 Articles Found in This Issue
 
Website Owner May be Vicariously Liable (Not Strictly Liable) for Affiliates’ CAN-SPAM Act Violations
FACTS:
- Defendant, Cyberheat, Inc., offers by subscription sexually explicit content for consenting adults to access via the Internet.
- Cyberheat contracts with affiliates (marketing partners) to promote its adult websites.
ALLEGATIONS:
- Cyberheat’s affiliates sent 642 sexually explicit unsolicited commercial emails in violation of the CAN-SPAM Act resulting in payment of $209,120 in commissions during a one-year period.
- Cyberheat received approximately 400 complaints from computer users that received unwanted sexually explicit emails, 300 of which were transmitted by a single affiliate.
- The Department of Justice (on behalf of the FTC) brought an action against Cyberheat alleging that it did not screen affiliates, supplied them with pornographic materials, did not monitor or oversee its affiliates’ promotional activities, and did not readily terminate affiliates after complaints associated with the receipt of sexually explicit spam.
COURT DECISION:
- The Court found that Cyberheat may be held vicariously liable under the CAN-SPAM Act and the Adult Labeling Rule for the actions of its affiliates.
- The Court reasoned that Cyberheat may be vicariously liable for its affiliates’ CAN SPAM Act violations if it had a sufficient level of knowledge (knew or should have known) and control over the affiliates’ activities.
- The Court refused to find Cyberheat strictly liable for its affiliates’ actions.
- The Court denied the Government’s motion for summary judgment, finding that reasonable jurors could come to different conclusions on these issues.
WHAT YOU SHOULD KNOW:
- The emerging trend is that companies will now be held liable for the acts of their affiliates under the theory of agency.
- Companies should have comprehensive affiliate agreements in place that contain strict marketing guidelines, the violation of which should result in immediate termination.
Purchase from Search Engines of Third Party Trademarks as Key Words May be Actionable “Use” Under the Lanham Act
FACTS:
- Plaintiff, Hamzik, holds a registered trademark for the mark “The Dating Ring” for use in connection with rings and other jewelry. Defendant, Zale Corp., is a national jewelry chain with brick and mortar and online retail stores.
- Plaintiff brought an action in the U.S. District Court for the Northern District of New York for trademark infringement and other Lanham Act violations.
- Defendant filed a motion to dismiss the action.
ALLEGATIONS:
- Hamzik alleged that Zale violated plaintiff’s rights by causing over 500 results to appear on its www.zales.com website when a search was performed using the phrase “dating ring,” and by purchasing the keywords “dating ring” for search engine advertising.
COURT APPROVAL:
- The court dismissed the infringement claims as to search results appearing on Zale’s own internal website, finding that there was no evidence that plaintiff’s mark was displayed in any of the links to rings offered for sale on Zale’s website. The court also found that the fact that Zale’s website displayed rings for sale in response to the “dating rings” search did not constitute “use” under the Lanham Act.
- The court declined to dismiss the action with respect to whether the purchase of plaintiff’s mark from various search engines constituted “use” under the Lanham Act. The court distinguished two previous cases in the Second Circuit (Rescuecom and Merck & Co.), holding that in this case there may be facts demonstrating that plaintiff’s mark does appear on the displays associated with the goods. In this case, when a computer user entered the words “dating ring” as a search term, several search engines returned results that displayed “Dating Ring-Zales.”
WHAT YOU SHOULD KNOW:
- Courts in the Second Circuit are split on whether the purchase of a third party’s trademark for use as a keyword constitutes trademark infringement under the Lanham Act.
- With this case, the court seems to carve out a specific situation where such use would constitute a violation.
| "The law limits the common practice of keyword-triggered advertising" |
| "Industry lawyers predict that the law has a high probability of being overturned in court." |
Utah Law Bans Keyword Advertising Employing Unauthorized Use of Third Party Trademarks
THE UTAH LAW:
- The Trademark Protection Act (Utah SB 236) effectively prohibits the competitive use of third party trademarked terms as keyword advertising triggers.
- SB 236 establishes “an electronic registration mark that may not be used to trigger advertising for a competitor” and “creates a database for use in administering marks.”
- The law appears to cover trademarks as well as domain names.
PAST HISTORY:
- Although an unsettled area of the law, courts have generally permitted the use of a competitor’s trademark to trigger keyword advertising when there is no likelihood of consumer confusion.
OPPOSITION TO THE LAW:
- Representatives of consumer groups say it is harmful to consumers that benefit from comparative advertising.
- Google, Inc. is also objecting to the law.
- Others say that only the Federal Government can try to regulate interstate commerce.
SUMMARY:
- The law limits the common practice of keyword-triggered advertising, where competitors can show their ads alongside a search query or in connection with a news story associated with other brands.
- Industry lawyers predict that the law has a high probability of being overturned in court. In fact, Utah has agreed to delay implementation of the law. The Governor has directed the State Department of Commerce to hold off on implementing the law "for at least a couple of months" while changes to the legislation are considered.
| "The Court found that defendant had a bad faith intent to profit from the use of its website and Anlin's specific domain names." |
| "...defendant should have heeded the warning and immediately stopped using the mark and domain names." |
Use of Domain Name After Cease-and-Desist Letter is Sufficient to Establish Bad Faith Intent under the
Anti-Cybersquatting Consumer Protection Act (ACPA)
FACTS:
- Anlin Industries Inc., a window making company in business since 1991, registered the domain name “anlin.com” in 1998.
- Anlin marketed itself through a network of dealers and, in 2000 and 2002, applied for federal registration of the marks “Anlin Windows” and “Anlin Window Systems.”
- Anlin sells its products only via a network of approximately 40 dealers.
- Defendant, Paul Burgess of Ultimate Home Windows (a window installer), registered the domain name “anlinwindows.com” and established a website associated with that name.
- Defendant also used “Anlin” metatags in his website. Included on defendant’s site was a picture of Anlin’s manufacturing plant, a delivery truck and information from its brochures.
- At the top of the anlinwindows.com homepage was a notice that the site was not Anlin’s official site and included a link to anlin.com.
- Defendant also registered the domain names “anlin-windows.com,” “anlin-windows.net,” and “anlinwindows.org.”
DEALERS COMPLAINED:
- Four dealers in Anlin’s dealer network complained that defendant’s site and domain names were confusingly similar to that of Anlin.
ANLIN TAKES ACTION:
- Anlin requested that defendant cease use of the domain names, as well as Anlin’s mark. Defendant refused.
- Anlin brought an action claiming that defendant’s various domain name registrations constituted cybersquatting, trademark infringement and unfair competition under federal law (as well as similar claims under state law).
COURT DECISION:
- Once defendant received Anlin’s cease-and-desist letter, and failed to act in accordance with Anlin’s reasonable directions, the Court found that defendant had a bad faith intent to profit from the use of its website and Anlin's specific domain names.
- The Court rejected defendant’s argument that the ACPA safe harbor provision – which requires that a defendant believe that his use was fair or lawful – applied during the post-demand period.
AWARD:
- The Court awarded Anlin partial summary judgment, damages and injunctive relief.
SUMMARY:
- Defendant’s use of Anlin’s mark and registration and use of remarkably similar domain names created confusion among some of Anlin’s dealers and likely among the consuming public.
- Once defendant received Anlin’s cease-and-desist request, defendant should have heeded the warning and immediately stopped using the mark and domain name
Utah Child Protection Registry Upheld
Against CAN-SPAM Preemption, Commerce Clause and
First Amendment Challenges
COURT ORDER:
- A Federal District Court in Utah upheld the State’s Child Protection Registry Act against a variety of challenges.
FACTS:
- Plaintiff, the Free Speech Coalition, brought an action seeking declaratory and injunctive relief as to the constitutionality of provisions contained in the Utah Child Protection Registry Act (Utah Code Ann. § 13-39-202 [“CPR”]).
- The CPR allows parents and guardians of minors residing in Utah to register electronic “contact points” with the Utah Consumer Protection Division to prevent the receipt of certain unwanted adult, alcohol, firearms and tobacco-related communications.
- One of the defendants, Unspam Registry Services, Inc., is a for-profit corporation that has contracted with the State of Utah to “scrub” email lists on behalf of marketers at a cost of, on average, .5 cents per name.
- The only way for marketers to determine whether or not any particular contact point in Utah has been registered under the CPR is to register to participate in the Registry’s “scrubbing” services and have Unspam compare hash values (of email lists, for example) to look for matches with any contact point on the Registry.
- Plaintiff contended that the CPR is expressly preempted by the CAN-SPAM Act of 2003; that it violates the Dormant Commerce Clause of the U.S. Constitution; and that it violates the First Amendment of both the U.S. Constitution and Article I, Section 15 of the Utah Constitution.
DECISION OF THE COURT:
- The CPR falls within an express exemption to preemption contained in CAN-SPAM.
- The plaintiff has not met its burden of demonstrating that it will likely succeed on the merits of its claim under the Dormant Commerce Clause.
- Plaintiff has not met its burden of demonstrating a likelihood of success on the merits of its First Amendment challenges to the CPR.
- Plaintiff has not met its burden of demonstrating clearly and unequivocally that it will be irreparably harmed absent the issuance of a preliminary injunction.
SUMMARY:
- Marketers targeting Utah State consumers must either continue to scrub against the CPR, or block the transmission to Utah of solicitations containing adult, alcohol, tobacco, firearms, etc., related matter.
See Free Speech Coalition, Inc. v. Mark Shurtleff, Kevin V. Olsen, Unspam Registry Services, Inc., Case 2:05-cv-00949-DAK, Filed 3/23/2007.
U.S. District Court Strikes Down
Child Online Protection Act (COPA)
COURT RULING:
- A U.S. District Court struck down a 1998 Federal Law designed to restrict underage access to pornography via the Internet.
- Basing the decision on free speech grounds, the Court pointed out that software filters are a more efficient mechanism than the safeguards promulgated under the law.
- Because the Child Online Protection Act targets only commercial web publishers, the Court noted that it fails to address threats that have emerged since the law was written, including online predators prevalent on social networking sites.
- The Court warned that “perhaps we do the minors of this country harm if First Amendment protections, which they will with age inherit fully, are chipped away in the name of their protection.”
SOME BACKGROUND:
- Since its enactment, the law was never enforced.
- In 2004, the U.S. Supreme Court upheld a temporary injunction blocking the law from taking effect.
- The law would have criminalized websites that allow children to access material deemed “harmful to minors” as determined employing “contemporary community standards.”
- The 1998 Law followed the Communications Decency Act of 1996 – which was the first congressional attempt to regulate online pornography. In 1997, the Supreme Court deemed key portions of that law unconstitutional on the grounds that they were too vague and overly restricted adults’ rights.
GOVERNMENT RESPONSE:
- Government lawyers attacked software filters as burdensome and less effective than protections built into COPA.
SUMMARY:
- While protection of children surfing the Internet is of paramount importance, fashioning legislation to address this need has proven to be consistently evasive due to countervailing First Amendment concerns.
RELATED ICANN ACTION:
- On March 30, 2007, the Internet Corporation for Assigned Names and Numbers (ICANN) once again defeated a proposal to create ".xxx" as a TLD for voluntary use by the adult entertainment industry.
- Some board members expressed concern that the TLD might put ICANN in a difficult position of having to enforce all of the world's laws governing pornography.
- The 9-5 decision by ICANN's board came nearly seven years after the proposal was first floated by ICM Registry LLC.
- It was the third time ICANN has rejected such a bid.
| "The FCC now requires telephone and wireless carriers to adopt further safeguards to protect the personal telephone records of consumers from unauthorized disclosure." |
| "FCC Chairman Kevin Martin stated that compliance with the Commission’s regulations is “not optional” for any telephone service provider." |
FCC Strengthens Privacy Rules to Protect Phone Records
NEW REQUIREMENTS:
- The Federal Communications Commission (FCC) now requires telephone and wireless carriers to adopt further safeguards to protect the personal telephone records of consumers from unauthorized disclosure.
- According to an FCC Press Release, “[t]hese new safeguards will help prevent unauthorized access to customer proprietary network information or CPNI.”
RULES ADDRESS SPECIFIC ISSUES:
- Carrier Authentication Requirements
- Notice to Customer of Account changes
- Notice of Unauthorized Disclosure of CPNI
- Joint Venture and Independent Contractor Use of CPNI
- Annual CPNI Certification
- CPNI Regulations Applicable to Providers of Interconnected VoIP Service
- Business Customers
SOME PRACTICAL EFFECTS:
- Under these provisions, phone companies will have to receive customers’ permission before their information may be released to third parties.
- Carriers are required to obtain “opt-in” consent from customers before disclosing their personal information to joint venture partners or independent contractors for marketing purposes.
- FCC Chairman Kevin Martin stated that compliance with the Commission’s regulations is “not optional” for any telephone service provider.
REACTION FROM INDUSTRY GROUPS:
- Industry groups are describing the measure as “extremely anti-consumer.”
- They assert that the broad changes will not prevent “pretexting,” i.e., when phone records are accessed by impersonators or other fraudulent means.
- Instead, they argue that anti-pretexting efforts should focus on finding the impersonators rather than imposing new restrictions on phone companies.
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