|Pop-up Advertisement Litigation
New Jersey Law Journal July 19, 2004 Copyright 2004 ALM Properties, Inc. All Rights Reserved.
BYLINE: By 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].
Pop-up advertisements spontaneously appear on a personal computer screen
when an Internet user is accessing the Internet. Currently, there is
no effective regulation of pop-up ads. Until regulations are imposed,
civil litigation is the most viable option to stop pop-up ads from invading
the privacy of unknowing and unwilling Internet users.
Three parties are involved in pop-up advertising: the Internet user, the ad server firm and the advertiser. The ad server firm embeds "adware" in the Internet user's computer, and then sells "advertising space" to the advertiser. The advertising space appears on an Internet user's computer.
"Adware" or "spyware" is software unknowingly uploaded by Internet users. The software stays in the Internet user's computer, tracking Internet usage and sending data back to an ad server. The ad server then sends pop-up ads to the Internet user's screen, which are superimposed on all existing content.
"Trojan Horse" software is the most common method used to install adware on an Internet user's computer. Trojan Horse software disguises its true purpose from the Internet user. For example, the software may be described as free music software.
The frequency of a pop-up advertisement is normally a function of the agreement between the ad server firm and the advertiser. One popular agreement is known as a "hijacking" campaign. Hijacking is when one business purchases its competitors' trade names as keywords. For instance, when users went to McDonalds.com, a pop-up ad for BurgerKing.com appeared on the screen.
Pop-up ads cause six legal difficulties for the owner of the Internet site associated with a pop-up ad. First, pop-up ads create a false impression that the pop-up ads originated with the owner's site. Second, pop-up ads give Internet users the false perception that the pop-up ads operate in conjunction, rather than in competition, with the owner's Web site. Third, pop-up ads interfere with or obliterate the owner's right to determine the companies, messages, and causes that can be advertised on the Web site. Fourth, pop-up advertisements obstruct and interrupt the owner's Web site content. Fifth, pop-up ads undercut the owner's ability to maintain a specific frequency of advertising that appears on the Web site. Sixth, pop-up ads may have a negative effect on the owner's reputation.
Site owners have nine possible causes of action against the purveyors
of pop-up ads: trademark infringement, unfair competition, trademark
dilution, copyright infringement, contributory copyright infringement,
content misappropriation, interference with prospective economic advantage,
unjust enrichment, and violation of state consumer protection statutes.
In August 2002, a United States District Court in Alexandria, Va. enjoined the Gator Corporation from running their ad server and adware. Washingtonpost.Newsweek Interactive Co. v. Gator Corp., No. 02-909-A [E.D. Va. July 16, 2002]. The plaintiffs' motion to enjoin Gator's activities rested entirely on intellectual property law.
The Gator Corporation [now renamed Claria Corporation] offered Internet software and content in exchange for the right to show highly targeted advertising based on consumers' anonymous surfing behavior. The plaintiffs alleged that Gator was making money and free riding off of their business by "placing advertisements for third parties on the plaintiffs' web sites without plaintiffs' authorization." As an example, plaintiffs' complaint contained a printout of Concierge.com's Web site covered in part by a Travelocity.com pop-up advertisement. Travelocity.com and Concierge.com, one of the plaintiffs, are direct competitors in the e-travel business.
The Gator plaintiffs claimed the pop-up windows infringed on their registered trademark rights under Section 32 of the Lanham Act. Section 32 gives registered trademark holders a cause of action against " ... any person who shall, without the consent of the registrant use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ... "
Gator stated that it did not "use" plaintiffs' marks in commerce by inserting pop-up ads into the plaintiffs' Web pages. According to Gator, the advertisements "reside only on its users' computers and are sequentially displayed in stand-alone windows separate and apart from any browser window displaying plaintiffs' Web sites."
The plaintiffs' argument was supported by the distinct advertisement doctrine. Under the doctrine, a fact-finder evaluates two or more proximate advertisements and determines whether a reasonable person would conclude that their content came from the same source or entity. In the case of pop-up ads, an unlawful trade practice arises when a pop-up ad is so closely associated with another's content in time and location as to be perceived as part of the other's content. The Gator court viewed the pop-up ad and the unrelated content as a distinct advertisement, and found that the Gator advertisement host server "used" the plaintiffs' registered marks in commerce.
In trademark infringement suits, the plaintiff must prove the likelihood of consumer confusion. In Gator, the plaintiffs claimed that the instant concurrence of the pop-up ads and plaintiffs' marks caused consumers to believe that the plaintiffs were somehow affiliated with the pop-up advertisers. The unauthorized use of another's trademark to lure consumers can create what is called initial interest confusion.
In a similar case, Home Box Office, Inc. v. Showtime/Movie Channel, Inc., 832 F.2d 1311 [2d Cir. 1987], the Second U.S. Circuit Court of Appeals found Showtime's ads could mislead and confuse consumers. The ads, which ran at a national cable programming convention, simultaneously showed both Showtime's and HBO's marks.
Unfair competition was another element of the Gator plaintiffs' complaint. The federal unfair competition statute prohibits the use of "any word, term, name, symbol, or device, or any combination thereof ... which is likely to cause confusion ... as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." 15 U.S.C. 1125[a] . Under the distinct advertisement doctrine, the pop-up advertisement's proximity to another's content will result in a finding of unfair competition.
Unfair competition may be based on a trade dress complaint. Trade dress refers generally to the image of a product, particularly its source identifiers such as packaging color combinations, wrapping and dimensional features. In the case of a pop-up ad, the entire trade dress of another's product is incorporated into the display area where the pop-up ad appears. The Internet viewer may erroneously couple another's trade dress with a pop-up advertisement. Once more it should be noted that this outcome depends upon the acceptance of the distinct advertisement doctrine.
Dilution was another cause of action - rooted in unfair competition - raised by the Gator plaintiffs. Trademark dilution is the continuing destruction of a mark by virtue of its use on noncompeting goods. Because pop-up advertising is novel to the law, the plaintiffs' grievances raise a novel issue: whether adware schemes can fit into the tarnishment or blurring theory of dilution.
Tarnishment occurs where a famous mark is associated with another product or context that is debasing and distasteful. The damage that occurs is best described as the resulting inability of consumers to dissociate such offensive images or contexts from the mark holder's business. Blurring is the diminished capacity of a famous mark to identify and distinguish goods or services due to another's use of the mark.
The Gator plaintiffs attempted to establish a prima facie case for trademark dilution under Section 43[c], arguing Gator's commercial exploitation of its marks blurred consumers' ability to recognize the plaintiffs as the suppliers of certain goods and services. Furthermore, the plaintiffs claimed that the nature of certain of Gator Corp.'s advertisers and pop-up ads tarnished their goodwill in several ways. First, the plaintiffs argued that the pop-up ads undermined their ability to control the content that appears on their own Web site. This allowed Gator to alter the "look and feel" of the plaintiffs' Web site product. Second, plaintiffs argued that they had lost control over the frequency of pop-up ads. This, they argued, disparaged their goodwill because pop-up ads are annoying to consumers.
Free speech defense
Gator argued that an injunction would violate its First Amendment rights. In 1980, the Supreme Court held that commercial speech has limited protection under the First Amendment. Central Hudson Gas & Electric Corp. v. Commission of New York, 447 U.S. 557 . The court found that as a threshold requirement, however, the speech couldn't be misleading or promote an unlawful activity. As a consequence, if a pop-up advertisement is likely to confuse consumers as to association, authorization, or sponsorship, the First Amendment protects neither the ad server host nor the advertiser.
Fair use defense
Both the FTDA and Section 33[b] of the Lanham Act provide defendants with a "fair use" defense. Based on common and case law, courts have broken down the fair use defense into two categories: classic fair use, and nominal fair use [comparative advertising].
Classic fair use defense applies only to marks that possess both a primary meaning and a secondary meaning - and only when the mark is used in its primary descriptive sense rather than its secondary trademark sense. In a recent Ninth Circuit case, Brother Records Inc., which was responsible for the Beach Boys' intellectual property rights, objected to Beach Boy member Alan Jardine's use of the name Beach Boys. Brother Records, Inc. v. Jardine, 318 F.3d 900 [9th Cir. 2003]. According to the court, the fair use defense failed because Jardine tried to use the Beach Boys mark for its secondary meaning [the musical band] and not for the mark's primary, descriptive meaning.
It is expected that pop-up advertisers will not be allowed to use the classic fair use defense because the defendant cannot manipulate the content of plaintiff's underlying Internet site to exhibit the plaintiff's mark in a descriptive way. Therefore, when the defendant's pop-up advertisement window appears together with the plaintiff's mark, the defendant is using the plaintiff's mark in its secondary sense.
Nominal fair use is where the defendant's use of the trademark is not for identification purposes, but rather for a secondary purpose in a trademark sense. The most common use is for comparative advertising. To establish the nominative fair use defense, the defendant has the burden of proving three items. First, the product or service in question is not readily identifiable without use of the trademark. Second, only so much of the mark or marks is used as is reasonably necessary to identify the product or service. Third, the user has done nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder. The court rejected Jardine's argument that the use of the Beach Boys' mark was nominal fair use, finding he had failed to prove any of the three items.
It is unlikely pop-up ad defendants will have any more success with the nominative fair use defense. First, in the case of pop-up ads, the plaintiffs' products and services most likely cannot be identified without making reference to the mark. A competitor of a pop-up ad plaintiff could not specifically identify the good or service simply by referring to a product category, and thus is likely to infringe on the plaintiff's mark. Second, under the single advertisement view, the pop-up ad server has little control over how much of a plaintiff's mark they use. Third, the ad host server must prove that use of the marks on the underlying Web site does not suggest sponsorship, authorization or endorsement by the mark-holder. The outcome of this requirement is difficult to predict because it is based on the facts of each case.