New Jersey Law Journal June 13, 2005

Copyright 2005 ALM Properties, Inc.

All Rights Reserved

HEADLINE: Trademark Law Shapes Internet Pop-up Ads;

Trademark infringement actions may get Internet advertisers to change their business methods

BYLINE: Jonathan Bick;    Bick is of counsel to WolfBlock Brach Eichler of Roseland and is an adjunct professor of Internet law at Pace Law School and Rutgers Law School. He is also the author of 101 Things You Need To Know About Internet Law [Random House 2000].

BODY:

Despite their negative public images, Internet pop-up ads and unsolicited commercial e-mail (spam) have transfigured marketing. Like spam, Internet pop-ups can be lawful if they are not deceptive.

Trademark infringement may be the only cause of action that succeeds in getting Internet pop-up advertisers to change their business methods. While the court in 1-800 Contacts, Inc. v. WhenU.com, Inc., 309 F.Supp.2d 467 (S.D.N.Y. 2003), granted a preliminary injunction for trademark infringement, the courts in both Wells Fargo & Co. v. WhenU.com, Inc., 293 F.Supp.2d 734 (E.D. Mich. 2003); U-Haul Int'l, Inc. v. WhenU.com, Inc., 279 F.Supp.2d 723 (E.D. Va. 2003), declined to apply trademark law. Thus, the application of existing trademark law to Internet pop-ups is in the midst of shaping Internet pop-up advertisement.

Pop-up ads are advertisements that appear on an Internet user's computer while the Internet user surfs the Internet. Internet pop-ups are normally generated by the host Web site without the user's consent, as when the user visits an Internet pop-up trigger page.

While both are disliked by the public, Internet pop-ups, unlike spam, generally rely on an opt in, or Internet user's consent model. Normally, the Internet sites which use pop-ups notify the Internet visitors that they will receive pop-up ads as part of the Internet sites' terms of use agreement. Alternatively, Internet users receive proprietary software in exchange for their consent to receive pop-up ads.

Pop-up Internet ads are more effective than spam on a per ad basis. Spam is by and large sent to a recipient merely because the recipient is an Internet user. Thus, spam marketing tends to be random and unfocused. Internet pop-up ads are sent to Internet users because of a prior Internet behavior. Thus, Internet pop-up marketing tends to be targeted and focused. For example, if an Internet user visits an Internet site associated with buying a car, then such a user might be a target for new car insurance pop-up advertisements.

Those displeased by the receipt of Internet pop-up advertisements have tried to limit the use of this marketing tool through numerous causes of action. Recipients of Internet pop-ups have claimed that the senders have engaged in copyright infringement, contributory infringement, trademark dilution, unfair competition, and/or state law violations. Lawsuits also asserted various other causes of actions, with little success. In one case, a pop-up advertiser was accused of nine unlawful acts, including copyright infringement, misappropriation, interference with a prospective business advantage, unjust enrichment and violations of the Virginia Conspiracy Act trademark, as well as infringement, unfair competition and trademark dilution under the Lanham Act. In that case, all counts were dismissed except for the trademark count.

The most successful cause of action aimed at limiting Internet pop-up advertisements thus far has been trademark infringement. However, even this attempt to shape Internet pop-up advertisements has not been conclusive. In particular, courts are divided with respect to the application of trademark law to pop-up ads. Three district courts considered the matter of whether WhenU's pop-up ads violate trademark law. Two district courts found WhenU's action to be lawful and one issued a preliminary injunction for trademark infringement.

The Lanham Act, 15 U.S.C. 1051-1141 (2000), protects trademarks used in commerce. This act is designed to prevent consumer confusion. In particular, a party alleging trademark infringement bears the burden of proving that it possesses a mark, the mark was used unlawfully in connection with the sale and the mark's use is likely to confuse consumers.

Either directly or indirectly, all the federal circuits recognize a cause of action where one party uses another party's trademark without permission to lure away consumers. The courts found that Congress's elimination of the phrase "purchasers" from the Lanham Act, implied that Congress intended to expand trademark shelter to presale and post-sale confusion.

As in the case of traditional trademark matters, likelihood of confusion is the most crucial aspect of the Internet cases. When courts apply the likelihood of confusion factors for Internet pop-up trademark related cases, courts examine the existence of disclaimers and branding, as they do in traditional trademark matters.

In the Wells Fargo, 1-800 Contacts and U-Haul cases, the courts considered the likelihood of confusion as the underpinning of trademark infringement. The actions were brought due to the fact that courts have found the revised Lanham Act's language sufficiently broad to permit applying the statute to Internet uses of trademarks.

The plaintiffs in each of the aforementioned cases presented similar rationales. Each argued that the defendants used the mark by hindering Internet users from access to the plaintiffs' Web sites by positioning the pop-up ads in close proximity to the plaintiffs' Web sites and by using their marks to trigger pop-up ads. The courts separately examined each activity that might constitute a use in commerce. In U-Haul, the court reasoned that the pop-up advertisements, which appeared in a separate window from the owner's Web site, did not "use" the owner's trademarks. In the Wells Fargo matter, the trademark use in dispute was found not to be a trademark use, because WhenU did not display the mark in pop-up ads. In short, the courts in both U-Haul and Wells Fargo cases used facts associated with all the pop-ups at issue to circumvent the case-by-case determination that the likelihood of confusion analysis would require.

The 1-800 Contacts court took a different approach and found a different result than the U-Haul and Wells Fargo courts. The 1-800 Contacts court found that the similarity between plaintiff's and defendant's mark was great because the plaintiff's mark was incorporated so completely into the defendant's mark. The only difference between the marks was the omission of spaces and grammatical marks, and in the addition of the www and .com.

In traditional cases, this analysis is appropriate. In Internet pop-up advertisement cases, this analysis may not be appropriate, in light of the fact that the potentially infringing mark does not appear on the pop-up ad itself -- it is hidden in the directory or appears in a separate window. Thus, the court's finding that the mark used by the defendants was "extremely similar" to the plaintiff's mark is not very relevant.

In fact, the similarity of the marks did not cause confusion. Rather, it is the circumstances surrounding the use of a similar mark that might cause confusion. There is no evidence that an Internet user was confused into believing that the pop-up ads originated from the Web site they were visiting. Additionally, the 1-800 Contacts court failed to consider a clear disclaimer set forth in the software licensing agreement -- agreed to by the Internet users -- which gave rise to the Internet pop-ups to begin with. In short, if the 1-800 Contacts decision is widely adopted, the case could reshape Internet pop-up advertising -- making branding and disclaimers irrelevant for Internet pop-up advertising protection.

It is also possible that courts will instead implement the doctrine set forth in the Wells Fargo case: that some confusion is acceptable. The Wells Fargo court pointed out that WhenU was engaged in legitimate comparative advertising. It stated that in accusing WhenU of "free riding" on their trademarks, plaintiffs ignore the fact that trademark laws are concerned with source identification. They are not meant to protect consumer good will created through extensive, skillful and costly advertising. If this doctrine is widely adopted, then trademark law will have shaped Internet pop-up advertising by promoting free-riding, which is generally discouraged by trademark law when applied to traditional marketing.