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1-800 Contacts, Inc. v. WhenU.com and Vision Direct, Inc.

Use Of Domain Name Containing Another's Trademark In Unpublished Directory To Trigger Delivery Of Pop-up Ads Does Not Infringe Trademark

Reversing the court below, the Second Circuit dismisses trademark infringement claims brought by a mark holder and website operator against a distributor of pop-up ads.  Such claims fail because "as a matter of law, [defendant] WhenU does not 'use' [plaintiff] 1-800's trademarks within the meaning of the Lanham Act, 15 U.S.C. § 1127 when it (1) includes 1-800's website address … in an unpublished directory of terms that trigger delivery of WhenU's contextually relevant advertising to [computer] users; or (2) causes separate, branded pop-up ads to appear on a [computer] user's computer screen either above, below, or along the bottom edge of the 1-800 website window."

The absence of such a use by WhenU of plaintiff's trademarks is fatal to 1-800 Contacts' trademark infringement claims, and mandated reversal of the District Court's grant of preliminary injunctive relief.  The District Court had enjoined WhenU from including the domain name of plaintiff's website in its unpublished directory, or causing pop-up ads to be displayed when that domain name is entered into the URL bar of a web browser, or as a search term.

In reaching this result, the Second Circuit agreed with the decisions of two other district courts - the Eastern District of Virginia in U-Haul Inc. v. WhenU.com Inc., 279 F. Supp. 2d 723 (E.D.Va. 2003) and the Eastern District of Michigan in Wells Fargo & Co., et al. v. WhenU.com Inc., 293 F.Supp.2d 734 (E.D.Mich. 2003) - each of which similarly held that WhenU's activities did not infringe the respective plaintiffs' trademarks because such activities did not constitute the requisite use of the plaintiffs' respective marks.

WhenU Delivers Pop-up Ads Triggered By Computer User's Entry Of Plaintiff's Domain Name

Plaintiff 1-800 Contacts, Inc. is a retailer of replacement contact lenses.  It sells these products at its website, located at www.1800contacts.com.  It has filed for and received registration of the mark "1-800 Contacts" which phone number is also used in plaintiff's retailing activities.  Defendant Vision Direct, Inc. is a direct competitor of plaintiff, which also sells replacement contact lenses to the public.

Defendant WhenU's principal business is the delivery of advertisements via the Internet to computer users on behalf of its clientele.  WhenU uses its software program 'SaveNow' to deliver these ads.  Typically, this software is downloaded by consumers as part of a bundle of software applications the consumer receives at no cost.  As part of this download process, the consumer is required to consent to the operation of the SaveNow program on his computer, and its delivery of ads to him.  In this process, the consumer is informed that "Save Now ads/offers are delivered independently from the site the user happens to be visiting when they see a SaveNow ad/offer and are not endorsed or affiliated with anyone other than WhenU."

SaveNow ads are triggered by the consumer's internet activity.  The SaveNow software compares the URLs and search terms the consumer types into his browser or search engine with a propriety directory created by SaveNow.  According to the court, this directory is comprised of "approximately 32,000 website addresses and address fragments, 29,000 search terms, and 1,200 keyword algorithms."  If there is a match, the SaveNow software will retrieve a pop-up ad from a server over the Internet, and display it on the consumer's computer.  This ad will be displayed in a WhenU branded window that informs the consumer it is a "WhenU offer," and appear on his screen simultaneously with whatever other programs he is operating in other computer "windows."  If a consumer seeks additional information as to the source of the ad, a link from the ad takes the consumer to a screen that further explains that the "offer is brought to you by WhenU.com."

The delivered ad is selected from a category of ads into which the typed URL is classified by WhenU.  WhenU's clientele can only purchase the right to have their ad included with those that are displayed when a consumer selects a particular information category - they cannot purchase the right to have an ad displayed when a consumer types in a particular domain name, such as that of the plaintiff.  Indeed, according to the Court, the contents of WhenU's proprietary director are neither disclosed to WhenU's advertising clients, nor the general public.

WhenU included plaintiff's domain name www.1800Contacts.com in the eye-care category of its proprietary directory.  When a consumer typed plaintiff's URL in his browser, the SaveNow program delivered an ad from one of WhenU's clients that had purchased the right to have their ads displayed when a consumer displayed interest in the eye care category, which included plaintiff's competitor Vision Direct.

Shortly before this litigation was commenced, Vision Direct instructed WhenU "to cease placing 'pop-up' ads on plaintiff's website."  In addition, Vision Direct commenced a lawsuit against WhenU arising out of WhenU's delivery to consumers of pop-up ads for a third eye-care company, Coastal Contacts, which partially obscured Vision Direct's own site via conduct substantially similar to that at issue here.

District Court Grants Injunctive Relief 

Objecting to defendants' conduct, plaintiff brought this suit, asserting claims of trademark and copyright infringement, as well as trademark dilution and unfair competition.  Plaintiff also asserted a claim under the Anticybersquatting Consumer Protect Act ("ACPA") against defendant Vision Direct, arising out of its registration of the domain name www.www1800contacts.com.

Plaintiff moved for a preliminary injunction, enjoining defendants from continuing to use plaintiff's domain name, www.1800contacts.com, as a trigger for the delivery of pop-up ads.  Finding plaintiff likely to prevail on its trademark infringement claim, the District Court granted plaintiff a preliminary injunction enjoining such use of plaintiff's domain name.  The District Court enjoined WhenU both from including plaintiff's domain name in its proprietary directory, and from causing ads for defendant Vision Direct to appear when a computer user typed plaintiff's domain name in either a browser or search engine.  At the same time, the District Court held it was unlikely that plaintiff would prevail on copyright infringement claims arising out of the display by WhenU of pop-up ads in separate windows that obscured part of the window in which plaintiff's website was itself displayed on a computer user's screen.

Second Circuit Reverses, Holding No Use Of Plaintiff's Trademark In Commerce

On appeal, the Second Circuit found, contrary to the decision of the District Court, that plaintiff could not prevail on its trademark infringement claims because WhenU was not using plaintiff's mark in commerce.  As such use was a prerequisite to a trademark infringement claim, the Second Circuit directed the dismissal of that claim, and reversed so much of the District Court's decision that had granted injunctive relief predicated on plaintiff's likelihood of success on that claim.  The Second Circuit did not review that branch of the District Court's decision that found that plaintiff was unlikely to prevail on its copyright infringement claims.

In order to prevail on a trademark infringement claim, "a plaintiff must establish that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark (3) in commerce (4) 'in connection with the sale . . . or advertising of goods or services' (5) without the plaintiff's consent.  In addition, the plaintiff must show that defendant's use of that mark 'is likely to cause confusion . . . as to the affiliation, connection, or association of defendant with plaintiff, or as to the origin, sponsorship or approval of the defendant's goods, services or commercial activities by plaintiff.'"  (citations omitted).

A trademark is 'used in commerce' for purposes of the Lanham Act, either when it is placed on goods, their containers, tags or labels sold or offered for sale, or "when it is used or displayed in the sale or advertising of services … rendered in commerce . . ."  15 U.S.C. §1127.

Second Circuit Finds No Trademark Infringment 

The Second Circuit held that WhenU did not use plaintiff's mark "in commerce" under the Lanham Act either when it included the domain name of plaintiff's website, which incorporated plaintiff's mark, in the proprietary directory that triggered the display of pop-up ads, or when it caused branded pop-up ads for its clientele to appear when a computer user sought to access plaintiff's website.

The Second Circuit held that the inclusion of plaintiff's domain name in a directory did not constitute a use of plaintiff's mark under the Lanham Act because its contents were disclosed neither to WhenU's advertisers, nor the general public.  As such, this use did not constitute the use of plaintiff's mark to improperly pass off another's goods or services as those of plaintiff, as WhenU never, by this conduct, caused the mark to be displayed.  Said the Court:

A company's internal utilization of a trademark in a way that does no communicate it to the public is analogous to a individual's private thoughts about a trademark.  Such conduct simply does not violate the Lanham Act, which is concerned with the use of trademarks in connection with the sale of goods or services in a manner likely to lead to consumer confusion as to the source of such goods or services.

Similarly, neither the placement of pop-up ads on a computer user's screen contemporaneously with the 1-800 website, or a list of search results obtained by the computer user's input of the 1-800 website address in a search engine, constituted an actionable use of plaintiff's mark.  The Second Circuit rested this decision on the fact that WhenU was not, in the ads it displayed, using plaintiff's mark at all.  Rather, the ads were labeled as originating from WhenU and contained only the marks of its clientele, and not plaintiff.  Thus, the only marks used to advertise the products or services promoted by those ads were those of the clients who's products they were promoting.  Moreover, WhenU did not offer to display the ads of an advertiser when a computer user sought to access a particular web site, such as that of the plaintiff.  Rather, advertisers could only purchase the right to have ads displayed when a user, based on the application of the SaveNow directory, exhibited interest in a category, such as eye care, that corresponded to the advertiser's own products.

The fact that such ads were in fact delivered when a user attempted to access plaintiff's site did not, contrary to the decision below, constitute an improper use of the mark, or an impermissible effort to capitalize on plaintiff's goodwill.  Rather, held the Second Circuit:

Absent improper use of 1-800's trademark … such conduct does not violate the Lanham Act.

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Indeed, it is routine for vendors to seek specific "product placement" in retail stores precisely to capitalize on their competitors' name recognition.  For example, a drug store typically place its own store-brand generic products next to the trademarked products they emulate in order to induce a customer who has specifically sought out the trademarked product to consider the store's less-expensive alternative.  WhenU employs this same marketing strategy by informing [Computer] users who have sought out a specific trademarked product about available coupons, discounts, or alternative products that may be of interest to them.

The Second Circuit accordingly directed the dismissal of plaintiff's trademark infringement claims, and reversed the District Court's decision awarding injunctive relief.

The Court's determination that there was no actionable trademark use accorded with decisions reached in U-Haul Inc. v. WhenU.com Inc., 279 F. Supp. 2d 723 (E.D.Va. 2003) and Wells Fargo & Co., et al. v. WhenU.com Inc., 293 F.Supp.2d 734 (E.D.Mich. 2003).  The Second Circuit noted that it found "the thorough analysis set forth in both U-Haul and Wells Fargo to be persuasive and compelling."

District Court Holds Plaintiff Not Likely To Prevail On Copyright Infringement Claims Arising From Display Of Branded Pop-up Ads In Windows On User's Computer Screen That Partially Obscure Plaintiff's Website

The District Court below had determined that plaintiff was not likely to prevail on its copyright infringement claims.  This decision is in accord with those of the courts in both Wells Fargo & Co. v. WhenU.com, 293 F. Supp.2d 734 (E.D. Mich., 2003) and U-Haul Intl. v. WhenU.com, 279 F. Supp.2d 723 (E.D. Va., 2003), and was not reviewed by the Second Circuit on appeal.

To establish a prima facie case of copyright infringement, a plaintiff must show ownership of a valid copyright, together with a violation by the defendant of one of the exclusive rights granted to the copyrighted owner of a work.  Plaintiff claimed that by causing a pop-up ad to be displayed in a window on a consumer's computer screen that partially obscured that containing plaintiff's own site, defendant infringed plaintiff's exclusive rights to display its copyrighted materials and to make derivative works therefrom.

The District Court rejected both of these contentions.  As to the display right, the District Court stated:

For this Court to hold that computer users are limited in their use of Plaintiff's website to viewing the website without any obstructing windows or programs would be to subject countless computer users and software developers to liability for copyright infringement and contributory copyright infringement, since the modern computer environment in which Plaintiff's website exists allows users to obscure, cover and change the appearance of browser windows containing Plaintiff's website.

Without authority or evidence for the claim that users exceed their license to view the copyrighted 1-800 Contacts website when they obscure the website with other browser windows (including pop-up ads generated by the SaveNow program), Plaintiff has little basis for its claim that Defendants have infringed its display right.

The District Court similarly rejected plaintiff's claim that defendant, by its activities, created a derivative work from plaintiff's copyrighted website.  The District Court reached this conclusion because the computer screen on which defendant's pop-up ad was displayed was not sufficiently fixed to constitute a derivative work.  To be a work subject to copyright protection, the work must be "fixed in any tangible medium of expression. . . .".  "A work is fixed in a tangible medium of expression . . . when its embodiment . . . is sufficiently permanent or stable, to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration."  The District Court held that defendant's display of pop-up ads did not meet this fixation requirement.

Applying the "fixation" requirement here, Plaintiff has filed to show that its website, and Defendants' pop-up advertisements are "sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration."  17 U.S.C. § 101.  Indeed, Defendants' pop-up windows may be moved, obscured, or "closed" entirely - thus completely disappearing from perception, with a single click of a mouse.  (Tr. at 63-64.)  Moreover, to the extent pop-up advertisements fit the description of "transmitted images," they are not "fixed" works, since there is no evidence that a fixation is made "simultaneously with" the pop-up advertisements' "transmission" to the viewer of the website.  18 U.S.C § 101.

Given that the screen display of the 1-800 Contacts website with Defendant's pop-up ads is not "fixed in any medium," it is not sufficiently "original" to qualify as a derivative work under the second sentence of 17 U.S.C. § 101

As a result, the District Court found that plaintiff was not likely to prevail on its copyright infringement claim.