By Julia Anne Matheson and Dinah Nissen
Originally published in Trademark World, September 2003
The past few years have spurred incredible changes and evolution in the law of trademark infringement, identification, and enforcement. But with the dot com bubble deflated, if not altogether burst, is the law of cyberspace still relevant and still evolving?
As the headlines in the major trademark bulletins across the globe reflect, and the ever-expanding online presence of even the most stalwart bricks and mortar companies confirms, the answer is an unqualified "yes."
Legal issues such as what acts on the Internet constitute infringement and dilution, to the minimum "Net" contacts necessary to establish jurisdiction over a nonresident, and sometimes out-of-country, defendant, continue to proliferate. What follows is a brief summary of some of the key disputes currently shaping the future of trademarks online.
The Question of Jurisdiction
When an infringing act occurs on a website that is hosted in one jurisdiction, but can be accessed all over the world, the question of where that infringement is said to occur can be controversial. Is the fact that a website is accessible from a particular country enough to fix jurisdiction in that country, or does the website need to be specifically targeted to that country in order to fix it with jurisdiction?
In the United States, demonstration that a defendant has some meaningful connection with a forum is a necessarily prelude to any court’s exercise of jurisdiction. Prior to the advent of the Internet, courts generally looked to a defendant’s physical contacts with the forum – a defendant’s domicile or primary place of business; visits to the forum; ownership of property in the forum; and the like – to justify their exercise of authority. The incorporeal nature of the electronic marketplace has necessitated vast revisions to the jurisdictional concept of "meaningful forum connections."
Courts in the United States were the first to articulate and continue to be on the forefront of fleshing out the concept of active versus passive Internet activities in evaluating the exercise of personal jurisdiction over web site operators.
To date, U.S. courts have restricted the exercise of personal jurisdiction to cases in which a web site operator has engaged in "interactive contact" with state residents. A website that permits visitors to place product or service orders; exchange information with the web site operator, or otherwise engage in business transactions is generally viewed as sufficient to substantiate the exercise of jurisdiction. On the other hand, in cases where the operator maintains a passive site that merely makes information available for browsing, U.S. courts have been hesitant to exercise personal jurisdiction. Recent case law continues to build on the theme that the greater the commercial nature and level of interactivity associated with a website, the more likely its operator will be found to have purposefully availed itself of the forum state’s jurisdiction. But what constitutes interactivity (a toll free number listed on the site; provisions permitting users to request a catalog; etc.) sufficient to justify the exercise of jurisdiction continues to evolve with significant consequences to all businesses on the Web.
With increasing frequency, U.S. courts are also having to grapple with domain name disputes where the registrant and the registrar are both located outside the United States. In such cases, trademark owners may bring a claim under the in rem provisions of the Anti-Cybersquatting Protection Act as long as the registry (e.g., Network Solutions for .com domain names) is located in the United States. Until recently, though, a decision in the trademark owner’s favour might be nothing more than a pyrrhic victory.
Earlier this year, for the first time, a U.S. Court held it can direct the registry to implement the remedies available under ACPA (GlobalSanteFe Corp v. GlobalSanteFe.com, 250 F. Supp. 2d 610 (E.D. Va. 2003). The Court, however, merely directed the registry to disable the domain name – less than the full relief than the trademark owner would routinely have been awarded against a U.S. registrant or registrar.
In a subsequent decision, the same court held that, where a foreign registrar that is not subject to U.S. jurisdiction refuses to comply with a U.S. court order directing the transfer of a domain name, the court may order the registry to transfer the domain name. (America Online, Inc. v. aol.org, 259 F. Supp. 2d 449 (E.D. Va. 2003). It remains to be seen if this ruling will be followed elsewhere, but such knotty issues will undoubtedly continue to arise in the months and years ahead.
Views from Europe and Australia
The United States is not alone in having to consider jurisdictional questions – clearly the challenge is an international one. Europe has long had a statutory regime addressing jurisdiction and the recognition and enforcement of judgments in civil and commercial matters in the shape of the Brussels Convention of 1968.
The Convention provided a framework for determining the jurisdiction in which a person domiciled in a EU Member State could be sued. The basic principle was that an EU defendant should be sued in his country of domicile, but in certain circumstances a consumer could also sue in his home court and claims in tort could also be brought where the ‘harmful event’ had occurred.
In 2001, the Brussels Convention was replaced by the Brussels Regulation EC/44/2001. The Brussels Regulation follows the principles of the Convention, but it includes changes to strengthen consumer protection. Article 15 of the Regulation now entitles a consumer to sue in relation to a contract made between the consumer and anyone who "by any means directs [commercial or professional] activities to that Member State."
This language is ambiguous, but attempts by the EU parliament to amend it to apply only to active targeting of a consumer by an online trader have failed. Instead, when Article 15 became law, the EU Commission issued a statement that "the mere fact of a site being accessible on the Internet does not automatically bring it within the scope of Article 15. Rather the Internet site must encourage the concluding of a contract at a distance." Although this statement was designed to allay fears about the possible scope of Article 15, it is not clear that it does.
For more than a decade, the international community has sought to conclude a treaty that would address issues of jurisdiction and enforce-ment on a global basis. The so-called draft Hague Convention is an attempt to address these challenges. It is based on Brussels Regulation EC/44/2001, but due to unresolved differences in approach towards jurisdiction in the U.S. and the EU Member States, has yet to be agreed upon. The challenge of concluding an agreement has undoubtedly been exacerbated by e-commerce issues in the context of consumer rights.
Three interesting recent cases outside the U.S. illustrate the jurisdictional challenge. The first is a UK case, Harrods Limited v. Dow Jones & Company Inc. [2003] EWHC 1162 (QB), involving an article in The Wall Street Journal that was alleged to have defamed Harrods, the famous London department store.
The article was available on The Wall Street Journal’s website but did not appear in The Wall Street Journal Europe. On the facts, there was very limited exposure to the article in the UK either through circulation of the newspaper itself or by hits from the UK to the Wall Street Journal website. The English judge nevertheless concluded that the statement in question related to an English company with a well established reputation in the UK, and that publication had clearly occurred in the UK (even if only to a limited extent). As a result he concluded that proceedings were most conveniently dealt with by an English court.
The second case, from Australia, also involved Dow Jones (Dow Jones & Company Inc. v. Gutnick [2002] HCA 56). Gutnick, an Australian citizen who lived and worked in Australia, was allegedly defamed in an article in Dow Jones’ Barron’s Magazine.
Dow Jones has its editorial offices for Barron’s in New York and sought to argue that this was where the article was first published and that New York was therefore the appropriate forum in which to sue. Despite limited exposure of the article in Australia through Internet subscription (1,700 subscribers), the Australian Supreme Court accepted jurisdiction, moved by the fact that Dow Jones "controls access to its material by reason of the imposition of charges, passwords and the like and the conditions of supply of material on the Internet" and because Dow Jones can, if it chooses, "restrict the dissemination of its publication Barrons on the Internet in a number of respects." There is an interesting tangential reference here to the use of geographical filtering software, such a hotly contested issue in the French Yahoo case in 2000.
The third case is a French one. The Paris Court of First Instance has recently ruled (SA BD Multimedia v. H) that French trademark law cannot be applied to prevent the unauthorised use of a French trademark in a domain name operated by a foreign registrant where the related website is not directed at French consumers, even if French Internet users can access the website.
Typically, French courts have been willing to uphold an infringement complaint where there is evidence (certified by a court bailiff) of unauthorised use of a French trademark registration on a website that is accessible in France. However, in this case the court has ruled that this is no longer sufficient. Trademark owners must now demonstrate that the website hosted at the disputed domain name is directed at French consumers, not merely that they are able to access the site.
The Law of Metatags
As search engines continue to eclipse domain names as navigational tools, the use of trademarks in metatags has continued to expand, as has the case law addressing the legal implications of that use.
Although not readily visible to web surfers, metatags often perform an important function by helping search engines analyse which sites should be listed in search results. The more often a term appears in metatags and in the text of web pages, the greater the chance that (1) a search engine will choose that web site in its search for the particular term and (2) the web site will be listed higher on the list of search results. The use of metatags thus can have a substantial effect on how often a site is accessed on the Internet.
Not surprisingly, site operators frequently use others’ trademarks in their metatags and trademark owners frequently object to such uses. Disputes regarding metatags generally fall into one of two categories: (1) situations in which web site operators use others’ trademarks to trade on the goodwill of the trademark owner, and (2) situations in which web site operators arguably have a legitimate right to use others’ trademarks.
A third party’s unscrupulous use of another’s trademark to trade on the mark’s goodwill and drive traffic to a site offers the easy case. The more interesting and innovative body of law is currently emerging around cases where the defendant arguably has some legitimate right to use a plaintiff’s trademark in metatags, whether because use of the mark will accurately advise site visitors that the website’s content has something to do with the plaintiff (i.e., "nominative fair use"); the defendant needs to use the plaintiff’s trademark in its ordinary descriptive sense to descriptive its own products and services (i.e., "descriptive fair use"); or the defendant has independent rights in the same mark for different products or services (i.e., "legal right to use").
In Horphag Research Ltd. v. Garcia, (Civ. A. No 8:99-cv-00816 (C.D. Cal. Aug. 29, 2001), aff’d in part and vacated and remanded in part, 328 F.3d 1108 (9th Cir. 2003)) the plaintiff sued the defendant for trademark infringement and dilution based upon defendant’s inclusion of the PYCNOGENOL mark in his website’s metatags, and in the content of the website itself offering competing products.
Following a jury trial, the court granted plaintiff’s motion for summary judgment that defendant infringed and diluted the PYCNOGENOL mark by its "ubiquitous and pervasive" uses of the PYCNOGENOL mark on its website and in its metatags. As to nominative fair use, although the court found that defendant satisfied the first requirement because defendant could not identify plaintiff’s product without using the PYCNOGENOL mark, he did not satisfy the second or third prongs of the nominative fair-use test because his use of the mark on the website as well as in metatags was unreasonably pervasive and because his excessive use of the mark suggested that plaintiff sponsored or was associated with defendant’s websites and products.
In Retail Servs., Inc. v. Freebies Publ’g, (247 F. Supp. 2d 822 (E.D. Va. 2003)), the parties engaged in battle over the term "freebies" and the corresponding domain name "freebie.com." Plaintiff launched a website at freebie.com to provide customer relationship management services to Blockbuster. The defendants owned an incontestable trademark registration for the mark FREEBIES, stylised, covering magazines and newspapers and registered the domain name freebies.com. Following a successful UDRP proceeding against plaintiff’s "freebie.com" domain name, plaintiff appealed to the federal court seeking cancellation of defendant’s trademark registration on genericness grounds, and to preclude transfer of the domain name.
In ruling that UDRP decisions are not afforded deference by the district courts, the court held that the UDRP decision was "unsupported by the evidence" and thus should be reversed. In particular, the court found the UDRP panelist’s finding that the "freebies" metatag was evidence of plaintiffs’ opportunistic bad faith was "directly contradicted by the evidence that the parties are not competitors."
Issues in Keyword Advertising
The increasing use of trademarks as keywords in pay-for-placement advertising is another hot, and as yet unresolved, issue in cyberspace trademark law. The frequent absence of clear disclosure and lack of consumer understanding about the nature of sponsored links and pay-for-placement services has led to a number of recent actions alleging infringement, unfair competition, false advertising, tortious interference, commercial misappropriation and deceptive diversion from angry trademark owners.
In the post dot com boom world, search engine "sponsored links" (aka "keyword advertising") have evolved into one of the few avenues by which online advertising remains profitable. Search engines prosper by selling sponsored links as part of search results with the promise that ads will be delivered to an audience with an express interest in the product.
Advertisers pay for banners or text links that appear beside query results on search engine pages. The line between informational search results and paid advertising is often indistinct (at best) and blatently misleading (at worst). Whereas in ordinary media, viewers have no expectation of relevancy in proximate advertising, given the popular perception of search engines as neutral purveyors of third information, the potential for confusion in the paid for placement context is appreciable.
Despite multiple cases filed Playboy, Estee Lauder, and others, the case law on the subject of key word registration of competitor trademarks and contributory liability of search engines remains unsettled. This topic too will likely receive close attention and lots of action in the near future.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes and is not intended to constitute legal advice. This memorandum may be considered advertising under applicable state laws.
