Moynihan Wins Again! $31 Million CAN SPAM / Washington State Law Claims Dismissed Against Affiliate Network Impulse Marketing Group, Inc.

Gordon v. Impulse Mktg. Group, Inc., 2008 WL 2783223 (E.D. Wa. July 17, 2008)

FACTS

• James S. Gordon (“Gordon”), claiming to be the sole proprietor of an Internet Access Service provider ("IAS"), alleged that Defendants, including Internet affiliate network Impulse Marketing Group (“Impulse”), sent approximately 31,000 commercial email messages to email addresses associated with the gordonworks.com domain.
• Gordon alleged violations of CAN-SPAM, the Washington Commercial Electronic Mail Act, Washington Consumer Protection Act, and Washington Prize Statute.

HOLDING

• All claims against Defendant Impulse were dismissed with prejudice. Sanctions issued against Gordon's attorney.

RATIONALE

Defendant Aggressively Challenged Each Pleading, Federal Rule Violation and Court Order Violation by Plaintiff

• Through Impulse's repeated motions to dismiss, Impulse successfully convinced the Court to direct Plaintiff to provide a more definite statement including:
• the number of emails at issue;
• the time frame during which the emails were allegedly sent;
• the addresses and domains that received the emails; and
• a brief summary of the factual basis upon which the Plaintiff claimed that Impulse sent the emails.

• Upon review, the Court found that the pleadings submitted by Plaintiff:
• relied upon "vague statements and conclusary allegations;"
• "rendered it impossible for Defendant to frame a responsive pleading;" and
• due to their lack of specificity, could "easily become a moving target."

• After four (4) motions to dismiss, the Court ultimately held that Plaintiff’s Amended Complaint failed to comply with the pleading requirements of the Federal Rules of Civil Procedure and with the Court's prior directives.

DEFENDANT AWARDED SANCTIONS

• In addition to dismissal, Impulse successfully obtained an order of sanctions against Gordon's counsel after Gordon's repeated violations of Court rules and Court orders.

Impulse was represented by Sean Moynihan of Klein Zelman Rothermel LLP, New York and local counsel Floyd Ivey of Richland, Washington.

RELATED $11 MILLION ACTION PREVIOUSLY DISMISSED

• KZR previously convinced the same Court to apply a seldom-used Federal Rule to dismiss a related action, Omni Innovations, Inc. v. Impulse Mktg. Group, Inc., Case No. CO6-1469-JCC (W.D. Wa Oct. 19, 2007).
• In response to Impulse's motion to dismiss Omni Innovations, Inc.'s ("Omni") original complaint, the Court directed Omni to file an amended pleading, with a more definite statement, within 30 days.
• The Court reasoned that the pleading did "not provide any clue to the Defendants about the number of emails at issue, or the dates on which they were originally sent, making it impossible for the Defendants to determine if they actually sent the unidentified emails alleged in the Complaint."
• After the 30 days elapsed, Impulse brought successive motions to dismiss based upon Omni's failure to timely amend the Complaint and for Omni's failure to obey the Court order directing it to do so;
• The Court granted Impulse's motion to dismiss the case with prejudice, relying upon Federal Rule 41(b), which allows the "severe and drastic measure" of dismissal for abuses of Court rules or Court orders; and
• Defendants were awarded full litigation-related attorneys' fees and costs.

Impulse was represented by Sean Moynihan of Klein Zelman Rothermel LLP, New York, NY and local counsel Matt Wojcik of Mullin Law Group, PLLC, Seattle, WA.

SUMMARY

• Spambulance chasers beware of Sean Moynihan.

Senate Bill Introduced to Extend CAN-SPAM Act to Wireless Arena
“Do-Not-Text Act”

Senate Bill 3138

PURPOSE OF SENATE BILL

• On June 17, 2008, Senator Gordon Smith of Oregon introduced S.3138 – the “Do-Not-Text Act of 2008.”
• The stated purpose of the Bill is “to prohibit text message spam.”
• Specifically, the Bill would amend the CAN-SPAM Act and the Communications Act to prohibit the sending of unsolicited commercial email advertisements to wireless devices.
• The Act would also prohibit the sending of commercial messages to wireless numbers listed on the National Do-Not-Call registry.
• If signed into law, the legislation would prohibit the sending of any mobile service commercial message without obtaining the express authorization of the recipient.

INTRODUCTION OF BILL NO SURPRISE

• In our May, 2008 Newsletter, we reported on the then-upcoming FTC Town Hall Meeting entitled, “Beyond Voice: Mapping the Mobile Marketplace.”
• At that meeting, the following issues were addressed:
1. The use of mobile-messaging services as instruments of M-commerce;
2. Consumers’ ability to control mobile applications;
3. The adaptation of advertising to mobile devices, including the challenges presented by small-screen disclosures;
4. M-commerce practices targeting children and teens;
5. Industry-best practices in preventing fraud, disclosing costs and resolving billing disputes;
6. Evolving security threats and solutions; and
7. Next-generation products and services.

SUMMARY

• The recently-introduced Senate Bill should come as no surprise.
• Businesses are increasingly looking to wireless devices as a convenient vehicle through which to advertise products and services.
• It will be important to follow this Bill through the legislative process to assess its potential impact on the wireless industry.

Arbitrator Awards MySpace $6 Million in Damages and Fees for Violations of CAN-SPAM and Other Statutes

MySpace, Inc. v. Richter, American Arbitration Ass'n Case No. 72 117 Y 00904 07 DEAR 6/12/08

FACTS

• Plaintiff, MySpace, operates an online social network.
• Scott Richter and his company Media Breakaway (collectively, “Media Breakaway”) operate a network of approximately 2000 independent contractors or “affiliates” who are compensated for driving Internet traffic to websites affiliated with Media Breakaway, or to other sites that pay Media Breakaway for generating website traffic.
• MySpace brought an action to obtain a preliminary injunction, contending that Media Breakaway violated the CAN-SPAM Act, the Lanham Act, the Computer Fraud and Abuse Act, and various California statutes, by allowing its affiliates to bombard its users with unsolicited commercial email messages.
• A California district court judge denied the motion and ordered the case to proceed to arbitration.

ARBITRATION DECISION

• AAA Arbitrator Philip W. Bosch found that Media Breakaway “violated the MySpace Terms of Use but also violated in many instances the CAN-SPAM Act and other statutes.”
• Arbitrator Bosch wrote in his decision, “Often messages were deceptive; legitimate physical addresses were not included; messages were sent to harvested accounts; messages contained false headers. Adherence to basic rules of compliance was missing.”
• In fact, according to Bosch, “Media Breakaway condoned, encouraged, knew about and benefited from the unlawful spam attacks on MySpace in August 2006.”
• However, in rendering his award, arbitrator Bosch refused to “lay responsibility” on Media Breakaway for the sending of unsolicited commercial email by affiliates about which it had no knowledge.
• Bosch found that, “in some instances, affiliates were actually affiliates of other affiliate networks and multiple steps removed from discipline and control [of Media Breakaway] . . . ."
• Bosch further pointed out that Media Breakaway undertook extensive compliance efforts to control affiliate behavior.

ARBITRATOR AWARD

• MySpace sought $100 million in damages.
• The arbitrator considered the amount to be excessive and punitive in nature, and could not fairly be “allocated to or apportioned to Media Breakaway.”
• Arbitrator Bosch awarded MySpace $4,800,000 in damages and an extra $1,200,000 in costs and attorneys’ fees.

SUMMARY

• The arbitrator was willing to afford some leeway to Media Breakaway but only to the extent that it did not appear to have any knowledge of, or control over, sub-affiliates.

Limited Use of Lennon’s “Imagine” Deemed Fair Use

Lennon v. Premise Media Corp., ___F.Supp.2d___, 2008 WL 2262631 (S.D.N.Y. July 16, 2008).

FACTS

• Plaintiffs, Yoko Ono Lennon, Sean Lennon and Julian Lennon, are owners of the copyright to the John Lennon song “Imagine” (the "Song").
• Defendants are the producers of “Expelled,” a nationally- released movie that addresses the debate between proponents of intelligent design and the scientific theory of evolution (the "Movie").
• Defendants included a 15-second excerpt of the Song in the Movie without first obtaining permission to use any part of the Song.
• Plaintiffs allege that defendants’ use of the 15-second excerpt from the Song infringes upon their copyright to same.
• Plaintiffs brought an action for preliminary injunction to prohibit the continued distribution of the Movie in its present form and a recall of all existing copies of the Movie.

DISTRICT COURT

• The Court denied plaintiffs' motion for preliminary injunction, citing the well-established “fair use” doctrine.
• “Fair use” is determined by consideration of the following four (4) factors:
1. whether the use was commercial or transformative;
2. the nature of the copyrighted work;
3. the amount and substantiality of the portion used in relation to the work as a whole; and
4. the effect of the use upon the potential market for, or value of, the copyrighted work.
• The Court found that while defendants’ Movie is a “commercial” film, the Movie’s use of the Song is “highly transformative” because the use is “for purposes of criticism and commentary.”
• Because the 15-second excerpt (out of a three (3) minute song) was minimal and the line chosen, “Nothing to kill or die for/And no religion too,” expresses the idea that the producers sought to critique, the Court found the quantitative use to be reasonable.
• Finally, the Court determined that plaintiffs did not show that defendants’ use of the Song will usurp the market for licensing the Song for non-transformative purposes.

SUMMARY

• The Court emphasized in its summary that “allowing defendants’ use would better serve ‘the copyright law’s goal of promoting the Progress of Science and useful Arts . . . than [would] preventing it.”
• The content in which defendants used the Song clip was of great significance to the Court. Merely cutting and pasting parts of a song (or any other copyrighted work) for use in a movie or other medium will not guarantee a successful “fair use” defense.

Parody Website Was Not “Commercial”
Use of Trademark Not Violative of the Lanham Act

Utah Lighthouse Ministry v. Foundation For Apologetic Info. and Research (“FAIR”), 527 F.3d 1045 (10th Cir. May 29, 2008).

FACTS

• Utah Lighthouse Ministry (“UTLM”) was founded for the principal purpose of critiquing the Church of Jesus Christ of Latter-day Saints ("LDS Church"). The UTLM sells books via its online bookstore located at www.utlm.org.
• The Foundation for Apologetic Information and Research (“FAIR”) is a volunteer organization that responds to criticisms of the LDS Church.
• Defendant-Appellee Allen Wyatt is the vice president and webmaster of FAIR.
• Wyatt created a website parodying the UTLM website.
• According to the District Court, many of the design elements between the sites are similar; however, the words, “Destroy, Mislead, and Deceive” are written across the Wyatt website.
• While the Wyatt website contains no advertising and offers no goods or services for sale, it contains 16 external hyperlinks.
• Wyatt, through FAIR, registered 10 domain names, each of which direct traffic to his website.
• Plaintiff brought an action for trademark infringement, unfair competition, and cybersquatting, alleging that defendants used the unregistered UTAH LIGHTHOUSE trademark in domain names linking to the Wyatt website.

THE DISTRICT COURT

• The District Court dismissed all claims.
• Plaintiff failed to satisfy the Lanham Act’s requirements for infringement, i.e.:
1. the mark UTAH LIGHTHOUSE was not protectable;
2. the defendants’ use of the mark was not commercial; and
3. there was no likelihood of confusion.

TENTH CIRCUIT COURT OF APPEALS AFFIRMS LOWER COURT DECISION

• The Court refused to consider an issue raised for the first time on appeal – that the UTAH LIGHTHOUSE mark is distinctive.
• The Court also found that UTLM failed to present sufficient evidence that the mark had acquired secondary meaning.
• Significantly, the Court affirmed the District Court’s finding that simply providing “hyperlinks” to commercial sites does not render Wyatt’s website “commercial” in nature and, therefore, subject to an action under the Lanham Act.
• The Court relied on the Ninth Circuit decision in Bosley Med. Inst. v. Kremer, 403 F.3d 672 (9th Cir. 2005) (Defendant created a website for the purpose of posting negative information about Bosley Medical and linked to another website (also maintained by defendant), which linked to a newsgroup that contained advertisements for Bosley’s competitors. The use was not considered “commercial” in nature as it was found to be too roundabout and attenuated. 403 F.3d at 677).
• Based on conventional analysis, the Court found that there was no likelihood of confusion. The Court pointed out that because defendants’ site was a “successful” parody, it was even more unlikely that consumers would be confused.

SUMMARY

• The Lanham Act will protect a mark “in connection with any goods or services,” i.e., commercial use.
• Under this decision, simple roundabout hyperlinks alone are not sufficient to transform an otherwise non-commercial site into a commercial one.

Consent Judgment Enjoins “Podfitness” From Using Apple’s Pod Marks

Apple Inc. v. Podfitness Inc., N.D. Cal., No.06-5808, June 6, 2008

FACTS

• Podfitness offers individual workout routines that can be downloaded to a user’s iPod from the Podfitness website.
• Apple filed a complaint alleging state and federal causes of action for trademark infringement, trademark dilution and other claims.
• Specifically, Apple alleged that Podfitness ran advertisements featuring Apple CEO Steve Jobs’ name and mimicking Apple’s silhouette commercials; direct copying of Apple's recognized white earbud trade dress; and the use of Apple’s iPod mark as a website metatag, a sponsored search engine keyword and in domain names.
• After various legal proceedings, the owner of Podfitness agreed to be bound by the terms of a negotiated consent decree.

CONSENT JUDGMENT

• The owner of Podfitness agreed that its products, name, and website likely infringed and diluted Apple’s rights.
• According to the judgment, Apple is the owner of the Pod mark for use in connection with portable and handheld digital electronic devices.
• The judgment also held that Podfitness’ products, logos, domain names, and other representations likely violated the Lanham Act by falsely giving the impression of an affiliation with Apple.
• Podfitness agreed to stop selling its products, using Apple’s Pod marks or “doing any other act likely to induce the mistaken belief that defendant or its goods or services or commercial activities are in any way affiliated, connected, or associated with Apple or its goods or services.”

SUMMARY

• Apple has established a strong mark entitled to protection under various state and federal laws.
• Fair use defenses to the use of a third party's marks are limited.
• Before attempting to use a mark in commerce, companies should carefully research the field to ensure that it is not violating the Lanham Act.