The future of cybersquatting litigation – battling click-through web directories and typosquatting

The Las Vegas Business Press ran an article today by Valerie Miller entitled “www.catchusifyoucan.com” (link here) on the current state and future trends of “cybersquatting” litigation.

The article notes that, as common domain names become less available, there are a growing number of companies registering domain names containing common misspellings of other well-known domains (so-called “typosquatting”). [See related blog post here].

More noteworthy, however, is what these domain owners are putting up on those pages. Gone are the days where such domain names would lead to an adult website or occasionally even a direct competitor. The trend these days (what the article describes as the next big thing in domain name disputes) is for such sites to host multiple “click-through” links from which such domains then derive revenue for every click.

Not just limited to typosquatting, many companies are in the business of registering domain names incorporating all or part of a well-known trademark (or common misspelling thereof) and then hosting these “web directories” in hopes that enough web visitors will click on the directory links provided that the revenue earned at least pays for the domain registration. The profit margins may be slim, but with the right volume, a very profitable business emerges.

As the article notes, one developing issue is whether hosting such “directories” constitutes commercial use for purposes of causes of action for cybersquatting, trademark infringement, or unfair competition. The article specifically mentions one lawsuit brought by 3700 Associates, LLC, the developer of The Cosmopolitan Resort & Casino, against Softech Ltd., a Cayman Islands company which owns the domain name “cosmopolitanlv.com.” See 3700 Associates, LLC v. Softech, Ltd., Case No. 07-CV-01600 (D. Nev. Nov. 30, 2007). [Click here for prior post on one of the first cybersquatting lawsuits filed by 3700 Associates in Nevada which was dismissed for lack of jurisdiction, but subsequently refiled in Florida]. In the case against Softech, some of the click-through links allegedly generated by visiting cosmopolitanlv.com lead to competing Las Vegas condominium projects or competing Las Vegas hotels such as Mandalay Bay – effectively using 3700 Associates’ trademarks to divert web surfers to competing businesses.

One nuance that the article does not explore is an important aspect of the current domain name registration system that has allowed this business model of hosting click-through links to thrive and prosper – Domain Name Tasting. The problem was noted recently by the World Intellectual Property Organization (WIPO) in its recent report entitled “DNS Developments Feed Growing Cybersquatting Concerns.” (HT: Marty Schwimmer). The report, which notes the unprecedented number of cybersquatting complaints filed in 2007 (2,156 complaints were filed with the WIPO’s mediation center -- an 18% increase over 2006 and a 48% increase over 2005), also highlights the growing concern that trademark owners have over the trend of Domain Name Tasting:

The practice of registering domain names during a five-day registration fee grace period for pay-per-click revenue remained a significant concern for rights owners in 2007. Frequently involving trademarks, the often automated practice of “tasting” effectively prevents rights holders from assembling reliable and timely information that would enable the filing of a UDRP complaint, leading them in some instances to resort to court litigation, especially in the USA.

While the concerns noted in the report are more focused on the ability of trademark owners to file UDRP complaints against alleged cybersquatters, the very fact that domain name registrars have a five day grace period on domain name registrations has enabled such companies to “taste” for free whether a website hosting click-through links will generate sufficient traffic and click-through revenue to pay for itself. Those sites not likely to be profitable are simply deleted and the registrar receives a credit. Fortunately, ICAAN recently announced its intent to take action with this year’s budget to end the five day grace period and begin charging registrars the annual ICAAN fee for each domain. But since the annual fee is still only 20 cents per domain, the issue of businesses registering multiple domains and hosting directories of click-through links will not go away.

One would hope that as more web surfers become more internet savvy, the proliferation of these directory sites would diminish. After all, these directory web sites only make money because people click on the links that are generated. If people, upon realizing that they are not on the site that they expected, would simply retype the domain name again or bring up a well-recognized search engine (like www.google.cm), then the domain name owners would eventually not be able to derive enough click-through revenue to make it profitable for them to keep such vast inventories of domain names.

Trademark 101: Registering domain names as trademarks

I am often asked about whether a domain name can be registered as a trademark.

The answer is Yes – a domain name can be registered as a trademark or service mark with the U.S. Patent and Trademark Office (“USPTO”), subject to certain qualifications (although these qualifications actually apply to non-domain name trademark/service mark applications as well).

First and foremost, in order to be registered as a trademark/service mark, a domain name, like any trademark/service mark, must serve as an actual identifier of a source of goods or services. If the mark would be perceived as nothing more than an Internet address where the applicant can be located online, then the USPTO will refuse registration. The mark, as shown in the specimen of use submitted to the USPTO (advertisements, product labels, etc.), must be presented in a manner that will be perceived by ordinary consumers to indicate source and not as merely an informational indication of the domain name address used to access a web site. See In re Eilberg, 49 USPQ2d 1955 (TTAB 1998). An applicant’s intent, hope or expectation does not determine whether the mark functions as a mark. See In re Standard Oil Co., 275 F.2d 945, 125 USPQ 227 (C.C.P.A. 1960).

In addition, because advertising one’s own products or services is not deemed to be a “service” for which an applicant can obtain service mark protection under the Lanham Act, a domain name which hosts a web site used by business for the sole purpose of advertising its own products or services cannot be registered as a service mark for such a service (e.g., where a domain name service mark applicant claims that its services are “providing information in the field of . . .” but in actuality, the website merely serves to advertise the applicant’s underlying goods or services).

Finally, any application to register a domain name as a trademark/service mark is subject to the same basic statutory restrictions to which all trademark/service mark registration applications are subject. The average consumer familiar with the Internet recognizes that every Uniform Resource Locator (“URL”) (i.e. web address) contains both “http://www” at the beginning and some top-level domain (“TLD”) at the end (e.g., “.com,” “.net,” or “.org”). As such, neither of these two parts of a domain name serve any kind of source-identifying function, and thus their addition to an otherwise unregistrable mark typically will not render the resulting domain name registrable. See In re Reed Elsevier Properties Inc., 482 F.3d 1376, 82 USPQ2d 1378 (Fed. Cir. 2007) (LAWYERS.COM generic for “providing an online interactive database featuring information exchange in the fields of law, legal news and legal services”); In re Oppedahl & Larson LLP, 373 F.3d 1171, 71 USPQ2d 1370 (Fed. Cir. 2004) (PATENTS.COM merely descriptive of computer software for managing a database of records and for tracking the status of the records by means of the Internet).

If a domain name is composed of merely descriptive terms, then the PTO may refuse registration under §2(e)(1) of the Lanham Act (15 U.S.C. §1052(e)(1)), on the ground that the mark is merely descriptive. If a domain name is composed of generic terms, the then the PTO may refuse registration under §2(f), 15 U.S.C. §1052(f) on the ground that the mark is generic. While the rule is that the addition of “http://www” and/or a TLD to an otherwise unregistrable mark typically will not render the resulting domain name registrable, the Federal Circuit has stated that in rare, exceptional circumstances, a term that is not distinctive by itself may acquire some additional meaning from the addition of a TLD. See In re Steelbuilding.com, 415 F.3d 1293, 1297, 75 USPQ2d 1420, 1422 (Fed. Cir. 2005) (STEELBUILDING.COM highly descriptive, but not generic, for “computerized on-line retail services in the field of pre-engineered metal buildings and roofing systems”).

If a domain name is composed of just a surname, then the PTO may refuse registration under §2(e)(4) of the Lanham Act (15 U.S.C. §1052(e)(4)), on the ground that the mark is primarily merely a surname. If a domain name is composed of geographic terms, then the PTO may, depending on how the geographic term is used, refuse registration on the grounds that the domain name containing a geographic term may be:

• primarily geographically descriptive under §2(e)(2) of the Lanham Act (15 U.S.C. §1052(e)(2));
• primarily geographically deceptively misdescriptive under §2(e)(3) of the Lanham Act (15 U.S.C. §1052(e)(3));
• deceptive under §2(a) of the Lanham Act (15 U.S.C. §1052(a)); or
• merely descriptive or deceptively misdescriptive under §2(e)(1) of the Lanham Act (15 U.S.C. §1052(e)(1)).

However, for an applicant facing domain name rejections based on §2(e)(1) merely descriptive or deceptively misdescriptive, §2(e)(2) primarily geographically descriptive, or §2(e)(4) primarily merely a surname, the applicant can try to show acquired distinctiveness under §2(f) of the Lanham Act (15 U.S.C. §1052(f)).

In short, in order to ascertain whether a domain name can be registered as a trademark/service mark, the applicant must first determine whether the second-level domain name, by itself, would be registrable. If so, then the applicant must determine if the domain name has been promoted in commerce in a way that the domain name serves as a source identifier (rather than just a source of information about the applicant or the applicant’s goods and services).

Dell alleges counterfeiting in trademark infringement lawsuit against Typosquatting Domain Tasters

The Washington Post ran an article yesterday about Dell Inc.’s (“Dell’s”) new “cybersquatting” lawsuit against several domain name registrars. See Brian Krebs, “Dell Takes Cybersquatters to Court,” The Washington Post, November 28, 2007 (link here).

The complaint apparently names three domain name registrars – BelgiumDomains, CapitolDomains, and DomainDoorman – along with several alleged Bahamian shell corporations (e.g,, Caribbean Online International, Domain Drop S.A., Domibot, Highlands International Investment, Keyword Marketing Inc., Maison Tropicale, Marketing Total S.A, Click Cons Ltd., Wan-Fu China Ltd. and Web Advertising Corp.) that the registrars supposedly used to act as the companies registering the domains. The suit also names Miami-resident Juan Pablo "JP" Vazquez and alleges that he is connected to the companies.

The case was apparently filed in the U.S. District Court for the Souther District of Florida in October, but placed under seal until yesterday. The judge in the case sealed the case while federal marshals seized hard drives and other computer equipment from Vazquez's home on November 9th. The judge also issued a temporary restraining order against the defendants barring them from using the practice of “domain tasting” to make money off of and then deleting any domain names that may infringe upon Dell's trademarks.

“Domain tasting” is cyber-squatting business model that came about because of rules established by Internet Corporation for Assigned Names and Numbers (ICANN) which give registrars up to five days to sample domains before actually having to purchase them. This allows these registrars to basically buy up large numbers of domain names, test (or “taste”) their value through pay-per-click ads on the parked domains, and then give up domain names that do not appear to generate enough traffic to provide any value. By purchasing domain names of commonly misspelled web site names, often including registered trademarks (so called “typosquatting”), the domain registrants can often make money on the misdirected web surfers who opt to click on one of the many6 pay-per-click ads rather than retyping the correct domain name address.

According to Dell, however, the defendants have been combining “typosquatting” with “domain tasting” by setting up a network of registrar companies that continually purchase and give up infringing domain names so that the companies never have to pay for them all while still profiting from them.

The lawsuit cites an example where on May 25, 2007, DomainDoorman registered dellfinacncialservices.com. Five days later, then the register dropped the domain name, the same domain was registered by BelgiumDomains within minutes. Five days later, that company dropped the domain name, only to have it be registered by CapitolDomains. When that company gave it up give days later, the domain was again registered by DomainDoorman. The same approach was done with other such domain names as dellinspirion.com, delloutletcom.com, and dellsuportcenter.com.

What has raised interest in this case, however, is that in addition to the standard trademark infringement causes of action, including cybersquatting cause of action under 15 U.S.C. §1125(d), Dell also alleges counterfeiting against the defendants (i.e., that the typosquatting is effectively a counterfeit of the authentic “trademark holder’s domain name”). While federal law allows a court to award damages up to a maximum of $100,000 per domain against cybersquatters, if the same domains are found to constitute counterfeits, then federal law would allow a court to award damages up to $1 million per violation.

If the defendants actually put up a fight in this case, Dell may have some hefty evidentiary hurdles to overcome and is likely to have to engage in some major discovery efforts to untangle this offshore web of “typosquatting domain tasters.”

As for the counterfeiting claim, the court is likely to grant Dell the injunctive relief it wants based on the trademark infringement and cybersquatting claims alone. Dell will also probably be awarded damages on such claims. Should the judge dismiss this novel cause of action, it will be interesting to see if Dell decides to appeal such a decision – either to make some new law or to get a larger damage award. Of course, one wonders whether it would be worthwhile to fight so hard for an additional $900,000 in damages. After all, winning a judgment is one thing, enforcing it is another -- especially where so much of the activity appears to be based offshore.

Dell is probably better off spending that money on a campaign to force ICAAN to change its rules to prevent “domain tasting” – or to at least put enough of a price tag on such tasting that the business model would not be as profitable.

Las Vegas’ Cosmopolitan Resort and Casino goes after cybersquatters

Over the last two weeks, 3700 Associates, LLC (“3700 Associates”), the developer of the Cosmopolitan Resort & Casino in Las Vegas, has filed several trademark infringement lawsuits in the U.S. District Court for the District of Nevada against various defendants. See 3700 Associates, LLC v. Griffin et al, Case No 2:2007cv01453 (D. Nev. Filed October 31, 2007); 3700 Associates, LLC v. Roshni et al, Case No. 2:2007cv01459 (D. Nev. Filed November 1, 2007); and 3700 Associates, LLC v. Inter Wires, Inc., Case No. 2:2007cv01460 (D. Nev. Filed November 1, 2007).

Until yesterday, however, the nature of these lawsuits was not apparent (I apologize for not shelling out the $1 to download the complaint from PACER). But after looking at the named defendants in the trademark infringement lawsuit filed by 3700 Associates yesterday, one can take an educated guess at the nature of the lawsuits.

On November 6, 2007, 3700 Associates filed a complaint against the following named defendants -- cosmopolitanhotelcasino.com, cosmopolitan-hotel.com, cosmopolitanlasvegashotel.com, cosmopolitanvegas.com and cosmopolitan-vegas.com. See 3700 Associates, LLC v. Cosmopolitanhotelcasino.com, et al, Case No. 2:2007cv01479 (D. Nev.). Without seeing a copy of the actual complaint, 3700 Associates appears to be going after domain registrants buying up domain names that are similar to the THE COSMOPOLITAN RESORT & CASINO mark.

3700 Associates announced the name for its hotel and casino project back on November 24, 2004 (click here for article announcing the name of the Cosmopolitan Resort & Casino). The day before, 3700 Associates filed several applications for federal registration of THE COSMOPOLITAN RESORT & CASINO word mark and stylized variation thereof: a) the word mark and stylized mark covering real estate services featuring condominiums (which applications are scheduled for registration in due course) and b) the word mark and stylized mark covering vacation time shares, casino services, and resort hotels (which have received notices of allowance and are awaiting Statements of Use).

3700 Associates was not as lucky, however, with some of its other pending applications for registration. When two of its applications for THE COSMOPOLITAN RESORT & CASINO were published for opposition (for restaurant and bar services and clothing), a notice of opposition was filed by Hearst Communications, Inc. (“HCI”), the publisher of the Cosmopolitan magazine and holder of several registrations for the mark COSMOPOLITAN. See Hearst Communications, Inc. v. 3700 Associates, LLC, Opposition No. 91177407 (T.T.A.B. Filed May 21, 2007). The consolidated opposition includes HCI’s opposition to several other pending applications filed by 3700 Associates which contain the word COSMOPOLITAN, including THE COSMOPOLITAN BEACH CLUB and COSMO BEACH CLUB. HCI argues that registration will cause confusion in violation of Section 2(d) of the Trademark Act (15 USC §1052(d)) and will cause dilution of HCI’s famous marks under 43(c) of the Trademark Act (15 USC §1125(c)). 3700 Associates’ answer to HCI’s opposition does not give any clues as to how the company plans to defend HCI’s allegations of likelihood of confusion and dilution.

Getting back to 3700 Associates’ cybersquatting lawsuits, the lawsuits likely resemble the lawsuit filed by Las Vegas Sands Corp against a Venetian cyber squatter (Vegas™Esq Blogged here). 3700 Associates is likely arguing that the defendants are violating Section 43(d) of the Lanham Act (15 USC §1125(d)), which holds a registrant liable if the registrant (i) registers, traffics in, or uses a domain name that a) is identical or confusingly similar to a distinctive mark or b) is identical or confusingly similar to or dilutive of a famous mark and (ii) has a bad faith intent to profit from that trademark, including a personal name, which is protected as a trademark under Section 43 of the Lanham Act. See 15 U.S.C. § 1125(d)(1)(A). And given that the defendant domain name registrants are not even attempting to use the registered sites (they are being parked by GoDaddy and protected by the company’s private domain registration), 3700 Associates is likely to be successful in arguing the “bad faith intent to profit” and obtaining an order to transfer the domains at issue.

SHAMELESS PLUG ALERT:
I cannot write about the Cosmopolitan without providing a link to my favorite Las Vegas real estate agent. If anyone is interested in purchasing a Cosmopolitan condominium (or any real estate in the Las Vegas area), please check out her website. Tell her the “Vegas Trademark Attorney” sent you.

Lulu lo-loses first round of trademark hubbub with Hulu

In the trademark infringement lawsuit brought by Lulu Enterprises, Inc. (lulu.com) against N-F Newsite, LLC (a/k/a hulu.com) (see prior Vegas™Esq post here), the District Court, on Friday, October 19, 2007, denied Plaintiff Lulu’s request for a preliminary injunction against Defendant Hulu. See Lulu Enterprises, Inc. v. N-F Newsite, LLC, Case No. 5:7-CV-347-D, Document 116 (E.D. N.C.) (download order here).

The court first explained the four factors for deciding whether to grant a preliminary injunction:

1. likelihood of irreparable harm to the plaintiff if the injunction is denied, where the irreparable harm is actual and imminent, and not remote or speculative;


2. if plaintiff shows actual and imminent irreparable harm, then harm must be balanced against the likelihood of irreparable harm to the defendant if the injunction granted;


3. likelihood that plaintiff will succeed on the merits, where the extent of the likelihood of success that needs to be shown depends on the balance of the harms (i.e., if balancing the harm favors the plaintiff, then plaintiff need only show serious questions about the merits of the case that are fair grounds for litigation; whereas if the balancing the harm favors the defendant, then plaintiff must show strong probability of success of the merits; and


4. whether the injunction would serve public interest.

See Direx Israel, Ltd. v. Breakthrough Med. Corp., 952 F.2d 802 (4th Cir. 1991).

While the court also set forth the Fourth Circuit’s seven factor test for determining likelihood of confusion in order to assess Lulu’s unfair competition claim (see CareFirst of MD., Inc. v. First Care, P.C., 434 F. 3d 263, 267 (4th Cir. 2006)), the court determined that such analysis was not necessary because Plaintiff’s asserted harm was not actual and imminent. The mere existence of irreparable harm is not enough – the plaintiff must make a clear showing of irreparable harm that is actual and imminent.

Lulu’s argument of irreparable harm rested on the premise that Hulu was intending to enter Lulu’s line of business. Lulu cited to Hulu’s intent-to-use trademark application, but the court rejected the long list of goods and services set forth in Hulu’s registration application, instead reinforcing that what matters is how the marks are used in the marketplace. Lulu also cited to a Hulu’s responses to discovery interrogatories as well as statements by Lulu representatives during depositions. However, the court felt that this evidence was outweighed by other sealed evidence as well as Hulu’s statements at oral argument which indicated that Hulu’s plans “are very narrow and are limited exclusively to making big-budget feature TV and movie content available for its user.” Order at 7.

In short, the court believed that Hulu did not intend to enter Lulu’s line of business (internet self-publishing) once Hulu fully launched its website, and thus faces no actual or imminent harm from Hulu’s business. The court did emphasize, however, that this decision to deny the injunction under the unfair competition claims was based strongly on Hulu’s good-faith assurance about what its website will and will not contain, and the court intends to hold Hulu to its word.

The court also denied a preliminary injunction based on Lulu’s cyberpiracy claims on the grounds that Plaintiff could not show bad faith on the part of Hulu in choosing the URL hulu.com.

Owner of KILLER BROWNIE wants brownie competitor to stop using domain name containing its trademark

The Columbia Dispatch ran an article today (link here) about the two trademark infringement lawsuits filed in the U.S. District Court for the Southern District of Ohio on Thursday, September 27, 2007, by Killer Brownie Ltd. against Hal Harris (Case No. 3:2007cv00362) and the Killer Baking Co. (Case No. 3:2007cv00363).

Killer Brownie Ltd. owns the trademark for KILLER BROWNIE. There are several types of Killer Brownies sold by the Dorothy Lane Market, the original registrant of the mark (Dorothy Lane Market, Inc.). The company is upset about the website used by the Killer Baking Co. to sell its brownies -- http://www.thekillerbrowniecompany.com/. The company is asking for the domain name to be transferred and to stop using the mark KILLER BROWNIE in any way.

Interesting to note that the Killer Baking Co. filed its own trademark registration application on February 12, 2007, for the mark BROWNIES TO DIE FOR. The PTO issued a non-final office action on May 30, 2007, rejecting the mark under §2(d) as likely to be confused with two trademark registrations for the mark DESSERTS TO DIE FOR (for restaurant services and bakery goods), in particular the registration for bakery goods which would encompass brownies. The examining attorney also cited the potentially conflicting application for 2 DI 4, but such application has since gone abandoned. Killer Baking Co. has until November 30th to respond.

More companies using their trademarks to quash online critics

Who amongst us hasn’t wanted to speak out against a particular company that has wronged us in some way? The Internet has made it much easier for a single voice to be heard among the masses. With more consumers using the Internet to express their grievances over particular companies, the companies are taking notice and using their trademark portfolio as a weapon to silence such criticism.

Last Friday, The Register ran a story (link here) about one such effort by Lowe's Companies Inc. (“Lowe’s”). Allen Harkleroad received a cease and desist letter from an attorney for Lowe’s regarding his website -- http://www.lowes-sucks.com/. Harkleroad paid Lowe’s $3,500 to install a chain-link fence; however, after the fence was installed, Harkleroad repeatedly complained to Lowe's about gaps in the chain-link fence that were so large that his dogs were able to repeatedly escape from his yard. After being unable to resolve the problem with Lowe’s, Harkleroad refused to pay the rest of the money owed for the fence and created the lowes-sucks website, which documented his ordeal, including pictures of the poorly constructed fence.

Despite no logos being used on the website and despite the obvious non-affiliation between the website and Lowe’s, the company’s attorney maintained in his letter that Harkleroad’s use of Lowe’s trademarks, including the registration of http://www.lowes-sucks.com/, infringes upon Lowes’ trademark rights, specifically, the rights of LF, LLC, a Delaware limited liability company, that apparently holds and manages Lowe’s trademarks.

Harkleroad is fortunate that he is only facing threatening legal letters at this time. One Maryland man is already facing the prospect of having to go to court to fight a similar battle.

Earlier this month, the Maryland Daily Record (subscription only link) ran a story about a man named Erik G. Levy who bought his Delaware home from Gemcraft Homes, Inc. in 2005. Apparently not satisfied with his home, Mr. Levy started up his own website named http://www.bewareofgemcraft.com/, documenting his troubles with Gemcraft and urging homeowners to be wary of buying a new home constructed by the company.

Now, Gemcraft is suing Levy for tortious interference, trademark infringement, defamation, intentional infliction of emotional distress and invasion of privacy and asking for $8 million. The complaint alleges that Levy is making defamatory statements about the company and its employees on the website, posting telephone numbers and addresses of the employees, and posting signs around Delaware and sending out mailers advertising his site.

This trend by companies to use trademark law against these so-called gripe websites has been growing for some time. See Baldas, Tresa “Trademark Lawsuits: The Price of Online Griping,” The National Law Journal (December 2, 2004) (link here). There is even a website dedicated to websites posting consumer gripes -- http://www.webgripesites.com/.

The trend has its origins in the Anticybersquatting Consumer Protection Act, which was enacted into law on November 29, 1999, and established a cause of action that trademark owners could bring against registrants of domain names that contain such owner’s trademarks. A domain name registrant is liable to a trademark owner if the registrant (i) registers, traffics in, or uses a domain name that a) is identical or confusingly similar to a distinctive mark or b) is identical or confusingly similar to or dilutive of a famous mark and (ii) has a bad faith intent to profit from that trademark, including a personal name, which is protected as a trademark under Section 43 of the Lanham Act. See 15 U.S.C. § 1125(d)(1)(A).

The problem has been with respect to the interpretation of when a registrant has a “bad faith intent to profit.” While the ACPA sets forth nine factors a court may consider in determining “bad faith intent to profit” (see 15 U.S.C. § 1125(d)(1)(B)), the Federal Circuits have taken differing approaches in deciding the issue. For a discussion of the differences among the Federal Circuit Courts, see Mazzie-Briscoe, Sarah, “Free Speech v. Trademark Rights: Has the weather changed?” DePaul University College of Law (March 19, 2006) (link here).

For most courts, the determination of “bad faith intent to profit” comes down to whether the website owner intended to extort money from the trademark owner or merely to express an opinion protected by the First Amendment, and involves an analysis of the facts and a weighing of the website owner’s right to free speech against the trademark owner’s right to protect the value and goodwill of its trademarks.

It would seem obvious that these gripe websites and their noncommercial use of a trademark would protected by the First Amendment. However, because the determination is fact specific, there is no quick and easy way of deciding such cases either way. Courts must review the facts because there may indeed be facts supporting an argument that a website owner was looking for a quick payday and established the website simply to get paid off. For a good article on the complex trademark and First Amendments issues surrounding these “forum websites,” see Barrett, Margreth, "Domain Names, Trademarks, and the First Amendment: Searching for Meaningful Boundaries," Connecticut Law Review, Vol. 39, 2007 (Available at SSRN: http://ssrn.com/abstract=928261).

Such uncertainty tends to favor the trademark owners, who can use the prospect of costly litigation to shut down website owners despite the fact that such website owners may be perfectly within their first amendment rights. In Mr. Levy’s case, the attorney for Gemcraft alleges that Levy is trying to use the Web site in an unlawful attempt to extort money from Gemcraft. The use of the phrase “attempt to extort money” is an obvious attempt to cast Gemcraft’s allegations as colorable under the ACPA. Allegations are one thing – facts are another.

It is puzzling why companies are willing to spend so much time and energy into silencing these consumer websites when, by taking such actions, they end up bringing more attention to these websites than they likely every would have received. If Mr. Harkleroad and Mr. Levy have the energy to put forth a fight, the facts seem to favor their websites as the type which expresses an opinion protected by the First Amendment. Whether they have the wherewithal to put up a fight is another matter. In a time when even a simple defense of a frivolous case can easily cost $20,000, who can blame them for settling out of court, walking away, and moving on with their lives.

[Sept. 26, 2007 update: Coincidentally, arstechnica.com also ran a story today on this very subject (link here). ]

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.]

Google Wins Its “AdWord” Battle with American Blinds, but Still Faces A War With American Airlines

On Friday, August 31, 2007, the internet was buzzing with the news that Google had reached a settlement agreement with American Blinds.

For those of you who have not followed the case, on November 26, 2003, Google filed a declaratory relief action against American Blinds & Wallpaper Factory seeking a judicial determination that Google’s "AdWords" advertising program did not infringe American Blinds’s trademarks. Google’s "AdWords" advertising program involved Google’s practice of selling at auction certain trademarked terms as “keywords” to various sponsors, often competitors of the trademark owners. When a person performs a Google search using the trademarked terms, sponsored links on Google’s search results would appear.

Under the settlement agreement, the lawsuit, which was scheduled to go to trial in November 13th, is dismissed with prejudice. Google did not pay anything to American Blinds under the settlement. The agreement was also specific to state that Google would not change its policy of allowing sponsors to place ads when a competitor’s trademark is searched.

Google is proclaiming this settlement as a victory, and some commentators maintain that this outcome will deter others from filing similar lawsuits against Google’s “AdWords” practice However, a closer look at how the case was progressing for American Blinds reveals that American Blinds settled because it did not have a strong trademark case – not because Google’s practice did not violate American Blind’s trademark rights.

The court, in its April 18, 2007, order granting in part and denying in part Google’s motion for summary judgment, made several rulings that hurt American Blinds’ case. See Google, Inc., v. American Blinds, 2007 WL 1159950 (N.D. Cal. 2007) (unpublished) – slip opinion here and Westlaw version here. Most notably, the “American Blind” and “American Blinds” trademarks were declared unenforceable. American Blinds did not register the “American Blinds” trademark until after the date the lawsuit was filed and did not provide sufficient evidence of secondary meaning to establish an enforceable descriptive common-law trademark.

However, some of the court’s ruling are encouraging to future trademark owners. Most notably, the court concluded that the sale of trademarked terms in Google’s AdWords program did constitute “use in commerce” for the purposes of the Lanham Act, following those cases that have reached a similar conclusion (Government Employees Insurance Co. v. Google, Inc., 300 F.Supp.2d 700 (E.D.Va.2004); 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)) and rejecting court decisions in the Second Circuit that concluded that the sale of trademarks as keywords for sponsored links does not constitute use for the purpose of the Lanham Act (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)). The court further stated that American Blinds had produced sufficient evidence of a likelihood of confusion to withstand summary judgment for the marks that were found to be enforceable.

The decision to settle with Google may have been more about not spending any more money on a losing lawsuit – and face the possibility of having to pay Google’s courts costs and attorneys fees (a point that was specifically addressed in the settlement agreement, whereby both parties agreed to pay their own costs).

But Google’s war over its AdWords program is not yet finished . . . and now faces a much more formidable opponent.

On August 16, 2007, American Airlines filed suit against Google in the U.S. District Court in Northern District of Texas. A copy of the complaint can be found here. American Airlines has a much stronger trademark portfolio and more financial resources to take Google all the way.

[NOTE: Interesting to note that if you do the same “Google” search as that shown in the complaint, the sponsored links are different.]

Mattel Sues China -- China Barbie that is.

While the rest of the world focuses its attention on Mattel’s seemingly endless troubles with its toys made in China, those of us in the trademark world are focused on another matter involving Mattel and China.

On August 21, 2007, Mattell filed a lawsuit against Global China Networks LLC and Terri Gibson alleging cybersquatting (15 USC Sec. 1125(d)), trademark dilution (15 USC Sec. 1125(c)), trademark infringement (15 USC Sec. 1125(a)) and common law unfair competition, with respect to Mattel’s “famous” Barbie trademark. A copy of the complaint can be found here.

The suit centers around the domain name http://www.chinabarbie.com/, an adult website which is owned by Global China Networks (with Terri Gibson the “China Barbie” pictured thereon). Mattel is seeking a permanent injunction preventing Global China from cybersquatting, diluting and infringing the Barbie trademarks and seeking an order compelling Global China to transfer the chinabarbie.com domain name to Mattel. The suit also asks for general damages (and/or Global China’s profits from its willful infringement and/or dilution), treble damages or profits, statutory damages from Global China’s use of the chinabarbie.com domain name, and punitive damages.

Much of the complaint is focused on proving the fame of the Barbie trademark by detailing the history of Barbie, the large portfolio of trademarks registered by Mattel with respect to Barbie, and the worldwide sales generated by Barbie dolls. For an analysis of the merits of the complaint, see Prof. Mark J. Randazza’s blog entry here.

He suggests that the lawsuit may have been Mattel’s attempt to trick the search engines so that when someone does a search for Mattell and China, the story of the lawsuit appears rather than stories about toy recalls. If this is the case, then someone at Mattel deserves a Machiavelli award.

And there may be some validity to this claim given Mattel’s eagerness to go straight to federal court to get the domain name transferred rather than by filing a lower-cost arbitration proceeding under ICAAN’s Uniform Domain-Name Dispute-Resolution Policy.

Or it may just be that Mattel does not want any adult use associated with its Barbie trademark. After all, Mattel has not gone after the domains asianbarbie.com and chinesebarbie.com, but neither of those currently host any adult content. Contrast this with blackbarbie.com, which appears to have been used for adult purposes back in 2001 if you look at the Internet Archives Wayback Machine.

Of course, Mattel may also be dealing with a certain type of cybersquatter that does not relinquish its domain names even after a successful arbitration proceeding. See this June 20, 2007 story published by RedOrbit regarding a company named Texas International Property Associates. Despite several companies receiving favorable UDRP arbitration decisions against the company, the company continues to retain the domain name and are pursuing actions in federal court to force the transfer of the domain names.