Advising Businesses That Are Advertising and/or Conducting Business Online

1. Advising Businesses That Are Advertising and/or Conducting Business Online By: Elizabeth P. Hodes

2. Topics for Discussion • Jurisdiction Reminder • The Disagreements Surrounding Sponsored Linking and Similar Activities • New Developments at ICANN

3. Jurisdiction Over A Business Operating Online • No significant changes in recent years • Traditional Jurisdictional Analysis – focus becomes passive vs. interactive websites • Passive: advertising, informational • Interactive: online sales • Boschetto v. Hansing, 539 F.3d 1011 (9th Cir. 2008) (sale of an item via eBay is not sufficient minimum contacts to establish jurisdiction). • Salu, Inc. v. Original Skin Store, 2008 WL 3863434 (E.D.Cal. 2008) (interactive website and direct sales to Ca. customers sufficient to establish personal jurisdiction under Ca. long arm statute that allows personal jurisdiction to the extent permitted by the Due Process Clause of the U.S. Constitution.) • Bird v. Parsons, 289 F.3d 865 (6th Cir. 2002) (registrar of Internet domain names had insufficient contacts with Ohio to establish general jurisdiction where 4,666 Ohio residents had registered domain names through its website). • Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir. 1997) (“the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet.”)

4. Sponsored Linking Is… • Search engines sell keywords and when those words are typed into the search engine, the purchaser’s ad or web link appears as a result • Google Adwords • Yahoo Sponsored Search • This is different from “organic linking” which just brings up a webpage link based on matches between search terms and the data on particular websites

5. The Legal Issues • Is this “use” of the trademark? • Is this fair/nominative use? • Is this activity likely to cause consumer confusion? • Initial interest confusion? • Actual confusion?

6. Sponsored Linking And Similar Activities – The Circuits • Playboy Enters., Inc. v. Netscape Commc’ns. Corp., 354 F.3d 1020 (9th Cir. 2004) (search engine operator denied summary judgment where using mark to trigger banner ads). • 1-800-Contacts, Inc. v. WhenU.com, 414.F.3d 400 (2d Cir. 2005) ("a company's internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual's private thoughts about a trademark.”) • Australian Gold, Inc. v. Hatfield, 436 F.3d 1228 (10th Cir. 2006) (“Initial interest confusion in the internet context derives from the unauthorized use of trademarks to divert internet traffic, thereby capitalizing on a trademark holder’s goodwill.”). • N. Am. Med. Corp. v. Axiom Worldwide, Inc., 522 F.3d 1211 (11th Cir. 2008) (describes 1-800 Contacts as a narrow holding and finds metatags infringing where search results include a description of Axioms website using trademarked terms)

7. Unauthorized Use? 15 U.S.C. § 1114(1)(a) Any person who shall, without the consent of the registrant— (a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or (b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive, shall be liable in a civil action by the registrant for the remedies hereinafter provided. Australian Gold and Axiom cases look to this statutory section in finding that there was an infringing use.

8. Use in Commerce? 15 U.S.C. § 1127 For purposes of this chapter, a mark shall be deemed to be in use in commerce— (1) on goods when— (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and (B) the goods are sold or transported in commerce, and (2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services. 1-800 Contacts court looks at this subsection and finds there is no “use in commerce”.

9. Defenses • Fair Use: Use that is descriptive of and used fairly and in good faith only to describe the goods or services. 15 U.S.C. § 1115(b)(4). • Nominative use: 1) the product or service in question is not readily identifiable without use of the mark; 2) Def. uses only so much of the mark as is reasonably necessary to identify the product or service; and 3) Def. does nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the mark holder. Playboy, 354 F.3d at 1029–30. • Functional Use: “parts of a design that have a functional use may not receive trademark protection” Id. at 1030.

10. District Courts • Finance Express v. Nowcom Corp., 564 F.Supp.2d 1160 (C.D. Ca. 2008): Nowcom’s purchase of a competitor’s mark (“Tracker DMS”) as a keyword caused consumers searching for that mark to see an ad for Nowcom’s product “Dealer Desktop”. Manage Your Dealership. Use Just One Software Program. Get A Free Trial of Dealer Desktop. www.Nowcom.com • Is this infringement?

11. District Courts • The District Court said yes, infringement. • “While it is true that a clearly-labeled banner advertisement might not create initial interest confusion, Nowcom’s banner advertisement cannot be fairly characterized as one which ‘clearly identifies its source with its sponsor’s name.’ . . . A website address located in small font at the bottom of the advertisement is not sufficient to overcome the initial interest confusion that results from Nowcom’s practice of keying.” 564 F.Supp.2d at 1178 (emphasis added) (discussing unlabeled banner ad in Playboy Enter., Inc. v. Netscape Communications Corp., 354 F.3d 1020 (9th Cir. 2004)). • Other infringing activity in the case may have affected the court’s decision (metatags, domain name squatting).

12. District Courts Other Cases Holding Sponsored Linking Is Infringement: • Boston Duck Tours, LP v. Super Duck Tours, LLC, 527 F.Supp.2d 205, 207 (D. Mass. 2007) (“Because sponsored linking necessarily entails the “use” of the plaintiff’s mark as part of a mechanism of advertising, it is “use” for Lanham Act purposes.”). • Hysitron Inc. v. MTS Sys. Corp., 2008 WL 3161969 (D.Minn. Aug. 1, 2008) (“‘use in commerce’ is not limited to affixing another’s mark to one’s own goods but also encompasses any use of another’s mark to advertise or sell one’s own goods and services.”)

13. District Courts Sponsored Linking is Not Infringement (2nd Circuit view): • Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402 (S.D.N.Y. 2006) (sponsored linking through Google and Yahoo was not “use in commerce” pursuant to 15 U.S.C. § 1127). • Rescuecom Corp. v. Google, Inc., 456 F.Supp.2d 393 (N.D.N.Y. 2006) (“there is no allegation that defendant places plaintiff’s trademarks on any goods, containers, displays, or advertisements, or that its internal use is visible to the public.”). • Site Pro-1, Inc. v. Better Metal, LLC, 506 F.Supp.2d 123 (E.D.N.Y. 2007) (“The sponsored link marketing strategy is the electronic equivalent of product placement in a retail store.”). • FragranceNet.com, Inc. v. FragranceX.com, Inc., 493 F.Supp.2d 545 (E.D.N.Y. 2007) (noting the internet user “is simply being shown alternatives” through sponsored linking). • Tiffany (NJ) Inc., v. Ebay, Inc., 2008 WL 2755787 (S.D.N.Y. July 14, 2008) (eBay’s purchasing the keyword “Tiffany” as part of its sponsored links is not “use” under the Lanham Act and the use of the mark in descriptions arising as a result of a search is nominative fair use).

14. Sponsored Linking to Cure Infringement • Punch Clock, Inc. v. Smart Software Development, 553 F.Supp.2d 1353, (S.D.Fla. 2008): Infringement caused Google search to place infringer above trademark owner through organic linking. Court requires 7 years of sponsored linking (same duration as infringement), in addition to trebled statutory damages and attorney fees and costs.

15. New Opportunities or New Problems? • June 26, 2008, ICANN approves guidelines to allow new “top level domains” • Increased choice & opportunity? • "It's a massive increase in the 'real estate' of the Internet." Dr Paul Twomey, President and CEO of ICANN • Increased expense & inconvenience?