TechLaw

Close Doesn't Count in Cybersquatting

The Anticybersquatting Consumer Protection Act, 15 U.S.C. 1125(d), is the federal law that gives trademark owners a civil claim against persons who act with a "bad faith intent to profit" from registering domain names that are identical or confusingly similar to protected marks. Remedies available to a prevailing trademark owner include an award of statutory damages of up to $100,000 per domain name, plus costs and attorneys' fees in some cases. Losing an ACPA case can ruin your day.

Congress softened the harshness of the ACPA by including a safe harbor for domain registrants who "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful," 15 U.S.C. 1125(d)(1(B)(ii). To date, courts have been very stingy with this defense. In Audi AG v. D'Amato, 469 F.3d 534 (6th Cir. 2006), the Sixth Circuit remarked that the safe harbor defense is available "only in the most unusual cases." In Virtual Works Inc. v. Volkswagen of Am. Inc., 238 F.3d 264 (4th Cir. 2001), the Fourth Circuit held that a domain registrant who acts even partially in bad faith is not entitled to the safe harbor. The intent of these cases is clear: cybersquatters won't be allowed to escape liability merely by professing a pure heart or mustering a decent argument that their use of the plaintiff's mark was fair or lawful.

The Ninth Circuit's decision yesterday in Lahoti v. Vericheck Inc., No. 08-35001 (9th Cir., Nov. 16, 2009), is in the same vein as Audi AG and Virtual Works. In Lahoti, the court said that the domain registrant was not entitled to claim the safe harbor defense because it was "unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case."

Wholly lawful. To my ear, "wholly lawful" is much more demanding than the language that Congress wrote, which is "believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful." But three federal appellate panels clearly feel otherwise. "Wholly lawful" is a tough standard for anyone to meet, and it proved insurmountable for a garden-variety cybersquatter like Lahoti. The bill of particulars against him:

• Lahoti registered <vericheck.com>, a domain identical to the plaintiff's "Vericheck" Georgia state service mark.
• Lahoti published a collection of outbound links (some pointing to the plaintiff's competitors), not a legitimate offering of goods and services, at the <vericheck.com> domain name.
• Lahoti offered to sell the domain name to the plaintiff for $72,500.
• Lahoti had been adjudicated a cybersquatter in other judicial proceedings.

In most courts' estimation, the above factors are tell-tale signs of a dark, bad faith, cybersquatter heart. In fact, these factors would form the core of any decent "what not to do" list for domainers.

Now, as it turns out, the lower court made a couple legal errors when it ruled that the VeriCheck mark was a "distinctive" mark (and thereby protectable under the ACPA). The appellate court discussed at length how an arguably generic or descriptive mark might become "distinctive," and it sent the case back to the lower court for reconsideration.

So this was a close case as far as whether or not the plaintiff's mark is distinctive enough to support an ACPA claim. However, in this court's estimation, it wasn't a close case as far as whether Lahoti's behavior met the "wholly lawful" standard: 

As we see the record, there is no genuine appellate issue on Lahoti’s bad faith. He has made his cybersquatter bed and now cannot persuasively challenge the district court’s conclusion that he must lie in it. A different case might be presented if Lahoti had a genuine business marketing service for which the Vericheck name was an aid, but there was no credible evidence of that here, nothing but his self-serving affidavit.

A reasonable person in Lahoti’s position—that is, a reasonable person who had previously been declared a cybersquatter in a judicial proceeding—should have known that his actions might be unlawful. Lahoti has previously advanced, unsuccessfully, the same trademark defenses he argues here, including the claim that the mark at issue was only descriptive and that he is entitled to the safe harbor. Lahoti’s failed defenses in these other cases make it unlikely that he legitimately believed that his use of the Domain Name was wholly lawful in this case.

The message I take from this language is that if you have been adjudicated a cybersquatter in a prior proceeding, or you are in the "domaining" or domain name speculation business, you had better knock down the trademark owner's claim to a protectable interest in the mark because you will never convince a court that your registration of the domain was "wholly lawful." Close doesn't count in cybersquatting.

GoDaddy Not Subject to Trademark Infringement Suit in Illinois

In the case of uBID Inc. v. The GoDaddy Group Inc., No. 09-cv-2123 (N.D. Ill., Nov. 5, 2009), a federal district court in Illinois ruled late last week that the Big Daddy of domain name registrars, Godaddy.com, is not subject to the jurisdiction of Illinois courts and need not defend a trademark infringement suit filed there. This is an interesting ruling, though "interesting" in the area of internet jurisdiction is a relative term to say the least.

The plaintiff's trademark infringement theory is a novel one, and the case is well-known in cyberlaw circles. The plaintiff alleged that Godaddy.com is unlawfully profiting from domain name registrations that infringe the plaintiff's UBID trademark -- because Godaddy.com sells advertising on web pages for parked domains. For example, if a person registers a domain name, like <ubidhigherthanme.com>, but does not immediately link the the domain name to a website under the registrant's control, Godaddy.com will temporarily associate the domain name with a web page under Godaddy.com's control and then sell advertising on that web page.

GoDaddy: Everywhere and Yet Nowhere at All (Except Arizona)

Godaddy.com, based in Arizona, is the leading ICANN-accredited registrar of domain names by a wide margin, with reportedly over 32 million domains registered. The court acknowledged that Godaddy.com received 3.19 percent of its revenues from Illinois, a not-inconsiderable sum. Add to that Godaddy.com's pervasive national advertising campaigns and sponsorships in the sport of auto-racing, including events that took place in Illinois. Yet the court found that all of this commercial activity was not enough to subject Godaddy.com to suit in Illinois.

In this court's view, it was important that Godaddy.com's national advertising campaign was not specifically directed to Illinois residents. "Without demonstration of an Illinois-specific focus, GoDaddy's sporadic contacts with Illinois as a result of its national advertising campaign to not support an exercise of general jurisdiction," the court said.

The idea of targeting came up again in the court's discussion of specific jurisdiction, where it ruled that the thousands of transactions (and domain registration contracts) processed by Godaddy.com's website with Illinois residents were not sufficient to create jurisdiction over Godaddy.com. The court seemed to weigh in Godaddy.com's favor the fact that these transactions were automated. Also in Godaddy.com's favor was the fact that Godaddy.com's automated contacts with Illinois residents were initiated by Illinois residents not by Godaddy.com. They were the product of "unilateral activity of a third person," the court wrote.

Asserting jurisdiction over Godaddy.com on the basis of these automated contacts would violate constitutional due process, the court held. It also rejected the Calder "effects test" as a basis for assertion jurisdiction here.

The court also mentioned favorably Godaddy.com's registration contract, which provides for jurisdiction in Arizona, though it didn't make too much of this fact.

I wonder if this ruling is an outlier or a turning point in how courts view jurisdiction over internet sites. If an entity as commercially large and pervasive as Godaddy.com is not subject to the jurisdiction of Illinois courts then, by this court's reasoning, Godaddy.com is not likely to subject to the general jurisdiction of any other forum -- save for Godaddy.com's home state of Arizona. Smaller domain name registrars (all of the others are smaller than Godaddy.com!) should also take comfort from the court's ruling.

Trademark owners alleging infringement tend to prevail on these sorts of jurisdiction challenges, inasmuch as the harm allegedly inflicted by the defendant's infringing activities is felt most keenly in the trademark owner's home jurisdiction. On this point too the court's ruling was somewhat surprising.

The Targeting Trend

Internet jurisdiction cases tend to be all over the map as far as reasoning as each court takes a whack at the novel issues presented, and they are "fact-intensive" as well, which is lawyer-speak meaning that the court's ruling is pretty well tied to the case before it. It is not terribly difficult to distinguish one case, or several cases, and build a good argument for ruling the other way. Myself, I could find a couple dozen cases where scant commercial activity was held to support the assertion of jurisdiction over an out-of-state defendant. That doesn't mean this judge was wrong in uBID v. Godaddy or that this ruling isn't a rational way to look at internet-based jurisdiction problems. It is entirely possible to see this case a part of the recent trend of "targeting" analysis in jurisdiction cases, which is scaling back expansive 1996-2000 era views on internet jurisdiction. In the end, though, I think it just means that the cases are all over the map.

(This doesn't have anything do to with jurisdiction, but I found it interesting that the court's opinion mentioned that Godaddy.com has filed a patent application for a domain registration system that examines the text of a domain name and then prevent advertisements from companies with similarly worded names from appearing on the parked page.)

Finally, a trivial tidbit. The judge in the uBID v. Godaddy case, Charles P. Kocoras, is the same judge who entered a $11.7 million default judgment against United Kingdom-based Spamhaus in a defamation case brought by a company claiming to have been wrongfully tagged by Spamhaus as a spammer. Spamhaus didn't challenge the court's jurisdiction in that case, and I bet they wish they did. Spamhaus's connections with Illinois seem awfully slight in comparison to Godaddy.com's connections. Spamhaus is still trying to get out from under that default judgment. The Seventh Circuit subsequently ruled that Spamhaus was entitled to a hearing on the size of the judgment, and that part of the case has been dragging on for the past two years. On Oct. 8, Judge Kocoras rejected Spamhaus's request for a jury trial on the damages question.

The bottom line for the uBID v. Godaddy case, however, is that if uBID wants to pursue Godaddy.com on trademark infringement claims, it is going to have to do so in Arizona.

Business Models That Require Restrictive Consumer Contracts for Success

The MediaFire vs. SkipScreen spat, which involves a download website's attempt to use a terms of use agreement to prevent a third-party software developer from distributing an ad-skipping plugin, highlights a weakness in business models that can succeed only if consumers are coerced by contract into doing something they really don't want to do. The business is only as good as the contract.

The download site, MediaFire, has an acceptable use policy that forbids users from (1) using automated tools to accomplish the download, (2) "interfer[ing] with the normal use" of the MediaFire website, (3) and "reformat[ting] or refram[ing] any portion of any web page," thereby bypassing the advertisements. Consumers don't want to watch display advertisements while waiting for a download to begin. Enter SkipScreen, a Firefox browser plugin that solves this annoyance on behalf of the user. SkipScreen "auto-clicks" toward the true download link, bypassing the wait time in which MediaFire displays advertising to the user.

So, MediaFire has a contract with its users that the users really don't want to follow. And it has no contract at all with SkipScreen's developers. (Though it might be able to assert a "robot contract" claim, Register.com v. Verio, 126 F. Supp. 2d 238 (S.D.N.Y. 2000), or a trespass claim, eBay Inc. v. Bidder's Edge, 100 F. Supp. 2d 1058, 1073 (N.D. Cal. 2000), or a Computer Fraud and Abuse Act claim, EF Cultural v. Explorica, 274 F.3d 577 (1st Cir. 2001). Or even a tortious interference with contract claim. Or a trademark claim. Unfortunately, the possibilities are limitless.) SkipScreen is fighting back with the Electronic Frontier Foundation's help, so now MediaFire will have to go to court to enforce its alleged right to require users to view its advertising, which they apparently don't want to do.

A similar case that produced a recent decision is MetroPCS Inc. v. Virgin Mobile USA LP, No. 08-cv-1658 (N.D. Tex., Sept. 25, 2009). I say that the case is similar because, like the SkipScreen dispute, it involves a business, Virgin Mobile, that is supporting its business model with a terms of use agreement that users do not really want to honor. And it involves a third-party, MetroPCS, that offers Virgin Mobile customers a ready means to avoid the agreement's restrictions.

Virgin Mobile sells cell phone handsets and network service for the handset. Virgin Mobile actually loses $50 on each handset sale, a loss that it can only recoup if the user purchases network service for the length of the service contract. A use agreement on the product packaging and in a terms of service booklet inside the packaging purports to bind the user to the Virgin Mobile network for the life of the service contract, along with other restrictions on how the handset may be used.

MetroPCS disrupts the Virgin Mobile business model by offering a service that re-programs Virgin Mobile handsets so that they can operate on the MetroPCS network. Virgin Mobile sued to stop MetroPCS from luring away its customers in this fashion, raising trademark (the re-programmed handsets still carried Virgin Mobile branding) and breach of contract claims. The court's Sept. 25 opinion, which is inconclusive regarding the trademark claims, features a fascinating discussion about whether MetroPCS is making a trademark "use" of the Virgin Mobile handset by re-programming it and whether consumers are confused about what is going on with their handset. The court cited the telecom industry's controversial practice of locking-in consumers to a particular device as evidence that a cell phone handset and cell phone service are, for trademark law purposes, an integrated product offering. Meaning that a change of networks might constitute an infringing trademark "use" of the handset. MetroPCS argued that a cell phone handset is like a television set, where the hardware and the service network (broadcast, cable, satellite) are distinct offerings that the consumer is free to choose among. Judging from the tenor of the court's discussion, it didn't look like the court was buying the television set analogy. 

The court was unimpressed with Virgin Mobile's contract claims, however, and it rejected arguments that the terms set out on the product packaging and service booklet should be extended to parties that had no direct dealings with Virgin Mobile.

Just as in the MediaFire/SkipScreen dispute, Virgin Mobile seems to have created a business that requires coercing consumers into doing something they really don't want to do; namely, sticking with Virgin Mobile when there are less expensive network alternatives and the technological means to do something about it. Even if MediaFire and Virgin Mobile are entirely correct in their legal positions (and they may very well be), they are nevertheless swimming against the current of consumer expectations and desires. That seems like a very difficult business to sustain over the long term.

Cash4Gold, Money4Gold, Tomato, Tom-ah-to

Pity poor Jeff Aronson, who built his company, Cash4Gold, into a highly successful venture -- only to see his fortune raided by a competing operator with the same business idea, using the same marketing methods, and very similar trade names. Names like Money4Gold and Dollars4Gold. Aronson's competitor wasn't very scrupulous in his respect for Aronson's trademark. The competitor used banner ads and logos similar to Aronson's on Web sites and in Google paid search advertising, all of which triggered clicks to the competitor's Web site.

Aronson's bid for a preliminary injunction against Money4Gold/Dollars4Gold started off strong. Whereas I probably couldn't have resisted commenting that Cash4Gold built its business by skillfully exploiting human misfortune, the trial court remarked that Cash4Gold's success "is the product of good timing, hard work, and effective advertising." Better yet, the court found that the defendant, Money4Gold, advertised with marks both identical and similar to Cash4Gold. The court further remarked that there was evidence in the record to support a finding that Money4Gold intended to cause consumer confusion.

But Aronson's case foundered on his choice of name for his business: Cash4Gold, a descriptive word mark that is not entitled to protection under Section 43(a) of the Lanham Act unless it has secondary meaning. ("Secondary meaning" means that the mark in question is so strongly associated with the mark's owner in the mind of the public that it is no longer a generic, descriptive term.) A case for secondary meaning is typically created by evidence of advertising campaigns and the extent to which these advertising campaigns are successful at creating link between the mark and the services provided by the mark owner. In this case, despite evidence that Cash4Gold had spent "tens of millions" of dollars in advertising (including TV spots featuring the late Ed McMahon, radio spots by Howard Stern, and sponsorship of a NASCAR driver), Cash4Gold's evidence failed to demonstrate secondary meaning existed at the time the defendant began encroaching on the Cash4Gold mark, sometime in September 2008. Cash4Gold's claim to secondary meaning was also undermined by Aronson's candid admission that the phrase has been around for a long time:

[T]there simply was not enough evidence for the Court to find as a factual matter that Plaintiff’s mark satisfied the Conagra factors and thereby obtained that quantum of recognition known as secondary meaning before September of 2008.

Moreover, Plaintiff’s CEO Jeff Aronson testified that the phrase "cash for gold” has been used “since the days of mining.” He said this while being questioned about the fact that Plaintiff does not presently hold a registration in the Patent and Trademark Office for its mark “Cash4Gold,” while another company, Napala Gold, does own one. When exactly “the days of mining” were is unclear, but his manner indicated that it was a long time in the past. While said only in passing, the fact that Plaintiff’s biggest cheerleader believes that the phrase has been used presumably since the California Gold Rush era seriously undermines its claim to the distinctiveness and exclusiveness of its mark “Cash4Gold” for a precious metal refining business.

Although the court denied Cash4Gold's request for a preliminary injunction, it left the door open for reconsideration if Cash4Gold could put together a better case for secondary meaning. Cash4Gold didn't offer much evidence regarding secondary meaning as of September 2008, and the court here wasn't willing to assume that the mark was as well-known then as it is now.

Cash4Gold also lost its copyright infringement claim against Money4Gold, a claim that was based on Money4Gold's copying of a small portion of the Cash4Gold Web site. The court remarked that, despite the evident copying that occurred here, the Money4Gold and Dollars4Gold Web sites "have a strikingly different look to them from the Plaintiff's site and would not strike a lay observer as having appropriated the protected elements of Plaintiff's website."

Cash4Gold submitted to the court 43 pages of material printed from its Web site. The copycat Web sites created by the defendant were just 1-3 pages in length. On this disparity of size alone, the court said, the defendant's Web sites cannot be deemed to be substantially similar to -- and thereby infringing -- the Cash4Gold Web site.

This case is further evidence that copyright law is a poor means to prevent free-riding of the sort that occurred here. It's also further evidence of the "generous" of copyright law: money-making ideas like Aronson's are free for the taking; only their expression is protected, and loosely so in the case of marketing content.

The case is Green Bullion Financial Services v. Money4Gold Holdings Inc., No. 09-60027 (S.D. Fla., June 22, 2009).

Facebook Gives Trademark Owners Chance to Block Infringing Vanity Addresses

We're running the following item tomorrow to alert BNA Electronic Commerce & Law Report readers of the opportunity Facebook is offering trademark owners to preemptively block misappropriation of their marks when Facebook opens up its service to vanity URL registrations tomorrow night. I don't see any reason not to share it more widely. Thank you to the estimable David Kelly at Finnegan, Henderson, Farabow, Garrett & Dunner LLP, who shared his insights as well as a few relevant cases I was unaware of, and to BNA's Amy Bivins, who dashed this off late today.

The Facebook social networking site is taking steps to combat "name squatting" ahead of its June 13 launch of a new feature that will permit users to create vanity URLs incorporating their names, such as http://www.facebook.com/username.

Trademark holders can sign up now to block the registration of their marks. Facebook has already reserved certain names in an effort to assist third parties in protecting intellectual property and other rights.

David Kelly, who chairs the Trademark Group at Finnegan Henderson Farabow Garrett & Dunner LLP in Washington, D.C., told BNA today that the Facebook development is yet another area where trademark owners will have an opportunity to enforce their intellectual property rights.

"The good news is that Facebook at least has guidelines, encourages parties to use their real personal or business names, and has a mechanism for trademark holders to object to the use of their marks in these personalized URLs, though these safeguards will not prevent all username squatting problems," he said.

One issue raised by Facebook's trademark protection mechanism asks mark owners to provide a registered trademark, which implies that common law trademark rights may not be sufficient.

This creates the possibility of a conflict in situations where businesses with similar names are in different markets or geographic areas use the same mark, or situations where users have the same personal name as a celebrity, Kelly said.

Liability Unlikely for Services, but User Liability Possible.

Most widely used social networking sites prohibit unauthorized name and trademark use in their terms of service, and a growing number are banning username squatting--registering accounts associated with names or companies without authorization--specifically.

Under the reasoning in Tiffany v. eBay Inc., it is possible that social networks themselves could be held liable for username squatting, on a contributory infringement liability theory, if they continue to provide services to users they know or have reason to know are engaging in infringement. Tiffany v. eBay Inc., No. 04-4607 (S.D.N.Y. July 14, 2008)(13 ECLR 942, 7/16/08). Under Tiffany, general knowledge that infringement is occurring on a service is not enough to generate contributory liability.

Kelly told BNA that the username squatting issue, from the registrant perspective, is similar to e-mail addresses and screen names, which courts have addressed. For example, in Highfields Capital Management L.P. v. Doe, 385 F. Supp. 2d 969 (N.D. Cal. 2005), a magistrate judge quashed a subpoena requiring Yahoo! to identify a party that posted sarcastic message board comments about a company's stock performance using the company's name.

Finding the comments were not driven by a competitive purpose, and that it was unlikely readers would think the negative comments were in some way sponsored by the company, the court said the use qualified as a fair use.

But in Freedom Calls Foundation v. Bukstel, 2006 WL 845509 (E.D.N.Y. Mar 3, 2006), the court issued a preliminary injunction against a company's former employee, who had set up an e-mail address and instant messenger account using the company's name, concluding the use was likely infringing.

Facebook Plans Name Squatting Protections.

In instructions on the new vanity username program, Facebook directed users to choose a name as close as possible to their true names, and states that names cannot be changed or transferred after they are created.

Facebook is limiting participation to users who were Facebook members prior to its announcement of the program, a restriction designed to deter parties from signing up to "name squat." However, the restriction is temporary: New users will also be able to sign up for vanity usernames beginning June 28.

Facebook provides a link for "rights holders," through which they can prevent the registration of a trademark as a username. The form requires trademark owners to list the trademark as well as the registration number to be blocked. Rights holders do not have to have Facebook accounts to block registration of their marks.

In an effort to combat name squatting, Facebook will not permit the transfer of vanity URLs. If a user cancels an account, the associated URL will not be available as a new Facebook URL. Users will also not be permitted to register generic terms as usernames. Facebook said that it reserves the right to remove or reclaim a username at any time and for any reason.

Twitter to Test Verified Accounts.

Facebook's announcement comes against the backdrop of a high-profile lawsuit against another social networking site, Twitter, brought by a public figure who was impersonated on the Twitter site.

St. Louis Cardinals manager Tony La Russa filed his complaint in the San Francisco Superior Court, asserting trademark infringement, false designation of origin, dilution, cybersquatting, misappropriation, invasion of privacy, and intentional misrepresentation claims (La Russa v. Twitter Inc., Cal. Super. Ct., No. 02487393, complaint filed 5/6/09). He attached to the complaint a series of updates, or Tweets, which the user posted as "TonyLaRussa."

Twitter removed the action to federal court on June 5. The next day, a Twitter official blogged that the La Russa complaint was an "unnecessary waste of judicial resources," asserting that the company's Terms of Use are fair to rights holders. The blog post further revealed that Twitter plans to test a verified account system this summer, through which public officials, public agencies, famous artists, athletes, and other well-known individuals at risk of impersonation can create accounts verified by a seal.

By Amy E. Bivins

Links:

Facebook's form for trademark owners to block mark registration.

Facebook's IP infringement notification form.

La Russa's complaint against Twitter.

Update: Morrison & Foerster has an alert on the Facebook situation.

Justice Sotomayor's Potential Cyberlaw Influence? Not Much

It was pleasant to note the other day that Judge Sonia Sotomayor, President Obama's choice for Associate Supreme Court Justice, has written a few opinions relating to Internet law during her time as judge in the lower federal courts. A first, apparently, and a sign of the centrality of the Internet in our business and personal affairs. From now on, the high court nominee who doesn't have a few cyberlaw decisions on his or her resume will be the remarkable case.

But does a Justice Sotomayor mean anything for the future direction of the laws that regulate online activity? No, not really. Not in the near future.

Consider this:

The Supreme Court has never reviewed a case involving the Computer Fraud and Abuse Act.

The Supreme Court has never reviewed a case involving the Electronic Communications Privacy Act.

The Supreme Court has never reviewed a case involving Section 230 of the Communications Decency Act (which gives interactive computer services immunity from most claims arising from the publication of third-party content), though it did consider, and strike down, the prohibitions against indecent online speech contained in another part of the CDA in Reno v. American Civil Liberties Union, 521 U.S. 844 (1997).

The Supreme Court has never reviewed a case involving the CAN-SPAM Act or the Digital Millennium Copyright Act.

The Supreme Court has never reviewed a case involving electronic contracting, jurisdiction arising from online activities, cybersquatting or any other domain name-related dispute.

Aside from Doe v. Chao, a case involving standing to sue the federal government under the Privacy Act, the Supreme Court has never taken a case involving online privacy or security (GLB, COPPA, FTC Act, you name it). If you want to count Bartnicki v. Vopper, go ahead, though I don't think that obscure decision in any way undermines the point I am trying to make here.

So that covers that vast majority of what I consider to fall under the general heading of cyberlaw. None of it is even on the Supreme Court's radar. And I don't see that situation changing anytime soon. The Web is a welter of contracts (a state law issue), and all of the afore-mentioned statutes need many more years of intermediate appellate scrutiny before they'll make good candidates for Supreme Court review. Sure, there are plenty of prosecutorial and judicial missteps to feed our blogs. But, as the Supreme Court often reminds us (see Rule 10), the Supreme Court is not in the business of correcting erroneous applications of settled law.

What's left? Copyright, patent, and First Amendment law. The last (and only) time the high court decided a digital copyright case was Metro-Goldwyn-Mayer Studios Inc. v. Grokster, 545 U.S. 913 (2005), a case in which Justice Souter (whom Judge Sotomayor will replace) wrote for a unanimous court that Grokster, a distributor of peer-to-peer file-sharing software, was a secondary infringer of the movie studios' copyrights. Not only did Grokster lose the case, but it inspired the high court to create a new theory of secondary liability -- "inducing" copyright infringement -- along the way. Given the apparently entrenched views already on the court, Judge Sotomayor's ascent to the Supreme Court offers little hope of benefiting copyright fair use advocates anytime soon, if at all.

First Amendment issues have traditionally been a leading source of Supreme Court activity, and it is not too far-fetched to imagine high court review of a case involving a federal government (FCC?) attempt to impose broadcast-style regulation on Internet transmissions. Here alone, I think, we have an area where Judge Sotomayor could exert some influence on cyberlaw issues. Without question, the Internet would be a far different -- and worse -- place if Reno v. American Civil Liberties Union had come out the other way. On First Amendment issues, Judge Sotomayor appears to have a rather unremarkable though liberal-leaning view of the First Amendment. About the same as the departing Justice Souter. No gain or loss for free speech proponents.

That leaves patents. In re Bilski, No. 08-964 (certiorari petition filed Jan. 28, 2009), is an important case in which the Federal Circuit curtailed the patentability of software-implemented business methods. According to SCOTUSBlog, there is a good chance the Supreme Court will grant review of the Bilski decision. Bilski was up for discussion yesterday at the Supreme Court's private cert-consideration conference, so we could know as early as Monday if Judge Sotomayor will have that one facing her in the fall. I have no idea what Judge Sotomayor's views are on the patentability of software-implemented business method patents, and I don't think anyone else does either. The Inventive Step blog unearthed a couple district court decisions. Not much there to go on.

Feel free to e-mail me (as usual) all the cases I've missed!

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Judge Sotomayor Is First Nominee With Cyberlaw Record

President Obama's choice today for Associate Supreme Court Justice, Sonia Sotomayor, authored a handful of cyberlaw opinions while on the Second Circuit. All business disputes and a privacy case, but nothing (I hope) that could provide ammunition for the World's Greatest Deliberative Body.

About Judge Sotomayor I will venture this: If confirmed, she will be the first justice who has written cyberlaw-related opinions before joining the court. I looked just now and couldn't find where Chief Justice Roberts or Associate Justice Alito had written a cyberlaw opinion while serving as appellate judges. (Then-Judge Alito missed both ACLU v. Reno and Playboy Entertainment Group, Inc. v. United States, a pair of new media cases that were decided initially by special three-judge panels in the Third Circuit.)

I don't think any of the following means much as far was what Judge Sotomayor will do as an Associate Supreme Court Justice. I'm passing it along for conversational purposes only.

Judge Sotomayor wrote the court's 2002 opinion in Specht v. Netscape Communications Corp., an important online contracting case. In Specht, the Second Circuit declined to enforce contract terms that were available behind a hyperlink that could only be seen by scrolling down on a Web page. A “reasonably prudent” user would not have learned of the existence of the terms before responding to an invitation to download free software, Judge Sotomayor wrote.

Judge Sotomayor's opinion in Specht made the point that clicking a button may not be construed as an assent to a contract if the site did not make clear that the act of clicking would signify assent to the terms of a contract. Although a party may not normally argue that his failure to read the terms of a contract made it unenforceable, the court said that there is an exception to this rule “when the writing does not appear to be a contract and the terms are not called to the attention of the recipient.”

“We are not persuaded that a reasonably prudent offeree in these circumstances would have known of the existence of license terms,” Judge Sotomayor wrote. “Plaintiffs were responding to an offer that did not carry an immediately visible notice of the existence of license terms or require unambiguous manifestation of assent to those terms. ... [I]n circumstances such as these, where consumers are urged to download free software at the immediate click of a button, a reference to the existence of license terms on a submerged screen is not sufficient to place consumers on inquiry or constructive notice of those terms.”

Judge Sotomayor also wrote opinions in a pair of domain name cases, Storey v. Cello Holdings LLC in 2003 and Mattel Inc. v. barbie-club.com in 2002.

In Storey v. Cello, the Second Circuit held, per Judge Sotomayor, that an adverse outcome in an administrative proceeding under the Uniform Domain Name Dispute Resolution Policy did not have preclusive effect on a later-initiated federal suit brought under the Anticybersquatting Consumer Protection Act (ACPA).

In Mattel Inc. v. barbie-club.com, Judge Sotomayor authored an opinion holding that a federal court may obtain in rem jurisdiction over a domain name under the ACPA only in a district in which the domain name registrar or other domain-name authority is located. The ruling was based on a straightforward reading of the ACPA. However, at the time, some attorneys held the view that federal court jurisdiction could be created in any federal district merely by "depositing" written evidence of the domain registration with the trial court. Judge Sotomayor rejected that argument.

In Leventhal v. Knapek, No. 00-9306 (2d Cir. Sept. 26, 2000), a privacy case, Judge Sotomayor wrote for the Second Circuit that New York state agency officials and investigators did not violate a state employee's Fourth Amendment rights when they searched the contents of his office computer for evidence of unauthorized use of state equipment.

Finally, while on the federal district court bench, Judge Sotomayor took the first crack at Tasini v. New York Times, 972 F. Supp. 804 (S.D.N.Y. 1997), writing an opinion in a case involving freelance authors' rights to news articles that the New York Times digitized and resold in an electronic database. Judge Sotomayor's judgment in favor of the Times was later reversed by the Supreme Court.

Update: Notwithstanding this record, Judge Sotomayor will be joining a court where she will have very little opportunity to rule on cyberlaw issues.

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Tugging on Superman's™ Cape

Google announced yesterday a change in its AdWords policy that will permit advertisers to display the trademarks of other companies in the text of their Google ads. Just so trademark owners will have something interesting to talk about at the International Trademark Association meeting in Seattle tomorrow, I guess.

While I am waiting to be educated about the meaning of all this by Eric Goldman, I will venture the suggestion that this is not all that big of a deal. Google's new policy permits the display of another company's trademark only in certain circumstances:

Ads which use the term in a descriptive or generic way, and not in reference to the trademark owner or the goods or services corresponding to the trademark term.

Ads which use the trademark in a nominative manner to refer to the trademark or its owner, specifically:

Resale of the trademarked goods or services: The advertiser's site must sell (or clearly facilitate the sale of) the goods or services corresponding to a trademark term. The landing page of the ad must clearly demonstrate that a user is able to purchase the goods or services corresponding to a trademark from the advertiser.

Sale of components, replacement parts or compatible products corresponding to a trademark: The advertiser’s site must sell (or clearly facilitate the sale of) the components, replacement parts or compatible products relating to the goods or services of the trademark. The advertiser’s landing page must clearly demonstrate that a user is able to purchase the components, parts or compatible products corresponding to the trademark term from the advertiser.

Informational sites: The primary purpose of the advertiser’s site must be to provide non-competitive and informative details about the goods or services corresponding to the trademark term. Additionally, the advertiser may not sell or facilitate the sale of the goods or services of a competitor of the trademark owner.

So we're talking about re-sellers ("Coca Cola on sale here at Safeway"), component parts ("Our cheapie cable is compatible with your Blackberry"), and informational sites ("Hondas get better gas mileage than Cadillacs but we sell neither"). I don't believe these are burning issues within the trademark owner community, and I am not aware of any cases that suggest Google has liability in these three situations. A case involving the display of a competitors' mark in the text of an AdWords ad, Government Employees Insurance Company v. Google Inc., No. 04-507 (E.D. Va. Aug. 8, 2005), did suggest that Google might have trademark liability:

Despite the many flaws in its design, the survey’s results were sufficient to establish a likelihood of confusion regarding those Sponsored Links in which the trademark GEICO appears either in the heading or text of the ad. Based on this finding, Google may be liable for trademark infringement for the time period before it began blocking such usage or for such ads that have slipped or continue to slip through Google’s system for blocking the appearance of GEICO’s mark in Sponsored Links. For, despite the flaws in the survey, the extremely high percentages of respondents who experienced some degree of confusion when viewing such ads provides sufficient evidence to survive defendant’s Motion for Judgment. Further, having been advised by defendant that it has no evidence to introduce on this last issue, the Court finds that plaintiff has established a likelihood of confusion, and therefore a violation of the Lanham Act, solely with regard to those Sponsored Links that use GEICO’s trademarks in their headings or text.

Aware of the importance of these issues to the ongoing evolution of Internet business practices and to the application of traditional trademark principles to this new medium, the Court emphasizes that its ruling applies only to the specific facts of this case, which include the unique business model employed by plaintiff and the specific design of defendant’s advertising program and search results pages. In addition, the Court has not addressed several remaining legal issues, including whether Google itself is liable for the Lanham Act violations resulting from advertisers’ use of GEICO’s trademarks in the headings and text of their Sponsored Links, as accomplished through Google’s Adwords program. That significant issue remains to be resolved, either through an agreement by the parties or in a continuation of the trial. Also unresolved is the timeframe during which violations occurred and the measure of damages or other relief to which plaintiff may be entitled if Google were to be found liable.

The case subsequently settled before any determination could be made on the merits of GEICO's trademark claims. Anyhow, the court's tentative and careful language here is hardly a condemnation of the use of trademarks in AdWords copy.

Setting aside the issue of Google's liability, here are recent three cases that held the use of a competitor's trademark in an advertisement can be a fair use. Granted, winning on fair use an expensive way to go.

• Mary Kay Inc. v. Weber, No. 08-776 (N.D. Tex. Feb. 20, 2009)

• Tiffany (NJ) Inc. v. eBay Inc., No. 04-4607 (S.D.N.Y. July 14, 2008)

• Designer Skin LLC v. S & L Vitamins Inc., No. 05-3699 (D. Ariz. May 20, 2008)

It will be interesting to read what trademark experts think about Google's move. Will trademark owners find this new policy provocative or somehow an infringement of their rights? If you've got a thought or have written something already, let me know.

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Who Can You Believe on Intellectual Property Rights Enforcement?

Somebody will have to explain to me how a country like Canada can be listed on the U.S. Trade Representative's Priority Watch List for worst intellectual property regimes and yet rank sixth best in the world for intellectual property protection, according to a study written by Taylor Wessing, a lawfirm specializing in enforcing intellectual property rights.

One of these studies must be buncombe, right?

The United States, ranked third, was dinged by Taylor Wessing for being a relatively expensive jurisdiction in which to enforce intellectual property rights.

Just to satisfy my curiosity I wrote down which countries appearing in Taylor Wessing's rankings were singled out for criticism by the U.S. Trade Representative. Looks like the USTR put Canada in with some pretty rough company. And it spared for scorn many countries that, in Taylor Wessing's estimation, are more hostile than Canada to intellectual property rights enforcement: Ireland, New Zealand, France, Singapore, Japan, Spain, South Africa, and South Korea.

Jurisdiction	Taylor Wessing Rank	USTR 301 Designation
UK	1	--
Germany	2	--
USA	3	--
Australia	4	--
Netherlands	5	--
Canada	6	Priority Watch
Ireland	7	--
New Zealand	8	--
France	9	--
Singapore	10	--
Japan	11	--
Israel	12	Priority Watch
Spain	13	--
South Africa	14	--
South Korea	15	--
Mexico	16	Watch
UAE	17	--
Italy	18	Watch
Turkey	19	Watch
Poland	20	Watch
Russia	21	Priority Watch
Brazil	22	Watch
India	23	Priority Watch
China	24	Priority Watch

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Fifth Circuit Faults Trial Court for Failure to Consider Typosquatter's Fair Use Defense

Make that 23 federal circuit cyberlaw cases so far this year. In last week's post Federal Circuits Heading Toward Busiest Cyberlaw Year Yet, I overlooked Southern Co. v. Dauben Inc., a Fifth Circuit case interpreting the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), and the duty of trial courts to carefully consider fair use and irreparable harm issues when ruling on a request for injunctive relief.