Online Advertising Business Models and Distinctive Signs: Should One Rethink the Concept of Confusion?

Transcription

1 Online Advertising Business Models and Distinctive Signs: Should One Rethink the Concept of Confusion? By Philippe Gilliéron J.S.M. (Stanford( Stanford), Attorney Professor at Lausanne Law School

2 (1) (1) Why Why this this paper? paper?

3 Intangible assets Most valuable business assets of companies

4 76% of the Fortune 100

5 Trademarks per se Most valuable asset of several companies

6

7 E-companies

8

9

10 Intangible assets Most valuable

11 BUT ALSO

12 The least stable

13 Constructed of legal rules Thus subject to constant changes

14 Desire to find the right balance between legitimate concerns of rightholders concerns of public to access and use information

15 Technological innovations play a significant role in IP shifts

16 How How may may the the development of new of new online advertising online business advertising models business reshape models the scope reshape of application the scope of trademark of application law? of trademark law?

17 (2) (2) An An economic analysis of of trademarks: rationales

18 <A> Trademarks protection is centered around the concept of confusion

19 because

20 Original goal of trademark is to provide information to consumers looking for a particular product

21 This information enables the consumer to locate the source of a given product

22 From an economical perspective Trademark s goal is to reduce search costs of consumers for given products

23 «the value of a trademark to the firm that uses it to designate its brand is the saving in consumers search costs made possible by the information that the trademark conveys or embodies about the quality of the firm s brand» (Landes/Posner Posner)

24 Economics of information Economics of information

25 Based upon this rationale

26 On the one hand Trademarks protected against proprietary uses

27 i.e. exploitation of one s trademark resulting in likelihood of confusion among consumers

28 On the other hand Trademarks not protected against referential uses

29 Such as

30 Comparative advertising Use of one s trademark to designate genuine products

31 BUT

32 <B> Over years Tendency of corporate brand owners to diversify their products

33 Lobbying to protect their trademarks for goods or services that were not similar to their own goods or services

34 Trademark holders seeking to protect their brand value as such, separate and distinct from any possible confusion

35 Seeking to protect the investment in their brand and the capitalization by others of this goodwill

36 Shift from economics of information

37 Towards the economics of public goods economics of public goods

38 Pressure proved successful - Dilution doctrine - Initial interest confusion doctrine in the US

39 Emergence of two rationales rather than one 1. Economics of information (protection of consumers against likelihood of confusion) - proprietary uses prohibited - referential uses allowed 2. Economics of public goods (protection against the exploitation of the value of the brand as such,, or as a tool to communicate information): what about the referential uses?

40 (3) The undesirable The undesirable evolution evolution resulting from the development resulting from of online the development advertising business of online advertising models business models

41 <A> <A> Pop-up advertising (WhenU.com cases) Pop-up advertising (WhenU cases)

42

43 Question: Does the display of a pop-up ad, triggered by a certain term entered by a user in a search engine, amount to a TM infringement when this term consists of a third party s TM?

44 - 2 district courts answered in the negative and ruled that the use of a trademark as keyword did not amount to a trademark use in commerce within the meaning of the Lanham Act. - A third one answered in a positive way, based upon the initial interest confusion doctrine

45 According to that theory «it is enough for the brand owner to show that consumers were initially confused as to source, even though their confusion was dispelled by the time they made their purchase»

46 Put in a different way «initial interest confusion is customer confusion that creates initial interest in a competitor s product»

47 While referring to the notion of confusion

48 This theory IS NOT based upon any confusion

49 BUT ONLY PROTECTS The goodwill associated with the brand against any possible diversion

50 Economics of public goods Economics of information

51 Economics of public goods Referential uses

52 Court of Appeals for the Second Circuit reversed this third case

53 Court analysis based upon different rationales = Different results

54 <B> <B> Google AdWords Adwords

55 a) a) Metatags Piece of code embedded in the HTML code of a webpage

56 Incentive to use third parties TM as metatags

57 Does such a use amount to a TM infringement?

58 If one refers to the Economics of information s rationale

59 NO

60 Metatags can ONLY be detected by search engines

61 NOT by users

62 USE OF METATAGS DOES NOT CREATE ANY LIKELIHOOD OF CONFUSION

63 DOES NOT INCREASE THEIR SEARCH COSTS

64 Nevertheless Courts used a different approach

65 Based upon an economics of public goods rationale

66 1. US Courts (Brookfield( Brookfield) «[a] sizeable number of consumers who were originally looking for Brookfield s product will simply decide to utilize Web Coast s offerings instead. Although there is no source confusion in the sense that consumers know they are patronizing West Coast rather than Brookfield, there is nevertheless initial interest confusion in the sense that,, by using moviebuff.com or MovieBuff to divert people looking for MovieBuff to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark».

67 «although there is no source of confusion» «West Coast improperly benefits from the goodwill that Brookfield developed in its mark» Clear move towards a propertization of TM through an economic of public goods rationale

68 2. German Courts (Impuls( Impuls) BGH, May 26, 2006 «[a] likelihood of confusion can already result from the fact that users, which search for the name of the plaintiff to get information, will also be informed about the defendant s offer of goods or services»

69 3. French Courts Constantly held that use of third party s TM as metatag amounts to TM infringement since Pacanet in 1998

70 Reasoning similar to the initial interest confusion doctrine. Goal: prevent anyone from capitalizing upon goodwill acquired by TM holder (economics of public goods)

71 b) Keywords

72

73 1. US Courts (Playboy v. Netscape) «[a]lthough dispelled before an actual sale occurs, initial interest confusion impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement» «the Internet user will have reached the site because of defendant s use of PEI s mark. Such use is actionable»

74 2. German Courts - Minority stick to the traditional rationale asking whether there is a risk of confusion as to the source of the product and denies such a risk - Vast majority holds that such usage amounts to TM infringement. - Impuls will make it hard for German Courts to deny a TM infringement.

75 3. French Courts - Admit TM infringement against users BUT GO EVEN MUCH FURTHER! - Admit TM infringement against Google

76 How can one admit a TM infringement against Google?

77 Google DOES NOT use the TM itself for its own products or services

78 Google DOES in most instances NOT Offer products or services that are identical or similar to the ones of the TM s holder

79 GOOGLE SHOULD NOT BE HELD LIABLE UNDER A TM CLAIM!

80 For the Tribunal de Grande Instance de Nanterre: «Google is not a competitor of CNRRH company.. It does not have any activity in the same field. Nevertheless, it reproduced the Eurochallenges trademark in its keyword listing so as to offer it to advertisers that conduct identical activities to the ones covered by the trademark. Thus, it does actually use the Eurochallenges brands as a trademark.. In other words, even though its activities are not identical or similar to the ones protected by the Eurochallenges trademark, one cannot deny the fact that its activity consists of proposing and selling ads spaces made of sponsored links of clients which have an identical or similar activity to the one of the trademark.»

81 For the Tribunal de Grande Instance de Nanterre: «Google is not a competitor of CNRRH company.. It does not have any activity in the same field. Nevertheless, it reproduced the Eurochallenges trademark in its keyword listing so as to offer it to advertisers that conduct identical activities to the ones covered by the trademark. Thus, it does actually use the Eurochallenges brands as a trademark.. In other words, even though its activities are not identical or similar to the ones protected by the Eurochallenges trademark, one cannot deny the fact that its activity consists of proposing and selling ads spaces made of sponsored links of clients which have an identical or similar activity to the one of the trademark.»

82 The Court ascribes to Google its advertisers activities,, as if it was one of their representatives!

83 This reasoning is obviously

84 WRONG!!

85 But

86 Sheds an interesting light upon the possible extension of TM to its most extreme

87 the activities activities carried One where carried out by the parties would not matter any longer

88 Provided the goodwill associated to the TM has been used without the rightholder s consent

89 Full abandonment of the economics of information rationale

90 In favor of a full application of the economics of public goods rationale

91 Which will lead to

92 A FULL PROPERTIZATION OF TMs!!

93 (4) Towards a full internalization of Trademarks externalities?

94 <A> Original rationale economics of information (reduce search costs)

95 <A> Original rationale economics of information (reduce search costs) Proprietary uses Prohibited (confusion)

96 <A> Original rationale economics of information (reduce search costs) Proprietary uses Prohibited (confusion) Referential uses Allowed (help consumers to make informed choices)

97 Referential uses <A> Proprietary uses prohibited (confusion) Trademarks positive externalities

98 <B> Move towards economics of public goods (capitalize upon one s goodwill)

99 <B> Move towards economics of public goods (capitalize upon one s goodwill) Proprietary uses Prohibited (confusion)

100 <B> Move towards economics of public goods (capitalize upon one s goodwill) Proprietary uses Prohibited (confusion) Referential uses Prohibited or in danger (capitalize upon one s goodwill)

101 Full propertization of TMs = proprietary uses prohibited <B> Referential uses prohibited Full internalization of Trademarks externalities

102 Moving from economics of information towards economics of public goods

103 Shifts the traditional paradigm of TM rights without any economical justification

104 WILL THESE EXPANSIONARY RULES CRAFTED FOR THE INTERNET MIGRATE OFFLINE?

105 One would then face A FULL PROPERTIZATION OF TMs

106 To the detriment of both - Consumers - Competition

107 Fair Competition DOES NOT MEAN No competition

108 Courts tend to forget that To harm a company s goodwill

109 IS NOT THE SAME AS

110 To benefit from that goodwill

111 Trademark law means to prevent the former, not the latter

112 Such a goal can only be achieved

113 If Courts stick to the traditional rationale of TM

114 Economics of information and its related question as the sole relevant criterion

115 i.e. whether there exists a likelihood of confusion among consumers