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E-Commerce News
Keyword Advertising and Diversion Violates Lanham Act; Gripe Site Gets CDA Protection
April 29, 2008
Keyword Advertising and Diversion Violates Lanham Act
When a company uses a competitor's trademark in keyword advertising and actually diverts Internet searchers it engages in initial interest confusion in violation of the Lanham Act, according to a California based federal trial court.
Storus Corporation manufactured and sold the patented "Smart Money Clip." Storus had also registered "Smart Money Clip" as a trademark.
Storus discovered that Aroa Marketing had purchased "smart money clip" as a Google AdWords term, and that Google searches for "smart money clip" returned advertisements for Aroa. Those advertisements described Aroa's competing product under a large subhead reading "Smart Money Clip." Storus sued, alleging that the use of the Storus trademark violated the Lanham Act.
A competitor engages in "initial interest confusion" when it uses a plaintiff’s trademark to capture a consumer’s attention. This activity constitutes "initial interest confusion" even if no sale results.Aroa's purchased search term was in fact identical to Storus' mark, and the products were direct competitors, according to the court. The court also noted that 1,374 searches for "smart money clip" yielded clicks on Aroa's ad. In the court’s holding, it noted:
"[O]n 1,374 occasions, consumers who were searching for a Web site by using Storus' mark were, in fact, 'diverted' to an Aroa Web site selling money clips that compete with Storus' money clips," the court said. "Such diversion constitutes the 'initial interest confusion' prohibited by the Lanham Act."
"Storus has failed to show no material issue of fact exists as to likelihood of initial interest confusion based on Skymall's search engine," the court concluded.
Courts continue to go both ways on the question of whether "keyword" advertising violates the Lanham Act. Add one more court to the list of courts who think it does.
Gripe Site Gets CDA Protection
An open forum Web site that allows users to post gripes about companies does not lose Communications Decency Act immunity, merely because it provides categories and "tags" for users to apply to posts.
A federal court in Florida found that the site’s limited assistance did not constitute evidence that the site or its owners controlled the posted content.
The defendants in the case were two Arizona corporations and their affiliated executives, who collectively published a consumer gripe site at <www.ripoffreport.com>. The site allowed consumers to post reviews of companies. The plaintiff, Colorado-based Whitney Information Network Inc., was a target of a review.
Apparently rejecting the adage that "the customer is always right," Whitney filed a libel suit against the ripoff report.
Many of the Whitney reviews were attached to categories such as "con artists," "corrupt companies," and "false TV advertisements." Because the defendants provided these and other categories to users, Whitney said the defendants were ineligible for immunity under CDA § 230.
The court disagreed, and dismissed Whitney's defamation action.
The CDA, § 230, provides that "[n]o provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider." A critical element under § 230 is that the content is provided by a third party.
"Defendants will be entitled immunity from [Whitney's] state law defamation claim under the CDA if they are able to establish that: (1) they are 'provider[s] or user[s] of an interactive computer service'; (2) the claim treats them 'as the publisher or speaker' of information; and (3) the claim against them is based on 'information provided by another information content provider,' " the court said.
Because Whitney alleged that the defendants were content providers based on their supplying categories and tags, the key for the court was determining whether the claim was based on information provided wholly by another.
The CDA defines an "information content provider" as "any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service."
The court found that the defendants were not content providers under this definition.
The court said that the defendants provided a long list of possible categories, and there was no evidence that they had in any way encouraged the users' choices. The fact that the users made the decision which categories to select made them the content providers, not the defendants.
The court granted the defendants’ motion to dismiss.
CDA immunity is frustrating to plaintiffs because it effectively lets a deep pocketed plaintiff off the hook. For the most part, though, courts have applied the law liberally, much to the relief of Web hosts everywhere.
This Newsletter is a periodic publication of Graydon Head & Ritchey LLP and should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general information purposes only, and you are urged to consult your own advisor concerning your situation and any specific legal question you may have.