Digital Media Lawyer Blog

Digital media law update: In a January 21 decision, a California Federal judge permitted a plaintiff to discover the identity of the operator of a counterfeit online poker chip business, without requiring the plaintiff to providing evidence to support its allegations. The court merely required the plaintiff to (1) show that the anonymous defendant was a real person who could be sued in a Federal court, (2) recount the steps it had taken to locate the defendant, (3) show that its action could survive a motion to dismiss, and (4) file its request for discovery with the Court. See Zynga v. Does 1-5 d/b/a Easy Chips, Northern District of California, No. 5:09-cv-05232, Order Granting in Part and Denying in Part Plaintiff Zynga's Motion for Leave to Conduct Third Party Discovery (January 21, 2010). While the standard imposed by the Court here was far lighter than that typically imposed in cases involving Internet defamation, it was not necessarily inappropriate in this case.

We have frequently written about the differing standards that courts use when confronted with a request from plaintiffs to uncover the identity of the anonymous author of material posted on the Internet. The right to speak and write anonymously is protected by the First Amendment of the U.S. Constitution -- and to an even greater extent by some State constitutions. However, the extent of the right to anonymous speech varies based on the content of the speech. At one end of the spectrum, the author of purely political anonymous speech may be given absolute protection against disclosure of his identity. At the other end, the author of defamatory speech may ultimately be given no protection from disclosure at all, since defamatory speech is considered unprotected under the U.S. Constitution. Fn1

While certain types of speech, such as defamation, may get little or no protection, a court considering a complaint is not in a position to know whether the allegations have any merit. There is always a danger that the allegations will prove untrue, or that the defendant will be able to establish a valid affirmative defense. As such, to protect the rights of anonymous authors, courts around the U.S. generally require a plaintiff to show that their claims have at least some level of merit before being permitted to discover the identity of the anonymous author of the speech at issue.

These standards can vary greatly from court to court. Some courts impose what we have termed a "light" standard, and merely required the plaintiff to show that his complaint would withstand a motion to dismiss or that it was filed in "good faith." This light standard was applied in the recent Liskula Cohen case. See In re Liskula Cohen, Supreme Court of the State of New York, County of New York: Part 11, Index No. 100012/09. While this test has different labels, it ultimately merely requires the plaintiff to show that his complaint meets pleading standards -- no evidence or proof is required.

Continue reading "Zynga v. Does d/b/a Easy Chips: California Federal Judge Applies Light Standard for Uncovering Identity of Anonymous Proprietor of On-line Business" »

Readers of this blog know that courts around the U.S. frequently arrive at opposite conclusions on whether the use of a competitor's trademark in search engine advertising constitutes trademark infringement. In my view, the courts should not devise a one-size-fits-all rule for such cases, that dictates that such use of a competitor's trademark does or does not constitute infringement. Rather, the courts should take into account the content and context of each ad in question, as well as concepts such as nominative fair use.

A recent decision by an Illinois District Court shows how close some courts come to adopting a per se rule that the use of a competitor's trademark in search engine advertising constitutes trademark infringement.

The case is Morningware, Inc. v. Hearthware Home Products, Inc.. See N.D. Ill., No. 1:09-cv-04348, Memorandum Opinion and Order (Nov. 16, 2009). Morningware sells counter-top electric ovens. Hearthware is Morningware's nearest competitor. Morningware claimed that Hearthware purchased Morningware's trademark as an AdWords keyword for pay-per-click advertising on Google's search engine. When an internet user entered the word "Morningware" as a search term, Hearthware's advertisement would appear at the top of the search results page -- before the link to Morningware's website. Moreover, the content of Hearthware's link stated "The Real NuWave Oven Pro Why Buy an Imitation? 90 Day Gty."

According to Morningware, the placement and content of the Hearthware ads misled some consumers into believing that Morningware's products were of poorer quality and were fakes -- which they were not. Other consumers were misled into simply believing that Morningware products were products were available from Hearthware, and thus were improperly diverted from Morningware's website.

Morningware sued Hearthware under several legal theories, including trademark infringement, under false designation of origin and product disparagement theories, and several related Illinois state law claims. Hearthware filed a motion to dismiss. This motion requires a court to determine whether the facts stated in the complaint, if true, are sufficient to state a plausible cause of action against the defendant. The Court denied the motion.

According to the Court, to establish a cause of action for false designation of origin, a plaintiff must show: (1) that it owns a protectable trademark, (2) that the defendant has used this mark in commerce, and (3) that the defendant's use of this trademark is likely to cause confusion. Here, while Morningware does not appear to have registered its trademark, it alleged that it had used it extensively and continuously for several years -- an allegation that the Court found to be sufficient to establish a protectable interest in a trade name. Following that 2nd Circuit's decision in Rescuecom Corp. v. Google, 562 F.3d 123 (2d. Cir. 2009), the Court also found that use of a trademark as a keyword in an online search program constituted a use in commerce.

Continue reading "Morningware v. Hearthware: Illinois Court Finds Use of Competitor's Trade Name to Drive Search Engine Advertising Can Constitute Trademark Infringement" »

Digital media law update: A September 30, 2009 decision supports a contention we have made for some time: use of a personal name in a gripe or parody website is unlikely to support a cause of action under trademark law. The exception is when a website misuses a famous name that has become synonymous with a business. However, as this decision also shows, even if your name isn't famous, that doesn't mean you have no legal remedy. You still may be able to sue and recover significant damages under defamation or privacy law.

The case is Bernard J. Carl v. BernardJCarl.com, D.C. Vir., No. 1:07-cv-1128. The Plaintiff, Carl, founded a private equity firm called Brazos Europe, Inc. In 2005, Brazos acquired the French linen company, D. Porthault. Brazos retained the French law firm Darrois Villey & Maillot (Darrois) to facilitate the transaction. Darrois, without Brazos' knowledge, subcontracted some of the work to the law firm Cotty Vivant Marchisio & Lauzeral ("Marchisio").

After the closing, Marchisio claimed that Brazos failed to pay it for its work. Brazos responded that Marchisio's work was defective. Marchisio then sued Brazos in a French court -- but lost! Marchisio, however, was not dissuaded. Instead of slinking away, it registered the domain name "bernardjcarl.com" and posted the following message on the site:

Message to the attention of Brazos Europe Inc. and managing partners Mr Bernard J. Carl and Mrs Shannon Fairbanks

In the meantime, feel free to meditate Benjamin Franklin: "Creditors have better memories than debtors." . . . .

The object of this message, Bernard J. Carl, contended that the statement was false and defamatory. He never hired Manchisio and owed it nothing. He also claimed that several potential investors in Brazos raised questions about the claims in the site. Accordingly, he filed suit -- first against the website, and then against its author Manchisio. His suit ultimately proceeded against Manchisio on three theories: (i) false representation under federal trademark law, based on Manchisio's use of his name "Bernard J. Carl" in the domain name of the website (15 U.S.C. § 1125(a)), (ii) cybersquatting under the Anti-cybersquatting Consumer Protection Act, for Manchisio's use of his name (15 U.S.C. § 1125(b)), (iii) cyberpiracy, also for the use of his name (15 U.S.C. § 1129(a)), and (iv) common law libel.

Continue reading "Carl v. BernardJCarl.com: Co-option of Personal Name for Gripe Website Supports Cause of Action for Defamation, but Not Trademark Infringement or Cybersquatting" »

In a recent decision on a claim for false endorsement, Judge Rudolph Randa of the Eastern District District of Wisconsin found that a plaintiff must at least show that she has an intent to make a commercial use of her name to bring a claim under the Lanham Act. Stayart v. Yahoo!, Inc., E.D. Wisc., No. 09-C-116 (August 28, 2009). Federal courts are less than settled on the standing requirements for a person to bring a false endorsement claim under the Act. On one extreme, some require a plaintiff to have celebrity status to bring such a claim. On the other extreme, at least one court has held that any person whose name is misused may bring such claims. Judge Randa's decision is squarely in the middle.

The Plaintiff, Beverly Stayart, worked for a number of major Chicago financial institutions, eventually attaining the rank of Vice President. For the past several years, she has been actively involved in animal protection programs and genealogy research throughout the world, and uses the Internet in support of these causes. She contributes to an online discussion forum relating to the Siouan (Saponi) nation. Her posts to this site have generated 17,000 hits over the past three years. Two poems she wrote supporting the preservation of baby seals have also appeared in Danish websites.

In December 2008, Ms. Stayart performed searches on her own name on the Yahoo! and AltaVista search engines. She was dismayed to find that her name appeared in Yahoo! (and Overture) results linking her to porn and Cialis websites. The name BevStayart was also allegedly used on a website advertising an adult-oriented operated by AdultFriendFinder.com.

Ms. Stayart sued Yahoo!, Overture, and Friendfinder.com under the Lanham Act (15 U.S.C. § 1125(a)), as well as under state law privacy theories. The Lanham Act provides that a person who "uses in commerce" any "name" which "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval or his or her goods or services, . . . shall be held liable in a civil action by any person who believes that he or she is likely to be damaged by such act."

From the little that can be divined from the Court's records, this case seems to reflect a variation on concepts frequently used in keyword advertising (and search engine optimization). Instead of using a well-known tradename, the advertiser uses any term that gets a significant amount of traffic. The 17,000 hits to Ms. Stewart's blog entries apparently generated enough traffic for advertisers to decide to use her as a draw. In some cases, Ms. Stewart's name was included as part of a "nonsense sentence" in an on-line ad (with the text of the nonsense sentence likely lifted from one of her blog posts). In other cases, her name appeared as part of the URL for an advertising site.

From my point of view, Ms. Stayart's case has the most in common with keyword advertising cases. Plaintiffs have prevailed in such cases on initial interest confusion and trademark dilution theories.

Continue reading "Stayart v. Yahoo!: Failure to Allege Intent to Commercialize One's Identity Dooms Action for False Endorsement under Lanham Act" »

Digital media law: Startling high damage awards in a number of recent copyright, trademark and cybersquatting cases are often the result of simple math. Plaintiffs in these cases have the right to demand an award of statutory damages in lieu of proving actual damages. In each case, the amount of damages is tied to the number of copyrighted works or trademarks infringed, or the number of infringing domain names. It is very common for juries or judges to make per violation awards of $50,000 to $1,000,000 and more. Where a defendant has committed infringements of multiple works or marks, using simple math, it is quite easy to get to damage awards in the tens of millions of dollars -- regardless of the actual harm suffered by the plaintiff or the profits earned by the defendant.

Here is the short and skinny law on these types of statutory damages:

• The Copyright Act provides for a minimum statutory award of $750 and a maximum of $30,000 for each copyright infringed. If the plaintiff proves that the infringement was willful, the maximum damage award is raised to $150,000. 17 U.S.C. § 504(c)(1), (2).

• The Lanham Act provides for statutory damages in trademark cases involving "counterfeit marks" of not less than $1,000 or more than $200,000 per counterfeit mark per type of good or services sold, offered for sale or distributed. The maximum is raised to $2,000,000 for willful infringement. 15 U.S.C. § 1117(c).

• The Anti-Cybersquatting Protection Act permits statutory damage awards of not less than $1,000 and not more than $100,000 per domain name. 15 U.S.C. § 1117(d). Courts take factors such as willfulness into account in determining the appropriate amount of statutory damages.

In all three cases, the plaintiff may elect an award of statutory damages, in lieu of actual damages, at any time before entry of final judgment.

Here are some recent examples of how the "math" of statutory damages has played out:

• Microsoft Corp. v. McGee, 490 F.Supp.2d 874 (S.D. Ohio 2007):
Microsoft brought this copyright and trademark infringement suit against the operator of the Computerme.net website, which sold and installed a variety of Microsoft software products. According to Microsoft, in August 2006 the defendant sold a counterfeit copy of Office 2000 Pro to a Microsoft investigator. Microsoft ultimately sued for infringement of five of its trademarks and seven of its copyrights. The defendant defaulted and Microsoft sought an award of statutory damages.

The Court found that the defendant had acted willfully because it had failed to respond to Microsoft's demand letters and had defaulted at trial. However, because Microsoft had only requested the maximum amount of non-willful damages for trademark and copyright infringement, the Court awarded just that: $30,000 each for the 7 copyrights infringed ($210,000) and $100,000 each for the 5 trademarks infringed ($500,000) -- a total of $710,000.

Continue reading "Akanoc, OnlineNIC and Computerme : Suits Involving Multiple Copyright, Trademark or Cybersquatting Claims Provide Opportunities for Startling Statutory Damage Awards" »

Trademarks on the Internet: We recently reported that a Dallas jury found in favor of the Dallas-based cosmetic giant Mary Kay, Inc. on a trademark suit it brought against a reseller of its products. See our post of August 2, 2009. This verdict seemed odd, because resellers of branded products are generally protected by the first sale and nominative fair use doctrines. Juries do not write opinions, so it is often difficult to understand the reasoning behind their decisions. However, in this case, a recent post-trial ruling by the presiding judge, Hon. Joe Fish, denying the defendants' motion for a new trial, has provided some fresh insight -- and confirms my earlier suspicions about the sufficiency of the evidence in this case. See Mary Kay, Inc., v. Weber, U.S.D.C. Northern District of Texas, Case No. 3:08-cv-0776 (August 14, 2009).

Mary Kay is a well-known manufacturer of cosmetics, which it distributes world-wide via a network of "beauty consultants". Defendant Mary Weber, was a Mary Kay beauty consultant until 2004. When she stopped working for Mary Kay, Ms Weber was left with a large inventory of Mary Kay products that she couldn't sell. To dispose of these leftovers, she began selling them on eBay. After Ms. Weber sold all of her products, she began to purchase leftovers from other Mary Kay beauty consultants, which she later resold on eBay as well. Eventually Ms. Weber and her husband set up an eBay store called "marykay1stop" to sell these products.
When eBay objected to this use of its trade name in this site, the Webers changed the name to touchofpinkcosmetics.com and set up their own website under this name.

Touchofpinkcosmetics.com continued to sell Mary Kay products, which it identified with the "Mary Kay" trademark. According to the Court, "[a]ll the products sold by the defendants were purchased from current or former Mary Kay [beauty consultants]" and [t]he defendants do not alter the products they sell in any way."

The Webers' business model sounds like the perfect case for the application of both the first sale and nominative fair use doctrines.

The Evidence on the First Sale Doctrine Defense

Under the first sale doctrine, a trademark's owners rights do not extend past the first sale of goods bearing its mark. As a result, so long as the trademarked goods it sells are genuine, a distributor who resells trademarked goods without change is not liable for trademark infringement. Polymer Technology Corp. v. Mimran, 975 F.2d 58, 61-21 (2d Cir. 1992).

The first sale doctrine protects the important secondary markets that exist in many branded goods, such as automobiles, boats and jewelry. While the existence of a secondary market likely deprives a trademark holders of some sales volume, the presence of a strong secondary market is often cited by trademark holders as evidence of the quality of their goods -- and likely increases the sales price of their new goods. Secondary markets clearly help consumers. Sellers are able to use them to dispose of usable assets for which they have no further use, and buyers are able to use them to purchase quality goods at far lower prices than new goods. Since the Webers were reselling genuine Mary Kay products, it would seem that the first sale doctrine should protect the secondary market they were creating in these goods.

Continue reading "Court Explains Why On-line Reseller Was Not Entitled to First Sale and Nominative Fair Use Defenses in Mary Kay Trademark Suit" »

Digital media law: As reported yesterday by Jaikumar Vijayan of ComputerWord.com, on August 28, a San Jose, California jury reached verdict in excess of $32M favor of Louis Vuitton Malletier against ISP operator Akanoc Solutions, Inc. and related defendants on contributory trademark and copyright infringement claims. Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., U.S.D.C., Northern District of California, Case No. C07-03952. The contributory trademark infringement claims in this case are similar to those raised in Tiffany v. eBay. Tiffany (NJ) Inc. v. Tiffany and Co., 576 F.Supp2d 463 (S.D.N.Y. 2008). However, the trials in the two cases have produced opposite results, largely based on the differing views taken by the courts of the evidence that can be used to show knowledge of infringing activity.

Louis Vuitton is the distributor of the well-known line of luxury handbags that bear the distinctive LV trademark. Akanoc offers traditional ISP webhosting services. However, its website indicates that it specializes in providing English-language webhosting services to Chinese companies, to assist in their sale of goods into the U.S. Its site states that "Attracting American clients through use of an online web presence is the key to success!" and that " Our company specializes in creating unique solutions to solve urgent needs of information exchange between the two nations based on the extensive background knowledge of the Chinese economy."

In 2006-2007, Louis Vuitton had its investigators purchase goods sold using its trademarks from websites hosted by Akanoc. Each item purchased was sent using a return address in China. After inspection, Louis Vuitton concluded that the goods were counterfeit. Louis Vuitton then sent letters to Akanoc identifying the websites that it believed were selling counterfeit goods and asking Akanoc to take down the sites. Akanoc acted to take down at least some of the sites. However, in its amended complaint, Louis Vuitton identified dozens of infringing websites that it claimed were still operational as of July 2008.

Louis Vuitton went forward at trial solely on contributory trademark and copyright infringement theories -- and prevailed on both of these claims, winning a jury award of $31.5M on its trademark claims and $900,000 on its copyright claims. Trial documents indicate that this victory was, at least in part, the result of the relaxed view taken by Judge James Ware of the evidence that is admissible and/or sufficient to establish a defendant's knowledge of the presence of infringing activity by the users of its services.

In Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 822, 102 S.Ct. 2182 (1982), the U.S. Supreme Court stated that "if a supplier of a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit." Id. at 855. These rules have been held to apply whether the supplier is providing an ingredient for the infringer's product, or a service, such as space in a flea market, for the infringer to sell his wares. Hard Rock Café Licensing Corp. v. Concession Services., Inc., 955 F.2d 1143, 1148-49 (7th Cir. 1992).

Continue reading "Louis Vuitton v. Akanoc: Letters to ISP Demanding Takedown of Infringing Websites Played Critical Role in Jury Finding that ISP Had Knowledge of Trademark Infringement" »

Twitter accounts, like the Internet domain names, are named-based. As a result, Twitter long ago developed problems that mirror Internet domain name cybersquatting -- namely, twittersquatting or twitterjacking. Twittersquatting is when a third party registers a trademark or a famous person's name as a Twitter username with the intent to cause confusion or mischief. Twittersquatting has already become extremely widespread. According to one report, as of January 2009, of the top 100 global brands, 93% had their Twitter names taken by someone else.

So what are Twittersquatters doing with their borrowed trademarks? The same things they did with borrow trademarks on the Web -- in many cases, using them to sell products unrelated to the trademark name, or simply holding them for sale. A visit to the Armani Twitter account on August 23rd, 2009 showed that the latest "tweet" was the following: "Retweet this! Xanax, Oxy, Valium, Vicodin, Viagra! over night shipping and no doctors required! http://supplymedd.com."

Other twittersquatters are using their Twitter names to harass, embarrass or satirize the holder of the mark of famous name. One of the best known cases was the Twitter site set up by a prankster in the name of St. Louis Cardinals manager Tony La Russa. The site, which purported to have been set up by LaRussa himself, contained posts criticizing Cardinal players or describing LaRussa's drinking habits. One entry read: "Lost 2 out of 3, but we made it out of Chicago without one drunk driving incident or dead pitcher . . . I'd call that an I-55 series." The fake LaRussa account also included the note: "Bio Parodies are fun for everyone."

With all of this twittersquatting, many commentators have assumed that we would see a flood of trademark infringement lawsuits. Some have even called for the creation of an digital media industry-wide Uniform Username Dispute Resolution Policy which would mirror ICANN's domain name dispute resolution system -- the Uniform Domain Name Dispute Resolution Policy (UDRP).

So why hasn't the flood of trademark infringement lawsuits occurred? One answer could be the control that Twitter retains over its accounts. Under its Terms of Use, Twitter "reserve[s] the right to reclaim usernames on behalf of businesses or individuals that hold a legal claim or trademark on those usernames." Given this retained power, a business interested in protecting its mark may be able to eliminate a cybersquatter through a simple request to Twitter. Of course, dispute resolution could get more troublesome where multiple persons are using the same mark. Another answer -- given the continued presence of so much obvious twittersquatting -- is that many trademark holders don't yet see sufficient business value in Twitter to take action.

So far, the only twittersquatting suit has gained notoriety was Tony LaRussa's suit earlier this summer against Twitter regarding the satire site described above. LaRussa v. Twitter, Inc., San Francisco Superior Court, Case No. CGC-09.488101. This suit did not last long: it was filed in May 2009 and voluntarily dismissed only six weeks later, apparently as the result of a settlement. A recent visit to the LaRussa Twitter account showed that the site had been taken over by Tony LaRussa himself, and contained a link to LaRussa's animal rescue foundation. See http://twitter.com/tonylarussa.

Continue reading "Digital Media Law: Where is the flood of Twitter-squatting lawsuits?" »

The suit between Tiffany and eBay is providing a serious test of eBay's "Notice and Takedown" model for avoiding contributory infringement liability for counterfeiting and other trademark misuse by sellers on its site. (Fn1) In this suit, Tiffany seeks to hold eBay liable for contributory and direct infringement, false advertising and trademark dilution for its involvement in the sale of counterfeit Tiffany merchandise on its site.

According to eBay, more than 100 million listing appear on eBay at any one time, and approximately 6 million new listings are posted each day. However, a certain percentage of these listings are for counterfeit goods. Tiffany alone reported 20,915 infringing listings to eBay in 2003, 45,242 in 2004, 59,012 in 2005 and 134,779 in 2006. According to Tiffany, 30% or more of Tiffany jewelry list on the site at any time can safely be deemed to be counterfeit.

Selling counterfeit trademarked merchandise constitutes trademark infringement. It also downgrades the confidence of consumers in the integrity of the source of those goods. eBay does not take possession of, and hence never sees, the goods sold on its site, so to combat the sale of counterfeit goods on its site, eBay has employed an ever-expanding arsenal of computer-based defenses. Chief among these is its "notice and takedown" system -- its VeRO program. Under this system, a trademark, copyright or patent rights owner who sees an infringing item on the site can report the listing to eBay by submitting a Notice of Claimed Infringement (NOCI).

eBay's NOCI form is its Digital Millennium Copyright Act (DMCA) takedown notice form -- which eBay has converted for use for all forms of alleged intellectual property rights infringement. The form requires that the rights owner submit all of the elements required for a DMCA notice (Fn2): (i) the identity of the alleged rights owner, (ii) the identity of the specific eBay listing numbers where the infringing material is located, (iii) the type of infringement, and (iv) the required DMCA statements that the complaining party has a good faith belief that the use on eBay is unauthorized and that the complaining party is authorized to act for the rights owner. For an overview of the VeRO program and to obtain a NOCI form, see http://pages.ebay.com/help/tp/vero-rights-owner.html.

Upon receiving a NOCI, eBay verifies that the NOCI contains the necessary information and appears accurate, and then removes the reported listing. At the time of the Tiffany v. eBay trial (2008), 75% of reported listings were removed within 4 hours. After removing a listing, eBay also attempts to prevent or to undo any actual sale. If the listing is removed before a sale has occurred, eBay cancels all bids and notifies the seller and bidder that the listing has been removed. If a sale has already occurred, eBay cancels the transaction retroactively, removes the listing and informs the parties that the listing has been removed and that the transaction should not be completed. eBay also refunds all associated fees. eBay also reviews the seller's account and may suspend the seller. (Fn3)

In addition to its NOCI system, eBay also uses what it terms a "sophisticated fraud engine," on which it spend more than $5 million annually to maintain and enhance. This search engine "uses more than 13,000 different search rules to locate potentially infringing or problematic activity. For example, it searches for listings that explicitly offer "knock-off," "replica," or "faux" merchandise. eBay also suspends sellers for repeat violations, conducts periodic "clean-up" reviews of listings and warns sellers against listing counterfeit goods. (Fn4)

Continue reading "Tiffany v. eBay: eBay's Notice and Takedown System and Trademark Law" »

Mary Kay, Inc.'s recently filed trademark infringement suit concerning Yahoo! Shortcuts' is the latest in a series of suits it has brought to defend its distinctive business model from encroachments by unauthorized resellers. (Fn1) In this suit, Mary Kay alleges that Yahoo! Shortcuts creates hyperlinks to websites owned by unauthorized resellers of Mary Kay products in emails sent from Mary Kay salespersons. Yahoo! presents these hyperlinks in popup windows that also include short ads from the resellers. Mary Kay claims that this practice creates confusion among Yahoo! email users as to whether Mary Kay is sponsoring or affiliated with the ads in the popup windows.

Mary Kay is fresh off a victory in a similar trademark suit filed against another reseller in Mary Kay, Inc. v. Weber. (Fn2) However, pre-trial rulings against Mary Kay in that case indicate that Mary Kay has work cut out for it in its suit against Yahoo!

Mary Kay is a Dallas-based cosmetics company that sells its products directly to the consumer through a world-wide network of beauty consultants. While Mary Kay disavows the label, it is commonly understood to operate as a classic multi-level marketing organization. Mary Kay keeps tight controls over its distribution network and only permits its products to be sold by authorized distributors -- termed Independent Beauty Consultants ("Consultants" or "IBCs"). Mary Kay offers a "Satisfaction Guarantee" under which it promises customers that it will replace, exchange or provide a full refund for products if the customer is not fully satisfied.

As with any multi-level marketing organization, Mary Kay has enthusiastic supporters and disappointed detractors. (For a sample of the different points of view, see the Mary Kay-centered blog www.pinklighthouse.com). (Fn3) One problem that Consultants have is disposing of unsold product. Sources indicate that to remain with Mary Kay, Consultants have to purchase $200 worth of product per month. While Mary Kay has a program to buy back unsold product, some reports indicate that this only applies to product purchased within the past 12 months. An unsuccessful sales person who isn't quick to act on this policy can find herself with several thousands of dollars worth of unsold product.

Some Consultants have turned to auction sites like eBay to resell their unreturnable product. There are also reseller sites, which purchase unsold product from Consultants and then resell it to the public. One such site is www.touchofpinkcosmetics.com, which is owned by Amy and Scott Weber. The current version of their website is very forthcoming about their business model and carries the following heading: "This company has been established by former Mary Kay Consultants who are assisting consultants to liquidate their inventory. We offer Mary Kay products at a great discount. Most of our items are discontinued, past shelf life or expired, which is why we can offer you such great prices."

Unfortunately for the Webers, the ghost of Mary Kay founder, Mary Kay Ash, was not amused. In 2008, Mary Kay sued the Webers on Lanham Act and interference with business relations grounds. The Lanham Act claims included unfair competition, passing off and trademark infringement theories. The Webers raised several affirmative defenses, including the first sale doctrine, nominative fair use and laches.

In February 2009, on a motion for summary judgment by the Webers, District Court Judge A. Joe Fish dismissed the interference with business relations claims. However, he permitted the Lanham Act claims to go the jury -- which ultimately found for Mary Kay on all its claims in the case. However, on summary judgment, Judge Fish did find for the Webers on one key element of their "nominative fair use" defense.

Continue reading "Mary Kay v. Yahoo! and Mary Kay v. Weber: Can Use of Third-Party Trademarks as Keywords for Ads Be "Fair Use"?" »

Search engine operators and their advertisers have been locked in a decade-long battle over whether the use of trademarks as keywords to trigger links to competitor ads is actionable as confusion or deceit under federal trademark laws. This practice has often been attacked as a form of "initial interest confusion." Initial interest confusion occurs when a competitor uses a trademark in a manner calculated to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion. (Fn 1) The concept of initial interest confusion is recognized in the 9th Circuit, although it has been questioned by some courts.

Search engine operators have long used trademarks as keywords to trigger competitor advertising, by either requiring advertisers to link their ads to the trademarks, or by selling the trademarks as keywords to the advertisers. In either case, when a user enters the trademark as a keyword in the search engine, the search engine will return advertisements from competitors to the trademark owner. In some cases, these have appeared as banner ads. In several recent cases involving Google, the competitor ads have appeared in a list identified by Google as "Sponsored Links." (Fn 2)

Earlier 9th Circuit cases had suggested that clearly identifying competitor ads as such might eliminate initial interest confusion. For example, a banner advertisement from a competitor might eliminate confusion by identifying the source of the advertisement. Or the search engine could eliminate confusion by including a statement saying "If you are interested in Brand X, you might also be interested in a message from Brand Y."

Google recently performed a test of this defense to a claim of initial interest confusion in the 2007 case Google, Inc. v. American Blind & Wallpaper. In that case, it filed a motion for declaratory relief against American Blind & Wallpaper, seeking a judgment that its use of American Blinds' trademarks as keywords in its AdWords program did not constitute trademark infringement. Google argued that it identified "Sponsored Links" as such and that such links were "conspicuous and differentiated from its genuine search results."

On Google's motion for summary judgment, American Blind introduced expert testimony that Google's practices still created initial interest confusion. According to American Blind's expert, 29% of respondents in a survey "falsely believed, after being shown a Google search engine results page from the entry 'American Blinds,' that "Sponsored Links" appearing on that page were affiliated with [America Blinds]." Over numerous objections by Google, Judge Jeremy Fogel admitted this survey as providing evidence of possible confusion.

We don't know what a jury would have done with this evidence, because the parties apparently settled the case shortly after Judge Fogel's order was entered.

Continue reading "Does Identifying a Search Result as an Advertisement Eliminate Confusion with a Trademarked Search Term?" »

The point of the spear in digital media law may be turning from copyright to trademark. As website operators take advantage of recent court decisions, such as Perfect 10, to provide access to third party content with less fear of a copyright suit, content providers as looking to other intellectual property laws to protect their work. The Rescuecom v Google (Fn1) case is an example of such an attack regarding Google's use of third party trademarks as keywords in internet searches.

Rescuecom filed suit over Google's use of Rescuecom's trademark in Google's search engine. At the time of suit was filed (Fn2), when a Google user entered an entity's name or trademark, Google provided two types of results. First, it provided a list of links to websites, listed in the order Google's algorithm's deemed to be of descending relevance to the user's search term. (The search results were generally found in a column on the left side of a user's screen). Search results would typically begin by providing a link to a site owned by the trademark holder, followed by a list of other links that Google's algorithm's also deemed relevant to the search term. Second, Google would also provide content-based advertising. These are the "Sponsored Links", which in my experience show up in a narrower column on the right side of a user's screen.

Google used a couple of programs to offer these "context-based" links to advertisers: AdWords and Keyword Suggestion Tool. AdWords permitted an advertiser to purchase keywords. The advertiser's ad would appear in the "Sponsored Links" section on a user screen whenever the purchased keyword was entered as a search term. The advertisers would then pay Google based on the number of times its ad was clicked by users.

Google's Keyword Suggestion Tool would provide hints to advertisers wishing to purchase keywords as to other useful words that they could purchase. If an advertiser X, a furnace repair company, purchased the keyword "furnace repair", the tool might also suggest that it purchase the term "Y" -- the brand name and trademark of a competing furnace repair company. This would permit advertiser's X's ad to appear on Google's website whenever a user searched for company's Y's brand name and trademark.

Rescuecom claimed that through the use of these tools, its competitors' ads would appear when users were searching for "Rescuecom" on Google. It alleged that as a result, users were deceived and diverted from Rescuecom to these other competing firms. Rescuecom sued, claiming that this practice violated the Lanham Act (federal trademark law).

Based on older 2nd Circuit precedent, the District Court dismissed the suit on Google's 12(b)(6) motion. (Fn3) However, on April 3, 2009, over a year after it heard the case, the 2nd Circuit reversed.

Continue reading "Inside Rescuecom Corp. v. Google, Inc.: Does Google's Use of Trademarks to Trigger Advertisements from Competitors Violate Federal Trademark Laws?" »