Court Finds  No "Visual Confusion" in Pop-Ups

Internet pop-up ads from one company that appear in conjunction with a competitor's Web site don't automatically create a trademark infringement claim for the competitor, several courts have ruled.

An Example of How Adware Works On its Web site, WhenU gives this edited example of how its product works: Jane is searching on her computer for a flight to a warm vacation spot. She previously downloaded WhenU's software and agreed to its licensing agreement. WhenU's software examines keywords, URLs and search terms on Jane's browser and recognizes she is searching for "airfares." It delivers a "timely, relevant" pop-up ad to Jane's desktop that features a lower-priced airfare to the Caribbean. WhenU's customers include the company that featured the lower-priced Caribbean airfare. Potential issue: What if the computer user was on a competitor's site when the Caribbean airfare ad popped up?

Facts of the latest case: 1-800 Contacts Inc. is a distributor that sells contact lenses and related products by mail, telephone, and on an Internet Web site.

In a lawsuit, the company claimed that its trademark was violated because a few seconds after computer users accessed its Web site, pop-up ads of competitors appeared.

The pop-up ads were delivered by WhenU.com Inc., a company that provides proprietary software called "SaveNow" without charge to individual computer users, usually as part of a bundle of software that is voluntarily downloaded from the Internet.

Once installed, the software requires no action by the computer users to activate its operations. Instead, the court explained, the software responds to their online activities by generating pop-up ads that are related.

1-800 Contacts officials argued that by allowing the pop-ups to appear in conjunction with the company's trademarked logo on its Web site violated its intellectual property rights. A federal judge in New York ordered Whenu.com to stop using the pop-up software, finding that it amounted to an illegal "use'' of 1-800 Contacts' trademarked material under the Lanham Act.

The lower court judge stated that WhenU's software allowed it to "profit from the goodwill and reputation" of 1-800 Contacts' Web site that led consumers there.

The 2^nd U.S. Circuit Court of Appeals overturned that ruling, finding that WhenU.com's use of 1-800 Contact's Web address in its software didn't violate trademark law. The two-judge panel cited several reasons including:

 WhenU software did not reproduce or display 1-800's trademarks. Instead, it reproduced the company's Web site address, "which is similar, but not identical," to the 1-800 Contacts trademark.

 Two other district courts have concluded that WhenU.com's pop-up ads do not result in trademark infringement and their reasoning was persuasive.

 WhenU.com's ads appeared in a separate window next to 1-800's Web site and were branded with the WhenU.com logo. "They have absolutely no tangible effect on the appearance or functionality of the 1-800 Web site,'' the judges concluded.

Allowing consumers to comparison shop via pop-up ads is similar to the routine practice of stores placing one product next to another with better name recognition. "For example," the court stated, "a drug store typically places 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.com's ads appeared in a separate window next to 1-800's Web site and were branded with the WhenU.com logo. "They have absolutely no tangible effect on the appearance or functionality of the 1-800 Web site,'' the judges concluded. (1-800 Contacts Inc. v. Whenu.com Inc., 2^nd  Circuit Ct. of Appeals, No. 04-0026, 6/27/05)

The case highlights the fact that laws governing trademarked and copyrighted material on the Internet are evolving daily. Courts are struggling to balance the rights of intellectual property holders against the desire for a free and open flow of information over the World Wide Web. To find the best way to protect your company's marks, consult with your intellectual property attorney. 

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