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  • Copyright fair use – Designer Skin LLC v. S & L Vitamins, Inc.
  • Copyright – Fair Use with Perfect 10 v. Google, Inc.
  • What is spam – Law
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  • In re: Asia Global Crossing, Ltd., et al.

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Court holds that unauthorized internet reseller of plaintiff’s tanning products is not guilty of trademark infringement as a result of its use of plaintiff’s trademarks in the meta tags of a website at which such products are sold, and as search engine keywords triggering the display of a link to such a website.  In reaching this result, the Court rejected plaintiff’s claim that such use of its marks causes actionable ‘initial interest confusion’ by directing those searching for plaintiff’s site to that of the defendant.  To sustain such a claim, holds the court, defendant’s conduct must be deceptive.  Plaintiff failed to meet this burden because defendant’s site does indeed offer plaintiff’s products for sale, and thus, its use of plaintiff’s mark in the site’s meta tags is not deceptive, but rather accurately describes the contents of defendant’s site.  This was true, held the Court, notwithstanding the fact that S & L offered plaintiff’s competitors products for sale on its site as well.

The Court also dismissed trademark dilution claims arising out of defendant’s use of plaintiff’s marks.  The Court held that, under the circumstances, defendant’s use of plaintiff’s marks in the meta tags of its site, and as search engine key words, constituted a permissible nominative fair use of those marks.  To establish that a use of a trademark qualifies as a permissible nominative fair use, the defendant must ‘do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.’  Notably, the Court reached this result because plaintiff failed to submit adequate evidence as to the impact this use of its marks had on the listing of defendant’s site in search results for plaintiff’s mark.  The Court left open the possibility that such a use of plaintiff’s mark may not qualify as a nominative fair use if in fact it caused defendant’s site to appear at or near the top of search engine results for plaintiff’s mark, and thereby suggested that plaintiff sponsored or endorsed defendant’s site.

The Court denied so much of defendant’s motion for summary judgment which sought dismissal of copyright infringement claims arising out of its use of electronic renderings of plaintiff’s products to promote the sale of such products on its web site.  Issues of facts as to whether defendant copied such images from plaintiff’s web site, or created its own, precluded an award of summary judgment.  In allowing this claim to proceed to trial, the Court rejected defendant’s argument that its alleged use of plaintiff’s images was protected as a fair use.  Notwithstanding the fact that defendant’s use did not effect the potential market for plaintiff’s images – which plaintiff does not offer for sale – the Court rejected defendant’s fair use argument, pointing to the fact that its use was commercial, and copied plaintiff’s image, which was a creative work, in its entirety.

Finally, the Court rejected plaintiff’s claim for intentional interference with contractual relations, which arose out of prohibitions contained in contracts with plaintiff’s distributors precluding their resale of plaintiff’s products to Internet resellers such as defendant.  Defendant obtained plaintiff’s products from tanning salons, to whom the distributors were permitted to sell such products.  Because there was no evidence either that such tanning salons were acting as defendant’s agent in purchasing goods from plaintiff’s distributors, or that defendant directly purchased such goods from the distributors in breach of the prohibitions contained in their agreements, this claim failed.

Unauthorized Internet Reseller Use Plaintiff’s Mark On Its Site To Market Plaintiff’s Products, In The Site’s Meta Tags, And In Keyword Advertisements

Plaintiff Designer Skin LLC (“Designer Skin”) manufactures tanning products.  To promote such products, Designer Skin uses various trademarks of which it is the registered owner.  Designer Skin also maintains a website, at which it has posted images of its products to promote their sale.  Plaintiff holds the copyright in such images.

Designer Skin sells its tanning products via independent distributors.  By agreement, such distributors are prohibited from selling plaintiff’s products to Internet resellers.  They are permitted, however, to sell such products to tanning salons.
Defendant S & L Vitamins (“S & L”) is an internet retailer which sells both Designer Skin’s tanning products, and those of its competitors, online at its website.  To aid in its marketing of plaintiff’s products, S & L’s website contains images of plaintiff’s products, which products are identified on defendant’s site by Designer Skin’s trademarks.  Defendant also uses Designer Skin’s trademarks in the meta tags of its website to aid in alerting third parties of defendant’s ability to sell such products.  In addition, S & L purchases keyword advertisements from search engines which cause defendant’s site to appear in the results of searches incorporating plaintiff’s marks in their search terms.

Defendant S & L does not obtain its supply of Designer Skin tanning products directly from either Designer Skin or its distributors.  Instead, S & L orders such products from tanning salons, who in turn order them from Designer Skin distributors.  S & L pays such tanning salons an agreed mark-up on such orders, ranging from 10-20% depending on the product purchased.

Upset with defendant’s conduct, plaintiff commenced suit, charging defendant with trademark infringement and dilution, copyright infringement, and tortuous interference with contractual relations.  The parties cross-moved for summary judgment.

No Initial Interest Confusion Because Defendant’s Use Of Plaintiff’s Marks Is Not Deceptive As Defendant Offers Plaintiff’s Products For Sale

The Court granted so much of defendant’s motion which sought dismissal of plaintiff’s trademark infringement claim.  At the hearing of its motion, plaintiff conceded that S & L’s use of plaintiff’s mark on its website to offer plaintiff’s products for sale did not constitute actionable trademark infringement.

It rested its claim instead on defendant’s use of plaintiff’s trademark in the meta tags of its website, and its purchase of search engine key word advertisements triggered by plaintiff’s marks.  Such uses, argued plaintiff, constituted actionable initial interest confusion.

The Court rejected this argument.  To cause initial interest confusion, defendant’s use of the mark must be deceptive.  Said the Court:

Initial interest confusion has been equated to a ‘bait and switch’ scheme.  It occurs when potential customers are lured away from a trademark holder’s product to a competitor’s product through the deceptive use of the holder’s mark.  Deception, it bears emphasizing, is essential to a finding of initial interest confusion.

The Court held that S & L’s use of plaintiff’s marks was not deceptive, because S & L did, in fact, offer plaintiff’s products for sale on its site.  The fact that S & L also offered for sale products from Designer Skin’s competitors did not alter this result. Said the Court:

In contrast to the deceptive conduct that forms the basis of a finding of initial interest confusion, S & L Vitamins uses Designer Skin’s marks to truthfully inform internet searchers where they can find Designer Skin’s products.  Rather than deceive customers into visiting their websites, this use truthfully informs customers of the contents of those sites.  Indeed, in practical effect S & L Vitamins invites Designer Skin’s customers to purchase Designer Skin’s products.  The fact that these customers will have the opportunity to purchase competing products when they arrive at S & L Vitamins sites is irrelevant.  The customers searching for Designer Skin’s products find exactly what they are looking for when they arrive at these sites.  S & L Vitamins is not deceiving consumers in any way.  Thus, its use of the marks does not cause initial interest confusion.

In reaching this result, the Court disagreed with a contrary holding of the Tenth Circuit in Australian Gold Inc. v. Hatfield, 436 F.3d 1228 (10th Cir.  2006).  Said the Court:

In this Court’s view, there is a meaningful distinction between (1) using a mark to attract potential customers to a website that only offers products of the mark holder’s competitors and (2) using a mark to attract potential customers to a website that offers the mark holder’s genuine products as well as the products of competitors.  As discussed above, in the latter situation no ‘bait and switch’ occurs.

Trademark Dilution Claims Fail

The Court also granted so much of defendant’s summary judgment motion which sought dismissal of plaintiff’s trademark dilution claims.  The Court held that defendant’s use was a protected nominative fair use of plaintiff’s trademark, and hence non-actionable.  To constitute a nominative fair use, a use must meet three elements:

First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.

Plaintiff argued that defendant’s use of its mark in its site’s meta tags, and to trigger key word advertisements, caused listings for defendant’s site to appear high in the search engine results for plaintiff’s marks, and thereby suggested plaintiff’s sponsorship of defendant’s site.  The Court recognized that such an argument may have merit.  However, because plaintiff failed to prove that listings for defendant’s site did in fact appear high in the results of searches for plaintiff’s marks, that argument failed here.  The Court also noted that plaintiff’s dilution claim may also fail because it could not demonstrate that it suffered the injury the Dilution Act was designed to prevent – namely an association between plaintiff’s mark and a different good or service.  Here, the mark was used to refer to plaintiff’s products.  “Thus [concluded the Court] the harm the anti-dilution statute seeks to prevent is absent from this case.”

Use Of Copyrighted Promotional Images To Market Copyright Holder’s Products Not A Protected Fair Use

Issues of fact precluded the Court from determining the validity of plaintiff’s copyright infringement claims.  These claims arose out of defendant’s use of images of plaintiff’s products on its site to market those products.  Designer Skin claimed that the images defendant S & L used were in fact copies of copyrighted images of Designer Skin’s products found on Designer Skin’s own website.  S & L disputed this fact, claiming that it had in fact created the images it used from original photographs it took of plaintiff’s products.  The Court held that this issue must be resolved at trial.

In reaching this result, the Court rejected S & L’s claim that its alleged use in marketing plaintiff’s products of copyrighted images plaintiff created for that very purpose constituted a permissible fair use that did not infringe plaintiff’s copyright in these images.

By statute, the court must weigh four factors to determine whether a use is in fact a permissible fair use of a mark:
(1) the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes: (2) the nature of the copyrighted work; (3) the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and (4) the effect of the use upon the potential market for or value of the copyrighted work.  17 U.S.C. Section 107.

Notwithstanding the fact that the most important of the four factors – the effect of the use upon the potential market for the copyrighted work – favored the defendant, the Court held that such an unauthorized use of plaintiff’s images to advertise its products was not a permitted fair use.  Thus, the Court found that the proposed use would have no effect on the potential market for plaintiff’s images, which it did not sell.  However, because defendant’s use was commercial and copied plaintiff’s image, which was a creative work, in its entirety, the Court held it was not a permitted fair use.

Intentional Interference With Contractual Relations Claims Fail

Finally, the Court dismissed plaintiff’s claim for intentional interference with contractual relations.  This claim arose out of prohibitions contained in plaintiff’s contracts with its distributors precluding their resale of plaintiff’s products to Internet resellers such as defendant.  Defendant obtained plaintiff’s products from tanning salons, to whom the distributors were permitted to sell such products.  The tanning salons make a 10-20% profit on the transaction, depending on the item purchased.  Plaintiff failed to submit any evidence that defendant purchased these products directly from distributors.  Similarly, held the Court, plaintiff failed to show that any tanning salon acted as S & L’s agent when it purchased the products at issue.  Instead, S & L bought the products from the tanning salon, which, in turn, bought the products from the distributors.  The Court accordingly dismissed this claim on defendant’s motion for summary judgment.

Case details: No. CV 05-3699-PHX-JAT (D. Arizona, May 19, 2008)

On a motion for a preliminary injunction, the Court holds plaintiff likely to succeed on copyright infringement claims arising out of defendant Google’s display of “thumbnail” images of plaintiff’s copyrighted photographs in response to users’ searches for images matching their description.  The Court held that it is likely to find that such a display is not a fair use of plaintiff’s works, given, inter alia, its commercial nature, and the fact that such use likely interferes with a market for plaintiff’s photographs.

The Court further holds that plaintiff is not likely to prevail on copyright infringement claims arising out of Google’s use of “in-line links” that incorporate into Google’s own web pages the web pages of third parties that themselves contain infringing copies of plaintiff’s copyrighted photographs.  These “in-line links” allow users who are interested in a thumbnail image presented in Google’s search results to view the actual image on the web page on which Google found it.  The Court held that it is not likely to find that Google directly infringed plaintiff’s copyrights by such conduct, because, adopting the “server test,” it is the third parties who created the websites that contain the infringing images, and not Google, that are displaying and/or distributing them in violation of plaintiff’s copyright.

The Court further held that it was not likely to find Google guilty of contributory or vicarious copyright infringement as a result of such third party displays, notwithstanding any advertising Google may deliver to the web pages that contain such images, or revenue Google may derive therefrom.  Google is not guilty of vicarious infringement because it does not possess the requisite ability to control the content of such third party sites, or compel the third parties that operate them to remove infringing content found thereon.  Google’s ability to remove such websites from search engine results does not constitute such control.  Nor, the Court stated, was it likely to hold that Google encourages or assists such infringement sufficiently to be guilty of contributory infringement.  The Court held that the record before it was insufficient to establish that the third parties displaying plaintiff’s content were motivated by the revenue they might derive from the display of Google ads or that such revenue contributed to their posting of the infringing images in question.

Plaintiff Perfect 10 holds the copyright is a number of photographs of nude women.  Perfect 10 derives revenue from such images by publishing them in a magazine and displaying them on a subscription website.  Perfect 10 also derives revenue by allowing a third party to sell “thumbnails” of such images for download to cell phones.  A “thumbnail” is a lower resolution version of a full size image.

Defendant Google operates one of the world’s foremost search engines.  Among Google’s search offerings is the ability to search for images.  Google catalogues images it finds on the Web by the text that surrounds the image on the web page on which it is found.  When a user conducts an image search, Google uses this text to present a user with a series of thumbnail images its search engine deems responsive to a user’s request.  These thumbnail images are created by Google from the original image Google located on the Web.  Google stores these thumbnails on its own servers.

Each of the thumbnail images presented by Google to the user contains an “in-line link” to the web page on which Google’s search engine located the image in question.  If the user clicks on the thumbnail, the “in-line link” pulls into a Google branded web page the third party webpage containing the image in question.  At the top of this web page is a frame containing information provided by Google, including Google’s trademark and the thumbnail image of interest to the user.  At the bottom of this webpage is a second frame, which contains the third party web page on which the full image was found by Google’s search engine.  The user’s browser indicates that the resulting two frame web page is found on Google’s website, and not that of the third party.  In reality, however, the information found on the lower frame is supplied by servers operated by the third party, and not Google.

Google derives a significant portion of its revenue from various advertising programs.  Its AdWords program allows Google to sell to third parties advertisements that appear on its own website.  Its AdSense program allows it to sell to third parties advertisements that appear on websites operated by others.  These third party website operators agree to permit Google to display ads on their websites that Google believes will be of interest to those who view them.  The revenues derived from the display of these advertisements are split between Google and the operator of the website on which the ads appear.  According to Google, a web page who’s images appear in its image search results is ineligible for participation in the AdSense program.  Plaintiff, however, submitted evidence that showed that a number of the third party web pages that contained infringing images also contained Google AdSense ads, raising an issue of fact as to Google’s enforcement of this policy.

Various third parties operate websites which contain infringing copies of plaintiff’s photographs.

Plaintiff commenced this suit, charging Google with infringing the copyrights it holds in various photographs both as a result of Google’s display of thumbnails thereof in its search results and as a result of its use of “in-line links” to third party websites which themselves displayed images that infringed plaintiff’s copyrights.  Google’s thumbnail images were created from the infringing images found on these third party websites.

Plaintiff moved for a preliminary injunction.

The Court found that “Perfect 10 is likely to succeed in proving that Google directly infringes by creating and displaying thumbnail copies of its photographs.”  As stated above, Google creates “thumbnails” of images it locates on the web which it stores on its own servers.  These images, reduced in size and resolution from the original, are delivered to the user in response to his search for various images.  Such “thumbnails” include images derived from plaintiff’s copyrighted works.  The Court held that, by displaying such thumbnails in response to a user’s search, Google was likely to have directly infringed plaintiff’s copyrights in such works.

The Court further held that this was not likely to constitute a fair use of plaintiff’s works.  The Court recognized that there was a transformative component to defendant’s use – while plaintiff provided its images for entertainment, defendant provided its images to enable users to better use the web, and find images located thereon.

This use, however, was outweighed by the commercial nature of Google’s use, and the competition it offered to plaintiff’s marketing of its photographs.  The Court held Google’s use was commercial because, via its AdSense program, it derived revenues each time a user clicked on the thumbnail, and caused the third party website which contained both it, and a Google ad, to appear.  Moreover, it held that Google’s use was likely to be found to be consumptive, because it likely competed with plaintiff’s program of licensing its own thumbnails for download to cell phones.  As a result, the Court held that it was likely to reject Google’s fair use defense, and find that Google had directly infringed plaintiff’s copyrights by its display of thumbnail images.

The Court held that Perfect 10 was unlikely to prevail on its claim that Google directly infringed its copyrights by in-line linking to the web pages of third parties which themselves contained infringing images.  To be guilty of direct copyright infringement, the defendant must violate one of the exclusive rights granted to the copyright holder in its copyrighted work.  Here, plaintiff claimed that Google’s in-line links resulted in both its display and public distribution of its copyrighted works in violation of plaintiff’s exclusive rights therein.

The Court held it was not likely to agree with this contention, and accordingly, that Perfect 10 was not likely to prevail on this direct infringement claim.

Adopting the “server test,” the Court held it was the third parties who created the web pages on which the infringing images were found, and not Google, that were displaying and distributing plaintiff’s works.  Said the Court:

The Court concludes that in determining whether Google’s lower frames are a “display” of infringing material, the most appropriate test is also the most straightforward: the website on which content is stored and by which it is served directly to a user, not the website that in-line links to it, is the website that “displays” the content.

The Court adopted this test over the ‘incorporation theory’ espoused by Perfect 10 for a number of reasons, including the fact that it “is based on what happens at the technological-level as users browse the web,” is “readily understand[able],” and leaves those who are the initial direct infringers – and the parties who misappropriated plaintiff’s content in the first place – responsible for the infringement at issue.

As Google’s in-line linking did not result either in its display or distribution of Perfect 10’s images, the Court held it was not likely to find such conduct directly infringed plaintiff’s copyright.

Nor, held the Court, was it likely to find that Google was guilty of contributory or vicarious copyright infringement as a result of its involvement in the display of these infringing materials by third parties.  To be guilty of contributory infringement, a defendant must be shown both to have knowledge of the infringing activity of third parties, and to have “induced, caused or materially contributed to that activity.”  Perfect 10 argued that Google did indeed contribute to this activity by providing both a revenue stream via its AdSense program, and an audience via its image search.

The Court held that it was not likely to find such allegations sufficient to sustain a claim of contributory infringement.  Significantly, held the Court, there was no evidence on the record before it:

that AdSense materially contributes to direct infringement occurring on third-party websites.  Although AdSense may provide some level of additional revenue to these websites, Perfect 10 had not presented any evidence establishing what that revenue is, much less that it is material (either in its own right or relative to those websites’ total income).  There is no evidence that these sites rely on Google AdSense for their continued existence or that they were created with the purpose of profiting from the display of AdSense advertisements.

The Court similarly held that Perfect 10 was not likely to prevail on its claim that Google was vicariously liable for the infringing activities of such third parties.  To be liable for vicarious infringement, a defendant must both obtain a direct financial benefit from the infringing activity and decline to exercise its right and ability to supervise or control it.

The Court held Google lacked sufficient ability to supervise or control the content of the third party websites at issue to be liable for vicarious copyright infringement.  Its ability to remove such a website from its search results was simply insufficient to meet this burden.  Said the Court:

Google does not exercise control over the environment in which it operates – i.e., the web.  Google’s ability to remove a link from its search index does not render the linked-to site inaccessible.  The site remains accessible both directly and indirectly (i.e., via other search engines, as well as via the mesh of websites that link to it).  If the phrase “right and ability to control” means having substantial input into or authority over the decision to serve or continue serving infringing content, Google lacks such right or ability.

*          *          *

In addition, Google’s right and ability to remove infringing websites from its index would make it more difficult for such websites to be found on the web, but those sites would continue to exist anyway.  Google cannot shut down infringing websites or prevent them from continuing to provide infringing content to the world.

The Court accordingly held that Perfect 10 was not likely to prevail on its claim of vicarious copyright infringement.

Based on the foregoing, the Court found Perfect 10 entitled to injunctive relief with respect to Google’s display of thumbnail images of plaintiff’s copyrighted works, and directed the parties to jointly propose the language of such an injunction.

Court decision in pdf format coming soon…

The problem of unsolicited email (or “spam” as its commonly referred to) continues to grow.  For many people, the number of junk messages they now receive promoting sexual aids, get rich quick schemes or pleas to help fictious deposed African leaders, has overtaken the number of legitimate messages they receive.  Not only does the arrival of such messages create a distraction during the work day, but the apparent increase in the last few months has been overwhelming many email delivery systems, causing a general slow down in the transmission of legitimate messages.

Some US states, such as California, have passed anti-spam legislation.  There is also a US federal bill being considered, The Can Spam Act of 2003.  These legislative responses typically prohibit senders from disguising their identities or including deceptive subject lines.  Penalties can include huge fines or even prison terms.

The California law, due to take effect on January 1, 2003, takes an “opt-in” approach, similar to what the European Union as adopted.  This is the contrast to the “opt-out” approach taken by the proposed federal bill.  The California bill makes it illegal to send an email to an email address utilized by a resident of, or accessed from California unless the sender has a preexisting relationship with the sender or has been given direct consent.  Violations allow recipients to sue for damages of US$1,000 per unsolicited message.  Legitimate businesses all over North America are scrambling to vet their email lists before the end of the year.

Legislative measures, while welcomed by most businesses and users, won’t totally eliminate the problem because certain types of messages will still be allowed and because many spammers can use foreign servers.  Consequently, many users have been turning to technical means to deal with the problem.

One option for dealing with the problem is to set the very basic (but often, not very effective) spam filtering options available in email programs such as Microsoft Outlook.  These can often be configured to filter incoming messages based either on keywords contained in the messages or based on the identity of the sender.  Although Outlook ships with a default list of keywords that can be used to screen for spam, larger and more effective lists are available on the Internet and can be installed as a replacement to what Microsoft provides.  The keyword approach can typically catch 30-50% of spam messages. Filtering based on the identify of the sender is usually not effective as most spammers will use a different email address each time they send out a broadcast.

A step beyond the built-in anti-spam functionality built into certain email programs is to install any one of the dozens of programs now available which work in conjunction with a user’s email programs to provide added features and more sophisticated functionality.  Programs of this type are available either for installation on the user’s PC or on the organization’s mail server.

The premium approach, being increasingly adopted by many organizations, including larger law firms, is to outsource spam control to a third party filtering service.  Due to the large volume of emails processed by such service providers, they are better able to see patterns and detect spam.  In addition to filtering spam, most also offer a virus scanning capability.  Some also offer additional features, like the ability to send a copy of incoming messages to user’s cell phones as an SMS message.  This is a handy capability for those of us who are still walking around without a Blackberry and don’t want to lose touch while traveling or during all day meetings outside the office.

Some of the outsourced antispam services hold onto any messages identified as potential spam, requiring the customer to periodically log in and review the list of captured messages.  Other services insert a special flag in the header portion of such messages and then forward them onwards to the recipient.  The recipient can then run a filter in their email program to automatically move any such flagged messages into a designated folder on their on system for periodic review.  The later can be easily accomplished by setting up a rule in Microsoft Outlook.

In either case, it is prudent to not simply automatically delete messages identified as spam but rather to set up a once a day routine to skim through them.  This 30 second process can help ensure that legitimate messages are not inadvertently ignored.  Most antispam filtering services and software will also usually provide the user with the ability to define how aggressively they want the system to filter the incoming messages.

Based on personal experience, the above approaches can help eliminate 80-90% of the unwanted emails.  An option offered by some programs is the ability to require verification of any message coming from a sender who is not in the recipient’s address book.  The program sends back an email to  such senders asking them to confirm that they sent the original message.  Unless such a confirmatory email is received, the original message is flagged as spam and not delivered.  This step, which only needs to be done once per sender, is effective because most spam messages are sent with forged or non-existent return addresses or by automated systems which cannot respond to such requests.

An important rule to follow for junk email is to delete such messages without opening them.  This also means turning off any automatic preview functionality provided by email programs such as Outlook.  A trick used by many spammers is to send their messages invisible embedded codes (called Web bugs) that “call home” when the message is viewed.  This technique is used to tell the spammer that the email address is valid and can be used again (or sold).  Outlook 2003, which was just recently released, has been updated to block such code.

What Is Copyright?

Employee Does Not Waive Attorney Client Privilege Simply By Communicating Over Company Email System

Court holds that the use of a company’s e-mail system by an employee to send personal e-mails to the employee’s personal counsel does not, without more, waive any attorney client privilege in such communications.  Whether a waiver had occurred must instead be resolved by examining the employee’s subjective and objective expectations that the communications would be confidential.  In analyzing this question, Courts should look for guidance to cases that address an employee’s privacy rights in e-mail sent over company e-mail systems, which hinge on the resolution of a similar question — the reasonableness of an employee’s expectation of privacy in such e-mails.  Issues of fact as to the existence and application of company computer usage policies, and whether employees were warned that the Company could inspect e-mails sent over the company’s system, prevented the Court from resolving the issue at this time.

The Court further held that any privileges attendant to certain additional e-mails between company employees and their personal counsel had been waived by their voluntary transmission of such e-mails both to counsel representing the company, and to a consultant rendering services to the company.

Employees Use Company Email System To Send Email To Personal Counsel

Various officers (the “Officers”) of Asia Global Crossing (“AGC” or the “Company”) sent personal e-mail over AGC’s company e-mail system to their personal counsel (“Server E-mails”).

AGC filed for bankruptcy protection.  A Trustee was thereafter appointed, who began an investigation into certain transactions involving the Officers.  In connection with this investigation, discovery was sought from the Officers pursuant to Fed. Bankruptcy Rule 2004.

After the Officers were directed to leave AGC’s premises, it was discovered that copies of the e-mails at issue were still resident on the Company’s e-mail servers.  The Trustee brought this motion to compel the Officers to produce these e-mails.  The Officers resisted, claiming the Server E-mails were privileged.  The Trustee responded by asserting that any privilege had been waived by the use of the Company’s e-mail system to transmit these e-mails.

The Trustee also sought to compel a consultant of AGC to produce various e-mails between the Officers and their counsel.  These e-mails had been voluntarily sent both to this consultant, and to attorneys then representing AGC.  Again, the Officers claimed that these e-mails were protected by applicable privileges.

No Per Se Waiver

The Court rejected the Trustee’s claim that the Officers had waived any privilege that attached to the Server E-mails simply by transmitting them over the Company’s e-mail system.  Said the Court:

The main question raised by the current motion is whether an employee’s use of the company e-mail system to communicate with his personal attorney destroys the attorney-client, work product or joint defense privileges in the e-mails where the employee and his former employer’s Trustee have become adversaries.  Assuming a communication is otherwise privileged, the use of the company’s e-mail system does not, without more, destroy privilege.

The Court found support for this conclusion in New York and California statutes that provide that “a privileged communication does not lose its privileged character for the sole reason that it was sent by e-mail or because persons necessary for the delivery or facilitation of the e-mail may have access to its content.”  (citing NY CPLR § 4548 and Cal. Evid. Code § 917 (b)).

Employee’s Expectation Of Confidentiality Central

Applying Federal Law, the Court held that for a communication to be privileged, it must be confidential.  This, in turn, required the party claiming privilege to establish both that he subjectively intended it to remain confidential, and that “under the circumstances, [the communication] was reasonably expected and understood to be confidential.”

In analyzing this later, objective component, the Court held it was appropriate to look at cases which had addressed an analogous issue – namely, whether an employee has a protectible right of privacy in e-mail sent over a company e-mail system.  As explained by the Court, in analyzing whether an employee has a reasonable expectation of privacy, courts look at “four factors:  (1) does the corporation maintain a policy banning personal or other objectionable use, (2) does the company monitor the use of the employee’s computer or e-mail, (3) do third parties have a right of access to the computer or e-mails, and (4) did the corporation notify the employee, or was the employee aware, of the use and monitoring policies.”

These factors should be applied in determining whether an employee objectively could expect his privileged communications with counsel to remain confidential when transmitted over a company e-mail system.  Said the Court:

The question of privilege comes down to whether the intent to communicate in confidence was objectively reasonable.  There is a close correlation between the objectively reasonable expectation of privacy and the objective reasonableness of the intent that a communication between a lawyer and a client was given in confidence.  Accordingly, the objective reasonableness of that intent will depend on the company’s e-mail policies regarding use and monitoring, its access to the e-mail system, and the notice provided to the employees.

Issues of fact precluded the Court from resolving this issue on the instant motion.  The parties disputed whether AGC had a computer usage policy apprising them of the possibility their e-mails could be inspected, if AGC had monitored employees’ e-mail pursuant to such policy, and if AGC had given its employees notice of either such policy, or monitoring activities.  I am advised by counsel for one of the parties that this issue was never resolved by the Court, because the underlying dispute was subsequently settled.

Attorney Client and Work Product Privileges Waived By Transmission Of Emails To Third Parties

The Court did hold that the Officers had waived any privilege in e-mail communications between them and their counsel, which they had voluntarily shared with both AGC’s bankruptcy counsel, and a consultant rendering services to AGC.  Said the Court:

The e-mail chains are not privileged, or alternatively, any privilege was waived, because they were sent to [AGC’s lawyer] and [consultant].  See In re Horowitz, 482 F.2d at 81 (“Subsequent disclosure to a third party by the party of a communication with his attorney eliminates whatever privilege the communication may have originally possessed, whether because disclosure is viewed as an indication that confidentiality is no longer intended or as a waiver of the privilege.”)

Similarly, any work product privilege that attached to these communications were waived by disclosing them to an adversary.  “Since the communications involved a potential dispute between the [Officers] and [AGC], the disclosure of the communications to [AGC’s] attorney and consultant obviously put the communication in the hands of the [Officers’] adversary.”

Here you can find the court decision for Global Crossing Bankruptcy here Asia-Global-Crossing-SD-NY-Bankruptcy (PDF)

Plaintiffs brought suit to challenge the constitutionality of a statute passed by the State of Georgia (O.C.G.A. § 16-9-93.1) which, inter alia, makes it a crime for:

any person … knowingly to transmit any data through a computer network … for the purpose of setting up, maintaining, operating, or exchanging data with an electronic mailbox, home page, or any other electronic information storage bank or point of access to electronic information if such data uses any individual name … to falsely identify the person …

and for

any person … knowingly to transmit any data through a computer network … if such data uses any … trade name, registered trademark, logo, legal or official seal, or copyrighted symbol … which would falsely state or imply that such person … has permission or is legally authorized to use [it] for such purpose when such permission or authorization has not been obtained.

Plaintiffs objected to this statute because they believed it “impos[ed] unconstitutional content-based restrictions on their right to communicate anonymously and pseudonymously over the Internet …” when, among other things, contacting home pages of others, participating in chat room conversations, or posting to various usenet groups. Such was arguably prohibited by the statute, which made it a crime to “falsely identify” oneself when transmitting electronic data.

Plaintiffs also objected to the scope of the statute’s prohibition on the usage of trademarks and logos in non-commercial hyperlinks.

Agreeing with the plaintiffs, the court determined that the “plaintiffs are likely to prove that the statute imposes content-based restrictions which are not narrowly tailored to achieve the state’s purported compelling interest … [and] that the statute is overbroad and void for vagueness.” Accordingly, the court enjoined Georgia from enforcing the statute.

The court held that the statute was not narrowly tailored to achieve defendants’ purpose of fraud prevention. Said the court:

[T]he statute is not narrowly tailored to achieve that end and instead sweeps innocent, protected speech within its scope. Specifically, by its plain language the criminal prohibition applies regardless of whether a speaker has any intent to deceive or whether deception actually occurs. Therefore, it could apply to a wide range of transmissions which falsely identify the sender, but are not fraudulent within the specific meaning of the criminal code.

The court further held that the statute’s prohibitions were overbroad. “The court concludes that the statute was not drafted with the precision necessary for laws regulating speech. On its fact, the Act prohibits such protected speech as the use of false identification to avoid social ostracism, to prevent discrimination and harassment, and to protect privacy, as well as the use of trade names or logos in non-commercial educational speech, news and commentary — a prohibition with well-recognized first amendment problems.” The court’s conclusion was buttressed by numerous existing statutes which permitted the regulation of the very activities sought to be covered by the statute at issue, including improper fraudulent conduct, and trademark infringement.

Lastly, of particular interest is the court’s determination that Georgia had articulated no compelling state interest that would justify the statute’s restriction on the use of trademarks and logos in hyperlinks. Said the court:

A fair reading of the clause, as written, is that it prohibits the current use of web page links. The linking function requires publishers of web pages to include symbols designating other web pages which may be of interest to a user. This means that an entity or person’s seal may appear on hundreds or thousands of other web pages, just for the purpose of enabling the linking system. The appearance of the seal, although completely innocuous, would definitely ‘imply’ to many users that permission for use had been obtained. Defendants have articulated no compelling state interest that would be furthered by restricting the linking function in this way.

Commentators have suggested that this passage of the Court’s decision creates a First Amendment right to utilize the trademarks of another in non-commercial hyperlinks. The validity of this proposition is sure to be tested in subsequent court proceedings.

The full text of this decision can be found on a web site maintaind by David Loundy.

One of the Internet’s greatest attributes is the hyperlink, which permits the “surfing” for which the Internet is famous. By clicking the mouse on a hyperlink, the user is transferred from one Web site to another. Typically, the linked sites are created by different individuals. Hyperlinks are found on virtually every Web site, including search engines, where they permit the user to assemble and review a number of sites that relate to a particular topic.

The law concerning the ability to use such links is in its infancy, with no definitive precedent. But after examining three law suits that have challenged uses of hyperlinks, one thing is clear — the cautious operator of a commercial Web site will either seek permission before linking to the site of another or only use links which transport the user to the home page of another’s site.

Hyperlinks are inserted into a Web site by the site’s owner, who can create the link without the assistance of the owner of the linked-to site. Under standard “netiquette,” such links are added without the permission of the linked site. Such is the case, in part, because the link benefits the linked site by bringing it additional viewers.

Recently, however, a series of lawsuits have drawn into doubt the continued viability of this practice. These suits are driven by a number of concerns, principal among them is the advertising potential of the Web. Advertisers are willing to post ads based on the traffic and number of viewers attracted to a site.

Because a site’s home page is generally the page most frequently visited, it is here that the most profitable ads are likely to be found. Linking can be used to transfer a user to pages deep within a site that contain content of interest, by-passing the home page of the linked site on which advertisements appear. The use of links in this manner threatens to dilute the advertising revenue generated by a site.

Linking can also be used to make the content of the linked site appear on the site on which the link is located permitting a site owner to profit from the content on a site he did not create, using it to draw traffic and advertisers to his site.

Some Web site owners also object to linking for the same reasons that traditional publishers, authors or owners of trademarks object to the unauthorized use of their works, such as dilution of trademarks, misappropriation or inappropriate display of their work, and other traditional infringement concerns. Collectively, these concerns have given rise to the challenges to ‘linking without permission’ advanced in the cases discussed below.

Scotland Case

The first court decision to address this issue was rendered by the Court of Session in Edinburgh, Scotland in Shetland Times Ltd. v. Dr. Jonathan Wills and Zetnews Ltd., (Lord Hamilton, J.)(Oct. 24, 1996).⁽²⁾ The court issued an “interim interdict” (a Scottish term for a temporary restraint) barring the defenders from creating hyperlinks that linked their site to that of the Shetland Times Ltd. (the pursuer), without the permission of the Shetland Times.

The pursuer owns and publishes a newspaper titled The Shetland Times newspaper. Versions of the paper appear both in print and on a Web site operated by the pursuer. The defenders own and/or operate a Web site on which they publish a news reporting service entitled The Shetland News.

Defenders reproduced verbatim a number of headlines appearing in The Shetland Times. These headlines were hyperlinked to the pursuer’s Web site. Clicking on the headline took the reader directly to the internal pages on the pursuer’s site on which the related story was found. As such, stated the court, “access to the pursuers’ items … can be obtained by by-passing the pursuers’ front page and accordingly missing any advertising material which may appear on it.”

The pursuer sought an interim interdict, directing defenders to cease this practice, which the pursuer claimed violated ” 7 and 20 of the Copyright Designs and Patents Act of 1988. Concluding that the pursuer had “a prima facie case that the incorporation by the defenders in their Web site of the headlines provided at the pursuers’ Web site constitutes an infringement …,” the court issued an interim interdict, temporarily directing that such linking be terminated, subject to further litigation on the subject.

Washington Post

The ability to link without permission is also the subject of a suit in the Southern District of New York, The Washington Post Company, et al. v. Total News, Inc.⁽³⁾ In this case, the challenged links did not transport the user into another’s site. Instead, the link effectively transported content from the linked site onto the site containing the link.

The plaintiffs each own famous trademarks under which they publish and create copyrighted news stories in various forms, including newspapers such as The Washington Post, magazines such as Time and Sports Illustrated, and television news programs, such as CNN Cable News Network. Each plaintiff operates a Web site which contains such copyrighted stories and trademarks. Plaintiffs derive advertising revenue as a result of the operation of their sites, and the number of users they attract.

Defendants operated a site on which a user could view articles and other content from plaintiffs’ sites, surrounded by advertisements placed on the site by defendants and from which they profited.

Defendants were able to achieve this result by utilizing “frame” technology. Frame technology permits the division of a Web page into a number of separate sections or frames, each of which appears simultaneously on the user’s screen and independently displays different images or content.

As alleged in plaintiffs’ complaint, defendants, within one frame of their site, featured links to the plaintiffs’ Web sites created without plaintiffs’ permission. Clicking on the link caused pages from plaintiffs’ sites to appear within this frame of defendants’ site.

The other frames on defendants’ site were filled predominantly with advertising, presumably supported by the traffic created by the ability to link to the various plaintiffs’ sites. (According to the complaint, these frames contained little or no substantive content created by defendants). These additional frames containing advertising, however, did not appear on the plaintiffs’ sites.

The links used in this case did not transport the user from defendants’ site to those of the plaintiffs. Instead, they effectively transported and incorporated content from plaintiffs’ site into that of the defendants. Defendants profited from this content by their receipt of the revenue generated by the advertisements appearing on their site.

Calling defendants’ site “parasitic,”⁽⁴⁾ plaintiffs sued, alleging that such unauthorized hyperlinking constituted misappropriation, unfair competition, trademark dilution and infringement, and false designation of origin.

The parties recently agreed to settle pursuant to an agreement submitted to the court for its approval. Under the settlement, the defendants agreed to stop linking plaintiffs’ sites into a frame located on defendants’ site, or to otherwise “directly or indirectly cause any plaintiff’s Web site to appear on a user’s computer screen with any material (e.g. URL, text, graphics, pop-up window, audio or other) supplied by or associated with defendants or any third-party, such as an advertiser…”.⁽⁵⁾

The parties left unresolved the issue of whether defendants had the right, without permission, to create a hyperlink that transported the user from defendants’ site to the sites created by plaintiffs. Under the settlement, plaintiffs granted defendants permission to create such links. If such permission was revoked, the parties agreed that defendants could litigate their rights to create such hyperlinks without plaintiffs’ consent.

The next development in this area is likely to come in a suit in the U.S. District Court for the Central District of California entitled Ticketmaster Corporation v. Microsoft Corporation.⁽⁶⁾

Ticketmaster sells tickets to entertainment events at various arenas and other venues throughout the U.S., and operates a Web site offering listings of upcoming live events. Once can purchase tickets on-line or via phone. Microsoft operates a Web site at seattle.sidewalk.com commonly known as a “city guide,” which features information about Seattle, including information concerning upcoming live entertainment events.

For those interested in purchasing tickets or obtaining more detailed information concerning ticket availability, a hyperlink was supplied by Microsoft, which took viewers to Ticketmaster’s Web site. These links were added without Ticketmaster’s approval.

Unlike the links in The Washington Post case, these links transported the viewer to the Ticketmaster site. But they bypassed the home page (and any advertising that appeared thereon), and took the user directly to that portion of Ticketmaster’s site which contains listings about particular venues. Once linked, the user saw the Ticketmaster “URL” in his browser, indicating that the user was at the Ticketmaster site.

In its Complaint, Ticketmaster claims that: “by accessing Ticketmaster’s live event information and services without Ticketmaster’s approval, and by prominently offering it as a service to their users, Microsoft is feathering its own nest at Ticketmaster’s expense. It is, in effect, committing electronic piracy. In this narrow corridor of cyberspace, Ticketmaster must maintain control of the manner in which others utilize and profit from its proprietary services, or face the prospect of a feeding frenzy diluting its content.”⁽⁷⁾

Ticketmaster has charged that Microsoft’s conduct runs afoul of the anti-dilution and infringement provisions of the Lanham Act, as well as various provisions of California State Law. At present, Ticketmaster has blocked links created by Microsoft on its “seattle.sidewalk.com” site from reaching Ticketmaster’s Web site.

As stated above, the law in this area is in its infancy, with no definitive precedent. The willingness of Web site owners to challenge in court hyperlinks created without their permission, however, throws into serious doubt the continued unfettered use of hyperlinks, particularly when placed on or linking to commercial sites deriving revenue from advertisements.

To date, no challenge has been raised to a link which, without using a logo or other image, simply transports the user from one site to the home page of another. Commentators who have analyzed this issue have concluded that such links are most likely non-actionable under applicable copyright or trademark law.⁽⁸⁾

Links which transport a user to places in a site other than a home page, or effectively incorporate the content of one site into the frame of another, present different issues. Such conduct may potentially subject the party creating the link to trademark or copyright infringement liability. Certainly, a lawsuit advancing such claims is a distinct possibility.

In such situations it is prudent for commercial site operators to consider obtaining permission from the site they are linking to before creating the link. At a minimum, until this issue is resolved, the cautious Web master will only use a link that truly transports the user to the home page of the linked site, whose “URL” should appear on the user’s browser after the link is completed.

On the flip side, Web site owners disturbed by connections made to their site without their authorization can communicate with the creator of the link and either request that the link be discontinued, citing the cases discussed above and the various legal theories advanced therein, or request that a license be obtained permitting such linking. Alternatively, the links can be blocked.

In either case, Web masters are well advised to proceed cautiously in this developing area.

(1)Martin H. Samson is a Partner in the law firm of Phillips Nizer Benjamin Krim & Ballon LLP who specializes in civil litigation.

(2)The Court of Session’s October 24, 1996 decision in Shetland Times Ltd. v. Dr. Jonathan Wills and Zetnews Ltd. (Lord Hamilton, J.) can be found on the Internet at http://www.shetland-news.co.uk/opinion.html.

(3)The Washington Post Company, et al. v. Total News, Inc. et al., 97 Civ. 1190 (PKL) (S.D.N.Y.).

(4)The Washington Post Company, et al. v. Total News, Inc. et al., 97 Civ. 1190 (PKL) (S.D.N.Y.), Complaint, par. 8.

(5)The Washington Post Company, et al. v. Total News, Inc., et al., 97 Civ. 1190 (PKL) (S.D.N.Y.), Stipulation and Order of Settlement and Dismissal, par. 3.

(6)Ticketmaster Corporation v. Microsoft Corporation, Civ. No. 97-3055 (DDP) (C.D. Cal.).

(7)Ticketmaster Corporation v. Microsoft Corporation, Civ. No. 97-3055 (DDP) (C.D. Cal.), Complaint, par. 6.

(8)See e.g. Dangerous Liaisons: The Legal Risks of Linking Web Sites, Raysman and Brown, N.Y.L.J. April 8, 1997; Frame Liability Clouds the Internet’s Future, Freeling and Levi, N.Y.L.J. May 19, 1997.

 

Use Of Domain Name Containing Another’s Trademark In Unpublished Directory To Trigger Delivery Of Pop-up Ads Does Not Infringe Trademark

Reversing the court below, the Second Circuit dismisses trademark infringement claims brought by a mark holder and website operator against a distributor of pop-up ads.  Such claims fail because “as a matter of law, [defendant] WhenU does not ‘use’ [plaintiff] 1-800’s trademarks within the meaning of the Lanham Act, 15 U.S.C. § 1127 when it (1) includes 1-800’s website address … in an unpublished directory of terms that trigger delivery of WhenU’s contextually relevant advertising to [computer] users; or (2) causes separate, branded pop-up ads to appear on a [computer] user’s computer screen either above, below, or along the bottom edge of the 1-800 website window.”

The absence of such a use by WhenU of plaintiff’s trademarks is fatal to 1-800 Contacts’ trademark infringement claims, and mandated reversal of the District Court’s grant of preliminary injunctive relief.  The District Court had enjoined WhenU from including the domain name of plaintiff’s website in its unpublished directory, or causing pop-up ads to be displayed when that domain name is entered into the URL bar of a web browser, or as a search term.

In reaching this result, the Second Circuit agreed with the decisions of two other district courts – the Eastern District of Virginia in U-Haul Inc. v. WhenU.com Inc., 279 F. Supp. 2d 723 (E.D.Va. 2003) and the Eastern District of Michigan in Wells Fargo & Co., et al. v. WhenU.com Inc., 293 F.Supp.2d 734 (E.D.Mich. 2003) – each of which similarly held that WhenU’s activities did not infringe the respective plaintiffs’ trademarks because such activities did not constitute the requisite use of the plaintiffs’ respective marks.

WhenU Delivers Pop-up Ads Triggered By Computer User’s Entry Of Plaintiff’s Domain Name

Plaintiff 1-800 Contacts, Inc. is a retailer of replacement contact lenses.  It sells these products at its website, located at www.1800contacts.com.  It has filed for and received registration of the mark “1-800 Contacts” which phone number is also used in plaintiff’s retailing activities.  Defendant Vision Direct, Inc. is a direct competitor of plaintiff, which also sells replacement contact lenses to the public.

Defendant WhenU’s principal business is the delivery of advertisements via the Internet to computer users on behalf of its clientele.  WhenU uses its software program ‘SaveNow’ to deliver these ads.  Typically, this software is downloaded by consumers as part of a bundle of software applications the consumer receives at no cost.  As part of this download process, the consumer is required to consent to the operation of the SaveNow program on his computer, and its delivery of ads to him.  In this process, the consumer is informed that “Save Now ads/offers are delivered independently from the site the user happens to be visiting when they see a SaveNow ad/offer and are not endorsed or affiliated with anyone other than WhenU.”

SaveNow ads are triggered by the consumer’s internet activity.  The SaveNow software compares the URLs and search terms the consumer types into his browser or search engine with a propriety directory created by SaveNow.  According to the court, this directory is comprised of “approximately 32,000 website addresses and address fragments, 29,000 search terms, and 1,200 keyword algorithms.”  If there is a match, the SaveNow software will retrieve a pop-up ad from a server over the Internet, and display it on the consumer’s computer.  This ad will be displayed in a WhenU branded window that informs the consumer it is a “WhenU offer,” and appear on his screen simultaneously with whatever other programs he is operating in other computer “windows.”  If a consumer seeks additional information as to the source of the ad, a link from the ad takes the consumer to a screen that further explains that the “offer is brought to you by WhenU.com.”

The delivered ad is selected from a category of ads into which the typed URL is classified by WhenU.  WhenU’s clientele can only purchase the right to have their ad included with those that are displayed when a consumer selects a particular information category – they cannot purchase the right to have an ad displayed when a consumer types in a particular domain name, such as that of the plaintiff.  Indeed, according to the Court, the contents of WhenU’s proprietary director are neither disclosed to WhenU’s advertising clients, nor the general public.

WhenU included plaintiff’s domain name www.1800Contacts.com in the eye-care category of its proprietary directory.  When a consumer typed plaintiff’s URL in his browser, the SaveNow program delivered an ad from one of WhenU’s clients that had purchased the right to have their ads displayed when a consumer displayed interest in the eye care category, which included plaintiff’s competitor Vision Direct.

Shortly before this litigation was commenced, Vision Direct instructed WhenU “to cease placing ‘pop-up’ ads on plaintiff’s website.”  In addition, Vision Direct commenced a lawsuit against WhenU arising out of WhenU’s delivery to consumers of pop-up ads for a third eye-care company, Coastal Contacts, which partially obscured Vision Direct’s own site via conduct substantially similar to that at issue here.

District Court Grants Injunctive Relief

Objecting to defendants’ conduct, plaintiff brought this suit, asserting claims of trademark and copyright infringement, as well as trademark dilution and unfair competition.  Plaintiff also asserted a claim under the Anticybersquatting Consumer Protect Act (“ACPA”) against defendant Vision Direct, arising out of its registration of the domain name www.www1800contacts.com.

Plaintiff moved for a preliminary injunction, enjoining defendants from continuing to use plaintiff’s domain name, www.1800contacts.com, as a trigger for the delivery of pop-up ads.  Finding plaintiff likely to prevail on its trademark infringement claim, the District Court granted plaintiff a preliminary injunction enjoining such use of plaintiff’s domain name.  The District Court enjoined WhenU both from including plaintiff’s domain name in its proprietary directory, and from causing ads for defendant Vision Direct to appear when a computer user typed plaintiff’s domain name in either a browser or search engine.  At the same time, the District Court held it was unlikely that plaintiff would prevail on copyright infringement claims arising out of the display by WhenU of pop-up ads in separate windows that obscured part of the window in which plaintiff’s website was itself displayed on a computer user’s screen.

Second Circuit Reverses, Holding No Use Of Plaintiff’s Trademark In Commerce

On appeal, the Second Circuit found, contrary to the decision of the District Court, that plaintiff could not prevail on its trademark infringement claims because WhenU was not using plaintiff’s mark in commerce.  As such use was a prerequisite to a trademark infringement claim, the Second Circuit directed the dismissal of that claim, and reversed so much of the District Court’s decision that had granted injunctive relief predicated on plaintiff’s likelihood of success on that claim.  The Second Circuit did not review that branch of the District Court’s decision that found that plaintiff was unlikely to prevail on its copyright infringement claims.

In order to prevail on a trademark infringement claim, “a plaintiff must establish that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark (3) in commerce (4) ‘in connection with the sale . . . or advertising of goods or services’ (5) without the plaintiff’s consent.  In addition, the plaintiff must show that defendant’s use of that mark ‘is likely to cause confusion . . . as to the affiliation, connection, or association of defendant with plaintiff, or as to the origin, sponsorship or approval of the defendant’s goods, services or commercial activities by plaintiff.'”  (citations omitted).

A trademark is ‘used in commerce’ for purposes of the Lanham Act, either when it is placed on goods, their containers, tags or labels sold or offered for sale, or “when it is used or displayed in the sale or advertising of services … rendered in commerce . . .”  15 U.S.C. §1127.

Second Circuit Finds No Trademark Infringment

The Second Circuit held that WhenU did not use plaintiff’s mark “in commerce” under the Lanham Act either when it included the domain name of plaintiff’s website, which incorporated plaintiff’s mark, in the proprietary directory that triggered the display of pop-up ads, or when it caused branded pop-up ads for its clientele to appear when a computer user sought to access plaintiff’s website.

The Second Circuit held that the inclusion of plaintiff’s domain name in a directory did not constitute a use of plaintiff’s mark under the Lanham Act because its contents were disclosed neither to WhenU’s advertisers, nor the general public.  As such, this use did not constitute the use of plaintiff’s mark to improperly pass off another’s goods or services as those of plaintiff, as WhenU never, by this conduct, caused the mark to be displayed.  Said the Court:

A company’s internal utilization of a trademark in a way that does no communicate it to the public is analogous to a 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.

Similarly, neither the placement of pop-up ads on a computer user’s screen contemporaneously with the 1-800 website, or a list of search results obtained by the computer user’s input of the 1-800 website address in a search engine, constituted an actionable use of plaintiff’s mark.  The Second Circuit rested this decision on the fact that WhenU was not, in the ads it displayed, using plaintiff’s mark at all.  Rather, the ads were labeled as originating from WhenU and contained only the marks of its clientele, and not plaintiff.  Thus, the only marks used to advertise the products or services promoted by those ads were those of the clients who’s products they were promoting.  Moreover, WhenU did not offer to display the ads of an advertiser when a computer user sought to access a particular web site, such as that of the plaintiff.  Rather, advertisers could only purchase the right to have ads displayed when a user, based on the application of the SaveNow directory, exhibited interest in a category, such as eye care, that corresponded to the advertiser’s own products.

The fact that such ads were in fact delivered when a user attempted to access plaintiff’s site did not, contrary to the decision below, constitute an improper use of the mark, or an impermissible effort to capitalize on plaintiff’s goodwill.  Rather, held the Second Circuit:

Absent improper use of 1-800’s trademark … such conduct does not violate the Lanham Act.

*          *          *

Indeed, it is routine for vendors to seek specific “product placement” in retail stores precisely to capitalize on their competitors’ name recognition.  For example, a drug store typically place its own store-brand generic products next to the trademarked products they emulate in order to induce a customer who has specifically sought out the trademarked product to consider the store’s less-expensive alternative.  WhenU employs this same marketing strategy by informing [Computer] users who have sought out a specific trademarked product about available coupons, discounts, or alternative products that may be of interest to them.

The Second Circuit accordingly directed the dismissal of plaintiff’s trademark infringement claims, and reversed the District Court’s decision awarding injunctive relief.

The Court’s determination that there was no actionable trademark use accorded with decisions reached in U-Haul Inc. v. WhenU.com Inc., 279 F. Supp. 2d 723 (E.D.Va. 2003) and Wells Fargo & Co., et al. v. WhenU.com Inc., 293 F.Supp.2d 734 (E.D.Mich. 2003).  The Second Circuit noted that it found “the thorough analysis set forth in both U-Haul and Wells Fargo to be persuasive and compelling.”

District Court Holds Plaintiff Not Likely To Prevail On Copyright Infringement Claims Arising From Display Of Branded Pop-up Ads In Windows On User’s Computer Screen That Partially Obscure Plaintiff’s Website

The District Court below had determined that plaintiff was not likely to prevail on its copyright infringement claims.  This decision is in accord with those of the courts in both Wells Fargo & Co. v. WhenU.com, 293 F. Supp.2d 734 (E.D. Mich., 2003) and U-Haul Intl. v. WhenU.com, 279 F. Supp.2d 723 (E.D. Va., 2003), and was not reviewed by the Second Circuit on appeal.

To establish a prima facie case of copyright infringement, a plaintiff must show ownership of a valid copyright, together with a violation by the defendant of one of the exclusive rights granted to the copyrighted owner of a work.  Plaintiff claimed that by causing a pop-up ad to be displayed in a window on a consumer’s computer screen that partially obscured that containing plaintiff’s own site, defendant infringed plaintiff’s exclusive rights to display its copyrighted materials and to make derivative works therefrom.

The District Court rejected both of these contentions.  As to the display right, the District Court stated:

For this Court to hold that computer users are limited in their use of Plaintiff’s website to viewing the website without any obstructing windows or programs would be to subject countless computer users and software developers to liability for copyright infringement and contributory copyright infringement, since the modern computer environment in which Plaintiff’s website exists allows users to obscure, cover and change the appearance of browser windows containing Plaintiff’s website.

Without authority or evidence for the claim that users exceed their license to view the copyrighted 1-800 Contacts website when they obscure the website with other browser windows (including pop-up ads generated by the SaveNow program), Plaintiff has little basis for its claim that Defendants have infringed its display right.

The District Court similarly rejected plaintiff’s claim that defendant, by its activities, created a derivative work from plaintiff’s copyrighted website.  The District Court reached this conclusion because the computer screen on which defendant’s pop-up ad was displayed was not sufficiently fixed to constitute a derivative work.  To be a work subject to copyright protection, the work must be “fixed in any tangible medium of expression. . . .”.  “A work is fixed in a tangible medium of expression . . . when its embodiment . . . is sufficiently permanent or stable, to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration.”  The District Court held that defendant’s display of pop-up ads did not meet this fixation requirement.

Applying the “fixation” requirement here, Plaintiff has filed to show that its website, and Defendants’ pop-up advertisements are “sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration.”  17 U.S.C. § 101.  Indeed, Defendants’ pop-up windows may be moved, obscured, or “closed” entirely – thus completely disappearing from perception, with a single click of a mouse.  (Tr. at 63-64.)  Moreover, to the extent pop-up advertisements fit the description of “transmitted images,” they are not “fixed” works, since there is no evidence that a fixation is made “simultaneously with” the pop-up advertisements’ “transmission” to the viewer of the website.  18 U.S.C § 101.

Given that the screen display of the 1-800 Contacts website with Defendant’s pop-up ads is not “fixed in any medium,” it is not sufficiently “original” to qualify as a derivative work under the second sentence of 17 U.S.C. § 101

As a result, the District Court found that plaintiff was not likely to prevail on its copyright infringement claim.

You can also study the court decision in this pdf: 800 vs WhenU court decision

Plaintiff Name.Space, Inc. and its predecessor-in-interest PGMedia, Inc. (collectively “Name.Space”) operated a domain name registry in competition with defendant Network Solutions, Inc. (“NSI”) which, at the time this action was commenced, operated the exclusive domain name registry for the generic top level domains (“gTLDs”) “.com”, “.org”, “.net” and “.edu”. In its effort to compete, Name.Space accepted domain name registrations for approximately 530 new generic top level domains, including “.forpresident”, “formayor” and “.computers”. Plaintiff’s new gTLDs are not, however, universally resolvable by those using the Internet. As a result, many users who access the domain names registered by Name.Space are not taken to the site they seek to access.

This problem arises because the Internet’s “root servers” have not been programmed to recognize Name.Space’s gTLDs. Under current Internet protocols, web sites are assigned a unique Internet Protocol (“IP”) number. This IP number can be linked by the web site owner to an alphanumeric name containing a word or phrase that is much easier to remember than a string of numbers. Each of these alphanumeric domain names includes a Top Level Domain (“TDL”). There are at present seven generic TLDs — “.com”, “.edu”, “.gov”, “.int”, “.mil”, “.net” and “.org” — and approximately 240 country code TLDs.

A web site owner links an alphanumeric domain to his particular IP number by registering the domain name with the appropriate registry. Once registered, this “linking” information is stored on the “A root server” (a computer connected to the Internet) from which this information is subsequently downloaded and stored on the 12 other root servers serving the Internet.

When a user accesses an alphanumeric domain name on his browser, his computer sends out an inquiry to ascertain the IP Number associated with that alphanumeric domain name. If a corresponding IP number is found on the root servers, the user is taken to the appropriate web site. (This process is known as DNS name resolution). If the IP number is not found, no connection is made.

NSI is the exclusive domain name registry for the gTLDs .com, .org, .net and .edu. Each alphanumeric domain name containing these gTLDs can be resolved to its assigned IP Number on the “A root server,” which is also operated by NSI, as well as the remaining root servers serving the Internet.

Because neither the “A root server” nor any of the Internet’s other root servers recognize Name.Space’s gTLDs, Internet users can not access these sites from anywhere on the Internet, as they can with internet domain name addresses possessing a recognized gTLD. To rectify this problem, Name.Space asked NSI to modify the “A Root Server” so that it would recognize Name.Space’s new gTLDs.

NSI asked the National Science Foundation (“NSF”), an instrumentality of the Federal Government, how it should respond to this request. Prior to the commencement of this lawsuit, NSF had entered into a Cooperative Agreement with NSI pursuant to which, among other things, NSI was given the authority to register domain names under the aforementioned gTLDs and to operate the “A Root Server.”

NSF instructed NSI not to reprogram the A Root Server so as to permit it to recognize Name.Space’s new gTLDs. NSF stated that various governmental agencies were studying whether the number of gTLDs should be expanded, and that no action should be taken until those agencies had resolved this issue.

Subsequently, NSF transferred responsibility for administering the Cooperative Agreement to the Department of Commerce (“DOC”). DOC and NSI then entered into Amendment 11 to the Cooperative Agreement, which required NSI to obtain approval from the DOC before taking the steps necessary to reprogram the A Root Server so that it could recognize new gTLDs such as those registered by Name.Space. A policy statement issued by the Federal Government reiterated its unwillingness to add any new gTLDs until it had fully resolved the issue of their expansion.

Name.Space brought suit, charging defendant NSI with violation of the Sherman Antitrust Act because of NSI’s refusal to reprogram the “A Root Server” to permit it to recognize Name.Space’s gTLDs. This, plaintiff argued, permitted NSI to perpetuate its monopoly in domain name registration. Name.Space also asserted that Amendment 11 to the Cooperative Agreement, which required NSI to obtain permission from the DOC before it altered the A Root Server so as to be able to recognize additional gTLDs, was a prior restraint on protected free speech in violation of the First Amendment.

The District Court rejected both of these claims, and awarded the defendants summary judgment, dismissing the complaint. The Second Circuit affirmed this holding, but on grounds different from those relied upon by the District Court to support its decision. The Second Circuit held that NSI’s refusal to add additional gTLD’s to the A Root Server was immune from challenge under the Sherman Act because it “was compelled by the explicit terms of NSI’s agreement with a government agency and by the government’s policies regarding the proper administration of the DNS.” In reaching this result, the court found that NSI possessed a “conduct-based immunity” — “‘[p]rivate parties, to the extent they are acting at the direction or with the consent of federal agencies, also fall outside the pale of the Sherman Act,’ where the complained of acts were specifically directed by the federal government.”

The Second Circuit was unwilling, however, as the district court had done, to extend this immunity to all acts taken by NSI in accordance with its Cooperative Agreement with the NSF, on the ground that this contractual relationship granted NSI “federal instrumentality” immunity. Said the Second Circuit:

We choose not to apply the essentially status-based federal instrumentality doctrine; reliance on such a broad rule of immunity might improperly insulate NSI and other private entities that are or will be involved in administering the DNS from liability for future anticompetitive conduct. Thus, NSI’s mere status as a government contractor does not entitle it to implied antitrust immunity for all its conduct.

The Second Circuit also rejected Name.Space’s First Amendment claim, but again on grounds that differed from those relied upon by the District Court. The District Court held that “Internet alphanumeric addresses are not speech but are ‘rather like telephone numbers…[it is] more analogous to source identification than to a communicative message.” The Second Circuit disagreed, holding that some Internet alphanumeric addresses may be communicative speech protected by the First Amendment. The emphasis is properly on the word “may”, because the court left for another day the determination of whether such protections did in fact apply. First Amendment protections did not apply, held the Second Circuit, to the existing three character gTLD’s at issue. Said the court “the existing gTLD’s are not protected speech, but only because the current DNS and Amendment No. 11 limit them to three-letter after-thoughts such as .com and .net, which are lacking in expressive content.”

The Second Circuit accordingly affirmed the rejection of Name.Space’s claims that Amendment No. 11 to the Cooperative Agreement violated its First Amendment rights. Name.Space argued that Amendment No. 11 improperly compelled speech by obligating plaintiff to use one of the designated gTLD’s in its domain names. The court rejected this claim, because it found the three character gTLDs did not constitute speech.

The Second Circuit also rejected plaintiff’s claim that Amendment No 11 represented an impermissible prior restraint on speech — Name.Space was free to “engage in any expressive speech of its choice by simply adding a period and a three-letter suffix to the speech in question.” This added requirement was at most an inconsequential interference with speech that did not rise to the level of a prior restraint. Finding that Amendment No. 11 was “a reasonable time, place and manner restriction” on speech, the Second Circuit affirmed its validity.

Please also study the courts decision in this pdf NameSpace-Network-Solutions-2d-Cir

Court dismisses action seeking redress as a result of Google’s alleged downward manipulation of the “Page Rank” it assigned plaintiff’s website.  This act allegedly reduced the ranking of plaintiff Kinderstart.com’s search engine in various Google Search results which, in turn, adversely impacted both the traffic and advertising revenue plaintiff Kinderstart.com’s site generated.  “Page Rank” is a system offered by Google for rating the usefulness of websites.  Google’s search engine utilizes the relative “Page Ranks” it assigns to websites in determining the order in which to deliver responsive search results to a user’s query.

In its Second Amended Complaint, plaintiff claimed such acts constituted violations of the Sherman Antitrust Act, the Lanham Act and California Business and Professions Code Section 17200, as well as plaintiff’s right to free speech under both the Federal and California constitutions.  Plaintiff Kinderstart.com also alleged that it was defamed by Google’s alleged statement that the low “Page Rank” it assigned plaintiff’s site was arrived at objectively, without human manipulation.

The Court found that Kinderstart.com had failed to state a claim, and accordingly dismissed its complaint with prejudice.

Plaintiff’s Sherman Antitrust Act claims failed because plaintiff did not allege a “relevant market” Google purportedly attempted to monopolize, an essential prerequisite to such a claim.  Because the Sherman Act only applies to attempts to monopolize ‘a group of sales,’ the ‘Search Market’ alleged by plaintiff as the relevant market did not qualify, because users are not paid to search.  Plaintiff’s alternative, the ‘Search Ad Market’ similarly failed because it was too narrow.  There was no basis for distinguishing the Search Ad Market from other Internet advertising.  The Court held that plaintiff’s Second Amended Complaint failed to set forth a number of additional necessary elements of a Sherman Act claim.

Plaintiff’s Lanham Act claim failed because the alleged misrepresentation on which it rested – that Google falsely represented that its “Page Ranks” were the objective result of the operation of its algorithms – did not cause plaintiff any injury.  Rather, it was the low Page Rank assigned to plaintiff’s site which purportedly caused injury.  As such, held the Court, plaintiff lacked standing to bring its Lanham Act claim.  This claim also failed because a “Page Rank” was not a statement in “commercial advertising or promotion” another prerequisite to a claim for false advertising under the Lanham Act.

Plaintiff’s free speech claims failed both because of the absence of State action in the conduct of Google challenged here – its assignation and description of “Page Ranks” – and because Google’s search engine was not a “public forum” in which websites such as plaintiff were permitted to speak.  Rather, it was akin to private property, free from free speech concerns.

Finally, Kinderstart.com’s libel claims failed because Google’s “Page Rank” was not an actionable statement of fact, but rather a construct of Google’s.  Said the Court:

Kinderstart’s argument that it is mathematically impossible to assign a Page Rank of zero presumes that Google in some way has represented that Page Rank is a purely objective measure.  As discussed above, PageRank is a creature of Google’s invention and does not constitute an independently-discoverable value.  In fact, Google might choose to assign PageRanks randomly, whether as whole number or with many decimal places, but this would not create “incorrect” PageRanks.

These claims also failed because Google’s statements were protected by applicable ‘common interest privilege,’ codified in California as Cal. Civil Code Section 47(c).  This privilege affords protection to statements made “without malice, to a person interested therein … (3) who is requested by the person interested to give the information.”

The Court held Google’s provision of the “Page Rank” of plaintiff’s site to users was protected by this privilege from defamation claims, at is constituted information requested by the user.  To obtain this information, the user had to download a Google tool bar, visit a website, and use the tool bar to supply the site’s “Page Rank.”  The Court held that this constituted a request for information, and rendered Google’s response privileged.

In an attempt to recover the legal fees it incurred in the defense of this action, Google also moved to strike plaintiff’s complaint under California’s anti-SLAPP statute, Cal. Civil Code Section 425.16.  The speech at issue – the Page Rank assigned to plaintiff’s site – was neither made to the government, nor involved an issue under government consideration.  As such, to be entitled to the protection of the anti-SLAPP statute, the speech must concern a matter of public interest.  The Court held the speech at issue was not a matter of public interest because it only dealt with the appropriate ranking of plaintiff’s site – an issue that was not of interest to most of the public at large.  The Court accordingly denied Google’s motion to strike and its related motion for attorney’s fees.

In a separate decision, the Court did award Google Rule 11 sanctions as a result of several of the allegations advanced by plaintiff Kinderstart.com in its pleading.

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