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January 2004
(Issue No. 1: Decisions published Dec. 16-31)
Internet Pop-Up Ads Violate Lanham Act
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1-800 Contacts, Inc. v. WhenU.com, et al.
(S.D.N.Y. Dec. 22, 2003) 2003 U.S. Dist. LEXIS 22932
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 Court Opinion
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 Case Snapshot:
Key Points:
Trademark Infringement
 Defendants' use of Plaintiff's mark satisfies the Lanham Act's "use in commerce" requirement.
- The court rejected Defendants' argument that they was not "using" Plaintiff's mark "in commerce" because they were not using the mark to identify their own products, and the use here was behind the scenes as part of Defendant WhenU.com's proprietary directory of terms that triggered pop-up ads within a category of products. A defendant's "use in commerce" under the Lanham Act need not be in a classic "trademark sense" – i.e., to identify the defendant's own goods or services.
- Defendants here "use" Plaintiff's mark "in commerce" as required by the Lanham Act in two ways:
- First, in causing pop-up advertisements for Defendant Vision Direct to appear when computer users have specifically attempted to access Plaintiff's website - on which Plaintiff's trademark appears - Defendants are displaying Plaintiff's mark "in the ... advertising of" Defendant Vision Direct's services. This allows Defendant Vision Direct to profit from the goodwill and reputation in Plaintiff's website that led the user to access Plaintiff's website in the first place.
- Second, Defendant WhenU.com includes Plaintiff's URL, <www.1800contacts.com>, in the proprietary WhenU.com directory of terms that triggers pop-up advertisements. In so doing, Defendant WhenU.com "uses" Plaintiff's mark, by including a version of Plaintiff's 1-800 CONTACTS mark, to advertise and publicize companies that are in direct competition with Plaintiff.
The initial interest confusion analysis applies here.
- Even though computer users still reach Plaintiff's website when the pop-up ads appear in windows over Plaintiff's website, and they are not directly diverted to the advertiser's website, the initial interest confusion analysis applies.
 Defendant apparently misunderstands ... the doctrine of initial interest confusion.... The harm to Plaintiff from initial interest confusion lies not in the loss of Internet users who are unknowingly whisked away from Plaintiff's website; instead, harm to the Plaintiff from initial interest confusion lies in the possibility that, through the use of pop-up advertisements Defendant Vision Direct 'would gain crucial credibility during the initial phases of a deal.' Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d at 259.  [pp. 68-69]
Defendants' pop-up advertisements will confuse consumers into thinking that Defendants are somehow associated with Plaintiff or that Plaintiff has consented to their use of the pop-up advertisements.
- Applying the Poloroid factors, the court found a likelihood of confusion:
... the Polaroid factors weigh heavily in favor of the Plaintiff's showing a likelihood of both source confusion and initial interest confusion. Having established a likelihood of confusion, Plaintiff has established both a likelihood of success on the merits and irreparable harm on its trademark infringement claim. [p. 104]
- Plaintiff's 1-800 CONTACTS mark is suggestive and commercially distinctive:
- Plaintiff's 1-800 CONTACTS mark is clearly suggestive, not descriptive or generic, because it does not directly describe Plaintiff's goods and requires some thought and imagination to understand that Plaintiff sells contact lenses.
- The mark is commercially distinctive because Plaintiff has spent $27 million on marketing efforts which have generated significant sales - e.g., $ 169 million in 2001. Over 221,800 people visited Plaintiff's website in September 2002.
Plaintiff's 1-800 CONTACTS mark is clearly suggestive since, although it may take some imagination to grasp that what Plaintiff markets is contact lenses (as opposed to electrical contacts or business contacts), the mark suggests Plaintiff's product. Thus, the Court finds that since Plaintiff's mark is suggestive, it is inherently distinctive.... [p. 76]
- Similarity: This is not the ordinary type of infringement case where the parties' respective marks are compared. Here, Plaintiff's website address <www.1800contacts.com>, is used by Defendants in the pop-up ad software's proprietary directory of terms and incorporates Plaintiff's 1-800 CONTACTS mark. As used in the WhenU.com directory, Plaintiff's address, <www.1800Contacts.com>, differs from Plaintiff's trademark only in the omission of spaces and grammatical marks, and in the addition of the "www" and ".com." These distinctions are not significant.
The similarity of the mark used by Defendants to Plaintiff's 1-800 Contacts mark is clearly relevant and increases the likelihood of confusion. If Defendants used a mark less similar to Plaintiff's mark - for example, 'www.contacts.com' - then a ... user who received Defendants' pop-up advertisements after typing into a browser "www.contacts.com" would be less likely to associate Plaintiff's mark with Defendants' pop-up advertisements. Accordingly, the Court finds Plaintiff's mark and the mark used by Defendants to be extremely similar, and that this similarity weighs in favor of a finding of likelihood of confusion. [p. 81]
- Proximity: The service offered by Plaintiff is identical to the service offered by Defendant Vision Direct - both offer replacement contact lenses to consumers over the Internet. Defendant Vision Direct concedes that it is a competitor of Plaintiff. Defendant WhenU.com is intentionally benefitting from the fact that Defendant Vision Direct provides services that are substantially the same as Plaintiff's services.
- Lack of actual source confusion/problematic survey evidence: This factor supports neither party. The court found that the evidence did not support a finding of actual source confusion, but this is only one of the factors to consider. Plaintiff's survey evidence was leading and suffered from other problems in its methodology. But, the survey is supportive of the likelihood of initial interest confusion.
- Bad faith: Defendant WhenU.com knowingly included Plaintiff's mark in the proprietary software directory, to increase the competitive advantage of Defendant Vision Direct. Such knowing use of Plaintiff's mark supports a finding of bad faith.
- Sophistication of the consumers: In the initial interest context, the level of customer sophistication will not change the harm that flows from initial interest confusion, since that harm arises when consumers' interest is diverted from Plaintiff's products by association of Plaintiff's trademark with Defendants' products.
Since the harm from initial interest confusion does not depend on actual confusion, the sophistication of consumers does not mitigate the likelihood of initial interest confusion. [p. 98]
Defendant WhenU.com's own branding and disclaimers do not alleviate the likelihood of initial interest confusion.
- The court rejected WhenU.com's argument that confusion is avoided due to branding and disclaimers that appear on the pop-up ad windows and the installer for the software that resides on the user's computer which triggers the pop-up ads.
- The disclaimers are not conspicuous.
- Even if they were, they do not alleviate the likelihood of initial interest confusion.
Even if Defendants had offered evidence of the effect of its branding and disclaimers, such evidence would do little to counter Plaintiff's showing of the likelihood of initial interest confusion.
[p. 103]
Cybersquatting
Defendant Vision Direct's registration of the domain name www.www1800Contacts.com violates the Anticybersquatting Consumer Protection Act.
- Defendant Vision Direct's registration of the domain name www.www1800Contacts.com –
- incorporates Plaintiff's mark 1-800 CONTACTS, and
- is almost identical to Plaintiff's www.1-800Contacts.com website domain name.
- Bad faith domain name registration: Defendant Vision Direct has acted with bad faith, under the factors set forth in 15 U.S.C. § 1125(d)(1)(B)(i) –
- It has no trademark rights in the domain name, is not identified by the domain name, has not demonstrated any prior bona fide use of the domain name or any site accessible using the domain name.
Defendant Vision Direct and Plaintiff are competitors, offering virtually identical services over the Internet - this alone tends to show that Vision Direct has registered the www.www1800Contacts.com domain name with the 'intent to divert consumers from the mark owner's online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site.' 15 U.S.C. § 1125(d)(1)(B)(i)(V). [p. 109]
- Irreparable harm presumed: The court joined the courts that have found irreparable harm may be presumed on a motion for a preliminary injunction in a cybersquatting case where a plaintiff has shown a likelihood of success on the merits.
- The Second Circuit has not yet addressed this issue. Some courts apply traditional trademark law and presume irreparable harm if infringement is found, while others require a showing of actual harm.
Mootness
The court rejected Defendant Vision Direct's arguments that the action was moot, and Plaintiff would therefore not suffer irreparable harm, because Vision Direct has ceased advertising via WhenU.com's pop-up ads.
- Although Vision Direct may have ceased its use of the complained-of pop-up ads, the Court nonetheless has authority to issue a preliminary injunction.
- Since here there is little to support a conclusion that use by Defendant Vision Direct of pop-up ads will not reoccur, the court rejected its claim that a preliminary injunction should not issue merely because it has ceased the offending conduct.
- Vision Direct submitted a self-serving, conclusory affidavit from someone connected with the company attesting that it voluntarily instructed its Co-Defendant WhenU.com to cease placing pop-up ads on Plaintiff's website three weeks before the action was filed, and that it had no intention of resuming. This is insufficient evidence to show that the action is moot.
This avowed lack of 'intention' to participate is a far cry from a guarantee by Vision Direct that it will not participate in pop-up advertising in the future. Here, Vision Direct has not convinced the Court that it has voluntarily done 'everything within its power" to ensure that "there is not even a slight danger that it would now turn around and embark upon another course of deceptive conduct.' Twentieth Century Fox v. Suarez Corp., 1998 WL 126065, *3-5 (S.D.N.Y. 1998) [p. 113]
Copyright
The court found that there is little likelihood that Plaintiff will succeed on the merits of its copyright claims.
- Thus, the likelihood of success on the trademark claims alone supported the issuance of the preliminary injunction.
Analysis
Compare this case with these recent decisions reaching the opposite result:
- Wells Fargo & Co., et. al. v. WhenU.com, (E.D. Mich. Nov.19, 2003), 2003 U.S. Dist. LEXIS 20756: The court in Wells Fargo reached the opposite result, denying a preliminary injunction against WhenU.com, and employed a markedly different analysis of the issues presented.
- U-Haul International, Inc. v. WHENU.COM, Inc., et al., (E.D. Va. September 5, 2003), 2003 U.S. Dist. LEXIS 15710: In U-Haul, the court granted summary judgment against Plaintiff on its trademark infringement, unfair competition, and dilution claims because the court found that Defendants do not "use" Plaintiff's mark in commerce in violation of the Lanham Act
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