26¢ Emails – Regulated by the FCC

Have your received the email alerts about the FCC charging a modem tax? Or about the US Postal Service starting to charge for stamps for email? These are of course hoaxes. One great hoax I remember had to do with a member of Congress Schnell (German for “Fast”) who introduced a legislative proposal 602P (legislative proposals are either “S” for Senate or “HR” for House of Representatives – there’s no “P”) proposing a 5¢ email tax. According the official USPS website,

Some rumors refuse to die-no matter how many times they have been put to rest. . . The fictional Congressman Schnell is making the Internet chat room circuit again, proposing a 5-cents surcharge on e-mail messages. This was a hoax when it first circulated several years ago, and is still a hoax today. There is no Congressman Schnell, and there has never been a Bill 602P. In addition, the USPS has already said it would not support this type of legislation.

And if you don’t believe the USPS, then you should believe the Dept of Energy (after all, they are charge of nuclear power).

Of course, the punch line is that the fee was not 5¢, it was 26¢! And it wasn’t proposed by Schnell - it was proposed by the US Postal Service itself.

Time to use the Way-Back Machine. The time is 1977. The country is in a tailspin. Saturday Night Live is singing carols about killing Gary Gilmore for Christmas. President Carter takes the Oval Office, and pardons Vietnam War draft evaders. The Clash releases their debut album. And the USPS is scared.

The USPS has learned about this thing called electronic mail and electronic transactions. It occurs to the USPS that if everyone were to use these electronic thingies, First Class mail would get wiped out and so would all that revenue. After some careful strategic planning, the USPS launched an attack on email with a classic pincer movement: on the left flank, the USPS initiated its own email service known as E-COM; on the rank flank, the USPS considered banning all private email service.

E-COM was a simple concept. The USPS would set up a network where a message would originate electronically. It would then be sent to one of a handful of participating postal offices that had terminals, where it would be printed out. The hard copy of the message would then be delivered to its destination – essentially in the same manner and with the same speed as first class mail. USPS launched this service in 1981.

Before E-COM could get off the ground, however, it was mired in controversy. The US Postal Commission, the Department of Justice, private companies, and even the FCC, objected. The first objection was that it was against government policy for a government agency to compete with the private sector. Private commercial email services were nascent and promising, and did not think much of a government monopoly using its government bankrole to pay for a competing email service. The FCC made a particularly interesting objection. The FCC said, “we have jurisdiction over all wireline and wireless services. That jurisdiction has been interpreted broadly. And there is no dispute that the transmission of a message over a communications network is communications, under the Communications Act, and under our jurisdiction.” “Not only that,” the FCC was heard to say, “but its common carriage.” Using an actual quote, the FCC stated:

With respect to the relevant judicial decisions defining the nature of common carriage, we note that none of the parties to this proceeding appears to dispute that ECOM service would constitute a common carrier offering if it were to be provided by an entity other than the Postal Service. [Oh really?!?!?!] We also conclude independently that ECOM is a quasi-public offering of a for-profit service which affords the public an opportunity to transmit messages of its own design and choosing. Based on those judicially defined criteria, we find that, in offering ECOM, the Postal Service is engaging in a common carrier activity.

In re Request for declaratory ruling and investigation by Graphnet Systems, Inc., concerning the proposed E-COM service, FCC Docket No. 79-6 (Sept 4, 1979).

In other words, before E-COM could get launched, the FCC said, “if you are going to do this, then you are under our jurisdiction, and you are going to have to file a tariff for the offering of your common carriage service” (do you hear that?!? The FCC said that email, whether from the USPS or privately offered, is a form of common carriage – they don’t say that anymore).

Well, the USPS would not accept “no” for an answer, tinkered with its network in order to weasel out of FCC jurisdiction, and launched E-COM in 1981. A message was priced at 26¢ - and for each email message, the USPS was said to lose around $5. They had apparently estimated that the service would be a raging success; it was not and, with the low message volume, the cost per message was rather high. And by the way, if you used the service you had to send at minimum 200 messages. The service was one directional; if you got an error message, you would receive it in the mail two days later. When the E-COM messages were printed out, it would take two days more to be delivered. And it cost the same as First Class mail.

For some reason, E-COM was a failure (one Senator called it a turkey). Three years after service was initiated, USPS terminated the service and tried to sell it off.

Some what’s the punch line? Congressman Schnell was going to undercut the USPS offering by 21¢ - and deliver you messages two day faster! Vote Schnell!

[Disclaimer]

The Sliding Scale Jurisdiction Test : Sliding toward Jurisdiction : Crummey v. Morgan, et al, 2007 CW 0087 (LA App 1st Cir. Aug. 8 2007)

Judges face hard choices. Do they rule in favor of a defendant or do they rule in favor of a plaintiff. Sometimes the law is well settled, and the role of Judge is easy; just follow precedent (in other words, just decide the same way every judge has before). Sometimes old law confronts new facts that confound judges. When adrift in a sea of uncertainty, judges reach deep in their armory of judicial tools and pull out old faithful: the sliding scale.

Sliding scales help sort out uncertainty. On the one extreme of the slide, cases go one way. On the other extreme, cases go the other way. In the middle, differing factual scenarios are resolved on a case-by-case basis. In other words, the judges fudge it, doing their best to see which way the facts tip – and then the decision slides to the outcome. Another way to describe this is that the judge must balance the differing factors and determine whether on the whole the facts weigh in favor of one party over another. The sea of uncertainty is gray and fuzzy.

When the sliding scale works, time gives the judiciary the opportunity to hammer out differing factual scenarios and create well settled precedent. When the sliding scale tumbles, there is little guidance, and the judiciary becomes overwhelmed with parties seeking elucidation of their predicament. See FCC Computer I.

Jurisdiction in Internet litigation is one of those seas of uncertainties. Old law resolves whether a person in one state can sue another person in another state. As articulated in the classic case International Shoe v Washington, a defendant Beta must have certain minimum contacts with the state Alpha in order to be haled into court in the state of Alpha. In applying this well settled law, the court asks questions such as whether the defendant from Beta purposefully availed itself of the privilege of conducting business in the state of Alpha and invoked the benefits of doing business in Alpha. This purposeful availment of Alpha must be of a nature that the defendant could reasonably be expected to be haled into court in Alpha.

Now comes a tsunami in the sea of uncertainty. If a party goes online, their activity online is accessible to any willing plaintiff anywhere. If I blog, can I really anticipate getting haled into court in Demoine? If I sell 1000 hockey T Shirts to Georgia, have I established minimum contacts with George? What if I sell one T Shirt on eBay to Louisiana?

Faced with this conundrum, the judiciary has created a sliding scale. At the one end of this scale is purely passive sites which simply provide information and offer no level of interactivity (and if you can find any of these “purely passive” sites any more, it belongs in a museum). At the other end of the scale is the fully interactive site such as an ecommerce site where the visitor can interact with an inventory, establish a relationship with the website’s company, purchase goods and services, find the status of those goods pending delivery, and provide a review of how good the product was. In between we have the fudge. If I set up an ecommerce business and sell 1 million books to Salem, Massachusetts, seems like I am purposefully availing myself of that jurisdiction. But if I put up one book for sale for whoever wants it on Craiglist, did I really intend to do business with puritans? The sliding scale is in place because there is a certain degree of ambiguity involved.

According a Louisiana Appellate Court, the analysis does in fact slide – it slides straight towards finding jurisdiction (perhaps the sea of uncertainty froze over). In the recent case Crummey v. Morgan, et al, 2007 CW 0087 (LA App 1st Cir. Aug. 8 2007), defendants placed an ad on eBay to sell an RV. Plaintiff reviewed that ad, purchased the RV, picked it up in Texas, and attempted to drive it home. The court makes a lot of the fact that plaintiff in Louisiana called defendant in Texas to ask questions about the RV and put down a deposit on the RV from Louisiana. Plaintiff picked the RV up in Princeton, Texas and, 40 miles after picking it up, it apparently stopped working. Interestingly enough, the court, which made meticulous note of each phone call and payment plaintiff made from Louisiana, fails to note where the RV was when it went kaput; but according to Google it is much more than 40 miles from Princeton to the Louisiana border, so presumably the gremlins emerged while still in Texas. The court provides no further contacts of defendant with the state of Louisiana.

The Louisiana Court reviewed International Shoe and precedent for the sliding scale. However, when it got to its analysis, the court started by saying eBay is not a mere passive site because sellers can receive payment from buyers – in other words, the court positions the one extreme of the scale as a strawman, and knocks it down. And if it is not the strawman, then it must be the alternative.

The court places a stake in the ground of what it means by “passive” by citing Quality Design and Construction, Inc. v Tuft Coat Mfg., Inc., 05-1712, 939 So2d 429 (La App 1^st Cir 7/12/06). Here the court defined a “passive site” as one that is informational only. At this extreme, according to the court, one cannot purchase goods. But what is surprising (shocking?) is that according to the court, one cannot even “download repeated or regular information from the website.” Now that’s passive! Although, apparently, in the Tuft’s case cited by the court, somehow buyers could use the information on the Tufts website to have their names added to the Tufts website and purchase goods from Tufts. It is an unusual stake in the ground – the court seeks to establish that a passive website is one where you can do virtually nothing at all – and yet uses as an example a company in the regular business of selling goods interstate.

Now let’s turn to our defendant who (according to the facts recited by this court) sold one thing once over eBay. The rationale of the court that the sliding scale favors jurisdiction is

• Defendant’s use of the eBay website is not “merely passive;”

• The use of eBay permitted defendants’ product to be marketed in Louisiana (and the North Pole for that matter); and

• Plaintiff called defendant, entered into the contract, and paid the down deposit from Louisiana.

Therefore, “Defendants used a variety of means of electronic communication to advertise, puff, negotiate, and accept payment for its product directed to a Louisiana consumer. Thus sufficient minimum contacts effectuated by electronic communications have been established to maintain personal jurisdiction.”

In the same paragraph, in the next words, the Court goes on and declares something that has no relevance to the jurisdictional analysis:

To hold to the contrary would have a chilling effect on ecommerce in that buyers wary of being haled into the home courts of out of state sellers will refrain from purchasing goods on eBay and other similar internet websites should the merchandise they considered purchasing be defective or otherwise not conform to the advertised online representations.

Slip at 12. I wont bother responding to this; the dissenting judges does a marvelously sufficient job:

Lastly, while the majority is concerned that a contrary holding would have a chilling effect on ecommerce buyers wary of being haled into the home courts of out of state sellers, perhaps greater significance lies in how the majority’s holding will affect ecommerce itself on eBay or other internet auction websites. The logical inference from the majority’s holding is that any person or entity placing an item for sale on eBay, bought by any person in any foreign forum, is subject to the personal jurisdiction of that foreign forum. The mere existence of such a rule in ecommerce would clearly inhibit such transactions - more so than any chilling effect on buyers wary of being haled into the home courts of out of state sellers.

While the plaintiff in this case will certainly be inconvenienced by having to go to Texas to assert his claim against the defendants, the plaintiff bought the RV without inspection knowing that it was in Texas. The plaintiff specifically chose to go to Texas to retrieve the RV and the sale of the RV was finalized in Texas. To summon the defendants from Texas into a Louisiana court on this matter and to assert personal jurisdiction over them, when they lack sufficient minimum contacts with this state, offends due process.

Dissent at 10.

The dissent reviews a plethora of eBay jurisdictions cases where other courts - a lot of other courts - found that a single sale on eBay is insufficient to establish jurisdiction. Before the sea of uncertainty, it had been well settled that a single phone call or a fortuitous contact with a state was insufficient to establish long arm jurisdiction. In the eBay cases, as in this case, defendants place for sale something with no intent to market or sell that thing in any particular state. The only intent of the defendant was to sell to the highest bidder. The state where the purchaser happened to be was, entirely, fortuitous. Thus, according to the dissent, it cannot be said that “defendant purposefully availed itself of the privilege of conducting activities with Louisiana, thus invoking the benefits and protections of its laws.” Dissent at 6.

The problem with the slippery slide is that factors can get weighed that actually have no part of the test. In this case, it seems clear that the court took great offense at defendant. The court makes clear that (1) defendants had represented on their eBay page that “everything works great on this RV and will provide comfort and dependability for years to come. This RV will go to Alaska and back without problems,” Slip at 3; (2) Plaintiffs had called for assurance that the RV was in good working order and inspected the RV as much as possible without taking it on the highway, and (3) not more than 40 miles on the road, “the vehicle quit running. Crummey also determined that the dashboard air conditioner did not work and that the RV s generator would not run continuously.” The court’s opinion of defendants may or not be valid, but the resolution of whether defendants were engaged in some level of fraud is not the same as the resolution of whether the court has jurisdiction over defendant.

Let’s spin the Wheel of Morality and learn the lesson of today’s post! “Wheel of Morality, turn, turn, turn - Tell us what lesson we should learn.” [Whirl, Click, Click, Clock]. “One should not play on sliding scales near seas of uncertainty.”

[Disclosure]

The Communications Decency Act is Dead; Long Live the Communications Decency Act! :: Zango v. Kaspersky Labs :: Good Samaritans

The Communications Decency Act (CDA) was Congress’ first attempt to censor the Internet. This new law plummeted to earth in a flame of glory, struck down as unconstitutional by a unanimous Supreme Court.

And by struck down, we mean, of course, the legislation is alive and well, having tremendous impact over the evolution of the Internet, and who gets sued for what.

The CDA was tremendously unpopular – by those few at the time who had a clue about the Internet and technology. Of course, back in 1995 the Internet was still essentially a military secret that most Americans (including members of Congress) knew little about. Sen. Exon, the sponsor of the CDA, stood on the Senate floor, holding a folder filled with pornography from the Internet for any Member of Congress to peruse. Of course, he reportedly had no idea where the material came from, whether it came from a US server or one from the land of Foo. He also had no idea how to access or download the material; news reports indicated that he had never himself been online.

Members of Congress were, at that early era, confronted with a choice: they could defend the liberty and freedom of cyberspace (for all 12 of their constituents who happened to be online at that time) or they could take a stand against smut! The choice was simple: Members of Congress had to be seen as standing against the barbarian pornographers and voting for the CDA.

There were, however, a few members of congress who had a clue (and by clue, I mean, they represented some part of the country like Berkley or Silicon Valley – and their constituents suggested to them that the CDA was dumb). A compromised was therefore worked out between the CDA and its opponents; the CDA would pass (as a part of the Telecommunications Act of 1996) but it would be amended with things like (1) the Good Samaritan provision which protected internet service providers from liability for third party content, (2) it would be the policy of the USA to keep the Internet “unfettered from state and federal legislation” (whatever “unfettered” might mean); and (3) any good soldier fighting the battle against the barbarian pornographers would likewise be immune from liability.

The DOA CDA got reincarnated as the Good Samaritan provisions. Interactive services have been protected from liability from third party remarks over and over again. The immunity has been interpreted broadly, even though ambitious litigants have tried attempt after attempt at getting big bucks out of service providers.

The Good Samaritan provisions have been vital for the Internet we know today. It has allowed ISPs to advance business plans without exposed liability. It has permitted Web2.0. It has permitted blogs, and wikis, and third-party reviews, and comments. It has permitted interactive services filled with third party content, for which the provider of the service has not be held liable.

Which brings us to today’s lucky contestant. According to the videotape (Zango v Kaspersky Lab, Inc., Case No. C07-0807-JCC (WDWA Aug 28, 2007)), plaintiff Zango is a company that provides free stuff online. Defendant Kaspersky Lab sells malware detection and protection software, that identified Zango’s free stuff as “potentially harmful or malicious” and blocks its use. Zango took offense at being labeled “potentially harmful” and sued.

Defendant Kaspersky said, “not so fast, the unconstitutional ill-fated CDA protects me from liability.” 47 USC § 230(c)(2)(B) says that an interactive computer service that provides a means of avoiding objectionable stuff is not liable on account of that good deed. Try as it may, plaintiff did not persuade the court that 230(c)(2) did not apply to Kaspersky. The court noted that this level of immunity has been interpreted very broadly, and concluded “There is no question that [defendant] Kaspersky USA considers [plaintiff's] software to be objectionable.”

Congressed made clear that it likes service providers that seek to protect us from the barbarians at the gate – whoever or whatever those barbarians might be. The CDA might be dead, but the immunity of Sec. 230 lives on. Defendant motion for summary judgment is granted and the case against it was dismissed.

Let’s spin the Wheel of Morality and learn the lesson of today’s post! “Wheel of Morality, turn, turn, turn - Tell us what lesson we should learn.” [Whirl, Click, Click, Clock]. “Senator Exon was the Father of Web 2.0!”

Disclaimer

In Which It Is Asked, Is It Possible to be Online and Not Be “Commercial”? Aitken v. Communications Workers of America

Pop quiz: What does the word “commercial” mean on the Internet? Chose one:

[A] Whatever a judge chooses it to mean – neither more nor less.

[B] The sale of goods or services.

[C] A link to someone elses’s website, with whom you have no relationship, which happens to sell t-shirts.

[D] A protest by a Union against a corporation where the Union impersonates officers of the corporation.

According to the CAN SPAM ACT, the definition of commercial, in terms of commercial emails, is those emails “the primary purpose of which is the commercial advertisement or promotion of a commercial product or service (including content on an Internet website operated for a commercial purpose).” 15 U.S.C. § 7702(2)(A).

Before we unpack the full extent of the word “commercial,” let’s go to the way-back machine to a time when words – as Humpty Dumpty informed Alice – mean exactly and precisely what Humpty Dumpty chooses them to mean, nothing more and nothing less.

'The question is,' said Alice, 'whether you can make words mean so many different things.'

'The question is,' said Humpty Dumpty, 'which is to be master -- that's all.'

- Alice in Wonderland

We find ourselves in 1998, in a litigation known as Jews for Jesus v. Brodsky, 993 F.Supp. 282 (D.N.J.), aff'd 159 F.3d 1351 (3rd Cir. 1998). In this case, the defendant registered a website jewsforjesus.com where the defendant made arguments antithetical to the mission of the group Jews For Jesus. The question before the court was whether the defendant had infringed on plaintiff’s trademark by registering and using the domain name jewsforjesus.com. In order to find that defendant was guilty of nefarious doings, the court would have to find that defendant had used plaintiff’s trademark in commerce. The court found that requirement was satisfied by the fact that defendant Brodsky linked to a third party’s website that sold t-shirts. I believe this constitutes a “Wow! That’s so cool! Who’d a thunk that linking to someone else’s website that sells shirts magically transforms your website, where you sell nothin’ a t’all, into a commercial website.” Apparently, in the Third Circuit, the word “commercial” meant exactly and precisely nothing at all.

Now we come to this month’s exploration of the word “commercial.” But wait, before we manage to depart from 1998, we recall Senator Dan Coats who was still recovering from his sponsored legislation, the Communications Decency Act, being unanimously declared unconstitutional. Sen. Coats’ solution was to listen to the Supreme Court and come back with a new law, the Children’s Online Protection Act (COPA), which comported with the views of the Supreme Court. One of the reasons that COPA was a solution to the perceived problem was that COPA would only be aimed at “commercial” websites. This was good because now “non-profit” websites would be outside of the cross-hairs of the censors at the Department of Justice. Of course, here “non-profit” is taken to mean exactly and precisely “not commercial.” Funny thing is, the defendant in this month’s case will make exactly the same argument.

This month’s case involves a squabble between Verizon and the Communications Workers of America (CWA). Aitken v. Communications Works of America, No. 1:06cv1161 (EDVA July 12, 2007) PDF. Some members of the CWA got a cute idea – they created free Yahoo! email accounts using the names of some Verizon officers and sent out a batch of fake emails that “disparaged Verizon.” The question before the court is whether the falsified email headers constitute a violation of the relatively new CAN SPAM Act. As the CAN SPAM Act only covers commercial speech, the court must find that the emails in question were “commercial.”

First, how exactly did the members of the CWA impersonating Verizon officials “disparage” Verizon in these emails? They did this by telling the recipients of the benefits of union membership, attempting to convince these non-union members to sign up.

Now that MCI has been purchased by Verizon, the company is doing all it can to

keep you and other former MCI employees from gaining Union benefits and

wages that your co-workers at Verizon receive.

Unionized Verizon workers are members of CWA or IBEW and:

• earn a lot more money

• have a better health plan and pay less for it

• have an excellent defined benefits pension plan and 401(k) plan

• have excellent job security

. . .

It doesn’t have to be this way for former MCI employees. CWA is committed to helping former MCI employees gain the respect and dignity you deserve. When we join together, we can win.

It may sound to you like the union was engaged in a commercial solicitation, attempting to persuade individuals to pay union membership dues in exchange for union representation. But according to the CWA this is not exactly and precisely what “commercial” means. Defendant’s argue that (a) unions are non-profits and therefore do not engage in commercial activity, and (b) the emails did not attempt to solicit union membership (they just proclaimed how wonderful union membership is).

As to the first, the court clarifies that defendants have confused “commercial” and “profit.”

[W]ell-established First Amendment law makes clear that the commercial status of speech is not determined by the speaker’s profit motive. See Board of Trustees of State University of New York v. Fox, 492 U.S. 469, 482 (1989) (“[S]ome of our most valued forms of fully protected speech are uttered for a profit.”); Rubin v. Coors Brewing Co., 514 U.S. 476, 494(1995) (Stevens, J., dissenting) (“[E]conomic motivation or impact alone cannot make speech less deserving of constitutional protection, or else all authors or artists who sell their works would be correspondingly disadvantaged.”); Adventure Communications, Inc. v. Kentucky Registry of Election Finance, 191 F.3d 429, 440-442 (4th Cir. 1999) (“In and of itself, profit motive on the speaker’s part does not transform noncommerical speech into commercial speech.”) (internal citations omitted). In sum, speech is neither per se commercial merely because of the presence of a profit motive, nor per se noncommercial merely because the speaker does not intend to make a profit. . . . Instead, whether speech is commercial depends on whether it “proposes a commercial transaction” or promotes specific products or services.

The CWA proposed a commercial transaction of exchanging union representation for union dues.

The response of the CWA to this was, “did not!” To which the court responded, “did!” CWA’s argument was that these were merely preliminary emails that informed of the benefit of union membership without a primary purpose of soliciting employees to join. To this the Court rejoined,

[A] communication need not be an attempt to consummate a transaction immediately in order to be commercial in nature; advocating the benefits of the speaker’s commercial product or service in hopes of later “sealing the deal” is sufficient. See, e.g., Rushman v. City of Milwaukee, 959 F. Supp. 1040, 1043 (E.D. Wis. 1997) (“[S]tatements encouraging a future economic transaction” are commercial speech). Thus, given that CWA representation is a commercial service, defendants’ promotion of CWA representation in the emails is not excluded from the Act merely because it did not seek to enroll the email recipients immediately.

Busted.

Let’s spin the Wheel-of-Morality in order to find out the lesson to today’s post [Whirrrrrl, click, click, click]. And today’s lesson -- “Humpty Dumpty was pushed!”

Disclaimer

Stealth Trademarks: Ad Keywords

Finally, the situation which is the goldmine (actually it is more like a copper mine, as in, it generates a few pennies every day) for small publishers like Cybertelecom: advertising generated by search engine companies based on keywords. The search engine company will let an advertiser bid on trigger-terms – any trigger-terms. The advertiser’s ads can appear in one of two ways: First, when those trigger-terms are typed into the search engine, the ads can appear on the search engine results page, normally designated as paid-for search results. Second, when a third-party website has embedded advertisements from the search engine and is somehow related to a trigger-term, an advertiser’s ad can appear in a little advertisement box (see the Google Ads on the left column of this blog).

Neat! So if an individual is searching for the AcmeNetLaw website and types that trigger-term into a search engine, I could use Acme’s trademark as a trigger-term to get an ad for Cybertelecom to appear! If the individual visit’s the AcmeNetLaw website, and the AcmeNetLaw website has those embedded search ads, my Cybertelecom advertisement could appear (well not really, Google Ads provides a tool to block advertisements from competitors appearing on my website – If AcmeNetLaw fears Cybertelecom, it can block CT). Does this opportunity stumble over trademark law?

Before we go forward, let’s go backwards to the video tape. What constitutes a Lanham Act trademark violation? To prevail on a trademark infringement claim for a registered trademark, a Plaintiff must establish that:

(1) he has a valid mark that is entitled to protection under the Lanham Act;

(2) defendant used the mark;

(3) in commerce;

(4) in connection with the sale or advertising of goods or services; and

(5) without plaintiff's consent.

Okay, you metaphysicians, if the use of the trigger-term is stealth – is it “used in commerce”? Trademark law is all about consumer protection. We want to prevent consumers from being confused about products and services. When a consumer has come to expect a lousy burger and fries from ACME Burger Joint, we want the consumer to always get that same lousy burger and fries wherever they see the ACME Burger Joint trademark. There would be a conundrum if ZETA Veggie Burger Joint used the ACME trademark and slipped people nutritious delicious tofu burgers. The key to trademark violations is the visible identification of the trademark with an imposter’s product or service. So, like the fallen tree, if a trademark is used in the forest and no one is there to visually identify it, is it “in use”? If not, the trademark violation claim fails. A lot of the cases turn on this metaphysical point, and as with the previous cases we have reviewed, the courts are not at all settled on how they want to come out on this one. Let’s look at two recent cases, one where the court finds that the trademark is used in commerce, and one where the court does not so find.

The first case from this year is quite interesting because, while it does in fact find that the trademark is in use in commerce, it still, nevertheless, finds for the defendant. JG Wentworth SSC Ltd v Settlement Funding LLC, No 06-0597 (EDPa Jan 4 2007). In this case, Plaintiff Wentworth is a finance company that provides cash now in exchange for something of value in the future – like if you win the lottery and would get it in 10 payments over the next 10 years – Wentworth would give you cash now for that future value. Defendant Settlement Funding apparent does pretty much the same thing. Both parties have websites and, according to the allegations, Defendant used Plaintiff’s trademark “JG Wentworth” as a trigger term for Google Ads (there is also a metatag argument in this case, but we dealt with metatags in the first article in this series). Claiming that Defendant was taking unfair advantage of the value Plaintiff had bestowed in its trademark, Plaintiff sued.

The court is not perfectly clear why it comes down in favor of “in use.” It reviews a bunch of non-binding cases from other jurisdictions that conclude that stealth trademarks are not in use - brought up by defendant - and some conflicting non binding cases that conclude that they are. And the court basically brushes it all aside stating that defendant is unpersuasive. The court simply lines up on the side of the “in use” cases, stating

But like [those cases], I recognize that defendant’s use of plaintiff’s marks to trigger internet advertisements for itself is the type of use consistent with the language in the Lanham Act which makes it a violation to use “in commerce” protected marks “in connection with the sale, offering for sale, distribution, or advertising of any goods or services,” or “in connection with any goods or services.”

Okay, why? The court acknowledges that it lines up with those cases, but it doesn’t really specify why that line of cases is more persuasive.

The court is more articulate on the next criteria, whether there is any “confusion.” Now, it is important to understand what is going on here. This is not a bait-and-switch thing where the consumer is asking for an ACME Lousy Burger and getting a ZETA Tofu Burger instead. This is a computer user typing “JG Wentworth” into Google, and getting a result page where “JG Wentworth” is likely the top result – go ahead and see what the results page would look like by clicking here (but promise to come on back). In addition to Plaintiff’s link, a whole bunch of other stuff comes up too. But it’s all there. Consumer is not getting one product in place of another – consumer is getting what they asked for… and some other stuff too.

Think about it differently. You go to a grocery store. You ask the clerk for ACME Lousy Frozen Burgers. And when you go to the shelf, there are the ACME Burgers along with ZETA Tofu Burgers. Has ZETA committed a trademark violation for being on the same shelf as ACME. No. So if you see a Google results page that has the ACME Burgers, and a listing for ZETA burgers right next to it, would you be any more confused?

At no point are potential consumers “taken by a search engine” to defendant’s website due to defendant’s use of plaintiff’s marks in meta tags. Rather, as in the present case, a link to defendant’s website appears on the search results page as one of many choices for the potential consumer to investigate. As stated above, the links to defendant’s website always appear as independent and distinct links on the search result pages regardless of whether they are generated through Google’s AdWords program or search of the keyword meta tags of defendant’s website.

Wentworth at 14.

It seems like the court wants to dodge the “in use” question for the “confusion” question. The “in use” analysis is a muffled flip-of the coin – on the one hand here is a bunch of cases, on the other hand here are some different cases and (flip), ah, I chose the former over the later. Where the court is persuasive is the critique of confusion. Whatever it is that is going on, the consumer is getting what they are asking for. The defendant is not engaged in counterfeiting; the defendant is not engaged in bait-and-switch. The defendant’s listing is simply listed on the result page as a “sponsored link” off on the side, or in a shaded box, where plaintiff’s link is front and center. Only a fool (or a lawyer, ah but I repeat myself) would be confused in this situation.

A more recent case Site Pro-1 v Better Metal, Inc., 06-CV-6508 (ILG) (RER) (EDNY May 9th, 2007), returned to the issue of “in use.” This case involved two parties that (according to the court decision) were involved in the sale of equipment used to construct wireless telecom towers. Plaintiff complained that defendant had placed “site” “pro” and “1” in metatags on its website, and purchased a sponsored search at Yahoo! based on those terms. Defendant responded, “yeah, so?! We aint ‘used’ the your trademark.” The court did a nice review of precedent and stated “The key question is whether the defendant placed plaintiff’s trademark on any goods, displays, containers, or advertisements, or used plaintiff’s trademark in any way that indicates source or origin.” In other words, does the consumer perceive the trademark and is the consumer thereby confused. It was undisputed that the use of the trigger-terms was entirely stealth – that the terms did not appear on defendant’s products or website in any way. As such, the court ruled, plaintiff’s claim that defendant is up to bad things fails.

Ah, but wait! Before I could finish this post, yet another case crosses my desk: Fragrancenet.com, Inc. v FrangrenceX.com, Inc., No. 06-CV-2225 (JFB) (AKT) (EDNY June 12, 2007). This case is so much like all the others that I will not bother to hit the auto-replay button for you. The decision is very well written and reviews most of the recent precedent. But the judge takes the analysis one step further. Plaintiff tries to make a fuss based on a New York theory of Passing Off. The court pummels this attempt, stating that this is not a case of Defendant trying to pass off its products as plaintiffs. Rather, this is a case where a consumer uses a trigger-term, and is presented with what the consumer is asking for, along with alternatives, and in a competitive capitalistic market, we like alternatives and choice!

In the world outside the Internet, individuals in search of a company or product are not blinded to competitive products. In other words, it is not unlawful to strategically place billboards or even store locations next to billboards or store locations of competitors. For example, an individual in search of a McDonald’s restaurant will often be confronted with a Burger King restaurant. As long as Burger King did not mislead the consumer under false pretenses to its location, the mere fact that it decided to place itself in close proximity to a McDonald’s, in an effort to potentially draw customers in search of fast food, is not “passing off.”

Slip p. 7. If you ask for a Coke, and are told you can have a Coke, a Pepsi, a rootbeer, or an iced tea, the court approvingly says, this is not confusion, this is the presentation of alternatives. Likewise the use of trigger-terms that produce desired results in search engines along with choices is not confusion - it is the presentation of alternatives.

The outcome of this line of cases if obviously very important. Currently search engines advertising companies can sell any trigger-word available, whether it is someone’s trademark or not. If this type of stealth trademark usage violates the Lanham Act, what type of liability would search engine companies have in these situations and what measures would they be forced to take in order to avoid this liability? It could create a substantial challenge for them to know that a trigger-term is a trademark, especially since pursuant to trademark law, the use of the term in one context could pose a violation where the use of the term in another context might not.

Personally I sort of agree with the Wentworth court here in rejecting the if-you-cant-see-it-its-not-in-use court decisions. The rule appears to be (a) for a trademark to be “in use,” it must be perceived, and (b) to be perceived means visually to see the mark. But seeing a trademark with one’s eyeballs is not the only way to perceive a trademark. I can perceive a trademark by hearing it. I can perceive a trademark by feeling it (particularly if I am blind and am reading Braille). In order to perceive it, I may require the use of some artificial device such as glasses, a hearing aid, or a camera. So why cant I “perceive” a trademark through the means of a computer? Has not a computer become an extension of my mental abilities akin to the primitive glasses and hearing aids? In an attempt to find a thing, I can look for it, I can feel for it, I can listen for it, or, perhaps, I can use my computer. The courts struggle with this line of cases and rightly so. A disruptive technology is taking old law to an entirely new place and the judges lack a solid footing on which to stand. The archaic suggestion that data in the virtual world is beyond human perception, if taken to be true, would fundamentally disorient and divorce the virtual world from the legacy world. We must reconceive our notions of perception and comprehend to degree to which computational power is becoming an amplification and extension of our abilities. To request that a computer find a trigger-term, and to have the computer present results means the computer as our agent perceived that trigger-term somehow associated with those results. We have perceived it.

However, Wentworth is right that this is not the end of the analysis. Getting beyond the metaphysics of perception is the obvious question of confusion; no one is confused here. As the court in Fragrancenet.com indicates, the presentation of alternatives is not confusion. As individuals’ general online experience matures, individuals’ know that search engines presents, if they are lucky, the trigger-term desired, and anything else associated with that trigger term. We may not know exactly what caused the paid-for ads to appear; we don’t care. We know there is a clear difference between the top results which hopefully contain our target, and the promises of fame and fortune in the advertisers box. We are not confused.

----

Read Our Disclaimer – All Facts are As Alleged or Reported – Some Are Entirely Fictitious -- Made from 100% Recycled and Organic Bits.

Stealth Trademarks: Pop-Up Ads

Another neat trick is the use of trademarks as trigger-terms that result in pop-up ads (I understand that Cerberus, the dog that guards the gates of Hades, has been reassigned to guard a special room where resides the inventors of pop-up advertising, spam, spyware and telemarketers). According to court accounts, some firms have created adware with databases of trigger-terms. When computer users type those trigger-terms into search engines, or when they access certain domain names, or however else these ingenious people might devise to trigger a response, a pop-up ad gloriously appears sharing news of valuable opportunities.

In reviewing these cases, the courts have considered the following theories and facts: trademark law and initial interest confusion, the fact that the adware program may have been voluntarily downloaded by the computer user, the fact that the popup ad makes no alteration or change to the underlying website, and the fact that the popup ad may not have the trademark term in it.

First, let’s see one where defendant loses: Newsweek Interactive Co., LLC, et al. v. The Gator Corp., (E.D. Va. 2002) In this case the court provides a one page order granting a motion for preliminary injunction against defendant. In other words, procedurally this is typically at the beginning of the litigation, where the plaintiff is arguing (a) I am really likely to win this case and (b) as long as defendant is doing these things, I feel pain. The court has not considered the case in depth and the court is not necessarily presenting a detailed finding of fact. In this case, Defendant, the pop-up company, loses. Note why: The Court says the Defendant is enjoined from:

1. Causing its pop-up advertisements to be displayed on any website owned by or affiliated with the Plaintiffs without the express consent of the Plaintiffs;
2. Altering or modifying, or causing any other entity to alter or modify, any part of any website owned by of affiliated with the Plaintiffs, in any way, including its appearance or how it is displayed…

The court believes that plaintiff’s websites are being mushed (and we have seen in the precedent of the framing cases that if you take someone else’s website and mush it, courts don’t like this).

Most likely you, the reader, are more familiar with how pop-ups work than this judge. When a pop-up appears, is it displayed on the webpage you are attempting to visit? Does it alter or modify that webpage? No! As annoying as pop-ups may be, the judge has his facts wrong. A pop-up is a fully separate browser window that pops-up and annoys you; it is its own webpage. And you sit there playing whack-a-popup, trying to close those things. It is not on the webpage you are attempting to see, nor does it alter it in any way. This distinction will become important in the next set of cases. By the way, Defendant Gator, now known as Claria Corp., reportedly subsequently settled many of these suits out of court.

Next is a set of cases known as the WhenU cases. WhenU apparently distributed adware that caused pop-ups to appear with third-party advertisements. When a website was visited, pop-ups would appear, sometimes from that website’s competitor. The pop-ups appear based on an algorithm WhenU employs to determine what might be relevant to the computer user (in other words, the advertiser does not have the opportunity to buy keywords). When a pop-up appeared, it indicated that it was from WhenU, and it did not include a trademark from the original webpage. Plaintiffs became quite bothered as pop-up ads from competitors magically appeared when people accessed their webpages. There had to be something untoward about this – so plaintiffs complained of trademark violations.

In these cases, the courts – and there have been several of them – have consistently found in favor of WhenU, concluding that the WhenU program was downloaded voluntarily by the computer user (usually bundled with something else the computer users downloaded – gotta read those user agreements to see what you are downloading!), that the WhenU program did not interact with third party webpages or their webservers, but instead interacted with its own webservers and the computer users’ screen. WhenU’s program, the court found, did not use plaintiff’s trademarks as trigger words, but instead triggered pop-ups based on domain names that are visited (which, as we know, can be identical with plaintiff’s trademark). In the frame around the pop-up, WhenU was identified, along with a “?” that, when clicked on, provided information about WhenU and the advertisements. Read the court decisions in 1-800 Contacts, Inc. v. WhenU.Com and Vision Direct, Inc., 309 F. Supp. 2d 467 (S.D.N.Y. 2003) rvsrd 414 F.3d 400, slip p. 21 (2d Cir. 2005) where the judges do a careful and extensive review of how pop-ups work.

In order to find a trademark violation, the court would have to find that defendant WhenU used a trademark in commerce without consent. WhenU has taken plaintiff’s domain name and included it in its own database, invisible to the computer user. The domain name (and if it is a trademark of plaintiff, the trademark) is not reproduced in the pop-up advertisement. The advertiser whose ad appears in WhenU’s service does not get to buy the trademark as a keyword. The trigger word is in WhenU’s database as a domain name and not as a trademark. In this case, the use of the trigger term is stealth and thus, according to the court, cannot constitute “use in commerce”:

A company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to an individual’s private thoughts about a trademark. Such conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services.

1-800 Contacts, Inc. v. WhenU.Com and Vision Direct, Inc., 309 F. Supp. 2d 467 (S.D.N.Y. 2003) rvsrd 414 F.3d 400, slip p. 21 (2d Cir. 2005).

In one of the WhenU cases, Quicken had become displeased with WhenU’s practices and sued. However, the Court had to politely point out, as above, that not only did WhenU not interact with or alter plaintiff’s website, but also that Quicken had a division that took advantage of WhenU’s services. D’oh! Wells Fargo & Co. v. WhenU.com, 293 F.Supp. 2d 734 (E.D. Mich. 2003). See also U Haul Int'l, Inc. v. WhenU.com, Inc. , 279 F. Supp. 2d 723 (E.D.Va. 2003).

Here’s the scoreboard so far: with metatags, where the use of the trademark cannot be seen, inserting a trademark into the metatags is bad! With pop-ups, where the use of a trademark (only its not a trademark, it’s a domain name which is similar to a trademark, which seems a lot like a trademark…) cannot be seen, it’s stealth and therefore not “in use in commerce.”

Next time we consider whether “Do No Evil” Google has violated its prime directive by allowing advertisers to purchase trademarks as keyword trigger-terms for Google Ads.

Read Our Disclaimer – All Facts are As Alleged or Reported

Calendar of Events

Here is a calender of upcoming Net Law and Policy events. To have your event included on the calendar, contact us.

• Jun 7-8 PF Broadband Policy Summit III Arlington VA
• Jun 7-8 Workshop on the Economics of Information Security Pittsburgh
• Jun 11 VON Europe
• Jun 25-29 2007ICANN North America
• Jul 10 DHS National Infrastructure Advisory Council
• Jul 18 Symposium on Usable Privacy and Security Pittsburgh
• Jun 20 Supernova San Francisco
• Jul 22-27 2007 IETF
• Sept 11 PCAST Meeting
• Sept 28-30 TPRC Arlington, VA
• Oct 4-5 APWG eCrime Researchers Summit Pittsburgh
• Oct 8-11 2007 Internet2 San Diego
• Oct 9 DHS National Infrastructure Advisory Council
• Oct 14-17 Rural Telecom Congress Springfield IL
• Oct 17 - 20 AOIR Conference Vancouver
• Oct 29 2007 ICANN Asia Pacific
• Oct 29 VON Boston
• Oct 2007 Verizon & AT&T Merger Conditions to abide by Network Neutrality expire
• Nov. 1, 2007 Net Tax Moratorium Expires
• Nov 12 - 15 Internet Governance Forum Brazil
• Dec 2-7 IETF
• Dec 3-7 ITU Telecom Europe
• Jan 20, 2008 Pres. Bush's term ends
• Mar 17 2008 VON San Jose
• Apr 21-23 2008 Internet2 Arlington
• May 17 World Telecommunications Day ITU
• Oct 27 VON Boston
• Dec 2008 AT&T / Bell South Merger Conditions re Net Neutrality expire

Stealth Trademarks: The Use of Trademarks As Ad Keywords, In Metatags, And In Pop-Ups

Is it wrong for me to use your trademark? Is it wrong for me to use your trademark to attract traffic to my website, if no one sees me using your trademark?

This is a contentious issue that the courts have struggled with. Of course, the use of trademarks in domain names has been explosively contentious, driving DNS policy. The use of a trademark in a domain name is a very visible use of the mark, in an environment where the supply of available opportunities to use the mark is limited (there are only so many dot-coms after all; there is dot-com, dot-biz, dot-ccTLDs, dot-org, dot-edu, dot…. Well, okay there are more opportunities now then there use to be and there would be a lot more opportunities if ICANN would approve more gTLDs). The DNS-Trademark contention has led to the creation of the Uniform Dispute Resolution Policy, the AntiCybersquatter Protection Act, the Fraudulent Online Identity Sanctions Act, lots of trademark litigations, and lots of activity before the World Intellectual Property Organization (WIPO).

But here we deal with the stealth use of trademarks. No human sees them. No human is getting confused by the ALPHA trademark that appears super-glued to BETA’s product.

There are three different models of stealth trademarks: metatags, keywords for search engines, and pop-ups. These models are very closely related, as are the legal proceedings that struggled with them.

Let’s start with the easy model: metatags. And by “easy,” here I mean the courts have a sort of rough consensus on outcome. In these cases, website owners insert trademark terms into the metatags of their webpages. After search engine spiders crawl and index these pages, the metatags will act as trigger-terms, causing the webpage in question (at least in theory) to appear in search results when that trademark is typed into a search engine (rumor has it that a lot of search engines now simply ignore metatags). The courts have generally thought that this use of metatags does not constitute playing nice.

Courts needed to find a confusion between plaintiff’s invisible trademark and defendant’s products, and in order to do this, they have relied on something known as Initial Interest Confusion. This doctrine was well articulated in the case Brookfield Communications v West Coast Entertainment, 174 F.3d 1036 (9th Cir. 1999). Of course, everything was well articulated in Brookfield; dare read that case only if you have a pot of coffee and a lot of spare time on your hand.

In Brookfield, according to the court opinion, plaintiff Brookfield gathered and sold information concerning the entertainment industry. One of its products is a searchable database called “MovieBuff,” which it began to sell in 1993. In 1996, Brookfield attempted to register the domain name moviebuff.com but had been beaten to the punch by defendant. So Brookfield registered “moviebuffonline.com,” set up a website, and sold its MovieBuff software. In 1997, Brookfield registered “MovieBuff” as a trademark.

As for defendant, West Coast, a video rental store chain – it had registered the domain name moviebuff.com in 1996 and had launched its website moviebuff.com in 1998 (I will not confuse you with other facts such as West Coast had acquired a service mark for “The Movie Buff’s Movie Store” in 1991, had marketed goods and services since 1988 using the term “Movie Buff,” or that the court concluded that defendant’s “Movie Buff’s Movie Store” mark was different than plaintiff’s “MovieBuff” mark because of the spaces between the words – and therefore not prior – but that defendant’s moviebuff.com domain name was identical to plaintiff’s “MovieBuff” mark – ignoring that domain names can’t have spaces or “moviebuff.com” had four additional non identical symbols.).

In the 36 or so arguments of defendant’s that the court obliterated was the argument that, as the defendant registered the domain name moviebuff.com in 1996, and as this was prior to plaintiff’s registering the trademark MovieBuff in 1997, defendant wins on the ground of prior use. The court rejects this argument on exactly the same grounds that subsequent courts will reject this court’s holding: if it can’t be seen, it’s not “in use in commerce” as required for a trademark violation.

Registration with Network Solutions, however, does not in itself constitute "use" for purposes of acquiring trademark priority. The Lanham Act grants trademark protection only to marks that are used to identify and to distinguish goods or services in commerce -- which typically occurs when a mark is used in conjunction with the actual sale of goods or services. The purpose of a trademark is to help consumers identify the source, but a mark cannot serve a source-identifying function if the public has never seen the mark and thus is not meritorious of trademark protection until it is used in public in a manner that creates an association among consumers between the mark and the mark's owner.

Brookfield ¶ 7. If it can’t be seen, then it’s not “in use” - hold that thought until we get to the next scenarios.

So after about three hours of reading about how MovieBuff was prior to MovieBuff, but different than MovieBuff, and therefore the use of the domain name moviebuff.com was a trademark violation, you get to the tagged-on argument about metatags (in other words, defendant had not just lost by this point; defendant had been beaten into a pulp by the court). It is now firmly established in the court’s opinion that plaintiff can do no wrong and defendant can do no right. Obnoxious defendant (the one that had been using the phrase “Movie Buff” for five years prior to plaintiff’s use) dared to visibly label its goods and services with the domain name moviebuff. Now the court considers whether defendant can use a stealth trademark in its metagags as trigger-term for search engines. The public cannot see the mark; there is no visible association between the stealth-mark and the defendant’s good and services. But the defendant is evil! The Court must bend it so that defendant has been bad once again, and therefore articulates the doctrine of Initial Interest Confusion in terms of metatags:

Web surfers looking for Brookfield's "MovieBuff" products who are taken by a search engine to "westcoastvideo.com" will find a database similar enough to "MovieBuff" such that a sizeable number of consumers who were originally looking for Brookfield's product will simply decide to utilize West Coast's offerings instead. Although there is no source confusion in the sense that consumers know they are patronizing West Coast rather than Brookfield, there is nevertheless initial interest confusion in the sense that, by using "moviebuff.com" or "MovieBuff" to divert people looking for "MovieBuff" to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark.

There’s no source of confusion; defendant this time has no visible use of plaintiff’s mark; the not-confused consumer has a results page in front of the consumer with both MovieBuff and West Coast – not-confused customer can pick the product that the not-confused customer asked for, or something else - and there will always be something else on the search results page. Because this not-confused consumer might elect to visit some other website than plaintiff’s, this makes defendant, once again, evil – and the not-confused customer is mysteriously confused as legally required.

Bad cases make for bad law. It’s clear the court did not like defendant’s use of “MovieBuff” in its domain name and it’s clear that the courts grasp of the Internet was novice at best. Brookfield was really a strong trademark-domain name case, with a weak meta-tag issue tagged on. It was an afterthought – and this afterthought set the course that many other cases followed. See, e.g., Promatek Industries v. Equitrac Corp, 300 F.3d 808 (7th Cir. 2002); Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 464 (7th Cir. 2000)

Not all courts, however, have bought into the Brookfield inquisition. See Site Pro-1 v Better Metal, Inc., 06-CV-6508 (ILG) (RER) (May 9th, 2007). As time has progressed, the metaphysical contradiction that the non-visible use of a trademark in one place did not constitute “a use” where in another place it did was too perplexing.

Final lark: After what must have been a costly litigation, the moviebuff.com domain, at the time of this writing, is no longer a working website!

In the next scenario, someone gets the bad idea of using stealth trademarks as trigger-terms in order to cause pop-up ads to appear!