www.rivkinradler.com March 30, 2004   Reprinted with permission from the March 30, 2004 issue of the New York Law Journal   Pop-Up Problems Latest Legal Challenges May Be Opening Salvo in Web War   By: Shari Claire Lewis, Esq.     [Author Bio: Shari Claire Lewis is a partner at Rivkin Radler LLP, where she specializes in litigation in the areas of Internet, Domain Name, and Computer Law as well as Professional Liability and Medical Device and Product Liability. Resident in the firm's office in New York, she may be reached at shari.lewis@rivkin.com.]   As most computer users know from experience, "pop-up" windows are boxes containing notifications or advertisements that appear on a computer screen, usually without any overt triggering action by the user. There are a number of different kinds of pop-up windows, including the small pop-up ad that appears over a portion of a user's screen, the less aggressive "pop-under" ad that appears behind the Web site the user initially visited, and a "panoramic" advertisement that stretches across the bottom of the user's screen. Computer users may have the same reaction to pop-up ads that they have to spam and telemarketing calls. Some view the ads as the necessary evil that supports their "free" or low-cost access to the information resources of the web. Others object to pop-up ads because of the time incurred in viewing them and the attendant cost, and because "targeted marketing"[1] requires "spyware" or other tracking software to be loaded onto a user's computer, thereby implicating privacy concerns. The greatest hostility to pop-up ads may be from enterprises that have established successful Internet businesses only to see their Web site visitors pulled away by a pop-up ad promoting a competitor's product or service. With varying success, some companies that have had their websites affected by a competitor's pop-up ads have brought suit against both the competitor and the business that provides the software enabling the pop-up ads to appear. One of the most recent decisions on this issue, by Judge Deborah A. Batts of the U.S. District Court for the Southern District of New York in 1-800 Contacts, Inc. v. WhenU.com,[2] granted a preliminary injunction. The court's detailed analysis of the legal issues arising under the copyright and trademark laws is likely to influence courts that have to face this issue in the future. Background Plaintiff 1-800 Contacts, Inc., sells replacement contact lenses and related products. The defendants were Vision Direct, Inc., a direct Internet competitor of 1-800 Contacts, and WhenU.com, a software company whose products include a targeted marketing software program called "SaveNow."[3] SaveNow software compares the contents and addresses of Web sites visited by a computer user with its proprietary directory, using algorithms to identify relevant pop-up ads to be delivered to the computer user. 1-800 Contacts complained that when a user typed in "www.1800contacts.com," the URL for its Web site, the SaveNow software recognized that the user was interested in the eye-care category, and a pop-up advertisement for Vision Direct appeared on the user's screen. Although the user could choose to disregard or close Vision Direct's pop-up ad, if the user clicked on it, the main browser window (containing the 1-800 Contacts website) would be navigated to Vision Direct's website. Copyright Claims 1-800 Contacts alleged that defendants invaded its exclusive right to display its Web site under the federal Copyright Law. The court rejected 1-800 Contacts' argument that, by delivering pop-up ads when the user first sought the 1-800 Contacts Web site, defendants created a new screen display that incorporated 1-800 Contacts' copyrighted work, thereby infringing its exclusive right to display its copyrighted work. The court found that plaintiff's interpretation of copyright law was inimical to the modern computer environment, which "allows users to obscure, cover, and change the appearance of browser windows" containing a Web site. The court similarly rejected plaintiff's contention that defendants' delivery of targeted pop-up ads invaded plaintiff's exclusive right to prepare derivative works based on the 1-800 Contacts Web site. It rejected the plaintiff's characterization of the pop-up as a derivative work, finding that it was not "fixed" in a tangible medium of expression, and noted its concern that the plaintiff's claim would expand the definition of derivative work so that any computer user's variation of the appearance of plaintiff's site, no matter how slight, would require plaintiff's permission. Trademark Infringement The court next considered 1-800 Contacts' claims under the Lanham Act, which prohibits the "use" in commerce, without consent, of any registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods, in a way that is likely to cause confusion.[4] Initially, the court found that defendants used plaintiff's mark in two ways. First, it stated, because the defendants relied on users typing the "1-800 Contacts" trademark into a search engine to trigger delivery of the Vision Direct pop-up ad, the plaintiff's mark was "clearly" being used. Second, the court found, WhenU.com included plaintiff's Web address in its proprietary directory of terms that triggered pop-up advertisements on SaveNow users' computers. By including a version of plaintiff's mark to advertise and publicize companies that were in direct competition with plaintiff, WhenU.com "used" the mark, the court found. Next, the court examined whether the defendants' use of the plaintiff's trademark was confusing within the purview of the Lanham Act. The court focused on "initial interest confusion," a phenomenon that occurs when a consumer's initial interest in one company is distracted through another company's misuse of the first company's mark. To determine whether there was consumer confusion, the court evaluated whether the "Polaroid factors"[5] tipped in favor of the plaintiff or defendants. The court first found that 1-800 Contacts was a "strong" trademark, based on analysis of plaintiff's historical investment and sales success and defendants' use of the trademark to trigger pop-ads. Another factor the court considered was that the services offered by 1-800 Contacts and Vision Direct were essentially "identical." The court stated that it seemed "likely" that a SaveNow user, thinking the Vision Direct pop-up ad was part of the 1-800 Contacts Web site, might be lured into clicking on the Vision Direct SaveNow pop-up ad, resulting in the user being diverted to and ultimately purchasing from the Vision Direct site. Additionally, the court found bad faith, stating it was "apparent" that WhenU.com had not "innocently" selected 1-800 Contacts' trademark for inclusion in its proprietary directory but rather knowingly had included it in the directory to increase Vision Direct's competitive advantage. The court said that because defendants' pop-up ad appeared shortly after a computer user sought out and accessed plaintiff's homepage, containing plaintiff's trademarked name, logos and graphics, it was likely that a consumer might assume defendants' pop-up ads were endorsed by plaintiff. Indeed, the court continued, even if a consumer who clicked on defendants' pop-up advertisements and accessed Vision Direct's Web site eventually realized - prior to purchasing anything - that Vision Direct's was not related to 1-800 Contacts, the consumer might nevertheless purchase replacement contacts on Vision Direct's site instead of taking the steps necessary to return to plaintiff's. Finally, the court declared that consumer confusion caused by the pop-up ads was not alleviated by WhenU's use of disclaimers "with terms that are buried in other web pages, requiring viewers to scroll down or click on a link." It then concluded that, in sum, the Polaroid factors weighed in favor of the plaintiff's showing a likelihood of confusion and, therefore, 1-800 Contacts had established both a likelihood of success on the merits and irreparable harm on its trademark infringement claim. The court enjoined the defendants from using plaintiff's trademark or confusingly similar terms in their proprietary directory and from triggering pop-up ads based upon plaintiff's website address appearing in a search engine.[6] Alternative Arenas The impact of "pop-up" ads also has been addressed in other fora. For example, in many circumstances, parties disputing the registration of an Internet domain name have the ability to submit their challenge to an alternative dispute resolution process incorporated into many domain name registration agreements, called the Uniform Domain Name Dispute Policy.[7] This policy requires the complainant to show, not only confusion between the complainant's mark and the domain name registered, but also that the domain name was registered in bad faith.[8] In several cases, the dispute arbiters have held that a registrant's use of the extreme pop-up practice of "mousetrapping"[9] was prima facie evidence of bad faith registration of a domain name, even when the domain name registered was not identical to the trademark of another.[10] The Federal Trade Commission also has entered the fray. Recently, for instance, the agency sought injunctive relief against a company whose pop-ads offered to sell Web users a program that would suppress pop-ads.[11] The FTC likened this practice to a "high tech version of a classic scam," whereby the company created the pop-up problem only to offer a solution - for a price. There also may be the possibility of legislative action. For example, a "Spyware Control Act" has been passed in Utah and Governor Olene S. Walker is considering whether to sign it.[12] Among other things, the bill bars the use of a "context based triggering mechanism to display an advertisement that partially or wholly covers or obscures . . . content on an Internet web site in a way that interferes with a user's ability to view the Internet web site." Federal Bill Some national legislation may be likely. A Senate bill introduced on Feb. 26, 2004 ?? the Software Principles Yielding Better Levels of Consumer Knowledge ("SPYBLOCK") Act ?? requires that consumers affirmatively consent to the installation of software on their computers following full disclosure of the personal information to be mined and the way the personal information will be used. The consumer must be provided with examples of the advertisements that will be generated including their format, size and the frequency of the ad delivery. A complete, user-friendly uninstall feature must be available. If either the state or federal bills become law, it is likely that they will be challenged in court, at least on First Amendment and vagueness grounds. Indeed, it has been reported that Web publishers, including America Online, Google, and Yahoo!, signed a letter to the Utah governor opposing that state's proposed law because under its broad definition of spyware, there could be interference with computer security, including virus protection, and because the bill would hurt the targeted delivery of local advertisement to the detriment of small, local businesses.[13] One thing appears certain: Litigation involving pop-up ads will continue. - top - NOTES: [1] Pop-up ads may be randomly generated or the result of targeted marketing. Targeted marketing is a data mining technique which results in the delivery of ads based upon the user's web use history or intended website destination. [2] 2003 U.S. Dist. Lexis 22932 (S.D.N.Y. Dec. 22, 2003). [3] Computer users typically install the SaveNow software as part of a "bundle" of other software applications, such as a free cartoon character screensaver. [4] 15 U.S.C. § 1114(1) (a). [5] See Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961). [6] See also Washingtonpost.newsweek Interactive Co., LLC v. Gator Corp., 2002 U.S. Dist. Lexis 20879 (E.D. Va. 2002); but see Wells Fargo & Co. v. WhenU.com, Inc., 293 F.Supp.2d 734 (E.D.Mich. 2003) (including plaintiff's trademark in SaveNow's proprietary directory not "use"); U-Haul Int'l, Inc. v. WhenU.com, Inc., 279 F. Supp.2d 723 (E.D.Va. 2003) (same). [7] See, e.g., http://www.icann.org/udrp/udrp.htm. [8] U.D.R.P. Rule 4(a)(iii). [9] Mousetrapping is a process of trapping a user at a website by a barrage of pop-up ads and/or disabling the web browser's navigation; often the only escape is for the user to exit the Internet connection entirely or even reboot the computer. [10] See, e.g., Worldwinner.com, Inc. v. The Cupcake Patrol a/k/a John Zuarrarini, National Arbitration Forum ,Case No. FA0307000175289 (). [11] FTC v. D Squared Solutions, LLC . U.S.D.C. District of Maryland, Northern Division. 03 CV 3108. [12] http://www.le.state.ut.us/~2004/bills/hbillenr/hb0323.htm. [13] www.mediapost.com/, Leading Internet Providers Oppose Passage of Spyware Control Act, March 15, 2004.