hot internet topics

INTERNATIONAL TRADEMARK ASSOCIATION

Hot Internet Topics

Sheldon H. Klein - Arent Fox PLLC (Moderator)

Mark Kudlacik – CheckMark Network

Michael Kwun – Google Inc.

Charles D. Ossola – Arnold & Porter LLP

Mike Rodenbaugh – Yahoo! Inc.

INTERNATIONAL TRADEMARK ASSOCIATION2

Hot Internet Topics

• Business Facts That Drive The Law

• Schemes Affecting Search Engine Results & Consequences for Trademark Owners

• Trademarks As Keywords For Paid Results

• Defenses: First Amendment, Fair Use & Nominative Use (Gripe Sites, Comparative Advertising)


Topic A: Business Facts ThatDrive the Law

• We are talking about real money– Total U.S. Ad Spending in 2005

• $145 Billion

– Online advertising in 2005 • $12 billion industry• 30% increase from 2004 ($9 Billion)• $23 to $55 Billion by 2010

– 84% of advertisers anticipate increased online advertising in 2006


Business Facts That Drive the Law

• Where is most of this money being spent?– Keyword Advertising

• Google reported gross revenue of 2.25 Billion for Q1 2006• Yahoo! reported gross revenue of 1.38 Billion for Q1 2006

– (this includes other services beyond advertising)

• Why keyword advertising?– U.S. Consumer Media Time

• TV—51%• Radio—23%• Internet—15%

– Internet advertising allows for very targeted advertising. Ads match search request


Intrinsic/Native Search resultsThe results for your search term as ranked by the search algorithms. Search engines state that advertising has no impact on search results.

Some basic definitions

Sponsored Links

Native Search

Sponsored Results/Keyword AdThese are ads triggered by your search term. They are displayed in prominent positions on the search results page


Some basic definitions

Sponsored Links

Native Search


What is PPC?• Pay Per Click Advertising

– These sites often look as if they are search engine results, but are nothing more than links to ads on Yahoo! or Google.

– Website owners are paid by Google or Yahoo! for displaying Google or Yahoo! ads on their websites.


What is PPC?


More about PPC• 2 ways people reach PPC sites

– Type in traffic. e.g. torontorealestate.com– Intrinsic reach results

• Typically, the only links PPC sites display are advertisements, even though they look like ‘real’ search engine results

• Every time someone clicks on one of these links, the domain owner gets paid– The domain owner (domainer) gets a percentage of

what the advertiser pays the search engine.


Why these PPC sites exist• These sites generate large profits for their

owners and foster continued domain registrations.

• Partner sites generated 928 Million or roughly 41% of all Google revenue in Q1

• Marchex purchased 100,000 domain names for $160 Million in 2005

• Buy Domains was sold for $80 Million


How PPC Impacts TM Owners

XYZ Co. Marketing Dept decides to use

keywords

XYZ Co. pays Yahoo!/Google/MSN $$

for high placement

PPC website owners recognize XYZ Co. pays a high $, so they feature XYZ

Co ads.

The PPC website owner registers more domain

names with XYZ to drive more PPC revenue

The XYZ Co. legal dept notices that many more typo

squatting or infringing domain

names are registered

The XYZ Co. legal dept bills their marketing dept

for the domain enforcement



• Over 50% increase in domain registrations from Oct 2004 to

Dec 2005

• Nearly a 100% increase from Oct 2002 to Dec 2005

Growth of gTLD registrations

0

10,000,000

20,000,000

30,000,000

40,000,000

50,000,000

60,000,000

1/1/2000 1/1/2001 1/1/2002 10/1/2002 10/1/2004 12/1/2005



• Domain Name ‘Taste Testing’– Domain registrations appear for a few days

only to disappear.• Some Domainers register 10,000+ names a week• They will track how much traffic (revenue) that

name generates• They will keep the names that are profitable, and

cancel the registrations of the other– 5 Day cancellation provision for registrars


Topic B: Schemes Affecting Search Engine Results & Consequences for Trademark

Owners

• PPC ‘sponsored’ search results vs. ‘native’ results of free web crawl.

• PPC models constantly evolving, new emphasis on ‘personalized’ search results.


Schemes Affecting Search Engine Results & Consequences for Trademark Owners

• How do search engines rank “native” website search results?

– Many factors -- proprietary algorithms decide “relevance” of each indexed site to every query.

– Content of the site is key; engines provide guidance to webmasters to make sites easier to index.

– Unlabeled paid results (“paid inclusion”) allowed?

– Manipulative techniques are punished when discovered.



• Common ways website operators attempt to manipulate rank:

– Keyword stuffing in metatags or text

– Link Farms

– Cloaking



• Law on use of others’ trademarks as metatags

– Ordinarily, use of a mark in metatags is permissible if it appropriately relates to the content of a website (fair use).

– However, this may not apply to the practice of repeating a term numerous times in metatags.

– Metatags no longer affect search results to a significant degree.



• Search engine spam – computer generated pages used to generate PPC advertising revenue.

• Big, growing business that has spawned the ‘domain testing’ problem for registrars and TM owners.

• Generally is not valuable content for users, and engines will remove or will lower ranking below ‘original’ sites.

• Both Yahoo! and Google have policies to take TM infringements out of their parked page programs.



• Are search engines successfully countering the methods used to manipulate results?

• Domain testing/monetization is the latest new business model, showing growing sophistication of the ‘domainers’.


Topic C: Trademarks As Keywords For Paid Results And Advertising In Search Engines

• Current search engine policies re trademarks

– Summary of keyword ad programs– Allow use of or prescreen for trademarks as

keywords?– Suggest use of trademarks as keywords?– Reactions to complaints by trademark owners


Trademarks As Keywords For Paid Results And Advertising In Search Engines

• Does the sale and use of trademarks as keywords violate U.S. trademark law?

– An improper attempt to profit from the good will of others’ trademarks? Or…

– Not commercial (trademark) “use” and therefore no infringement ?

– Even if “use,” is there a likelihood of confusion?



• Requirement for commercial (trademark) use by an infringer stems from Lanham Act, Sec. 32(1):

“Any person who shall, without the consent of the registrant – (a) 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…(b)…shall be liable in a civil action by the registrant for the remedies hereinafter provided...”



• Requirement for commercial (trademark) use by an infringer may also stem from Lanham Act, Sec. 45:

“… a mark shall be deemed to be in use in commerce … on goods when … it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and … the goods are sold or transported in commerce, and … on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce …”



• Key cases have lead to differing rulings:– Merck & Co. v. Mediplan Health Consulting,

Inc. (S.D.N.Y. 2006)– Edina Realty v. Themlsonline.com (D. Minn.

2006)– Google v. American Blind and Wallpaper

Factory (N.D. Cal. 2005) (still pending)– GEICO v. Google (E.D. Va. 2004 & 2005)



• Analogy to pop-up ad cases:– Courts have held that use of others’

trademark to trigger ads is not commercial “use” of a trademark:

• 1-800 Contacts, Inc. v. WhenU.com, Inc. (2d Cir. 2005)

• Wells Fargo & Co. v. WhenU.com, Inc. (E.D. Mich. 2003)

• U-Haul Int’l., Inc. v. WhenU.com, Inc. (E.D. Va. 2003)



• Should there be a distinction between keyword ads that include the trademark in the body of the ad and those that do not?

• See Geico v. Google, Inc., 2005 WL 1903128 (E.D. Va. Aug. 8, 2005) (finding a likelihood of confusion only when trademark appears in heading or text of the ad)



• Likelihood of Confusion Theory– Initial interest confusion: consumers

mistakenly believe that a sponsored listing triggered by a trademark search term is sponsored or affiliated by the trademark owner and click on the sponsored link based upon that belief.



• Under this theory, it is irrelevant whether the consumer remains confused after he opens the landing page on the sponsored link. The initial confusion occurred before he or she clicks on the sponsored link and it is not “cured” if that confusion is later dispelled.



• Leading initial interest confusion cases are Playboy Enter., Inc. v. Netscape Comm. Corp., 354 F.3d 1020 (9th Cir. 2004) and Brookfield Comm., Inc. v. West Coast Entm’t Corp., 174 F.3d 1036 (9th Cir. 1999). But see the Fourth Circuit’s apparent skepticism about this doctrine expressed in Lamparello v. Falwell, 420 F.3d 309, 316-17 (4th Cir. 2005).



• Dilution Theory– Likelihood of confusion irrelevant.– Theory: “Blurring” of distinctiveness of the

mark as associated exclusively with trademark owner’s goods or services occurs as a result of sponsored listings triggered off of the trademark when used as a search term.



– Proving dilution in court, whether under the federal dilution statute or state statutes, is challenging, especially in Internet context

– The Trademark Dilution Revision Act of 2006, HR 683, requires only “likelihood of dilution,” nullifying the Supreme Court’s 2003 ruling in Moseley v. V Secret Catalogue, Inc.

– But…the Senate version of the bill (passed March 8, 2006) contains a more broadly defined fair use exemption than the House version, expressly excluding:



“(A) Any fair use, including a nominative or descriptive fair use, or facilitation of such fair use, of a famous mark by another person other than as a designation of source for the person’s own goods or services, including use in connection with(i) advertising or promotion that permits consumers to compare goods or services; or(ii) identifying and parodying, criticizing, or commenting upon the famous mark owner or the goods or services of the famous mark owner.

(B) All forms of news reporting and news commentary.(C) Any noncommercial use of a mark.”



• Contributory Infringement– An untested theory as applied to search

engines and paid listings.– Requires direct infringement by someone

(advertiser?).– Requires knowledge or inducement of

infringing activity.



– Theory: In establishing and administering a paid advertising program based in part on trademarks triggering sponsored listings, search engines are contributorily liable for advertisers’ infringement.



• Non-U.S. cases:– Germany – not infringement:

• Metaspinner Media v. Google• Nemetschek AG v. Google

– Austria – not infringement:• Longevity Health Products v. Google

– France - infringement:• Luteciel and Viaticum v. Google• Societe des Hotels Meridien v. Google• Louis Vuitton Malletier v. Google• Accor v. Yahoo!• Other cases



• Search engine liability versus advertiser liability

• Should search engines be required to prescreen trademarks or merely respond to complaints?


Topic D: Defenses: First Amendment, Fair Use, And Nominative Use

• The First Amendment guarantees US citizens the right to comment and criticize others by name (or trademark).

Exceptions:

• “Use” of a mark commercially, in a manner which is likely to cause confusion, deception, dilution, or to further unfair competition– “Commercial use” issue is same inquiry as in keyword, pop-up

and metatag cases – correct?

• State trade libel or defamation law


Defenses: First Amendment, Fair Use, And Nominative Use

• Fair use defense

– Lanham Act, Sec. 33(b)(4): descriptive fair use

– Nominative use defense (comparative advertising or other legitimate need to refer to trademark owner)



• Sample case law – gripe sites

– When gripers have prevailed, it’s usually on grounds that site is noncommercial; sometimes on inability of trademark owner to prove likelihood of confusion:



• Bally Total Fitness Holding Corp. v. Faber (C.D. Cal. 1998)

• Taubman Co. v. Webfeats (6th Cir. 2003)

• Lucas Nursery and Landscaping, Inc. v. Grosse (6th Cir. 2004)

• TMI, Inc. v. Maxwell (5th Cir. 2004)

• Bosley Medical Institute, Inc. v. Kremer (9th Cir. 2005)

• Lamparello v. Falwell (4th Cir. 2005).



– Gripers have not prevailed when a commercial purpose and likelihood of confusion or dilution (or some other wrong, like defamation), can be shown:

• People for the Ethical Treatment of Animals v. Doughney, (4th Cir. 2001)

• Coca-Cola Company, et al. v. Purdy (8th Cir. 2004)


Concluding Thoughts

• Challenges to maintaining objectivity and value of search results and rank exist – an ongoing battle focusing more on technical than legal remedies for now

• Issue of whether utilization of trademarks as keywords for ads is commercial use as a trademark still unsettled; liability of search engines and advertisers still unclear

• Manner of use (i.e., in text of ad or not) of keyword matters

• True noncommercial gripe sites can rarely be shut down on trademark infringement grounds


Concluding Thoughts

Thanks for listening!

• Sheldon H. Klein - Arent Fox PLLC

• Mark Kudlacik – CheckMark Network

• Michael Kwun – Google Inc.

• Charles D. Ossola – Arnold & Porter LLP

• Mike Rodenbaugh – Yahoo! Inc.

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