pirates and protocols: trademark use and protection on the internet wednesday, march 18, 2009 7:00...

Pirates and Protocols:Pirates and Protocols:Trademark Use and Protection on Trademark Use and Protection on

the Internetthe Internet

Wednesday, March 18, 2009Wednesday, March 18, 20097:00 p.m.7:00 p.m.

New York City Bar AssociationNew York City Bar Association42 West 44th Street42 West 44th Street

New York, NYNew York, NY

ModeratorMonica Richman, Partner

Sonnenschein Nath & Rosenthal LLP

Speakers

Mark Fiore Erik WalshWeil, Gotshal & Manges LLP Arnold & Porter LLPCounsel for eBay, Tiffany v. eBay Counsel for Tiffany, Tiffany v. eBay

Heather Greenberg Mitchell SteinAssociate General Counsel PartnerThe Topps Company, Inc. Sullivan & Worcester LLP

Jonathan Sirota Kevin Taylor Secretary & Director of Legal Affairs PartnerSmartMoney Taylor & Mrsich, LLP

Pirates and Protocols: Trademark Use and Protection on the Internet

Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the InternetTrademark Use and Protection on the Internet

The format for the discussion will be as follows:

(1) Strategies for enforcement of trademark rights against onlineinfringers and counterfeiters - a discussion of Tiffany (NJ), Inc.and Tiffany and Company v. eBay, Inc., 2008 U.S. Dist. LEXIS

53359(S.D.N.Y., July 14, 2008).

(2) Guidelines for using ‘adwords’ and behavioral advertising on the Internet - what is happening right now?

(3) Recent developments regarding intellectual property and use on the Internet.

Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the Trademark Use and Protection on the Internet Internet

TIFFANY & CO. TIFFANY & CO. v.v.

eBay Inc.eBay Inc.

Counterfeiting of the Tiffany Marks Counterfeiting of the Tiffany Marks

Greatest threat to the Tiffany brandGreatest threat to the Tiffany brand Until the early-mid 2000’s, anti-Until the early-mid 2000’s, anti-

counterfeiting efforts focused on street-counterfeiting efforts focused on street-levellevel Customs SeizuresCustoms Seizures

RaidsRaids Canal St.Canal St.

Litigation against Individual Litigation against Individual Vendors/ManufacturersVendors/Manufacturers


Counterfeit Trade Explodes on the Counterfeit Trade Explodes on the Internet Internet

Early 2003, Tiffany observes significant number of counterfeit Early 2003, Tiffany observes significant number of counterfeit Tiffany items available on eBay.Tiffany items available on eBay.

Tiffany initially pursues legal action against individual Tiffany initially pursues legal action against individual counterfeiters selling on eBay. counterfeiters selling on eBay.

Pursuing legal action against individual eBay sellers does not stem Pursuing legal action against individual eBay sellers does not stem the tide.the tide.

Too manyToo many

Relative anonymityRelative anonymity

Many located abroadMany located abroad

Little likelihood of enforcing judgmentLittle likelihood of enforcing judgment


Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the Internet Trademark Use and Protection on the Internet

Why Sue eBay?Why Sue eBay?

eBay’s Active Role in the SaleseBay’s Active Role in the Sales

eBay takes a fee at:eBay takes a fee at: ListingListing SaleSale Payment (if through PayPal)Payment (if through PayPal)

eBay assists its sellers to help grow their eBay assists its sellers to help grow their salessales Business adviceBusiness advice Marketing calendarsMarketing calendars Advertising assistance (reimbursements)Advertising assistance (reimbursements)

eBay focuses on Luxury BrandseBay focuses on Luxury Brands Inform sellers that “Tiffany” is a top sellerInform sellers that “Tiffany” is a top seller ““Hot Lists”Hot Lists” Sponsored links to advertise “Tiffany” on eBaySponsored links to advertise “Tiffany” on eBay


Tiffany’s Chain of DistributionTiffany’s Chain of Distribution

No sale/discounted merchandiseNo sale/discounted merchandise

No liquidationNo liquidation

Controlled Chain (No Wholesalers)Controlled Chain (No Wholesalers)

No Overruns Allowed by ManufacturersNo Overruns Allowed by Manufacturers

Full Refund on ReturnsFull Refund on Returns

Nevertheless, eBay sellers observed offering Nevertheless, eBay sellers observed offering

hundreds of “Tiffany” items at a timehundreds of “Tiffany” items at a time


eBay’s Efforts to Prevent eBay’s Efforts to Prevent Counterfeits Ineffective:Counterfeits Ineffective:

VeROVeRO VeRO Program and its DeficienciesVeRO Program and its Deficiencies

Rights owners submit a Notice of Claimed Rights owners submit a Notice of Claimed Infringement (“NOCI”)Infringement (“NOCI”) Good faith basis (under penalty of perjury) that listing Good faith basis (under penalty of perjury) that listing

is infringingis infringing eBay will remove upon receipteBay will remove upon receipt

Burden on rights ownerBurden on rights owner Not proactiveNot proactive Too many listings to reviewToo many listings to review Dynamic nature of eBayDynamic nature of eBay

Timing: Items can be sold between searching, Timing: Items can be sold between searching, reporting and removalreporting and removal

Clever counterfeitersClever counterfeiters


eBay’s Efforts to Prevent eBay’s Efforts to Prevent Counterfeits Ineffective:Counterfeits Ineffective:

Fraud EngineFraud Engine

eBay system that flags listings for eBay system that flags listings for eBay employees to revieweBay employees to review

Most of the filters flag only those Most of the filters flag only those items that are blatantly counterfeititems that are blatantly counterfeit– e.g., “faux Tiffany”; “counterfeit Tiffany”e.g., “faux Tiffany”; “counterfeit Tiffany”


eBay’s Efforts to Prevent eBay’s Efforts to Prevent Counterfeits:Counterfeits:

Repeat OffendersRepeat Offenders Tiffany has identified dozens of Tiffany has identified dozens of

repeat offendersrepeat offenders

– Identified numerous sellers that it Identified numerous sellers that it reported on 3 or more occasions reported on 3 or more occasions

– Identifies repeat offenders who come Identifies repeat offenders who come back listing dozens, sometimes back listing dozens, sometimes hundreds of “Tiffany” itemshundreds of “Tiffany” items


Tiffany’s VeRO ReportingTiffany’s VeRO Reporting

Tiffany among the most active VeRO participantsTiffany among the most active VeRO participants– 2003: 20,915 listings reported2003: 20,915 listings reported– 2004: 45,242 2004: 45,242 – 2005: 59,0122005: 59,012– 2006: 134,7792006: 134,779– Between 2003 and trial (November 2007): Between 2003 and trial (November 2007):

284,149284,149

Tiffany among Top 10 VeRO Reporters in 21 of Tiffany among Top 10 VeRO Reporters in 21 of the 28 months between June 2003 and the 28 months between June 2003 and September 2005September 2005


Summary of Tiffany’s Claims at Summary of Tiffany’s Claims at TrialTrial

Contributory InfringementContributory Infringement Direct InfringementDirect Infringement False AdvertisingFalse Advertising DilutionDilution


Arguments on AppealArguments on Appeal

InwoodInwood

– General vs. Specific KnowledgeGeneral vs. Specific Knowledge

Snow CrestSnow Crest, , InwoodInwood, , FonovisaFonovisa

Comparative burden analysisComparative burden analysis

Applicability of Nominative Fair Use Applicability of Nominative Fair Use doctrinedoctrine

Public Policy implications of District Public Policy implications of District Court’s decision Court’s decision



Tiffany’s AllegationsTiffany’s Allegations

• Tiffany’s central allegation: eBay knowingly facilitatedTiffany’s central allegation: eBay knowingly facilitated

the sale of counterfeit Tiffany silver jewelry items bythe sale of counterfeit Tiffany silver jewelry items by

sellers on the eBay websitesellers on the eBay website

• Tiffany’s ancillary allegations: eBay advertised theTiffany’s ancillary allegations: eBay advertised the

availability of Tiffany goods via promotions on itsavailability of Tiffany goods via promotions on its

website and via “sponsored links” on search engineswebsite and via “sponsored links” on search engines

such as Google and Yahoosuch as Google and Yahoo


eBay’s Anti-Infringement MeasureseBay’s Anti-Infringement Measures

Context: eBay’s WebsiteContext: eBay’s Website• More than 200 million registered users worldwideMore than 200 million registered users worldwide• At least 100 million listings on eBay at any given At least 100 million listings on eBay at any given

timetime• Approximately 6 million new listings posted each Approximately 6 million new listings posted each

dayday• eBay itself does not sell any itemseBay itself does not sell any items• eBay never possesses nor inspects items listed on eBay never possesses nor inspects items listed on

its websiteits website• Subject to eBay policies, sellers are responsible for Subject to eBay policies, sellers are responsible for

creating their own listingscreating their own listings


eBay’s VeRO Program eBay’s VeRO Program

• eBay’s “Notice-and-Takedown” SystemeBay’s “Notice-and-Takedown” System• eBay allows rights owners to report listings through eBay allows rights owners to report listings through

VeROVeRO• eBay automatically removes reported listingseBay automatically removes reported listings• More than 14,000 rights owners participate in VeROMore than 14,000 rights owners participate in VeRO• Thousands of listings are removed each weekThousands of listings are removed each week• All fees associated with removed listings are All fees associated with removed listings are

refundedrefunded• Listings are removed within 24 hours, usually in Listings are removed within 24 hours, usually in

under 4 hoursunder 4 hours


Notice of Claimed InfringementNotice of Claimed Infringement


Reporting an eBay Listing Reporting an eBay Listing


eBay’s Responses to Tiffany’s ReportseBay’s Responses to Tiffany’s Reports

• The trial record showed that eBay routinely removed The trial record showed that eBay routinely removed listings that Tiffany reported to itlistings that Tiffany reported to it

• eBay never refused to remove a reported listingeBay never refused to remove a reported listing

• Evidence showed that eBay’s response rate was closeEvidence showed that eBay’s response rate was close

to 100 percentto 100 percent

• Tiffany could point to only 15 instances in which eBayTiffany could point to only 15 instances in which eBay

allegedly did not respond to a report and thus allegedly did not respond to a report and thus required Tiffany to follow up (based on nearly required Tiffany to follow up (based on nearly 300,000 reported listings)300,000 reported listings)


eBay’s Additional Key Anti-Infringement eBay’s Additional Key Anti-Infringement MeasuresMeasures

• More than 4,000 eBay and PayPal employees are More than 4,000 eBay and PayPal employees are devoted to anti-infringement/anti-fraud activitiesdevoted to anti-infringement/anti-fraud activities

• eBay requires users to abide by its User eBay requires users to abide by its User Agreement and has implemented policies that Agreement and has implemented policies that forbid infringing itemsforbid infringing items

• eBay uses pop-up warning messages and eBay uses pop-up warning messages and undertakes efforts to educate users about undertakes efforts to educate users about intellectual property rightsintellectual property rights

• eBay allows rights owners to create “About Me” eBay allows rights owners to create “About Me” webpages to provide information about webpages to provide information about themselvesthemselves


eBay’s Fraud EngineeBay’s Fraud Engine

• eBay proactively monitors listings on its eBay proactively monitors listings on its site via a “fraud engine” consisting of tens site via a “fraud engine” consisting of tens of thousands of search rulesof thousands of search rules

• The fraud engine automatically flags for The fraud engine automatically flags for further review and removal listings that further review and removal listings that may be offering infringing itemsmay be offering infringing items

• Listings are flagged if they explicitly offer Listings are flagged if they explicitly offer “knock-off” items or meet other criteria of “knock-off” items or meet other criteria of suspiciousnesssuspiciousness

• Thousands of listings are flagged each dayThousands of listings are flagged each day


Suspensions of eBay UsersSuspensions of eBay Users

• eBay suspends users, on both temporary eBay suspends users, on both temporary and permanent bases, based on willful or and permanent bases, based on willful or repeat violationsrepeat violations

• eBay suspends hundreds of thousands of eBay suspends hundreds of thousands of sellers each year, including tens of sellers each year, including tens of thousands for infringing conductthousands for infringing conduct

• Tiffany could point to only a handful of Tiffany could point to only a handful of instances where users were alleged to instances where users were alleged to have not been suspended, and the District have not been suspended, and the District Court did not credit those instancesCourt did not credit those instances


District Court’s Application of InwoodDistrict Court’s Application of Inwood

• The Legal Standard:The Legal Standard:

“ “[I]f a manufacturer or distributor [I]f a manufacturer or distributor intentionally induces another to infringe a intentionally induces another to infringe a trademark, or if it continues to supply its trademark, or if it continues to supply its product to one whom it knows or has reason product to one whom it knows or has reason to know is engaging in trademark to know is engaging in trademark infringement, the manufacturer or infringement, the manufacturer or distributor is contributorially responsible for distributor is contributorially responsible for any harm done as a result of the deceit.”any harm done as a result of the deceit.”

Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).


Specific Versus Generalized Specific Versus Generalized Knowledge Knowledge

• The District Court held that generalized knowledge of infringing The District Court held that generalized knowledge of infringing activity is insufficient under Inwood: “[C]ompanies like eBay activity is insufficient under Inwood: “[C]ompanies like eBay cannot be held liable for trademark infringement based solely on cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might their generalized knowledge that trademark infringement might be occurring on their websites.”be occurring on their websites.”

• “ “[T]rademark plaintiffs bear a high burden in establishing [T]rademark plaintiffs bear a high burden in establishing ‘knowledge.’” Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d ‘knowledge.’” Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409, 420 (S.D.N.Y. 2001).409, 420 (S.D.N.Y. 2001).

• Drawing support from copyright law, the District Court noted thatDrawing support from copyright law, the District Court noted that

“ “generalized knowledge that copyright infringement may take generalized knowledge that copyright infringement may take place place

in an Internet venue is insufficient to impose contributory in an Internet venue is insufficient to impose contributory liability.”liability.”


Rejection of Restatement Rejection of Restatement

The Restatement (Third) of Unfair Competition states that contributory The Restatement (Third) of Unfair Competition states that contributory infringement occurs where a defendant “fails to take reasonable infringement occurs where a defendant “fails to take reasonable precautions” against infringing activity in circumstances in which that precautions” against infringing activity in circumstances in which that activity “can be reasonably anticipated.”activity “can be reasonably anticipated.”

• Noting that the Supreme Court in Inwood called the “reasonable Noting that the Supreme Court in Inwood called the “reasonable anticipation”anticipation”

standard “watered down and incorrect,” the District Court held that the standard “watered down and incorrect,” the District Court held that the Restatement did not govern: “Tiffany’s argument is foreclosed by Inwood Restatement did not govern: “Tiffany’s argument is foreclosed by Inwood itself.”itself.”

• “ “In determining whether eBay is liable, the standard is not whether eBay In determining whether eBay is liable, the standard is not whether eBay could reasonably anticipate possible infringement, but rather 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 continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers.”know of infringement by those sellers.”

• The rejection of the “reasonable anticipation” standard is consistent with the The rejection of the “reasonable anticipation” standard is consistent with the principle that generalized knowledge is insufficient for contributory liability.principle that generalized knowledge is insufficient for contributory liability.


eBay’s Alleged KnowledgeeBay’s Alleged Knowledge The District Court:The District Court:

• rejected Tiffany’s demand letters as a basis for knowledge, rejected Tiffany’s demand letters as a basis for knowledge, concluding concluding that demand letters generally “are insufficient to impute that demand letters generally “are insufficient to impute knowledge as knowledge as to instances not specifically identified in such notices, to instances not specifically identified in such notices, particularly in particularly in cases where the activity at issue is not always cases where the activity at issue is not always infringing.”infringing.”

• rejected Tiffany’s “five-or-more” rule, by which Tiffany alleged rejected Tiffany’s “five-or-more” rule, by which Tiffany alleged that that any seller of “five or more” Tiffany items is “almost certainly” any seller of “five or more” Tiffany items is “almost certainly” selling selling counterfeit items: “Tiffany’s own CEO disavowed the importance counterfeit items: “Tiffany’s own CEO disavowed the importance of of the five-or-more rule.”the five-or-more rule.”

• declined to credit the “buying programs” Tiffany conducted in an declined to credit the “buying programs” Tiffany conducted in an attempt to determine the amount of counterfeit Tiffany items on attempt to determine the amount of counterfeit Tiffany items on eBay: “Tiffany entirely suspended its normal policing procedures eBay: “Tiffany entirely suspended its normal policing procedures during the programs.”during the programs.”


eBay’s Responses When It Had Knowledge eBay’s Responses When It Had Knowledge When advised of specific instances of infringement,“eBay When advised of specific instances of infringement,“eBay

responded appropriately.”responded appropriately.”

• Even if a defendant has knowledge of infringing activity, contributory Even if a defendant has knowledge of infringing activity, contributory liability only attaches if the defendant fails to take steps to remedy it, liability only attaches if the defendant fails to take steps to remedy it, that is, if the defendant “continues to supply” its product or service.that is, if the defendant “continues to supply” its product or service.

• ““Here, when Tiffany put eBay on notice of specific items that Tiffany Here, when Tiffany put eBay on notice of specific items that Tiffany believed to be infringing, eBay immediately removed those listings.”believed to be infringing, eBay immediately removed those listings.”

• Tiffany conceded at trial “that eBay always acted in good faith and Tiffany conceded at trial “that eBay always acted in good faith and never refused to remove a listing after a NOCI had been filed.”never refused to remove a listing after a NOCI had been filed.”

• In addition, “when eBay had knowledge that a seller was repeatedly In addition, “when eBay had knowledge that a seller was repeatedly engaging in counterfeit activity, eBay’s pattern was to suspend that engaging in counterfeit activity, eBay’s pattern was to suspend that seller and then take further corrective action.”seller and then take further corrective action.”


Authentic Tiffany Items on eBayAuthentic Tiffany Items on eBay

Relevant to the District Court’s conclusion was evidence Relevant to the District Court’s conclusion was evidence showing that authentic Tiffany items are sold on eBay.showing that authentic Tiffany items are sold on eBay.

• ““[A] substantial number of authentic Tiffany goods are sold on [A] substantial number of authentic Tiffany goods are sold on eBay,eBay,

including both new and vintage silver jewelry, sometimes in including both new and vintage silver jewelry, sometimes in lots of five or more.”lots of five or more.”

• The doctrine of contributory trademark infringement “cannot The doctrine of contributory trademark infringement “cannot be used as a sword to cut off resale of authentic Tiffany items.”be used as a sword to cut off resale of authentic Tiffany items.”

• “ “eBay and other online market websites may properly eBay and other online market websites may properly promote and facilitate the growth of legitimate secondary promote and facilitate the growth of legitimate secondary markets in brand-name goods.”markets in brand-name goods.”


Trademark Owner’s Policing DutyTrademark Owner’s Policing Duty

• ““Tiffany and eBay alike have an interest in eliminating Tiffany and eBay alike have an interest in eliminating counterfeit Tiffany merchandise from eBay.”counterfeit Tiffany merchandise from eBay.”

• “ “[T]he heart of this dispute is . . . who should bear the burden [T]he heart of this dispute is . . . who should bear the burden of policing Tiffany’s valuable trademarks in Internet of policing Tiffany’s valuable trademarks in Internet commerce.”commerce.”

• “ “The law is clear: it is the trademark owner’s burden to police The law is clear: it is the trademark owner’s burden to police its mark”; “Tiffany must ultimately bear the burden of its mark”; “Tiffany must ultimately bear the burden of protecting its trademark.”protecting its trademark.”

• See also, e.g., Standing Stone Media, Inc. v. Indiancountrytoday.com, 193 F. Supp. 2d See also, e.g., Standing Stone Media, Inc. v. Indiancountrytoday.com, 193 F. Supp. 2d 528, 532 (N.D.N.Y. 2002) (trademark owners have duty to “police and enforce their 528, 532 (N.D.N.Y. 2002) (trademark owners have duty to “police and enforce their trademark rights”); McCarthy on Trademarks and Unfair Competition (“[C]orporate trademark rights”); McCarthy on Trademarks and Unfair Competition (“[C]orporate owners of trademarks have a duty to protect and preserve the corporation’s owners of trademarks have a duty to protect and preserve the corporation’s trademark assets through vigilant policing and appropriate acts of enforcement.”).trademark assets through vigilant policing and appropriate acts of enforcement.”).


Willful Blindness in Trademark Law Willful Blindness in Trademark Law

• As a corollary to the knowledge requirement for As a corollary to the knowledge requirement for contributory trademark liability, courts have contributory trademark liability, courts have recognized the concept of “willful blindness.”recognized the concept of “willful blindness.”

• “ “To be willfully blind, a person must suspect To be willfully blind, a person must suspect wrongdoing and deliberately fail to investigate.” wrongdoing and deliberately fail to investigate.” Hard Rock Cafe Licensing Corp. v. Concession Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1149 (7th Cir. 1992).Servs., Inc., 955 F.2d 1143, 1149 (7th Cir. 1992).

• But a defendant “has no affirmative duty to take But a defendant “has no affirmative duty to take precautions against the sale of counterfeits.” Hard precautions against the sale of counterfeits.” Hard Rock, 955 F.2d at 1149.Rock, 955 F.2d at 1149.


eBay’s Alleged Willful Blindness eBay’s Alleged Willful Blindness The District Court held that the evidence did not support The District Court held that the evidence did not support

a finding of willful blindness by eBay.a finding of willful blindness by eBay.

The court instead found, among other things, that:The court instead found, among other things, that:• eBay had committed as much as $20 million each year to tools eBay had committed as much as $20 million each year to tools

to promote trust and safety on its site.to promote trust and safety on its site.• one quarter of eBay’s workforce was devoted to trust and safety.one quarter of eBay’s workforce was devoted to trust and safety.• eBay proactively searched listings on its site for indications of eBay proactively searched listings on its site for indications of

fraudulent activity.fraudulent activity.

“ “Put simply,” the court concluded, “it cannot be said Put simply,” the court concluded, “it cannot be said that eBay purposefully contrived to avoid learning of that eBay purposefully contrived to avoid learning of counterfeiting on its website, or that eBay failed to counterfeiting on its website, or that eBay failed to investigate once it learned of such counterfeiting.”investigate once it learned of such counterfeiting.”


Tiffany’s Remaining Claims Tiffany’s Remaining Claims

The District Court rejected Tiffany’s remaining claims of direct The District Court rejected Tiffany’s remaining claims of direct trademark infringement and false advertising, direct and trademark infringement and false advertising, direct and contributory dilution, unfair competition, and analogous state-law contributory dilution, unfair competition, and analogous state-law claims.claims.

Tiffany challenged eBay’s use of Tiffany’s trademarks on its Tiffany challenged eBay’s use of Tiffany’s trademarks on its website and its purchases of “sponsored links” on Google and website and its purchases of “sponsored links” on Google and Yahoo to advertise the availability of Tiffany jewelry on eBay.Yahoo to advertise the availability of Tiffany jewelry on eBay.

• These practices are protected by the doctrine of “nominative fair These practices are protected by the doctrine of “nominative fair use,” pursuant to which “trademark owners cannot prevent others use,” pursuant to which “trademark owners cannot prevent others from making a descriptive use of their trademark.”from making a descriptive use of their trademark.”

• The doctrine “is essential because it is undisputed that trademark The doctrine “is essential because it is undisputed that trademark owners cannot use trademark law to prevent the resale of authentic, owners cannot use trademark law to prevent the resale of authentic, trademarked goods.”trademarked goods.”

Behavioral

Advertising

Pirates and Protocols:Pirates and Protocols: Trademark Use and Protection on the InternetTrademark Use and Protection on the Internet

Advertising targeted to a specific individual based on that person’s web-surfing behavior.

With behavioral advertising, this means that two people could see vastly different ads when viewing the identical webpage at the same time.

Behavioral Advertising


What is contextual advertising?

• “Keywords” are pre-identified relevant terms that are used to trigger appropriate “contextual advertising.”

• Keywords can be either generic terms or trademarks (e.g., “cars” and “insurance”; “Ford” and “GEICO”).


Contextual AdvertisingContextual Advertising

Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the Trademark Use and Protection on the InternetInternet

•• Contextual advertising providers, such as adware Contextual advertising providers, such as adware companies and search engine providers, program companies and search engine providers, program their systems to match interested consumers to their systems to match interested consumers to contextual advertising based on keywords.contextual advertising based on keywords.

•• Under the contextual advertising model, advertisers Under the contextual advertising model, advertisers bid on “keywords” that an Internet user might enter in bid on “keywords” that an Internet user might enter in a search query. The search engine then matches the a search query. The search engine then matches the advertisement and sponsored hyperlink to the advertisement and sponsored hyperlink to the keyword the advertiser purchased. When an Internet keyword the advertiser purchased. When an Internet user user enters the keyword as a search, it triggers the enters the keyword as a search, it triggers the sponsored link to appear on sponsored link to appear on the search results page the search results page either to the right or immediately above the natural either to the right or immediately above the natural search results.search results.

Contextual Advertising

Advertisers’ Position:The practice should be considered a permissible noncommercial use or fair use of a trademark that places an advertisement in front of a potential purchaser, which is no different from other types of competitive / comparative advertising.




Trademark Owners’ Position: Many trademark owners consider the use of their marks as keywords to constitute infringement or unfair competition that improperly diverts Internet traffic from their sites and confuses consumers about the source of the products they encounter via pop-up ads, banners and sponsored search results.

But does the sale of trademarks as keywords to trigger ads represent “use” in commerce, a prerequisite to an infringement cause of action under the Lanham Act?


Statutory Requirements

Trademark infringement claims under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1)2, require that the plaintiff establishes that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark, (3) in commerce, (4) ‘in connection with the sale . . . or advertising of goods or services,’ 15 U.S.C. § 1114(1)(a), (5), without the plaintiff's consent.”


Statutory Requirements

The plaintiff must also show that the defendant's use of that mark “is likely to cause confusion . . . as to the affiliation, connection, or association of [the defendant] with [the plaintiff], or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by [the plaintiff].” 15 U.S.C. § 1125(a)(1)(A).


Use in CommerceUse in Commerce

Courts are split on whether the sale and/or purchase of another's trademark as a keyword constitutes use of the mark in commerce.

Does not constitute “Use in Commerce”

Fragrancenet.com Inc. v. Fragrancex.com Inc., 439 F. Supp. 2d 545 (E.D.N.Y. 2007) (12 ECLR 653, 7/18/07)

Site Pro-1 Inc. v. Better Metal LLC, U.S. Dist. LEXIS 34107 (E.D.N.Y. May 9, 2007) (12 ECLR 459, 5/16/07)

Merck & Co. v. Mediplan Health Consulting Inc., 431 F. Supp. 2d 425 (S.D.N.Y. 2006) (11 ECLR 375, 4/5/06)


Use in CommerceUse in Commerce

Does Constitute “Use in Commerce”

Government Employee Ins. Co. v. Google Inc., 330 F. Supp. 2d 700 (E.D. Va 2004) (9 ECLR 772 9/15/04)

Google Inc. v. American Blind and Wallpaper Factory Inc., No. 03-05340 (N.D. Cal. March 30, 2005) (10 ECLR 361, 4/6/05)

Buying for the Home v. Humble Abode LLC, D.N.J., No. 03-2783, 10/20/06


In 2004 the Ninth Circuit held - without addressing the "use in commerce" question - that the use of trademarks to trigger the display of banner advertising creates initial interest confusion (Playboy Enter. Inc. v. Netscape Communications Corp.,354 F. 3d 1020 (9th Cir. 2004) (9 ECLR 55 1/21/04)

International Profit Associates, Inc. v. Paisola, 461 F. Supp. 2d 273 (D.N.J. 2006)Edina Realty Inc. v. MLSonline.com, Civ. 04-4371, 2006, WL 737064 (D. Minn. March 20, 2006) Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008)

Initial Interest Confusion


Behavioral Advertising GuidelinesBehavioral Advertising Guidelines

•• Self-Regulatory Principles For Online Behavioral Self-Regulatory Principles For Online Behavioral Advertising (“Principles”)Advertising (“Principles”) - Federal Trade Commission - Federal Trade Commission staff report issues on February 12, 2009.staff report issues on February 12, 2009.

•• Online Behavioral AdvertisingOnline Behavioral Advertising “means the practice of “means the practice of tracking a consumer’s online activities over time – including tracking a consumer’s online activities over time – including searches the consumer has conducted, the web pages searches the consumer has conducted, the web pages visited, and the content viewed - in order to deliver visited, and the content viewed - in order to deliver advertising targeted to the individual consumer’s interests”advertising targeted to the individual consumer’s interests”



•• FTC – FTC – First Party Behavioral AdvertisingFirst Party Behavioral Advertising “is behavioral “is behavioral advertising by and at a single website, which practice is advertising by and at a single website, which practice is more likely consistent with consumer expectations, and less more likely consistent with consumer expectations, and less likely to lead to harm than other forms of behavioral likely to lead to harm than other forms of behavioral advertising”advertising”

•• FTC – FTC – Contextual AdvertisingContextual Advertising is “advertising based on a is “advertising based on a consumer’s current visit to a single web page or single consumer’s current visit to a single web page or single search query that involves no retention of data about the search query that involves no retention of data about the consumer’s online activities - beyond that necessary for the consumer’s online activities - beyond that necessary for the immediate delivery of an ad or search result – is likely to be immediate delivery of an ad or search result – is likely to be less invasive than other forms of behavioral advertising.”less invasive than other forms of behavioral advertising.”



•• First PartyFirst Party and and Contextual Advertising:Contextual Advertising:

•• Fall outside the scope of the PrinciplesFall outside the scope of the Principles

•• Still subject to other laws and policies that impose Still subject to other laws and policies that impose obligations regarding the collection of dataobligations regarding the collection of data



•• FTC – FTC – Personally Identifiable InformationPersonally Identifiable Information and and Non-Non-Personally Identifiable InformationPersonally Identifiable Information “in context of “in context of behavioral advertising, rapidly changing technology and behavioral advertising, rapidly changing technology and other factors have made the line between personally other factors have made the line between personally identifiable and non-personally identifiable information identifiable and non-personally identifiable information increasingly unclear.”increasingly unclear.”

•• The The PrinciplesPrinciples are designed to serve as the basis for are designed to serve as the basis for industry self regulatory efforts to address privacy concerns industry self regulatory efforts to address privacy concerns regarding the following four (4) aspects of online consumer regarding the following four (4) aspects of online consumer data collection: data collection:



First Aspect: First Aspect: Transparency and Consumer ControlTransparency and Consumer Control

•• Meaningful disclosure to consumers about the practice of Meaningful disclosure to consumers about the practice of behavioral advertisingbehavioral advertising

•• Disclosures within a privacy policy/terms of use is no longer Disclosures within a privacy policy/terms of use is no longer considered “best practice”considered “best practice”

•• Disclosure via a prominent link attached to each targeted Disclosure via a prominent link attached to each targeted advertisement served or that is placed on the home page advertisement served or that is placed on the home page linking to a page describing behavioral advertising practiceslinking to a page describing behavioral advertising practices

•• A choice to opt out should be easily accessibleA choice to opt out should be easily accessible



Second Aspect: Second Aspect: Reasonable Security and Limited Data Reasonable Security and Limited Data Retention for Consumer DataRetention for Consumer Data•• Reasonable data security measures so that behavioral data Reasonable data security measures so that behavioral data

does not fall into the wrong handsdoes not fall into the wrong hands•• Retain data only as long as necessary for legitimate Retain data only as long as necessary for legitimate

business or law enforcement needsbusiness or law enforcement needs



Third Aspect: Third Aspect: Affirmative Express Consent Before ForAffirmative Express Consent Before ForMaterial Changes To Existing Privacy PromisesMaterial Changes To Existing Privacy Promises•• FTC understands that businesses have a legitimate need to FTC understands that businesses have a legitimate need to

change their privacy policies on a prospective basis to engage in change their privacy policies on a prospective basis to engage in new advertising practicesnew advertising practices

•• Prospective changesProspective changes - affirmative express consent is not - affirmative express consent is not required when changes only relate to the use of newly collected required when changes only relate to the use of newly collected data in accordance with a changed privacy policy. However, data in accordance with a changed privacy policy. However, prominent disclosure of the changed privacy policy as well as an prominent disclosure of the changed privacy policy as well as an easily accessible choice to opt out is expectedeasily accessible choice to opt out is expected

•• Companies are bound by promises made to consumers at the Companies are bound by promises made to consumers at the time of data collection regarding how such data is collected, used, time of data collection regarding how such data is collected, used, and sharedand shared



Third Aspect ContinuedThird Aspect Continued

•• ““Material”Material” refers to uses of behavioral data that are refers to uses of behavioral data that are materially different from promises made at the time the materially different from promises made at the time the data was collecteddata was collected

•• ““Retroactive”Retroactive” and and “Material”“Material” changes to privacy policies changes to privacy policies require affirmative express consentrequire affirmative express consent

•• ““Affirmative express consent”Affirmative express consent” - pre-checked boxes, - pre-checked boxes, disclosures buried in a privacy policy, and other similar disclosures buried in a privacy policy, and other similar mechanisms are not sufficient to constitute affirmative mechanisms are not sufficient to constitute affirmative consent.consent.

•• However, the Principles do not list any specific mechanisms However, the Principles do not list any specific mechanisms that are sufficient to constitute affirmative consentthat are sufficient to constitute affirmative consent


Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the Trademark Use and Protection on the InternetInternet

Behavioral Advertising Guidelines

Fourth Aspect: Affirmative Express Consent To (OrProhibition Against) Using Sensitive Data For BehavioralAdvertising• “Sensitive Data” – is data such as information about children, medical information, account numbers, sexual orientation, or finances• Note: Certain data may also be subject to obligations under other policies or laws, such as children’s data (COPPA), health data (HIPAA), and financial data (GLB).

Source – February 2009 FTC Staff report titled “Self-regulatory Principles For Online Behavioral Advertising”

IAB Advertising AddendumIAB Advertising Addendum

•• IAB's Board of Directors Adopts Privacy Guidelines for IAB's Board of Directors Adopts Privacy Guidelines for Interactive AdvertisingInteractive Advertising

•• Applicable to Internet media companies, ad serving Applicable to Internet media companies, ad serving organizations and rich media vendorsorganizations and rich media vendors

•• Meant to be an addendum to the existing IAB standard Meant to be an addendum to the existing IAB standard terms and conditionsterms and conditions


Case Law Round-upCase Law Round-up


ISP “Secondary Liability”ISP “Secondary Liability”

ISPs can be ISPs can be contributorily liablecontributorily liable for for trademark infringementtrademark infringement– Factors:Factors:

Defendant intentionally induced the Defendant intentionally induced the infringement; or eitherinfringement; or either

Defendant continued to supply an infringing Defendant continued to supply an infringing product to a third party after learning that product to a third party after learning that the product was infringing; ORthe product was infringing; OR

For on-line services, that defendant had For on-line services, that defendant had knowledge of and direct control over the knowledge of and direct control over the infringing activity. infringing activity.

Pirates and Protocols:Pirates and Protocols: Trademark Use and Protection on the Trademark Use and Protection on the InternetInternet

ISPs can be ISPs can be vicariously liablevicariously liable for for trademark infringementtrademark infringement

To establish vicarious liability, To establish vicarious liability, defendant and infringer must have defendant and infringer must have either:either:– a partnership, or authority to bind one a partnership, or authority to bind one

another; oranother; or– otherwise exercise joint ownership or otherwise exercise joint ownership or

control over the infringing product. control over the infringing product.


Contributory and Vicarious Liability Contributory and Vicarious Liability claims have generally failed against:claims have generally failed against:– Credit card companies. Credit card companies. see e.g., Perfect 10, see e.g., Perfect 10,

Inc. v. Visa Int’l Serv. Ass’nInc. v. Visa Int’l Serv. Ass’n, 2004 WL , 2004 WL 1773349 (N.D. Cal. Aug. 5, 2004);1773349 (N.D. Cal. Aug. 5, 2004);

– Search engines, Search engines, see, e.g., Newborn v. see, e.g., Newborn v. Yahoo, Inc.Yahoo, Inc., 391 F.Supp.2d 181 (D.D.C. , 391 F.Supp.2d 181 (D.D.C. 2005); and2005); and

– Domain name registrars, Domain name registrars, see, e.g., see, e.g., Lockheed Martin Corp. v. Network Lockheed Martin Corp. v. Network Solutions, Inc.Solutions, Inc., 194 F.3d 980 (9, 194 F.3d 980 (9thth Cir. 1999). Cir. 1999).


Secondary liability claims have Secondary liability claims have succeeded against ISPs on basis that succeeded against ISPs on basis that ISPs are analogous to brick-and-ISPs are analogous to brick-and-mortar “landlords” who are aware of, mortar “landlords” who are aware of, and benefit from, the infringer’s legal and benefit from, the infringer’s legal activitiesactivities– See, e.g., Gucci Am. V. Hall & AssocsSee, e.g., Gucci Am. V. Hall & Assocs., .,

135 F.Supp.2d 409 (S.D.N.Y. 2001)135 F.Supp.2d 409 (S.D.N.Y. 2001)


Recent Cases:Recent Cases:– Louis Vuitton Malletier SA v. Akanoc Solutions, Louis Vuitton Malletier SA v. Akanoc Solutions,

IncInc., 591 F.Supp.2d 1098 (ND Cal. Dec. 23, ., 591 F.Supp.2d 1098 (ND Cal. Dec. 23, 2008) (claims of ISP contributory and vicarious 2008) (claims of ISP contributory and vicarious liability survive motion for SJ)liability survive motion for SJ)

– Heartland Beef Inc. v. Lobel’s of New York LLC,Heartland Beef Inc. v. Lobel’s of New York LLC, (S.D. Tex. Feb. 5, 2009) 2009 WL 311087 (Yahoo (S.D. Tex. Feb. 5, 2009) 2009 WL 311087 (Yahoo not liable under LA for causing sponsored link to not liable under LA for causing sponsored link to trigger based on user-inputted term)trigger based on user-inputted term)

– Voyageurs du Monde, Terres d’Aventure v. Voyageurs du Monde, Terres d’Aventure v. Google,Google, (TGI Paris, Jan. 7, 2009) (Google liable (TGI Paris, Jan. 7, 2009) (Google liable for failing to establish means to verify for failing to establish means to verify advertisers had right to use ad words and failing advertisers had right to use ad words and failing to make clear that ad words were to make clear that ad words were advertisements)advertisements)


Using Marks on or in Web Using Marks on or in Web PagesPages

Risk of Liability arises from Risk of Liability arises from unauthorized use of other’s unauthorized use of other’s trademarks on:trademarks on: Web PagesWeb Pages HyperlinksHyperlinks MetatagsMetatags

Liability can arise from “initial Liability can arise from “initial interest confusion.”interest confusion.”


Recent Cases:Recent Cases:– BabyAge.com Inc. v. Leachco IncBabyAge.com Inc. v. Leachco Inc., 2009 WL ., 2009 WL

82552 (M.D. Pa. Jan. 12, 2009) (on-line company 82552 (M.D. Pa. Jan. 12, 2009) (on-line company may be liable for providing links to its products may be liable for providing links to its products on web page despite listing other company as on web page despite listing other company as “featured brand”)“featured brand”)

– Indiaweekly.com LLC v. Nehaflix.com IncIndiaweekly.com LLC v. Nehaflix.com Inc., 2009 ., 2009 WL 189867 (D. Conn. Jan. 27, 2009) (on-line use WL 189867 (D. Conn. Jan. 27, 2009) (on-line use of competitor’s tm on web site in order to appear of competitor’s tm on web site in order to appear in search engine hits states actionable claim in search engine hits states actionable claim under LA)under LA)


Recent Cases (cont.)Recent Cases (cont.)– Market America v. Optihealth Products, IncMarket America v. Optihealth Products, Inc., .,

2008 WL 5069802 (M.D. N.C. Nov. 21, 2008) (use 2008 WL 5069802 (M.D. N.C. Nov. 21, 2008) (use of competitor’s tm in metatags and as trigger for of competitor’s tm in metatags and as trigger for sponsored links constituted “use in commerce” sponsored links constituted “use in commerce” under LA)under LA)

– Suarez Corp. Indus. V. Earthwise Technologies, Suarez Corp. Indus. V. Earthwise Technologies, IncInc., 2008 WL 4934055 (W.D. Wash. Nov. 14, ., 2008 WL 4934055 (W.D. Wash. Nov. 14, 2008) (use of competitor’s tm in domain names 2008) (use of competitor’s tm in domain names and metatags likely caused confusion, despite and metatags likely caused confusion, despite disclaimer)disclaimer)


Domain NamesDomain Names Domain Names can be:Domain Names can be:

– Hijacked, see 15 U.S.C. Sec 1125(d) Hijacked, see 15 U.S.C. Sec 1125(d) (requires bad faith)(requires bad faith)

– Reverse Hijacked, Reverse Hijacked, seesee 15 U.S.C. sec. 15 U.S.C. sec. 1114(2)(D)(v) (mark must be 1114(2)(D)(v) (mark must be suspended, disabled or transferred)suspended, disabled or transferred)

– TastedTasted– KitedKited


Representative Domain Tasting Cases:Representative Domain Tasting Cases:– Neiman Marcus Group, Inc. v. Dotster, IncNeiman Marcus Group, Inc. v. Dotster, Inc., .,

C06-5292RBL (W.D.Wash. May 30, 2006)C06-5292RBL (W.D.Wash. May 30, 2006)– Neiman Marcus Group, Inc. v. Name.com, Neiman Marcus Group, Inc. v. Name.com,

LLCLLC, 07-CV-00525-WYD-BNB (D.Co. March , 07-CV-00525-WYD-BNB (D.Co. March 15, 2007)15, 2007)

– Dell, Inc. v. BelgiumDomains, LLCDell, Inc. v. BelgiumDomains, LLC, No. 07-, No. 07-22764 (S.D.Fla. Nov. 2, 2007) (PI granted 22764 (S.D.Fla. Nov. 2, 2007) (PI granted Nov. 20, 2007)Nov. 20, 2007)


Are domain names contract rights or Are domain names contract rights or property rights?property rights?

If property, where are domain names If property, where are domain names located for jurisdictional purposes?located for jurisdictional purposes?

Can domain names be seized or Can domain names be seized or forfeited?forfeited?

See Kentucky v. 141 Domain Names, See Kentucky v. 141 Domain Names, 08-CI-1409 (Ky Cir. Court, Oct. 16, 08-CI-1409 (Ky Cir. Court, Oct. 16, 2008), 2008), rev’drev’d No. 2008-CA-002000-OA No. 2008-CA-002000-OA (Ky. Ct. App. Jan 20, 2009).(Ky. Ct. App. Jan 20, 2009).


Personal JurisdictionPersonal Jurisdiction When does a web page create When does a web page create

minimum contacts with a particular minimum contacts with a particular state?state?– Passive vs. Interactive Websites: a sliding Passive vs. Interactive Websites: a sliding

scalescale– Interactively, however, may be Interactively, however, may be

insufficient: still need “purposeful insufficient: still need “purposeful availment”availment”

– Also, economic harm to in-state plaintiff Also, economic harm to in-state plaintiff may satisfy state long-arm statutes.may satisfy state long-arm statutes.


Recent Cases:Recent Cases:– Portfolio Solutions LLC v. ETF Portfolio Portfolio Solutions LLC v. ETF Portfolio

Solutions, IncSolutions, Inc., 2009 WL 111908 (E.D. ., 2009 WL 111908 (E.D. Mich. Jan. 15, 2009) (web site was basis Mich. Jan. 15, 2009) (web site was basis for jurisdiction under federal and Michigan for jurisdiction under federal and Michigan law)law)

– Chanel, Inc. v. Guetae,Chanel, Inc. v. Guetae, 2009 WL 2009 WL 348501(D.N.J. Feb. 11, 2009) (“highly 348501(D.N.J. Feb. 11, 2009) (“highly interactive” web site insufficient basis for interactive” web site insufficient basis for jurisdiction absent purposeful availment)jurisdiction absent purposeful availment)


Recent Cases (cont.)Recent Cases (cont.)– Kruska v. Perverted Justice Foundations, IncKruska v. Perverted Justice Foundations, Inc., .,

2009 WL 577708 (D. Ariz. Feb. 2, 2009) 2009 WL 577708 (D. Ariz. Feb. 2, 2009) (registration of domain name in AZ and (registration of domain name in AZ and location of server in AZ insufficient to establish location of server in AZ insufficient to establish personal jurisdiction over defendant)personal jurisdiction over defendant)

– Family Watchdog LLC v. Schweiss, Family Watchdog LLC v. Schweiss, 2009 WL 2009 WL 276856 (S.D. Ind. Feb. 5, 2009) (interactivity of 276856 (S.D. Ind. Feb. 5, 2009) (interactivity of web site insufficient by itself: there needs to be web site insufficient by itself: there needs to be nexus between website and cause of action)nexus between website and cause of action)


Virtual Trademarks:Virtual Trademarks:The Fight over SLARTThe Fight over SLART

The Lanham Act protects trademarks The Lanham Act protects trademarks created and used in virtual worlds created and used in virtual worlds against real and virtual infringement.against real and virtual infringement. Minsky v. Linden ResearchMinsky v. Linden Research (N.D.N.Y. (N.D.N.Y.

2008) 2008) What about protecting real world What about protecting real world

trademarks in virtual worlds?trademarks in virtual worlds?


Pirates and Protocols: Pirates and Protocols: Trademark Use and Protection on the Trademark Use and Protection on the

Internet Internet

Thank you to our speakers:Thank you to our speakers:Mark Fiore Mark Fiore [email protected]

Heather Greenberg Heather Greenberg [email protected]

Jonathan Sirota Jonathan Sirota [email protected]

Mitchell SteinMitchell Stein [email protected]

Kevin Taylor Kevin Taylor [email protected]

Erik Walsh Erik Walsh [email protected]

pirates and protocols: trademark use and protection on the internet wednesday, march 18, 2009 7:00...

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