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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Wells Fargo & Co., et al. v., Inc.

293 F.Supp.2d 734 (E.D. Mich., November 19, 2003)

Court denies website operators' application for a preliminary injunction, and refuses to enjoin defendant, Inc. from delivering advertisements, triggered by a computer user's visit to plaintiffs' sites, that either pop-up or under those sites.  Defendant WhenU delivers such ads via its software applications Save and Save Now!  These applications are typically consensually downloaded by the user to his or her computer as the quid pro quo of his free receipt of another software application.

The Court held that WhenU's delivery of these ads neither infringes the trademarks found on plaintiffs' sites, nor their copyrights in the material thereon.  WhenU's activities - including the use of plaintiffs' marks in a directory which determines the ads a user receives, and the display of ads in windows that partially obscure plaintiffs' websites but do not contain plaintiffs' marks - do not constitute a use of plaintiffs' marks in commerce, a prerequisite to a trademark infringement claim.  Plaintiffs' trademark infringements claims also failed because plaintiffs did not present evidence sufficient to establish that users would likely be confused by WhenU's activities, and conclude that plaintiffs sponsored WhenU's ads.  Rather, the Court held, users with Save and Save Now! installed on their computers are likely to conclude that WhenU is the sponsor of the ads in question, both because the ads so inform the user, and because of their familiarity with such displays.

The Court held that plaintiffs' copyright infringement claims failed because the appearance of WhenU's ads in a window that partially obscures plaintiffs' sites does not constitute the creation of an unauthorized derivative work in violation of plaintiffs' exclusive right to create the same.  Rather, plaintiffs' copyrighted works - the content of their websites - remain unaltered on the servers on which they are hosted, and simply appear simultaneously with WhenU's advertisements in separate windows opened by and with the consent of the user on whose computer screen they appear.  Plaintiffs' copyright infringement claims also failed because any images appearing on a user's screen are simply too transitory to constitute the creation of a work.  As such, WhenU and the users cannot be held to have created a derivative work, and thus cannot be held to have infringed plaintiffs' copyrights.

Plaintiffs are the owners and/or licensees of the trademarks "Quicken Loans" and "Wells Fargo."  Plaintiffs use these marks in promoting their products and services, and in the domain names of commercial websites they operate.  Plaintiffs hold copyrights in the content found on their sites.

Defendant, Inc. ("WhenU") delivers online "contextual marketing" on behalf of its clients, who include Citibank, Verizon, JPMorgan Chase, Panasonic, Merck and, surprisingly, Intuit, the owner of the Quicken Loans mark at issue.  WhenU delivers its ads via its software products Save and Save Now!  Consumers typically download this software in return for obtaining a free software application such as "WeatherCast."  As explained by the Court, before Save and Save Now! are downloaded to, and activated on, a consumer's computer, "some user assent is required."  Importantly, "during the installation process, the consumer always receives a notice stating that Save Now is part of the download, and explaining how Save Now functions."  As part of the download process, the user must accept a license agreement for Save Now which "explains that the Software [delivers] contextually relevant advertisements, and coupons, utilizing "pop-up" and various [ad] formats."  Thus, as the Court made clear, consumers consent to the installation of Save and Save Now! on their computers before the software begins operating, and after receipt of notice that the software will deliver ads to them.

WhenU promises its customers that it will deliver their ads to consumers interested in a particular product or service sales category.  While individual company domain names play a part in the determination of the ads delivered to consumers, as explained more fully below, WhenU does not promise its customers that their ads will be delivered when a customer inputs a particular domain name.

Consumers receive ads based on their Internet browsing activity.  WhenU has created a directory of domain names, search terms and "keyword algorithms" (a combination of search terms), which it links to various categories (such as air travel or finance/mortgage).  Client ads are also linked to these categories.  When a consumer enters in his browser one of the domain names or search terms found in the directory, WhenU's Save Now software matches it to the appropriate ad category and delivers an ad from that category based on the system's priority and internal frequency limitations.  WhenU's directory includes both of plaintiffs' marks.  The Wells Fargo mark is linked to the finance/mortgage category, and its entry by a consumer in his browser will trigger the delivery of an ad linked to that category.

Rejecting plaintiffs' contention, the Court held that "WhenU[s] advertisements do not appear 'on' plaintiffs' websites."  Nor do they modify plaintiffs' websites or utilize plaintiffs' trademarks.  Quite the contrary, WhenU's ads appear in a separate window on the consumer's computer screen which is opened by the Save Now software.  This window contains only the marks of WhenU and its client.  Thus, each Save Now ad contains a notice stating, "This is a WhenU offer and is not sponsored or displayed by the website you are visiting."  Plaintiffs' websites are in no way affected by this activity, as they consist of code resident on a server which is unaffected by defendant's activities.

The Court refused to issue an injunction, enjoining WhenU from continuing to display its ads over or under plaintiffs' sites, because it found that plaintiffs were unlikely to succeed on the merits of either their trademark or copyright infringement claims, a prerequisite to injunctive relief.

Plaintiffs claimed that WhenU infringed their trademarks in violation of Section 32(1) of the Lanham Act, which provides, in relevant part:

Any person who shall, without the consent of the registrant -

(a) use in commerce any reproduction, counterfeit, copy or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake or deceive ...

As evidenced by the foregoing, to establish a violation of the Lanham Act, plaintiffs must demonstrate that WhenU used their marks in commerce.  However, "if [a defendant is] using [a plaintiff's] trademark in a non-trademark way - that is, in a way that does not identify the source of a product - the trademark infringement and Lanham designation of origin laws do not apply."

The Court held that WhenU was not using plaintiffs' trademark in commerce, within the meaning of the Lanham Act, and that plaintiffs were thus not likely to prevail on their trademark infringement claims.  WhenU did not use plaintiffs' marks in their ads or otherwise seek to identify plaintiffs as their source.  Quite the contrary, WhenU's ads contained a notice plainly stating that WhenU was their source, which ads utilized only the marks of WhenU's sponsors. 

In reaching this result, the Court rejected plaintiffs' claims that WhenU's use of plaintiffs' marks in WhenU's directory, or the appearance of WhenU's ads over part of plaintiffs' websites, constituted a prohibited use in commerce of the marks.

In reaching the latter conclusion, the Court relied on the fact that the appearance of WhenU's ads on a consumer's screen was the result of the consensual activity of the consumer, which activity was independent of, and separate from, the appearance of plaintiffs' site thereon.  Said the Court:

Plaintiffs' marks are neither displayed nor appear to be displayed on WhenU's windows, and the fact that WhenU advertisements appear on a computer screen at the same time plaintiffs' web pages are visible in a separate window does not constitute a use in commerce of plaintiffs' mark.

The former conclusion rested on the Court's determination that the use by WhenU of plaintiffs' marks in its directory "does not constitute the 'use' of any trademark belonging to plaintiffs, as that term is used in the Lanham Act, because WhenU does not use any of the plaintiffs' trademarks to indicate anything about the source of the products and services it advertises."

The Court also rejected plaintiffs' attempt to analogize the use of plaintiffs' marks in WhenU's directory to the use of a mark in a meta tag, in part because the Sixth Circuit had not adopted the initial interest confusion doctrine found in the Ninth Circuit's recent decision in Brookfield Communications.

The Court also held that plaintiffs had not submitted sufficient evidence to establish that consumers were likely to be confused by WhenU's activities, or conclude that plaintiffs were the source of the ads they were receiving.  In reaching this result, the Court rejected the survey evidence offered by plaintiffs, of which it was highly critical.  Instead, held the Court:

there is good reason to believe that the typical Save Now user would not perceive a WhenU advertisement as sponsored by or affiliated with the plaintiffs' websites [because] Save Now users are accustomed to receiving offers from WhenU when surfing the Web. ... Save Now ads are identified by WhenU … bear a prominent notice and disclaimer stating they come from 'WhenU' and are 'not sponsored or displayed by the website you are visiting' [and] … appear in a distinct window, bear all the indicia of a distinct software application, and do not relate in any way to any other window on the user's screen.

The Court also concluded that plaintiffs were not likely to prevail on their copyright infringement claims.  Plaintiffs claimed that WhenU violated their exclusive rights to prepare derivative works from their copyrighted materials, which consist of plaintiffs' websites.  Plaintiffs claimed that such derivative works are created when WhenU's ads appear on a consumer's computer screen and obscure part of plaintiffs' sites appearing thereon.

The Court rejected this contention.  First, the Court found that WhenU does not cause anything to appear on the consumers' screens.  All WhenU does is provide a software application, which the consumer then uses.  As such, WhenU was not guilty of direct copyright infringement.

The Court further held that WhenU was not guilty of contributory copyright infringement, because the consumer who uses its Save Now program does not create a derivative work.  Said the Court:

Save Now users do not infringe plaintiffs' right to prepare derivative works because consumers who cause the display of WhenU advertisements or coupons on their screens do not alter Plaintiffs' websites.  Plaintiffs' websites reside on separate servers.  The WhenU window has no physical relationship to plaintiffs' websites, and does not modify the content displayed in any other open window.

The Court also held that consumers do not create infringing derivative works because any display that appears on their screens is too transitory to constitute a copyrighted work.  As such, held the Court, these displays did not constitute infringing derivative works.  Said the Court:

[I]n order for a work to qualify as a derivative work, it must be independently copyrightable.  To be independently copyrightable, it must be fixed … The pixels on a computer screen are updated every 1/70th of a second.  The alteration of pixels is therefore far too transitory an occurrence to form a basis for a copyright violation.  The appearance of a WhenU advertisement on a consumer's computer screen at the same time as one of the plaintiffs' Web pages is also a transitory occurrence that might never be duplicated exactly on that or another person's computer screen.  Accordingly, the WhenU advertisement does not create a work that is sufficiently permanent to be independently copyrightable, and hence does not create a derivative work. Since Save Now users do not infringe the plaintiffs' right to prepare derivative works, WhenU is not liable for contributory infringement.

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