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Pirates and Protocols: Trademark Use and Protection on the Internet

Pirates and Protocols: Trademark Use and Protection on the Internet. Wednesday, March 18, 2009 7:00 p.m. New York City Bar Association 42 West 44th Street New York, NY. Pirates and Protocols: Trademark Use and Protection on the Internet. Moderator Monica Richman, Partner

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Pirates and Protocols: Trademark Use and Protection on the Internet

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  1. Pirates and Protocols:Trademark Use and Protection on the Internet Wednesday, March 18, 20097:00 p.m.New York City Bar Association42 West 44th StreetNew York, NY

  2. Pirates and Protocols: Trademark Use and Protection on the Internet Moderator Monica Richman, Partner Sonnenschein Nath & Rosenthal LLP Speakers Mark Fiore Erik Walsh Weil, Gotshal & Manges LLP Arnold & Porter LLP Counsel for eBay, Tiffany v. eBay Counsel for Tiffany, Tiffany v. eBay Heather Greenberg Mitchell Stein Associate General Counsel Partner The Topps Company, Inc. Sullivan & Worcester LLP Jonathan Sirota Kevin Taylor Secretary & Director of Legal Affairs Partner SmartMoney Taylor & Mrsich, LLP

  3. Pirates and Protocols: Trademark Use and Protection on the Internet • The format for the discussion will be as follows: • Strategies for enforcement of trademark rights against online • infringers and counterfeiters - a discussion of Tiffany (NJ), Inc. • and Tiffany and Company v. eBay, Inc., 2008 U.S. Dist. LEXIS 53359 • (S.D.N.Y., July 14, 2008). • (2) Guidelines for using ‘adwords’ and behavioral advertising on the Internet - what is happening right now? • (3) Recent developments regarding intellectual property and use on the Internet.

  4. Pirates and Protocols: Trademark Use and Protection on the Internet TIFFANY & CO. v. eBay Inc.

  5. Pirates and Protocols: Trademark Use and Protection on the Internet Counterfeiting of the Tiffany Marks • Greatest threat to the Tiffany brand • Until the early-mid 2000’s, anti-counterfeiting efforts focused on street-level • Customs Seizures • Raids • Canal St. • Litigation against Individual Vendors/Manufacturers

  6. Pirates and Protocols: Trademark Use and Protection on the Internet Counterfeit Trade Explodes on the Internet • Early 2003, Tiffany observes significant number of counterfeit Tiffany items available on eBay. • Tiffany initially pursues legal action against individual counterfeiters selling on eBay. • Pursuing legal action against individual eBay sellers does not stem the tide. • Too many • Relative anonymity • Many located abroad • Little likelihood of enforcing judgment

  7. Pirates and Protocols: Trademark Use and Protection on the Internet Why Sue eBay?

  8. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Active Role in the Sales • eBay takes a fee at: • Listing • Sale • Payment (if through PayPal) • eBay assists its sellers to help grow their sales • Business advice • Marketing calendars • Advertising assistance (reimbursements) • eBay focuses on Luxury Brands • Inform sellers that “Tiffany” is a top seller • “Hot Lists” • Sponsored links to advertise “Tiffany” on eBay

  9. Pirates and Protocols: Trademark Use and Protection on the Internet Tiffany’s Chain of Distribution • No sale/discounted merchandise • No liquidation • Controlled Chain (No Wholesalers) • No Overruns Allowed by Manufacturers • Full Refund on Returns • Nevertheless, eBay sellers observed offering hundreds of “Tiffany” items at a time

  10. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Efforts to Prevent Counterfeits Ineffective:VeRO • VeRO Program and its Deficiencies • Rights owners submit a Notice of Claimed Infringement (“NOCI”) • Good faith basis (under penalty of perjury) that listing is infringing • eBay will remove upon receipt • Burden on rights owner • Not proactive • Too many listings to review • Dynamic nature of eBay • Timing: Items can be sold between searching, reporting and removal • Clever counterfeiters

  11. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Efforts to Prevent Counterfeits Ineffective:Fraud Engine • eBay system that flags listings for eBay employees to review • Most of the filters flag only those items that are blatantly counterfeit • e.g., “faux Tiffany”; “counterfeit Tiffany”

  12. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Efforts to Prevent Counterfeits:Repeat Offenders • Tiffany has identified dozens of repeat offenders • Identified numerous sellers that it reported on 3 or more occasions • Identifies repeat offenders who come back listing dozens, sometimes hundreds of “Tiffany” items

  13. Pirates and Protocols: Trademark Use and Protection on the Internet Tiffany’s VeRO Reporting • Tiffany among the most active VeRO participants • 2003: 20,915 listings reported • 2004: 45,242 • 2005: 59,012 • 2006: 134,779 • Between 2003 and trial (November 2007): 284,149 • Tiffany among Top 10 VeRO Reporters in 21 of the 28 months between June 2003 and September 2005

  14. Pirates and Protocols: Trademark Use and Protection on the Internet Summary of Tiffany’s Claims at Trial • Contributory Infringement • Direct Infringement • False Advertising • Dilution

  15. Pirates and Protocols: Trademark Use and Protection on the Internet Arguments on Appeal • Inwood • General vs. Specific Knowledge • Snow Crest, Inwood, Fonovisa • Comparative burden analysis • Applicability of Nominative Fair Use doctrine • Public Policy implications of District Court’s decision

  16. Pirates and Protocols: Trademark Use and Protection on the InternetTiffany’s Allegations • Tiffany’s central allegation: eBay knowingly facilitated the sale of counterfeit Tiffany silver jewelry items by sellers on the eBay website • Tiffany’s ancillary allegations: eBay advertised the availability of Tiffany goods via promotions on its website and via “sponsored links” on search engines such as Google and Yahoo

  17. Pirates and Protocols: Trademark Use and Protection on the InterneteBay’s Anti-Infringement Measures Context: eBay’s Website • More than 200 million registered users worldwide • At least 100 million listings on eBay at any given time • Approximately 6 million new listings posted each day • eBay itself does not sell any items • eBay never possesses nor inspects items listed on its website • Subject to eBay policies, sellers are responsible for creating their own listings

  18. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s VeRO Program • eBay’s “Notice-and-Takedown” System • eBay allows rights owners to report listings through VeRO • eBay automatically removes reported listings • More than 14,000 rights owners participate in VeRO • Thousands of listings are removed each week • All fees associated with removed listings are refunded • Listings are removed within 24 hours, usually in under 4 hours

  19. Pirates and Protocols: Trademark Use and Protection on the InternetNotice of Claimed Infringement

  20. Pirates and Protocols: Trademark Use and Protection on the InternetReporting an eBay Listing

  21. Pirates and Protocols: Trademark Use and Protection on the InterneteBay’s Responses to Tiffany’s Reports • The trial record showed that eBay routinely removed listings that Tiffany reported to it • eBay never refused to remove a reported listing • Evidence showed that eBay’s response rate was close to 100 percent • Tiffany could point to only 15 instances in which eBay allegedly did not respond to a report and thus required Tiffany to follow up (based on nearly 300,000 reported listings)

  22. Pirates and Protocols: Trademark Use and Protection on the InterneteBay’s Additional Key Anti-Infringement Measures • More than 4,000 eBay and PayPal employees are devoted to anti-infringement/anti-fraud activities • eBay requires users to abide by its User Agreement and has implemented policies that forbid infringing items • eBay uses pop-up warning messages and undertakes efforts to educate users about intellectual property rights • eBay allows rights owners to create “About Me” webpages to provide information about themselves

  23. Pirates and Protocols: Trademark Use and Protection on the InterneteBay’s Fraud Engine • eBay proactively monitors listings on its site via a “fraud engine” consisting of tens of thousands of search rules • The fraud engine automatically flags for further review and removal listings that may be offering infringing items • Listings are flagged if they explicitly offer “knock-off” items or meet other criteria of suspiciousness • Thousands of listings are flagged each day

  24. Pirates and Protocols: Trademark Use and Protection on the InternetSuspensions of eBay Users • eBay suspends users, on both temporary and permanent bases, based on willful or repeat violations • eBay suspends hundreds of thousands of sellers each year, including tens of thousands for infringing conduct • Tiffany could point to only a handful of instances where users were alleged to have not been suspended, and the District Court did not credit those instances

  25. Pirates and Protocols: Trademark Use and Protection on the InternetDistrict Court’s Application of Inwood • The Legal Standard: “[I]f a manufacturer or distributor intentionally induces another to infringe a trademark, or if it continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement, the manufacturer or distributor is contributorially responsible for any harm done as a result of the deceit.” Inwood Labs., Inc. v. Ives Labs., Inc., 456 U.S. 844, 854 (1982).

  26. Pirates and Protocols: Trademark Use and Protection on the InternetSpecific Versus Generalized Knowledge • The District Court held that generalized knowledge of infringing activity is insufficient under Inwood: “[C]ompanies like eBay cannot be held liable for trademark infringement based solely on their generalized knowledge that trademark infringement might be occurring on their websites.” • “[T]rademark plaintiffs bear a high burden in establishing ‘knowledge.’” Gucci Am., Inc. v. Hall & Assocs., 135 F. Supp. 2d 409, 420 (S.D.N.Y. 2001). • Drawing support from copyright law, the District Court noted that “generalized knowledge that copyright infringement may take place in an Internet venue is insufficient to impose contributory liability.”

  27. Pirates and Protocols: Trademark Use and Protection on the InternetRejection of Restatement • The Restatement (Third) of Unfair Competition states that contributory infringement occurs where a defendant “fails to take reasonable precautions” against infringing activity in circumstances in which that activity “can be reasonably anticipated.” • Noting that the Supreme Court in Inwood called the “reasonable anticipation” standard “watered down and incorrect,” the District Court held that the Restatement did not govern: “Tiffany’s argument is foreclosed by Inwood itself.” • “In determining whether eBay is liable, the standard is not whether eBay could reasonably anticipate possible infringement, but rather whether eBay continued to supply its services to sellers when it knew or had reason to know of infringement by those sellers.” • The rejection of the “reasonable anticipation” standard is consistent with the principle that generalized knowledge is insufficient for contributory liability.

  28. Pirates and Protocols: Trademark Use and Protection on the InterneteBay’s Alleged Knowledge • The District Court: • rejected Tiffany’s demand letters as a basis for knowledge, concluding that demand letters generally “are insufficient to impute knowledge as to instances not specifically identified in such notices, particularly in cases where the activity at issue is not always infringing.” • rejected Tiffany’s “five-or-more” rule, by which Tiffany alleged that any seller of “five or more” Tiffany items is “almost certainly” selling counterfeit items: “Tiffany’s own CEO disavowed the importance of the five-or-more rule.” • declined to credit the “buying programs” Tiffany conducted in an attempt to determine the amount of counterfeit Tiffany items on eBay: “Tiffany entirely suspended its normal policing procedures during the programs.”

  29. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Responses When It Had Knowledge • When advised of specific instances of infringement,“eBay responded appropriately.” • Even if a defendant has knowledge of infringing activity, contributory liability only attaches if the defendant fails to take steps to remedy it, that is, if the defendant “continues to supply” its product or service. • “Here, when Tiffany put eBay on notice of specific items that Tiffany believed to be infringing, eBay immediately removed those listings.” • Tiffany conceded at trial “that eBay always acted in good faith and never refused to remove a listing after a NOCI had been filed.” • In addition, “when eBay had knowledge that a seller was repeatedly engaging in counterfeit activity, eBay’s pattern was to suspend that seller and then take further corrective action.”

  30. Pirates and Protocols: Trademark Use and Protection on the InternetAuthentic Tiffany Items on eBay • Relevant to the District Court’s conclusion was evidence showing that authentic Tiffany items are sold on eBay. • “[A] substantial number of authentic Tiffany goods are sold on eBay, including both new and vintage silver jewelry, sometimes in lots of five or more.” • The doctrine of contributory trademark infringement “cannot be used as a sword to cut off resale of authentic Tiffany items.” • “eBay and other online market websites may properly promote and facilitate the growth of legitimate secondary markets in brand-name goods.”

  31. Pirates and Protocols: Trademark Use and Protection on the InternetTrademark Owner’s Policing Duty • “Tiffany and eBay alike have an interest in eliminating counterfeit Tiffany merchandise from eBay.” • “[T]he heart of this dispute is . . . who should bear the burden of policing Tiffany’s valuable trademarks in Internet commerce.” • “The law is clear: it is the trademark owner’s burden to police its mark”; “Tiffany must ultimately bear the burden of protecting its trademark.” • See also, e.g., Standing Stone Media, Inc. v. Indiancountrytoday.com, 193 F. Supp. 2d 528, 532 (N.D.N.Y. 2002) (trademark owners have duty to “police and enforce their trademark rights”); McCarthy on Trademarks and Unfair Competition (“[C]orporate owners of trademarks have a duty to protect and preserve the corporation’s trademark assets through vigilant policing and appropriate acts of enforcement.”).

  32. Pirates and Protocols: Trademark Use and Protection on the Internet Willful Blindness in Trademark Law • As a corollary to the knowledge requirement for contributory trademark liability, courts have recognized the concept of “willful blindness.” • “To be willfully blind, a person must suspect wrongdoing and deliberately fail to investigate.” Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1149 (7th Cir. 1992). • But a defendant “has no affirmative duty to take precautions against the sale of counterfeits.” Hard Rock, 955 F.2d at 1149.

  33. Pirates and Protocols: Trademark Use and Protection on the Internet eBay’s Alleged Willful Blindness • The District Court held that the evidence did not support a finding of willful blindness by eBay. • The court instead found, among other things, that: • eBay had committed as much as $20 million each year to tools to promote trust and safety on its site. • one quarter of eBay’s workforce was devoted to trust and safety. • eBay proactively searched listings on its site for indications of fraudulent activity. • “Put simply,” the court concluded, “it cannot be said that eBay purposefully contrived to avoid learning of counterfeiting on its website, or that eBay failed to investigate once it learned of such counterfeiting.”

  34. Pirates and Protocols: Trademark Use and Protection on the InternetTiffany’s Remaining Claims • The District Court rejected Tiffany’s remaining claims of direct trademark infringement and false advertising, direct and contributory dilution, unfair competition, and analogous state-law claims. • Tiffany challenged eBay’s use of Tiffany’s trademarks on its website and its purchases of “sponsored links” on Google and Yahoo to advertise the availability of Tiffany jewelry on eBay. • These practices are protected by the doctrine of “nominative fair use,” pursuant to which “trademark owners cannot prevent others from making a descriptive use of their trademark.” • The doctrine “is essential because it is undisputed that trademark owners cannot use trademark law to prevent the resale of authentic, trademarked goods.”

  35. Pirates and Protocols:Trademark Use and Protection on the Internet BehavioralAdvertising

  36. Pirates and Protocols:Trademark Use and Protection on the Internet BehavioralAdvertising Advertising targeted to a specific individual based on that person’s web-surfing behavior. With behavioral advertising, this means that two people could see vastly different ads when viewing the identical webpage at the same time.

  37. Pirates and Protocols:Trademark Use and Protection on the Internet Contextual Advertising What is contextual advertising? • “Keywords” are pre-identified relevant terms that are used to trigger appropriate “contextual advertising.” • Keywords can be either generic terms or trademarks (e.g., “cars” and “insurance”; “Ford” and “GEICO”).

  38. Pirates and Protocols: Trademark Use and Protection on the Internet Contextual Advertising • Contextual advertising providers, such as adware companies and search engine providers, program their systems to match interested consumers to contextual advertising based on keywords. • Under the contextual advertising model, advertisers bid on “keywords” that an Internet user might enter in a search query. The search engine then matches the advertisement and sponsored hyperlink to the keyword the advertiser purchased. When an Internet user enters the keyword as a search, it triggers the sponsored link to appear on the search results page either to the right or immediately above the natural search results.

  39. Pirates and Protocols:Trademark Use and Protection on the Internet Contextual Advertising Advertisers’ Position: The practice should be considered a permissible noncommercial use or fair use of a trademark that places an advertisement in front of a potential purchaser, which is no different from other types of competitive / comparative advertising.

  40. Pirates and Protocols:Trademark Use and Protection on the Internet Contextual Advertising Trademark Owners’ Position: Many trademark owners consider the use of their marks as keywords to constitute infringement or unfair competition that improperly diverts Internet traffic from their sites and confuses consumers about the source of the products they encounter via pop-up ads, banners and sponsored search results. But does the sale of trademarks as keywords to trigger ads represent “use” in commerce, a prerequisite to an infringement cause of action under the Lanham Act?

  41. Pirates and Protocols:Trademark Use and Protection on the Internet StatutoryRequirements Trademark infringement claims under § 32(1) of the Lanham Act, 15 U.S.C. § 1114(1)2, require that the plaintiff establishes that (1) it has a valid mark that is entitled to protection under the Lanham Act; and that (2) the defendant used the mark, (3) in commerce, (4) ‘in connection with the sale . . . or advertising of goods or services,’ 15 U.S.C. § 1114(1)(a), (5), without the plaintiff's consent.”

  42. Pirates and Protocols:Trademark Use and Protection on the Internet StatutoryRequirements The plaintiff must also show that the defendant's use of that mark “is likely to cause confusion . . . as to the affiliation, connection, or association of [the defendant] with [the plaintiff], or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by [the plaintiff].” 15 U.S.C. § 1125(a)(1)(A).

  43. Pirates and Protocols:Trademark Use and Protection on the Internet Use in Commerce Courts are split on whether the sale and/or purchase of another's trademark as a keyword constitutes use of the mark in commerce. Does not constitute “Use in Commerce” Fragrancenet.com Inc. v. Fragrancex.com Inc., 439 F. Supp. 2d 545 (E.D.N.Y. 2007) (12 ECLR 653, 7/18/07) Site Pro-1 Inc. v. Better Metal LLC, U.S. Dist. LEXIS 34107 (E.D.N.Y. May 9, 2007) (12 ECLR 459, 5/16/07) Merck & Co. v. Mediplan Health Consulting Inc., 431 F. Supp. 2d 425 (S.D.N.Y. 2006) (11 ECLR 375, 4/5/06)

  44. Pirates and Protocols:Trademark Use and Protection on the Internet Use in Commerce Does Constitute “Use in Commerce” Government Employee Ins. Co. v. Google Inc., 330 F. Supp. 2d 700 (E.D. Va 2004) (9 ECLR 772 9/15/04) Google Inc. v. American Blind and Wallpaper Factory Inc., No. 03-05340 (N.D. Cal. March 30, 2005) (10 ECLR 361, 4/6/05) Buying for the Home v. Humble Abode LLC, D.N.J., No. 03-2783, 10/20/06

  45. Pirates and Protocols:Trademark Use and Protection on the Internet Initial Interest Confusion In 2004 the Ninth Circuit held - without addressing the "use in commerce" question - that the use of trademarks to trigger the display of banner advertising creates initial interest confusion (Playboy Enter. Inc. v. Netscape Communications Corp.,354 F. 3d 1020 (9th Cir. 2004) (9 ECLR 55 1/21/04) International Profit Associates, Inc. v. Paisola, 461 F. Supp. 2d 273 (D.N.J. 2006) Edina Realty Inc. v. MLSonline.com, Civ. 04-4371, 2006, WL 737064 (D. Minn. March 20, 2006) Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008)

  46. Pirates and Protocols:Trademark Use and Protection on the Internet Behavioral Advertising Guidelines • Self-Regulatory Principles For Online Behavioral Advertising (“Principles”) - Federal Trade Commission staff report issues on February 12, 2009. • Online Behavioral Advertising “means the practice of tracking a consumer’s online activities over time – including searches the consumer has conducted, the web pages visited, and the content viewed - in order to deliver advertising targeted to the individual consumer’s interests”

  47. Pirates and Protocols:Trademark Use and Protection on the Internet Behavioral Advertising Guidelines • FTC – First Party Behavioral Advertising “is behavioral advertising by and at a single website, which practice is more likely consistent with consumer expectations, and less likely to lead to harm than other forms of behavioral advertising” • FTC – Contextual Advertising is “advertising based on a consumer’s current visit to a single web page or single search query that involves no retention of data about the consumer’s online activities - beyond that necessary for the immediate delivery of an ad or search result – is likely to be less invasive than other forms of behavioral advertising.”

  48. Pirates and Protocols:Trademark Use and Protection on the Internet Behavioral Advertising Guidelines • First Party and Contextual Advertising: • Fall outside the scope of the Principles • Still subject to other laws and policies that impose obligations regarding the collection of data

  49. Pirates and Protocols:Trademark Use and Protection on the Internet Behavioral Advertising Guidelines • FTC – Personally Identifiable Information and Non-Personally Identifiable Information “in context of behavioral advertising, rapidly changing technology and other factors have made the line between personally identifiable and non-personally identifiable information increasingly unclear.” • The Principles are designed to serve as the basis for industry self regulatory efforts to address privacy concerns regarding the following four (4) aspects of online consumer data collection:

  50. Pirates and Protocols:Trademark Use and Protection on the Internet Behavioral Advertising Guidelines First Aspect: Transparency and Consumer Control • Meaningful disclosure to consumers about the practice of behavioral advertising • Disclosures within a privacy policy/terms of use is no longer considered “best practice” • Disclosure via a prominent link attached to each targeted advertisement served or that is placed on the home page linking to a page describing behavioral advertising practices • A choice to opt out should be easily accessible

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