E-Commerce Law

Starting, Operating, and Exiting an Internet Business: Common Mistakes and Internet Marketing

Last week's episode of Power of Attorney has been posted on the Power of Attorney website.  In this episode, Eric Horvitz, Esq. and Daniel Ingersoll, Esq. discuss common mistakes made by Internet entrepreneurs.  Then Zee Rahim stops by to discuss his experiences as an Internet entrepreneur and marketer.

Ninth Circuit Explores Likelihood of Confusion Involving Keyword Ads

BNA, Inc.'s Electronic Commerce & Law Report has published an article on the Ninth Circuit's recent decision in Network Automation, Inc. v. Advanced Computer Concepts, Inc.  For the article, I was asked to comment on the court's apparent shift away from a rigid application of the so-called "Internet trinity" in determining whether the Internet use of a trademark is likely confuse consumers in the relevant market.  I also discussed the Ninth Circuit's recognition of the growing sophistication of Internet shoppers (which is not surprising, given that 75% of the 240 million American Internet users use the Internet to shop for products or services).  You can read the full copy of the article here:  Ninth Circuit Explores Likelihood of Confusion Involving Keyword Ads, Adopts New Standard.

If you have any thoughts about the case, the article, or my comments, please let us know.  For additional commentary on the case, please see Eric Goldman's Technology & Marketing Law Blog and Rebecca Tushnet's 43(b) Blog.

Sports Brandjacking Generates Millions of Dollars and Tens of Millions of Web Visits Each Year

Savvy Internet marketing allows thousands of individuals and companies to peddle more than a million counterfeit sports shirts and jerseys annually, according to the 2011 Special Edition of the Brandjacking Index published today.  The online sale of counterfeit sports apparel is a multi-million dollar industry that generates tens of millions of visits to the websites selling such products.

MarkMonitor, which provides Internet brand protection services to companies, began publishing its Brandjacking Index in 2007.  The index analyzes trends and statistics about brand abuse online, and addresses the business and technical methods used by brandjackers, by applying proprietary algorithms to publicly available information.

According to the most recent edition of the index, MarkMonitor identified more than 6,000 suspects selling more than 1.2 million shirts and jerseys bearing counterfeit sports league and team logos.  The e-commerce sites selling these counterfeit goods attract 56 million visits annually and generate more than $25 million in revenue.

The operators of sites selling counterfeit sports apparel use sophisticated Internet marketing techniques to drive traffic to their sites.  They invest heavily in paid search advertising,  "black hat" SEO techniques, cybersquatting, and typosquatting.  They also use affiliate marketing programs and pay-per-click advertisements.  

MarkMonitor has identified more than 1,300 of these sites selling some 800,000 units of suspicious sports apparel each year.  Most of these sites are associated with a Chinese registrant or registrar.

E-Commerce Law Briefs: Week of October 20, 2008

"American Airlines is suing Yahoo Inc. for trademark infringement, a case similar to one that the nation's largest airline settled this summer against Google, Inc.  American filed its lawsuit last week in U.S. District court in Fort Worth for unspecified damages, legal costs and money to run a "corrective" advertising campaign"

E-Commerce Law Briefs is a weekly feature appearing each Friday afternoon on E-Commerce Law. Each week, E-Commerce Law Briefs will provide a brief summary and commentary on recent legal news affecting e-commerce businesses.

E-Commerce Law Briefs: Week of April 21, 2008

Apparantly, we're about to reach the end of the Internet.  Accordingly to AT&T, the Internet's current network architecture will reach the limits of its capacity by 2010.

(Link:  AT&T:  Internet to hit full capacity by 2010 at CNET News)

Sixteen years after the collapse of the Soviet Union, "Web sites ending in the Soviet ".su" domain name have been rising - registrations increased 45 percent this year alone. Bloggers, entrepreneurs and die-hard communists are all part of a small but growing online community resisting repeated efforts to extinguish the online Soviet outpost."

(Link:  Back in the USSR:   Soviet Internet domain name resists death at SilliconValley.com)

An advertiser has sued Google Inc. in federal court in California alleging fraud in connection with Google's AdSense program.  "The plaintiff in the case, David Almeida, had signed up for Google ads to promote his private investigation business in Massachusetts. Because he did not want to buy AdSense ads, Almeida said he left the maximum per-click bid blank, believing 'optional' meant he could opt out of the AdSense program by doing so. Instead, it turned out the AdWords bid applied when he did not exercise that option, and he should have put 'zero' into the box to opt out, said his attorney, Brian Kabateck. "

(Link:  Google accused of deception in selling AdSense keyword ads at washingtonpost.com)

eBay has sued Craigslist for "unfairly diluting" its interest in the community ad site. 

(Link:  EBay sues Craigslist ad website at BBC News)

E-Commerce Law Briefs is a weekly feature appearing each Friday afternoon on E-Commerce Law. Each week, E-Commerce Law Briefs will provide a brief summary and commentary on recent legal news affecting e-commerce businesses.

1-800 Contacts Files Its Latest Keyword Advertising Suit in Utah

Yesterday, Eric Goldman posted that 1-800-Contacts has filed its latest keyword advertising suit in federal court in Utah.  The company is apparently hoping for better luck than it had in its earlier forays into trademark litigation. 

Common Issues Facing E-Commerce Businesses

Issue # 6: Keyword Advertising and the Effect of Trademark Law

Keyword Advertising

Keyword advertising is a growing marketing method for e-commerce businesses and a growing revenue source for Internet search engines. The success of keyword advertising, coupled with aggressive marketing approaches involving the use of trademarks owned by competing businesses, has resulted in a recent flood of litigation testing applying traditional trademark principles to this fairly new form of advertising. It is imperative that e-commerce businesses appreciate not only the value of keyword advertising but also the potential legal exposure attendant to its use.

Federal Trademark Law

A "trademark" is "any word, name, symbol, or device, or any combination thereof . . . used by a person, or . . . [intended to be used in commerce] . . . to identify and distinguish his or her goods . . . from those manufactured or sold by others and to indicate the source of the goods, even if that source is unknown." 15 U.S.C.S. § 1127 (2005) Trademarks serve as an indicator of the source or sponsorship of goods or services and, in a derivative fashion, may serve as an indicator of their quality.

The Lanham Act, 15 U.S.C.S. § 1051, et seq., provides federal protection for both registered and unregistered trademarks, with the greatest protection being afforded to highly distinctive marks. The Lanham Act prohibits both infringement and dilution, permitting "trademark owners to obtain injunctions and, in some cases, monetary damages, for the improper use of their marks." Id.

Trademark Infringement

Under the Lanham Act, "any person who shall, without the consent of the registrant use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive" can be found liable for trademark infringement. 15 U.S.C.S. § 1114(1)(a) (2005).

Unfair Competition

The Lanham Act also affords protection to unregistered trademarks, imposing liability for unfair competition where a person "uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact which . . . is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person without another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another . . . ." 15 U.S.C.S. 1125(a)(1) (2005). The tests for infringement of registered and unregistered marks are nearly identical.

Trademark Dilution

The Lanham Act protects trademarks from dilution, as well as infringement. Dilution "refers to the decreased capacity of a famous mark to identify and distinguish goods or services, regardless of competition between the parties or likelihood of confusion." Kurt M. Saunders, Confusion is the Key: A Trademark Law Analysis of Keyword Banner Advertising, 71 FORDHAM L. REV. 543, 543 (2002) [hereinafter Saunders]. Trademark dilution "usually takes the form of ‘blurring’ or ‘tarnishment.’ Blurring occurs where consumers mistakenly associate the famous mark with goods and services of another’s mark, thereby weakening the power of the famous mark owner to identify and distinguish its goods and services. . . . By contrast, tarnishment occurs ‘where an accused, junior mark is used on unwholesome or inferior goods or services that may [degrade or] create a negative association with the goods or services protected by the famous mark.’" Id. In determining whether a mark is distinctive and famous the federal dilution statute outlines eight factors for courts to use, along with other relevant factors:

• "the degree of inherent or acquired distinctiveness of the mark;

• the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

• the duration and extent of advertising and publicity of the mark;

• the geographical extent of the trading area in which the mark is used;

• the channels for trade for the goods or services with which the mark is used;

• the degree of recognition of the mark in the trading areas and channels of trade of the mark’s owner and the [adverse party];

• the nature and extent of use of the same or similar marks by third parties; and

• whether the mark was registered . . ." 15 U.S.C.S. § 1125(c)(1) (2005).

Trademark Infringement Claims Based Upon Keyword Advertising

In this area of the law, only uncertainty is certain. The lack of appellate court decisions on this issue and the incomplete or competing analysis of the district courts who have addressed the matter make it difficult to develop an effective strategy for reducing the risk of trademark liability for keyword advertisers who purchase competing trademarks. The only safe approach may be to avoid the use of another’s trademarks in any keyword advertising campaign.

Certainly, search engines that use a party’s trademark to sell advertising and then link that advertising to search results created as a result of the use of the trademark in an Internet search have reason for concern that their conduct may be considered a "use in commerce" of the trademark. Their concern should be shared equally by the advertisers who use another’s trademark as a source identifier in the advertising links posted on a search results page, though the potential exposure may be reduced or eliminated where the advertiser does not use the trademark as a source identifier and does not otherwise display the trademark on its website.

A keyword advertisement that actually uses another’s trademark (or a substantially similar mark) is certainly more likely to mislead consumers as to the source of goods or services than one that does not make any reference to the subject mark (or any substantially similar mark). As such, the potential exposure of this conduct is significant though at least one commentator has opined that "keyword…ads triggered by trademarks as search terms should be considered a privileged form of comparative advertising when they allow a firm to offer an alternate product or service in competition with that of a competitor." Id. at 573.

The evaluation of whether a particular use may constitute trademark infringement involves a particularly complex legal analysis. As such, e-commerce businesses considering using another’s trademarks in keyword advertising should seek the advice of an experienced and properly-licensed attorney.

Note: Some of this material appears in Jonathan D. Frieden & Sean P. Roche, Legal Issues of the Online Retailer in Virginia, 13 Rich. J. L. & Tech. (forthcoming Summer 2006).

Previous Posts in this Series

Issue # 1:  Protection of Domain Names

Issue # 2:  Protection of Original Website Content

Issue # 3:  Website Terms of Use

Issue #4:  The Potential for Universal Jurisdiction

Issue # 5:  E-Mail Marketing and Managing Risk Under the CAN-SPAM Act of 2003

"Common Issues Faced by E-Commerce Businesses" is a seven-part series appearing each Tuesday afternoon on E-Commerce Law. Readers are reminded that all of the information on this site is provided for informational purposes only and is not intended to be a substitute for legal counsel. No one should act or refrain from acting on the basis of any content included on this site but should instead seek the appropriate legal advice on the particular facts and circumstances at issue from a properly licensed attorney.

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