Technology & Marketing Law Blog

February 03, 2012

Are You Kinning Me? Microsoft Beats Trademark Lawsuit Over Kinect--Kinbook v. Microsoft

By Eric Goldman

Kinbook LLC v. Microsoft Corp., 2012 U.S. Dist. LEXIS 8570 (E.D. Pa. Jan. 25, 2012)

Microsoft makes the Kinect motion controller for Xbox, and for a while tried out a mobile phone named Kin. Kinbook makes a Facebook app (is this it?) that is intended to capture and organize family memories. Kinbook discovered Facebook's overzealous position that it owns the -book suffix, so Kinbook changed its product name to Kinbox. It alleged that Microsoft's branding of Kinect for the Xbox infringed the Kinbook/Kinbox trademark.

It's hard to tell how successful the Kinbook app is. Microsoft says it had 14 active users in May 2011. Kinbook claims closer to 17,000. Either way, Kinbook is hardly setting the world on fire. The court explains:

"Kinbook credits the arrival of the Kinect for XBOX 360 and Microsoft's accompanying marketing blitz with the poor start of its "Kinbox" Facebook application"

Stop right there. How could that be true? Assuming for a moment that "Kinbox" and "Kinect for the Xbox" are so overlapping that they could confuse consumers (a proposition I don't believe), wouldn't Microsoft's massive marketing blitz increase interest in Kinbox's offerings? So this should have produced a tidal wave of folks looking for Kinbox. Even if some of those users suffer disappointed expectations (they came because they wanted something other than what Kinbook provided), those users will turn over but won't affect the organic interest in Kinbook. Microsoft's promotion could only help Kinbook. Passing the blame to Microsoft isn't very credible.

Instead, the court finds the following:

* Kinbook has never generated any revenues
* they intended to build a website and mobile app but never did
* they intended to spend a quarter-million dollars on marketing but have only invested "a few thousand" dollars instead. Indeed, "Kinbook acknowledges that it has not dedicated any significant time, money, or effort to advertise, promote, or market its marks or services."

It sounds like any alleged trademark troubles with Microsoft are just the tip of the iceberg. Instead of fixing those core issues with their business, they invested their valuable resources in court proceedings.

The court reaches the entirely sensible conclusion that there's no likelihood of consumer confusion and tosses the claims. Among other reasons, the court points out multitudinous other users of the "kin" prefix:

"Kincafe," an online social network for families to connect; "Kin Valley," a secure online social network for the family; "Kinzin," an online social publishing service to allow groups to privately share photos; "Kinnect.Us," an online social networking service to stay connected with family and friends; "Kinector," an online service to help users stay connected with relatives through a private web site where family can share information; "Connect 2 Kin," an online service for families to stay in touch and share photos, share documents, schedule events, etc.; "Kindle," an e-book reader with social networking capabilities; and many others.

The plaintiff admitted that none of these other examples were confusing. Yet, somehow Kinect for the Xbox was. Hmm.

Kinbook also tried to argue that Xbox appeals to 5 year olds, so they should be the paradigmatic "consumer" whose confusion is measured. The court mocks this argument:

No matter what else the ever-remarkable current-day precocious 5 year-old can accomplish, this Court cannot fathom a 5 year-old with either the faculties or the financial means to independently purchase a retail item costing hundreds of dollars. Second, even the hypothetical precocious 5 year-old dispatched by indulgent parents (or grandparents) to make her or his own selections of amusement would likely be able to distinguish between a free software application, and a $150 piece of gaming hardware.

This lawsuit has all the indicia of a small trademark owner trying to squeeze a big company for a nuisance settlement. After all, Microsoft spent $100M promoting Kinect; if Kinbook could get only a 5% taste of the action, that would still be quite tasty. This ruling reminded me a little of the recent Fancaster ruling, which also involved a trademark plaintiff who hadn't really invested much in building a business before running to court. In the Fancaster case, there was some evidence that Comcast may have muscled into the plaintiff's sphere knowing the potential pitfalls, but there's no hint of that on Microsoft's part here (the case indicates that Kinbook didn't show up in Microsoft's trademark search). Instead, I'm just left with the suspicion that the plaintiff thought that a low-merit trademark lawsuit would be a faster path to revenues than building a business. If that's your idea of entrepreneurship, as a LOLcat might say, ur doin it wrong.

Posted by Eric at 08:52 AM | Trademark | TrackBack

January 27, 2012

Top Internet Law Developments of 2011

By Eric Goldman

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

Countdown: My Top 5 List of Developments in 2011

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

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

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

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

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

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

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

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

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

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

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

Other Interesting Developments.

Some other interesting developments this year:

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

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

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

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

Other Key Court Rulings in 2011

Some other interesting court decisions this year:

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

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

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

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

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

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

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

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

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

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

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

Favorite "Overlooked" Posts

A few posts that maybe got overlooked a little:

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

Lists of Yore

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

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

January 19, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

January 17, 2012

Egregious/Overreaching Ex Parte Orders for Rightsowners Keep Coming -- Deckers and Richemont

[Post by Venkat Balasubramani, with comments from Eric]

Deckers v. Liyanghua, 11-cv-07970 (N.D. Ill.; Dec. 15, 2011) (report and recommendation)

Deckers proceeds against a slew of domain names in Illinois. The case was originally sealed, but in granting a preliminary injunction, the court unseals it. The court's November 15, 2011 (now-unsealed) order provides for the following relief:

- an injunction against defendants
- An order requiring the registries and/or registrars to “prevent the . . . domain names from connecting to corresponding” websites and prevent the registration or transfer of new domain names
- an order directed at search engines, web hosts, registrars and registries to cease facilitating access to any websites through which defendants conduct business
- expedited discovery (Deckers emails a subpoena to banks and service providers who now have to turn over documents)
- authorizing notice via email . . . but “[a] ruling on permissible service of process methods is held in abeyance until Deckers has obtained discovery responses from third parties” [this is significant -- there has not yet been service of process]
- an asset transfer restriction

The preliminary injunction similarly includes a broad injunction against defendants. It also orders the registries to change the registrar of record for the domain names to a registrar of Decker’s choosing. There’s a broad injunction against those "in privity" with defendants, including search engines, web hosts, registrars and registries. The court orders broad discovery, and an asset freeze.

The one interesting thing is that the court makes Deckers post a $150,000 bond. Deckers contested this but the court didn't budge on this issue.

Richemont Int’l v. Montesol OU, 11-cv-09322 (S.D.N.Y.; Jan. 3, 2012)

In this case, the court enters a TRO on Dec. 21, 2011. The TRO broadly enjoins defendants from infringing on the marks and contains an asset freeze. It also purports to enjoin websites, online search engines, online shopping price comparison services and other businesses and publications from advertising, promoting, or marketing the websites or products in question. A similar prohibition is directed to website hosts, ISPs “or any other business supporting, hosting, or providing e-commerce services to defendants’ websites.” The order also directs registries or registrars to “delete all existing DNS entries” for the domain names and to enter the registrar’s default DNS address for the domain names, and orders a slew of service providers to "temporarily disable service to" the domain names.

On January 3, 2011, the court enters a preliminary injunction. The order notes that defendants were served with the papers on December 23 and, as of January 3, 2012, they did not submit any papers in objection. The injunction is similar in scope to the TRO. It contains a broad account freeze directed at third parties. It enjoins service providers from providing support to the websites. It tells the registries/registrars to delete all existing DNS entries and enter the registrar's default DNS address.
__

Venkat's Comments

This activity in the courts is crucially relevant to the SOPA/PIPA discussions taking place right now. Congress should take a look at what is going on in courts--if for no other reason than to figure out what relief judges think is authorized under current law (or what relief plaintiffs seem to obtain) and what potential abuses (if any) may occur, and also to explain how exactly SOPA/PIPA changes existing law. Obviously, just because a court authorizes a certain type of relief does not mean that there is always a proper basis for it. There are a lot of cites to "the court's inherent equitable power" in these orders. That's judicial code for: "there is no express basis for it, but I think certain relief is appropriate and I'm going to grant it."

It may not be easy to engender much sympathy for these defendants, but that's not the point. The system has certain procedural safeguards in place, and those should not go out the window just because you're dealing with a foreign online infringer. The relief that is being granted in these cases is extraordinary and is frequently being done with no notice or minimal notice. There is no way much of this will fly against a domestic litigant. In some cases, the initial papers are filed under seal, so defendants cannot determine what the allegations are against them until the preliminary relief--in the form of a shutdown--is awarded. Plaintiffs seem to be required to do nothing more than to present a declaration from their investigative team alleging that (1) defendants infringe, (2) defendants are located abroad, and (3) perhaps the defendants will evade or frustrate the court's relief.

Based on this, the court typically shuts off the defendant's website and also orders relief directed at third parties who may or may not be subject to the court's jurisdiction. These third parties are not before the court and have no chance to contest the scope of the relief being sought. I'm curious as to how they react when they are presented with the order. Do registrars routinely transfer domain names to a friendly registrar of the plaintiff's choosing? Is DNS deletion or revision routinely implemented in response to these orders?

It's interesting to compare the approach Deckers took in this case to the approach it took against alleged infringers who was selling counterfeit UGG boots out of a house (located in Illinois). See Deckers v. Migliore, 11-cv-06836 (N.D. Ill.; Nov. 15, 2011). Deckers didn't obtain any ex parte relief; they moved for a default after effecting service. Is this because a court was less likely to order the total shutdown of the point of sale of the infringing goods (in this case, a house), or because Deckers views infringement occurring on the internet as somehow different?

All of these ex parte shutdown cases (and there are probably many more out there) warrant a *close* look. It's disappointing to see so many of these orders sail through without any significant objection from the judges who sign them. Of course, they offer a preview of how rightsowners will proceed under SOPA. Many have highlighted the potential for abuse under SOPA. There's little doubt that rightsowners will push the envelope. They are already doing so under current law.
_______

Eric's Comments

Ex parte orders regarding foreign alleged infringers are out-of-control. Without sufficient regulation and without any adversarial pushback, rightsowners have learned that they can ask for ridiculous relief on an ex parte basis and get a judge to sign off on most or all of it. It's clear that rightsowners are asking for way more than the law allows, but judges seem to acquiesce. The results are two-fold:

1) the rightsowners are taking control over third party domain names on an ex parte basis and with questionable notice given to the domain name registrants
2) worse (IMO), judges are issuing orders that purport to bind third party non-litigants, such as domain name registrars, search engines and shopbots. The Federal Rules of Civil Procedure purport to limit such orders against non-litigants, but litigants and judges apparently interpret phrases like "acting in concert" incredibly broadly. The result is that these third party service providers--who aren't in court protecting their interests when the orders are being signed--are presented with a court order that imposes costs on them no matter what they do. They can take the action required in the court order...at some cost. Or they can contest the order...at some cost. Or they can ignore the order and risk being found in contempt. Naturally, these third parties will take whatever path is cheapest--which is usually to honor the order regardless of its legal legitimacy. (This is especially true in the case of domain name registrars, who typically make only a buck or two of profit a year off any particular domain name). So when the judge doesn't tightly control the ex parte requests being imposed on third parties, the judges are usually ensuring that the third party won't contest even an illegitimate order.

Rightsowners don't look so good in this process, but who can blame them for overreaching? If judges are freely handing out lollipops, why not ask for a lollipop! Plus, lawyers view themselves as zealous advocates, so anything that they can get a judge to sign must, by definition, be OK.

This means the real breakdown is occurring with judges. They are supposed to be the safeguards to prevent abuses, but judges are so dependent on adversarial proceedings that they are surprisingly flexible when only one side bends their ears. It looks we need some urgent judicial education about the issues raised by rogue website enforcements.

As Venkat points out, some members of Congress and their rightsowner patrons are also looking pretty silly right now. They keep insisting, with the straightest face imaginable, that rightsowners lack the current ability to bring effective enforcement actions against foreign rogue websites, and this is just FLAT-OUT WRONG. So either these folks are ignorant about what's happening in the courts or lying about it (or possibly both). Now, the entire legislative process is routinely detached from actual facts, so this is nothing unusual, but it's hardly a credit to those who are looking increasingly foolish as rightsowners in court keep getting what lobbying rightsowners and members of Congress keep insisting isn't possible to get. Get your story straight, please.

For the critics of SOPA and PIPA who have decided this legislation is the place to draw the line in the sand: I'm with you, brothers and sisters, but defeating the legislation doesn't end the problem. Until we fix what's taking place in the courts with rightsowners running hog-wild in ex parte proceedings, any legislative successes will be hollow. After we wipe out SOPA and PIPA completely, we need to proactively seek out at least two additional policy solutions:

1) We need to develop educational programs for judges about dealing with ex parte orders, especially when it comes to third party non-litigants.
2) We may need to fix or clarify the portions of the Federal Rules of Civil Procedures so that ordinary service providers aren't bound by ex parte orders against them. The rules should be clear enough that service providers don't have to spend their money to correct judicial errors. Maybe an automatic fee-shift if a plaintiff gets a judge to sign off on an overbroad order that a third party non-litigant successfully contests?

If you have any other suggestions about proactive steps we should take to fix the abuses we're seeing in court, please send them along.

Prior blog coverage of these topics:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

UPDATE FROM ERIC: A reader reminded us of the UDRP Sec. 3, which says: "We [registrars] will cancel, transfer or otherwise make changes to domain name registrations under the following circumstances...b. our receipt of an order from a court or arbitral tribunal, in each case of competent jurisdiction, requiring such action." So when a judge issues an ex parte order against a registrar, the registrar's hands may be tied. All the more reason for the judge to get it right and not rely on ex post pushback from the non-litigant third party. This also creates the possibility of abuse of ex parte orders, just like I discussed in this blog post. If we were to redraft the UDRP, we probably would not make it mandatory for registrars to honor ex parte orders.

Posted by Venkat at 11:49 AM | Copyright , Domain Names , Trademark | TrackBack

January 15, 2012

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

By Eric Goldman

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

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

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

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

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

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

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

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

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

47 USC 230

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

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

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

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

Implications

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

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

Paul Levy's comments on the ruling.

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

January 07, 2012

Trademark Owner Can't Hold GoDaddy Liable for Domain Name Forwarding -- Berhad v. GoDaddy

[Post by Venkat Balasubramani]

Berhad v. GoDaddy, C 09-5939 PJH (N.D. Cal.; Jan. 3, 2012)

Plaintiff, Petroliam Nasional Berhad (Petronas), a government owned entity, owns the Petronas Towers in Malaysia. It’s trying to enforce its trademark rights against two domain names (petronastowers.net and petronastower.net). In mid-2010, it quickly obtained relief against both domain names, via in rem actions. These aren’t the disputes before the court. Prior to obtaining in rem relief against the domain names, Petronas urged GoDaddy to disable the website and domain names (the domain names were registered to GoDaddy and GoDaddy provided forwarding services, which pointed the domain names to porn sites). GoDaddy demurred, stating that as the registrar, it could not adjudicate Petronas’s cybersquatting claim and since it did not host the underlying sites, it couldn’t process Petronas’s trademark infringement claim. Petronas is trying to hold GoDaddy liable for not ‘disabling’ the domain name and website at Petronas’s urging. It asserted claims for cybersquatting and contributory cybersquatting against GoDaddy. Its hook for trying to hold GoDaddy liable? GoDaddy “used” the domain names by providing forwarding services for its customers.

Cybersquatting claim: GoDaddy argued that it was covered by the ACPA’s safe harbor. It also argued that two of the three ACPA elements ((1) use; (2) confusingly similar domain name; (3) bad faith intent to profit) were not satisfied. The court does not rule on the safe harbor issue but agrees with GoDaddy that Petronas's claims cannot withstand summary judgment.

The court finds that GoDaddy’s forwarding service does not amount to “use” of the domain names: “GoDaddy simply provided the infrastructure to the registrant to route the [domain names] to the website of his choosing.” It was a free service that GoDaddy provided to its domain name registration customers. Additionally, under the cybersquatting statute, only the registrant or its representative can “use” the domain name and potentially incur liability. Second, there was no evidence that GoDaddy harbored a bad faith intent to profit by providing forwarding services. It also did not charge for the service so it did not profit from the forwarding in any way.

Contributory Cybersquatting: As the court acknowledges, it’s unclear whether courts even recognize claims for contributory cybersquatting. (I blogged about a Western District of Washington case whre Judge Martinez allowed the claim to go forward at the early stages: “Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward”; see also Eric’s post about SolidHost v. NameCheap: “Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?”). The court analyzes the contributory cybersquatting claim under Perfect 10 and Lockheed and says that Petronas has to show that GoDaddy had knowledge and directly contributed to or induced the infringement. When the defendant provides a service the defendant can be held liable where it exercises “direct control and monitoring of the instrumentality” used to infringe. The court says that there is no evidence that GoDaddy exercised any type of control over the registrant’s use of the forwarding services. The court also says that Petronas has not shown that there is any bad faith by the registrant (the person who utilized GoDaddy’s forwarding services). According to the court, the registrant could have used the forwarding to “create mischief” or “annoy the owner of the Petronas mark” – he didn’t necessarily use the forwarding to “profit.” [This was a strange conclusion. I would have thought that the disposition of the in rem actions would conclusively establish bad faith intent to profit by the underlying registrant.]

Cancellation of Petronas’s Mark: GoDaddy asserted counterclaims and sought to cancel Petronas’s mark. Petronas argued that GoDaddy lacked standing to assert the claim for cancellation but the court rejects this: “GoDaddy has standing to seek cancellation because Petronas is using the registration as a sword against GoDaddy.” With respect to the merits of GoDaddy’s claim, the court says that factual issues preclude the grant of summary judgment. [Ouch. Petronas tries to hold GoDaddy liable, but all that's left of the lawsuit at this point is GoDaddy's claim for cancellation of Petronas's mark.]
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The recently much-maligned GoDaddy may deserve a star for not caving to Petronas’s takedown notice, even at the risk of liability to GoDaddy. The court’s discussion alludes to the fact that registrars play a central role in the functioning of the internet as we know it. This just highlights the effect of GoDaddy’s conduct in other cases (e.g., the ex parte takedown cases Eric and I have blogged about). Of course, there’s also GoDaddy’s SOPA-support debacle, which resulted in a drain of domain names (including this one) away from GoDaddy. It’s unclear exactly what GoDaddy did in response to Petronas’s claims. While it did not cancel the forwarding, it did “assist Petronas in seeking a transfer order, and [locked] each domain.” In any event, GoDaddy deserves kudos for not summarily killing the forwarding that the registrant had in place.

The court’s treatment of Petronas’s direct infringement claim for cybersquatting spans many pages. The court ultimately concludes that GoDaddy provided services to the registrant in the nature of “infrastructure,” but still declines to consider GoDaddy’s claim that it was protected under the safe harbor. This is unfortunate because GoDaddy was forced to expend resources dealing with discovery and summary judgment; this may well influence GoDaddy's future dealings with others who are similarly situated to Petronas. ACPA's relevant registrar immunity provision (for damages) provides:

A domain name registrar, a domain name registry, or other domain name registration authority shall not be liable for damages under this section for the registration or maintenance of a domain name for another absent a showing of bad faith intent to profit from such registration or maintenance of the domain name.

GoDaddy’s forwarding services arguably fall under “maintenance” of a domain name, but there’s not much discussion of GoDaddy’s immunity argument at all in the court’s order. The text of the immunity provision also leaves room for a damages claim where the plaintiff shows a “bad faith intent to profit.” This looks like unfortunate drafting that makes it tough for courts to grant immunity without consideration of fact-specific issues that are germane to the overall cybersquatting analysis. It would be nice for the immunity to distinguish between when the registrar is acting as a registrar and when it’s arguably trying to monetize domain names (e.g., through parking). (See: "Film Academy Targets GoDaddy Founder As Legal Fight Heats Up.") Registrar immunity rulings are rare, but if there was ever a candidate for when it is appropriate, this was it. A scenario where registrars routinely comply with rightsholder requests and disable forwarding or DNS resolution would break the internet. The court recognizes as much in its background discussion of the case (“If registrars stopped performing the function of taking name server information and providing it to registries, the Internet would not function.”) Unfortunately, the court does not take the route of providing immunity. [The routing point is relevant to the overall SOPA discussion.]

The court analyzes the contributory claim under Lockheed’s test for contributory trademark infringement. Courts continue to assume the viability of a claim for contributory cybersquatting, but they rarely dig in. Courts also don’t seem to discuss the contours of a cause of action against the backdrop of registrar immunity. A broad cause of action for contributory cybersquatting against registrars is a work-around of the registrar immunity provisions. (As GoDaddy pointed out, it was precluded by the ICANN/UDRP rules from disabling the site pending resolution of Petronas's claims, which were properly directed to a UDRP forum or a court.) I’m surprised the court did not take a much more critical look at Petronas’s claims here. Trying to hold GoDaddy liable for routing and pointing to DNS servers is a short step away from arguing that GoDaddy should be liable for forwarding. What’s next? Will Petronas sue Al Gore for its injuries because he invented the internet?

Petronas obtained the relief it sought: control or cancellation of the infringing domain names. It tried to hold GoDaddy liable because GoDaddy did not in effect disable access to the domain names. The court correctly rejects GoDaddy’s claims, but does not take the shortest possible route in doing so. The court should be cognizant of how its resolution of claims against GoDaddy will affect how GoDaddy reacts in the future to notices from rightsowners. The current trademark liability rules have resulted in a system where trademark owners can send takedown notices, typically to sites themselves. Rightsowners have pushed the envelope and through rulings such as Akanoc, are likely extending this to hosts as well. Petronas's claims tried to take it one step further, and broaden this to the registrar level. The court rejects its attempt, albeit in a long-winded way.

Related posts:

Contributory Cybersquatting and the Impending Demise of Domain Name Proxy Services?
Domain Name Privacy Protection Services Not Liable for Failure to Disclose Identity of Alleged Spammer
Court Allows Microsoft's Claims for Contributory Cybersquatting and Dilution to Move Forward
Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?
If You Dislike SOPA, You'll Dislike This Case Too
Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods

Posted by Venkat at 11:20 AM | Derivative Liability , Domain Names , Trademark

January 05, 2012

SOPA/PROTECT-IP/OPEN Linkwrap #2

By Eric Goldman

It's been a busy time for news related to SOPA (the Stop Online Piracy Act, not the Stop Online Privacy Act, although that could be an unintended result!), PROTECT-IP/PIPA, and the OPEN Act. In a bit, I'll recap some links. First, though, some general thoughts about the last month.

As I predicted, SOPA has been incredibly divisive. It has largely boiled down to Hollywood in support vs. the rest of the world against, with an emerging "with me or against me" attitude. What a shame. We get much better results when the tech and entertainment community collaborate rather than play zero-sum games.

Naturally, I think Hollywood has made several strategic miscalculations here. First, the outrageousness of its proposals has mobilized the tech community. It's been fascinating watching companies and politicians scramble to disavow themselves from SOPA when targeted by the anti-SOPA advocates. That NEVER happens when it comes to a Congressional proposal to regulate technology. Perhaps this mobilization will be a flash in the pan, or perhaps Hollywood has poked a sleeping tiger once too often.

Second, Hollywood's credibility with its financially-sponsored politicians may be wearing thin. Politicians will happily take its money, but they don't enjoy looking like fools--and many SOPA supporters have, in fact, looked pretty silly while being left twisting in the wind by their Hollywood patrons. Money will buy a lot of politician patience, but the goodwill reservoir is not bottomless.

Third, even if Hollywood can succeed in passing something like SOPA or even PIPA, I believe it would be counterproductive to its long-term interests. As I've mentioned before, we all benefit from having larger common markets (see, e.g., NAFTA or the EEC), and the Internet has emerged as the largest common market of all. A Balkanized Internet will devolve into disparate smaller markets that represent less value for everyone.

A final counterproductive point, although Hollywood may not care. SOPA/PIPA absolutely will drive US dollars--and jobs--overseas. For example, I ditched GoDaddy as my domain name registrar and took my business to a foreign registrar who won't be subject to SOPA/PIPA. If other folks make the same calculations I did, collectively it will be a boon for foreign service providers and a net loss for US service providers. At best, SOPA/PIPA preserve some jobs at the expense of others; my guess is that our economy will suffer a net reduction in jobs. Just what we need during this protracted economic downturn.

The amazing thing is: despite the complete lack of credible empirical evidence supporting SOPA/PIPA, and despite a groundswell of grassroots opposition to it, and despite companies and politicians dropping their support of SOPA/PIPA when the spotlight is cast on them, Hollywood might still be able to succeed in this rent-seeking endeavor. It's evidence of just how well Hollywood has embedded itself into Congress' psyche (and wallets).

Some news items since my last linkwrap:

* OPEN has been introduced in the Senate as S.2029.

* CDT's list of opponents. As you know, I am on it.

* Mike Masnick broke a huge story about Dajaz1.com, showing how our government repeatedly broke the law in falsely pursuing a so-called rogue website. The conduct of the government is chilling--things like this aren't supposed to happen in our democracy!--and if heads don't roll for the coverup, it will be another nail in the coffin of our republic.

* The government also lost the Rojadirecta case. Also, an in-depth look at the Operation in Our Sites bust of Ninja Video, where the government continues to make questionable interpretations of criminal copyright law.

* Constitional Law scholar extraordinare Laurence Tribe and advocate Marvin Ammori both explained how SOPA violates the First Amendment. Marvin followed up with a First Amendment assessment of the manager’s amendment. Corynne McSherry’s thoughts.

* Why aren't members of Congress listening to the opposition? Maybe it has something to do with the revolving door between government and industry. See this article: SOPA revolvers: Sixteen former Judiciary staffers lobby on online copyright issues.

* Wikimedia’s General Counsel Geoff Brigham explains “How SOPA will hurt the free web and Wikipedia”

* One of the many unanswered questions: who is a rogue website and how many are there? CNET News.com suggests that SOPA is all about taking out just one website--The Pirate Bay. Seriously, we're going to break the Internet because of The Pirate Bay? Talk about collateral consequences for something that could be handled with incredibly narrow legislative fixes—or better yet, with precise transborder enforcement cooperation.

* EFF on the good and bad in the OPEN Act.

* Mike Masnick completely destroys Lamar Smith’s so-called statement of facts in support of SOPA. Reading articles like this remind us that support for SOPA/PROTECT-IP is hardly about "the facts."

* More "fact" debunking, this time by Julian Sanchez.

* Speaking of "the facts" or the lack thereof, it appears that the House Judiciary Committee is massively overclaiming who supports SOPA. Misleading the American public apparently is just business as usual in DC.

* Meanwhile, companies are realizing that being listed as a SOPA supporter isn't necessarily good for business. SOPA opponents targeted GoDaddy, who instantly declared their lack of support for SOPA but remains completely untrustworthy and hypocritical.

* Meanwhile, SOPA is turning into an election-year issue, and politicians are beginning to learn the power of Reddit.

* If you want to speak up, check out SOPA Track and find out where your legislators stand. My Congresswoman, Anna Eshoo, has been firm in her opposition to SOPA, but the California senators are both PIPA co-sponsors because they too deeply in bed with Hollywood to listen to other constituents. So fair warning to Sen. Boxer and Feinstein--I plan to vote for your opponents, whoever they are, in the next election cycle.

* Great article about how SOPA will become a Trojan horse for all types of online content censorship, not just the suppression of rogue websites.

* Opposition to SOPA is bipartisan: “I suggest the left and right unite and pledge to defeat in primaries every person named as a sponsor on H.R. 3261, the Stop Online Piracy Act.”

Just a reminder because everyone knows SOPA is so ridiculously extreme: PROTECT-IP is NOT an acceptable "compromise" to SOPA. PROTECT-IP is also extreme. As I indicated previously, if we're going to have any legislative discussions about rogue websites, we should start with the OPEN Act and iterate from there. In light of the action in the courts (see the links below), any legislative solution should be coupled with increased immunities for Internet intermediaries so that they don't just coddle the rightsowners irrespective of the legislation.

FWIW, I have called Rep. Eshoo to thank her for her opposition to SOPA, and I've contacted Sens. Feinstein and Boxer to let them know that I disagree with their positions on PROTECT-IP. Have you contacted your legislators to tell them how you feel? If you don't speak up, they won't know where you stand.

Prior blog coverage of SOPA/PROTECT-IP/OPEN:

* More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names
* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 09:15 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

January 04, 2012

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

January 03, 2012

Nov.-Dec. 2011 Quick Links, Part 2 (Extended IP Edition)

By Eric Goldman

Copyright

* Costco v. Omega (E.D. Cal. Nov. 9, 2011). On remand after the disappointing non-result from the Supreme Court in this case, the district court gives Costco a decisive win, holding that Omega engaged in copyright misuse:

Omega concedes that a purpose of the copyrighted Omega Globe Design was to control the importation and sale of its watches containing the design, as the watches could not be copyrighted. Accordingly, Omega misused its copyright of the Omega Globe Design by leveraging its limited monopoly in being able to control the importation of that design to control the importation of its Seamaster watches.

The net effect is that Costco violated copyright law's importation clause but Omega's copyright misuse makes the importation not actionable. This is one of the most significant copyright misuse decisions we've seen. Assuming it goes to the Ninth Circuit again, it will be interesting to see what they do with it. If this latest ruling stands, Omega's legal hack will be decisively shut down; and other manufacturers trying to use copyright to control their channels for non-copyrightable articles will want to reevaluate their approach.

* The Righthaven debacle continues to wind towards its messy but inevitable conclusion. Some of the items from the last couple months that caught my attention:

- Every time Righthaven's lawyers whine about opponents' unfair litigation tactics, I'm dumbstruck by the duplicity.

- Stephens Media dropped its efforts to contest that Democratic Underground made a fair use by republishing a newspaper article excerpt.

- Righthaven v. Wolf: "The Court admonishes Mr. Mangano regarding his lack of civility. The motion for reasonable attorney's fees in the amount of $32,147.50 and costs of $1,000.85 is GRANTED."

- Righthaven LLC v. Newsblaze LLC, 2011 WL 5373785 (D. Nev. Nov. 4, 2011). Yet another dismissal for lack of standing.

- the auction for Righthaven.com is going on right now. Current high bid is $1,900.

* C-70/10, Scarlet Extended SA v. Societe Belge des auteurs, compositeurs et editeurs (SABAM) (ECJ Nov. 24, 2011). Some interesting quotes from an ECJ opinion:
- "EU law precludes the imposition of an injunction by a national court which requires an internet service provider to install a filtering system with a view to preventing the illegal downloading of files"
- "The filtering system would also be liable to infringe the fundamental rights of its (Scarlet's) customers, namely their right to protection of their personal data and their right to receive or impart information"
- “E.U. law precludes an injunction made against an Internet service provider requiring it to install a system for filtering all electronic communications passing via its services, which applies indiscriminately to all its customers, as a preventive measure, exclusively at its expense, and for an unlimited period”

* Brownmark Films LLC v. Comedy Partners, 2011 WL 6002961 (E.D. Wis. Nov. 30, 2011): In awarding a fee shift to defendants, "the Court finds that Brownmark's legal positions were also objectively unreasonable, and thus their position was frivolous. To this Court, there is little that could justify the plaintiff's stated view that the South Park version was not parody....given the transformative nature of the use and the lampooning Brownmark's original received, there is ample reason to believe that South Park's use would have greater spurred the market for the original. In the internet era, with information freely and quickly accessible, viewers interested in South Park's version could turn to the internet to find a copy of the original. And any confusion over which version was the original could be supplied to online viewers through a statement at the video's web page. For all of these reasons, the Court finds that Brownmark was objectively unreasonable in its position that South Park's use was not fair." Wendy Davis' writeup.

* Carolyn Wright, a/k/a PhotoAttorney, who helps photographers enforce their copyrights, got side-swiped in a misguided enforcement action and had her photo site mistakenly taken offline by a DMCA takedown notice (not surprisingly, GoDaddy was in the middle of this).

* UC Berkeley revamps its policies about student note-taking and recordings of classes. It seems a little odd to encourage faculty members to be sending 512(c)(3) takedown notices freely. James Grimmelmann has more criticisms.

* Gibson v. Amazon (C.D. Cal. Sept. 8, 2011). The court rejected a copyright infringement case against Amazon, Urban Dictionary and others. Gibson is appealing to the Ninth Circuit.

* RIAA is in pre-litigation enforcement mode against ReDigi for reselling digital files.

* The Zynga-Vostu litigation settled.

* Ars Technica: Warner Bros: we issued takedowns for files we never saw, didn't own copyright to

* Megaupload brought a 512(f) suit against UMG for wrongfully taking down a promotional video. The complaint. The contract. James Grimmelmann's comments.

* The economics of the record label-online music site deals look very, very bad for the music sites.

* Techdirt: Congressional Research Service Shows Hollywood Is Thriving

* David v. CBS complaint. Tertiary infringement re-redux: Download.com sued again for secondary copyright infringement for distributing LimeWire and BitTorrent clients.

* A Singapore newspaper sued Yahoo News for copyright infringement.

* An analysis of the Trans Pacific Partnership (TPP).

Trademark

* 1-800 Contacts, Inc. v. Lens.com, Inc., 2011 WL 5403368 (D. Utah Nov. 4, 2011). The court denies 1-800 Contacts' motion for post-judgment relief based on newly discovered evidence. This case could be a textbook case of trademark bullying--remember, 1-800 Contacts has spent well over $650k on this case and Lens.com made $20 (not a typo) of profit directly from its keyword ads based on 1-800 Contacts' trademarks. Prior blog post.

* Speaking of trademark bullying, does an "Eat More Kale" t-shirt infringe any IP rights that Chik-fil-A has in "Eat Mor Chikin"? See the 2011 C&D letter, the 2006 C&D letter and the 2006 C&D response. I assume most kale eaters don't overlap with Chik-fil-A consumers. But, Paul Levy explains why there should be a pox on both parties' houses.

* Lovely Skin, Inc. v. Ishtar Skin Care Products, LLC., 2011 WL 6055489 (D. Neb. Dec. 6, 2011). In a trademark lawsuit, the defendant asked for:

REQUEST NO. 32: All documents referring or relating to purchasing of keywords, “Ad Words,” “sponsored links,” or other advertisements for search engines and any efforts to achieve search prominence on search engines, including but not limited to Your purchase, or consideration to purchase, the name “Lively Skin” or the URL www.livelyskin.com.

REQUEST NO. 37: Documents referring or relating to communications with Google to purchase “lively skin” and “livelyskin.com” as keywords or “Adwords.”

The court says (cites omitted):

In support of its motion to compel, Ishtar states that Lovely Skin's production of documents in response to these requests are “deficient for two reasons.” First, the Google information lacks the dates that the keywords were used, which are necessary to establish “(1) whether Lovely Skin's marks had achieved secondary meaning when Ishtar entered the market; and (2) the extent of Lovely Skin's inequitable use of the term “livelyskin” in its keyword advertising campaigns.” Second, Ishtar claims that as a result of its recent Internet searches, Ishtar has learned that “Lovely Skin possesses additional information regarding keyword purchases made by Lovely Skin through other search engines.” The Court finds that the information sought by Ishtar is relevant to its affirmative defenses of the claims made against it by Lovely Skin.

* Partners for Health and Home, L.P. v. Seung Wee Yang, 2011 WL 5387075 (C.D. Cal. Oct. 28, 2011):

Defendants have infringed Plaintiff's Perma–Life trademark by each of the following acts, taken either individually or as a whole:

a. Registering the domain www.perma-life.co.kr and using it to promote their competing Pearl Life cookware;

b. Applying the metatags “perma life” and “permalife” to the website at www.perma-life.co.kr through which they sold their competing Pearl Life cookware;

c. Applying the term “permalife” as visible video tags (indexes) on videos promoting Pearl Life cookware which they posted on the Internet at video sharing websites YouTube (www.youtube.com) and Tag Story (www.tagstory.com), and on the “blog” site Daum (www .daum.net).

d. Purchasing the term “permalife” as an Internet search engine advertising keyword to direct Internet users to their website at www.pearllife.com at which they advertised their Pearl Life cookware.

* Foreword Magazine Inc. v. Overdrive Inc., No. 10-1144 (W.D. Mich. Oct. 31, 2011). Offering to sell a domain name after getting a C&D can't be introduced as evidence of bad faith in the resulting ACPA suit.

* Weather Underground v. Navigation Catalyst (E.D. Mich. Nov. 9, 2011). Typosquatters' liability for ACPA violations must be evaluated on a domain name-by-domain name basis, not based on the defendant's entire portfolio; and ACPA bad faith cannot be established on a "willful blindness" standard.

* iYogi Holding Pvt. Ltd. v. Secure Remote Support, Inc., 2011 WL 6291793 (N.D.Cal. Oct. 25, 2011). A default judgment against a competitor who created fake reviews bashing the plaintiff.

* Fordham sent a trademark demand letter to Texas Wesleyan for using the acronym "CLIP" to describe its IP center, which garnered derision from many other IP professors. The demand letter (currently set to private; I'm trying to fix that).

* Multi-Time Machine v. Amazon complaint. A watch manufacturer sues Amazon for trademark infringement based on Amazon's internal search engine's results.

* Night Owl Games v. Zynga complaint. Another game developer seeks a declaratory judgment against Zynga over the -ville trademark, this time "Dungeonville."

* Harvard spikes a Yale t-shirt making fun of it.

* Rebecca provides three updates on Southern Snow Manufacturing Co. v. Sno Wizard Holdings, Inc. (see my prior blog post on the case): insurer had duty to defend, a baffling battle over false trademark marking, and a further rejection that metatags matter.

Patents/Trade Secrets

* The Trade Secret Litigator: The America Invents Act: What Will the Impact of the New Patent Law's "Prior Commercial Use" Defense Have on Trade Secret Protection?

* Coca-Cola turns the vault for its secret formula into a tourist attraction.

* The producers of the Bachelor/Bachelorette sued Reality Steve for inducing show participants to leak spoilers. Reality Steve’s response.

* Are strict limits on e-discovery coming for patent cases?

* All Things D reports on Abhyanker v. Benchmark Capital, an idea theft lawsuit against a VC fund involving the entrepreneur who also is behind Trademarkia.

Posted by Eric at 01:05 PM | Copyright , Domain Names , Evidence/Discovery , Patents , Trade Secrets , Trademark | TrackBack

I'm Not a Fan of this Craptastic Trademark Lawsuit--Fancaster v. Comcast

By Eric Goldman

Fancaster, Inc. v. Comcast Corp., 2011 WL 6426292 (D.N.J. Dec. 22, 2011).

We've seen some pathetic trademark lawsuits this year (SUE MOAR KALE, anyone?), but I'll nominate this long-running litigation money-sink (going over 3.5 years) as the saddest trademark case of 2011.

Fancaster registered its mark in 1989 for broadcasting services, and over the years it's been used in connection with a range of services, "including selling Fancaster branded radios, charging customers to watch closedcircuit boxing matches, producing karaoke shows, transmitting sponsored news messages to wireless pagers and cell phones, and conducting live demonstrations of FANCASTER broadcast services" (cites omitted).

In 2006, it launched Fancaster.com to broadcast short sport-related video clips. It hopes to cover such must-see events "as La Tomatina in Spain, Ostrich racing in Arizona, the Westminster Kennel Club Dog Show and the annual Nathan's Hot Dog Eating Contest." Rather than advertise the website on the Internet (you know, where people who enjoy content online might already be), instead they are seeking out untapped Internet enthusiasts by "marketing the website at sporting events, bars, on local television channels in Sioux Falls, South Dakota and Sioux City, Iowa, on radio stations in Charleston, South Carolina, and via flyers and handbills."

Meanwhile, in 2008 Comcast rolled out a service called fancast.com "that allowed users to watch full-length premium mainstream media over the Internet." The service was a debacle, losing $80M in less that 2 years due to “the unexpectedly high cost of distributing video content on the internet.” (Even though Comcast acquired bandwidth at wholesale rather than retail costs...how much it would have cost non-carriers to launch competitive services?). In March 2011, Comcast shut down the Fancast service and rolled the domain name over to XfinityTV.

With the overlap between the Fancaster and Fancast names, one possibility is that Comcast blatantly ripped off the name of a small startup who wouldn't want to tangle with a giant, thereby creating "reverse confusion" where everyone thinks first-mover Fancaster infringes second-comer Comcast. But another story equally fits this facts: Fancaster is doing a little trademark trolling, seeking to increase Comcast's $80M of losses by grabbing some gravy for itself. (Some gravy indeed: Fancaster's damages expert thought it would take $73M of corrective advertising to fix Comcast's damage to a brand that has no market awareness outside of Sioux City.)

It's a sad commentary on our milieu when we can't tell which litigant is bullying the other. Maybe *both* parties are equally imbibing the bullying elixir. Fancast initially unleashed the litigation hounds, but Comcast responded with a hailstorm of countermoves, including an ACPA counterclaim for a slew of "fancast" domain names Fancaster registered after learning about Comcast's upcoming launch. A lot of lawyers appear to have satisfied their billable hour goals using this case. Yay for free-spending deep-pocketed clients!

Trademark Infringement

The court resoundingly thumps Fancaster's core argument about consumer confusion, miraculously finding a way to twist all of the factors to Comcast's favor. The judge may have cut some analytical corners, but that says the judge simply didn't accept Fancaster's narrative.

The court specifically rejected the possibility of initial interest confusion, citing 3rd Circuit precedent that basically limited IIC to competitors, and the parties didn't directly compete. The court also dismisses Fancaster's efforts to show overlaps in search engine results, saying "the confusion one encounters on an Internet search engine is a twenty-first century version of that experienced when searching the phone book." I am going to be doing some work this quarter to show that the initial interest confusion doctrine almost never succeeds in court any more, and therefore it imposes costs on both litigants for no gain. This case is just one example of that.

The court also scoffed at Fancaster's request for $73M for corrective advertising:

There is not a shred of evidence of any damage to the fancaster mark caused by Comcast. The only loss to Fancaster that Mr. Krueger could testify to was that resulting from pursuing the instant litigation against Comcast.

Evidentiary Issues

Comcast had survey expert Hal Poret do two surveys. The court tosses the first one because it didn't adequately replicate market conditions by not presenting consumers with a navigable website:

use of a printout and static screenshots, instead of live websites, provide ample grounds on which to exclude the March 2009 survey. For one, it is difficult to fathom how presenting a respondent with a paper printout of the FANCAST homepage in anyway replicates how an Internet user would encounter and perceive the FANCAST website in the marketplace. Websites, particularly those that offer video content, are meant to be viewed on a computer and allow consumers to browse and interact with them via hyperlinks. The FANCAST printout offered none of these aspects. Similarly, although viewed on a computer, the static screenshots of the fancaster and control website homepages did not allow respondents to interact with them as they ordinarily would in the marketplace.

I haven't researched this issue, but this ruling may tell us something important about the requirements for consumer surveys when websites are involved.

JUST FOR LAW PROFESSOR READERS: Our colleague Greg Lastowka (a longtime friend) gets toasted by the judge for his expert report, which the judge repeatedly called "totally inappropriate" and says "wanders far from the proper scope of an expert's opinion." For example, Greg's report says the judge can award between $1k-$100k for an ACPA violation (a true statement of the law), to which the judge sarcastically responds "Lastowka's generosity gives the Court at least a modest role." Later, the judge blasts Greg for narrating the requirements of an ACPA claim, saying "A jury should not be receiving instructions on the law from two sources, and however erudite and accurate they may be, Mr. Lastowka's instructions will not be allowed to compete with the Court's instructions." The judge also tosses Greg's report on why Fancaster engaged in ACPA bad faith, saying "the expert assumes the role of the fact finder and is therefore not performing the role of an expert." This is a good reminder that when we're called for potential expert gigs, we have to clarify exactly what we're being asked to opine upon and whether it's appropriate for expert testimony. This judge clearly didn't respond well to any line-blurring about expert testimony.

For what it's worth, the court similarly shreds Gary Krugman's expert report for Comcast about PTO practices (part of Comcast's counterclaim for fraud on the PTO), part of which the judge says "inappropriately usurps the role of the fact finder."

Conclusion

This ruling eviscerated Fancaster's case, making it a strong win for Comcast, but it left a few residual legal issues open. Yet, the legal battle has been mooted by the passage of time. Comcast already stopped using Fancast as a brand, and Fancaster still hasn't shown a lot of movement towards developing a real business or even a revenue model. Are the parties really going to spend more money on a pointless lawsuit? We all know what the answer should be; let's see what they actually answer.

For more on the case, see Rebecca's post.

Posted by Eric at 09:00 AM | Domain Names , Evidence/Discovery , Trademark | TrackBack

December 23, 2011

Academic Literature Recap, Q4 2011

By Eric Goldman

I'm mired in grading heck, slogging my way through 146 exams. As a result, blogging has taken a back seat. I have several key items to blog, including the UMG v. Shelter Capital and Ascentive v. Opinion Corp. rulings. I'll get to these and other topics soon.

In the interim, just in time for the holidays, let me call your attention to some recent academic articles that caught my eye this quarter. They may be worth checking out during your holidays. Happy reading!
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Bevin Ashenmiller and Catherine Shelley Norman, Measuring the Impact of Anti-SLAPP Legislation on Monitoring and Enforcement, The B.E. Journal of Economic Analysis & Policy: Vol. 11: Iss. 1 (Topics), Article 67 (2011). The abstract:

We examine changes in environmental monitoring and enforcement activity in the presence of state legislation prohibiting Strategic Lawsuits Against Public Participation (anti-SLAPP laws). Using data on the Clean Air Act from the Environmental Protection Agency’s ECHO database, we find evidence that state inspections increase by almost 50% after a state passes anti-SLAPP legislation. In addition, we find strong evidence that the ratio of findings of noncompliance to inspections more than doubles in the presence of anti-SLAPP legislation.

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danah boyd, Eszter Hargittai, Jason Schultz & John Palfrey, Why parents help their children lie to Facebook about age: Unintended consequences of the ‘Children’s Online Privacy Protection Act’, First Monday, Volume 16, Number 11 - 7 November 2011. The abstract:

Facebook, like many communication services and social media sites, uses its Terms of Service (ToS) to forbid children under the age of 13 from creating an account. Such prohibitions are not uncommon in response to the Children’s Online Privacy Protection Act (COPPA), which seeks to empower parents by requiring commercial Web site operators to obtain parental consent before collecting data from children under 13. Given economic costs, social concerns, and technical issues, most general–purpose sites opt to restrict underage access through their ToS. Yet in spite of such restrictions, research suggests that millions of underage users circumvent this rule and sign up for accounts on Facebook. Given strong evidence of parental concern about children’s online activity, this raises questions of whether or not parents understand ToS restrictions for children, how they view children’s practices of circumventing age restrictions, and how they feel about children’s access being regulated. In this paper, we provide survey data that show that many parents know that their underage children are on Facebook in violation of the site’s restrictions and that they are often complicit in helping their children join the site. Our data suggest that, by creating a context in which companies choose to restrict access to children, COPPA inadvertently undermines parents’ ability to make choices and protect their children’s data. Our data have significant implications for policy–makers, particularly in light of ongoing discussions surrounding COPPA and other age–based privacy laws.

This article stirred up a fair amount of discussion. See, e.g., the CNET coverage.

Some notes about this article:

* no one looks good here: not the kids, parents, Facebook or Congress.
- Parents teach children how to lie to get what they want online
- Gilmore’s law that the Internet interprets censorship as damage and routes around it. COPPA has been a success at getting websites to shun kids 12 and under, but it’s been a complete failure at protecting kids online.
- all of the lying kids are presumptively engaged in criminal activity

* when kids are asked to represent themselves as older than they actually are, do they inadvertently put themselves in more adult situations than they can handle? See my post on mistake of age defenses.

* the policy implications of this report cut in both directions. Pro-regulation: the only way to keep kids off Facebook is to do mandatory age authentication that parents can’t game; or do comprehensive privacy regulation. Anti-regulation: COPPA was a bust, so we should repeal it or structurally modify it.
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Felix T. Wu, Collateral Censorship and the Limits of Intermediary Immunity, 87 Notre Dame L. Rev. 101 (2011). We don't have too many law professor papers really grokking 47 USC 230, which makes this paper instantly noteworthy. Felix presented this paper at our 47 USC 230 fiesta earlier this year. His conclusion:

Intermediary immunity can and should play an important role in protecting speech on the Internet. Immunity prevents the application of laws targeted at original speakers to intermediaries that lack the incentives of original speakers to speak. Immunity can thus be used to avoid the collateral censorship of lawful, socially desirable speech that poses a real or perceived risk of liability to intermediaries. At the same time, immunity can and should be limited. When intermediaries are actually original speakers, and have the incentives of original speakers, immunity is no longer appropriate. Similarly, immunity as to causes of action that are specifically targeted at intermediaries inappropriately prejudges the reasonableness of such liability.

Even ardent supporters of intermediary immunity would be well-served to recognize its limits. When immunity becomes unbounded, it begins to seem increasingly unfair, stimulating calls to cut back on the immunity, or even eliminate it entirely. The framework developed here demonstrates how, without any need to amend current law, we can limit the immunity, while still serving its core purposes.

James Grimmelmann's comments about the paper.
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Sandra L. Rierson, The Myth and Reality of Dilution, 2012 Duke Law & Tech. Rev. ___ (forthcoming 2012). From the introduction:

This Article advances three claims. First, statutory dilution erroneously assumes that the source-identifying function of a trademark is a rivalrous good and one that is dissipated by use. This assumption lacks empirical support, and is assuredly not categorically true despite the contrary principle that underlies the federal dilution statute. If marks are nonrivalrous, as they often are, no cause of action for dilution should exist.

Second, even were particular marks indeed rivalrous, the social and transaction costs imposed by the federal dilution statute would still outweigh the supposed harm to trademark holders. Dilution claims inflict profound anticompetitive burdens, preclude beneficial comparative advertising, and entrench dominant (often oligopolist) firms at the expense of market entrants. Dilution has serious non-economic costs as well and prohibits protected First Amendment speech without justification. For these reasons and others, the federal dilution statute imposes substantially more harm than it (allegedly) prevents.

Finally, the true foundation for the federal dilution statute lies not in alleged economic harms, but rather results from an entirely misplaced fiction of corporate personality. We do not require trademark holders to prove actual economic injury in the context of a dilution claim because, in truth, there is none. Instead, we have granted the holders of famous trademarks the equivalent of a “moral” right to these marks: an extension of the rights granted to a creator of an expressive work in the copyright context. Trademark owners feel vested in their brands, many of which are deliberately anthropomorphized, and the dilution statute reifies and protects these rights as a matter of federal law.

Stacey Dogan's cogent critique of the article. You may recall that in 2007, SCU convened a major academic conference on trademark dilution.
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Lydia Pallas Loren, Deterring Abuse of the Copyright Takedown Regime by Taking Misrepresentation Claims Seriously, 46 Wake Forest L. Rev. ___ (forthcoming 2011). A nice in-depth look into one of my favorite topics, 17 USC 512(f), by one of my favorite authors. The conclusion:

The takedown provisions of the Copyright Act are a powerful tool that copyright owners may use to obtain prompt removal of infringing material from the Internet without judicial assessment of the assertion of infringement. Congress provided a mechanism to deter abuse of this extrajudicial enforcement mechanism in the form of a new cause of action for material misrepresentation. Courts should interpret the requirements for prevailing on a claim of misrepresentation with an eye toward fulfilling Congressional intent. This means using a standard that would hold copyright owners liable not only when they had actual knowledge that the material targeted for takedown was not infringing, but also when the copyright owner should have known if it acted with reasonable care or diligence that the material was lawful. It also means interpreting the injury requirement broadly and awarding attorney’s fees to prevailing plaintiffs. Taking the claims of misrepresentation seriously will shape the behavior of copyright owners who seek removal of material through takedown notices.

Posted by Eric at 07:55 AM | Content Regulation , Copyright , Derivative Liability , Privacy/Security , Trademark | TrackBack

December 18, 2011

More on Ex Parte Cutoffs of Foreign "Rogue" Domain Names

By Eric Goldman

I got the following email regarding our prior three posts on ex parte cutoffs of foreign "rogue" websites in the Chanel, True Religion and Philip Morris cases (I'm republishing the email with permission):
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All of the court papers in the Chanel case were been posted to http://servingnotice.com/sdv/. Similarly, the court papers in the Philip Morris case are at http://servingnotice.com/jiang/index.html.

A little exploration of the site reveals that a Fort Lauderdale lawyer named Stephen Gaffigan (who seems to be a sole practitioner) has brought a bunch of these cases. In the Chanel case, "service" on the vast majority of the defendants was achieved by posting the complaint at http://servingnotice.com/sdv/ and getting a TRO ordering the registrar of defendants' domains to redirect the accused domain names to http://servingnotice.com/sdv/. Reading the court papers, it turns out that the purported authority cited by Mr Gaffigan in his memorandum supporting Chanel's motion is a collection of orders and default judgments in other uncontested cases brought by the same lawyer, according to the same template. (See http://www.servingnotice.com/ofn/index.html; http://servingnotice.com/pan/index.html; http://servingnotice.com/off/index.html; http://servingnotice.com/oft/index.html; http://servingnotice.com/li2/index.html; http://servingnotice.com/qi/index.html; http://servingnotice.com/wu/index.html; http://servingnotice.com/ling/index.html).

Gaffigan's method seems to be to rely on default judgments. Nobody has showed up in any of these cases to contest his motions in court. (The docket sheet in the Chanel case shows the voluntary dismissal of a couple of defendants, so I assume those individuals showed up and either settled out of court or got off without settling to avoid an in-court contest.) So, there has been nobody to make the argument to district courts that no US statute authorizes the remedies Gaffigan seeks, and nobody to appeal the judgments to a court of appeals, and no opportunity for a court to assess the appropriateness of the remedy in a contested proceeding.
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Eric's comments: This email helps to answer some of my prior questions, such as how many similar cases are out there (many) and whether these cases will multiply (it appears the True Religion case was brought by an unrelated law firm, Greenberg Traurig). Yet, it leaves open my most basic question, which is what can be done proactively to educate judges about the potential abuses of the ex parte process, joinder, notice to defendants and orders purportedly binding non-litigant third parties. It also leaves open the implicit question of whether attorneys who seek overreaching ex parte requests will be subject to discipline or sanction for any possible abuses of the process.

Prior coverage:

* Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang
* If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
* The OPEN Act: Significantly Flawed But More Salvageable Than SOPA/PROTECT-IP
* I Don't Heart SOPA or PROTECT-IP: A Linkwrap
* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika
* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

Posted by Eric at 11:17 AM | Domain Names , Trademark | TrackBack

December 16, 2011

Does the House Judiciary Committee Debating SOPA Know What's Going On In the Courts?--Philip Morris v. Jiang

[Post by Venkat Balasubramani, with comments from Eric]

Philip Morris USA, Inc. v. Jiang, 11-cv-24049 (S.D. Fla.) (TRO entered on Nov. 16, 2011) (Prelim. Injunction Entered on Dec. 12, 2011)

This is yet another case where a court orders broad remedies to a rightsowner who alleged that various foreign domain names were selling infringing products. See our recent blog posts on the Chanel and True Religion cases.

The plaintiff in this case is Philip Morris, who alleges that an investigator purchased products from various websites. The investigator forwarded the products to a Philip Morris representative, who alleged that "what appeared to be Marlboro cigarettes were in fact counterfeit." Additionally, the representative

reviewed and visually inspected the internet websites operating under each of the subject domain names, as well as pictures of items bearing the Philip Morris USA Marks offered for sale on the internet websites, and determined that the products were not genuine and/or authorized Philip Morris USA products.

The court issues a TRO that is similar in scope to the Chanel TRO. (The same lawyer was involved in both cases on the plaintiff's side, so this is probably more of a function of the fact that Chanel and Philip Morris sought similar relief.) The TRO contains the following:

- Defendants are enjoined from using any Philip Morris marks, in websites, domain name extensions, links to other websites, search engine databases.
- The domain name registrars are directed to transfer the domain name certificates to plaintiff (for deposit with the court).
- The registrars are directed to transfer the domain names to GoDaddy, who will "hold the registrations for the . . . domain names in trust . . . during the pendency of [the] action."
- GoDaddy shall also update the DNS data so it points to a copy of the complaint, summons, and court documents (<http://servingnotice.com/jiang/index.html>).
- Finally, Western Union is directed to "divert" transfers made by US consumers to three named individuals

The court later extends the TRO and enters a preliminary injunction with substantially similar terms. The orders in this case don't order any sites de-listed, but are still pretty extraordinary in scope. The fact that the court orders the complete disabling of websites and orders registrars to transfer domain names to GoDaddy based solely on the strength of the declarations Philip Morris's investigator and representative is really surprising. Of course, ordering (on an ex parte basis) the diversion of funds transmitted through Western Union is extreme.

As with the Chanel and True Religion cases, the same questions remain. Is there a relationship between the various defendants and the domain names? What type of notice of the lawsuit did defendants actually receive? Was there actually infringement or counterfeiting? The plaintiffs in these cases end up convincing the court of a key fact: immediate, ex parte relief is necessary because defendants will hide assets and shift operations. Courts seem to take this allegation at face value. (The court does authorize service via alternate means and Philip Morris filed affidavits of service in accordance with the court's directive, but this seemed like an afterthought.)

Yesterday's SOPA hearings caused many observers to cringe (see, e.g., Mike Masnick's horrifying recap). I think it's worth revisiting the question of how courts appear already open to remedies people think are objectionable in legislative proposals that are being considered.

Related posts:

If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei
Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does
Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act
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Eric's Comments

In our True Religion post, I asked just how many similar cases are in the system. Unfortunately, there's not an easy way to quantify the litigation activity. For example. in the True Religion case, the entire action was sealed for a couple of weeks. Even without the seal, I don't know how to find these ex parte rightsowner enforcement cases against foreign rogue websites other than laboriously reviewing every federal filing, having readers tip us off or serendipity.

However, with today's case representing the third foreign rogue website enforcement case we've found in the past month, I'm going to guess that more enforcement actions are out there today or are coming imminently. This seems to suggest that rightsowners have figured out a way to work with the current system without any additional legislation.

The fact that rightsowners are making progress on their own without help seems quite relevant to the debates about SOPA taking place right now in the House Judiciary Committee. Unfortunately, those debates are so ungrounded from reliable fact-based deliberation that the unpersuadable committee members wouldn't care if we found a million of these cases. In contrast, if they were willing to consider the facts on the ground, the possibility that courts are giving rightsowners what they want is a strong indication that SOPA doesn't need to be slammed home on the fast track without proper deliberation.

From my perspective, the three cases demonstrate the problems with ex parte judicial oversight. Only hearing one side of the story isn't enough to trigger the kind of draconian remedies the courts are granting. In particular, in this case, interdicting money being sent via Western Union is quite troubling. Basically, the court says that money being sent by customers who may have done nothing wrong goes into a holding tank--the customers don't get their money back now (and maybe never?) even if the transaction didn't consummate. It seems like rejecting the money transfers, rather than interdicting the money, would have a lot fairer to the buyers caught in the middle. But they aren't in court to defend their interests, and no one else is speaking up on their behalf, so the rightsowner can make a pure cash grab from potentially innocent buyers. That kind of result wouldn't happen with real due process.

Instead of insulting each other on Twitter or reading the sports pages, what the House Judiciary Committee should be doing is putting the existing legislative proposal to the side, taking a close look at what's going on in these cases, figuring out how much relief rightsowners are getting today from the courts, and then deciding if any incremental legislation is necessary to fill any gaps or--equally importantly--curb any rightsowners' abuses of the ex parte process. Instead, sadly, the House Judiciary Committee will continue its bizarre form of political theater until the rightsowners get what they paid for.

Meanwhile, I would be interested in trying to curb the ex parte abuses in court, but I don't know how. We are finding out about these orders after-the-fact, and I don't know how to get ahead of the curve. If the affected domain name owners aren't complaining after-the-fact, perhaps that's a sign that the rightsowners are truly hitting only the bad guys. On the other hand, if the process remains ex parte, inevitably rightsowners will make some serious mistakes that will have terrible consequences for legitimate players. I wish I could figure out a way to sensitize the judges about those risks before they rotely accede to the rightsowners' requests.

Posted by Venkat at 09:46 AM | Domain Names , E-Commerce , Trademark

December 14, 2011

If You Dislike SOPA, You'll Dislike This Case Too--True Religion v. Xiaokang Lei

[Post by Venkat Balasubramani, with comments from Eric]

True Religion v. Xiaokang Lei (S.D.N.Y.) (TRO; Nov. 18, 2011) (Prelim. Injunction; Dec. 2, 2011). The initial complaint.

We recently blogged about a case where Chanel obtained surprisingly broad remedies against domain names associated with foreign "rogue" websites which allegedly sold counterfeit Chanel items. Much of the relief Chanel sought and obtained in that case overlapped with relief that the proposed SOPA law would provide to rightsowners.

True Religion, a company which manufactures jeans, brought a similar enforcement action against foreign "rogue" websites in the Southern District of New York. It first obtained a temporary restraining order, which the court converted into a preliminary injunction. The relief obtained by True Religion is similarly broad as, and presents the same due process concerns raised by, the Chanel case.

True Religion filed a lawsuit in the Southern District of New York. As in the Chanel case, it went after numerous domain names in a single lawsuit, and it presented declarations from its investigators that they bought counterfeit goods from those domain names. True Religion also presented evidence that defendants undertook efforts to conceal their true identities (primarily by supplying 'purposely-deceptive contact information' to registrars), and that if defendants were provided notice, they would "likely destroy, move, hide or otherwise make [the domain names, products in question, accounts, and records] inaccessible to the Court." True Religion filed its lawsuit on November 15, and the court issued an ex parte TRO three days later. The TRO broadly enjoined the conducts of defendants and third parties, authorized service via email, and set a hearing for November 30, 2011. Defendants were required to show cause on or before the hearing date as to why the court should not issue a preliminary injunction. True Religion filed two sealed declarations and an unsealed declaration. No defendant appeared or filed any pleadings. On December 2, 2011, the court issued the preliminary injunction.

The TRO: The TRO finds that True Religion established a likelihood of succeeding on the merits of its claims that defendants sold products which infringed on True Religion's trademarks and copyrights and that defendants' conduct will cause irreparable injury to True Religion. The TRO also finds that defendants undertook efforts to conceal their identity and that if "True Religion were to proceed on notice to defendants," defendants would shift their operations. Pending the court's ruling on True Religion's request for an injunction, the court issues the TRO, which contains the following provisions:

- defendants and any third parties acting in concert with them, including ISPs, registrars or third party selling platforms are restrained from selling allegedly infringing items;
- True Religion is entitled to broad financial discovery and discovery from various service providers (MasterCard, Visa, PayPal, back-end service providers, web designers, third-party selling platforms, registrars, registries, ad-word providers, etc.);
- third party payment processors and financial institutions are ordered to freeze any of defendants' funds;
- domain name registries (VeriSign, Neustar, Public Interest Registry) and registrars are orderd to "temporarily disable" the domain names referenced in the TRO, "through a registry hold or otherwise";
- third party service providers are ordered to cease providing service to defendants.

The Preliminary Injunction:

The order largely tracks the TRO, but adds a approximately 24 new domain names. As with the TRO, the preliminary injunction broadly enjoins defendants from exploiting True Religion's copyrights and trademarks. In addition, it contains the following provisions:

- third party service providers who are provided notice are enjoined from providing services to defendants in conjunction with any of the acts which defendants are enjoined from doing;
- a broad asset freeze, directed at banks, payment processors, PayPal and other payment services providers;
- continuing right to conduct discovery for True Religion;
- domain name registries and registrars are directed to continue disabling and lock the domain names, including the new domain names;
- third party service providers, including ISPs, back-end service providers, affiliate program providers, web designers, sponsored search engine or ad-word providers are ordered to "disable service" to the defendant websites; and
- an authorization to serve process via "registered electronic mail" pursuant to rule 4.

__

This is a slightly different flavor from the Chanel orders, but it raises similar due process concerns. The initial order (the TRO) is issued on an ex parte basis without notice, and it contains extraordinary relief--it's essentially a kill switch for the websites in question. There are a variety of reasons why this has the potential to run roughshod over the rights of defendants or third parties; among other things, there could be some mistake as to the underlying domain name or website. There's no assurance that the site as a whole (as opposed to one or two products) is infringing. Also, after bona fide adversarial proceedings, True Religion's copyrights or trademarks may not turn out to be as enforceable as they seem at first blush. But on the strength of True Religion's unchallenged assertions, the court orders various third parties, including registrars, registries, payment processors, ad-word providers and others, to cut off the defendants. (The court did require True Religion to post a bond of $10,000--a laughably nominal amount.)

Regardless of whether the court has the authority to issue an injunction binding third parties who are not before the court, and who may not even be subject to the court's jurisdiction, many service providers will just follow the court order anyway. They may have no interest in expending resources to fight for a third party's due process rights. Indeed, in its declaration filed after the TRO was issued, True Religion indicated that the registries (VeriSign, Affilias, Public Interest Registry, Nominet UK) disabled many of the domain names in question upon receiving notice of the court order. PayPal also froze the funds in 84 different PayPal accounts.

It's unclear how much business defendants conducted in the United States. If their business activities in the US were nominal, this looks like an extraterritorial enforcement by a US rightsowner in a US court. It's tough to tell, given that the process hasn't been adversarial or even designed to facilitate bona fide participation by the defendants.

I know there are some tweaks in pending SOPA/PIPA legislation that surely would be even more helpful to plaintiffs, but courts today seem willing to grant broad remedies to rightsholders without any legislative change at all. It seems that today, rightsowners are able to go to court and, quickly and at low cost, take down domain names and get an order directing third parties, including service providers, ad networks, and payment processors, not to provide services to various websites. That's a pretty good deal if you are a rightsholder. They may even prefer that to the ITC proceedings proposed in OPEN.

_______

Eric's Comments

This case raises so many unanswered questions for me:

1) Just how many rightsowner vs foreign rogue website lawsuits are already in the court system? Are the Chanel and True Religion cases unique, or are dozens or hundreds of similar cases percolating through the system?

2) Did so much of this case really need to be done under the cloak of secrecy, and even if the answer is yes, why is so much of the case history still sealed?

3) Just how far can rightsowners go in suing dozens or hundreds of unrelated defendants in a single lawsuit? We've seen some pushback against copyright trolls. Are trademark owners similarly overreaching?

4) Just how far can rightsowners go in forcing third party service providers, like domain name registrars, ad networks, payment service providers and others, to honor rulings where the service providers aren't litigants? We dealt with this issue a bit in the 47 USC 230 context in the Blockowicz case. In that case, the Seventh Circuit set some important limits on the reach of Rule 65. Without an adversarial process, were the Chanel and True Religion courts perhaps a little lax in their reading of Rule 65?

5) If rightsowners can already get in court so much of the remedies that SOPA would provide, then why are they pushing so hard for SOPA?

6) Then again, if rightsowners can already get SOPA-like remedies in court, why are we fighting so hard against SOPA? This reminds me a little of the public outcry against UCITA a decade ago--much of the angst was about the parts where UCITA merely restated then-current contract law. Similarly, perhaps SOPA is more of a mirror on present reality than a bona fide change in the law. At minimum, it suggests SOPA may be distracting us from other real problems. If we object to the remedies in SOPA, not only do we need to kill SOPA, but we need to proactively seek new statutes that prevent the outcomes Chanel and True Religion are getting in court.

I plan to continue my personal efforts against SOPA, but it's clear that killing SOPA isn't enough to end the fight. Perhaps OPEN would help by giving rightsowners an easier path to attacking illegitimate foreign websites and thereby alleviate the pressure that rightsowners are putting on doctrines not specifically designed to deal with that problem. That would be a good reason to support OPEN, but it's now 100% clear to me that OPEN also needs more immunities, safe harbors and other limitations on rightsowner powers. If rightsowners get a shiny new enforcement toy via OPEN, they should have to give up some of their overreaching elsewhere.

Posted by Venkat at 11:54 AM | Copyright , Domain Names , Trademark

December 10, 2011

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

By Eric Goldman

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

Before I get further into substance, two process notes:

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

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

An Overview

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

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

What's Good

Substantively, some of the things I liked about OPEN:

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

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

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

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

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

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

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

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

What's Not Good

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

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

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

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

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

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

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

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

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

Why I’m Not Enthusiastic About OPEN

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

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

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

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

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

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

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

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

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

December 08, 2011

Employee's Claims Against Employer for Unauthorized Use of Social Media Accounts Move Forward--Maremont v. SF Design Group

[Post by Venkat Balasubramani]

Maremont v. Susan Fredman Design Group, Ltd., et al., 10 C 7811 (N.D. Ill.; Dec. 7, 2011)

I blogged about a case earlier this year where a plaintiff sued her former employer for improperly accessing the plaintiff's social media accounts. (Here's my earlier post on the case: "Employee's Twitter and Facebook Impersonation Claims Against Employer Move Forward.") I thought the case was dismissed due to plaintiff's inaction, but it looks like the case is still trudging along.

The basic facts: Susan Maremont worked for the Susan Fredman Design Group as the director of marketing. Maremont created a blog and Facebook account for SFGD. She also created Facebook and Twitter accounts that the court says are undisputedly her personal accounts. Maremont suffered an accident. While she was in the hospital, SFDG continued to access and post from Maremont's accounts. (The court is never 100% clear on which of the two Facebook accounts SFDG posted from.) Maremont returned to work briefly on a part-time basis, and during this time she thanked her temporary replacements "for their amazing posts on [the blog] in [her] absence." Subsequently, Maremont apparently changed her mind and sued for alleged misuse of her personal accounts. [The order says that Maremont stored her account access info on the SFDG server, although the folder in which she stored this info was ‘locked’ and she never gave authority to anyone to access it. This was Maremont’s version of the facts. The order does not say exactly how SFDG got access to the passwords (SFDG could have obtained the passwords through accessing the folder on the SFDG server, or it's possible that the computer Maremont used to create the accounts--which were SFDG computers--remembered them).]

SFDG brings a motion for summary judgment, which the court largely punts for lack of evidence on damages.

Lanham Act claim: Maremont's Lanham Act claim requires her to show that she had an intent to commercialize her identity. The court says that she satisfies this requirement, noting that "it is undisputed that Maremont created a personal following on Twitter and Facebook for her own economic benefit . . . " However, Maremont also must show that she was somehow damaged by her unauthorized affiliation with SFDG. The court gives Maremont additional time to marshal evidence as to how she was damaged. Maremont tells the court that she will bring an expert to testify as to the damages issue.

Stored Communications Act claim: As to the Stored Communications Act claim (which Maremont added later on in the lawsuit) there is no dispute that SFDG accessed Maremont's accounts:

there is undisputed evidence in the record that Defendants accessed Maremont's personal Facebook account and accepted friend requests at least five times from September 23, 2009 through November 24, 2009. Moreover, evidence in the record reveals that Defendants posted seventeen Tweets to Maremont's personal Twitter account during the relevant time period.

This probably amounts to unauthorized access of "a facility through which an electronic communication service is provided." However, the court says that in order to be entitled to statutory damages under the SCA, Maremont has to show that she suffered some "actual damages." (See Van Alstyne v. Electronic Scriptorium.) Because of the dearth of evidence on the damages issue, the court declines to grant summary judgment at this juncture. (Although the court's discussion of whether the SCA requires actual damages as a prerequisite to relief is not extensive--and as Van Alstyne acknowledges, there is mixed authority on the issue--the ruling is significant in this regard.)

Right of Publicity claim: The right of publicity claim fails because SFDG did not pass itself off as Maremont, even though it posted tweets through Maremont's Twitter account. The first of the objectionable tweets explained Maremont's absence and linked to a blog post by Susan Fredman. Additionally, upon returning to work on a part-time basis, Maremont "thanked" SFDG's guest editors for their efforts. Thus, the court concludes that SFDG did not misappropriate Maremont's likeness.

Common Law Privacy claim: Maremont also brought a common law privacy claim, which appeared to be based on the "intrusion of seclusion" tort. The court says that she has to show that defendants intruded into a matter that was private and which the plaintiff attempted to keep private. The court says that Maremont cannot satisfy these elements:

there is no dispute [that] . . . the matters discussed in Maremont's Facebook and Twitter posts were not private and that Maremont did not try to keep any such facts private. In short, Maremont fails to point to any private information upon which Defendants intruded.

Cf. Moreno v. Hanford Sentinel.
__

This is a messy dispute, and some of the facts don't seem clearly developed by either the court or the parties. For example, there were two Facebook accounts involved (one for SFDG and one which Maremont uses personally), but later in the discussion, the court doesn't specify which Facebook account it is talking about. Second, the court notes that "there is no evidence in the record concerning the actual Facebook postings and their content." This is a strange evidentiary omission by the plaintiff.

Then there's the issue of actual damages. Maremont has a Herculean task in proving that her affiliation with SFDG as a result of a smattering of social media posts somehow had a negative financial effect on her. How exactly was she damaged by this association? It's not as if SFDG said anything negative about her. Maremont's claim is that while she was in the hospital, SFDG continued to post and make it look (to the untrained eye) that Maremont continued to handle SFDG's social media efforts. Would a prospective client really refuse to hire Maremont because of these posts? Did this somehow diminish Maremont's earning capacity? I'm not sure what Maremont's expert is going to say, but he or she better come up with something good.

The court's analysis of the invasion of privacy issue also threw me for a loop. The court concludes that the information contained in the posts were public, so there's no violation by SFDG when it posted to Maremont's accounts, but this didn't seem to be the crux of Maremont's invasion of privacy claims. Maremont should be arguing that when SFDG accessed Maremont's accounts, SFDG could also have accessed private facts stored in the account, such as private messages, DMs, photos, and other information in the Twitter/Facebook accounts that were not public. The court's analysis makes me think that the court didn't understand that Twitter or Facebook accounts can contain other information than what's actually publicly "posted" through the account. (Of course, Maremont would have faced a challenge when it comes to damages. She may not have had a standing problem, but she would have to show that she suffered damage as a result of the intrusion, and it's fair to presume from the court's dismissal of her claim that she failed to put forth adequate evidence on this issue.)

This case, along with the PhoneDog case (and Ardis Health) highlight the inherent ambiguity in ownership over social media accounts. Property-wise, it's tough to slot the accounts in a particular box. There also seems to be differing expectations on the part of the employer and employee. The employee obviously wants to take the account with her when she leaves, but the employer would like to continue to take advantage of the goodwill built by the account. There is a solution, and that's to have a written policy in place! A policy is not a cure-all, and I think it's equally important to have a discussion up front about whose account this is and what happens when the relationship terminates. (This is a mini-version of the "blog ownership question" that Eric has harped on.)

As with the PhoneDog case, this is another dispute where the attorney's fees expended could eclipse the value of the case. If the facts as alleged are true, SFDG stepped way over the line in accessing Maremont's accounts, but Maremont's damages are probably minimal. (Ironically, I would think the invasion of privacy claim would be one of the strongest, but the court kicks this claim.)

As a final note, it's worth comparing the result in this case to In re Rolando S., the case where a California appeals court found that a juvenile violated California's identity theft statute when he took someone's Facebook account for a joyride. Here, SFDG gets dangerously close to this line, although it was not clear that the posts in question purported to be from Maremont. As I mentioned in my initial post on the case, depending on what jurisdiction you are in, meddling with someone's social media account in this context could result in e-personation liability.

Related posts:

Employee's Twitter and Facebook Impersonation Claims Against Employer Move Forward
Courts Says Employer's Lawsuit Against Ex-Employee Over Retention and Use of Twitter Account can Proceed--PhoneDog v. Kravitz
Ex-Employee Converted Social Media/Website Passwords by Keeping Them From Her Employer--Ardis Health v. Nankivell.
Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account -- Deck v. Spartz, Inc.

Posted by Venkat at 03:45 PM | Privacy/Security , Publicity/Privacy Rights , Trademark

December 07, 2011

I Don't Heart SOPA or PROTECT-IP: A Linkwrap

By Eric Goldman

Venkat and I have been covering SOPA and related topics. In case you missed our posts:

* Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

* Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

* Ad Network Avoids Contributory Copyright Infringement for Serving Ads to a Rogue Website--Elsevier v. Chitika

Next week, SOPA is supposed to go to committee markup. In anticipation of that, some of the SOPA-related links from the past few weeks that have caught my attention:

* Bose v. Ejaz (D. Mass Nov. 7, 2011). Paypal cut off funds transfers to an International eBay merchant at the request of Bose, a rightsholder. The court rejects the merchant's tortious interference claim.

* Techdirt: The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas

* Politico: Shootout at the digital corral. The entertainment industry spent $91M this year on lobbying. Tech industry spent $15M. Guess who wins that battle?

* Op-eds against SOPA from NYT, LA Times and the Economist.

* EFF: What's On the Blacklist? Three Sites That SOPA Could Put at Risk

* Public Knowledge explains why PROTECT-IP isn’t an acceptable compromise to SOPA. Both "solutions" are off-the-charts extreme.

* Wired: Analysis: Internet Blacklist Bill Is Roadmap to ‘the End’ of the Internet.

* WaPo: SOPA opposition goes viral. Partially related: interesting stats about SOPA's lack of popularity.

* DHS/ICE seize another 150 domain names. Who needs SOPA? Reuters’ coverage.

* Hollywood Esq.: How Controversial Antipiracy Laws Could Be Enacted Even Without Congress.

* Nazerali v. Mitchell, 2011 BCSC 1581 (B.C. Sup. Ct. Oct. 19, 2011): A Canadian court ordered Google and other support providers to cut off the domain name of an allegedly defamatory website.

* EFF: Free Speech is Only as Strong as the Weakest Link. Check out their new resource, www.globalchokepoints.org.

* The RIAA wrote a letter to the editor headlined “RIAA largely succeeds in goal of bringing piracy under control.” Yet, they insist that SOPA is needed?

* Amusingly misguided: The $500,000,000 Cost of Google’s Five Million DMCA Notices. Partially related: Techdirt: As We Complain About SOPA & PIPA, Don't Forget The DMCA Already Has Significant Problems

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

December 06, 2011

Trademark Lawsuit Against Groupon Isn't Going Well--Groupion v. Groupon

By Eric Goldman

Groupion LLC v. Groupon, Inc., 2011 WL 5913992 (N.D. Cal. Nov. 28, 2011)

Groupion provides CRM software as a service (SaaS). Groupon distributes "deal of the day" offers that are typically unprofitable for advertisers and often have the extra "benefit" of causing the advertisers to get trashed on Yelp. Groupion sued Groupon for trademark infringement. I previously blogged on the complaint.

The court denies Groupion's various motions. The court runs through a typical multi-factor likelihood of consumer confusion analysis:

* mark similarity. Calling this factor "critical," the court concludes that consumers can keep the marks separate. The visual depictions of the logos are different, Groupion has one more syllable, and the words are portmaneaus from different inspirations ("coupon" + "group" vs. "groupware" + "companion").
* product similarity. "The parties' products are used for different functions and purposes, and are purchased by different classes of consumers."
* marketing channels. The Internet's commonality is discounted (cite to Network Automation), and the rest of the parties' channels are disparate as you would expect when one company is B2B and the other B2C.
* mark strength. The court says "Groupion" is weak because others are using similar marks in its field and Groupion didn't show evidence of the mark's commercial strength.
* intent. Groupion asserted that Groupon must have selected the mark knowing about it, but Groupion didn't provide any evidence to that effect. Groupon's failure to stop after Groupion's C&D was irrelevant.
* evidence of actual confusion. None of Groupion's evidence "demonstrates instances of actual confusion by its customers regarding the source of its products."
* likelihood of expansion. Groupon bought a mobile apps business, but the court says it will use that to distribute deals, not for intracompany groupware.
* purchaser care. B2B software buyers are careful, as are advertisers.

Thus, the factors point against Groupion's likelihood of success, so the court denies the preliminary injunction, Groupion's motion for summary judgment and motion to cancel Groupion's registered mark. I assume Groupon will view this as an invitation to bring its own summary judgment motion and kill this case. The judge's tone was unmistakable.

Posted by Eric at 08:49 AM | Trademark | TrackBack

December 03, 2011

Facebook's Trademark Enforcement Effort Against "Faceporn" Hits Jurisdictional Snag -- Facebook v. Pedersen

[Post by Venkat Balasubramani]

Facebook, Inc. v. Pedersen, et al., 10-cv-04673 (N.D. Cal.; Nov. 29, 2011)

Facebook sued Pedersen and Retro Invent, who are based in Norway and run the "Faceporn" site. "Faceporn" is a website which features pornographic content and "allows its users to create profiles, join groups, upload photos and video, and conduct live chats." Facebook served Retro Invent using the Hague Convention, and moved for default judgment.

The court, on its own motion, raises the issue of personal jurisdiction, and orders Facebook to show cause why the lawsuit should not be dismissed for lack of personal jurisdiction. Facebook argued in its filings that Faceporn targets a United States audience by using a ".com" address, and by virtue of the fact that Faceporn is an interactive website with 250 users in California and 1000 users in the United States. The court says that these allegations alone are not sufficient to satisfy the standard for personal jurisdiction:

not all material placed on the Internet is, solely by virtue of its universal accessibility, expressly aimed at every state in which it is accessed.

(citing Mavrix Photo, Inc. v. Brand Techs., Inc.).

Given the numerous foreign regulators who are taking aim at Facebook, it seems foolhardy for Facebook to argue that use of a TLD along with local registered users confers jurisdiction in a foreign country. Perhaps this argument won't directly tag Facebook because it is already subject to jurisdiction in every country where it uses the TLD, but it's not a great precedent for other internet companies. I'm somewhat surprised Facebook made this argument. Clearly, it's not an internet start-up any more.

Posted by Venkat at 10:32 AM | Domain Names , Trademark

November 28, 2011

Court OKs Private Seizure of Domain Names Which Allegedly Sold Counterfeit Goods--Chanel, Inc. v. Does

[Post by Venkat Balasubramani]

Chanel, Inc. v. Does, et al., 11-cv-01508-KJD-PAL (D. Nev.) (Sept. 26, 2011 Order) (Oct. 11, 2011 Order) (Nov. 14, 2011 Order)

Luxury brand Chanel has engaged in a fierce campaign against counterfeit websites in federal court in Nevada. It has seized approximately six hundred domain names in the last few months.

The basic facts alleged by Chanel are nearly identical. It identifies domain names which are used to "advertise, promote, offer for sale or sell" Chanel goods, including "handbags, wallets, shoes, boots, sunglasses, tee shirts, watches, and costume jewelry." Chanel's investigative team orders goods from the sites. When the goods arrive, they identify the goods as counterfeit (i.e., they bear Chanel marks but are "non-genuine Chanel products"). Chanel also argues that the defendant websites can "transfer registrations, change registration data and content, change hosts, and redirect traffic," thus thwarting Chanel's ability to have effective recourse against the defendants.

Based on these allegations, the court first enters a TRO against approximately 400 domain names, followed by a preliminary injunction (the September 26 and October 11 orders). The second time around, the court enters a temporary restraining order and preliminary injunction aimed at approximately 200 domain names (the November 14 order).

The relief granted by the court is extraordinary in its scope, and includes:

- an injunction against the defendants prohibiting them from using any Chanel marks or selling any Chanel products;

- an injunction against the top-level domain name registry, directing it to change the registrar of record for the domain names to GoDaddy (!);

- an injunction telling GoDaddy to change the DNS data for the domain names so the domain names resolve to a site where a copy of the case documents are hosted (servingnotice.com/sdv/index.html);

- authorization for Chanel to enter the domain names into "Google's Webmaster Tools" and cancel any redirection of the domain names;

- an order requiring Google, Bing, Yahoo, Facebook, Google+, and Twitter to "de-index and/or remove [the domain names] from any search results pages."

Chanel is required to post a bond in the amount of $20,000.
__

Wow.

I'm sympathetic to the "whack-a-mole" problem rights owners face, but this relief is just extraordinarily broad and is on shaky procedural grounds.

First, I did not get a clear sense that this is an enforcement action against a single defendant. If there's no credible allegation of a conspiracy or an arrangement between whomever is behind these domain names, it strikes me as problematic for Chanel to file a placeholder lawsuit and then add or remove defendants at its convenience.

Second, it was not entirely clear why the lawsuit was in Nevada. The domain names are not registered to a registrar that is based in Nevada, and there's no clear basis for in rem jurisdiction. It's possible that plaintiff picked this jurisdiction as a matter of convenience, but there's no apparent relationship between the alleged counterfeiting activities and the State of Nevada.

Then there's the matter that some of the court's relief is directed at a variety of entities that are not parties to the dispute (including the registrars, the registry, Facebook, Twitter, Google, etc.). I'm not sure how this court can direct a registry to change a domain name's registrar of record or Google to de-list a site, but the court does so anyway. This is probably the most problematic aspect of the court's orders. [Interesting that GoDaddy was chosen as the registrar that the domain names would be transferred to.]

Finally, there's no clear basis to authorize a transfer of a defendant's property pending resolution of a lawsuit to the plaintiff. (See Bosh v. Zavala.) I don't see this as particularly problematic in this case because Chanel is not looking to liquidate the domain names, but it certainly raises due process red flags, given that this is all done with minimal (or no) notice to defendants.

On a loosely related note, TorrentFreak has a post about the latest seizure action by ICE/DOJ: "Feds Seize 130+ Domain Names in Mass Crackdown," where the feds seized a bunch of domain names that were allegedly used to sell or promote "counterfeit clothing." I'm always stumped by the timing, motivation, choice of targets, and other aspects of the DOJ's intellectual property enforcement efforts, but particularly in this context, I'm unclear as to why the DOJ puts energy towards enforcements that private parties seem to be able to accomplish on their own. (I'm sure they have their reasons, but they're never obvious to me.)

It's also worth viewing this case within the broader context of SOPA and thinking about which of the remedies obtained by Chanel in this case are ones that SOPA provides (and which have resulted in a hue and cry). (See, e.g., Eric's post: "Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act"; Techdirt: "The Definitive Post On Why SOPA And Protect IP Are Bad, Bad Ideas.") An injunction requiring Google to "de-list" sites is one remedy which SOPA expressly makes available, and ordering the registry to transfer domain names to GoDaddy and ordering GoDaddy to update the DNS records is in effect achieving another remedy which SOPA creates. The fight against SOPA may be a red herring in some ways, since IP plaintiffs are fashioning very similar remedies in court irrespective of the legislation. Thus, even if SOPA is defeated, it may turn out to be a Pyrrhic victory--opponents may win the battle but may not have gained much as a result.

Posted by Venkat at 11:21 AM | Domain Names , Trademark

November 22, 2011

Court Awards Damages for Wrongful Disruption of Web Presence -- Ordonez v. Icon Sky Holdings

[Post by Venkat Balasubramani]

Ordonez v. Icon Sky Holdings LLC, 10-cv-60156-PAS (S.D. Fla. Aug. 30, 2011)

This was another dispute involving two parties who jockeyed for control of an online presence. I guess you could say that one “jacked” the other’s presence.

Elizabeth Ordonez is a dancer, model, actress, choreographer (etc.) and is known by her fans as “Elizabeth Sky.” She sued Nisha Elizabeth George and her entity Icon Sky Holdings alleging that Icon Sky wrongly obtained a trademark registration for “ELIZABETH SKY” and went on a campaign to disrupt Ordonez’s web presence. George allegedly sent letters to ModelMayhem, Twitter, MySpace, and Facebook, all of whom took down Ordonez’s content, account, or forced Ordonez to change her name.

Ownership of the mark: As far as which of the two parties should be entitled to use the ELIZABETH SKY mark, the facts were pretty unfavorable to George and Icon Sky. Ordonez had been using Elizabeth Sky as a stage name for many years, and the court described some pretty serious irregularities in George’s procurement of the trademark. George was aware of that Ordonez was the senior user, and submitted a specimen that wasn’t really a specimen (it was the exact same specimen which George submitted for another trademark application, but appeard to have been “graphically edited”).

Athough it was a default case, the court easily disposes of the trademark issue. The court finds that George was the junior user and used the ELIZABETH SKY mark in connection wich similar goods and services. This is sufficient for the court to find for plaintiff on her Lanham Act and state law unfair competition claims and this entitles Ordonez to injunctive relief as to George’s use of the ELIZABETH SKY mark.

Tortious interference: Plaintiff also prevailed on her tortious interference claims, which were premised on George’s interference with the contractual relationships between plaintiff and various social networks. The court found that (1) there was a contractual relationship, (2) George knew about this relationship (since she signed up for the services, she was aware of the applicable terms of use), (3) an intentional and unjustified interference, (4) which caused damage. In addition to the social networks, George also demanded that other website take down content which plaintiff had put up. The court found that Ordonez was damaged because her business contacts “discontinued showcasing plaintiff on their websites for fear of being sued,” and many entertainment industry professionals “stopped requesting plaintiff for jobs.”

Libel per se: Finally, plaintiff made out a claim for libel because George falsely accused plaintiff of identity theft. Since identify theft is an “infamous crime,” the court says that plaintiff satisfied the elements of libel per se and did not need to prove damages from George’s statements.

Relief: The court grants plaintiff injunctive relief with respect to the trademark issue and enjoins defendants from continuing to use the mark. Plaintiff also asked to freeze certain of George’s domain names but the court denies this relief since the complaint did not specifically allege a cause of action under the ACPA. Finally, the court awards $81,000 in damages. The bulk of the damages were for plaintiff’s tortious interference claim, and plaintiff put forth evidence that it cost her $78,000 to build her “online presence” – ten hours per week at $50 per hour (over a period of three years). She sought $243,000 in damages for performances that plaintiff’s booking company refused to book because of George’s actions, but the court found the evidence flimsy on this point (and duplicative of the $78,000 in damages it already awarded). The court awards $3000 for lost booking.
__

Eric has blogged a bunch about brands dueling on social networks via takedowns. The Complexions spa case: “Business Sues Facebook to Restore Its Fan Page” and the Ozimals case “Second Life Ordered to Stop Honoring a Copyright Owner's Takedown Notices” are two recent examples. In both of those cases, the networks ended up embroiled in the dispute whereas here Ordonez went after the alleged wrongdoer directly. A user can be enjoined from sending improper takedown notices, but it’s legally questionable as to whether a court can force a network to put someone’s webpage back online (both from a First Amendment and section 230 filtering standpoint, the network should be able to keep content off-line). This particular case is a trademark case, but in the copyright context, section 512 provides some applicable rules: Wrongful takedowns can result in money damages (Lenz), Someone can be enjoined from sending bogus takedown notices (Design Furnishings v. Zen Path), and an intermediary can be enjoined from providing access to a piece of content (section 512(j)).

The interesting thing about this dispute is how the networks in question readily took down plaintiff’s webpages and content. It’s unclear as to whether George went to Facebook, Twitter, and YouTube and waved around the trademark registration—from the court’s recitation of the facts, it did not seem like George was armed with a registration when she complained to the various networks. It’s tough to draw any conclusions from this case, but my instinct is that networks are more than willing to honor takedown notices without closely scrutinizing them, although at times it seems like networks have their own (sometimes maddening) administrative mazes in place.

This is a rare ruling awarding damages to a plaintiff who is claiming tortious interference based on a wrongful takedown. Where the takedown is based on copyright ownership, there may be a preemption issue, so it’s not easy to assert a tortious interference claim based on a copyright takedown notice. (See the Ozimals ruling, “17 USC 512(f) Preempts State Law Claims Over Bogus Copyright Takedown Notices” but see the Smith v. Summit Entertainment case: “17 USC 512(f) Claim Against 'Twilight' Studio Survives Motion to Dismiss” and Rossi v. MPAA. Where a copyright takedown is involved, a plaintiff is better off proceeding under section 512(f).)

Since this case was resolved on a default motion, it’s unclear as to whether in a contested case damages are viable. At any rate, this is one additional datapoint that people who submit takedowns want to keep mind. You can be liable under section 512 if you send a wrongful DMCA takedown, but you may also face liability for tortious interference for causing a network to take someone’s web presence off-line.

Posted by Venkat at 09:39 AM | Publicity/Privacy Rights , Trademark

November 15, 2011

Why I Oppose the Stop Online Piracy Act (SOPA)/E-PARASITES Act

By Eric Goldman

[Note: I've been working on this post for about 2 weeks, so my apologies if my comments are duplicative of the intervening discussion about the bill]

The DMCA online safe harbors have worked pretty well over the past 13 years. I don't know that anyone loves the compromise, but everyone seems to have done OK. We've seen an explosion of UGC websites fueled by the safe harbor, and content owners as an industry have done pretty well for themselves financially and have developed a working relationship with most major UGC sites.

The Stop Online Piracy Act, with its ridiculously named subpart the "E-PARASITE Act," doesn't expressly modify 17 USC 512. Nevertheless, it is a full-fledged assault on the safe harbor's scheme. It employs the same basic notice-and-takedown structure of 512, but it applies the cutoff obligations to payment processors and ad networks (thus effectively reversing Perfect 10 v. ccBill and Perfect 10 v. Visa), expands--for the first time--the takedown obligations to trademarks (thus embracing and expanding Gucci v. Frontline), expands the takedown obligations to cover anti-circumvention in addition to the 17 USC 106 rights, expands the reasons why a rightsowner can complain, and does not give the governed intermediaries any business incentive to stand up for user content. On the latter point, because SOPA is designed to cut off the cash, each and every UGC item potentially jeopardizes its entire economic enterprise of a website hosting it. In other words, if the website goes offline because of cash flow problems caused by the cutoff attributable to a single UGC content item, all of the UGC on that website goes dark because of a single content item. Talk about collateral damage.

Thus, among other adverse consequences, if SOPA passed, it effectively repeals 17 USC 512 by shifting most of the action to the notice-and-takedown process in SOPA. In doing so, SOPA radically changes the balance between content owners and UGC websites. Despite the FUD from the content industry and other bill supporters about the supposedly serious problems caused by "rogue" websites and the supposedly fine-grained targeting of this bill, make no mistake--this law mortally threatens the entire UGC community.

There are a lot of other serious problems with the law and I'll discuss a few in a moment, but let me step back for a moment. Some legislative proposals, even if everyone knows they won't pass, are nevertheless useful for sparking healthy conversation among disparate communities. SOPA is not such a law. It doesn't seek to engender productive conversations. Instead, it goes out of its way to pit Silicon Valley v. Hollywood. This fosters unhealthy and antagonistic conversations, and the ongoing battle between the two diverts valuable resources that could be used to enrich both communities. See, e.g., the $100M+ that Google has spent fighting Viacom in the YouTube lawsuit--a huge amount of money that could have been instead invested in new services that benefit consumers, help rightsowners make more money and generally improve society.

Further, this law represents the worst kind of rent-seeking we see from incumbent industries. One approach to drafting legislation is to put so many objectionable concepts into a single bill that the opponents feel like they won if they clean up 50% of the problems, but that still leaves the other 50% of nasties to get through the system. I find it dispiriting that we must spend a lot of resources just to preserve the status quo from this type of industry overreaching. I support democracy for the reasons articulated by Winston Churchill, but I wished I lived in a democracy where attempts at legislative manipulation like SOPA were obviously DOA and led to its proponents suffering appropriately adverse consequences for their overreach.

In addition to the trumping of the 512 notice-and-takedown provisions, other major structural deficiencies of the law include:

* attempting to reinstantiate geographic borders on the Internet. Perhaps rebordering the Internet is inevitable, but it's bad policy for the United States to be cutting off transborder data flows, even for the putatively noble purpose of suppressing copyright infringement. Basically, the law provides a roadmap to foreign governments on how to reinstantiate geographic borders over their Internet connections, and they won't limit their censorship to copyright infringement. Instead, they'll go for the whole enchilada to restrict every type of foreign content the governments object to. (It seems virtually inevitable that we'll do the same in the US too, but that's a separate post). It will be hard for us to criticize those foreign governments' efforts because we taught them how to do it. The retort that we only deemed border reinstantiation worthy for copyright infringement and no other content type will ring hollow. When the Internet balkanizes into the US Internet, which looks nothing like the Egypt Internet, we'll have no one to blame but ourselves. I encourage the act's proponents to think very carefully whether such a Balkanized Internet will make them less money in the long run.

* The imposition of cutoff obligations on a wide variety of intermediaries, including Internet access providers and search engines in addition to the payment processors and ad networks I discussed above.

* Terms that don't lend themselves to precise statutory definitions, including "Internet advertising service," "Internet search engine," and "Internet site." All of these definitions are broad, ambiguous and based on assumptions about current technology. They don't make sense today and will look even sillier 10 years from now.

* the complete absence of empirical evidence supporting the need for any changes, or that the proposed changes fix any important problem. The collateral consequences would be unacceptable even if this evidence existed; without it, it's hard to interpret this law as a good faith effort to improve society.

While most of the discussion has been justifiably focused on the cutoff provisions, I also want to call your attention to Section 205 of SOPA. The way I read it, it proposes to build a huge bureaucracy of foreign diplomats whose sole job is to advance the interests of US IP owners in foreign countries. We already have problems with USTRs being IP maximalists, but this section would dramatically expand the number of IP maximalists in the US diplomatic corps. I'm not sure I have a good handle on all of the implications, but it seems like (1) we'll have more opportunities for the revolving door from IP owners to government and back, (2) this will further inculcate the agenda of legacy/incumbent IP industries into our government policy, and (3) we will have more boots on the ground to push the US IP maximalist agenda on other countries as part of our doctrinal imperialism.

There has been a lot of commentary about the bills. Some links worth exploring:

EFF Coverage

SOPA: Hollywood Finally Gets A Chance to Break the Internet (an excellent single-stop resource to begin your research)

Proposed Copyright Bill Threatens Whistleblowing and Human Rights

Techdirt

[I know you're already reading Techdirt, but no one is doing a better job of chronicling the day-to-day SOPA developments than Mike Masnick.]

E-PARASITE Bill: 'The End Of The Internet As We Know It'

MPAA Helped Police Seize 'Pirated' DVDs That Were Actually Fully Authorized [a must-read article of how content owners who should know better nevertheless mistakenly accuse legitimate businesses of infringing activity and, using the power of law enforcement, shut down legitimate businesses and cost Americans jobs]

Go Daddy Supports E-PARASITE Legislation Even Though Its Own Site Is Dedicated To Theft Of Property Under Terms Of The Bill

Viacom Exec: 'Everyone Knows A Rogue Site When They See One'… Except He Doesn't

Others

Larry Downes, News.com, SOPA: Hollywood's latest effort to turn back time

Future of Music Coalition, Coming Clean on SOPA

Rebecca MacKinnon, New York Times, Stop the Great Firewall of America

Public Knowledge, SOPA and Section 1201: A Frightening Combination

James Temple, San Francisco Chronicle, Stop Online Piracy Act would stop online innovation

What You Can Do

If your member of Congress is supporting the law, remember that fact come election time. Before then, some things you can do today:

Contact your legislator

Sign the petition at Whitehouse.gov

Sign the petition at Avaaz

If you qualify, sign the Educators' Letter to Congress

Posted by Eric at 08:16 PM | Copyright , Derivative Liability , Trademark | TrackBack

November 08, 2011

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

By Guest Blogger Mark Bender, with some comments by Eric

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

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

History

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

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

Facts

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

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

Kloster Ford

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

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

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

The Case

The ACCC's case was comprised of two parts.

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

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

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

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

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

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

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

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

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

The Use of Competitors’ Names in the Headlines

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

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

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

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

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

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

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

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

Outcome

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

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

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

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

Appeal

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

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

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

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

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

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

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

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

October 20, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

October 12, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

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

October 11, 2011

Q3 2011 Quick Links, Part 2 (Trademarks/Domain Names Edition)

By Eric Goldman

* In the Betty Boop case (Fleischer Studios v. AVELA), the Ninth Circuit stepped back from some of its perplexing language about aesthetic functionality and the Dastar opinion, but the revised opinion remains confusing. Rebecca's coverage.

* Car-Freshner Corp. v. Getty Images, Inc., 2011 WL 4527782 (N.D.N.Y. Sept. 28, 2011). In rejecting a motion to dismiss, the court say that selling photos of trademarked items can be trademark use in commerce and may not qualify as trademark fair use; and Getty could be contributorily liable for third party photographs. Terrible decision! Marty’s coverage.

* Rebecca recaps the latest ruling in Fair Isaac Corp. v. Experian Information Solutions, Inc., 2011 WL 3586429 (8th Cir. 2011). Prior blog post.

* Firefly Digital Inc. v. Google Inc., 2011 WL 4454909 (W.D. La. Sept. 23, 2011):

Firefly's Marks, GADGET and WEBSITE GADGET, are generic and/or descriptive without distinction or secondary meaning. Accordingly, the Motion for Summary Judgment filed by Google will be granted and Firefly's claims for trademark infringement under the Lanham Act, federal unfair competition, LUPTA and federal and state dilution will be dismissed. Finding that all the requirements for cancellation of Firefly's federal marks have been met, the Court will order that Federal Registration Numbers 3,711,998 and 3,730,874 are cancelled, and will direct the Clerk of Court to provide a certified copy of the judgment that will issue pursuant to this ruling, to the Director of the U.S. Patent and Trademark Office pursuant 15 U.S.C. § 1119 for appropriate cancellation of the foregoing federal registration numbers. Further, the Court will order that the Louisiana Secretary of State cancel from the state registry Firefly's mark, WEBSITE GADGET, pursuant to La. Rev. Stat. 51:219.

Yet another trademark owner ends a trademark lawsuit against Google with fewer trademarks than they started with.

* IPKat provides a very useful explanation of what happened (and didn't happen) with the L'Oreal v. eBay ECJ ruling.

* LimoStars Inc. v. New Jersey Car & Limo, 2:10-cv-02179-LOA (D. Ariz. Aug. 8, 2011). In a default judgment, the court wrote “the mere existence of the www.nylimostars.com website likely adversely impacted Plaintiff’s ranking of www.limostars.com in the listings of Google and other popular online search engines.” Really…? Compare the Bitchen Kitchen case. Also interesting: the court said that the trademark plaintiff could sue the defendant in Arizona based on the defendant’s registration of a domain name with GoDaddy, citing the GoDaddy-registrant agreement’s venue selection clause. I wonder if that contract also has a “no third party beneficiary” clause…?

* Adaptive Marketing LLC v. Girard Gibbs LLP, 2009 WL 8464168 (C.D. Cal. Oct. 9, 2009). I don’t remember seeing this case before, and it just showed up in my Westlaw alerts after 2 years. Keyword advertising defendants may find this case useful. The defendant was a law firm seeking clients who had been allegedly victimized by the plaintiff. The defendant bought the plaintiff’s trademark as an ad trigger and then used the trademark in the ad copy. The court says that the ad buy didn’t constitute initial interest confusion or dilution because the advertiser made a nominative use; and also there was no initial interest confusion because the litigants were not competitors. This outcome is so logical that it should be unremarkable, but defense wins are rare when the keyword ad copy includes the third party trademark.

* Suntree Technologies, Inc. v. Ecosense Intern., Inc., 2011 WL 2893623 (M.D. Fla. July 20, 2011): "Suntree alleges initial interest confusion, which is not actionable confusion in the Eleventh Circuit." Rebecca has more on this case, which reminded me a little of the classic Jacob & Young v. Kent case.

* Mirina Corp. v. Marina Biotech, 770 F. Supp. 2d 1153 (W.D. Wash. March 7, 2011): "in this case, Plaintiff does not argue that Defendant lures its customers away: it argues instead that Plaintiff has a harder time making business contacts because the contacts believe the Plaintiff is the Defendant. Thus, this case is distinguishable from cases where the court has applied an 'initial interest confusion' theory."

* QVC Inc. v. Your Vitamins Inc., No. 10-4587 (3d Cir. July 14, 2011). A corporate-authored blog post about a competitor's products didn't support a false advertising preliminary injunction. The court rejected user-authored comments to the blog post as evidence of consumer confusion (cites omitted):

Comments left on blog posts can be very difficult to authenticate. The use of false identities in Internet forums is now a well-known tactic for attacking corporate rivals. Even if a poster is "legitimate," doubts will often remain as to the sincerity of the comment. And, finally, even if a poster is genuine and making a comment in good faith, whether he or she would fall in to the universe of consumers whose opinions are relevant (i.e., those who are or potentially might be purchasers of the products in question) often cannot be known. Given these considerations, it was especially appropriate for the District Court to give the blog comments only limited weight.

Rebecca's blog post on the case.

* Z Productions, Inc. v. SNR Productions, Inc., 2011 WL 3754693 (M.D. Fla. Aug. 18, 2011). Trademark battle over the mark “cam guys.”

* Coventry First lawsuit dismissed. Prior blog post.

* Sex spray settles Sears "Die Hard" trademark lawsuit.

* Rosetta Stone v. Google oral arguments. A recap (perhaps a little biased).

* Coke Zero’s latest “joke” about overexpansive trademark rights (remember their "joke" about "taste infringement"?) is that it claims it owns the word “and.” That would be funny, except that it’s more of a sad commentary on the state of trademark law--expanded significantly by big trademark owners...like Coca-Cola--that I wouldn’t rule anything out. Yuck yuck yuck.

* Mark McKenna, Probabilistic Knowledge of Third-Party Trademark Infringement, Stanford Technology Law Review (2011). Part of the abstract:

This essay argues that the Supreme Court’s Inwood decision [requires] knowledge that particular actors are likely to infringe as a condition of secondary trademark liability. If, however, courts were inclined to take the analogy to tort law more seriously, then cases involving probabilistic harm would be viewed as negligence cases rather than trademark infringement cases. Liability in these cases would turn on an evaluation of the reasonableness of the defendant’s conduct in preventing harm, taking into account the full cost of alternative precautions. It would also turn on the trademark owner’s ability to prove causation – both in-fact and proximate – concepts that generally are completely absent from trademark cases.

* Tucows.Com Co. v. Lojas Renner S.A., No. 11-C52972 (Ontario App. Ct. of App. Aug. 5, 2011). Ontario court says domain names are property.

* Humorous critique of ICANN's new TLDs.

Posted by Eric at 08:57 AM | Domain Names , Trademark | TrackBack

October 03, 2011

Re-registration of Domain Name is not a "Registration" Under the ACPA -- GoPets Ltd. v. Hise

[Post by Venkat Balasubramani]

GoPets Ltd. v. Hise, 08-56110; 08-56112 (9th Cir. Sept. 22, 2011)

Although Eric is not a big fan of them, the Ninth Circuit has produced a slew of domain name opinions this year. GoPets Ltd. v. Hise is one to add to the list.

Background: Hise registered gopets.com in 1999. Hise and his brother and their entity are experienced domainers; they registered more than 1,300 domain names in the past decade. In 2004, Eric Bethke founded GoPets Ltd., a Korean company that developed a game involving "virtual pets that move between the computers of registered users." GoPets filed an application to register the "GoPets" mark in 2004 and the registration issued in 2006. Starting in 2004, Bethke made several attempts to purchase the gopets.com domain name from Hise. The parties went back and forth but never consummated a sale of the domain name.

In 2006, GoPets filed a UDRP action against Wise. The arbitrator ruled in favor of Hise, finding that since Hise registered gopets.com before GoPets Ltd. started using the mark, there could be no bad faith. After the UDRP ruling, the Hise brothers registered a slew of other gopets domain names, including gopet.biz, gopet.org, egopets.com, gopetz.bz, gopets.ws, gopet.tv, gopet.ws, gopet.bz, gopet.de, gopet.eu, and gopet.name. Meanwhile, Bethke again tried to purchase the domain name, and offered up to $40,000 for gopets.com. The Hises demurred and instead sent a letter to the investors of GoPets, offering to sell the domain name for $5 million. After receiving the offer to sell the domain name for $5 million, GoPets Ltd. filed a complaint for cybersquatting, and for claims under the ACPA, and Lanham Act.

The district court granted GoPets Ltd.'s motion for summary judgment on its ACPA and Lanham Act claims with respect to all of the domain names. The court also granted GoPets Ltd. its attorney's fees.

Re-registration of gopets.com: Hise transferred the gopets.com domain name to Digital Overture, an entity owned by him and his brother. Digital Overture re-registered the domain in 2006. The question is whether the 2006 re-registration violated the ACPA. GoPets argued that since its mark was distinctive in 2006 when the domain was re-registered, this is sufficient to state a claim under the ACPA. According to the court, the key question is whether the initial registration was done in bad faith--subsequent renewals or even transfers are irrelevant:

we conclude that Congress meant "registration" to refer only to the initial registration. It is undisputed that . . . Hise could have retained all of his rights to gopets.com indefinitely if he had maintained the registration of the domain name in his own name. We see no basis in ACPA to conclude that a right that belongs to an initial registrant of a currently registered domain name is lost when that name is transferred to another owner.

The court finds that although the re-registration or transfer of gopets.com was not in bad faith, there was ample support for the factual conclusion that Hise's registration of the remaining domain names were done in bad faith. Hise tried to argue that he thought that registration of these domain names was proper based on his UDRP victory, but not surprisingly, the court rejects this defense.

Damages: The trial court awarded $100,000 in damages for Hise's registration of gopets.com and $1,000 in damages for the remaining domain names. The Ninth Circuit vacates the $100,000 award based on gopets.com but affirms the remaining damage award.

The ACPA allows for a plaintiff to elect statutory damages: "in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just." Hise argued (relying on Feltner v. Columbia Pictures Television) that the statutory damage award should have been decided by a jury and not a judge, and having a judge rather than jury determine statutory damages violated his Seventh Amendment right to a jury trial. The court says that this may be a viable argument, but not in this case, since the court awarded the minimum statutory amount. Hise could not have achieved a better result in front of a jury since the jury would have had to award the minimum as well. (See the similar BMG v. Gonzalez ruling in the copyright context). This issue will have to be hashed out in another case.
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If I'm reading the court's opinion correctly, it means that any time someone registers a domain name before a mark has become distinctive or famous, that domain name gets a free pass, regardless of any transfers or changed use of the domain name? Or is the court's decision based on the fact that the basis for the ACPA claim was based on "registration" (as opposed to "trafficking" or "use"), and therefore the renewal or transfer does not create ACPA liability? If GoPets had stronger facts around Hise's use of the domain name, would it have made a difference?

I'm guessing the opinion just speaks to registration. Other decisions have held that the determination of the lawfulness of a domain name registration is not fixed--it may change over time, depending on the defendant's conduct and use of the domain name. (Storey v. Cello Holdings, L.L.C., 347 F.3d 370, 385 (2d Cir. N.Y. 2003) ("Congress intended the cybersquatting statute to make rights to a domain-name registration contingent on ongoing conduct rather than to make them fixed at the time of registration".) It's useful to contrast the result for gopets.com with Newport News Holding Co v. Virtual City Vision (4th Cir. April 18, 2011) [pdf]. As Eric wrote in May, the registrant of newportnews.com won a UDRP proceeding, but ten years later, was the subject of an adverse ruling on ACPA claims against it. What went wrong?

[I]n making changes to its website in 2007, VCV [the registrant of newportnews.com] shifted its focus away from the legitimate service of providing information related to the city of Newport News and became instead a website devoted primarily to women’s fashion....VCV cannot escape the consequences of its deliberate metamorphosis....newportnews.com went from being a website about a city that happened to have some apparel advertisements to a website about women’s apparel that happened to include minimal references to the city of Newport News.

Thus, the court awarded $80k in damages, $10k in sanctions and attorneys' fees against VCV (the registrant of newportnews.com). It would not be prudent to read the Ninth Circuit's Gopets.com opinion as giving registrants a free pass for the life of the domain name. I doubt that's what the court meant, but I was surprised the court was not clearer about it, and surprised that the facts around the Hises' use of the domain name did not factor at all into the legal analysis.

UPDATE: Ryan Gile says "The lesson here is two-fold. Failing to negotiate in good faith can lead to unnecessary lawsuits and lawsuits often last longer than internet companies or their brands."

Posted by Venkat at 01:22 PM | Domain Names , Trademark

October 01, 2011

Facebook's Trademark Suit Against Teachbook Survives Motion to Dismiss

by Eric Goldman

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

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

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

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

Evidentiary Issues

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

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

Is the "Book" Suffix Generic?

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

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

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

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

Trademark Dilution

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

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

Conclusion

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

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

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

September 29, 2011

Court Declines to Dismiss or Transfer Lawsuit Over @OMGFacts Twitter Account -- Deck v. Spartz, Inc.

[Post by Venkat Balasubramani]

Deck v. Spartz, Inc., 11-Cv-1123 (E.D. CA.; Sept. 27, 2011)

I posted about the lawsuit involving the @OMGFacts Twitter account some time ago. ("Thoughts on the Lawsuit Over the @OMGFacts Twitter Account.") The account was created by Adorian Deck, who at the time was a minor. Deck signed an agreement with Spartz to commercialize the brand, and the parties ended up in a dispute over the agreement and who could control the "@OMGFacts" brand. As the court notes, Deck had an "OMG-moment," and decided to bail out on the agreement. He sued in California to disaffirm the agreement and Spartz, an Indiana corporation, moved to dismiss or transfer the case to Indiana. The court denies Spartz's motion and allows Deck to proceed.

Personal jurisdiction: Spartz's argument that it is not properly subject to personal jurisdiction in California does not go very far with the court. At the time the parties entered into the agreement, Spartz knew that Deck was a California resident, and the court finds this dispositive. It does not matter that the parties conducted their negotiations over the internet:

It is immaterial that the primary method of communication between the parties was electronic and that Adorian Deck's performance was to occur online. The Internet is not a place, and Adorian Deck was to complete his performance in California, his place of residence. The fact that he was to send the resulting materials to [Spartz] via the Internet does not change the nature of the parties' relationship.

Nothing too earthshattering there. Spartz also pointed to the forum selection clause in the agreement that required disputes to be resolved in Indiana. The court says that if Deck is entitled to disaffirm the agreement (and the court finds that he is), the forum selection clause goes out the window.

Disaffirmance: With respect to the disaffirmance issue, Spartz argued that Deck was trying to have it both ways: on the one hand, Deck was trying to disaffirm the agreement and on the other hand he was suing for breach. The court disagrees and says that dispute is over the remedies Deck is entitled to if he gets to disaffirm the agreement. Spartz also argued that Deck could not disaffirm unless he returned the consideration he received under the agreement, but the court says that there is case law support for the proposition that disaffirmation before the minor reaches the age of majority does not require the return of consideration, and the current version of the statute (Section 6710) "no longer requires restoration of consideration for any disaffirmed contract." Deck filed the lawsuit when he was still a minor and this reflects a clear intent to disaffirm the agreement. The fact that he did not restore any consideration he received is immaterial.

Trademark claims: Deck brought common law trademark claims against Spartz, and Spartz's principal defense was that the contract is still valid and Deck thus cannot claim unauthorized use. The court says that since Deck is entitled to disaffirm the agreement and expressed an intent to do so and because Deck revoked any permission granted to Spartz to use the mark, Deck states a valid claim for infringement.

__

Ouch. This is a rough result for Spartz. It's going to have to continue to litigate the dispute in California. The court pretty much nukes the agreement, and this does not put Spartz in a great position in the dispute. It looks like control over the @OMGFacts brand will revert to Deck, and the parties will probably resolve this dispute in short order.

Posted by Venkat at 01:13 PM | Trademark

September 13, 2011

Ninth Circuit Upholds Web Host's Liability for Counterfeiting Retailers--Louis Vuitton v. Akanoc

By Eric Goldman

Louis Vuitton Malletier SA v. Akanoc Solutions, Inc., No. 10-15909 (9th Cir. Sept. 12, 2011). Prior blog posts:
* Another Bad Ruling in Louis Vuitton v. Akanoc
* Making Sense of the $32M Contributory Trademark Infringement Judgment Against a Web Host
* Web Host Faces Potential Contributory Trademark Liability

This cases involves a US web host, Akanoc, that hosted Chinese retailers selling counterfeit Louis Vuitton goods. The web host apparently ignored numerous takedown notices from Louis Vuitton. Louis Vuitton sued for contributory copyright and trademark infringement, and the result has been a string of troubling rulings. For a sample of those, consider the trial court's rulings that individuals directly infringe copyrights when browsing a photo of a counterfeit good, and a 512 agent for service of notice could be personally liable for any infringements. Ugh. The coup de grace was a massive $32+M jury verdict against the defendants for willful infringement.

On appeal to the Ninth Circuit, the court issued a characteristic "omnibus" opinion that resolves lots of contentions in relatively short order. Opinions like this rarely become major precedents, which is fine by me given the results. Overall, the court rejects all of the defendants' arguments except one, but that one saves the defense over $10M.

Some of the more interesting points:

* MSG leased equipment to Akanoc. The jury held MSG liable, but the trial court reversed that. On appeal, the Ninth Circuit agreed that MSG wasn't liable for the retailer counterfeiting because "Louis Vuitton presented no evidence that MSG had reasonable means to withdraw services to the direct infringers."

* the defendants argued that its customers' websites were the "means" of trademark infringement, not the hosting services to them. The court rejected the argument as irrelevant:

websites are not ethereal; while they exist, virtually, in cyberspace, they would not exist at all without physical roots in servers and internet services....Appellants had control over the services and servers provided to the websites. Stated another way, Appellants had direct control over the “master switch” that kept the websites online and available.

This seems to resolve one of the open issues from the Ninth Circuit's 1999 Lockheed v. NSI case, which is the circuit's benchmark opinion on contributory trademark infringement online. That case said NSI as a domain name registrar wasn't responsible for an infringing domain name, but it implied that vendors closer to the infringement--such as web hosts--could be. This ruling confirms our assumption that web hosts have more affirmative obligations to intervene against trademark infringement than domain name registrars do.

* "providing direct infringers with server space" qualifies as a material contribution for contributory copyright infringement.

* the court touched on the required scienter for both contributory trademark and copyright infringement, but this discussion goes nowhere given that the jury found willful infringement.

Even though the defendants did not prevail on its doctrinal arguments, the appeal was partially successful because the court reduced the damages award over $10M (the jury had awarded $32+M against three defendants; the judge post-ruling had dismissed MSG, which cut the award to about $21M; this panel reduces it further to $10.8M). The trial court judge's jury instructions allowed the jury to cumulate awards against each defendant for the same infringements, rather than forcing them to make a single award joint-and-several. The appeals court fixed that perplexing error.

Even so, the lesson remains that any web host that fails to promptly honor takedown notices--copyright or trademark--does so at extreme peril. We don't have an express notice-and-takedown scheme for trademarks, but we've gotten there on a de facto basis.

Posted by Eric at 09:05 AM | Copyright , Derivative Liability , E-Commerce , Trademark | TrackBack

September 08, 2011

Blogger Can Display County Seal in Blog Posts--Rothamel v. Fluvanna County

By Eric Goldman

Rothamel v. Fluvanna County, Va., 2011 WL 3878313 (W.D. Va. Sept. 2, 2011)

I don't use images on this blog, but many bloggers include images to help illustrate their posts. It's not uncommon, then, for bloggers to include government seals or other insignia in posts discussing the government. I've never seen an empirical study of readers' perceptions when presented with such displays, but I find it hard to believe that readers are confused in the slightest.

In Fluvanna County, Virginia (part of the Charlottesville metro area), Bryan Rothamel (a blogger at http://flucoblog.com) included the county seal when blogging about county stories. The county Board of Supervisors deserve mad props for apparently having solved all of the major problems facing them, because Rothamel's seal usage quickly emerged on their priority list ahead of other, obviously more trivial, issues. In response, the county passed an ordinance with the following restriction:

Sec. 2–7–2. Seal Deemed Property of the County; Unauthorized Use Prohibited.

The seal of Fluvanna County shall be deemed the property of the County; and no person shall exhibit, display, or in any manner utilize the seal or any facsimile or representation of the seal of Fluvanna County for non-governmental purposes unless such use is specifically authorized by law. (Ord. 9–15–10; Ord. 2–16–11)

Violations were punishable by up to 30 days in jail, a $100 fine or both.

Rothamel brought a First Amendment challenge to the statute, which the court grants. The court notes that the statute restricts speech and can't survive even intermediate scrutiny because it's not narrowly tailored. The court notes: "This sweeping prohibition encompasses a substantial number of uses of the seal that would not suggest government endorsement, such as the display on a website of an exact copy of an official County news release that contains the image of the seal next to the text, or the publication in a newspaper of a photograph of a County official delivering a speech from a podium upon which the County seal is attached and visible."

The court compares this regulation with the regulations governing federal seals and related logos, noting that they restrict uses that might communicate sponsorship or endorsement. This statute wasn't so targeted, and I don't think anyone truly believes that readers will think a blog post was sponsored or endorsed by the county because the post displays the seal. The state of Virginia intervened in this lawsuit because its seal restriction is similar to the county's; it appears Virginia's seal restrictions would not survive a challenge either. Similarly, this case brought to mind the FBI's ridiculous position that Wikipedia couldn't display the FBI seal. The Wikipedia entry recaps the situation, including then-Wikimedia GC Mike Godwin's withering response. This case suggests that the FBI's position indeed wasn't defensible.

The court also rejects the county's self-serving designation of the seal as "county property." I'm not sure exactly what that's supposed to mean. Perhaps such designations matter when dealing with tangible assets. When applied to intangible assets, it is just another way of restricting speech.

The net effect is that, under the First Amendment, bloggers should be free to display government seals or insignia in their blog posts about the government agency. With my newly confirmed freedom, I'm now displaying the seal of Fluvanna County, Va., which, as county seals go, is actually quite pretty (those are persimmons at the top):

God bless America!

Posted by Eric at 09:51 AM | Content Regulation , Trademark | TrackBack

September 06, 2011

Marijuana Activist Can't Change His Name to "NJWeedman.com" -- In re Forchion

[Post by Venkat Balasubramani with additional comments by guest blogger Laura Heymann and Eric]

[Eric's note: this may be our first post with *three* different bloggers covering the same case! Venkat starts us off:]

In re Robert Edward Forchion, Jr., 2011 WL 3834929 (Ca. Ct. App. Aug 31, 2011)

Robert Edward Forchion, Jr. filed a petition to have his name changed legally to "NJWeedman.com." The trial court denied the request, and the appeals court affirms.

Background: As the court describes him, Forchion:

is a resident of New Jersey. Since 2009, he has managed a Rastafarian temple in Los Angeles and has operated a medical marijuana dispensary that he claims is lawful under the Compassion Use Act of 1996. . . . He has devoted his adult life to promoting the legalization of marijuana and, in 2000, was convicted in New Jersey of marijuana offenses. Forchion is currently facing trial in New Jersey on marijuana charges arising out of an arrest on April 1, 2010. He is free on bail.

Forchion has a national reputation as a marijuana advocate and is popularly known as NJweedman. He operates a Web site, "NJweedman.com," which discusses his efforts to legalize the drug. In 2001, Forchion unsuccesfully petitioned the New Jersey state courts to change his name to "NJWeedman.com."

Discussion:

Forchion's life: The court spends approximately 20 pages recounting the details of Forchion's life, including his protests, and brushes with the law. (These facts were apparently taken from Forchion's website.) For example, the court notes that he "smoked his first marijuana cigarette and 'was immediately impressed by its medical healing powers, in regard to his asthma' . . . . [b]y age 18 he was a regular user . . . and dismissed the Surgeon General's claims of its harms as 'propaganda and Christian superstitions.'" He enlisted in the United States Marine Corps where he continued to use marijuana, despite the government's prohibition. He became a coast-to-coast trucker in 1994. In 1995 he "became a practicing Rastafarian."

In 2008, he apparently fled to California, "seeking asylum, leaving the garden state for the pot friendly environs of Los Angeles." In 2009 he opened a "Rastafarian Temple" on Hollywood Boulevard. The temple was named "Liberty Temple II, after a series of protests he held at the Liberty Bell in Philadelphia." He then became a "Hollywood persona," and opened a "party promotions company called "NJweedmanPromotions." In 2010, he penned his biography, which was titled "Public Enemy #420." None of this is particularly relevant to Forchion's name change petition, but the court walks through the facts in some detail and they were strangely interesting. (All of this just gets to page 6 of the court's recitation of facts.)

Name changes generally: The court notes that people who wish to change their names have two different options. They can take the route of a "common law change of name," and simply start referring to themselves as something else (as long as their purpose is not to "defraud or intentionally confuse"). They can also formally change their names pursuant to statute. The statutory route offers certain advantages, namely the change of name is "definitely and specifically established and easily proved." In contrast:

[a] common law name change . . . carries with it no mandate to those with whom one comes in contact to accept at face value the nexus between the new name and the individual who assumes it.

In any event, the court concludes that while there must be a "substantial" reason for denial of a request to change one's name, the trial court is vested with discretion in ruling on a name change petition and the reasons offered in case law for refusing a name change request are not exhaustive.

Can Forchion change his name to a domain name?: The court turns to the key issue of whether Forchion can change his name to a domain name. This turns on whether Forchion is guaranteed to be able to use the NJWeedman.com domain name indefinitely. The court notes that although domain name registrants "appear to possess all [of] the component rights" of property owners, on closer examination, "it becomes apparent that a domain name is not property." The court concludes that a domain name is merely the product of an agreement for services between the registrant and the registrar. The agreement--pursuant to which a registrant secures a domain name--is not guaranteed to continue indefinitely. The registrar places numerous limitations on the registrant's use of a domain name and if the registrant breaches the domain name registration agreement in any number of ways (e.g., fails to pay fees, allows the domain name registration to lapse, uses the domain name in violation of the law), the registrar can cease providing the registration services. The court sees this as problematic because if Forchion's name change is approved, his name would "permanently" become "NJWeedman.com," but if he loses the domain name a subsequent user could end up with the rights to NJWeedman.com. In the court's eyes, the "dual use might create confusion, depending in part on what the new registrant did with NJweedman.com."

The court also notes that even if Forchion continued to pay the registration fees in perpetuity, his use of the domain name may run into problems due to a conflict with third party trademark rights. If a third party is able to assert trademark rights and successfully force Forchion to change his website or discontinue his use of the NJweedman domain name, the court says that his continued use of NJweedman.com as a personal name would be problematic. The court says it's not aware of any procedure pursuant to which a third party could force NJweedman.com (f/k/a Forchion) to change his personal name. The court says that these types of trademark considerations are not ones that the trial court should be forced to consider, when ruling on a name change. [Strangely enough, the court relies on those considerations in making its decision.] At the end of the day, the court says that domain names and personal names should remain in separate realms and the streams should not be crossed:

In sum, personal names and domain names should not overlap; they belong in distinct realms. Domain names were created for use on the Internet and should be limited to assisting a user in finding a desired Web site. By the same token, we should not treat a person as part of a domain.

As an added bonus, the court also points out that Forchion's website encourages others to break the law and is on thin legal ice. The website provides instructions on how to grow marijuana. It urges individuals to call New Jersey law enforcement and "provide false reports about the use of marijuana, hoping to send the police on wild goose chases and squander valuable resources." The court also closes the 37 page (!) order with a nod to comity principles. The court notes that while courts are "divided over res judicata applies to name changes . . . the principles that underlie the application of that doctrine are present here."

__

The court's opinion borders on entertaining and covers a lot of different ground. In particular, the discussion of the two types of name changes was interesting. At 37 pages, it felt a bit excessive, but I can't say I was disappointed after reading it.

I was surprised to see the court treat the domain name registration rights as a contract right, rather than a property right, given that numerous cases have discussed the issue since Kremen v. Cohen and have concluded that (at least for conversion and creditor remedies purposes) domain names are considered property and not a contract right. (See, for example: Eysoldt v. ProScan and CRS Recovery, Inc. v. Laxton.) As Eric points out, the fact that the domain name registration agreement could lapse or be terminated wasn’t a particularly persuasive basis to deny Forchion’s name change request.

I hadn't given any thought to the interplay between trademarks and personal name changes, but a quick Google search led me to a Yahoo! answers question titled "Can i legally change my name to Krispy Kreme," which in turn led to a New York Times article about a 1995 lawsuit between Coca Cola and Fredrick Koch, who wanted to change his name to "Coke-is-It." (See "Coke Settles With 'Coke-is-it.'") It looks like Coca Cola settled with Mr. Coke-is-it based in part on his agreement to not use his name commercially. To the extent the court should have even raised the issue on its own, the trademark versus personal name conflict was unrealistic in this case, given the name chosen by Forchion. I guess a lawn maintenance company in New Jersey could have a similar name and grumble, but really?

I wasn't particularly persuaded by the court's reasoning that a person should not share a personal name with a website because of the possibility of confusion between the two. Is there a realistic possibility that someone would look at Forchion post-name change and equate him with a website found on the internet? Even to the extent there is confusion, would this really result from the addition of .com to NJweedman? Courts and the PTO have long recognized the lack of trademark significance of a .com, and the court's conclusion seems to presume that Forchion's use of a dot com for his personal name would somehow be the basis for confusion.

I didn't have any immediate plans to change my name to balasubramani.com, but at least in California it looks like this wouldn't fly.

Other coverage:

"Court won’t let marijuana activist change his legal name to njweedman.com" (Evan Brown)

______________

Laura Heymann's Comments

[Eric's introduction: I'm pleased to include the following thoughts from Laura Heymann, the Class of 2014 Professor of Law at William & Mary Law School. Laura has been doing some excellent and thought-provoking work on the regulation of naming, and this case squarely implicates the issues she has been thinking about deeply.]

In In re Robert Edward Forchion, the California Court of Appeal affirmed a lower court decision denying Forchion the right to change his name to NJweedman.com, which also happens to be the URL for his website. Forchion is not the first individual to attempt to change his name to a URL. In 2003, animal rights activist Karin Robertson legally changed her name to GoVeg.com, the website of her employer, the People for the Ethical Treatment of Animals, in order to spark discussions about vegetarianism and animal rights; she reverted to her birth name three years later.

Forchion has apparently long advocated in favor of the legalization of marijuana, and both his advocacy and his personal experience with the drug have been the cause of a number of run-ins with the law, all of which is detailed at his website. (As Venkat notes, the California appellate court, taking “judicial notice of the content of [Forchion’s] Web site and any other Web site to which it provides a link,” quoted extensively from the website in rendering its decision.) While he was incarcerated in New Jersey, his home state, Forchion unsuccessfully petitioned the New Jersey state courts to change his name to NJWeedman.com. Forchion subsequently moved to California, where he continued his advocacy (and also operated an allegedly lawful medical marijuana dispensary). In California, Forchion tried again, petitioning a lower court to change his name to NJweedman.com, and was similarly rebuffed both there and on appeal.

As Forchion’s choice of moniker demonstrates, and as I have discussed in a recent article (Naming, Identity, and Trademark Law), personal names have at least three functions. A name is denotative, in that it refers to or identifies a person, allowing us to talk about an individual when he or she isn’t present. A name is also connotative, in that it often suggests or brings to mind a set of characteristics or attributes relating to the person to whom the name is connected. Parents typically have connotation in mind when they decide what to name their children, particularly when choosing a name that signifies a connection to a religious or ethnic heritage. And a name also has an associative function in that it signals a connection to a group or family. Indeed, the decision of Eric and his wife, Lisa, to take on a new shared surname upon their marriage is an example of, as he once wrote, establishing a “new common identity which is uniquely [theirs] as a couple.”

Our personal names also function, in a sense, like trademarks. When we write or speak or otherwise share our creativity with the world, our name is what tells people who is responsible for those thoughts and what allows us to build our reputations. And, like trademarks, we may well want to choose a name for our efforts that is itself creative – that expresses something about ourselves that our given names do not. Indeed, each time we participate in an online environment – a social network, a virtual world, a blog, or even sending e-mail – we choose a name through which we will present ourselves to the world.

Many naming choices are made informally – we ask friends and relatives to call us by a nickname or choose a pseudonym when we decide to comment on a blog post. But in an increasingly administrative world, some choose to make names “official” by petitioning the courts for a change in name. Despite the claim by many jurisdictions that this process is ministerial – simply to create an official record of the exercise of the right we have under the common law to change our name – courts will, from time to time, deny such requests on the grounds that the requested name was chosen for fraudulent or deceptive reasons, is offensive or obscene, or is otherwise objectionable. California’s name change statute has been interpreted as granting the courts discretion in deciding whether to grant a name change petition but also as providing that petitions should not be denied without some “substantial reason.” Indeed, the California courts’ own website suggests that the “main reasons” for denying a name change petition in the state are a finding that the petitioner is changing his name to commit fraud, hide from authorities, or for some other illegal reason.

So why was Forchion’s petition to change his name to NJweedman.com denied? The California appellate court offered four reasons, all of which seem somewhat curious. First, the court held that allowing Forchion to change his name to NJweedman.com ran the risk of confusing others. For example, the court noted, if Forchion ever lost the domain name for his website and someone else were to pick it up, there would now be two entities out there sharing the name NJweedman.com: Forchion and the now unrelated website. This, the court held, was untenable because “if both parties used that name to conduct business, confusion might result.” Second, even if Forchion did maintain the website, the court held, “the name might be so similar to another Web site name or trademark that the multiple usage would create confusion.” Third, the court held that the name change would encourage those who encountered Forchion to view his website, which, the court concluded, encouraged illegal activity. And, finally, the court held that given Forchion’s failed attempt to request a similar name change in New Jersey, his home state, principles of comity militated in favor of denying relief in California.

The idea that changing one’s name to that of an existing URL would create a level of confusion warranting the denial of the name change – either as between that URL or another URL or trademark – seems implausible. Naming is always contextual, and it is the rare name that isn’t also being used by someone else. We all like to think of our names as unique, but a quick Google search will often reveal at least one other person who shares our first name/last name combination. [Eric's note: recall our mockery of Bev Stayart on this point]. It’s also not uncommon for a personal name to be identical to a common word in the English (or another) language, such as the first names Hope, Faith, Hunter, and Clay. None of this presents a considerable difficulty either for the named or for those who refer to them; context will typically tell us whether the sentence “Faith is important to me” is being uttered by a congregant or by Faith’s partner. Although it has communicative components to it, a URL is ultimately an address. “Montana,” for example, has ranked among the top 1,000 girls’ names in the United States in recent years [you can do a search for Montana in NameVoyager], but no one would suggest that the existence of hundreds of little Montanas running around is going to cause travelers to have problems finding the state on a map. Nor is the potential similarity to an existing trademark problematic. A quick Internet search reveals more than fifty individuals with the given name John Deere, but it is unlikely that anyone negotiating with any of these men has been confused into thinking that they are dealing with the farm equipment manufacturer.

Comity also seems to be a curious basis for denying a name change petition. Given the mobility of individuals today and evolving family situations, it’s possible that an individual might change one’s surname upon marriage, change it back to one’s birth name upon divorce, change it again upon remarriage, and change it again for professional reasons. It would be odd to suggest that the ruling of any one state on one of these petitions would affect in any way the ability of another state to make a subsequent ruling. There may be statutory limitations on a court’s ability to render such a judgment, in that a particular state statute might require that the petitioner be a resident of the state in order to file a petition (as the appellate court suggested here). But comity doesn’t seem to be the reason to bar such requests, particularly if part of the basis for deferring to a sister state is, as the court stated here, that “the first two letters of the requested name — NJ — are not only the home state’s abbreviation but are intended to refer to that state.”

And so we come to what seems to be the primary motivation for the denial: the content of Forchion’s website. The court did not conclude that the name “NJweedman.com” was itself offensive; indeed, it noted that several New Jersey residents bear the surname Weedman. And while courts have rejected petitions to change one’s name to words that are, on their face, offensive or obscene, on the ground that the court should not be seen as stamping its imprimatur on the name choice, the name “NJweedman.com” does not seem to rise to that level. Nor should the fact that the name request is unusual be dispositive. Courts have approved name changes to single words, such as “Variable,” and to names that include punctuation marks, such as exclamation points. Not all courts have followed this path; a Pennsylvania court in 2000 affirmed a lower court’s rejection of a woman’s request to change her surname to the letter R on the ground that such a surname was “bizarre” and would therefore arouse suspicion. But even the New Jersey appellate court hearing Forchion’s previous petition noted, in its 2004 ruling, that “the name is not so bizarre as to call for denial of the request on that basis.”

But denying a name change petition on the ground that it may lead others to read about the petitioner’s views on controversial matters – even if those views can be characterized as supporting illegal activity – seems to create difficult boundary problems. A name change inspired by a reclaiming of one’s heritage, for example, may connect that individual to new or additional communities, but it would be problematic to suggest that a court’s view of that community should be the basis for rejecting the change. The fact that Forchion’s requested name change is also the URL of the site may well inspire a few who encounter Forchion to visit the site. But given Forchion’s own self-promotion efforts – and the media stories that have resulted, many of which use Forchion’s adopted name in any event – any such effect seems to be a thin justification for deeming the name change improper. Indeed, the fact that the court stated that the URL “should not also serve as Forchion’s personal name as long as he uses the Web site to encourage others to violate the law,” thus suggesting that the name would be appropriate were the content of the website to change, raises interesting First Amendment implications.

Here, the words of an Ohio appellate court seem relevant, when, in 2005, it granted a petitioner’s request to change his name to “Sacco Vandal,” after the anarchist Nicola Sacco and the Germanic tribe. “It’s a free country,” the court wrote. “The applicant is a grownup. He can change his name to anything he wants so long as the new name is not clearly improper or unreasonable . . . . If the applicant is using the name change to make a statement to society – and most applicants do – it is a subtle one.” The statement that Forchion is making by calling himself NJweedman.com may be considerably less subtle, but that does not mean it is without expressive content.
___________

Eric's comments

I agree with Laura's comments that the court's rationales for rejecting the name change are indefensible. It seems that the court implicitly--and improperly--shifted the burden onto Forchion to have a good reason for the name change, instead of retaining the burden to provide a good reason why the name change was problematic.

I was especially unpersuaded about the possibility that the NJWeedman.com domain name would end up in someone else's hands. If this is the court's concern, Forchion could have prepaid the domain name registration for the maximum length permissible, which I believe is at least a decade. That wouldn't have changed the fact that Forchion could still lose the domain name due to a breach of the registration agreement, but I believe those interventions are exceedingly rare. So the "permanence" of a domain name registration could be largely addressed through cash, and the court cut an analytical corner by treating a domain name registration as impermanent.

I'm also scratching my head because Forchion can still effectuate a common law name change, which will give him 90% of the website publicity traffic he seeks. So it's not clear how the court actually advances its policy concerns by denying the official name change.

More generally, despite Laura's scholarly work, state policies governing name spaces remain undertheorized and under-scrutinized. For example, as I blogged on my personal blog, California went decades with a facially illegal distinction in its marriage license, letting the woman take the man's name but not letting the man take the woman's name. California finally fixed this problem with a statute in 2007. For more discussion on government policies towards personal names, see these articles on marriage names and baby names). Another government-operated namespace that doesn't get much attention are vanity automobile license plates; we've seen a variety of questionable government policies emerge there without much pushback.

FWIW, because I changed my name to Eric Goldman from Eric Schlachter, the name Eric Schlachter is freely available for other takers (although, I should point out, there are a few other Eric Schlachters currently using the name). As I mentioned in this blog post, anyone else is free to adopt "Eric Goldman" too, but I plan to defend my favorable search engine placement vigorously!

Posted by Venkat at 08:41 AM | Domain Names , Publicity/Privacy Rights , Trademark

August 31, 2011

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

By Eric Goldman

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

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

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

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

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

and

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

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

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

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

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

Rebecca also blogged this ruling.

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

August 29, 2011

Levi Strauss's Trademark and Domain Name Claims May Block Unauthorized Resales -- Levi Strauss v. Papikian

[Post by Venkat Balasubramani]

Levi Strauss & Co v. Papikian Enterprises, C 10-05051 JSW (N.D. Cal.; Aug. 24, 2011) [pdf]

Facts: Levi Strauss owns trademarks for "Levi's," "501" and other terms. It sells its products directly and to authorized retailers but does not sell through "distributors, wholesalers or jobbers." Retailers are contractually restricted from reselling "first quality merchandise." Papikian registered several domain names (501USA.com, 550jeans.com, 517jeans.com) through which he offered Levi Strauss products for sale. Levi Strauss grumbled about his use of various Levi Strauss trademarks and how Papikian sold goods to EU residents. The parties engaged in settlement discussions which were not fruitful, and ultimately Levi Strauss brought suit, alleging trademark and cybersquatting claims. Levi Strauss alleged that in response to some of Levi Strauss's complaints, Papikian made some changes to his website, but at some point along the way, these changes reverted, and Papikian's website "looked more professional, offered [Levi Strauss] products exclusively, and make more extensive use of [Levi Strauss] trademarks."

Papikian brought a motion for summary judgment, which the court denies.

Discussion:

First sale defense: Papikian argued that his sales of Levi Strauss products was protected under the first sale doctrine. Similar to the first sale doctrine in copyright, courts have held that "the right of a producer to control distribution of its trademarked product does not extend beyond the first sale of the product." (One big difference is that unlike copyright law, trademark law does not allow trademark owners to control importation of trademarked goods, other than counterfeits.) However, resellers who wish to take advantage of the first sale rule have to carefully tread the line between a retailer merely carrying/selling the goods and "suggesting affiliation" with the trademark owner. While the court doesn't describe the actual evidence put forth by Levi Strauss, it finds that Levi Strauss put forth sufficient evidence to create a factual question on the issue of whether Papikian crossed the line.

Nominative fair use: Papikian argued that his use of Levi Strauss trademarks was protected under the nominative fair use defense. Once a defendant shows that it is using the trademark to refer to the trademarked good, the burden shifts to the plaintiff to show a likelihood of confusion. The court finds that Levi Strauss sufficiently created a factual dispute on this point; again, the court looks to the changes to Papikian's website and the fact that it had disclaimers at one point but no longer does. The court also cited to Toyota Motor Sports v. Tabari and noted that Papkian's domain names were the types of domain names that the Ninth Circuit hinted could suggest sponsorship or endorsement.

Cybersquatting: The court also denies Papikian's request for summary judgment on Levi Strauss's ACPA claim. The court says that there are "material facts in dispute with regard to Papikian's intent." The court notes that Papikian's fair use defense remains unresolved. Additionally, Levi Strauss presented evidence of an adverse WIPO decision against Papikian. The order does not contain any discussion of the ACPA's safe harbor provision, which protects registrants who "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful."

European law: The order thus far has been bad news for Papikian, but there is one ray of light. Levi Strauss asserted claims under EU trademark law against Papikian. It argued that Papikian's importation of products into the EU without Levi Strauss's consent violated "Articles 5 and 7 of the First Council Directive 89/104/EEC of 21 December 1988, to approximate the laws of the Member States relating to trademarks, as amended by the Agreement on the European Union of 2 May 1992." The court declines to exercise jurisdiction over this claim out of comity. The relevant treaties provide for the "independence" of various member countries, and having tribunals in one country adjudicate the rights under the trademarks of another country would undermine the "spirit of cooperation" that underlies the comity doctrine. The court says that while it declines to exercise supplemental jurisdiction over Levi Strauss's claims in this case, this does not mean that it would decline supplemental jurisdiction "over every case involving foreign trademarks."

[The court also rejects Papikian's request for summary judgment on the dilution claims, finding that Papikian failed to demonstrate the absence of factual disputes with respect to these claims.]
___

The court's refusal to entertain Levi Strauss's claims under EU law is noteworthy. Allowing it to proceed with those claims would allow Levi Strauss to enforce an importation ban into the EU based on EU trademark law, something that it clearly could not do under US trademark law. The court did not discuss it in those terms, but it would be an end run around the fact that trademark law does not permit the trademark owner to control exportation or importation to allow the trademark owner to enforce a foreign ban on importation without consent. It would have also sharply limited the first sale defense.

Once the EU claims are taken out of the picture, you're left with claims by a trademark owner against a re-seller, who is legitimately selling the trademark owner's goods. The re-seller should have some amount of leeway to use the trademark owner's mark in order to refer to the trademarked goods and in the re-seller's domain name, but the court's order doesn't cut the re-seller much slack. The repeated tweaks to Papikian's site, along with the removal of the disclaimer and Levi Strauss's vague allegations that Papikian used more than Levi Strauss's marks than was necessary, is enough to get past summary judgment. As prior posts demonstrate, courts readily seem to find a hook to deny summary judgment to a reseller-defendant who raises first sale and nominative fair use defenses. (See "eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine--Beltronics v. Midwest" (alleged warranty misstatements);"Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber" ("expired" cosmetics that plaintiff argued were materially different)). One takeaway here is that trademark first sale and nominative fair use defenses remain murky and fact-specific.

Previous related posts:

eBay Resales Constitute Trademark Infringement Despite First Sale Doctrine--Beltronics v. Midwest
Online Resale of Expired Cosmetics May Be Trademark Infringement--Mary Kay v. Weber

Posted by Venkat at 09:07 PM | Domain Names , Trademark

August 03, 2011

Newspaper's Discussion About Trademark Owner Protected as Nominative Use--1 800 GET THIN v. Hiltzik

By Eric Goldman

1 800 GET THIN v. Hiltzik, 2:11-cv-00505-ODW -E (C.D. Cal. July 25, 2011)

I'm sure any trademark experts reading this post are scratching their heads at the blog post title. Newspapers discussing a trademarked product qualify for the nominative use defense. Well, duh. Why is that even a question that needs to be answered?

Well, because sometimes trademark owners bring asinine lawsuits. In particular, this case may be part of an emerging trend in the surgical procedure industry to misuse trademark law as a weapon against unwanted criticism. See, e.g., the Lifestyle Lift cases (1, 2).

This case involves the Lap Band surgical procedure. 1 800 GET THIN is a marketing agent for the procedure. The LA Times has repeatedly criticized the Lap Band. In one passage, it arguably implied that 1 800 GET THIN provided the procedure rather than just marketed it. Even against a pushover defendant, this is a weak point to gripe about. But against a well-regarded journalistic institution like the LA Times, there's simply no point in tangling in court.

Yet, 1 800 GET THIN still cranked up the machinery of justice. Predictably, the court expends few words in tossing the false designation of origin claim on nominative use grounds. The court also tosses the Lanham Act false advertising claim because the news article was editorial content, not advertising. Rebecca digs into the doctrinal details.

This outcome was so predictable that most trademark litigators probably would have advised 1 800 GET THIN that it had no chance of winning and it should not even try. In fact, the LA Times may very well extract some cash out of 1 800 GET THIN for bringing such a weak case. The case doesn't mention an anti-SLAPP motion, but this case seems tailor-made for anti-SLAPP protection. Otherwise, it's a strong candidate for a Lanham Act fee shift and perhaps Rule 11 sanctions.

Despite the "sun rising in the East" nature of this case's legal outcome, I still wanted to highlight it because it reminds us that trademark law's overexpansive sweep creates several problem. (I discuss these concerns in more detail in my paper, Online Word of Mouth and its Implications for Trademark Law). First, to the extent such a thing exists, this was an example of trademark bullying. The LA Times isn't an easy target for bullying, but smaller defendants will just capitulate in the face of 1 800 GET THIN's trademark threats.

Second, the LA Times didn't make a trademark "use" at all. We should have never reached the nominative use defense because there was no trademark use in the first place. The fact that courts aren't gatekeeping at that level lets weak trademark cases get further than they should. In this situation, relying on the nominative use defense works fine in the Ninth Circuit but is dicey in other circuits that don't cleanly recognize a nominative use defense.

Third, if the LA Times doesn't get 100% compensation from 1 800 GET THIN, then a travesty still occurred even though the LA Times prevailed in court.

A final thought. Having seen so many such lawsuits, I must admit that I become more suspicious of any trademark owner who resorts to completely meritless trademark litigation. It makes me wonder what they are trying to hide. In this case, the fact that the Lap Band and 1 800 GET THIN desperately grasped at legal straws makes me more skeptical of the legitimacy of their offerings.

Posted by Eric at 09:37 AM | Content Regulation , Marketing , Trademark | TrackBack

July 20, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

July 13, 2011

Coventry First Withdraws Twittersquatting Lawsuit Against @Coventryfirst -- Coventry First, LLC v. Does

[Post by Venkat Balasubramani]

Coventry First, LLC v. Does, 11-cv-03700-JS (voluntarily dismissed)

I previously posted about Coventry First's lawsuit against the operator of the @coventryfirst Twitter account. ("Trademark Owner Sues Over Alleged Twittersquatting--Coventry First, LLC v. Does.") I did not expect the plaintiff to prevail. Perhaps not surprisingly, then, Paul Levy of Public Citizen, who represented Doe, sends word that Coventry First voluntarily dismissed the lawsuit. (See "Coventry First’s Abuse of Trademark Law to Suppress Criticism Falls Apart.")

The dismissal of the lawsuit was precipitated by a procedural gaffe on Coventry First's part. In order to proceed with the lawsuit, it had to identify the Doe defendant, and jump through a few hoops before it sent a subpoena. Coventry First did not jump through the right hoops, and sent a deficient subpoena to Twitter. Twitter, to its credit, did not blindly comply with the subpoena; it passed the subpoena on to Doe's lawyer, Paul Levy. Paul prepared a hammer down motion to quash, and upon being advised of the grounds for the motion, Coventry First withdrew its lawsuit. Even if Coventry First had complied with the rules governing subpoenas, it's unclear that it would have been unable to unmask Doe because this requires some sort of showing that Coventry First had colorable claims.

Paul's post mentions that the @CoventryFirst account was pushing the envelope on Twitter's guidelines for parody and fan accounts, which do not allow for exact matches. In order to bring itself into compliance with Twitter's policy, the account-holder (Doe) added disclaimers, and also added "in" to the username, so the account is now @coventryfirstin.

With more and more companies establishing and relying on a presence on Twitter or Facebook, many of these types of disputes will be resolved by the likes of Twitter or Facebook rather than by the courts. Given that they face risk of secondary liability for trademark claims from brand owners, Twitter and Facebook will probably end up adopting a policy and making decisions that are more favorable to trademark and brand owners. Paul notes that Twitter's policy has a slight brand-owner bias, but it looks fairly nuanced. The fact that Twitter adopted a parody/fan account policy is in itself a win. Also, as mentioned above, Twitter took steps in this case to notify Doe of the subpoena, and this reflects a thoughtful approach on its part.

In any event, it looks like we will have to wait for another case to come along and resolve "the interesting issue of whether the many cases authorizing the use of trademarks in the domain names, titles and meta tags of non-commercial commentary web sites apply equally to Twitter account names." In the meantime, at least you now know who Coventry First is.

Other coverage:

Coventry First’s Abuse of Trademark Law to Suppress Criticism Falls Apart (Public Citizen)

Posted by Venkat at 11:25 AM | Trademark

"Recent and Future Developments in Trademark Law" Talk Slides

By Eric Goldman

Last month, I spoke with Mark Lemley and Peter Menell at a Silicon Valley IP Law Association dinner event designed to be a "year-in-review" of IP. I spoke on trademark law. My talk slides. To avoid the inherent limitations of a talk built around seriatim case highlights, I converted the year-in-review into a "hot topics" type presentation highlighting 5 key developments. These types of talks are much more time-consuming to prepare than my typical talk, so I don't expect to do them very often!

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

July 09, 2011

"App Store" Isn't Generic, But Apple Can't Enforce Its Purported Trademark in the Term--Apple v. Amazon

By Eric Goldman

Apple, Inc. v. Amazon.com Inc., 2011 WL 2638191 (N.D. Cal. July 6, 2011)

Apple's enforcement campaign over the term "App Store" is ridiculous. Apple is trying to prop up a farcically weak trademark claim--and to what end? To prevent its competitors from using the only logical term to describe their venue? Apple's efforts to control the term seem to be anti-consumer because Apple wants to make consumers think harder to figure out the relationships between various vendors. I'm glad Microsoft and Amazon are fighting Apple's overzealousness.

The judge apparently didn't think much of this dispute either, because she almost certainly had a law clerk do the heavy lifting on this opinion. The opinion doesn't start its analysis until page 11 (of 18); the prior material being an uninsightful summary of the parties' contentions. I can read the contentions in the parties' briefs if I really care, thank you very much.

When the opinion actually starts cooking, it breezily dismisses Amazon's claim that "app store" is generic:

The court does not agree with Amazon that the mark is purely generic, for the reasons argued by Apple

Okay...

The opinion next concludes that Amazon didn't create a likelihood of consumer confusion by offering an "appstore." The LOCC factors:

* "App Store" isn't a strong mark.
* even though the parties' services are related (both are app stores using that term in the proper generic sense), Amazon's apps only run on Android, not iPhones.
* the terms are identical in sight/sound/meaning, but the opinion again notes the Android/iPhone divide.
* no evidence of actual confusion.
* the point on marketing channels was incoherent and irresolute.
* the parties' arguments on purchaser care were too speculative.
* the intent factor favors Amazon because it believes the term is generic.
* the product line expansion point was also irresolute. The court says Amazon would like to offer iPhone apps but needs Apple's permission to do so.

Here's how the court summarizes the LOCC analysis:

Thus, two of the eight factors somewhat favor Apple, and three factors somewhat favor Amazon. The remaining three factors are neutral, or do not clearly favor either side. Accordingly, under this analysis, the court finds that Apple has not established that it is likely to prevail on the “confusion” element of its infringement claim.

This is what happens when you use the LOCC test to adjudicate a generic term. The LOCC test isn't insightful in that case, and some of the factors will weigh in favor of the plaintiff because the defendant is just trying to use the dictionary term for its dictionary meaning. Microsoft is still fighting Apple's trademark registration application in the TTAB, and I'm hoping the TTAB's expertise with trademarks will help it do what this judge seemed afraid to do: call the term generic.

The opinion allocates another 5 pages to a dilution analysis, although most of those pages are also a recap of the parties' contentions. The court's complete analysis of dilution issue:

The court finds that Apple has not established a likelihood of success on its dilution claim. First, Apple has not established that its “App Store” mark is famous, in the sense of being “prominent” and “renowned.” The evidence does show that Apple has spent a great deal of money on advertising and publicity, and has sold/provided/furnished a large number of apps from its AppStore, and the evidence also reflects actual recognition of the “App Store” mark. However, there is also evidence that the term “app store” is used by other companies as a descriptive term for a place to obtain software applications for mobile devices.

With regard to the statutory “blurring” factors, the marks are similar, but “App Store” is more descriptive than it is distinctive. Apple did have substantially exclusive use of “App Store” when it launched its service a little over three years ago, but the term appears to have been used more widely by other companies as time has passed. The mark does appear to enjoy widespread recognition, but it is not clear from the evidence whether it is recognition as a trademark or recognition as a descriptive term. Moreover, there is no evidence that Amazon intended to create an association between its Android apps and Apple’s apps, and there is no evidence of actual association.

With regard to tarnishment, there is no evidence to support a likelihood of success on this part of the claim. Apple speculates that Amazon's App Store will allow inappropriate content, viruses, or malware to enter the market, but it is not clear how that will harm Apple's reputation, since Amazon does not offer apps for Apple devices.

This discussion is so garbled, I'm not even sure where to begin. Let's drill down on the blurring discussion. In the LOCC analysis, the court assumed without deciding that "App Store" had achieved secondary meaning. Here, the court apparently undercuts that assumption by implying (saying?) that the mark isn't "distinctive"--in other words, lacking secondary meaning.

If the court intended to conclude that App Store had secondary meaning, then stacking up new definitions for the term is exactly what blurring is supposed to prevent, so the court should allow Apple to shut down Amazon and all of the other parties who are adding those new definitions. Or, if the court is saying that the term was once "distinctive" but now isn't, that's genericide. I don't know of a way for a descriptive term to obtain secondary meaning and then lose it without that term becoming generic for trademark purposes.

We all know what really happened--the term was generic from the moment Apple started using it, and the term has been proliferating through the English language as new useful dictionary terms tend to do. The court's timidness in reaching that conclusion forces it to contort the rest of its doctrinal analysis.

Despite the doctrinal mush, one thing seems pretty clear to me. Apple may have delayed the genericide death of its App Store trademark claim, but I don't see any situations where Apple can enforce its mark currently. I read this opinion as saying that so long as the term isn't being used in connection with a store for iPhone apps, there won't be any consumer confusion or dilution. But my understanding is that Apple isn't letting other stores offer iPhone apps, so the defendant pool should be a nullset. So whether it's because of genericism or the impossibility of consumer confusion, this opinion signals to Apple that it's wasting everyone's time and money trying to protect the App Store term.

Posted by Eric at 12:47 PM | E-Commerce , Trademark | TrackBack

July 03, 2011

June 2011 Quick Links, Part 1 (Copyright & Trademark Edition)

By Eric Goldman

Copyright

* Good news: the US government is funding alternative networks that dissidents can use to communicate when the Internet is censored by repressive regimes. Bad news: the US government is teaching the rest of the world how to censor the Internet through DHS domain name seizures and COICA/PROTECT IP Act. Maybe the US-funded alternative networks will help out those censored by the US government?

* Speaking of which, the EFF and Mark Lemley are fighting back against the DHS ICE domain name seizures. The EFF has more on the topic.

* Warner Bros. settled the Hangover 2/Mike Tyson tattoo lawsuit. Prior blog post.

* We don't have too many publicly announced settlement amounts for Righthaven. The latest: Righthaven settled with the US Marijuana Party for $1k. It's hard to see a profitable business model in that.

* Righthaven's dwindling inventory of cases: it filed 25 in March, 2 in April, 9 in May and ZERO in June.

* Are major US IAPs about to voluntarily implement a graduated response program?

* Murphy v. Millennium Radio (3rd Circuit June 14, 2011). Cropping the "gutter credit" from a photo violates 17 USC 1202.

* Friedman v. Guetta. Photographer gets summary judgment against an artist who copied photos from the Internet and remixed them.

* Jonathan Basamanowicz and Martin Bouchard, Overcoming the Warez Paradox: Online Piracy Groups and Situational Crime Prevention, Policy & Internet, Vol. 3, Iss. 2, Article 5 (2011). Abstract:

US federal law enforcement operations occurring between 2001 and 2005 attempted to disrupt the online piracy scene, targeting copyright piracy rings known as 'warez groups'. Previous work on warez groups has demonstrated a paradoxical situation where attempts to curtail warez group activities through policing and advancements in DRM only further encourage such groups to crack and distribute content. This study collected data on 93 convictions from these policing operations to construct a crime script of these groups' motivations and modus operandi in the release process. The results confirm previous findings that attempts to disrupt the activities of warez groups are counterproductive. To avoid the paradox, this study suggests that industry account for the motivations and modus operandi of these groups by creating DRM technologies which allow un-cracked content to seep through the testing step of the script, thereby placing a group's ability to obtain prestige at risk. Law enforcement should focus on apprehending crackers, as they are the most significant step in the release process.

See my complementary article, The Challenges of Regulating Warez Trading, from 2005.

Trademarks and Domain Names

* I'm not 100% sure what happened when ICANN approved the rollout of new gTLDs, but I'm pretty sure a lot of lawyers are going to find it lucrative for them.

* Scooter Store, Inc. v. Spinlife.com, LLC, 2011 WL 2160462 (S.D. Ohio June 1, 2011). Court allows a litigant to obtain discovery on its opponent's keyword ad buys. As I blogged in 2007, I'm surprised we don't see those discovery requests more frequently.

* Best Buy is chasing lots of folks to enforce its "Geek Squad" trademark. A prior blog post on other trademark litigation involving "geek."

* GoForIt Entertainment, LLC v. DigiMedia.com L.P., 2011 WL 2516163 (N.D. Tex. Jun 23, 2011). Plaintiff's theory that third-level domains were "domain names" for ACPA purposes did not justify awarding attorneys' fees as an "exceptional" case. Prior blog post.

* Lens.com v. 1-800 Contacts complaint. An antitrust lawsuit predicated on 1-800 Contacts' overzealous TM enforcement efforts (what some might call trademark bullying). Wendy Davis' writeup. Prior blog posts on the 1-800 Contacts v. Lens.com litigation (1, 2).

* ISystems v. Spark Networks, Ltd., 2011 WL 2342523 (5th Cir. June 13, 2011). The dating website Jdate's efforts to obtain jdate.net through a UDRP was not reverse domain name hijacking.

* Video from the March STLR Symposium panel on Emerging Issues of Secondary Liability in Trademark Law.

* Evan Williams: Five Reasons Domains Are Getting Less Important.

Posted by Eric at 06:49 AM | Copyright , Domain Names , Trademark | TrackBack

June 17, 2011

A Century of Trademark Law: Looking Back and Looking Forward (Notes from my INTA Annual Meeting Talk)

By Eric Goldman

At the INTA Annual Meeting in San Francisco in May, I spoke on a panel with Miles Alexander of Kilpatrick Townsend and The Rt Hon. Professor Sir Robin Jacob, now a professor at University College London. The panel was moderated by the esteemed Tom McCarthy. Nominally, the panel theme was celebrating 100 years of the Trademark Reporter, but in practice this theme allowed us to riff on the past and future of trademark law. We had a huge audience of over 300 folks. Photos of the panelists and the audience. Audio recordings are available presumably for a fee (you have to navigate this baffling website--no deep linking allowed there!).

I made 3.5 points during my remarks. The first two-and-a-half points relate to what has changed in trademark law; the last point relates to the future.

Point #1: Rise of Online Word of Mouth/Fall of Brand Control. In the old days, brand owners has pretty clear rules of engagement for reaching consumers. Following the 4Ps of marketing, brand owners who wanted to shape consumer perceptions could exercise tight control over distribution channels and could woo mass media gatekeepers. Consumer word of mouth was important, but it was slow, low-scale (in that any individual consumer could reach a relatively bounded universe of other consumers) and steerable through mass media exposure. Now, consumer word of mouth is lightening fast, can have the same reach as the traditional mass media, and is extremely difficult to control because of its fractured and democratized nature. I explore this point more in my paper, Online Word of Mouth and its Implications for Trademark Law.

Point #2: Crumbling of Commercial/Non-Commercial Distinction. Many legal doctrines are predicated on distinguishing commercial from non-commercial activity. None of them are prepared for the collapse of that distinction. Certainly trademark law isn't prepared. Commerciality is a Constitutional imperative for trademark law. Perhaps more importantly, most trademark doctrines are designed to correct a specific type of defect in the marketplace.

Trademark law has proven ill-equipped to handle non-commercial activity. The doctrinal boundaries are simply too plastic to work well when applied to fundamentally non-commercial activity. In the past, trademark law struggled with fundamentally non-commercial parodies like Air Pirates or the Screw Magazine depiction of the Pillsbury Doughboy that had relatively small reach. Now, a similarly non-commercial parody can generate 100M views on YouTube or a million Twitter followers (think BPGlobalPR)--thus having the reach, but not the intent or effect, of activity that used to be limited only to commercial actors.

Point #2.5: Emergence of Private Namespaces. One specific application of the rise of online word of mouth and the incoherence of the commercial/non-commercial distinction arises with the development of new private namespaces. Historically, any private non-trademark namespaces typically were limited in reach. But this changed with the rise of 1-800 vanity numbers, then domain names, then usernames on online services (especially social media). Now, each private namespace creates a new opportunity for third parties to register a trademark owner's brand and reach the world under that brand. Yet, we don't have consistent rules for the application of trademark law to private namespaces, and it seems like we have to invent the rules anew each time.

Point #3: Trademarks and Scientific Understanding of Consumers. A tension for the future: how much will trademark doctrine integrate scientific learnings about consumer behavior? Most of basic trademark doctrine was built decades ago, and our understanding of consumer psychology and behavior has improved substantially in the intervening years. Yet trademark doctrine hasn't really changed to reflect any of those learnings. In fact, we have weak or zero scientific support for the doctrinal contours of things like the multi-factor likelihood of consumer confusion test or trademark dilution.

At some point, we might just acknowledge that trademark law is the product of trademark owner rent-seeking rather than anything that tries to reflect actual consumer behavior. This is why the courts may be more useful than legislatures when it comes to improving trademark law. For example, the courts could unilaterally change the elements of the multi-factor likelihood of consumer confusion test because it's purely common law, although it will be hard for any single judge to reshape the test nationally. Nevertheless, as trademark doctrine further deviates from consumer behavior, trademark owners will encounter more friction in courts and society will have less respect for trademark law.

IP Kat/AmeriKat's recap of the panel. Managing IP's coverage of the talk.

Functionality Talk. Separately at the annual meeting, I also spoke on a panel with Mark Lemley and Dan Burk on the functionality doctrine, especially as applied to Rosetta Stone. A photo of the panelists. Managing IP's coverage of the talk.

Posted by Eric at 07:40 AM | Trademark | TrackBack

June 14, 2011

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

By Eric Goldman

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

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

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

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

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

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

June 09, 2011

Trademark Owner Sues Over Alleged Twittersquatting--Coventry First, LLC v. Does

[Post by Venkat Balasubramani]

Coventry First, LLC v. Does, 11-cv-03700-JS (complaint filed June 7, 2011)

The last big tussle over twittersquatting, and infringement through use of a trademark or name in a twitter handle was between Tony La Russa and the person who operated a fake account in La Russa's name. La Russa sued Twitter but his lawsuit ended in a whimper, when he dropped the complaint. ("This Time, Tony La Russa Drops Twitter Case for Real.")

A couple of days ago, Coventry First, "a leading company in the life settlement industry" brought suit against unnamed defendants over the @coventryfirst twitter account. It has not named Twitter and looks like it's going after the person(s) behind the account. You can access a copy of the complaint here, and Exhibit A, which contains a screenshot of the account here. You don't see many lawsuits of this nature so this one surprised me.

The part that shocked me is that the twitter account was recently established and had 14 tweets and 5 followers at the time the complaint was filed (and now has 3 followers). The account has minimal activity and likely no effect whatsoever on Coventry First's business and affairs. It probably comes up when you do a search for "Coventry First," but it doesn't look like it's garnered much interest. There's also no indication from the complaint that Coventry First tried to utilize Twitter's complaint mechanism or otherwise brought up any issues it had with the person who runs the @coventryfirst Twitter account.

Coventry First's complaint suffers from many of the failings as La Russa's or any other complaint against a squatter or infringer on Twitter--there is no indication that the allegedly infringing Twitter account is being used for any commercial purpose. @coventryfirst is not selling or promoting any products or services. It's tough to see how this can amount to trademark infringement or unfair competition under the Lanham Act. In addition to trademark claims, Coventry First also asserts a claim for unjust enrichment. It's entirely unclear how anything @coventryfirst does amounts to unjust enrichment. Twitter accounts aren't exactly moneymakers on their own, and if anything, the person behind @coventryfirst has spent a few hours setting up the account and has generated zero dollars from it.

Coventry First also included a claim under the cybersquatting statute (the ACPA), but the ACPA only applies to second level domain names, and a user-name assigned by Twitter clearly does not fall into this category since Twitter is not a domain name registrar. The ACPA claim is a non-starter. (See Professor Goldman's post on Goforit v. Digimedia: "Wildcarding Subdomains Is OK; Reverse Domain Name Hijacking Isn't.")

This leaves Coventry First's claim for dilution or tarnishment. To bring a claim for dilution or tarnishment, Coventry First would have to show that its mark is "famous" (and distinctive). I wish them good luck with that.

Unless there's something that did not make its way into the complaint, this looks like a drastic overreaction on Coventry First's part. It may or may not result in action being taken by Twitter or by the person behind the @coventryfirst, account, but at first glance, Coventry First's legal claims do not appear particularly strong.

Added (additional coverage):

"Insurer sues Twitter imposter who cheers death, mayhem" (Reuters)
"Can a Twitter username be cybersquatting? One insurance company thinks so." (Domain Name Wire)

Posted by Venkat at 08:05 PM | Trademark

May 30, 2011

April-May 2011 Quick Links, Part 1 (Trademarks and Advertising Edition)

By Eric Goldman

Trademark

* Facebook has quite an active trademark docket.

- Facebook, Inc. v. Teachbook.com, LLC, 2011 WL 1672464 (N.D.Cal. May 3, 2011). Facebook’s trademark suit against Teachbook was dismissed for lack of personal jurisdiction. Facebook promptly refiled in Illinois.

- Facebook sues Various over a "Face Book of Sex" site.

- Facebook v. Bearbook. Facebook forced a name change at a site for "bears."

* What are people bringing trademark lawsuits over? Sears is suing over DieHard sex spray, whiskey manufacturers are suing over “Give ‘Em the Bird,” and the Huey P. Newton Foundation is suing CafePress over "All Power to the People" (one of the rare times when "Power to the People" and trademark enforcement will be in the same sentence). And don't forget the laughable claim that the NYSE has trademark protection in its trading floor.

* Newport News Holding Co v. Virtual City Vision (4th Cir. April 18, 2011). Newportnews.com is the subject of an ACPA loss 10 years after it survived a UDRP. What went wrong? "[I]n making changes to its website in 2007, VCV shifted its focus away from the legitimate service of providing information related to the city of Newport News and became instead a website devoted primarily to women’s fashion....VCV cannot escape the consequences of its deliberate metamorphosis....newportnews.com went from being a website about a city that happened to have some apparel advertisements to a website about women’s apparel that happened to include minimal references to the city of Newport News." Result of the ACPA loss: $80k in damages, $10k in sanctions and attorneys' fees.

* It was a bad two months for plaintiffs suing keyword advertising defendants:

- Starsurgical, Inc. v. Aperta, LLC, 2011 WL 2037554 (E.D. Wis. May 24, 2011): “Star also claims that defendants infringe its mark by using it as a “keyword” on internet search engine advertising such that whenever a customer performs a search for the phrase “Wittmann Patch” defendants' website appears as a sponsored search result. Star, however, makes no effort to explain how this activity confuses consumers. Cent. States, SE & SW Areas Pension Fund v. Midwest Motor Express, 181 F.3d 799, 808 (7th Cir.1999) (arguments not developed in any meaningful way are waived); see also Network Automation, Inc. v. Advanced Sys. Concepts, No. 10–55840, 2011 U.S.App. LEXIS 4488, at *37–39 (9th Cir. Mar. 8, 2011) (using a trademark in keyword advertising does not violate Lanham Act absent showing of likelihood of confusion).”

- World Entertainment, Inc. v. Brown, 2011 WL 2036686 (E.D. Pa. May 20, 2011): “Plaintiffs showed Brown's use of their protected trademarks in advertising and diverting internet traffic to Grand Entertainment's website through search engine phrase matching using Google Adwords and meta tags, but they did not offer any evidence suggesting the percentage of their business downturn caused by such infringement.” Accord InternetShopsInc.com v. Six C Consulting, Inc.

- The Scooter Store v. SpinLife.com, 2011 WL 1460438 (S.D. Ohio amended opinion April 18, 2011). The Scooter Store sued SpinLife for buying its trademarks in Google AdWords. This ruling preserves SpinLife’s antitrust counterclaims.

- Traveler's Joy, Inc. v. Haycco LLC, 2011 WL 1587132 (S.D. Ind. April 26, 2011): "In an attempt to stave off dismissal, Joy points to numerous screenshots of Google's search results and pages generally discussing how Google's “AdWords” keyword-based advertising program operates. Based on this “evidence,” Joy jumps to the conclusion that Haycco's advertisements are specifically targeted to users in Indianapolis. However, this evidence is in no way sufficient to establish that Haycco engaged in any such intentional targeting of Indiana. Instead, the credible evidence establishes that Haycco only engages in general web advertising."

* Architectural Mailboxes, LLC v. Epoch Design, LLC, 2011 WL 1630809 (S.D. Cal. April 28, 2011). In a case involving critical comparative advertising, the court grants the advertiser’s nominative use defense on a motion to dismiss. Rebecca’s coverage.

* Koch v. Does. A hoax press release survives a trademark challenge. Coverage from EFF and Bill McGeveran.

* Eva Bridal Ltd. v. Halanick Enterprises Inc. (7th Cir. May 10, 2011). A botched franchising attempt leads to a finding that the purported franchisor abandoned the mark.

* be2 LLC v. Ivanov, 2011 WL 1565490 (7th Cir. April 27, 2011). An alleged knockoff website didn't have jurisdiction when it had only 20 registered users in the plaintiff's home court.

Advertising

* The plaintiffs voluntarily dropped the Taco Bell beef lawsuit. But Taco Bell may not be done with the plaintiffs.

* NYT: A study suggests that 3 credit card merchant account providers support the vast majority of spammers. The paper. Unfortunately, this will almost certainly encourage politicians to deputize credit card providers as the Internet police.

* In a crackdown on fake "news" sites promoting acai berries, the FTC takes another broad view about affiliate liability (1, 2).

* Similarly, “The FTC has consistently maintained that sellers are responsible for their marketers’ telephone calls to solicit purchases of the seller’s goods or services.”

* NYT: angst about advergames oriented towards kids. Evidence that kids don't understand ad labeling.

* The vegan-oriented magazine VegNews used stock photos of items containing meat to accompany the vegan recipes it publishes (and didn't disclose this fact). The vegan community erupted in anger. VegNews initially stood its ground but finally relented and apologized.

* NYT on functional foods.

* Patton Boggs: "FTC Enforcement Against Individuals: Legal Standards Impacting Individual Liability for Alleged Violations Enforced by the FTC’s Bureau of Consumer Protection."

Posted by Eric at 08:24 AM | Derivative Liability , Marketing , Trademark | TrackBack

May 24, 2011

Keyword Advertising and Domain Name Law Slides

By Eric Goldman

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

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

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

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

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

May 18, 2011

Thoughts on the Lawsuit Over the @OMGFacts Twitter Account -- Deck v. Spartz, Inc.

[Post by Venkat Balasubramani]

Deck v. Spartz, Inc., 2:11-cv-01123-JAM-DAD (E.D. Ca.; Apr. 26, 2011) (Complaint) (Agreement)

An Associated Press story reports on the lawsuit over the @OMGFacts Twitter account. (Here's a link to the story with comments from Professor Goldman.)

Background: @OMGFacts is a Twitter account which was created by Adorian Deck. It rose to prominence in 2010. As alleged in the complaint:

In September 2009, [Deck] created a Twitter feed [@OMGFacts]. The feed retrieved and republished titillating, sometimes trivial, factual tidbits about such subjects as celebrities, pop culture, world history and commerce. The feed quickly amassed more than 300,000 followers, including many celebrities. It became the 18th most active Twitter trend in 2009, and remained among the top ten trending terms until January 2010.

Most interesting about this dispute is that Deck was a high school student and a minor when he created the account.

Deck was allegedly approached by Emerson Spartz, who ostensibly agreed to help Deck capitalize on this success. The two entered into an agreement which provided that Deck, who was labeled as a "contractor" in the agreement, would be entitled to 30% of the revenues from the OMGFacts YouTube channel and 100% of the revenues from the sales any "OMG Facts" t-shirts. Under the agreement, Spartz agreed to promote the sale of these t-shirts and deal with the OMG Facts YouTube channel. The agreement also provided that any "documents or records or creations . . . which are made by [Deck]" would be owned by Spartz's company. The agreement also had copyright assignment provisions which purported to assign to Spartz's company "any copyright in any existing or future works . . ." that are created by Deck. The duration of the agreement was one year. Deck had limited termination rights under the agreement, but Spartz's company could extend the term for 10 additional one-year periods.

Complaint: The complaint says that Spartz breached. It alleges:

[Deck has] received less than $100 in compensation from Spartz, and has received no account or other disclosure of the revenues associated with the YouTube channel.

The complaint also alleges false designation of origin and false advertising claims, and it asks for recission of the agreement.
__

Some initial observations about the lawsuit and agreement.

First, with respect to ownership, the agreement focuses on the content. The blogosphere has tackled ad nasuem the issue of whether or not you can copyright a Tweet and who owns the content in a Twitter feed. The complaint contains a small concession or two that could end up being harmful to Deck's copyright claims - it says that the feed consists of "factual tidbits" which are "retrieved and republished" by Deck through the Twitter feed. Small bits of content are not easily the subjects of copyright protection, and if they are factual in nature that raises the bar for copyrightability. If Deck did not come up with the content himself and merely republished content found elsewhere, this also poses a barrier. Still, maybe Deck can argue that the compilation as a whole should be protected. (The agreement also speaks to the Twitter account itself and states that Deck has to keep Spartz apprised of the passwords for the @OMGFacts Twitter account.)

However, as the Associated Press article points out, this lawsuit is not about the content of the Twitter account at all or even over the ownership of it. The core of the dispute is over the @OMGFacts (or OMG Facts) brand, even though the complaint does not expressly alleged a claim for trademark infringement. Unfortunately, the agreement says very little about trademark rights. (Here is a link to the .pdf version of the agreement.) Spartz will argue that he was the one who commercialized the brand in the first place and therefore should own any trademark rights. On the other hand, the agreement provided that Deck will deal with all aspects of the shirt sales and retain 100% of the revenues from it, so Deck may still argue that he was the one who truly commercialized it. Deck can also argue that the hundreds of thousands of followers which he amassed prior to Spartz coming into the picture demonstrate that he already had a brand and had built up common law rights in @OMGFacts and "OMG Facts."

This of course raises the issue of whether someone can establish trademark rights by putting out a Twitter feed. In recent trademark disputes, companies have argued about whether their use on Facebook or Twitter is sufficient to establish trademark rights. Those cases have presented situations where companies have included stray references to products or services on their Twitter feeds, and none of the cases to date approach a situation where someone has amassed a substantial following on Twitter. (The Boathouse v. Tigerlogic dispute over the "POST POST" mark for "social search services" touches on this: "Social Search Services Duel Over "Post Post" Mark -- Boathouse Group v. TigerLogic.")

The equities obviously favor Deck. The agreement is very one-sided and contains an Indiana forum selection clause. When you take into consideration Deck's minority status, I can see a factfinder poking the agreement so full of holes that it becomes the contractual equivalent of swiss cheese. The agreement acknowledges Deck's minority status and includes Deck's mother as a signatory, but given the novelty of the subject matter of the agreement, you can't fault Deck's mother for not negotiating for a clearer and less one-sided agreement--to the extent she even took the agreement seriously. Deck also asks for recission of the contract, citing to a California Code section 6710 which looks like it allows minors to disaffirm contracts they enter into, except as provided by other statutes. I'm not familiar with any statutory exceptions to this rule that restrict the ability of minors to disaffirm contracts, but there must be some limitations on a minor's ability to disaffirm an agreement which the parent or guardian reviews and signs. Either way, even if the court does not end up rescinding the agreement, the agreement does not offer Spartz a definitive win. Nothing in the agreement says that Spartz owns the trademark rights, or even that he or his company have a license to use the marks.

A final comment on the agreement. It's easy to second-guess an agreement after the fact, but joint venture agreements should always deal with trademark rights, and should also provide for some sort of procedure for ownership of the trademark rights when the agreement falls apart. Some sort of formal wind-down procedure is optimal. This is discussed in Professor Goldman's article on Co-Blogging Law, which specifically talks about trademark rights.

Additional coverage:
Hollywood, Esq. (Eriq Gardner): "Teen Who Created OMGFacts Twitter Feed Sues, Claiming Swindle"
Ben Kerschberg (Forbes): "Twitter Brands, @OMGFacts, and an Allegedly “Predatory” Contract"
Emerson Spartz (the defendant): "OMG Fact: There are two sides to every story"

Posted by Venkat at 09:34 AM | Copyright , Licensing/Contracts , Trademark

May 15, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

May 03, 2011

Ruminations on the Likelihood of Consumer Confusion Standard in Trademark Law

By Eric Goldman

Last month, I attended the Third Trademark Scholars’ Roundtable in Bloomington, Indiana. See my prior blog posts about the first and second roundtables. See a photo of the participants. As usual, Rebecca acted as event chronicler. See her comprehensive blog posts (1, 2 (with artwork by Bill McGeveran!), 3, 4).

The roundtable’s theme was the likelihood of consumer confusion (LOCC) test and its deficiencies. Overall, the roundtable participants generally agreed that the test has obvious doctrinal deficiencies, but unfortunately we did not reach a consensus either on the underlying harms that trademark law should ameliorate or any fixes to the existing LOCC multi-factor test. I called on the group to come up with a consensus proposal, figuring that if our group of knowledgeable and largely like-minded academics could not come up with a consensus proposal, no one could. Sadly, we didn’t rise to that challenge.

I introduced one of the panels. The three main points I made in my introductory remarks:

1) Trademark law protects both producer and consumer interests. To the extent trademark law is protecting consumer interests, the LOCC test attempts to measure what’s going on in consumers’ heads (i.e., how the senior and junior users’ activities affect the consumers’ psychological processes). That inquiry is ultimately doomed. Consumer psychological processes are too complicated and heterogeneous for a legal test to accurately measure these effects.

2) The individual factors in the standard LOCC test are a weird mix of producer- and consumer-oriented factors. This mix of factors doesn’t make sense, which is why courts sometimes pull them apart and put them back together in interesting ways. (See the Network Automation case for a good example of remixed factors). Structurally, the LOCC test implicitly assumes that all consumers use the same search processes, but this assumption isn’t defensible. Different products have different search processes; and even for a single product, different consumer subcommunities will use different search processes.

3) Courts have developed a number of bypasses to the standard multi-factor LOCC test, especially to deal with cases involving non-competing trademark uses. Examples include initial interest confusion and post-sale confusion. However, these tests rarely improve the judge’s analysis; and as an empirical matter, I believe most courts reject the bypass tests and just go back to the standard LOCC test. For example, over the past few years, initial interest confusion gets mentioned fairly rarely in court opinions, and it has been dispositive in those cases even less frequently. I am planning to take a closer empirical look at citations to the initial interest confusion doctrine over the summer.

Having said all that, it’s my own ad hoc empirical observation that most courts reach the right result when using the LOCC test, even if the test (or the judge’s application) is flawed. The errors can be conspicuous, but most cases get to equitable results most of the time. The bigger issue are the errors in decision-making that never reach a court case, such as companies that steer away from grey areas in socially suboptimal ways or potential defendants who cave in response to a trademark owner’s C&D. (With respect to the latter, I still think a threats action may be useful).

Even so, I wonder if we could do simple things that would reduce the errors, reduce the adjudication costs, or empower potential defendants to make decisions with less uncertainty. It seemed like the LOCC test has been stretched to too many different types of TM owner-vs.-defendant factual positions. It is also conspicuous that the LOCC test is completely common law; Congress has never expressly adopted the test. Thus, I wonder if we might find it useful to statutorily adopt the test but then give explicit statutory guidance on how to apply the factors (just like the fair use test gives some explicit guidance to courts about applying the test, although we might view fair use as a cautionary tale rather than a model).

For example, we could statutorily introduce some “buckets” which give judges guidance about when to use the LOCC test or do something different. For example, I offered up the following four different buckets: (1) direct competitive uses, (2) TM uses in adjacent products, (3) merchandising/licensing, (4) everything else. In some sense, courts have already implicitly developed some different tests reflecting these different categories. For example, we have special rules for counterfeiting as a specific case under bucket #1; the courts do different things in merchandising cases; and the LOCC test works particularly poorly in bucket #4 (which is where I think the LOCC test errors are the greatest and most pernicious).

One other interesting takeaway I’ll mention here. At one point we talked about our frustration with the marketing literature that discusses trademark issues and how those papers often do not reflect a nuanced understanding of trademark law. At the same time, when we talk with marketing professors, they are baffled by how trademark law doesn’t reflect well-accepted insights in the marketing community. It seems that there could be some benefit to getting the trademark law professor and marketing professor community together to discuss how we can work together better. If you’re a marketing professor and might be interested in such an endeavor, please contact me.

Posted by Eric at 09:58 AM | Trademark | TrackBack

April 29, 2011

Department of Commerce Releases Worthless Report on Trademark Bullying

By Eric Goldman

Trademark Litigation Tactics and Federal Government Services to Protect Trademarks and Prevent Counterfeiting, April 2011.

[For background, see my earlier blog post on trademark bullies. The term "bully" appears only 4 times in the report; as FN51 explains, the statute didn't use the term and so the report doesn't either. I don't like the term "bully" because of all the baggage associated with cyber-bullying, but I suspect the decision not to use "bully" in the report reflects the report's heavy slant towards trademark owners instead of a retreat from the term's semantic ambiguity.]

We have Sen. Leahy to thank for ordering this report last year studying how trademark owners were overenforcing their rights against weak targets. Of course, Sen. Leahy parochially raised this issue only after one of his local constituents was targeted; but however he got there, at least he realized the importance of the issue. Unfortunately, maybe we should say "thanks for nothing," because the report he got back from the Department of Commerce got totally coopted by the trademark owner constituency and thereby was rendered worthless. Useless. A complete whiff.

The report takes two key ill-fated turns. First, the report says that the Department of Commerce got a lot of comments, but "few explicitly addressed whether and to what extent trademark abuse is a significant problem." It later denigrates those comments as "anecdotal." In other words: Problem? We don't see any problems here!

Yet, the report doesn't indicate that the Department of Commerce tried to scientifically research the problem, like conducting a survey to overcome the "anecdotal" defect. Instead, the report describes its efforts opaquely (page 7 of the PDF): it
* "reviewed data and research materials regarding trademark litigation tactics" (huh? Citations, please)
* read the submitted comments
* reached out to "a large industry organization" (INTA? Chamber of Commerce? Whoever it was, it was surely a trademark owner lobby)
* talked with its "Trademark Public Advisory Committee" (It's conspicuous that I don't recognize a single member of that committee, but a quick search suggests most of them are former PTO insiders or TM owner advocates--or both)
* held a roundtable in Detroit (a one-hour session bundled into a conference teaching businesses how to be IP plaintiffs), and
* reviewed an ABA IP section survey of 270 section members (basically, a survey of trademark owners or their counsel), who not surprisingly said everything was A-OK.

Given this apathetic and stacked research effort, it's hardly surprising the Department of Commerce found any problems worth getting excited about.

Second, the report says "a trademark is a property right that an owner has a duty to police." WHOA! Many folks would dispute the characterization of trademarks as "property"; and many folks (including me) insist that the "duty to police" is massively overstated. Later, the report says, "In view of the mark owner’s obligation to police violations, aggressive enforcement of one’s trademark rights does not automatically equate to abuse or bullying." In effect, the report says that it doesn't see any problem at all; but if there is a problem, it's just the natural consequence of that pesky duty to police....oh well, c'est la vie.

Given its apathetic nature, the report doesn't make the logical jump that any intellectually curious person would instantly make: if the "duty to police" might be driving trademark owners to be (over)zealous in their enforcement efforts, maybe we should fix the duty to police. After all, this "duty" isn't in the statute at all; it's barely in the caselaw; and it could be easily remedied with a statutory clarification that might very well be welcomed by both trademark owners and secondary trademark users because it might eliminate ambiguity plaguing both communities. C'mon, guys--that conclusion isn't exactly rocket science.

From my perspective, the "duty to police" is like the proverbial monster under a child's bed. It's not actually there, but boy, it sure seems scary. My academic writing queue is too thick right now to tackle this issue immediately, but I don't recall seeing a good comprehensive academic article grokking the duty to police (if I'm forgetting something, please let me know). That would be an excellent paper topic. I would be happy to work with someone on this project so that we can demonstrate just how massively the "duty to police" is overstated--typically as a business development tool for trademark litigators trying to afford their kids' private school tuition. Naturally, the Department of Commerce report undertook no such research effort into the trademark policing duty itself.

Consistent with the (lack of) effort invested in the report, the report's actual recommendations are also uninspired and lackadaisical. The recommendations include:

1. Engage the private sector about providing free or low-cost legal advice to small businesses via pro bono programs and intellectual property rights clinics;

2. Engage the private sector about offering continuing legal education programs focused on trademark policing measures and tactics;

3. Enhance Federal agency educational outreach programs by identifying resources that enable small businesses to further their understanding of trademark rights, enforcement measures, and available resources for protecting and enforcing trademarks.

Basically, since there's not really a problem, let the private sector fix anything that needs fixing. Gee, that's helpful. As I said, a WORTHLESS report.

If the report authors had even a modicum of inspiration, there are so many recommendations the report could have fruitfully explored, such as:

* as I indicated, a statutory codification/fix to the "duty" to police
* a way of capturing data so this issue could be more precisely studied in the future, such as funding for a real survey or, better yet, requiring C&D letters to be filed in a public repository so they could be studied more scientifically than the ChillingEffects database permits (given the voluntary nature of C&D tenders to the database). Leah Chan Grinvald's paper, "Shaming Trademark Bullies," gets into this idea more. Not surprisingly, her article wasn't cited in the report, but it's worth a read anyway.
* the "threats action" idea I mentioned in my prior blog post on the topic. The report expressly acknowledges that a trivial number of trademark disputes get to court, yet it fails to follow up on the possibility that the disputes "resolved" outside of court are actually the problem.
* a small claims IP court where low-stakes disputes could be adjudicated more cheaply than full-scale litigation.
* more aggressive fee-shifts to the defendant in abusive situations. Right now, the statutory standard for a fee-shift award is "exceptional," and many courts treat it as such. The report elsewhere makes the absolutely farcical statement that "in Federal court proceedings, Rule 11 of the Federal Rules of Civil Procedure provides an effective mechanism to combat overreaching." Another thing the report could have studied is how often courts actually award fee-shifts to the defense or assess Rule 11 sanctions against trademark plaintiffs to see if those tools effectively curb bad trademark owner behavior. That would be another good paper topic.

I could go on with more solutions, but then I would be doing the work that the report drafters should have done.

In response to this useless document, Sen. Leahy ought to haul the report drafters before him, chew them out, and ask them to redo the report properly. Instead, he'll probably thank the authors for their attention to this important matter and stick the report in his desk drawer to be ignored forevermore. Your tax dollars at work!

UPDATE: David Pardue's blog post is almost as harsh as mine!

Posted by Eric at 09:58 AM | Trademark | TrackBack

April 05, 2011

March 2011 Quick Links, Part 2

By Eric Goldman

Trademark

* Apple is on the road to CrazyTown with its attempt to secure and protect trademark rights in “App Store.” Among the "highlights" this month:
- it sued Amazon. Marty’s comments. The Justia page.
- Microsoft has been scoring a lot of points in its TTAB opposition. My comments on the latest developments. This battle is so pitched, it’s devolved into a font war.
- Apple successfully “persuaded” MiKandi, an "app store" for adults, to change its description to "app market."

* Google's trademark win for "Android" is being appealed to the Seventh Circuit.

* Advocate General's opinion in the EU keyword advertising case of Interflora v. Marks & Spencer. Let me know if you have the patience to read the whole thing. I don't.

* Jim Jansen: "it probably doesn't pay, on average, to bid on competitors branded phrase."

* At SSRN: Counterfeiters: Friend or Foe? The article tries to evaluate when knockoffs create demand for the original or act as substitutes: "The advertising effect dominates substitution effect for high-end authentic product sales, and the substitution effect outweighs advertising effect for low-end product sales."

* BoingBoing: NYT shuts down the @freeNYTimes auto-retweeting account on trademark grounds because the re-tweet service blows apart NYT's paywall. BTW, given its holes, I don’t think it should be called a “paywall.” Maybe more like a “pay-chain-link-fence”?

* GoDaddy takes down a website that tried to emulate Reed College's website.

* Washington Post caves in response to demand from Washington Redskins' team and changes a blog name from "Redskin Insider" to "Football Insider."

Retailing and Manufacturing

* WSJ: Manufacturers and retailers are beginning to push back on the paradox of choice. AdAge on Walmart using its market share to promulgate private regulations on its suppliers.

* Fast Company: How to sell more carrots? Market them like junk food.

* Illinois is the latest state to enact an "Amazon tax," so Amazon and Overstock tossed their Illinois affiliates overboard. When are states going to learn that the Amazon tax doesn't actually improve their financial situation? They don't get the increased sales tax revenue, and they lose the income tax from state-based affiliates. This is the opposite of a Pareto optimal move--no one gets made better off, but some get made worse off. This is also a good example of how state tax policy can degrade our national economy.

* SaferProducts.gov is now live.

* NYT: Car manufacturers are asserting copyright to prevent the National Highway Transportation Safety Administration from republishing their “technical service bulletins” describing warranty extensions and other unusual problems with their cars.

Privacy

* From the FTC: "in the last 15 years, the FTC has brought more than 300 privacy-related actions, including: 32 data security cases, 64 cases against companies for improperly calling consumers on the Do Not Call registry, 86 cases against companies for violating the Fair Credit Reporting Act (FCRA), 97 spam cases, 15 spyware (or nuisance adware) cases, and 15 cases against companies for violating the Children’s Online Privacy Protection Act (COPPA)."

* FTC busts Chitika for having opt-out cookies expire in 10 days. According to ClickZ, Chitika claims it was a bug; the cookie was supposed to expire in 10 years.

* ClickZ: "Device Fingerprinting Could Be Cookie Killer." A follow-up story on privacy concerns.

* Time Magazine: Data Mining: How Companies Now Know Everything About You

* The FTC gave final approval to its settlement with Twitter. Prior blog post.

* Jane Yakowitz, Tragedy of the Data Commons. Brooklyn VAP Jane Yakowitz takes on Paul Ohm's reidentification paper. The abstract:

Accurate data is vital to enlightened research and policymaking, particularly publicly available data that are redacted to protect the identity of individuals. Legal academics, however, are campaigning against data anonymization as a means to protect privacy, contending that wealth of information available on the Internet enables malfeasors to reverse-engineer the data and identify individuals within them. Privacy scholars advocate for new legal restrictions on the collection and dissemination of research data. This Article challenges the dominant wisdom, arguing that properly de-identified data is not only safe, but of extraordinary social utility. It makes three core claims. First, legal scholars have misinterpreted the relevant literature from computer science and statistics, and thus have significantly overstated the futility of anonymizing data. Second, the available evidence demonstrates that the risks from anonymized data are theoretical - they rarely, if ever, materialize. Finally, anonymized data is crucial to beneficial social research, and constitutes a public resource - a commons - under threat of depletion. The Article concludes with a radical proposal: since current privacy policies overtax valuable research without reducing any realistic risks, law should provide a safe harbor for the dissemination of research data.

* Woodrow Hartzog, Promises and Privacy: Promissory Estoppel and Confidential Disclosure in Online Communities, 82 Temp. L. Rev. 891 (2009). The abstract:

Online communities often provide significant support for those who seek it. Yet in order to take advantage of that support, users must frequently disclose sensitive information such as dating profiles, candid thoughts, or even past substance abuse. What happens when other community members fail to keep this potentially harmful information confidential? Traditional remedies will likely fail to protect people when members of an online community violate the confidentiality of other members. In this Article, I contend that promissory estoppel, an equitable doctrine designed to protect those who detrimentally rely on promises, can ensure confidentiality for members of online communities. The application of promissory estoppel via a website's terms of use agreement as a method for protecting disclosure has substantial advantages over tort-based, technological, or contractual remedies. Under the third-party beneficiary doctrine or the concept of dual agency, these agreements could create a safe place to disclose information due to mutual ability to enforce promises of confidentiality.

Posted by Eric at 02:33 PM | E-Commerce , Privacy/Security , Trademark | TrackBack

April 01, 2011

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

By Eric Goldman

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

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

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

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

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

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

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

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

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

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

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

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

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

March 28, 2011

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

By Eric Goldman

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

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

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

The Groupion Suit

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

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

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

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

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

San Francisco Comprehensive Tours suit

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

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

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

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

The Pending Google AdWords Cases

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

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

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

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

March 16, 2011

Jury Awards Damages Against Web Designer/SEO/Host on Contributory Trademark Infringement Theory--Roger Cleveland v. Prince

By Eric Goldman

Roger Cleveland Golf Co. v. Prince, 2:09-cv-02119-MBS (D.S.C. jury verdict March 10, 2011 and judgment March 14, 2011). See also the jury instructions.

I blogged about this case back in December. That ruling was a puzzling head-scratcher holding that a web design/SEO/host firm working with an alleged online retailer of counterfeit goods could be liable for contributory trademark infringement. The ruling didn't make any sense substantively, but the court clearly didn't appreciate the defense counsel's 1.5 page citationless summary judgment brief. The court separately ruled that the website did engage in counterfeiting--thus removing that issue from the jury's consideration--leaving two principal questions for the jury: (1) was the designer/SEO/host secondarily liable, and (2) damages.

The jury concluded that the designer/SEO/host was in fact contributorily liable and that both the website and the designer/SEO/host willfully infringed. The jury then awarded $28,250 in total damages against the website operator and $770,750 in total damages against the designer/SEO/host. As big as these numbers are, they are a drop in the bucket compared to the theoretical case maximum--the jury could have awarded statutory damages for willful counterfeiting of $2M per mark, or $22M in this case.

There are many puzzling aspects of the jury's verdict, but the one that has had me scratching my head all day is how the jury could award greater damages against the contributory infringer than it awarded to the direct infringer--28X greater. We've seen other massive damage awards against contributory IP infringers, but usually those awards are an amalgamation of many individual direct infringers' activities. Here, the jury verdict is only predicated on a single customer's infringement but awards 28X the damages against the secondary infringer. I think I'm missing something big.

The conclusion that the designer/SEO/host infringed willfully is also noteworthy. I haven't gone through the jury arguments, but the earlier ruling hinted that the designer/SEO/host coaxed the web operator into the counterfeiting world and was optimized for providing services to counterfeiting websites. The prior ruling did an absolutely horrendous job explaining exactly what the designer/SEO/host did wrong (a partial reflection of the unhelpful advocacy by its defense counsel), so we don't have a good sense of how likely it is that other web designers or SEOs/hosts will be sucked into the same liability trap. I do think we have some good reason to believe that courts are allergic to the entire "copycat"/"replica" business. Those code-words aren't fooling anyone.

Plaintiff's counsel released a press release touting their victory, saying:

This represents the first time that an SEO/Web Host or other Internet Intermediary was found liable for contributory infringement without having first received actual notification of the counterfeit sales from a third party. The case was presented and pursued by Cleveland Golf/Srixon based on a theory that Bright Builders knew or should have known of the infringing conduct based on the name of the website, the content of the website, and certain discussions Bright Builders had with Prince regarding his web site.

The NLJ article has more chest-beating.

I agree that I can't think of another case where contributory trademark infringement has been found online without so much as a takedown notice. I disagree that this portends a new era of secondary trademark liability; instead, I think it reinforces the likelihood that this case is a one-off attributable to a confluence of things that went wrong (starting with that 1.5 page summary judgment motion).

Even so, I expect that trademark owners will be revving up their engines looking for new defendants. Already, recently I've been hearing a lot of gleeful talk from trademark owners about the utility of the Akanoc case and especially the Gucci v. Frontline case to their enforcement efforts. This case completes a troika of cases in the past year where service providers to counterfeiters have gotten nailed. As the saying goes, bad things come in threes, and three may be the magic number to unleash a flood of new litigation.

Posted by Eric at 09:28 AM | Derivative Liability , Trademark | TrackBack

March 11, 2011

Social Search Services Duel Over "Post Post" Mark -- Boathouse Group v. TigerLogic

[Post by Venkat Balasubramani]

Boathouse Group v. TigerLogic Corp., 10-12125-NMG (D. Mass.; March 7, 2011)

Background: Boathouse developed a "social media search and curation application" called POSTPOST which it launched at postpo.st in August 2010. Its application allows users to conduct keyword searches of twitter, Flicker and RSS feeds and post relevant search results to the user's profile. Although its search didn't cover Facebook, Boathouse asserted that it planned on launching a search for Facebook from day one. TigerLogic also launched an application called POSTPOST which it launched at postpost.com in December 2010. TigerLogic described its application as a "real-time personal social newspaper" which aggregates "links, pictures, and videos [from Facebook] and presents them . . . in newspaper format." Boathouse sued, alleging trademark infringement.

Was TigerLogic the Senior User?: The first issue was which of the companies was the senior user. TigerLogic tried to get crafty, and obtained an assignment from DK New Media, which used POSTPOST (since 2007) in connection with "computer software and computer and social networking services." As part of the assignment, TigerLogic licensed back rights to use the mark to DKNM. The court was quite skeptical of the use of the assignment to obtain priority, and among other things, points out a timing discrepancy in the assignment documents (the license back was dated after the assignment) and points out that the timing of the assignment indicates that it was used as an attempt to obtain seniority for the purposes of the lawsuit. The court also notes that as a practical matter, TigerLogic probably did not exert the requisite control over DKNM's services which were distributed under the mark. The assignment also probably suffers from the defect that there's no goodwill or equipment transferred to TigerLogic as part of the assignment. (Is TigerLogic producing the same quality and type of goods as DKNM?) However, what the court ends up focusing on is the fact that the services covered by DKNM's registration were distinct from those provided by TigerLogic. Thus the assignment failed to confer priority.

Was Boathouse's Pre-Sale Use Sufficient to Establish Trademark Rights?: A follow up question was whether Boathouse's release of its beta service was sufficient to establish trademark rights. TigerLogic argued that Boathouse failed to achieve significant traction in the market and that Boathouse used its search product internally (for its existing clients), but the court rejects these arguments. The court notes that Boathouse's launched its service in the "trial phase" via postpo.st on August, 2010, publicized its use via Twitter and other sites, and achieved over 800 registered users. Based on this, the court finds that Boathouse's "use" of the mark was sufficient to establish its rights. [As a side note, the court rejects TigerLogic's arguments that Boathouse's launch of the service through the .st TLD, rather than the .com undermined Boathouse's claim of priority. Apparently, the .com was for sale and although the registrant asked $35,000 for it, TigerLogic ended up acquired it for $3,000.]

Likelihood of Confusion Analysis: After concluding that Boathouse is the senior user, the court runs through the likelihood of confusion analysis. The court finds that the marks are similar (nearly identical) and this factor favors Boathouse. The court also finds - despite "profound discord regarding the specific characterization of each product" - that the services were sufficiently similar. The products both "work on widely-used social networks." The court was not swayed by the fact that one of the products requires active input from the user - at the end of the day, they both performed "search and curation functions." The channels of advertising and trade factor also weighed in favor of Boathouse. The products were both marketed via Twitter and both aggregated content from social media platforms. The fact that there was evidence of actual confusion was also a factor which weighed in Boathouse's favor. When all is said and done, the court finds that the factors weighed in Boathouse's favor and the court grants the injunction. (The injunction will require TigerLogic to change the name of its service, although it can continue to use the domain name provided it includes a disclaimer and a link to Boathouse's site. Interestingly, the injunction restricted each party's use of their service to the platforms on which they then offered the service - Boathouse was restricted from expanding to Facebook, and TigerLogic was restricted from expanding to Twitter.)
__

One initial observation is that companies continue to spend a fair amount of money litigating trademark disputes prior to having firmly established their brand. Both companies used big law firms, and probably incurred a fair amount of expense. Although Boathouse achieved a successful result, it expended a fair amount of resources on this, and even though it prevailed, both parties may have been better off seeking a business solution, and focusing on their products and customers. TigerLogic certainly should have considered this option, when it realized that it was not the senior user.

Second, companies continue to be willing to chose alternates to .com domain names. In the old days, a non-.com was viewed as the kiss of death, but over the years, there has been a proliferation of successful sites (including URL shorteners) which have adopted non-.com names. Here, Boathouse didn't obtain the .com version of the name, but that did not stop it from adopting the POST POST name (and it looks like it may come out on top - as far as the name game goes). Also, Boathouse may have had a cybersquatting claim against TigerLogic, but wisely chose the trademark infringement route over the ACPA route.

The court engages in a relatively nuanced look at the services in question. TigerLogic purportedly acquired the rights to POSTPOST from DKNM, and DKNM used the mark in connection with "computer software and computer and social networking services," but the court notes that this wasn't similar enough to TigerLogic's social search service:

although DKNM's plugin and TigerLogic's application share some general and broadly-construed similarities (e.g., both are used on the internet), they seem otherwise unrelated with different purposes, thus making the assignment ineffective for the purpose of transferring priority. DKNM's plugin is an optional feature designed to work with specific software. It has limited functionality, requires the user to input content and lacks a search feature. Furthermore, it does not rely on or require access to a user's social network to function, unlike the applications of TigerLogic and Boathouse.

This can cut both ways, and for purposes of arguing confusion, just arguing that products or services are offered via the internet or on social networks is not necessarily going to be enough.

There was also the question of how these services would play with Facebook, Twitter and their users. It's one thing to use the tools provided by those services to share content, but the services can be prickly about who they let play with their platform. (Many companies have learned the hard way that building a service on top of a platform that has the ability to shut you out offers little certainty.)

Finally, the case highlights how using an assignment to obtain priority can be tricky. Apple and other companies have been doing this, but it seems like if your intent is to get rid of a senior user, this is fine, but you may not have as much luck when it comes to establishing priority.

UPDATE: Pamela Chestek's comments.

Posted by Venkat at 12:00 PM | Trademark

March 09, 2011

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

By Eric Goldman

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

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

Introduction

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

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

Background

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

The ad copy read:

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

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

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

Use in Commerce

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

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

A Side Note About Metatags

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

Likelihood of Consumer Confusion

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Holding

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

Implications

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

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

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

Defense Wins

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

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

Thus, this case indicates that a manufacturer may be able to bid on the trademarks of its component suppliers without running afoul of Lanham Act false advertising rules.

Consumerinfo.com, Inc., v. One Techs., LP, CV-09-3783-VBF (MANx) (C.D. Cal. jury verdict Jan. 12, 2011).

The TM owner asserted its purported TM rights in "freecreditreport.com," a problematic domain name designed to take advantage of misdirected consumers who were really seeking annualcreditreport.com, the government-mandated website that lets consumers get free access to their credit reports. Consumers at freecreditreport.com get coopted into credit monitoring services that they may not want and probably don't need.

Given the marginal legitimacy of freecreditreport.com, you'd think it would lay low legally. Instead, like other owners of crappy trademarks (see, e.g., 1-800 Contacts, discussed below), they tend to be more bare-knuckled litigious than typical trademark owners. In this case, they sued businesses that registered typosquatting domain name variations of freecreditreport.com. I trust you see the irony--freecreditreport.com plays on consumer misrecollections of annualcreditreport.com, yet they don't like anyone doing the same to their purported trademark. Nice. The jury awarded a big cybersquatting judgment under the ACPA to the tune of $1.9M; however, the jury found that the defendants' keyword bidding did not create a likelihood of consumer confusion.

We don't have many jury verdicts about keyword advertising. The two I can think of are College Network v. Moore and Fair Isaac v. Experian. This would make the third time a jury has found in favor of the keyword advertiser over the trademark owner when the jury finally gets the question asked to them. This reinforces that juries may be more tolerant of keyword advertising than judges (and are certainly more tolerant than trademark owners!). This particular jury ruling is especially noteworthy because the jury thought the defendants were bad guys (hence the very large ACPA judgment), yet the jury still approved the keyword advertising.

1-800 Contacts, Inc. v. Lens.com, Inc., 2010 U.S. Dist. LEXIS 132389 (D. Utah Dec. 14, 2010).

This case, another suit over competitive keyword bidding, got stuck in my blogging queue. It's a tremendously important ruling and a terribly embarrassing one for 1-800 Contacts, so I planned to devote a lengthy blog post exploring its interstices. Unfortunately, the time never materialized in my schedule. Why was this case so high on my list? Three highlights:

1) It was a resounding loss for 1-800 Contacts, a company that has earned my ire over the years for their duplicity and pugnaciousness about trademarks and keywords. (For my blog coverage of them, see here). Some lowlights in 1-800 Contacts' track record:
* they are hyper-aggressive about protecting a marginal trademark. In my mind, it's not a trademark at all, it's a phone number. Frankly, I think we should categorically declare phone numbers as ineligible for trademark protection, just like we no longer recognize trademarks in [noun].[tld].
* they buy third party competitors' trademarks as keyword triggers, yet they sue competitors for buying their name (I can't really call it a trademark) as keyword triggers. Indeed, the court recounts that 1-800 Contacts bought "1 800 lens; 1 800 lense; 1 800 lenses; 1 800 the lens; 1 800 Lens; 1-800 lens; 1800lenses; 1800lens; 1800lenses; 1-800-lenses; 800 lens; 800 lenses; 800lens. These keywords generated 91,768 impressions, 8,477 clicks, and about $219,314 in profits for Plaintiff." HYPOCRITE ALERT. (BTW, their $26 of profits per click is mind-bogglingly impressive).
* they flip-flopped on the Utah legislature's efforts to ban keyword advertising, helping to kibosh the first law and then trying to sneak in a second law that favored their interests--aided by the fact that their in-house lobbyist is also a legislator and voted in favor of the bill her employer advocated. Yet, on its site, 1-800 Contacts claims "1-800 CONTACTS engages on public policy issues related to ocular health and the right of contact lens wearers to choose where they fill their prescriptions. We have not and will not get involved in public policy outside of the scope of this interest." Sorry, I'm going to have to call BS on that.

2) The case rejects 1-800 Contacts' attempt to hold the defendant Lens.com liable for keyword ad buys made by Lens.com's affiliates. Trademark owners have been angling to establish a legal doctrine that online retailers are automatically liable for keyword ad buys by affiliates, but this case gives some additional reason to believe that trademark owners have been overreaching.

3) The case gets into details about how much money Lens.com made and, in theory, 1-800 Contacts lost due to Lens.com's keyword ad buys. The court says Lens.com bought the following keywords:

1 800 contact lenses; 1800 contact lenses; 800 contact lenses; 800comtacts.com; 800contacta.com; 800contavts.com;800contaxts.com; 800contzcts.com; and 800conyacts.com. These nine keywords generated about 1,626 impressions, 25 clicks, and $20.51 in profits

Wait, what? The parties are fighting over Lens.com’s $20 of profits??? Hey, 1-800 Contacts, if you'll stop bringing pitiful lawsuits, I'll send you an Andrew Jackson out of my own pocket. Clearly, the real thrust of this lawsuit were the affiliates' keyword ad buys, but even those weren't voluminous: one affiliate bought 65,000 allegedly infringing impressions generating 352 clicks, and another affiliate allegedly bought 240,000 impressions generating 1,445 clicks.

Are ~1,800 allegedly misdirected clicks worth making a federal case out of? Even at 1-800 Contacts’ impressive (and probably overstated) $26 of profit per click, we’re talking about less than $40k of value that 1-800 Contacts purportedly lost. Yet, 1-800 Contacts was prepared to spend $1.1 MILLION on this lawsuit (and actually spent at least $650k). Great business decision there, guys. WHAT A WASTE. As I wrote in that earlier blog post, "I'm super-skeptical that the value of the consumers "diverted" (whatever that means) by Lens.com's competitive keyword advertising is more than $1.1M." The financial details in the case reinforce that I was 100% right about that.

Substantively, the court says keyword ad buys are a use in commerce. The court correctly explores the effect of broad matching on searches like "1-800 Contacts"--due to broad matching, competitive ads keyed to "contacts" may show up. The court grants summary judgment to Lens.com for its ads.

It suggests that some of Lens.com affiliates' ads may have infringed because they mention 1-800 Contacts in the ad copy. (The court later clarifies that it wasn't the ad buy that infringed; it was the ad copy). However, those actions aren't imputed to Lens.com because Lens.com got its affiliates through Commission Junction, and therefore Lens.com didn't know their identity and had little direct contact with them. The court also rejects 1-800 Contacts' takedown notice to Lens.com because 1-800 Contacts didn't give enough information to find the affiliate who ran the ad.

Finally, 1-800 Contacts tried to argue that Lens.com contractually agreed not to buy its trademarks as keywords during their various correspondences in response to 1-800 Contacts' legal threats. This is similar to Barnes v. Yahoo and Scott P. v. Craigslist in that the plaintiff is arguing that the defendant promised to remediate and thus its failure to do so is a contract breach. The court rejects this bypass.

You can see why I love this opinion. It's a long but rewarding read. Check it out.

(For people interested in Ben Edelman's work, you might be interested in the court's discussion about Ben's expert report on pages 20-23. A sample: "parts of Edelman’s declaration are improper in that he presents evidence not within his personal knowledge by reciting what another said in deposition and stating that testimony as fact, he opines on facts for which no expert testimony is needed, and he draws legal conclusions that are outside his role as an expert").

Plaintiff Wins

FTC v. Cantkier, 2011 WL 742647 (D.D.C. March 3, 2011). The court's recap of the complaint:

The FTC has alleged that Lady and certain other defendants were running deceptive online advertisements featuring the names, phone numbers, and website addresses of federal homeowner relief and financial stability programs. The advertisements allegedly appeared on popular web search engines, such as Google and MSN, and were targeted to users using as search terms keywords related to the federal assistance programs. The Second Amended Complaint alleges that the advertisements represented that they were sponsored by federal homeowner relief and financial stability programs by featuring text and titles associated with those programs, including "makinghomeaffordable.gov" and "financialstability.gov." When web users clicked these ads, they were not directed to the websites for the federal programs, but rather to private Internet websites ("lead collection websites") that collected marketing leads for mortgage loan modification or foreclosure relief services. These lead collection websites had no actual connection with government programs; they solicited consumers to enter personal identifying and confidential financial information, and then the operators of the websites sold the consumers' confidential information as marketing leads to persons who sell mortgage loan modification or foreclosure relief services....

Plaintiff alleges that Lady purchased advertisements on www.google.com ("Google"). On Google, Lady bid on keywords "financial stability.gov," "fha.com," "financialsecurity.gov," "hope now alliance," "hope for homeowners," "www.makinghomeaffordable.gov," and "makinghomeaffordable.gov." On Google, his advertisements displayed titles "Makinghomeaffordable.gov," "Financial Stability.gov," "Fha Gov," "wwwhud.gov," "www.995hope.org," and "www.hopenow.com/." The FTC alleges that consumers who clicked on Lady's advertisements were not directed to the government websites, but rather to his own websites that collected marketing leads for mortgage loan modification or foreclosure relief services. Lady's websites prompted consumers to enter personal identifying and confidential financial information, which Lady then allegedly sold as marketing leads to persons who sell mortgage loan modification or foreclosure relief services. (cites omitted)

On this basis, the FTC alleged deceptive acts under the FTC Act. The court rejects the defendant's motion to dismiss.

There are a number of interesting points in the discussion. Some highlights:

* the defendant argued that consumers understood they were clicking on ads. The court acknowledges this but says the FTC's complaint is that the ad copy was deceptive.

* the defendant argued that his advertised websites didn't look like official government websites. The court responds: "Internet users may not know what the real federal program website looks like until they successfully navigate to it. If they are diverted by advertisements bearing the name and web address of the federal program before ever reaching the program's actual website, reasonable consumers could assume they have reached their intended destination, when, in fact, they have reached a commercial service."

This is a little like the old Promatek v. Equitrac discussion of diversion, to which the "back button" is a solid retort. However, it feels qualitatively different to me that we're dealing with allegedly false ad copy trying to mimic official government services. Contrast the rulings in the Consumerinfo case above, where the jury found no consumer confusion from keyword advertising for a website replicating a government-mandated website, and the recent Canadian decision in Private Career Training Institutions Agency v. Vancouver Career College (Burnaby) Inc., where the defendants’ websites mimicked community colleges. In the latter case, the court said that prospective students would figure out any confusion before enrolling in college. That case clearly expected consumers to be more sophisticated than the FTC did in this case. Also along this lines (but not a keyword ad case) is the lawsuit over dmv.org.

Rebecca's post on the case.

Binder v. Disability Group, 2011 WL 284469 (C.D. Cal. Jan. 25, 2011). This is another lawyer-as-plaintiff suit, so you know we’re in trouble. The advertiser, a direct competitor, purchased the law firm's name as keywords. The court breezily says that keyword purchases are a use in commerce. The district court found a likelihood of confusion by focusing on the Internet trinity of factors; the opinion also made a number of other statements inconsistent with the Network Automation case. Unlike Network Automation, in this case there was some evidence presented of actual confusion, including after users clicked on the ad (so the confusion was not solely attributable to the keyword ad). That might suggest the ruling would withstand further scrutiny, especially given that we're talking about law firms competing with each other and clients could get into trouble by connecting with the wrong law firm.

In underdeveloped parts of the opinion, the court also finds Lanham Act false advertising and California unfair competition violations, saying "Plaintiffs have proven by