Clearinghouse Topic Areas:

ACPA Anticircumvention (DMCA) Copyright Copyright and Fair Use Court Orders Defamation Derivative Works DMCA Notices DMCA Safe Harbor DMCA Subpoenas Documenting Your Domain Defense Domain Names and Trademarks E-Commerce Patents Fan Fiction International John Doe Anonymity Linking No Action Patent Piracy or Copyright Infringement Protest, Parody and Criticism Sites Responses Reverse Engineering Right of Publicity Trade Secret Trademark UDRP Uncategorized

Court Sees Clearly Now: "Use" in 1 800-Contacts, Inc. v. WhenU.Com, Inc. and Vision Direct, Inc.

Chloe Hecht, DePaul University College of Law Technology/Intellectual Property Clinic, September 25, 2005

Abstract: 1-800 Contacts, Inc., (1-800) sued WhenU.Com, Inc.(WhenU)and Vision Direct, Inc. alleging inter alia that WhenU’s advertising services infringed its trademark rights. The district court found in favor of 1-800 and issued a preliminary injunction enjoining WhenU from “using or otherwise displaying 1-800’s trademarks or anything confusingly similar to such trademarks” as part of its advertising. However, on appeal, The Second Circuit Court of Appeals disagreed and held that WhenU’s actions do not amount to “use” as required under the Lanham Act to prove trademark infringement. The Court reversed the district court’s entry of a preliminary injunction and ordered the court to dismiss all claims 1-800 made against WhenU that were based on trademark infringement.

WhenU.com, Inc. (WhenU), a provider of online advertising in the form of “pop-up ads”, has successfully defended itself against a number of lawsuits attacking the legitimacy of its services. In the latest challenge to pop up against the company, 1-800 Contacts, Inc., v. WhenU.Com, Inc. and Vision Direct, Inc., 1-800 Contacts, Inc. (1-800) alleged that WhenU’s advertising services infringed its trademark rights under Section 43 of the Lanham Act. The district court found in favor of 1-800 and issued a preliminary injunction enjoining WhenU from “using or otherwise displaying 1-800’s trademarks or anything confusingly similar to such trademarks” as part of its advertising. However, on appeal, The Second Circuit Court of Appeals disagreed and held that WhenU’s actions do not amount to “use” as required under the Lanham Act to prove trademark infringement. The Court reversed the district court’s entry of a preliminary injunction and ordered the court to dismiss all claims 1-800 made against WhenU that were based on trademark infringement.

WhenU is the developer of computer software used to market goods and services through pop-up ads. The software, known as “SaveNow” is bundled with free software applications offered online, also known as “freeware.” In order to download the freeware, the computer-user (user) must agree to the terms of a “clickwrap agreement,” which discloses the presence of WhenU’s SaveNow software. Since the user wants the freeware and the only way to get the freeware is to agree to the terms of the clickwrap agreement, many users simply click on the “I agree” option not realizing that by doing so they have agreed that WhenU can bombard them with ads related to the sites the user is accessing. WhenU software is estimated to be installed on 25 million computers. Once installed, the WhenU software begins to monitor the computer-user’s Internet browsing.

The “heart” of WhenU’s SaveNow software is the Directory. This Directory contains thousands of website addresses, search terms and keyword algorithms that trigger an advertisement’s appearance. The search terms are organized topically into product or service categories, and as the user browses the internet, the software searches for terms the user has employed that are topically associated with one of the ad categories contained in the Directory. If the software matches one of the terms the user has chosen with an ad category in the directory, an ad from that directory is randomly selected and delivered to the computer screen. The ad appears as a separate and distinct window from the particular window the user accessed and bears the disclaimer, “This is a WhenU offer and is not sponsored or displayed by the website you are visiting.” The software generates three types of ads: (1) a small “pop-up” that appears in the bottom right hand corner of the user’s screen; (2) a “pop-under” that appears behind the web-page the user initially accessed; or (3) as a “panoramic” ad that appears across the bottom of the user’s computer screen. The result is that a potential customer of the sponsoring company of the website that the user originally chooses to access is also shown a topically relevant ad of a competing company.

The Court criticized the primary basis for the district court’s finding of “use”: namely, that WhenU’s advertisements are delivered to the SaveNow user when that user directly accesses 1-800’s website which allows WhenU’s customers “to profit from the goodwill and reputation in” 1-800’s website. In deciding that none of WhenU’s actions amounted to a “use” in connection with the sale of goods or services in a manner that is likely to lead to customer confusion, the court made note of the following: (1) at no time did WhenU display 1-800’s trademark in the text of its ads; (2) WhenU only included 1-800’s domain name (www.1800contacts.com) in its Directory, which is inaccessible to the public; and (3) WhenU only included the domain name in its Directory because it functioned as a “public key” to the 1-800 Contacts’ website – not because it was similar to the trademark 1-800CONTACTS. The Court succinctly stated, “A company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to a (sic) individual’s private thoughts about a trademark. Such conduct simply does not violate the Lanham Act…”

The Court also held that the appearance of a pop-up ad on a computer screen at the same time as 1-800’s website appears does not constitute “use” under the Lanham Act. WhenU’s pop-up ads each appear in a separate window branded with the term “WhenU” and do not include 1-800’s trademarks in the text of the advertisement. The Court likened the contemporaneous appearance of a website and a pop-up ad to the practice of product placement in retail stores. A drug store regularly places its store-brand generic products next to brand-name products, hoping to induce a customer to purchase the generic version. The Court described WhenU’s conduct as the electronic version of product placement.

Throughout the opinion, the Court referred to WhenU’s advertising policies that ostensibly have been adopted to prevent any improper “use” of the marks of others. Specifically, WhenU does not allow its advertising clients to have access to the proprietary contents of the SaveNow directory. Further, WhenU’s clients cannot request or purchase specific key words which would trigger the appearance of their ads. WhenU also brands its ads prominently, and it refuses to allow advertisers to link their ads to specific websites. It remains to be seen whether advertisers without such stringent policies will be able to survive allegations of trademark infringement when trying to lure potential customers to the websites of their own advertising clients at the time users are accessing competitors’ websites.

Related News

It's June, 2013: Is Big Brother Watching You?, Maria Serena Ciaburri, June 17, 2013 Chilling Effects Announces 2013 Summer Interns , The Chilling Effects Team, June 14, 2013 When the Government comes Knocking, Who Has Your Back?, EFF.org, Electronic Frontier Foundation, May 01, 2013 On Censoring Twitter, Adam Holland, January 07, 2013 Google engineers policing governments trying to police Internet, Melissa Harris, Chicago Tribune, October 19, 2012 more

Related Resources

Build Your Own DMCA Counter-Notice, (form) Legal Scholarship Using Chilling Effects, (bibliography) Online Media Legal Network, (resource) Chilling Effects (Chinese) “寒蝉”, Chilling Effects Clearinghouse Cease and Desist, (introduction) more