Utah District Court Rejects 1-800 Contacts Google Adword Lawsuit Against Lens.com

While this decision is a little old by blogging standards, since it did not receive much publicity and yet deals directly with the hot trademark issue of purchasing a competitor’s trademarks as part of Google’s Adwords program, I thought it worthwhile to give it some coverage.

Plaintiff 1-800 Contacts, Inc. (“Plaintiff”), an online seller of contact lenses, had filed suit against Defendant Lens.com, Inc. (“Defendant”), also an online seller of contact lenses, for trademark infringement arising from the purchase by Defendant (or marketing affiliates of Defendant) of Plaintiff’s trademarks as keywords to generate sponsored links to Defendant’s website.

Both parties filed motions for summary judgment and on December 14, 2010, the U.S. District Court for the District of Utah, in a lengthy but detailed decision (including providing great detailed background information regarding Google’s Adword program), granted Plaintiff’s motion for summary judgment on Defendant’s defense that purchase of a keyword is not a use in commerce, but also found that Defendant was entitled to summary judgment on all of Plaintiff’s claims. See 1-800 Contacts, Inc. v. Lens.com, Inc., Case No. 2:07-cv-591, 2010 U.S. Dist. LEXIS 132389 (D. Utah December 14, 2010). A copy of the decision can be found here (Justia.com).

After setting forth the respective trademark rights of the parties and providing a detailed discussion of Google’s Adword program (recommended reading for any trademark attorneys with clients out there upset about competitors purchasing their trademarks as keywords for sponsored links), the court noted that while Defendant had purchased numerous keywords that consisted of variations and misspellings of Plaintiff’s service mark, none were Plaintiff’s actual service mark and Plaintiff had failed to present any evidence showing that Defendant ever purchased Plaintiff’s exact service mark as a keyword.

The court noted, however, that some of Defendant’s marketing affiliates had purchased Plaintiff’s exact service mark as a keyword (the court’s decision also provides a detailed discussion regarding the use by online sellers of marketing affiliates). Defendant has a relationship with the affiliate network Commission Junction, which included the marketing of Defendant’s website JustLenses.com.

Plaintiff presented evidence showing two of Defendant’s affiliates as having purchased Plaintiff’s service mark as a keyword. The first affiliate purchased variations of Plaintiff’s trademark as keywords which resulted in the following “impressions” (i.e., the appearance of an advertiser’s link after a user conducts an internet search), the language of which were drafted by the affiliates’ own employees:
1. Buy Contacts Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
2. 1-800 Contacts
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/
3. 1800 Contacts: Buy Online
Simple online ordering of lenses.
Compare our prices and save!
http://www.justlenses.com/

The second affiliate’s keyword purchases resulted in the following impressions
LensWorld.com 75% Off
Up to 75% off Retail Price!
Free Shipping on Orders Over $89
http://www.lensworld.com/
JustLenses.com Savings
Up to 70% off Retail Price. Name
Brand Contacts & Low Prices.
http://www.justlenses.com/

In 2005, Plaintiff, having done some routine searches to see what competitor impressions appear when doing a internet search for Plaintiff’s trademarks, contacted Defendant about sponsored advertisements for Defendant’s website being triggered by searches of Plaintiff’s trademarks. After Defendant discovered that the ads were coming from Defendant’s marketing affiliates, Defendant agreed to work with Plaintiff’s counsel, who provided Defendant with a list of twenty terms that Plaintiff asked Defendant and its affiliates to implement “negative matching” for such terms (i.e., to ensure that no ad is generated when a particular term is searched). Plaintiff again contacted Defendant in April 2007 about impressions being generated from searches of Plaintiff’s trademarks. After receiving no satisfaction, Plaintiff filed suit in August 2007. In October 2007, Commission Junction put Defendant in touch with one of the affiliates, who was informed by Defendant to implement certain negative keywords such as “1-800-Contacts.” Defendant ultimately was able to get Commission Junction to identify and communicate to the affiliates who were generating the offending impressions (the two mentioned above) to cease bidding on certain keywords, which they did immediately.

The court first analyzed the “use in commerce” issue – and quickly sided with those courts who have concluded that use of another’s mark to trigger internet advertisements for itself is a use in commerce:

The Lanham Act does not require use and display of another’s mark for it to constitute “use in commerce.” Rather, “use in commerce” occurs when a mark is “used or displayed in the sale or advertising of services and the services are rendered in commerce.”120 Here, Plaintiff’s service mark was used to trigger a sponsored link for purposes of advertising and selling the services of Defendant. In other words, Plaintiff’s mark was used to promote Defendant’s services and to provide a consumer with a link to a website where it could make a purchase from Defendant. The court concludes such actions constitute a “use in commerce” under the Lanham Act.

The court then turned to the issue of likelihood of confusion. Plaintiff attempted to argue that the appearance of Defendant’s advertisements whenever a user does a search for “1800Contacts,” amounts to a “bait and switch that “spawns confusion,” – “akin to a consumer asking a pharmacist for Advil and the pharmacist handing the consumer Tylenol.” However, the court quickly shot down Plaintiff’s faulty analogy:

This analogy mischaracterizes how search engines function. A more correct analogy is that when a consumer asks a pharmacist for Advil, the pharmacist directs the consumer to an aisle where the consumer is presented with any number of different pain relievers, including Tylenol. If a consumer truly wants Advil, he or she will not be confused by the fact that a bottle of Tylenol is on a shelf next to Advil because of their different appearances.

This analogy is supported by case law. In J.G. Wentworth, a court questioned the Brookfield decision because of its “material mischaracterization of the operation of internet search engines.” “At no point are potential consumers ‘taken by a search engine’ to defendant’s website due to defendant’s use of plaintiff’s marks in meta tages.” Instead, “a link to defendant’s website appears on the search results page as one of many choices for the potential consumer to investigate.” When the link does not incorporate a competitor’s mark “in any way discernable to internet users and potential customers,” there is “no opportunity to confuse defendant’s services, goods, advertisements, links or websites for those of” its competitor.

The court then goes on to explain the problem with companies like Plaintiff who focus too much on the “use” of their marks alone rather than focusing on use that is likely to cause consumer confusion:

Plaintiff monitors use of its mark by others on the Internet. It does so by entering its mark or a variation of it as a search term. If a competitor’s advertisement appears on the search-results page, it sends a cease and desist letter to the competitor to preclude the competitor’s advertisement from appearing on the same page as Plaintiff.

Notably, however, ninety-five percent of the impressions for Plaintiff are triggered by non-trademarked keywords such as contacts, contacts lenses, or by brand names such as Acuvue or Focus. When a company incorporates broad matching for terms such as “contacts or contact lenses,” its sponsored link will appear even if the search term is “1800Contacts.” In other words, simply because the search term is “1800Contacts,” does not mean the keyword generating the sponsored link also was 1800Contacts or a similar variation thereof. One cannot tell from a screen shot alone what keyword generated the sponsored link.

The end result, though, is that when a consumer enters “1800Contacts” as a search term, it will see a competitor’s advertisement anytime the competitor bids on “1800Contacts” “contacts” or “contact lenses” as a broad match. If the advertisement remains the same regardless of which search term triggers it, there is no more likelihood of confusion for the advertisement triggered by the trademark versus the advertisement triggered by the generic phrases. Nor is there any greater impact on the goodwill or reputation of the trademark holder. It is beyond dispute that a competitor cannot be held liable for purchasing a generic keyword to trigger an advertisement that does not incorporate a holder’s mark in any way, even if that competitor’s advertisement appeared when a consumer entered a trademarked search term. Given that fact, it would be anomalous to hold a competitor liable simply because it purchased a trademarked keyword when the advertisement generated by the keyword is the exact same from a consumer’s perspective as one generated by a generic keyword. Imposing liability under such circumstances would elevate “use” over consumer confusion.

As stated above, Plaintiff sends cease and desist letters anytime a competitor’s advertisement appears when Plaintiff’s mark is entered as a search term. Were Plaintiff actually able to preclude competitor advertisements from appearing on a search-results page anytime its mark is entered as a search term, it would result in an anti-competitive, monopolistic protection, to which it is not entitled. Because a consumer cannot see a keyword, nor tell what keyword generated an advertisement, the court concludes that the mere purchase of a trademark as a keyword cannot alone result in consumer confusion. Accordingly, the relevant inquiry here regarding consumer confusion is not just what keyword was purchased, but what was the language of the advertisement generated by that keyword.

(emphasis added).

With that, the court turned to the two types of impressions at issue – ones that did use Plaintiff’s mark and ones that did not. Regarding the ones that did not use Plaintiff’s mark or a similar variation in the advertisement, the court noted that the closest case was one ad that generated “1-800 -Discount Contacts” in the title. But the court found that the composite view of the advertisements were overwhelmingly dissimilar in both sight and sound. The only similarity was the use of “contact” or “contacts” which is unlikely to create consumer confusion because of the numerous sellers of contact lenses. This strongly weighed in favor of no confusion. Regarding the advertisements that did use Plaintiff’s mark, the court focused on the advertisements generated by Defendant’s affiliates (noted above) that expressly used “1800 Contacts” in the title. The court found this was use of Plaintiff’s mark and weighed in favor of a finding of likelihood of confusion.

Regarding the “intent to copy” factor, while the court acknowledged that Defendant’s own purchase of variant keywords could lead one to conclude that it was done to derive benefit from Plaintiff’s reputation or goodwill by generating an advertisement for Defendant, the court accepted Defendant’s evidence that any such benefit was a de minimus part of its business:

Defendant purchased over 8,000 keywords, of which only nine are complained about by Plaintiff. Those nine keywords generated about 1,600 impressions out of more than 112 million impressions that have been linked to Defendant between the years 2004 and 2008. This, too, demonstrates that Defendant was not targeting its marketing efforts to ride on Plaintiff’s reputation or goodwill. While all doubts must be construed against Defendant, there is insufficient evidence to create a doubt about Defendant’s actions. The court therefore concludes this factor is, at most, neutral with respect to Defendant.

But the factor favored Plaintiff with respect to the ads by the marketing affiliates who had directly used Plaintiff’s mark in their ads.

Plaintiff had presented no evidence of actual confusion, so this factor favored Defendant. As for similar marketing channels, the court made the observation that, focusing just on internet, both parties advertise through sponsored links and the fact that both links appear on the same search page would dispel rather than cause confusion because the websites are separate and distinct, suggesting two completely unrelated business entities [ed.—interesting way of looking at it]. Nonetheless, the court found sufficient similarity to have this factor weigh somewhat in favor of Plaintiff. The court also found that it was unlikely that consumers exercise a high degree of care in selecting contact lens providers, so this factor favored Plaintiff.

Finally, in analyzing the strength of Plaintiff’s mark, the court found the mark to be conceptually weak – putting together the two generic terms “Contacts” (“The strength of Plaintiff’s mark on the Internet is weakened by the very nature of how third parties use generic and descriptive words on search engines.”) and “1-800” (“others necessarily must use similar generic and descriptive phrases to market their product on-line or through a toll free number”). As for the commercial strength of Plaintiff’s mark, the court found several flaws in the survey evidence provided by Plaintiff to demonstrate the commercial strength of its mark (including not focusing just on Internet, the fact that it was not a double-blind survey, and the fact that the results were somewhat marginal). The court noted that while Plaintiff had shown about 2.5 million impressions were generated on the Internet specifically matching the keyword “1800Contacts” or a close variation over a six year period, it still only represented about 2.5% of the Plaintiff’s total internet impressions. The court concluded that the conceptual and commercial strength combined indicated that Plaintiff’s mark was only moderately strong. And because Defendant’s own sponsored ads did not include Plaintiff’s mark or a similar variation of it, then, given the moderate strength of Plaintiff’s mark, the court found there was little possibility that a consumer would confuse Defendant with Plaintiff. However, with respect to the advertisement by the marketing affiliates with did use Plaintiff’s mark in the advertisement, the court found that such use, given the moderate strength of Plaintiff’s mark, would likely confuse a consumer about the source of the affiliate’s advertisement.

Taking all of the factors together, the court concluded that there was insufficient evidence for a jury to conclude that Defendant infringed on Plaintiff’s mark for all advertisements that did not use Plaintiff’s mark in them, and accordingly, granted summary judgment in favor of Defendant on that issue. In contrast, the court found there was a likelihood of confusion for the marketing affiliate advertisements that did use Plaintiff’s mark. However, because the affiliates were not named as parties to the lawsuit, the court then turned to the issues of whether the affiliate’s action could be imputed to Defendant under a theory of contributory infringement or vicarious infringement.

The court rejected any vicarious liability on the basis of any lack of an agency relationship between Defendant and the affiliates with the infringing impressions. Plaintiff attempted to impute liability for its very participation in the affiliate marketing program whereby affiliates could purchase keywords. However, because it was the language of the impressions, and not the purchase of keywords themselves, that created a likelihood of confusion, it is only as to those impressions that Defendant could be vicariously liable. In this case, Defendant had little direct contact with affiliates (and had to work through Commission Junction). Defendant had no authority to monitor or supervise affiliate operations except with respect to the use by such affiliates of Defendant’s own marks. Defendant also was not in a position to exercise any degree of control over an affiliate’s website.

As for a theory of contributory infringement, the court found that Plaintiff had not presented any evidence that Defendant intentionally induced the affiliates to infringe on Plaintiff’s mark: “At most, Plaintiff has presented evidence that Defendant did not institute negative keywords and that it knew of some of the keywords that a few affiliates were using in their advertising efforts. As discussed above, however, trademark liability cannot attach from the mere use of a trademark as a keyword. Thus, none of the evidence presented by Plaintiff demonstrates that Defendant intentionally induced its affiliates to infringe on Plaintiff’s mark.”

Moreover, Plaintiff failed to show that Defendant knew about the specific impressions noted above generated by Defendant’s marketing affiliates and failed to take action or was willfully blind to such infringement. Specifically, in the screenshots that were attached to Plaintiff’s April 2007 correspondence, none of them demonstrated the impressions found by the court to be infringing – and instead, were of the non-infringing advertisements that the two marketing affiliates had generated. “Thus, in April 2007, Plaintiff did nothing more than provide general information to Defendant that a non-infringing advertisement was appearing upon entry of certain search terms. Defendant therefore cannot be charged with knowledge or willful blindness based on that information. Nor did the information impose a burden on Defendant to go search out all of its affiliates’ actions to make sure none of them were using Plaintiff’s mark.”

The court also noted that when Plaintiff included one of the infringing impressions it is August 2007 complaint, the screenshot by itself did not provide Defendant with sufficient information for it to determine immediately who the affiliate was (among Defendant’s 10,000 affiliates). “Because contributory trademark infringement does not require a defendant ‘to refuse to provide a product or service to those who merely might infringe the trademark,’ Lens.com had no obligation to cease licensing its name to all of its affiliates while it took steps to identify the one who generated this particular impression.”

The court found that “there is insufficient evidence to show that Defendant failed to take appropriate action to stop McCoy from publishing the advertisements. There is no indication that Defendant intended to benefit from the Infringing Impressions, nor is there evidence of how many Infringing Impressions and clicks occurred during the relevant time period. Accordingly, the court concludes that Defendant cannot be held liable for contributory infringement.”

The remainder of the court’s decision involves Plaintiff’s claim for breach of contract (for which the court found no enforceable agreement on the part of Defendant to not purchase Plaintiff’s mark or variations thereof as a keyword), Plaintiff’s claim for unfair practices under state law (claims not supported by Plaintiff in its opposition), Plaintiff’s claim for common law trademark infringement and unfair competition (rejected for the same reasons as Plaintiff’s Lanham claims), and Plaintiff’s claim for unjust enrichment (since Plaintiff has not shown that use of its service mark as a keyword constituted infringement, then it is not entitled to any payment for such use – “Stated differently, while the law protects one’s property right in a trademark, the scope of that protection is not without its limits. Use outside of the scope of that property protection is not a use that is unjust to retain without payment. Indeed, if Plaintiff were able to obtain payment under unjust enrichment, common law would effectively expand the scope of Plaintiff’s statutory protection. Because one generally cannot extend legal rights beyond one’s property rights, the court grants summary judgment in Defendant’s favor on this claim.”).

In the end, the court gave the Plaintiff one small victory in granting summary judgment on Defendant’s defense that the purchase of keywords did not constitute a “use” in commerce; however, it was certainly overshadowed by the overwhelming victory given to Defendant by the court granting summary judgment in favor of Defendant and dismissing all of Plaintiff’s claims against Defendant.

District Court Dismisses Tiffany’s Final Claim Against eBay

Tiffany & Co.’s last chance at any kind of legal claim against eBay, Inc. in the long-running contributory trademark infringement lawsuit between the parties arising from the alleged sale of counterfeit Tiffany goods on eBay’s auction website came to an end today when District Court Judge Richard Sullivan concluded that there was “insufficient evidence” to support the false advertising claim that remained after the Second Circuit Court of Appeals in April of this year affirmed (decision here) most of the District Court’s earlier decision (previously blogged here) in favor of eBay. See Tiffany (NJ) Inc. and Tiffany and Company v. eBay, Inc., Case, No. 04-cv-04607 (S.D.N.Y. September 13, 2010). A copy of the court’s order can be viewed here. New stories on the decision from Reuters, Bloomberg, and WSJ. For blog posts on the Second Circuit’s April 2010 decision dismissing nearly all of Tiffany’s claims, see Ron Coleman and Eric Goldman.

Mary Kay Cosmetics Sues Yahoo Over “Yahoo Shortcuts” Feature In E-mails

Both Mediapost and TheDomains have stories today about the trademark infringement filed by Mary Kay Cosmetics against Yahoo. See Mary Kay Inc. v. Yahoo! Inc., Case No. 09-cv-01278 (N.D. Tex. July 6, 2009).

The crux of the complaint is over the “Yahoo Shortcut” feature of Yahoo’s e-mail services whereby certain keywords in a particular user’s yahoo e-mail are highlighted and by scrolling the cursor over the text of the keywords a pop-up window appears which contains the search results generated by that particular term as searched through various types of integrated searches including Yahoo’s basic web search, HowStuffWorks.com, Wikipedia, and, as was apparently the case case here, “Shopping Offers.”

From Mary Kay’s perspective, an e-mail sent by an authorized May Kay representative to a customer using Yahoo’s e-mail is being “hijacked and manipulated by Yahoo and provide an unfair advantage for the unauthorized re-sellers and other competitors.” [Comment: hijacking and manipulating might be a little strong.]

One interesting point is the argument that e-mail recipients might "mistakenly believe that the hyperlinks and pop-ups which include ads associated with the Mary Kay marks were affirmatively included or authorized by either Mary Kay or the Independent Beauty Consultant sending the email." Of course, isn’t this only true for a short period of time during which yahoo e-mail users learn about the function and after which, they will clearly recognize it for what it is – a quicklink for Yahoo search engine results? After all, is there anybody out there who is truly confused anymore by the Google search engine results that appear at the top in the highlighted area that reads “Sponsored Links”? And don’t most internet users today recognize after typing (or mistyping) a particular domain name thinking that it is the website for the brand they are looking for only to find the standard landing page with click-through links that the page is simply not the page they were looking for and then simply brings up a new web browser page to use one of the major search engines to find the brand for which they were looking?

Of course, Mary Kay’s action suffers the same uphill battle as any of the “Google adword” trademark infringement cases. Indeed, Yahoo’s popup function appears to be nothing more than an interface that allows a user to see certain search engine results (Yahoo’s or otherwise) for a particular term in a pop-up screen. So is having the link in the e-mail what is really bothering Mary Kay – or is it the search results themselves? And as noted in one of the articles, while Mary Kay complains about “unauthorized resellers,” some of the products being sold may be authorized products that were properly purchased and being resold (in which case the use of the Mary Kay name in reselling them is not trademark infringement).

So let the Yahoo Shortcut based trademark infringement lawsuits begin. Can a “Yahoo E-mail Shortcut” class action lawsuit be far behind? Anything can happen in Texas!!!

GunBroker.com Seeks Declaratory Relief Against Heckler & Koch and the Trademark Enforcement Efforts of Continental Enterprises, Inc.

On May 14, 2009, GunBroker.com, LLC (“GunBroker”), the owner of the website www.GunBroker.com, filed a declaratory relief action against Heckler & Koch Inc. (“H&K”), the U.S. subsidiary of the German firearm manufacturer Heckler & Koch, GmbH, in the U.S. District Court for the Middle District of Georgia. See GunBroker.com LLC v. Heckler & Koch Inc., Case No. 09-cv-00051 (M.D. Ga.). A copy of the complaint can be downloaded here.

H&K is the owner of the registered HK logo trademark (pictured above) as well as numerous other registered marks that H&K uses in connection with certain models of H&K firearms such as USP, P7, and MP7 (some of which are also occasionally used in connection with other items including swords and knives).

Heckler & Koch's MP7

GunBroker’s website offers an online auction service for third parties to sell merchandise such as firearms, knives, swords, and hunting equipment and accessories to interested parties. Sellers create the auction listing and submit it to GunBroker, which then adds the auction to its site, administers the auction, notifies the auction winner, and provides details on how the winner can contact the seller. GunBroker’s Website User Agreement specifically prohibits the posting of items for sale that violate any third party’s intellectual property rights, and GunBroker provides a mechanism for trademark holders to report any violations.

According to the complaint, on August, 27, 2008, GunBroker’s predecessor-in-interest received a letter from the “Office of the General Counsel” for Continental Enterprises, Inc. (“CE”). The letter indicated that CE had been engaged by H&K to protect H&K’s intellectual property and that several hundred auction listings on GunBroker’s website violated H&K’s trademark and copyright rights. The letter enclosed a 16 page printout from GunBroker’s website that showed a list of auction listings (over 340) posted by third party sellers on the website who were attempting to sell merchandise and in some way using one or more of the H&K trademarks.

The basis of CE’s engagement to enforce H&K’s intellectual property rights was a letter from James E. Baker, Jr., an attorney with the Baltimore, Maryland law firm of Baxter, Baker, Sidle, Conn & Jones, P.A. (the “Baxter Firm”), which purportedly confirmed that H&K had engaged the services of CE to identify and investigate any unauthorized uses of H&K’s intellectual property. Apparently, however, the letter did not explain the relationship between the Baxter Firm and H&K nor did it indicate whether or not the Baxter Firm is an agent of H&K or otherwise entitled it to act on behalf of H&K.

According to the complaint, the owner of CE is Mr. Karl Manders, a career private investigator (but not a lawyer) who, through his company, concentrates exclusively on the enforcement of intellectual property rights. GunBroker believes that CE obtains a percentage of any settlement proceeds that CE receives from its efforts. CE has supposedly acted on behalf of such companies as Heineken USA, Inc., Just Born, Inc., and Big Dog Holdings, Inc.

GunBroker also notes in its complaint that Indiana’s Rules of Professional Conduct (Rule 5.4(a)) prohibits a lawyer from entering into a partnership with a non-lawyer and from sharing legal fees with a non-lawyer and cites Indiana State Bar Legal Ethics Opinion (Indiana State Bar Association, Legal Ethics Committee, Opinion #7, 1991) discussing that Rule 5.4(a) was designed to prevent “the possibility of control by a lay person who is interested in profit, rather than the client’s interests, and control by a person who is unregulated by the profession.”

GunBroker alleges that it has become the target of CE’s “for profit” intellectual property enforcement efforts. Click here for one website’s detailed discussion about CE’s trademark enforcement efforts – including a separate page entitled “What To Do If Contacted By Continental Enterprises.”

GunBroker’s complaint notes that the list of allegedly infringing auctions provided by CE did not distinguish between allegedly infringing use of H&K’s trademarks and the fair use of H&K’s trademarks by sellers listing authentic H&K products or otherwise making a fair use of H&K’s trademarks. Moreover, despite GunBroker’s request, neither CE nor H&K have used the mechanism on GunBroker’s website, to report a specific violation or to clarify which if any, specific postings on GunBroker’s website that CE or H&K believe infringe on H&K’s trademarks.

CE has threatened that GunBroker’s further advertisement or sale of “infringing merchandise” would be considered “willful infringement,” and would subject GunBroker “to enhanced penalties, including, but not limited to, treble or statutory damages and attorneys fees.” CE has also threatened to “advise H&K to take whatever steps it deems necessary to fully protect its intellectual property rights.”

Based on CE’s actions and threats regarding GunBroker’s alleged trademark infringement of H&K’s trademarks through the third party auction listings on GunBroker’s website, GunBroker maintains that a substantial controversy exists between the parties to warrant GunBroker’s request for declaratory relief.

GunBroker seeks a declaratory judgment that it has not infringed H&K’s trademarks, that it has not committed any contributory trademark infringement through the auction listings by sellers comparing their product to an H&K product, selling products that are compatible with an H&K product, selling products that are a “knock-off or look alike” to an H&K product, or reselling a used H&K product, and that such uses of H&K’s trademarks by sellers in their auction listings is fair use.

American Airlines Pursues Another Trademark Infringement Lawsuit Over Keywords

Eric Goldman writes on his Technology & Marketing Law Blog about the new lawsuit filed by American Airlines against Yahoo! And Overture (dba Yahoo Marketing Services) over “keyword” advertising. See American Airlines, Inc. v. Yahoo! Inc. et al, Case No. 08-00626 (N.D. Tex. Filed October 17, 2008). A copy of the complaint can be downloaded here.

When AA filed a similar lawsuit against Google last year (previously blogged here, here, and here), many trademark law spectators watched the legal wrangling with anticipation that it could result in a definitive legal decision on whether the sale of trademarks as keywords constitutes trademark infringement (whether direct, vicarious, or contributory infringement). Alas, the lawsuit between AA and Google settled under under confidential terms (blogged here).

Now with this new lawsuit by AA, does anybody really expect it to end any differently than the suit between AA and Google?

I guess AA’s motive for settling with Google wasn’t the growing financial troubles faced by the airlines in this faltering economy after all.

Rosetta Stone Files Trademark Infringement Lawsuit Against Rocket Languages Over Keyword Advertising “Piggybacking”

On July 2, 2008, Rosetta Stone Ltd., the maker of the Rosetta Stone line of interactive computer software for learning many different foreign languages, filed a trademark infringement lawsuit in the U.S. District Court for the Central District of California against two New Zealand companies, Rocket Languages Ltd. and Libros Media Ltd. (together “Rocket”) with offices in Los Angeles, two individuals, and several unnamed defendants. See Rosetta Stone Ltd v. Rocket Languages Ltd. et al, Case No. 08-cv-04402 (C.D. Cal.) A copy of the complaint is available here (from WSJ.com); see also related article from the Wall Street Journal here.

Rosetta owns the federally registered mark ROSETTA STONE for computer software for teaching and learning foreign languages. Rocket sells its own line of foreign language tutorial computer software.

One of the individual defendants, Matthew Weidner, owns and operates the websites http://www.spanishsoftwarereview.com/ and http://www.topratedspanish.com/. The other named individual defendant, Ishmael Lopez, owns and operates the websites http://www.gainspanish.com/rosetta-stone/, http://www.learnspanishreviewer.com/, and http://www.spanishscams.com/rosetta-stone/.

According to the complaint, Weidner, Lopez, and other unnamed defendants are part of “an affiliate advertising program approved and funded” by Rocket in order to promote and sell Rocket’s competing foreign language software products on their websites in return for a 75% commission for every Rocket Languages product sold through their websites.

The primary issue in Rosetta’s complaint is what is being called “piggybacking” – the use of a company’s trademark or brand name by competitors as a keyword or in the text of internet ads in order to direct internet traffic searching for such trademark or brand to their own site. (Click here for Wall Street Journal on the growing resentment by large companies over this practice.)

In this case, Rosetta asserts that the Defendants purchased the words “Rosetta Stone” as an advertising keyword in Google's AdWords program and Yahoo's Marketing Solutions program so that when an internet user performs a search for “Rosetta Stone” or similar variation (e.g., “Rosetta” “Rosetta Spanish” etc.), the Defendants’ websites appear at the top as Sponsored Links offering Rocket’s language software or as websites purporting to offer information and reviews about foreign language software products.

Rosetta also complains about the use by the Defendants of the ROSETTA STONE mark in the header and text of such sponsored links. The complaint illustrates this with the following examples: 1) the sponsored link advertisement for http://www.topratedspanish.com states, “Rosetta Spanish A Scam?” in the header of the advertisement and “Read These Reviews Before Buying Rosetta Spanish!” in the text of the advertisement; and 2) the sponsored link advertisement for http://www.mylanguagereviews.com, owned by one of the unnamed defendants, states, “Is Rosetta Spanish a Scam?” in the header of the advertisement and “Don't Buy Rosetta Spanish Before You Read This” in the text of the advertisement.

Rosetta further maintains that the Defendants are using certain websites (http://www.topratedspanish.com and http://www.mylanguagereviews.com) to post “comparison reviews” of ROSETTA STONE products and other competing foreign language software products, including Rocket Languages' products, without disclosing that the sites are funded by Rocket to market its products.

Rosetta also points to what it claims is false and misleading information on two of the websites which supposedly claim that Rosetta is not offering a free trial of its software when in fact a free “online” demonstration of Rosetta’s software is available (Comment: Isn’t there a difference between a free trial of a software and a free demonstration?).

Rosetta also maintains that two of the websites have hyperlinks that purport to direct customers to Rosetta’s official website, but instead lead the user to an advertisement for Rocket’s product (Comment: I could not find evidence of this on one of the sites named and the other site is temporarily unavailable).

Rosetta’s causes of action are for federal trademark infringement under 15 U.S.C. §§ 1114 and 1125(a), federal unfair competition and false advertising under 15 U.S.C. § 1125(a), trademark dilution under 15 U.S.C. § 1125(c), state unfair competition and false advertising under California Bus. & Prof. Code §§ 17200 and 17500 et seq., and claims of contributory and vicarious trademark infringement directed specifically to Rocket.

Rosetta seeks injunctive relief along with the usual claims for damages. Rosetta also wants the Defendants to remove their keyword advertising and sponsored links from Google and Yahoo, place corrective ads on their websites regarding their “misrepresentations” of Rosetta’s software, and to remove the “false and misleading” comparison reviews of Rosetta’s software from their “comparison review” websites.

Regardless of the merits of Rosetta's claims (and as most readers probably know, the question of whether use of a trademark as a keyword even constitutes trademark use is uncertain right now), the lawsuit may have achieved its objective. A search today on both the Google and Yahoo search engines did not result in any Sponsored Links of the type complained of by Rosetta. Of course, it's possible that those sponsored links had already reached their daily advertising budget limit.

Tiffany & Co. loses its contributory trademark infringement lawsuit against eBay

The trademark news story du jour was the long awaited (and lengthy) decision in the Tiffany v. eBay trademark infringement lawsuit. See Tiffany (NJ) Inc. and Tiffany and Company v. eBay, Inc., Case, No. 04-cv-04607 (July 14, 2008). See news stories here and here.

Judge Richard J. Sullivan of the U.S. district Court for the Southern District of New York decided that eBay was not liable for contributory trademark infringement for the actions of sellers of counterfeit Tiffany & Co. items over eBay’s auction website.

Tiffany had tried to argue that the law required eBay to monitor its website and preemptively remove listings of Tiffany jewelry. However, the court held that the law does not impose liability for contributory trademark infringement for eBay refusing to take such steps based on a “reasonable anticipation” that counterfeit goods might be sold on its site, but instead requires that action be taken only after eBay has specific knowledge regarding infringing items and the sellers listing such items.

Stated another way, the standard for contributory trademark infringement is “not whether eBay could reasonably anticipate possible infringement, but rather whether eBay continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers. See Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).” In this case, the court found that eBay took the appropriate steps to remove listings once it was given specific knowledge about counterfeit items, and thus was not liable for contributory trademark infringement

The court summarized as follows:

[T]he law is clear: it is the trademark owner's burden to police its mark, and companies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their website.

The court also rejected Tiffany’s claims of false advertising and trademark dilution on the basis that eBay’s use of Tiffany’s trademarks – in its advertising, on its home page, and in sponsored links purchased through Yahoo! and Google – constitutes protected, nominative fair use of such marks. Specifically, eBay established that Tiffany’s product is “one not readily identifiable without use of the trademark,” demonstrated that it “used only so much of the marks as was reasonably necessary to identify the product,” and proved that “it did not do anything that would suggest sponsorship or endorsement” by Tiffany.

What is interesting about this court’s decision is that it stands in stark contrast to the adverse decision eBay has obtained in Europe. Recently, a French court ordered eBay to pay over $60 million to Louis Vuitton for similar claims of counterfeiting (New York Times story here). eBay lost a similar challenge brought by the maker of Hermes scarves (Businessweek story here).

Expect an appeal to the Second Circuit Court of Appeals from Tiffany.

SCRABBLE makers want to scrabble "Scrabulous"

The hot trademark story du jour was the news that the two toy companies that own the rights to the SCRABBLE game have sent a letter to Facebook, the popular online social networking website, requesting that it remove a popular online application named Scrabulous that resembles the famed board game. Scrabulous was developed by brothers Jayant and Rajat Agarwalla of Calcutta, India. The application is apparently so popular that it reportedly draws more than half a million Facebook users every day.

Scrabulous Screenshot

The intellectual property rights in and to the SCRABBLE game are owned in the U.S.A and Canada by Hasbro Inc. and throughout the rest of the world by J.W. Spear & Sons Limited of Maidenhead, Berkshire, England, a subsidiary of Mattel Inc. In addition, the online rights to SCRABBLE are currently licensed to Electronic Arts (although it appears that Yahoo! currently offers an "authorized" online SCRABBLE game).

SCRABBLE online at Yahoo!

How the rights to SCRABBLE became split and owned by such arch-rivals as Hasbro and Mattel is an interesting story of its own. The scrabble.com home page requires web users to select which country they reside leading either to http://www.mattelscrabble.com/ or http://www.hasbro.com/. Hasbro’s history of SCRABBLE can be read here while Mattel’s version is here, but what follows is an amalgamation of the two.

SCRABBLE logo outside the U.S. and Canada

SCRABBLE logo in the U.S. & Canada

The game was invented by Alfred Mosher Butts, an out-of-work architect from Poughkeepsie, New York – a cross between anagram puzzles and crossword puzzles that was initially named LEXIKO and later called CRISS CROSS WORDS. Butts supposedly studied the front page of The New York Times in order to calculate letter frequency in order to determine tile letter distribution.

After encountering many rejections, Butts found an interested entrepreneur named James Brunot. They made some changes to the game, including naming it SCRABBLE (which actually has a meaning beyond the famed game). In exchange for the right to manufacture the game, Brunot agreed to pay a royalty to Butts. Brunot, through the Production and Marketing Corporation, applied to register the mark SCRABBLE on December 16, 1948; the mark was ultimately registered on April 25, 1950. Brunot, with the help of his wife, initially started manufacturing the game in the living room of his home in Newtown, Connecticut, at a pace of about 18 games per day – hand stamping letters on wooden tiles one at a time. Brunot later moved to an abandoned schoolhouse in Dodgington, Connecticut, where, with the help of friends, production increased to about 12 games per hour. Brunot later outsourced the manufacturing of the board and tiles, but with assembly remaining their main factory.

According to SCRABBLE lore, in 1952, Jack Strauss, the Chairman of Macy's at the time, played a game of SCRABBLE while on vacation and enjoyed it so much that when he returned to New York, he contacted the Games Department at his store to send one to him. Supposedly, the Games Department did not have the game in stock, but soon after did. With the help of a Macy’s-backed promotional campaign, SCRABBLE so became the must-have game.

Unable to keep up with demand, Brunot licensed the rights to make and distribute the game in the U.S. and Canada to Selchow & Righter Company, a well-known game manufacturer at the time that apparently had earlier rejected the SCRABBLE game.

By 1953, the SCRABBLE craze apparently hit both Australia and the United Kingdom. J.W. Spear & Sons launched the game in the U.K. in 1953. (Note: it’s not clear from the online histories how J.W. Spear initially acquired the rights to manufacture the games in the U.K.).

Brunot eventually sold off the rights to SCRABBLE. Around 1968, J.W. Spear & Sons acquired the rights outside of the USA, Canada and Australia (although eventually picked up Australia as well). In 1971, Selchow & Righter acquired the U.S. and Canada rights. In 1986, Selchow & Righter was sold to COLECO Industries; but when COLECO declared bankruptcy three years later, the rights to SCRABBLE were purchased by Hasbro Inc., through the Milton Bradley Company. In 1994, J.W. Spear and Sons was acquired by Mattel Inc. – apparently much to the chagrin of arch-rival Hasbro (see this NYT article from 1994).

Getting back to Scrabulous, at first glance, Hasbro/Mattel have a pretty strong case. While the marks are not identical in appearance or even sound, the “Scrab-” prefix is similar, the goods are similar (games – Hasbro also holds a SCRABBLE registration for computer game programs), and there is no doubt that the SCRABBLE mark is strong. Under normal circumstances, these factors alone would be enough for Hasbro/Mattel to win the day.

However, in this case, the letter was directed to Facebook, where the infringing game is being hosted, and not the Agarwalla brothers, the developers of the game. Facebook may argue that it is the Agarwalla brothers who are directly infringing the SCRABBLE mark, not Facebook. If Hasbro/Mattel try to argue contributory infringement or vicarious infringement, Facebook will maintain that it does not have any direct control or exercise any direct supervision of Facebook users who may be infringing nor does it have any financial interest in such infringing activity.

Since Facebook probably has some way that it can prevent Scrabulous from being part of social networking website, I would be surpirsed if Facebook does not simply remove the application and avoid any possible lawsuit. But removing it from Facebook may not remove the application – and if Hasbro/Mattel want to stop the direct infringers from any further use of Scrabulous (through Facebook or online in any other way), then the companies may have to go to India where the Agarwalla brothers reside.

The SCRABBLE Board and Tiles

Google files motion to dismiss American Airlines trademark infringement lawsuit

Last Wednesday, September 17, 2007, Google filed a motion to dismiss the American Airlines (“AA”) Adwords trademark infringement lawsuit (previously blogged here) under Fed. R. Civ. Pro. 12(b)(6) for failure to state a claim upon which relief can be granted. A copy of the motion to dismiss filed with the U.S. District Court for Northern District of Texas can be found here (courtesy of resourceshelf.com)

Trademark Use
As expected, Google’s primary argument is that Google and its advertisers are not using the marks as trademarks when used to trigger advertisements (i.e., Google’s Adwords programs) and are using the marks in permissible ways (accurately describing products or providing information) when the trademarks are used in ad text. Motion at 5-6.

Regarding the use of trademarks to trigger advertisements, Google argues that trademark law provides trademark holders with the ability to prevent others from using a mark (or confusingly similar mark) to identify the source or origin of the product. Motion at 6. In the case of Google and its “Sponsored Link” advertisers, however, neither are using AA’s trademarks to identify the source of the advertisers’ products or services. Google cites to Exxon Corp. v. Oxxford Clothes, Inc., 109 F.3d 1070, 1083 (5th Cir. 1997) in asserting that the use of a trademark or trade name occurs only when the label is used as an indicator of origin and/or quality of particular goods or services. Motion at 7. Google maintains that the use of the terms by Google and its advertisers is tantamount to contextual advertising – referencing or using a trademark as part of a consumer marketing strategy rather than as an indicator of the source or origin of goods and services.

Google also cites to the 1-800 Contacts case to support its position that the triggering of Internet ads is not trademark use under the Lanham Act. See Motion at 8: “The only federal appellate court that has considered the propriety of triggering Internet advertisements with terms similar to trademarks concluded that this activity is not trademark use under the Lanham Act. 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F. 3d 400, 407 (2d Cir. 2005).” Google goes on to discuss the Second Circuit’s conclusion that the defendant in that case was not using the trademark as trademarks (i.e. using them to pass its products off as emanating from or authorized by 1-800 Contacts), but rather in the same way that a store uses rival trademarks when it is placing its own generic brand products next to trademarked brand products in order to induce customers looking for the brand name to try a similar, but cheaper alternative product. Google then cites to the numerous federal district court decisions that have held there is no trademark use when a “Sponsored Link” on Google’s search engine is triggered by a search of a trademarked term. Motion at 8-9. Google also cites to the numerous federal district court decisions that have held just the opposite. Google notes that none of the “Sponsored Link” ads contain AA’s trademarks in either its title or text – nothing indicates or implies that AA is the source of the ad (citing to a search hit for U.S. Airways Official Site, which was one of the ads submitted by AA as evidence of infringement).

Regarding the use of trademarks in the text of advertisements appearing from a regular Google search, Google argues that the two types of such ads that AA complains about – advertisements from independent sellers of AA’s services or merchandise and advertisements from websites that provide news and information about AA – both fit within the fair use of a trademark. Independent sellers are allowed to accurately describe what they sell, such as the case of Funjet.com, one of the advertisers complained about by AA, which sells American Airlines tickets. “Funjet is permitted to accurately promote the availability of American Airlines tickets on its website even if it also sells tickets on other carriers.” Motion at 11 (citing Scott Fetzer Co. v. House of Vacuums, Inc., 381 F. 3d 477 (5th Cir. 2004)). Furthermore, websites that provide news and information about AA are not prohibited by trademark law from using the trademarked names of the companies about which such websites are reporting and such use of a trademark is fair use. Motion at 11 (citing WCVB-TV v. Boston Atheletic Ass’n., 926 F.2d 42, 47 (1st Cir. 1991). In the case of one of the websites cited by AA, “AA.com-Promotion.info” provides information on AA as well as links to other articles about AA.

Direct Trademark Infringement
Google argues that AA cannot state a claim for direct infringement because Google has not labeled its search engine or advertising services using AA’s trademarks. Motion at 12-13.

Contributory Trademark Infringement
Google asserts the following test for contributory trademark infringement: “a plaintiff must show that the defendant either intentionally induced another to infringe a mark or continue to produce or distribute a product knowing or having reasons to know the recipient is engaging in trademark infringement.” Motion at 13 (citing Inwood Labs., Inc. v. Ives Labs., Inc. 456 U.S. 844, 860 (1982)).

With respect to the first part, Google argues that AA has not plead any facts showing that Google has intentionally induced any advertisers to do anything, much less infringe AA’s trademarks (noting that AA’s pleadings of legal conclusions without pleadings facts cannot sustain a complaint, citing Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1964-65 (May 21, 2007)). AA’s complaint references the use of loopholes by Google’s advertisers, which only supports the argument that Google does not control its advertisers or the text they write any more than a newspaper publisher or billboard owner can control their advertisers (such as when one car company places an ad next to a competitor’s ad or a fast food restaurant places its billboard near a competing fast food chain). As for whether Google makes suggestions to advertisers regarding the use of brand name keywords, AA has not specifically alleged that Google made such suggestions to any advertiser that used AA’s trademarks as a keyword.

With respect to the second part, liability arises only if a service provider has actual knowledge of infringement using a service under its direct control. Motion at 16 (citing Lockheed Martin v. Network Solutions, Inc., 194 F.3d 980 (9th Cir. 1999)). Google argues that the rationale which led the Ninth Circuit to conclude that Network Solutions had no affirmative duty to police the internet in search of potentially infringing domain name registrations applies equally to its situation regarding its advertisers.

Vicarious Trademark Infringement
Google asserts that vicarious liability can be based only on a special relationship (principal-agent, employer-employee) such that the defendant and infringer have an apparent or actual partnership, have authority to bind one another in transactions with third parties, or exercise joint ownership or control over the infringing product. Motion at 15-16. Google argues that AA has not alleged facts demonstrating any partnership between Google and any merchant using AA’s trademarks (including authority to bind), nor any joint control or ownership of any product or service which AA claims infringes on AA’s trademarks.

Remaining Causes of Action
The remainder of Google’s motion focuses on AA’s state law claims and AA’s claim for false representation under the Lanham Act. Google argues that the Communications Decency Act of 1996 (“CDA”), 47 U.S.C. §230, immunizes a website such as Google (“interactive computer services”) from state law claims and non-intellectual property federal claims regarding content on the website that is provided by third parties. 47 U.S.C. §230(c)(1) states: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” One exception is for intellectual property causes of action (47 U.S.C. §230(e)(2)), which has been construed by at least one federal appellate court as meaning federal intellectual property causes of action, and not state law intellectual property claims. Motion at 21-22 (citing Perfect 10, Inc. v. CCBill LLC, 488 F.3d 1102, 1118-19 (9th Cir. 2007). Furthermore, Google argues that the Lanham Act false representation claim is not an intellectual property claim by virtue of the fact that the U.S. Supreme Court, in considering whether a bank’s lawsuit for false misrepresentation against the State of Florida was barred by sovereign immunity, held that a false misrepresentation did not implicate a property right to exclude others. Motion at 23 (citing College Sav. Bank v. Florida Prepaid Postsecondary Educ. Expense Bd., 527 U.S. 666 (1999)). Because Google is an “interactive computer service” and the content is “provided by another information content provider” (and AA does not allege otherwise in its complaint), the CDA immunity applies to Google. Therefore, AA’s state causes of action (including intellectual property causes of action) and the Lanham Act false misrepresentation claim must be dismissed.

Regarding AA’s claim for money had and receive, Google argues that such a claim must be based on AA receiving money intended for Google’s use and that recovery cannot be had where AA has not alleged any facts showing its ownership over such money or any privity between the parties in relation to the money sought to be recovered. Motion at 23-24.

Regarding AA’s claim for misappropriation under Texas law, Google also argues that AA has not alleged any facts showing that Google and AA are competitors in order to show that Google has misappropriated AA’s name for the commercial purposes of running an airline. Motion at 24-25.
Finally, with respect to AA’s claim for unfair competition under Texas law, Google also argues that AA has not alleged that Google makes any products or sells any service which Google is passing off as a product or service of AA. Motion at 25.


[Comment: As with the other federal district court cases, this case will all come down to whether the sale of trademark terms constitutes “use in commerce” for the purposes of the Lanham Act. Will this District Court judge follow the line of federal cases holding that such use is not “use in commerce” -- Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 408 (S.D.N.Y.2006); 1-800 Contacts v. When U.com, Inc., 414 F.3d 400 (2d Cir. 2005); Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393 (N.D.N.Y.2006)? Or will this Court reject those Second Circuit based decisions and follow the decisions from other Circuits finding such use to be “use in commerce” -- 800-JR Cigar, Inc. v. GoTo.com, Inc., 437 F.Supp.2d 273 (D.N.J.2006); Buying for the Home, LLC v. Humble Abode, LLC, 459 F.Supp.2d 310 (D.N.J.2006); Edina Realty, Inc. v. TheMLSOnline.Com, 2006 WL 737064 (D.Minn.2006)? It is anybody’s guess at this point.]