Internet Trademark Litigation

In Wake of Successful Lawsuit Against Reseller, Mary Kay Sues Yahoo! for Trademark Infringement

December 2, 2009 | Peter S. Lubin and Patrick Austermuehle

Our Chicago Internet trademark infringement litigation lawyers were interested to see a recent lawsuit with a new twist on the trademark infringement claims corporations are bringing against online companies. According to the Dallas Business Journal, Mary Kay v. Yahoo!, a pending lawsuit filed July 6 in Dallas federal court, does not allege that Yahoo! violated the cosmetics seller’s trademarks by selling keywords in advertisements. Instead, Mary Kay claims its copyrights are violated when its independent sales associates send email to clients with Yahoo! email accounts, because Yahoo! adds advertisements for competitors and third-party resellers into the messages. Mary Kay claims dilution, trademark infringement and unfair competition in its lawsuit, and seeks damages and an injunction against the practice.

The case comes shortly after a victory for Mary Kay in a related case. In Mary Kay v. Weber, the defendants were not advertisers, but a reseller of Mary Kay products that authorized sales consultants couldn’t sell. As David Johnson’s Digital Media Lawyer blog explained, Amy and Scott Weber sell Mary Kay cosmetics (along others) at touchofpinkcosmetics.com, often at a discount because they are discontinued or expired. Mary Kay sued them on several legal theories and won on its trademark claims, although the judge in that case did make a summary judgment ruling favorable to the Webers on nominative fair use grounds.

Nominative fair use allows businesses to use another’s trademark in a way that’s not likely to cause confusion, such as a car repair shop advertising that it focuses on fixing Volvos. As Johnson explains, a nominative fair use defense can be used in the Fifth Circuit if the alleged infringers had only used as much of the trademark as necessary to identify the products and did not do anything to suggest that they were sponsored by, endorsed by or affiliated with the trademark holder. However, the jury ultimately found that the Webers’ use of Mary Kay’s trademarks went beyond fair use, in part because their advertisements did suggest sponsorship by Mary Kay. Importantly for Illinois online trademark infringement litigators like us, however, the judge found that the Webers’ purchase of Google keyword ads using Mary Kay’s trademarks did not inherently make a fair use defense unavailable.

Keyword issues will come up more explicitly in Mary Kay’s current suit against Yahoo! Mary Kay alleges that Yahoo! is violating its trademarks by allowing them to be used as keyword ads in text and pop-up ads for third parties, inserted into messages to Yahoo! users. As with all trademark infringement lawsuits, Mary Kay will have to prove that this creates a likelihood of confusion among consumers. Similar lawsuits against Google, largely based on its Google AdWords program, were pending when this was filed. Trademark infringement lawyers interviewed in a Dallas Business Journal thought the makeup seller’s claim was weak, but Johnson suggested that a fair use defense might be difficult for Yahoo! because the sponsored ads show up in emails, which could legitimately confuse consumers not accustomed to seeing them there. Ultimately, a jury will decide whether consumers could realistically be confused by the practice.

New Jersey Man Sued and Criminally Charged for Alleged Theft of Domain Name

November 18, 2009 | Peter S. Lubin and Patrick Austermuehle

As Illinois online trademark infringement attorneys, our interest was piqued when we saw an Aug. 4 article in the New Jersey Star-Ledger about civil and criminal charges against a man accused of outright stealing a domain name. P2P.com, LLC v. Goncalves et al, pending in New Jersey federal court, accuses Union, N.J. man Daniel Goncalves of hacking into an email account owned by Albert and Lesli Angel in order to illegally gain control of three of their domain names. These are p2p.com, drugoverdose.com and profreedom.com, which are co-owned by investor Marc Ostrofsky. Goncalves, a 25-year-old who runs a Web hosting business, was arrested in late July for the same alleged actions, in what the newspaper said may be the first criminal case over the theft of a domain.

A domain name is the unique identifier for a Web site — for example, chicagobusinesslawfirm.com is the domain name for one of our own Web sites. Some investors buy domain names they believe will be in demand and therefore valuable someday. That was the case when the Angels and Ostrofsky bought p2p.com for $160,000 from a Wisconsin company called Port 2 Print, believing they could resell it to a business related to peer-to-peer software. On the Internet, peer-to-peer software is frequently referred to as p2p. Similar thinking went into the purchases of profreedom.com and drugoverdose.com. They paid to register and “lock” p2p.com for ten years with registrar GoDaddy.com.

But in 2006, the investors’ complaint alleges, Goncalves and possible others intentionally and knowingly gained illegal access to the Angels’ AOL email account, allowing them to transfer the domains from the Angels’ GoDaddy hosting account to another hosting account they controlled. They then allegedly re-registered the domains under false names and addresses and redirected traffic away from the sites. A few months later, the complaint says, the defendants put p2p.com up for sale on auction Web site eBay, where NBA player Mark Madsen paid more than $111,000 for it. Drugoverdose.com has also been resold. The complaint also accuses Goncalves of falsifying records showing that the Angels sold the domains to Goncalves. An attorney for Goncalves told the Star-Ledger that Goncalves bought p2p.com for $1,500, through a third party he believed represented the Angels.

The lawsuit accuses Goncalves and others of breaking state and federal racketeering laws with their conspiracy to steal the domains; fraud; tortuous interference in the investors’ business opportunities and unauthorized access prohibited by the federal Computer Fraud and Abuse Act. More recently, the plaintiffs asked to add GoDaddy.com as a defendant for allegedly allowing Goncalves to transfer the domain. In addition to financial damages, the investors seek the return of all three domains and an order stopping the defendants from selling their domains. The new owners of the allegedly stolen domain names were named as defendants in the original suit, but according to news reports, Madsen claims to be a good faith buyer and the Star-Ledger said he has had civil discussions with the investors.

As Chicago online trademark infringement attorneys, we are very interested in the outcome of this case. As we noted, this may be the first case of criminal charges in a domain name theft. According to DomainNameNews.com, it may also break new ground if it holds GoDaddy legally liable for allowing the theft. According to that article, the Angels claim GoDaddy stonewalled their attempts to investigate and blamed them for inadequate security — despite evidence implicating Goncalves in earlier domain name thefts. Registrars are generally not found liable for allowing domain name theft, though there are notable exceptions. The decision(s) in this case could change that, at least in cases with clear negligence.

Federal Circuit Rules Hotels.com May Not Have Trademark Because Name is too Generic

October 28, 2009 | Peter S. Lubin and Patrick Austermuehle

Our Chicago trademark litigation lawyers noticed a recent trademark law decision that underscores the difficulty of protecting a mark in the emerging world of Internet commerce. The Federal Circuit Court of Appeals ruled July 30 that the hotel review and search Web site Hotels.com may not trademark its name because “Hotels.com” is a generic term. In Re Hotels.com, L.P., 08-1429 (Fed. Cir., July 30, 2009). Hotels.com had argued that it is distinct from the generic word “hotels” because it is not a hotel that provides lodging; it is a Web site that provides information about finding lodging at a discount, travel agency services and related services. The Federal Circuit disagreed, saying the addition of “.com” was not enough to remove the generic nature of the name.

To get to the appeals court, the Hotels.com application was first denied by a trademark examiner, then by the Trademark Trial and Appeal Board (TTAB). The examiner denied the application because the name “Hotels.com” was “merely descriptive of hotel reservation services,” meaning that it fails the distinctiveness requirement laid out by the Lanham Act. In doing so, the examiner rejected evidence Hotels.com offered to show that it had acquired distinctiveness, including surveys showing that the majority of respondents associated the name “Hotels.com” with its business. On appeal, the TTAB agreed that the term was too generic to trademark, but said acquired distinctiveness may be enough to support registration if the site succeeded on appeal.

In its appeal to the Federal Circuit, Hotels.com argued that its proposed mark is not generic because it is not a hotel in the business of providing lodging; it is a Web site in the business of providing information about hotels. It also argued that its surveys show that consumers associate the name “Hotels.com” with its business and do not see it as generic. Relying largely on the TTAB’s analysis, the court rejected these claims.

Addressing the issue of genericness first, the Federal Circuit found that the TTAB did not err when it considered the word “hotels” for genericness separate from the “.com” suffix. That board found that both “hotels” and “.com” were generic, and Hotels.com did not have the only URL that combined the two words. They do not produce a new meaning in combination or indicate source, the TTAB said, and thus the combination is generic. Furthermore, the TTAB argued, the existence of other sites incorporating “hotels” and “.com” shows that there’s a need to protect competitors who would use the proposed mark in their own names. The appeals court agreed, pointing out a similar decision in the case of Lawyers.com, In re Reed Elsevier Props., Inc., 482 F.3d 1376, 1378 (Fed. Cir. 2007).

The circuit court next tackled the evidence of distinctiveness offered by Hotels.com. This includes 64 declarations by the company’s customers, competitors and vendors that Hotels.com is not a generic name. The TTAB dismissed these outright as form letters. While the Federal Circuit found that rejected “unwarranted,” it said they were negated by the totality of other evidence. It next turned to a survey commissioned by Hotels.com, which found that 76% of respondents believed “Hotels.com” was a brand name. The TTAB criticized the design of this study, saying it was skewed in the company’s favor. It also said that respondents may associated a domain name with a brand name. The Federal Circuit took it one step further, suggesting that the TTAB could easily have made its decision on the basis of the genericness evidence alone. Thus, it concluded, the TTAB met its burden of proof and should not be overturned.

Second Circuit Rules Sale of Google Keyword Advertisements May Be a Use in Commerce Under Lanham Act

October 21, 2009 | Peter S. Lubin and Patrick Austermuehle

A trademark infringement lawsuit against Google may go forward despite a related ruling by the same court, the Second Circuit Court of Appeal ruled April 3. In Rescuecom v. Google, No. 06-4881-cv (2nd Cir. April 3, 2009), the appeals court ruled that its own previous ruling in 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir. 2005), which held that an online advertiser was not using the plaintiff’s trademark in commerce, did not apply. The court made no determination as to whether Google’s use of Rescuecom’s trademark was a use in commerce, as required by the Lanham Act to show infringement. Rather, it said Rescuecom should have a chance to present its evidence, and sent the case back to trial court.

The case is one of multiple lawsuits against Google alleging that the search engine giant infringes trademarks by selling them as keywords. When a Google user searches for these trademarked keywords, the competitor’s advertisements appear as “Sponsored Links.” Rescuecom (and plaintiffs in other suits) claimed that this created a likelihood of confusion among consumers searching for its own Web site. Rescuecom also alleged that Google’s Keyword Suggestion Tool, which automatically generates keywords for potential advertisers, infringed its trademark by suggesting the trademark to competitors. It sued Google on multiple grounds, but Google succeeded on a motion to dismiss some trademark claims for failure to state a claim (Rule 12(b)(6)), because the use of Rescuecom’s trademark was not a use in commerce under 1-800-Contacts.Rescuecom appealed.

In a ruling that will be important for Illinois online trademark infringement attorneys like us, the Second Circuit overturned that decision. It said 1-800-Contacts was not binding because it had material differences from this case. In that case, the defendant distributed free software displaying popups that were clearly advertisements and clearly indicated that the defendant, rather than the trademark holder, was responsible for them. This was not a “use in commerce” under the meaning of the Lanham Act, the court wrote, and thus the defendant was not liable for the trademark claims. (The court went into detail about the weighty issue of “use in commerce” in an appendix.) Furthermore, the defendant in 1-800-Contacts did not display the plaintiff’s trademark or sell it as a keyword.

Neither of those was true in Rescuecom, the Second Circuit wrote. Unlike in the previous case, in which competitors’ ads would pop up after a search for a broad product category like “eye care,” Google was actively using the plaintiff’s trademark as a keyword for sale and putting it s on display. Furthermore, the court said, Google was using the trademark as a suggestion for potential advertising customers using the Keyword Suggestion Tool. Google’s argument that placing the advertisements next to “organic” search results was similar to placing competing brands next to each other on a store’s shelf failed, the court said, because its Sponsored Links could be deceptive to consumers. The court emphasized that it made no ruling on whether this was likely to be confusing — necessary for proving a trademark infringement claim — but said Rescuecom should have a chance to make that case in trial court. Thus, it reversed and remanded the Rule 12(b)(6) decision.

‘Domainer’ Sues for Declaratory Judgment That Domain Name Does Not Violate Company Trademark

October 14, 2009 | Peter S. Lubin and Patrick Austermuehle

A federal case out of Las Vegas recently caught the eyes of our Chicago Internet trademark litigation attorneys. A Texas man who invests in domain names has sued to establish that one of his domains does not infringe on a similarly-named company’s trademark rights, the Las Vegas Sun reported Aug. 3. Gregory Ricks of Texas is a “domainer,” which means he buys domain names he believes will generate high traffic, for the purpose of either redirecting traffic to business partners or selling them. One of his domains is datecheck.com. He is suing DCAEV Inc., a Nevada company that owns date-check.com and the registered service mark DATE CHECK.

According to the article, DCAEV Inc. uses date-check.com to promote escort services in Las Vegas and other cities. The complaint in Ricks’ lawsuit alleges that this is a “well-recognized guise for illegal prostitution services.” Ricks alleges that he bought datecheck.com in 1999, believing it was a generic combination of words not being used by any commercial interest. Since 2001, he says, he has used it continuously to promote the Web sites of other businesses. However, he alleges, when DCAEV discovered that Ricks owned datecheck.com, it began in June 2008 to look for ways to “hijack” the domain name rather than buy it. This effort included an application in the same month to register DATE CHECK as a service mark, which was successful. In July of 2009, DCAEV sent Ricks a cease-and-desist letter threatening a trademark infringement, unfair competition and cybersquatting lawsuit.

Ricks responded with a lawsuit of his own. In his case, filed in Nevada federal district court, he claims that he was using datecheck.com in commerce before DCAEV, and that because of the different nature of their businesses, there is no likelihood of consumer confusion between his site and DCAEV’s site. He seeks a declaratory judgment saying his use of the site does not infringe DCAEV’s trademark or constitute “cybersquatting.” In another count, he also alleges that DCAEV’s service mark application falsely represented that it didn’t know of anyone else using the proposed mark in commerce, harming Ricks. He seeks cancellation of the service mark, unspecified damages, attorney fees and costs.

Unfortunately, DCAEV had no comment for the article. But as Illinois online trademark infringement lawyers, we will be interested in the outcome of this case. Under federal law, businesses and individuals may petition to cancel registration of a mark that they believe harms them, or when the registrant does not have legitimate control over a certification mark. We only have one side of the story, but if the allegations raised by Ricks are true, they imply that DCAEV registered a service mark with the intention of using it to force Ricks to give up datecheck.com through litigation. Lubin Austermuehle vigorously defends clients caught in this type of hostile trademark litigation.

Second Circuit to Rule on Whether Retailer May Be Held Liable for Failing to Stop Sales of Counterfeit Products

October 7, 2009 | Peter S. Lubin and Patrick Austermuehle

Our Illinois trademark infringement lawyers and many others involved in online commerce are awaiting an important ruling from the Second U.S. Circuit Court of Appeals. As the American Lawyer noted July 17, the court heard oral arguments the day before in Tiffany v. eBay (USDC SD NY opinion), in which the famous jewelry retailer sued online auction company eBay for trademark infringement. Tiffany does not claim that eBay directly infringed its trademarks, but that the auction company fails to do enough to stop its users from selling counterfeit Tiffany products. The appeal to the Second Circuit followed a loss for Tiffany in trial court, where a New York judge ruled that the company failed to make its case for trademark infringement, unfair competition, false advertising and dilution.

In the original suit, Tiffany alleged that eBay allowed hundreds of thousands of counterfeit silver jewelry items to be sold on its Web site over three years. Even though these items were sold by individual users of the site rather than eBay itself, Tiffany argued that eBay was liable for not taking strong enough steps to stop the infringing sellers. As Richard J. Sullvian, the trial judge in the case, observed, the heart of the case was the question of who should police Tiffany’s trademarks online. That judge found that the burden fell on Tiffany itself. Relying on Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982), the judge wrote that eBay should only be liable if it continued to permit sellers after it knew or should have known about their infringement. He ruled that it did not, and in fact went into detail about eBay’s efforts to reduce counterfeiting.

The same issues were the focus of the Second Circuit’s oral arguments, the American Lawyer said. According to the article, a trademark attorney for Tiffany argued that eBay is aware of ongoing problems with counterfeiting, yet continues to allow sellers to sell alleged Tiffany products at suspiciously low prices. He suggested remedies to the court including a zero-tolerance approach to sellers caught counterfeiting and a policy of verifying suspicious goods before they are publicly posted. In response, an attorney for eBay noted that the company spends $18 million a year fighting counterfeiters and takes down listings immediately when their legality is challenged. He further suggested that Tiffany is trying to force eBay to shoulder the work and cost of policing Tiffany’s brand.

This is a closely watched case, with amicus briefs filed by major online retailers and Internet companies, as well as by companies and industry groups whose products are frequently counterfeited. Our Chicago Internet trademark litigation attorneys would not be surprised to see a further appeal to the U.S. Supreme Court after the ruling comes down from the Second Circuit. Trademark holders like Tiffany have a very good reason to be vigilant about trademarks. Allowing others to hijack their brand names dilutes the value of their products, and thus their businesses. However, forcing online companies like eBay to preemptively take down all listings could cripple their business and, ironically, encourage users to move to a black market site willing to break the law.

Damages Not Duplicative Under Lanham Act and Anti-Cybersquatting Consumer Protection Act, Eleventh Circuit Rules

September 30, 2009 | Peter S. Lubin and Patrick Austermuehle

In a ruling that clarified laws important to our Chicago and Wheaton internet trademark infringement and business trial lawyers, the Eleventh U.S. Circuit Court of Appeals ruled July 9 that actual damages for service mark infringement under the Lanham Act do not duplicate statutory damages under the Anti-Cybersquatting Consumer Protection Act. In St. Luke’s Cataract and Laser Institute v. Sanderson, No. 08-11848 (11th Cir. July 9, 2009), the court also found that a lower court did not err in denying a motion for a new trial on copyright claims by the clinic and a motion for judgment as a matter of law by Dr. James Sanderson.

Sanderson worked at St. Luke’s, a private clinic, as its only cosmetic eye surgery specialist between 1995 and 2003. In 1998, they launched a Web site advertising Sanderson’s services at St. Luke’s, at lasereyelid.com and laserspecialist.com, using LaserSpecialist.com as a logo and service mark. Both the doctor and the clinic contributed content to the site, and a copyright notice attributed the site to the clinic. St. Luke’s paid directly for the site’s creation and maintenance, although Sanderson testified that these costs were deducted from his pay as “overhead,” which St. Luke’s disputed. The clinic’s webmaster provided backup disks to Sanderson.

Sanderson left St. Luke’s in June of 2003 to start a solo practice. The webmaster transferred ownership of the domain names into Sanderson’s name at his request. Sanderson later testified that he did not ask anyone else at St. Luke’s for permission to take ownership of the site. A few months later, Sanderson relaunched the site without references to St. Luke’s or links to its main site. The clinic noticed this in 2005 and removed links from its own site to Sanderson’s site. In January of 2006, it registered a copyright to a version of the site from 2003, claiming ownership of all of the content.

A month later, it sued Sanderson for copyright infringement, Lanham Act and Digital Millennium Copyright Act claims, Anti-Cybersquatting Consumer Protection Act (ACPA) claims, unfair competition, unfair business practices and misappropriation of the domain names. Sanderson counterclaimed for a declaratory judgment that the copyright was unenforceable. The jury found that the copyright was indeed unenforceable, but found for St. Luke’s on all other counts, awarding $150,000 in damages and about $587,000 in attorney fees and costs. The court later reduced the damages award to $98,000, saying the statutory damages under the ACPA duplicated the actual damages awarded for service mark infringement. Both parties appealed on multiple grounds. The Eleventh took up the questions of the duplicative damages; the issue of whether Sanderson should have succeeded on his motion for a judgment as a matter of law on the unfair competition and service mark claims; and the issue of a new trial for St. Luke’s on the copyright claims.

The Eleventh affirmed the trial court on every issue but the duplicative damages, which it found were not duplicative, for several reasons. The Anti-Cyberpiracy Act explicitly says that damages should be awarded in addition to any other civil action or remedy available. Furthermore, the court argued, the laws allow damages for different purposes — the ACPA awards them as sanctions against bad faith conduct, while the Lanham Act awards them as compensation for losses. The Lanham Act allows plaintiffs to choose a statutory damages award rather than an award of actual damages, the court noted. E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 278 (5th Cir. 2002). Thus, it remanded that part of the case, with instructions to reinstate the cyberpiracy damages award.

However, it affirmed the trial court on the new trial issue and the judgment as a matter of law issue. Citing extensive evidence from the trial, it found that the jury had good reason to find that the clinic’s copyrights to the site may not be valid. One copyright was not registered until months after the clinic filed its suit, the court noted, which violates well-established precedent saying that a valid copyright is a necessary prerequisite for suing. The other copyright was registered beforehand, it said, but with overly broad claims that attempted to copyright stock photos, material Sanderson provided and copy from Botox manufacturers. The court noted that intentional misrepresentations and omissions can render a copyright invalid. Original Appalachian Artworks,
Inc. v. Toy Loft, Inc., 684 F.2d 821, 828 (11th Cir. 1982). Because there was evidence that St. Luke’s may have intentionally misrepresented information on its application for the earlier copyright, the court found that it was not entitled to a new trial on that claim.

Finally, the court denied Sanderson’s claim that the trial court should have granted judgment as a matter of law on the service mark infringement and unfair competition claims. There was sufficient evidence to show that the name “LaserSpecialist.com” was a service mark for St. Luke’s, the opinion said, and that it was worthy of protection. Furthermore, the court said, there was sufficient evidence to show that the term had acquired a secondary meaning, as the law requires. St. Luke’s had advertised it extensively for several years, and evidence showed that patients both used it and were referred to it frequently. Thus, there was a clear likelihood of confusion, as required by the law — meaning that the trial judge did not err in denying judgment as a matter of law.

Software Company Sues Google for Allowing Competitors to Buy Advertisements Using Its Trademarks

September 9, 2009 | Peter S. Lubin and Patrick Austermuehle

As Illinois Internet trademark infringement attorneys, we have kept track of the series of lawsuits filed against Google for selling advertisements using trademarked names and phrases. So we were not surprised to see an article in BusinessWeek July 13 announcing that Rosetta Stone, a maker of language-learning software, has sued Google for allowing competitors to buy its name for use in its Google AdWords advertisements. This was the ninth such lawsuit against Google for the same practices, although some have since been resolved.

Under the program, competitors to Rosetta Stone may bid for the right to have their own advertisements appear on the page of search results when a user searches for “Rosetta Stone.” The company contends that this is an illegal use of its trademark that forces it to spend thousands of dollars bidding on the keywords, so that competitors cannot have them. According to the article, the lawsuit was inspired by the loosening of Google’s AdWords restrictions. Until June 15, companies could not put the competitor’s name in their advertisements, although they could purchase the right to appear when users search for competitors. Now they may do either. This is tantamount to allowing competitors benefit from the goodwill and name recognition Rosetta Stone has invested in building, the company’s general counsel said.

The lawsuit’s chances are unclear. As the article points out, the case will likely hinge on whether consumers are legitimately confused by Google’s practices. No court has clarified this, making it an unsettled area of the law. However, in a different case, the Second U.S. Circuit Court of Appeals reinstated a software company’s lawsuit against Google, saying selling trademarks as keywords counts as a “use in commerce” under trademark law. While trial courts in other circuits, including our own Seventh, are free to disagree, our Chicago Internet trademark litigation lawyers believe this is a promising sign that courts will allow a jury to consider the likelihood of consumer confusion.