senate failed to act on it before the Utah Legislature adjourned for the year. My understanding is that 1-800 Contacts, the bill's principal advocate, stopped pushing the bill in the Senate earlier this week when it became clear that it couldn't muster the votes.

On its face, this bill's failure appears to be good news. While the bill was less ill-conceived than Utah's past two anti-keyword advertising laws, it was still an ill-conceived anti-competitive law designed principally to advance the protectionist interests of a local Utah company. Laws like this should be rejected.

Nevertheless, I feel that there is no real good news here. If the law had died because the Utah Legislature had recognized the folly of thinking that it was uniquely well-positioned to improve keyword advertising, or had abandoned the quest because of its abysmal track record in regulating the Internet, we'd have good reason to celebrate. Unfortunately, I haven't seen any evidence of such an epiphany.

Instead, I *guarantee* that the Utah legislature will revisit the topic of regulating keyword advertising for a fourth time. (I'm reminded of the fable of Ulysses and the Sirens; trying to "fix" keyword advertising appears to be simply irresistible to the Utah Legislature). One reason is that there remains a lot of hostility towards keyword advertising in the Utah Legislature. For example, Rep. S. Clark was quoted last week as opposing HB 450 (indeed, he voted no) because:

"We should be going after the Googles that are creating this problem. They're the villains." .... "If we're going to use the strength and resources of the state to go after businesses, then we ought to go after the business that is causing the harm. … We ought to go after the Googles with the state's resources and reputation."

Nice. In addition to this ill-informed antipathy, companies like 1-800 Contacts and Overstock.com--both Utah-based web retailers with, at best, highly descriptive trademarks--are always interested in ways to reduce their competition. So, Utah's legislative hubris plus local company rent-seeking creates a toxic brew that ensures repeat surfacing of bad policy proposals. Let's reconvene here in February 2010 and see what the Utah bunch is cooking up for the 2010 legislative session. [UPDATE: Kate Kaye has a little more to say about the future.]

Meanwhile, even though 1-800 Contacts didn't get its statutory shortcut to control keyword ads on its trademarks, I expect 1-800 Contacts will keep bringing traditional trademark lawsuits against competitive retailers who buy competitive keyword advertising. 1-800 Contacts has already been busy on this front; I don't have a complete census of these lawsuits, but I pulled the following case list from PACER ()which is usually incomplete for a variety of reasons):

* 1-800 Contacts v. Lensworld.com, 2:2008cv00015 (filed 01/08/2008, closed 09/09/2008)
* 1-800 Contacts v. Drugstore.com, 2:2008cv00157 (filed 02/26/2008, closed 08/12/2008)
* 1-800 Contacts v. Lens.com Inc., 2:2007cv00591 (filed 08/13/2007)
* 1-800 Contacts v. Premier Holdings, 2:2007cv00946 (filed 12/06/2007, closed 05/16/2008)
* 1-800 Contacts v. Memorial Eye, 2:2008cv00983 (filed12/23/2008)
* 1-800 Contacts v. Lensfast, 2:2008cv00984 (filed 12/23/2008)
* 1-800 Contacts Inc v. Manila Industries Inc, 8:2007cv00102 (filed 01/26/2007, closed 04/07/2008) (note: the complaint wasn't on PACER, so I couldn't confirm that this was a keyword suit)

Given this level of activity, I doubt we've seen the last of these lawsuits (unless 1-800 Contacts has exhausted the universe of defendants).

One last point: I remain flabbergasted by the standards of acceptable conduct in the Utah Legislature. For example, as I mentioned before, I got a reliable tip (but I haven't been able to confirm otherwise) that one house representative mistakenly voted yes on HB 450. Whoops! Subsequently, the Salt Lake Tribune reminded us that Rep. Jennifer "Jen" Seelig--who voted yes on HB 450, in case that wasn't obvious--is a lobbyist-employee of 1-800 Contacts, the principal advocate for the bill. (This page describes her title as "Associate Director of Governmental Relations" for 1-800 Contacts). What??? Rep. Seelig explained that she doesn't lobby for 1-800 Contacts in the Utah Legislature, but I would think any representative with such obvious conflicts would necessarily abstain from voting on bills advocated by her employer. (Or perhaps there should be rules against legislators also being employed as lobbyists, but I digress...). Apparently not in the Utah Legislature. Utah residents, I just don't get it--why are you not demanding better practices from your elected representatives???

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

March 12, 2009

Fifth Circuit Denies Yahoo's Jurisdictional Appeal in American Airlines Case

By Eric Goldman

In re: Yahoo! Inc; Overture Services, Inc., No. 09-10098 (5th Cir. March 11, 2009)

In January, the Texas district court denied Yahoo's request to transfer the American Airlines keyword advertising lawsuit out of Texas and into Yahoo's home court in California. Yahoo appealed that ruling to the Fifth Circuit, and yesterday the Fifth Circuit denied the request.

Yahoo's principal argument was that the parties' lawsuit was governed by its Sponsored Search Agreement, which had a mandatory venue clause requiring litigation in Yahoo's home court. The district court judge did not respond well to that argument, calling it "completely nonsensical." The appeals court wasn't as harsh but still concludes that Yahoo didn't make the extraordinary showing required to obtain the relief Yahoo sought--even though American Airlines is seeking disgorgement of its payments under the Sponsored Search Agreement as one of the requested remedies.

This case remains at an early procedural stage, but already I'm struck by how aggressively Yahoo is fighting to get the case out of Texas. There may be good reasons for this--naturally, a litigant prefers to be in its home court and not in its opponent's home court, plus there may be substantive doctrinal benefits in the Ninth Circuit instead of the Fifth Circuit. However, Yahoo is spending a fair amount of money over this procedural point, signaling that it isn't looking for a quick or cheap settlement.

The only remaining jurisdictional question is what, if anything, Judge Fogel in Northern District of California will do with Yahoo's declaratory judgment suit. The most logical thing would be for Judge Fogel to stand down in the face of the continued litigation in Texas, but I don't know if that's the only possible result.

Posted by Eric at 04:01 PM | Search Engines , Trademark | TrackBack

March 06, 2009

Utah House Barely Passes HB 450 (Maybe)--UPDATED

By Eric Goldman

The Utah legislature is continuing its embarrassing third attempt to regulate keyword advertising. Today, after making a ticky-tack amendment, the Utah House passed HB 450 and sent the bill to the Senate. However, the House was sharply divided, voting 38-36-1 to pass it. The law barely made it through due to the fierce last-minute lobbying efforts of 1-800 Contacts; Kate Kaye catches us up on some of 1-800 Contacts' maneuverings.

It's not clear if the Senate will approve the law; or if it will even act on the law before the legislature recesses on March 12. It's also possible that the governor would veto the law. However, for now, it is clear that the Utah legislature is still working hard to retain its status as the reigning jesters of Internet regulators.

UPDATE (12:30 Pacific): Perhaps I should have known better than to rely on the Utah legislative website. I got the following email from a tipster:

"So the bill passed by one vote but one rep realized she voted the wrong way....So she's putting a hold on it and they're going to try to reconsider the action, basically revote the thing, today or Monday."

WHAT??? I realize that mistakes can happen, but I would think that legislators would work really, really hard to vote the right way on bills. After all, isn't that the single most important thing we pay legislators to do? In light of this apparently crucial flub, it seems like the last line of my initial post was even more apropos than I realized.

UPDATE 2: Kate Kaye provides an update.

UPDATE 3 (6 pm Pacific): My latest understanding is that the misvoting representative lifted her hold, and the bill will move to the Senate.

Posted by Eric at 11:26 AM | Marketing , Search Engines , Trademark | TrackBack

March 04, 2009

Utah Trying to Regulate Keyword Advertising....Again!? Utah HB 450

By Eric Goldman

When I first heard that the Utah legislature is considering yet another law to regulate keyword advertising, I thought: Are you kidding me? After all, Utah has pursued these regulations twice with disastrous results. The first time, in 2004, Utah's attempt to regulate adware-mediated keyword advertising was declared unconstitutional, and Utah amended the law in 2005 to make it irrelevant. In 2007, Utah tried again, passing a law that restricted keyword advertising across-the-board. That law was a spectacular failure, garnering derision both within Utah--especially from angry Utah citizens shocked that their elected representatives passed a law that the state AG thought was unconstitutional and that was going to cost valuable taxpayer money to defend in court--and globally as everyone wondered if the Utah legislature was really that crazy. In 2008, the legislature tucked its tail between its legs and repealed the 2007 law.

With this track record, the Utah legislature wants to try regulating keyword advertising again...? Are you kidding me?

Then again, perhaps this latest foray really isn't all that surprising. My sources tell me that 1-800 Contacts is the prime mover behind this statute, and 1-800 Contacts has testified in support of the law. 1-800 Contacts has an hard-to-explain love/hate relationship with keyword advertising. 1-800 Contacts has been a repeat litigant against keyword advertising, including being the losing plaintiff in the landmark 1-800 Contacts v. WhenU case, and 1-800 Contacts has continued to bring other lawsuits against competitive retailers (such as the LensWorld case I blogged about a year ago). At the same time, 1-800 Contacts has been a buyer of trademarked keyword ads, and it was one of the companies that protested the 2007 law because it was concerned the law would limit its own advertising practices (although, at the last minute, 1-800 Contacts flip-flopped and tried to sneak in new restrictions on keyword advertising into the putative repeal of the 2007 law). Clearly, 1-800 Contacts has a complex attitude towards keyword advertising, although it might just be pure duplicity. Either way, with 1-800 Contacts’ flip in 2008 and its continued litigation against keyword advertising, it’s not unexpected that they might try to bend the ear of the apparently pliable Utah legislature.

The Proposed Law

The 2004-05 laws banned trademark-triggered pop-up ads triggered by adware. The 2007 law allowed trademark owners to register their marks with a newly created Utah administrative registry (which never got created) and prohibited keyword buyers and sellers from using registered marks as triggers for keyword advertising. HB 450, the proposed 2009 law, takes a very different approach than the 2007 law:

Fewer Defendants. The law only applies to keyword buyers (advertisers). Unlike the last two laws, keyword sellers such as search engines are immune from liability under this law. However, the law is expansive in other ways: the law expressly holds an advertiser liable for affiliates' keyword purchases (a currently open point in trademark law), and the law expressly references telephone directory assistance advertiser as being within its scope.

Opt Out. The law only applies after the trademark owner sends a takedown notice/cease & desist demand to the advertiser. Further, if the advertiser stops within 10 days of the takedown notice, it is not liable for any remedies under this law. (They might still be liable under other legal doctrines).

Limited Remedies. My reading of the law is that the only remedies against an advertiser are an injunction and attorneys fees--no damages. I'm not 100% sure about this because some states have laws that create damage claims outside the scope of any specific statute (I'm thinking of California B&P 17200). I don't know if Utah has a catchall provision like that.

Geographic Restrictions. One of the most deficient aspects of Utah's 2007 law was that it required advertisers throughout the country to check the new registry before buying keyword advertising on a third party trademark, even if the advertiser, the keyword seller and the trademark owner all had zero connection with Utah. This law tries much more clearly to restrict its reach to Utah. First, the law only applies to ads "in Utah," whatever that means. Second, the law only restricts keyword buys made from sellers that allow "an advertiser to limit the display of advertisements by geographic location." I'm not exactly sure what this means--after all, a site like eBay segregates its listing database by country; does that mean eBay gives advertisers geographic choices?--but it's clear that an advertiser purchasing ads from a seller that doesn't offer any geolocation choices isn't covered by the law. Third, the law doesn't apply if segregating Utah ad viewers from non-Utah ad viewers isn't "technologically feasible" or would impose "an undue financial burden." I'm not saying that this law will survive a dormant commerce clause challenge--personally, I think all state regulation of the Internet is inherently suspect--but the law certainly tried to limit its reach to Utah.

Narrow Scope. The law applies when "the delivery or display of an advertisement in Utah...is the product of a bad-faith attempt to profit from the registrant's mark by diverting a consumer from the registrant, the registrant's authorized licensees, or another source authorized by the registrant." The statute provides for a multi-factor evaluation of what constitutes a "bad faith diversion" by keyword advertising, with the first factor being that the ad "is likely to create an initial, misleading impression that the person is a legitimate source of the goods or services" (which itself is subject to another multi-factor evaluation). Personally, I don't think there is such a thing as bad faith diversion or initial misleading impressions with respect to truthful ad copy, so this ought to be a null set. Even so, the law lists a number of categorical exclusions from its coverage, including:

* advertiser belief that the ad is fair use. Note: the bill uses the term "fair use" several times, even though this term is not well-defined in trademark law. So it isn't clear to me if "fair use" meant descriptive fair use, nominative use, both, neither, or yet something else.
* the sale is permissible under the First Sale doctrine. This should exclude keyword buys by other parties in a trademark owner's distribution channel. However, as I recently blogged, courts are struggling with the First Sale doctrine's application to e-commerce.
* "(a) fair use of a mark in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark; (b) noncommercial use of a mark; and (c) all forms of news reporting and news commentary." This is an interesting set of exclusions; it looks like the drafter tried to (incompletely) mimic the federal dilution exclusions. However, the implicit redundancy with the other fair use aspect mentioned above also raises a question why (a) only applies to famous marks. That's either a drafting error or a significant limitation on that prong.

So What Does This Law Do?

From my reading, it appears that this law does not apply to gripe ads or trademark conflicts within a distribution channel. Therefore, I think the law really only applies to advertising on competitors' trademarks, and even then, only some of the ads.

Given the application to competitive keyword advertising and the focus on an injunction as a remedy, this law covers only limited circumstances that are not already addressed by the search engines' trademark policies, which provide an extrajudicial "injunction." Indeed, this law is nearly co-extensive with Yahoo's and Microsoft's trademark policies. On the other hand, the law would govern situations that Google isn't remediating with its trademark policy because it could force advertisers off keywords that Google would happily sell. Furthermore, the ambiguous application of the law to keyword buys from places other than search engines, such as telephone directory assistance services, may implicate some keyword sellers who don't currently have trademark policies.

Conclusion

If I'm right that this law simply codifies current search engine trademarks policies and extends them some, then this law isn't as problematic as Utah's last two efforts. But it also makes me wonder--what's the point? Doesn't Utah have more important problems to solve???

Even if the law is less troublesome than the last two, let's be clear: this is not a good proposal. As with Utah's past two efforts, this law has nothing to do with improving consumer welfare. Instead, it would allow companies to suppress competition by helping companies keep their competitors from gaining exposure among the company's potential customers; meaning that companies won't have to work as hard competing on price and quality. I understand why companies such as 1-800 Contacts, who has a pattern of trying to use legal tricks to suppress competitors, would find it attractive to ply their local legislators for some corporate welfare. But why any legislator would waste their time with such an unabashed anti-competitive, anti-consumer request is simply beyond me. As I have explained elsewhere, policy-makers should be helping consumers get relevant content, not enacting laws to take it away from them.

The bill is making its way through the Utah House, and my observation of Utah legislative proceedings is that bills can be amended substantially from beginning to end. So this bill could get better, or it could get much worse. Fortunately, a coalition of Internet companies is lobbying against the bill, and the bill barely survived its first committee hearing on an 8-6 vote. Thus, it's not guaranteed that this law will make it through. My hope is that the Utah legislators will recognize the law’s depravity and their own poor track record in the area and squelch this latest effort.

Posted by Eric at 09:55 PM | Adware/Spyware , Derivative Liability , Domain Names , Marketing , Search Engines , Trademark | TrackBack

March 03, 2009

Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber

By Eric Goldman

Mary Kay, Inc. v. Weber, 2009 WL 426470 (N.D. Tex. Feb. 20, 2009). The Justia page. There are a number of Mary Kay meta-sites tracking this and other Mary Kay lawsuits. For more filings and commentary on this case, see pinklighthouse.com.

Amy Weber is a former Mary Kay Cosmetics independent salesperson (in Mary Kay-speak, "Independent Beauty Consultant," or "IBC"). To retain her IBC status, she was required to buy $200/mo of cosmetics. It sounds like Weber wasn't able to move this much product through traditional Mary Kay sales techniques, so she ultimately lost her IBC status. Meanwhile, apparently stuck with an inventory of unsold goods, Weber started reselling the cosmetics on eBay. Over time, she started buying cheap Mary Kay products on eBay from other folks and flipping them on eBay for more. Eventually she started an e-commerce website, initially called "marykay1stop" but later renamed "touchofpink.com." It sounds like the venture became quite successful.

Not surprisingly, Mary Kay wasn't pleased with the channel conflict that the defendants were causing. A Mary Kay representative first contacted the defendants in 2005, ordering them to change their e-commerce site's name (so that it didn't reference Mary Kay) and remove any copyrighted product shots. The parties dispute this conversation; the defendants say that the representative promised that they would be legally OK if they took these steps, while Mary Kay says that its demands didn't promise safety. Not satisfied with the defendants' responses, Mary Kay sued in 2008 for trademark infringement and a variety of other claims.

Regular blog readers will recognize this fact pattern. We've seen a number of similar lawsuits where a manufacturer/brand owner with restricted distribution channels sues because those channels break down and legitimate original goods hit the Internet. See, e.g., Standard Process. v. Total Health Discount (E.D. Wis. 2008); Australian Gold v. Hatfield (10th Cir 2006); S&L Vitamins v. Australian Gold (EDNY 2007); Standard Process v. Banks (E.D. Wis. 2008); Designer Skin v. S&L Vitamins (D. Ariz. 2008); and Tiffany v. eBay (SDNY 2008). The legal principles developed in these cases are decidedly mixed.

In this case, it sounds like one possible problem is that Mary Kay forced its retailers (i.e., the IBCs) to buy more product (through the minimum monthly orders) than the retailers could sell--which would be a type of channel stuffing that leads to big inventories of unsold goods being held by retailers. If so, then Mary Kay got blitzed by all of this unsold inventory when an Internet sales channel opened up. If anything, the minimum monthly order probably exacerbates the problem because those orders are probably at the reduced distributor prices, which would allow IBCs to flip a portion of the inventory at cost to Weber (keeping the rest for personal consumption at the discounted distributor price or resale through traditional means), enabling Weber to undercut standard retail prices.

Trademark Infringement

From a legal standpoint, the trademark infringement claim looks easy to dispose of. Due to the First Sale doctrine, IBCs and any downstream resellers should be free to resell legitimate goods at whatever price they want; and they should be free to let consumers know of the availability of those goods. However, the First Sale doctrine applies only when the resold goods are not "materially different." Mary Kay argued that the goods were materially different because "(1) they are expired, (2) they do not carry the same product guarantee, and (3) they are old, used, discontinued, or otherwise defective." Some of these arguments are questionable (why are discontinued but unmodified goods "materially different"?), but everyone agreed that Weber was reselling expired goods, and with perishable goods this could matter. Not being a cosmetics consumer, I'm not sure how perishable cosmetics are; I suspect some aren't, even if they are stamped with an expiration date. In any case, the court denies summary judgment, making this a fact question for the jury.

The defendants also claimed nominative use, which allows the defendants to use "Mary Kay" to refer to the vendor/licensor Mary Kay. The nominative use defense is only available if the defendants did not take more of the trademark than necessary and did not imply any sponsorship or affiliation.

In addition to the defendants' website references, the defendants spent $20,000/mo on Google keyword advertising to purchase 79 keywords, of which 75 included the phrase Mary Kay or the name of a Mary Kay product. Further, some of the text ads included Mary Kay in the ad copy. Citing the Total Health case, Mary Kay argued that purchasing keyword ads categorically precluded a nominative use defense because the defendants took more of the trademark than necessary. The court rejects this argument, reading the Total Health case more narrowly. The court goes further to say that it would disagree with a broader reading of the Total Health case because Mary Kay's proposed reading would mean that "second hand sellers could not advertise on search engines such as Google without facing liability for trademark infringement."

Instead, the court cites Tiffany and Designer Skin for the proposition that keyword advertising on third party trademarks does not automatically create an implied sponsorship or affiliation. As the court says:

the law will destroy the valuable resource that search engines have become if it prevents those search engines from doing what they are designed to do: present users with the information they seek as well as related information the user may also find helpful or interesting [cite to Designer Skin]

Yes! However, the court says that a fact issue remains whether the ad copy created an implied sponsorship/affiliation. The ad in question read:

"Mary Kay Sale 50% Off: Free Shipping on Orders over $100 Get up to 50% Off-Fast Shipping www.touchofpinkcosmetics.com."

The court says the language "Mary Kay Sale 50% Off" could be read to imply that the ad was from Mary Kay itself.

As for the Mary Kay references on the touchofpink.com website, the court says that the likelihood of confusion factors point heavily in favor of a plaintiff win, so on that basis summary judgment for the defense is inappropriate. The court's whole discussion of likelihood of confusion is entirely odd; the court seems to miss the point that the likelihood of confusion factors necessarily will point towards infringement when dealing with an unauthorized reseller of legitimate goods.

Other Discussion

* The court dismisses the tortious interference claims because the defendants didn't actively recruit other IBCs to resell goods to them, even if the defendants knew that the IBC contract had a restriction on Internet resales, and because the defendants sale of the "trappings" of being an IBC didn't substitute for becoming an IBC.

* The court also dismisses the unjust enrichment claim because unjust enrichment isn't a standalone cause of action. Why why why do so many plaintiffs waste their time alleging unjust enrichment as a standalone cause of action???

* The court partially tosses Mary Kay's consumer survey putatively showing the consumers assumed an affiliation between Mary Kay and the touchofpink website: "confusion that stems solely from the fact that the Webers are reselling Mary Kay products is not legally relevant and might confuse the jury. As a result, the court cannot allow the jury to hear the bald statement that forty five percent of consumers were confused about touchofpinkcosmetics.com's affiliation with Mary Kay." However, respondents' narratives about why they assumed affiliation are admissible.

Conclusion

Mixed rulings like this often produce a settlement. Frankly, I could see both sides wanting to keep this case out of a jury's hands. In court, defense counsel will hammer on the fact that Mary Kay is trying to suppress legitimate resales because they don't like the competition; plaintiff's counsel will probably argue that the defendants deliberately went too far in pretending to be Mary Kay instead of being clearer that they were an unauthorized reseller. I don't know which argument will appeal more to a Texas jury, and this unpredictability increases the attractiveness of a settlement.

Doctrinally, I suspect the defendants hoped for a better ruling. Their First Sale defense was so palpable that it's frustrating the defendants couldn't get the court to embrace it fully. Then again, unauthorized resales of legitimate goods that have leaked out of a controlled channel have really confounded the courts, so perhaps a mixed ruling is to be expected--especially in light of some questionable (in hindsight) decisions by the defendants, such as their original choice for their website name, the ambiguous references to Mary Kay in their ad copy, and the heavy reliance on reselling expired cosmetics.

While the defendants' failure to get a solid win was a loss of sorts, this case does offer some good news for future defendants--especially the court's clear conclusion that simply buying trademarked keyword ads, without more, does not create an implied sponsorship or affiliation with the trademark owner. It would have been nice for the court to rely on some social science to support this proposition, but let's celebrate the court's wisdom however it got there. This, combined with the recent case saying that keyword advertising isn't a false designation of origin, suggest that we are slowly overcoming past rulings that have treated keyword advertising as having some mystical power to hypnotize and divert consumers.

Finally, while completely irrelevant to the case, I'd be remiss if I didn't link to a Mary Kay pink Cadillac--perhaps the most enduring attribute of the Mary Kay brand for a non-consumer like me. Wow.

Posted by Eric at 12:54 PM | E-Commerce , Search Engines , Trademark | TrackBack

February 25, 2009

Domaining Registrar Defeats Cybersquatting Lawsuit--Philbrick v. eNom

By Eric Goldman

Philbrick v. eNom, Inc., 2009 WL 152127 (D.N.H. Jan. 22, 2009). The Justia page.

Philbrick's Sports is a New Hampshire retailer of sporting goods. eNom's customer registered two domain name variants of Philbrick Sport's website. When the customer didn't pay eNom, eNom took the names back for itself. Subsequently, eNom registered another domain name variant of Philbrick's website through a domain name tasting program. Each of these domain names were parked with Yahoo, who displayed sponsored ads on the domains. Philbrick's then sued eNom, claiming cybersquatting and trademark infringement.

Anti-Cybersquatting Consumer Protection Act (ACPA) and Trademark

The court sidesteps the complexities associated with the domain name registrar safe harbor when applied to a registrar holding the domain name for itself, but calls eNom's argument "troubling" (for a little more on this, see my blog post on OnlineNIC). Instead, the court finds that the Philbrick trademark is neither famous (thus not triggering the ACPA protection for famous marks) nor distinctive because it's a personal name and the plaintiffs failed to establish secondary meaning. The fame analysis is actually easy due to the geographically limited footprint of the business, although the court doesn't reference that.

To overcome the fact that Philbrick is the plaintiff's surname, the plaintiff makes a common argument that eNom intentionally copied the plaintiff's trademark, which the plaintiff argues should act as prima facie evidence that the mark has achieved secondary meaning (i.e., if the term is meaningless to consumers, why is the defendant mimicking it?). Philbrick's goes further to argue that Yahoo's auto-population of the links provides evidence that Yahoo recognizes the Philbrick's mark and is responding to it. The court rejects these arguments, correctly calling them "circular," and ultimately concludes they are unpersuasive. It was nice to see a court apply a rigorous scrutiny of secondary meaning considerations, rather than rotely rubber-stamping data that only acts as a proxy for consumer perceptions.

The net result is a painful outcome for the plaintiff. As we've seen before (e.g., the American Blinds lawsuit), the plaintiff walks out of court with fewer trademarked assets than it thought it had.

With Philbrick's marks declared non-distinctive for lack of secondary meaning, Philbrick's trademark infringement claim drops away. For good measure, the court independently concludes that there was no likelihood of consumer confusion.

Cyberpiracy

In an unusual move, the plaintiff brought a "cyberpiracy" claim for registering a domain name containing his personal name (15 USC 1129). This portion of the ACPA is lightly litigated because it only applies when the registrant obtains a domain name for profitable resale, and few domain registrants do that any more. Rather than ruling on this ground, the court says that the domain "philbricksports" is not substantially similar to the plaintiff's name of "Daniel Philbrick," and thus the claim fails for lack of similarity. This is a pretty narrow reading of 1129 because it seems to allow a personal name in the domain name so long as there is a substantial noun in the domain name as well. If this reading holds, we'll see even fewer 1129 claims in the future.

Other Points

A false advertising claim fails as well. The plaintiff claimed that the headline "Welcome to Philbrickports.com” was false, but because the domain was Philbrickports.com, this headline is unquestionably true.

In addition to the factual novelty of the case (the registrar as an ACPA defendant and the 1129 cyberpiracy claim), some other interesting angles to this case:

* I've repeatedly argued that lawsuits over domain names don't make economic sense, and we get more evidence of that here. The court cites evidence that one domain name generated $183.29 in revenue and a second domain name generated 70 cents of revenue. If Philbrick's doesn't get statutory damages from the court, with numbers like these, there is no possible way that a court will award enough damages to make this lawsuit economically rational.

* the case does not cite the limited precedents involving domainers and cybersquatting. Most conspicuous is the absence of a citation to Verizon v. Navigation Catalyst, which is the flagship plaintiff's win in the area. Verizon's other big win, with $33M in damages, didn't get a mention either.

* the court rejects any initial interest confusion argument with a nice shoutout:

it is worth noting that the initial interest confusion doctrine has been criticized as “predicated on multiple and empirically unsupported assumptions about searcher behavior” on the Internet, e.g., “that using a trademarked keyword means that the searcher wanted to find the trademark owner.” Eric Goldman, Deregulating Relevancy in Internet Trademark Law, 54 Emory L.J. 507, 555-56 (2005). That is yet a further problem with the proof in this case-apart from the one customer who encountered the “philbricksports.com” site while looking for the plaintiffs, there is no evidence to suggest how anyone else ended up there, and thus no basis to assume that they were necessarily trying to find the plaintiffs' business but became “lost,” even initially.

I love it when a court does good research! :-)

Conclusion

In the end, eNom wins summary judgment on all claims. According to this news report, Philbrick plans to appeal. From my perspective, that doesn't look like a prudent call. Putting aside the illogic of throwing more money at these not-worth-it domain names, the district judge missed a number of defense-favorable rationales to support its ruling. As a result, there is plenty of room for an appeals court to find alternative grounds to affirm.

UPDATE: Marty Schwimmer doesn't agree with this opinion or with me. Marty is right that the court was decidedly not generous with the secondary meaning analysis, although I did like that the court didn't just accept the plaintiff's arguments blindly.

Posted by Eric at 10:02 AM | Domain Names , Trademark | TrackBack

February 24, 2009

Guerrilla Marketing Under False Pretenses Might Be Passing Off--Heartland v. Forest River

By Eric Goldman

Heartland Recreational Vehicles, LLC v. Forest River, Inc., 2009 WL 418079 (N.D. Ind. Feb. 18, 2009). The Justia page.

When deciding whether it should bring a lawsuit, a potential plaintiff needs to consider not only their likelihood of winning, but also the risk that the lawsuit will prompt some counterclaims or affirmative defenses that leave the plaintiff worse off than if it had never sued in the first place. We've seen several examples of plaintiffs who probably wished they hadn't started the litigation. See, e.g., American Blinds, Axact, and Buying for the Home. Sometimes it really is better to do nothing.

Today's lawsuit started with a patent infringement claim by Heartland, a manufacturer of travel trailers/RVs, against its competitor Forest River. Forest River strikes back against Heartland by arguing that Heartland engaged in a type of guerrilla marketing. Here's a recap (based on the facts recounted in the opinion):

Forest River brought RV dealers to lovely Mishawaka, Indiana (a suburb of South Bend) for a private trade show (which sounded like an event to wine-and-dine dealers of Forest River's RVs). Forest River put the 700+ attendees up at local hotels. Heartland apparently got wind of the shindig and prepared packets for these attendees containing comparative advertising and an invitation to visit Heartland's facility in beautiful Elkhart, Indiana (also part of the greater South Bend/Michiana metro area). Then, while the attendees were at one of Forest River's events, Heartland employees:

went to the front desks of the hotels and then falsely stated and represented to the hotel attendants that they were "from Forest River" and that they had "important" envelopes which needed to be delivered to the Forest River guests "for a Forest River dealer meeting the next day."

At least two hotel security cameras caught Heartland employees making these requests. (Say cheese!) Not wanting to reject a request putatively from a major customer, the hotel employees dutifully distributed Heartland's packets to the guests staying there. According to Forest River, Heartland's action caused "disruption and confusion among several of Forest River's guests because of the incongruity and surprising manner in which the envelopes were delivered ... [and] adversely affect[ed] Forest River's good will with its dealers and adversely affected Forest River's sales of its products."

Clearly Heartland isn't afraid of aggressive marketing. But was their stunt illegal?

The opinion does not suggest that Heartland's packets contained deceptive marketing materials. The court also does not say that Heartland misappropriated a trade secret or otherwise impermissibly learned about the attendees (although the opinion implies that Heartland might have gotten an illicit copy of the attendee list). Further, knowing that the dealer group was in town, Heartland can freely communicate with the attendees in a variety of ways--billboards, radio ads, even leafletters standing outside the various hotels

So the main crux of the problem is Heartland's apparent misrepresentation to the hotel employees to get them to distribute the packets to the hotel guests. Is such a misrepresentation actionable by the putatively harmed competitor? The court expresses doubt about the merits of Forest River's claim but does not dismiss it, saying:

Heartland's intentionally deceptive conduct in the hotel action plausibly had the natural and probable tendency and effect of which was to deceive the public so as to pass off its goods or business as for that of Forest River. Moreover, the Court will not condone Heartland's actions as simply healthy competition.

One possible lesson from this case is that it would make a lot of sense for Heartland and Forest River to collaborate on a greater Michiana RV trade show that would have given them shared access to the dealer group. This would have mitigated the risk of guerrilla marketing by one of the local competitors and allowed them to share expenses.

Another lesson is that the case reinforces the already well-established rule that marketers should not lie in marketing campaigns, either in the marketing message's substance or to get the marketing message delivered.

Finally. the case reminded me a little of the Toy Manufacturer's case (Toy Manufacturers of America, Inc. v. Helmsley-Spear, Inc., 960 F.Supp. 673 (SDNY 1997)), which suggests that certain kinds of time-and-space adjacencies for competitive activities are not permissible. For more discussion about the trademark implications of such adjacencies, see my Brand Spillovers article.

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

February 19, 2009

AP Enforcement Action Against Syndicator Survives Dismissal Motion--AP v. All Headline News

By Eric Goldman

Associated Press v. All Headline News Corp., 08 Civ 323 (SDNY Feb. 17, 2009)

We've seen a lot of ruffled feathers over Internet republication of news headlines, ledes and snippets--the most recent being the GateHouse lawsuit and settlement, but we can easily go back at least a dozen years to the old Shetland Times lawsuit to find similar issues. Some of the teeth gnashing is due in part to the ambiguity and paucity of directly applicable law, so any new judicial ruling, even an opinion on a motion to dismiss, is noteworthy.

According to the opinion (which is a little cryptic), All Headline News either rewrites AP stories or copies stories in full, strips out the source identification in some cases, and republishes its version of the stories to a network of paying customers. To the extent All Headline News is a syndication service of real-time news, it appears to be at least a partial competitor of AP. AP alleged a number of claims against All Headline News, and this ruling addresses All Headline News' motion to dismiss the following complaints:

* Hot News. After concluding that All Headline News was subject to NY's law, it held that a hot news claim was properly pled. This makes sense in light of both the original INS v. AP case from 1918 (which addressed a not-dissimilar set of facts) and the more recent 1997 2nd Circuit Motorola case, which held that sports scores might be protectable under a hot news doctrine. While we have not seen a lot of viable hot news claims in the past dozen years, the hot news doctrine remains important because it exists independent of copyright. Accordingly, the republication of headlines and ledes could be a hot news misappropriation even if it isn't a copyright infringement. Because of the early procedural posture, the hot news claim might still fail, but the hot news doctrine's survival of the motion to dismiss isn't a favorable development for news aggregators and republishers.

* Copyright Management Information (17 USC 1202). We haven't seen much action under this portion of the DMCA, which protects against the removal or modification of "copyright management information" (such as a byline) from copyrighted works. It hasn't been extensively litigated, and the courts have interpreted the statute narrowly. Despite that, the court does not dismiss the claim. It will be interested to see if the AP can have any success with this claim given the narrow precedent supporting it.

* Trademark Infringement. The court dismisses the trademark infringement claim. The AP's pleading of both CMI violations and trademark infringement points to an interesting conundrum for content publishers/aggregators. Remove the source attribution and you create a potential 1202 problem. Preserve the source attribution and you might be committing trademark infringement. The court overcomes the damned-if-you-do/damned-if-you-don't situation by implying that citing your sources can't be a trademark infringement.

* Unfair Competition. The court dismisses the 43(a) false advertising claims but preserves the common law unfair competition claim.

Implications. if, in fact, All Headline News is paraphrasing or plagiarising AP stories to operate a competing business, this is a materially different factual scenario than the aggregation and republication of headlines/ledes/snippets that has been the primary focus of Internet legal angst for the past few years. Nevertheless, revitalized doctrines of hot news and 1202 copyright management information both pose significant risks to these aggregation and republication activities independent of the copyright analysis. At minimum, this is a good reminder that focusing purely on copyright infringement claims misses other important considerations.

HT: Marty Schwimmer

UPDATE: Joe Mullin has some interesting things to say about the hot news doctrine and this lawsuit.

UPDATE 2: Jeff Neuburger's comments.

Posted by Eric at 11:21 AM | Copyright , Trademark | TrackBack

February 17, 2009

Affiliate Liability Talk Notes from SMX West

By Eric Goldman

Last week, I spoke for 10 minutes (actually, I took 12) at SMX West on the topic of advertiser liability for affiliates' actions. My talk notes:

General Principles

Issue: when are advertisers liable for their affiliates’ behavior?

General rule: a company isn’t automatically liable for the acts of independent contractors.

Main exception: principal-agency liability. Principals are automatically liable for agent’s behavior within scope of agency. Agency can be express, implied or apparent. Generally, to form an agency, principals must control the agent’s behavior; an agency isn't formed merely by telling an independent contractor the desired results.

Application of general rule: Unless affiliates are agents, advertisers aren’t liable for their behavior, and most affiliates aren’t agents.

CAN-SPAM

CAN-SPAM is a statutory exception to the general rule. State anti-spam laws may have similar statutory extensions.

15 USC 7705: Advertiser liability if advertiser (1) knew that affiliate is spamming, (2) is economic beneficiary of spam, and (3) doesn’t take reasonable steps to prevent or report.

Numerous advertisers have settled with the FTC based on the FTC’s theories of how to interpret this statute. However, the FTC's interpretations don’t have a great track record in court:

* U.S. v. Cyberheat, Inc., 2007 WL 686678 (D. Ariz. March 2, 2007). Government’s theory of strict liability for affiliate behavior rejected—liability requires advertisers’ knowledge and control of affiliate behavior.

* US v. Impulse Media. Government took Impulse Media’s liability for affiliate spam to a jury and lost.

Also, most civil plaintiffs have lost trying to hold advertisers liable for affiliate spam. See, e.g., Fenn v. Redmond Venture, Inc., 2004 UT App 355 (Utah Ct. App. Oct. 15, 2004); Hypertouch, Inc. v. Kennedy-Western University, No. 3:04-cv-05203-SI (N.D. Cal. Mar. 8, 2006); People v. Synergy6, Inc., Index No 404027/03 [Sup Ct N.Y. Co 2006]; ASIS Internet Services, v. Optin Global, Inc., 2008 WL 1902217 (N.D. Cal. March 27, 2008; unsealed April 29, 2008),

Other Types of Affiliate Liability

* Fraudulent ads prepared by affiliates. Florida's AG office has pursued mobile content ads, including those prepared by affiliates to promote the advertiser.

* Adware. The FTC and NYAG have taken expansive view of advertiser liability for running ads in adware. Indeed, based on these theories, the NYAG procured a settlement from Priceline, Travelocity, and Cingular Wireless in Jan. 2007 for $30-$35k each. But the NYAG’s expansive theories about affiliate installations of adware were soundly rejected in People v. Direct Revenue LLC, 2008 WL 1849855 (N.Y. Sup. Ct. March 12, 2008).

* Trademarks. In at least three cases, trademark owners have alleged that advertiser liable for trademark infringement due to affiliate behavior (such as affiliates bidding on trademark owner’s keywords). See DSW v. Zappos.com (S.D. Ohio complaint filed May 12, 2008); NameSafe v. LifeLock (M.D. Tenn. complaint filed June 26, 2008); Rosetta Stone v. Rocket Languages (C.D. Cal. complaint dated July 2, 2008). This is an unsettled area of trademark law. I think it should be analyzed as contributory trademark infringement, which probably would result in no liability for advertisers. As a point of comparison, advertisers are not liable for ads appearing on a site that infringes trademarks. See Fare Deals v. World Choice Travel.com case, 180 F. Supp. 2d 678 (D. Md. 2001),

Other Consequences of Affiliate Liability

Even if advertiser isn’t liable for affiliate’s behavior, advertiser-affiliate relationship may still create problems:

* NY sales tax collection obligation. NY Tax Law Section 1101(b)(8)(vi) enacted April 2008 says:

a person making sales of tangible personal property or services taxable under this article ("seller") shall be presumed to be soliciting business through an independent contractor or other representative if the seller enters into an agreement with a resident of this state under which the resident, for a commission or other consideration, directly or indirectly refers potential customers, whether by a link on an internet website or otherwise, to the seller, if the cumulative gross receipts from sales by the seller to customers in the state who are referred to the seller by all residents with this type of an agreement with the seller is in excess of ten thousand dollars during the preceding four quarterly periods

Legal challenge to the statute: Amazon and Overstock v. NY, decided Jan. 12, 2009. The court upheld the statute against dormant commerce clause, due process and equal protection claims. I think this is a goofy ruling.

Implications of the NY Sales Tax law:

1) If upheld, other states undoubtedly will adopt the same model.

2) Web retailers will either double-down on affiliate programs or kill them (Overstock killed its NY affiliates).

3) This may be the effective death knell for retailer-sponsored online affiliate programs, which could have a significant consequence on the Internet advertising community.

* Competition with affiliates for AdWords/organic placement.

* Public opinion, including FTC shaming, adverse media coverage, and disgruntled consumers.

Best Practices for Advertisers

1) Advertisers' affiliate contracts should prohibit ads in spam, adware, etc. This has successfully cut off advertiser liability in several cases (Fenn, Hypertouch, Impulse Media, Synergy6)

2) Affiliate contract should restrict the affiliates' keyword ad practices. Note, however, the more the affiliate contract controls affiliate behavior, the greater the risk that a court will misinterpret the contract to form an agency relationship.

3) Escrowed/delayed payments are the best way to minimize affiliate fraud and manage contract compliance. It's rare for advertisers to bring lawsuits against affiliates (e.g., Land’s End v. Remy, eBay v. Digital Point Solutions). The best way to curb bad affiliates is to keep dollars out of their pockets.

4) Advertisers must actually police affiliate behavior

5) Especially in light of NY tax law, advertisers must do a cost-benefit analysis of affiliate programs. Are they net-profitable, after considering all of the costs? The answer may surprise you.

For more reading on this topic, see my lengthy article from last year, Affiliate Liability Extravaganza.

Posted by Eric at 10:07 AM | Derivative Liability , E-Commerce , Marketing , Trademark | TrackBack

February 13, 2009

Yahoo's Sale of Competitive Keyword Ads Isn't False Designation of Origin--Heartbrand Beef v. Lobel's

By Eric Goldman

Heartbrand Beef, Inc. v. Lobel's of New York, LLC, 2009 WL 311087 (S.D.Tex. Feb. 5, 2009). The Justia page.

Heartbrand sells Akaushi beef, a special and very expensive Japanese variety of beef. Heartbrand brought an enforcement action against several defendants, including Yahoo for selling a retailer, Lobel's, the first ad position for the keyword "Akaushi." Lobel's sells very expensive beef but not Akaushi beef. Heartbrand alleged that Yahoo's display of the ad constituted Lanham Act false designation of origin and common law unfair competition. I suspect that other plaintiffs have alleged that the search engine makes a false designation of origin by presenting keyword ads, but I can't recall an actual ruling on this issue before.

From my perspective, the natural analytical approach would be to assume the advertiser makes the false designation of origin and then consider Yahoo's liability under some kind of "contributory" or "derivative" false designation claim (if such a thing exists). However, stated this way, the claim then should be preempted by 47 USC 230; other cases have concluded that 47 USC 230 preempts non-trademark portions of the Lanham Act. See, e.g., Kruska v. Perverted Justice Foundation Inc. But see Doe v. Friendfinder.

The court sidesteps this direct-v.-contributory issue entirely, even though it acknowledges that Heartbrand's claim doesn't make sense because "Yahoo! obviously does not fit into these classic models [of false designation of origin] because Yahoo! is not in the business of selling beef." Instead, the court rejects the false designation claim because (1) Yahoo doesn't make any "statement" (the advertiser does), and (2) even if Yahoo does make a statement, it's not designating the origin of Yahoo's offerings.

This case reminded me of the Overstock v. SmartBargains opinion from last August, where the Utah Supreme Court said that trademark-triggered competitive pop-up ads do not constitute common law unfair competition or tortious interference. (Note that in that case, the defendant was the ad buyer, not the ad seller, so there is a significant factual difference). In both the Overstock case and this one, the courts rejected plaintiffs' efforts to fit their claims in doctrines that are ancillary to the more traditional trademark infringement claim. In that respect, this case helps channel the lawsuits back to trademark infringement and might help curb claim sprawl.

Ryan Gile has also blogged on the case.

UPDATE: Rebecca weighs in.

Posted by Eric at 12:02 PM | Derivative Liability , E-Commerce , Marketing , Search Engines , Trademark | TrackBack

February 06, 2009

2008 Cyberlaw Year-in-Review

By Eric Goldman

It's a sign of my schedule that I'm just now getting to this, and this post will be more pithy than I initially conceived. This post recaps some of the Cyberlaw highlights from last year. Frankly, the two biggest stories of 2008 were the financial markets meltdown and the ascension of President Obama, neither of which have a lot of Cyberlaw angles. In light of those big developments, Cyberlaw in 2008 was comparatively quiet. However, there is still plenty of interesting developments to revisit.

Broad Themes

A few broad themes emerged last year:

* Ludicrous trademark claims. 2008 hardly had a monopoly on dumb trademark claims; those are perennial. But 2008 certainly saw some asinine entries, including putative Cyberlawyer Eric Menhart's claim to own a trademark in the term "Cyberlaw," Jones Day's efforts to claim that a web page referencing its name as the employer of some homebuyers violated its trademark rights, and putative Cyberlawyer John Dozier's claim that if his name is used as anchor text, the link must go to his website or it violates his trademark right.

* This was a good year for expansive readings and applications of user agreements. Some examples:
- the Lori Drew prosecution, where Lori was convicted of violating an agreement that someone else clicked through.
- Jacobsen v. Katzer, where a user of copyrighted material is bound by a contract that he/she never clicked through at all.
- AV v. iParadigms, where kids were not allowed to void a user agreement despite their status as minors (and despite the fact that some of them had no meaningful choice about whether or not to consent).
- JuicyCampus enforcement action, where the New Jersey Attorney General's office tried to treat a negative user behavioral restriction in a user agreement as an affirmative marketing representation that such user behavior would not occur on the site.

* One of the long-standing Cyberlaw memes is that websites must either be passive conduits to avoid liability or active editors to manage their liability, but if a website chooses the latter, the website is liable for any editorial mistakes. That is, if the website edits its site but misses something, it's fully liable for what it missed. This simply isn't true under 47 USC 230, which allows websites to choose to be passive, active or anything in between without varying liability. In the IP context, this passive v. active meme has had more traction, but 2008 saw two solid cases suggesting that if a website tries to police its premises and fails, courts will be sympathetic and excuse any omissions. Example #1: Tiffany v. eBay, where the court gave eBay extra credit for its VeRO program as a basis to excuse any counterfeit goods that slip through. Example #2: Io v. Veoh, where the court was more willing to excuse Veoh because it had undertaken extra policing efforts than was required for the 17 USC 512 safe harbor. Finally, although not an IP case, the court in Cisneros v. Yahoo also lauded search engines for their affirmative efforts to block gambling ads, which the court acknowledged was a hard challenge.

* Despite some adverse rulings early in the year, punctuated by the Ninth Circuit's en banc ruling in Roommates.com, the 47 USC 230 immunization is still extremely robust. We saw a number of expansive and pro-defense rulings per 230 throughout the year, including Craigslist, Doe v. MySpace, Cisneros v. Yahoo and Goddard v. Google. Perhaps more importantly, in the three 230 cases I've seen since Roommates.com that cited to the opinion, all three cited the opinion in ruling for the defense.

* Battles over keyword advertising are hardly over, even though Utah officially backed off its attempt to ban them. The ABA IP Section tried to get into the act, and American Airlines sued Google, settled, and then sued Yahoo.

Top 11 Cyberlaw Developments of 2008

#11: Utah Trademark Protection Act repealed. The Utah Trademark Protection Act had the potential to throw the entire keyword advertising business into turmoil. Instead, now that it's repealed, it just remains as a dramatic reminder of the Utah legislature's incompetence regarding Internet legislation.

# 9 and 10: Fair Housing Council v. Roommates.com and Goddard v. Google. The Roommates.com en banc opinion makes the list based mostly on its potential consequences, not its actual effect. It remains one of the most significant pro-plaintiff incursions into the solidly defense-favorable interpretations of 47 USC 230, but it's so riddled with contradictory and ambiguous language that no one really knows what to do with it. I think Judge Fogel's reading of the case in Goddard v. Google has the potential to become the defining interpretation of the case, and his solidly defense-favorable reading of the precedent in excusing Google for ads placed by its advertisers may only reinforce how little Roommates.com changed the law.

#8: AV v. iParadigms. This case was a terrific win for online fair use enthusiasts because the for-profit commercialization of a database of third party copyrighted works was still deemed fair use. The upholding of the contract against the minors forced to enter into it was also significant. Before this ruling, my assumption is that any plaintiff trying to form a class action lawsuit in the face of an adverse user agreement could always form the class on behalf of any minors who had the right to void the contract. This case seems to shut down that loophole in user agreement protection.

#7: Io v. Veoh. The 17 USC 512(c) safe harbor has been law for over a decade and has produced a couple dozen rulings, but few are cleaner and more decisive for the defense than this one. It was a textbook example of a court rejecting the many different arguments plaintiffs make to kick a defendant out of the safe harbor, and as mentioned before, it was a great validation for Veoh's decision to do more than 512 required.

#6: Jacobsen v. Katzer. From a doctrinal standpoint, this case raises really difficult questions about how a copyright consumer can be bound to terms that he/she never "assented" to. Even so, this case had huge implications because it effectively validated that open source licenses can be binding on licensees, giving much more legal credibility to the entire multi-billion open source software industry. However, an odd footnote: on remand, the district court denied an injunction for the plaintiff, raising more issues about what exactly the plaintiff won at the Federal Circuit.

#5: Tiffany v. eBay. A fantastic validation of eBay's practices against a very serious and sympathetic challenger who had plenty of evidence that counterfeit goods were being sold on eBay's site. The case also shows that courts can grow tired of IP owners simply making up their own rules about how online sites should protect them and then suing the sites for breaching these artificial rules.

#4: Mazur v. eBay. A more scary case to 47 USC 230 defense enthusiasts than the Roommates.com opinion. The court says that eBay isn't protected by 230 for some of the marketing representations it makes, even if those representations are rendered untrue by third parties. While this makes a lot of doctrinal sense, it is also a green light for plaintiffs to mine a website's marketing representations as a way to bypass the otherwise-fatal consequences of 230 on a lawsuit triggered by user behavior or content.

#3: