Second Circuit Holds that Use of Competitor's Name to Trigger Pop-Up Ads Does Not Violate Trademark Law

by Lee Gesmer on July 12, 2005

Trademark Law. Last year I wrote (together with Susan Mulholland, an attorney at my firm), an article on the WhenU line of cases. We reviewed the three legal decisions that had been published to date on the WhenU technology: two from the district courts in Virginia and Michigan holding that WhenU’s practice was permissible; and one, from the federal district court in New York holding that WhenU had violated the Lanham Act, the federal trademark statute.

What does WhenU do that resulted in three federal court cases? In brief, once downloaded by a user (concealed in a “Trojan Horse” application), WhenU’s software will continuously monitor (invisibly, to the user) the user’s Internet browser to determine whether content accessed by the user matches key words stored in WhenU’s client directory. When the software finds a match for an associated key word – often a trademark or service mark – it triggers the SaveNow program to transmit a WhenU-branded pop-up ad to the user’s computer. The pop-up ad is selected from a list supplied by WhenU’s advertising clients, and may be a competitor of the owner of the mark that triggered the pop-up. The pop-up ad provides a hyperlink to the web site of WhenU’s client that, if clicked on, results in the competitor’s web site opening on the user’s computer.

That was enough to send U-Haul, Wells Fargo and 1-800 CONTACTS running to court in protest. Unfortunately, they had only federal trademark law as the basis for their complaint, and the courts in Virginia and Michigan held that since WhenU didn’t “use” their trademarks in a way that was visible to potential customers — that is, it never actually displayed the trademarks — preliminary injunctions were inappropriate.

The New York federal district court disagreed, and issued a preliminary injunction.

The Second Circuit reversed that preliminary injunction on June 27, 2005, permitting WhenU to resume its use of the 1-800-CONTACTS trademark in this manner. In brief, the Second Circuit held that there was no trademark infringement because the WhenU ads do not display the 1-800-CONTACTS trademark.

This case is important decision in the developing law of the use of keywords on the Internet.

  • Read the case here

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