 Articles
Found in This Issue
   FTC
Proposes Governing Principles for Online Behavioral Advertising
- Agency Seeks Industry Comments
Background:
- On November 1 and 2, 2007, the FTC hosted a Town
Hall meeting entitled “Ehavioral Advertising: Tracking,
Targeting, and Technology” to discuss privacy issues
associated with online behavioral advertising.
- The FTC defines online “behavioral advertising”
as the tracking of a consumer’s activities online,
including the searches that the consumer has conducted,
the web pages visited, and the content viewed in order to
deliver advertising targeted to the individual consumer’s
interests.
- As a result of these sessions, the following core
issues were identified:
- While behavioral advertising provides benefits to consumers,
the practice itself is largely invisible and unknown to
consumers (few appear to understand the role that data collection
plays in the online marketplace);
- Business and consumer groups appreciate the values of
transparency and consumer autonomy, and view them as critical
to the development and maintenance of consumer trust in
the online marketplace; and
- The possibility of consumer data that is collected for
behavioral advertising ending up in the wrong hands or being
used for unanticipated purposes.
- The importance of these issues led the FTC staff
to propose principles for behavioral advertising for which
it is now seeking comment from interested parties.
- In developing these principles, the FTC indicates
that its purpose is to address privacy concerns while keeping
in mind the need to maintain vigorous competition in online
advertising, as well as the importance of accommodating
the variety of business models that currently exist.
Behavioral Advertising Principles for Discussion and Development
- Transparency and Consumer Control: Websites where data
is collected for behavioral advertising purposes should
provide a clear, concise, consumer-friendly, and prominent
statement about behavioral advertising;
- Reasonable security, and limited data retention, for
consumer data:
- Any company that collects and/or stores consumer
data for behavioral advertising should provide reasonable
security for that data;
- Companies should retain data for only as long as
is necessary to fulfill a legitimate business or law enforcement
need.
- Affirmative express consent for material changes to
existing privacy promises: Before a company can use data
in a manner materially different from promises the company
made when it collected the data, it should obtain affirmative
express consent from affected consumers for such different
use;
- Affirmative express consent to (or prohibition against)
using sensitive data for behavioral advertising: Companies
should only collect sensitive data for behavioral advertising
if they obtain affirmative express consent from the consumer
to receive such advertising;
- Call for additional information: Using tracking data
for purposes other than behavioral advertising – the
FTC staff is seeking additional information about the potential
uses of tracking data beyond behavioral advertising.
Call for Comments
- The FTC is seeking comments and discussion on the
appropriateness and feasibility of these principles for
both consumers and businesses. Comments may be submitted
until February 22, 2008.
Online Advertiser Settles FTC Charges
United States of America (for the Federal
Trade Commission) v. Adteractive, Inc.
(United States District Court for the Northern District
of California), Case No. CV-07-5940 SI FTC File No. 072-3041
ACCORDING TO THE FTC
- Adteractive, Inc. ("Adteractive") used
deceptive email marketing and online advertising to lure
consumers to its websites.
-
When consumers arrive at Adteractive’s promotional
websites, they are led through a series of advertisements
for goods and services offered by third parties
- To “qualify” for their “free gifts,”
consumers must first sift through pages of “optional”
offers.
-
Once through this level of offers, consumers discover
that they must “participate in” a series of
third-party promotions – which require consumers to
either purchase products, take out a car loan, subscribe
to a satellite TV service, or apply for multiple credit
cards.
- The failure to disclose material facts, e.g., that
consumers must make a purchase or provide some other consideration
to obtain their “free gift,” is deceptive and
in violation of the FTC Act.
- The FTC also charged that deceptive subject lines
in Adteractive’s commercial email messages violate
the CAN-SPAM Act.
THE SETTLEMENT
- Adteractive agreed to clearly and conspicuously
disclose in its advertising and on its promotional websites
that consumers must spend money or incur other obligations
to qualify for a gift or prize.
- The company also agreed to provide a list of the
obligations that a consumer is likely to incur to qualify
for their chosen gift – such as applying for credit
cards, purchasing products, or obtaining a car loan, in
close proximity to the "free" offer and in a clear
and conspicuous manner.
- The settlement also bars Adteractive from engaging
in future violations of the CAN-SPAM Act and requires Adteractive
to pay a civil penalty of $650,000.
- The settlement contains bookkeeping and record-keeping
provisions to allow the FTC to monitor future compliance.
Citing Website Terms of Use, Court Enjoins Boardfirst from Accessing Southwest's Website
Southwest Airlines Co. v. BoardFirst, LLC, No.
06-0891 (N.D. Tex. 2007)
FACTS
- Plaintiff, Southwest Airlines, utilizes an “open
seating” policy – passengers are not assigned
to specific seats but are divided into three (3) boarding
groups: A, B or C.
- The A group is entitled to board first, then B, then
C.
- Boarding passes indicating group designation, are
awarded on a “first-come, first-served” basis.
- Passengers are able to check in for flights and obtain
a boarding pass (with group designation) within 24 hours of
departure.
- Passengers may check in online at southwest.com and
click on a tab marked “Check In Online.”
- In 2005, defendant BoardFirst started a company with
the sole purpose of being able to assist Southwest customers
in securing “A” boarding passes for a fee.
- Defendant operates through its website boardfirst.com.
- Defendant does not print the pass, but simply charges
the customer’s credit card and emails the receipt confirming
that the pass was obtained and that it can be printed via
southwest.com or at an airport kiosk.
- Plaintiff sent defendant two (2) cease and desist
letters indicating that Southwest’s Terms of Use prohibits
the use of its website for commercial purposes.
- Defendant did not stop its operations and plaintiff
brought an action claiming defendant’s use of the Southwest
website violates the Terms of Use posted on its website.
OPINION OF THE COURT
- The Court first reviewed whether the Terms of Use,
a “browsewrap” agreement, formed a binding contract
between the parties.
- A browsewrap agreement typically takes the form of
a notice on a website that conditions the use of the site
upon compliance with certain terms or conditions which may
be included on the same page as the notice, or are accessible
via a hyperlink.
- The Court pointed out that the “validity of
a browsewrap [agreement] turns on whether a website user has
actual or constructive knowledge of a site’s terms and
conditions prior to using the site.”
- Here, the Court noted that there was no dispute that
defendant had actual knowledge of plaintiff’s Terms
of Use, as defendant received two (2) cease and desist letters
citing to the Terms of Use and warning against the continued
use of the site for commercial purposes.
- Based upon the evidence, the Court ruled that defendant’s
use of the site violated the Terms of Use as a matter of law.
SUMMARY
- Here, the Court found that website users, commercial
or otherwise, are bound by associated website terms and conditions
of which they have notice, even if they do not expressly agree
to same.
| "...the conjoined forms of “perfumebay” created a likelihood of confusion and that the non-conjoined forms of the mark did not. |
| "...
learned from this case, courts will analyze “marks in their internet usage, not simply as the terms are pronounced or viewed in the abstract.” |
Conjoined Forms of "Perfumebay" Infringes "eBay" Mark
Perfumebay.com, Inc. v. eBay, Inc., ___F.3d___,
2007 WL 3243998 (C.A. 9)
FACTS
- Perfumebay sells perfume on the Internet via several
websites, including perfumebay.com, using both conjoined
and non-conjoined forms of “perfumebay,” namely
“PerfumeBay” and “Perfume Bay.”
- Perfumebay sold perfume on eBay prior to launching
perfumebay.com.
- When Perfumebay applied for a trademark for its
Perfume Bay mark, eBay filed an opposition motion with the
United States Patent and Trademark Office ("USPTO").
- After the parties failed to resolve their dispute
before the USPTO, Perfumebay filed a complaint in federal
district court seeking a declaratory judgment that its various
marks did not infringe on eBay’s mark or otherwise
violate the Lanham Act.
- The district court held that the conjoined forms
of “perfumebay” created a likelihood of confusion,
but that the non-conjoined forms of “Perfume Bay”
did not. The court also held that the Perfumebay marks did
not produce a likelihood of dilution.
- Perfumebay appealed the court’s finding that
the conjoined terms “perfumebay” and PerfumeBay”
created a likelihood of consumer confusion under the Lanham
Act with respect to the mark “eBay.”
COURT OF APPEALS
- The Court of Appeals affirmed the district court’s
decision that the conjoined forms of “perfumebay”
created a likelihood of confusion and that the non-conjoined
forms of the mark did not.
- However, the Court found that Perfumebay’s
marks did produce a likelihood of dilution, as the marks
are nearly identical to eBay’s mark.
- The Court cited to the decision in Interstellar
Starship Servs., Ltd. v. Epix Inc., 304 F.3d 936, 941 (9th
Cir. 2002) where the Court found that three (3) factors
must be weighed when determining the likelihood of confusion
in Internet trademark actions:
- the similarity of the marks;
- the relatedness of the goods and services associated
with the marks; and
- the simultaneous use of the web as a marketing channel.
- Employing these factors, the Court held that the
use of the “PerfumeBay” mark was likely to cause
confusion because it contains the “eBay” mark
in its entirety and searching the term “perfume ebay”
via the Internet produced both “eBay” and “perfumebay”
link results.
SUMMARY
- When selecting a name for your product or service,
carefully consider this decision.
- As we have learned from this case, courts will analyze
“marks in their internet usage, not simply as the
terms are pronounced or viewed in the abstract.”
Use
of Trademarks in Metatags and Linked Advertising Not a “Use
in Commerce” under the Lanham Act
S & L Vitamins, Inc. v. Australian Gold, Inc.,
___ F. Supp.2d ___, 2007 WL 2932778 (E.D.N.Y.)
FACTS
- Australian Gold (“AG”) manufactures tanning
lotions and other related products that are sold at tanning
salons throughout the country.
- AG owns, and/or is the licensee of, registered or
common law trademarks associated with these products ("Marks").
- S & L Vitamins ("S&L") sells products
to the public through its websites and at its bricks-and-mortar
retail location.
- S&L’s websites contain links to a listing
of all featured products according to brand name, including
AG’s products using its Marks.
- Without authority, S&L sold AG’s products
(which are sold only in salons) online for approximately half
of the salon price.
- S&L also purchased “Australian Gold”
as a trigger term for sponsored links on major Internet search
engines and used the Mark in the HTML source code and metatags
for its website.
- AG claims that S&L’s use of its Marks and
distribution of its products via the Internet violates AG’s
intellectual property rights and tortiously interferes with
its distribution contracts with third party retailers.
- AG brought an action against S&L alleging multiple
violations of the Lanham Act in connection with S&L's
use of AG Marks.
COURT
- The Court found that neither the purchase of “Australian
Gold” as a trigger term, nor the use of the Mark in
S&L's website metatags, were “use” in commerce
under the Lanham Act.
- According to Judge Joanna Seybert, “[t]he general
rule in this circuit is that use of a trademark in keywords
and metatags, where the use is strictly internal and not communicated
to the public, does not constitute a Lanham Act ‘use’
and, therefore, does not support a Lanham Act claim.”
Court has Personal Jurisdiction over Non-Resident Defendant's Internet Business
Chicago Architecture Found. v. Domain Magic,
LLC,
2007 WL 3046124 (N.D. Ill.)
FACTS
- Plaintiff, Chicago Architecture Foundation (“CAF”),
provides architectural tours, education and book services
relating to Chicago architecture.
- Plaintiff claimed that the name “Chicago Architecture
Foundation” is a famous mark.
- CAF advertises its services on its website located
at www.architecture.org.
- Defendant is a Florida-based company that registered
an Internet website with the domain name www.chicagoarchitecturefoundation.org.
- Defendant’s website offers architectural tour
services similar to those provided by CAF.
- Plaintiff filed a complaint alleging trademark infringement
and dilution under the Lanham Act and applicable state laws.
- Defendant argued that, as an out-of-state defendant
with no minimum contacts with the State of Illinois, a federal
district court sitting in Illinois had no jurisdiction over
it.
- Defendant also claimed that it maintained a “passive
website” through which it does not conduct business
in the State of Illinois.
OPINION OF THE COURT
- The Court found that defendant clearly transacted
business within the State of Illinois, as it has profited
from individuals clicking on hyperlinks posted on its website.
- The Court used the “sliding scale” analysis
established in Zippo Mfg. Co. v. Zippo Dot Com. Inc., 952
F. Supp. 1119 (W.D. Pa. 1997). In Zippo, the Court found that
“the likelihood that personal jurisdiction can be constitutionally
exercised is directly proportionate to the nature and quality
of commercial activity that an entity conducts over the Internet.”
- Specifically, the Court found the following contacts
with the State of Illinois were sufficient to establish personal
jurisdiction over defendant:
- The offending websites displayed the headings “Chicago
Architecture Foundation,” and “chicagoarchitecturefoundation.org”
even though defendant has no affiliation with CAF, an Illinois
corporation;
- The offending web page also included hyperlinks to various
businesses that offered bike, bus and boat tours around the
City of Chicago (some of which were in direct competition
with plaintiff);
- Any user who clicked on these links was directed to content
and websites that compete with CAF;
- Defendant received a payment based on the number of clicks
on each hyperlink;
- Content associated with the defendant's website was created
strictly for the purpose of providing information about various
products and services available in and around the Chicago,
Illinois area to visitors of the site; and
- Defendant intended for its website to affect Illinois residents:
it used CAF’s well-known trademark, and attached links
to non-affiliated companies that conducted businesses solely
in Chicago to a web page with an Internet address deceptively
similar to that of CAF.
SUMMARY
The decision points out that a “passive website”
– one that does little more than make information available
to those who are interested in
it – will not be grounds for the exercise of personal
jurisdiction. However, where, as here, the level of interactivity
and commercial nature of the exchange of information that
occurs on the website is so substantial, a finding of personal
jurisdiction over the subject defendant will be proper.
Court Finds use of "eVisa" Actually Dilutes "Visa" Mark
Visa Int'l Serv. Assoc. v. JSL Corp., 2007 WL
4631264 (D. Nev.)
FACTS
- Defendant, JSL Corporation, offers travel, foreign
language, and other multilingual applications and services.
- In 2002, the Ninth Circuit enjoined defendant from
using or registering the mark “EVISA” or the domain
name evisa.com.
- After the injunction was issued, the U.S. Supreme
Court decided Moseley v. V. Secret Catalogue, Inc., 537 U.S.
418 (2003), holding that to prevail on a Federal Trademark
Dilution Act ("FTDA") claim, a plaintiff must establish
actual dilution, rather than a likelihood of dilution (which
was the standard in the earlier decision in this matter).
- The Ninth Circuit remanded the case to the district
court to consider the facts in light of the new standard set
forth in Moseley.
COURT ON REMAND
- The district court upheld the decision, concluding
that plaintiff is entitled to summary judgment even in light
of the heightened standard created by Moseley.
- The district court pointed out that “Defendant’s
use of the EVISA mark weakens the ability of the VISA mark
to identify its respective goods and services because internet
users who enter the domain name 'evisa.com' are not brought
to Plaintiff’s website. Rather, they are brought to
Defendant’s language services website, which makes use
of the VISA trademark with only an added 'e.' This dilution
reduces the capacity of the VISA mark to identify the goods
and services of its owner.”
- Further, the district court pointed out that “the
use of an 'e' before a trademark is commonly used to denote
the online version of a business.”
SUMMARY
- Similar to the decision in Perfumebay.com, Inc. v.
eBay, Inc., ___F .3d___, 2007 WL 3243998 (C.A. 9), (featured
in this Newsletter), attempts to register marks that amount
to merely modified or enhanced forms of well-known trademarked
names, will not be looked upon favorably by the courts.
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