Hotel Internet Marketers Beware: Pop-up And Keyword Advertising Threaten Your On-line Brand| By Peter M. Ripin
If your competitor sends a pop-up advertisement for his competing hotel brand to your hotel’s website or uses your company’s trademark for keyword advertising, is this an unscrupulous and deceptive business tactic or simply good marketing? Studies have shown that pop-up advertising is viewed by many people as among the most intrusive and/or obnoxious features on the Internet. However, it is also considered one of the most effective and profitable advertising techniques. In fact, a recently published report stated that a number of our most prominent companies were now using popup ads to target their competitors’ websites including Best Western whose ads appeared on 208 other sites including those of Comfort Inn and Day’s Inn; Thrifty Rent A Car whose ads were aimed at Dollar-Rent-A-Car and Enterprise Rent-A-Car and Verizon DSL whose ads were triggered by visits to the sites of broadband provider competitors.
While there have been a number of legal challenges to both types of advertising resulting in some important recent lower court decisions, this is still very much an unsettled and evolving area of the law. In the very first decision in this area, the Washington Post Newsweek Interactive Company obtained a preliminary injunction against Gator (now known as Claria), a pop-up advertising company. Thereafter, however, the next couple of decisions represented victories for the pop-up advertising companies, WhenU.com and Gator. In the first case which was decided last year, a federal judge in Virginia dismissed a lawsuit by U-Haul which argued that WhenU’s SaveNow pop-up program infringed U-Haul’s copyrights and trademarks by sending its competitors’ pop-up ads to U-Haul’s website. Although the court acknowledged that the average computer user who accessed U-Haul’s website would not expect to find a pop-up ad from U-Haul’s competitor on the website, the court nevertheless dismissed the lawsuit because it found that the computer user had made a “conscious decision to install the WhenU program [which generated these ads]”; that WhenU’s pop-up window was separate and distinct from U-Haul’s website; and that the incorporation by WhenU of the U-Haul URL in the SaveNow directory in order to generate competitor’s pop-up ads was not an illegal use of a trademark because WhenU merely used the marks for a “pure machine linking function” and in no way advertised or promoted U-Haul’s web address or any other U-Haul trademark.
In the next case, a federal judge in Michigan denied Wells Fargo’s request for a preliminary injunction against WhenU after concluding that Wells Fargo was unlikely to prevail on its claims of copyright and trademark infringement. The court held that WhenU did not use Wells Fargo’s trademark per se in its advertising since the pop-up ads did not display those trademarks. In addition, the court held that there was no trademark infringement because WhenU only used the mark in its directory to determine what advertisements to display for consumers and did not hinder access to Wells Fargo’s website. Thereafter, two Internet retailers, Overstock.com and TigerDirect.com voluntarily withdrew lawsuits against WhenU.
It certainly seemed like WhenU was on a roll until a decision which came down right here in New York around last Christmas. In this case, a contact lens retailer named 1-800 Contacts brought a lawsuit against WhenU after it sent pop-up ads for Vision Direct, a direct competitor of 1-800 Contacts to the 1-800 Contacts website. This time the Court granted a preliminary injunction to 1-800 Contacts after concluding that it was likely to succeed on its trademark infringement claims because there was a strong likelihood of customer confusion arising from the appearance of the pop-ups. The judge’s opinion stated:
The fact that Defendants’ pop-up advertisement for competing Internet contact lenses retailers appears shortly after a consumer types into the browser bar [1-800 Contacts’] trademarked name and accesses [its] homepage increases the likelihood that a consumer might assume Defendants’ pop-up advertisements are endorsed or licensed by 1-800 Contacts.
The judge also took note of a survey undertaken by an expert hired by 1-800 Contacts which showed that 68% of WhenU’s Savenow users did not know they had the software installed on their computers and that 76% of those who did know did not know what the software did. In addition, the survey found that 59% of Savenow users believed that pop-up ads were placed on sites by the site’s owners and 52% believed such ads were pre-screened and approved by the websites on which they appeared. The survey results indicated to the Judge that “a consumer is likely to associate a Vision Direct pop-up ad generated by the Savenow program with the 1-800 Contacts websites on which it appeared”. Finally, the judge also found that the use by WhenU of 1-800 Contacts.com as a term in the SaveNow directory triggering Vision Direct pop-ups added to the likelihood of customer confusion and trademark infringement.
Even though the facts were practically identical to the facts in the U-Haul and Wells Fargo cases, the judge in the 1-800 Contacts case reached exactly the opposite conclusion of the other two judges. Since the 1-800 Contacts case has been appealed to the United States Court of Appeals for the Second Circuit, we should have a more authoritative decision on this issue shortly.
Earlier this year, there were two significant decisions rendered on the topic of keyword advertising. In the first case, Playboy sued Netscape Communications for selling advertisers the use of the trademarked terms “playboy” and “playmate” to generate banner ads on the search engine’s web site. Playboy claimed that consumers who saw clearly unlabeled ads were likely to be confused about whether Playboy had sponsored them. The lower court dismissed the case which led many people to believe that the sale of trademarks in keyword packages was not a trademark violation.
However, the United States Court of Appeals for the Ninth Circuit reversed this decision saying that the keyword advertising could lead to “initial interest confusion” because some consumers who were seeking Playboy’s site may initially believe that unlabeled banner ads were linked or affiliated with Playboy. The court said that although the consumers who clicked on these ads might thereafter realize that they were not at a Playboy sponsored site, they might nevertheless be perfectly happy to remain on the competitors’ site and purchase their product. The court concluded that since the consumer would have reached the competitor’s site because of Netscape’s use of Playboy’s mark, this use could constitute trademark infringement. As a result, the Court of Appeals reversed the lower court’s decision and sent the case back down for a trial.
Shortly thereafter, Netscape settled with Playboy for an undisclosed amount rather than risk putting a fundamental part of its business model at risk. However, it’s important to note that the Court’s decision was a limited one which only addressed ads that would be confusing to the consumer and did not address the broader issue of the mere use of trademarked keywords. In other words, the court did not address a situation where a banner ad clearly identified its source with its sponsor’s name or which overtly compared Playboy’s products to a competitor’s by saying for example if you’re interested in Playboy, you may also be interested in the following. Instead, the court limited its holding to competitors’ banner ads which were unlabeled and which did not overtly compare themselves to Playboy.
While Google had originally gone out of its way to comply with trademark owners who requested that the company stop using trademarked words to sell ads, earlier this year it changed its policy and said that it would allow advertisers to base their ads on trademarked keywords. At about this same time, Google and Overture were sued by GEICO based upon a similar set of facts as in the Playboy case. Most recently, the federal district court in Virginia issued a decision denying Google’s motion to dismiss the lawsuit. In rendering its decision, the court considered all of the cases which we’ve previously discussed, the U-Haul and Wells Fargo cases on the one hand, and the 1-800 Contacts and Playboy cases, on the other, and came down on the side of 1-800 Contacts and Playboy on the grounds that these cases were better reasoned. As a result, the court concluded that the complaint was sufficient to state a claim for unlawful trademark use.
For the moment at least, it certainly seems like the legal tide has turned against the pop-up and keyword advertising companies. A few weeks ago, Claria announced that it was postponing its initial public offering in the face of numerous lawsuits concerning its pop-up advertising including a decision by a European court earlier this year which issued a preliminary injunction prohibiting Claria from sending pop-up ads to a German rental car company. Google is currently involved in a lawsuit with a home furnishing company called American Blind and Wallpaper Factory which claims that when customers search Google for “American” and “blind” or “wallpaper”, Google wrongfully delivers the names and links to American Blind’s competitors. Since these terms are generic in most contexts, this case may help to decide just how broadly or narrowly a court will define trademark infringement in the context of keyword advertising.
With conflicting lower court decisions and an important appeal pending, it is obvious that we have not yet received our “final answer” from the courts on these issues. Stay tuned.
- U-Haul International Inc. v. WhenU.com, 279 F.Supp. 723 (E.D. Va. 2003).
- Wells Fargo & Co. v. WhenU.com, Inc., 293 F.Supp.2d 734 (E.D. Mich. 2003).
- 1-800 Contacts, Inc. v. WhenU.com, 309 F.Supp.2d 467 (S.D.N.Y. 2003).
- Playboy Enterprises Inc. v. Netscape Communications Corporation, 354 F.3d 1020 (9th Cir. 2004).
- Government Employees Insurance Company v. Google, Inc., 2004 WL 1977700 (E.D. Va. 2004).
Peter M. Ripin
(212) 557-7200
Davidoff Malito & Hutcher LLP
