The New Frontier of Brand Enforcement on the Internet: A U.S. Perspective Steven J. Wadyka, Jr. Shareholder Greenberg Traurig, LLP Washington, D.C. USA (202) 331-3105 wadykas@gtlaw.com GREENBERG TRAURIG, LLP n ATTORNEYS AT LAW n WWW.GTLAW.COM 2011. All rights reserved.
Overview of Internet Brand Enforcement Ø Challenges/costs/benefits Ø Internet marketing, search engines and keyword advertising Ø Secondary liability for online service providers Ø Brand enforcement in social media Ø Remedies against rogue websites Ø Conclusions and predictions
Challenges Facing Brand Owners in Internet Enforcement Ø Potential IP rights violators Search engines selling trademarks as keywords (Google, Yahoo!, Bing) Domain name registrars (GoDaddy) Social networking sites (Facebook, Twitter, LinkedIn) Rogue websites/online counterfeiters Auction sites (ebay) Web hosting providers/isps Payment processors (PayPal)
Challenges Facing Brand Owners in Internet Enforcement Ø Jurisdictional issues How to subject offshore (and often anonymous) IP rights violator to the courts and laws of the U.S. and obtain relief that can be enforced against the violator? Ø Cost considerations Private investigators Monitoring/watching services Legal fees Ø Efficiency and effectiveness Identify and choose targets wisely Ø Deterrence and Return on Investment Substantial relief may provide disincentive to would-be violators and help brand owner recoup losses and cost outlays
Challenges Facing Brand Owners in Internet Enforcement Ø Secondary liability Hold online service providers responsible for the infringing acts of others Hold brand owners responsible for the actions of third parties Two theories: Vicarious infringement: Principal liable for acts of its agent Contributory infringement: Analogous to aiding and abetting
Search Engines & Keyword Advertising Rosetta Stone v. Google, 676 F.3d 144 (4 th Cir. 2012) Ø Rosetta Stone sued Google for trademark infringement based on sale of keywords consisting of Rosetta Stone s trademark to trigger ads for competitors and counterfeit products Ø District court granted summary judgment for Google on Rosetta Stone s direct and contributory infringement claims
Search Engines & Keyword Advertising Rosetta Stone v. Google Ø Direct trademark infringement Disputed issues of fact regarding Google s intent; evidence showed that Google expected uptick in litigation due to AdWords policy change District court ignored evidence of actual confusion as to sponsorship Sophistication of consumers internal Google study showed seasoned Internet users were confused by Google s sponsored links Functionality doctrine inapplicable Irrelevant that Google s computer program functioned better by use of Rosetta Stone s mark
Search Engines & Keyword Advertising Rosetta Stone v. Google Ø Contributory trademark infringement Insufficient for service provider to have general knowledge that some percentage of purchasers use the service to engage in infringing activities Must provide service to identified individuals that it knows or has reason to know are engaging in trademark infringement District court improperly weighed conflicting evidence regarding Google s allowance of known counterfeiters to bid on Rosetta Stone keywords
Search Engines & Keyword Advertising Ø 1-800 CONTACTS, Inc. v. Lens.com, Inc., 722 F.3d 1229 (10 th Cir. 2013) Lens.com used an affiliate network, managed through an aggregator, to assist with online marketing Affiliates purchased keywords containing 1-800 s mark Some impressions displayed 1-800 s mark 1-800 argued initial interest confusion Sued Lens.com based on theories of vicarious and contributory infringement
Search Engines & Keyword Advertising Ø 1-800 CONTACTS, Inc. v. Lens.com, Inc. Relevant issue for consumer confusion is not what keyword was purchased, but what language was used in the ad generated by keyword Likelihood of confusion existed as to impressions containing plaintiff s mark No vicarious liability s Affiliate had no authority to act on behalf of defendant and thus was not an agent BUT, there was contributory liability s Lens.com could have stopped use of infringing ads by requiring its aggregator to send e-mail blast to affiliates forbidding such use
Domain Name Registrars Ø Petroliam Nasional Berhad (Petronas) v. GoDaddy, 737 F.3d 546 (9 th Cir. 2013) A third party registered petronastower.net and petronastowers.net and used GoDaddy s domain forwarding service to direct users to a porn site Petronas sued GoDaddy for contributory cybersquatting under the federal anti-cybersquatting statute (ACPA) Appeals court held that neither the plain text nor purpose of the ACPA supports a claim for contributory cybersquatting Would saddle registrars with nearly impossible task of divining the intent of their customers Issue may soon be before US Supreme Court
Auction Sites & Online Marketplaces Ø Tiffany v. ebay, 600 F.3d 93 (2d Cir. 2010) First U.S. case to apply contributory trademark infringement standard to online marketplace Tiffany claimed that ebay was liable for contributory trademark infringement by supplying its services to sellers of counterfeit Tiffany goods while knowing or having reason to know that such sellers were infringing Tiffany s marks District court ruled in favor of ebay; Tiffany appealed
Auction Sites & Online Marketplaces Ø Tiffany v. ebay Affirms judgment in favor of ebay For contributory trademark infringement, a service provider must have more than a general knowledge or reason to know that its service is being used to sell counterfeit goods s Some contemporary knowledge of which particular listings are infringing or will infringe in the future is necessary s Tiffany s generalized allegations of counterfeiting failed to provide ebay with the required knowledge ebay s extensive anti-piracy efforts Trust & Safety Dept., fraud engine to detect listings for counterfeit goods, VeRO Program providing rights owners with notice and takedown remedies all were critical to a finding of no liability
Web Hosting Providers Ø Louis Vuitton v. Akanoc Solutions, 658 F.3d 936 (9 th Cir. 2011) Defendants provided web hosting services to sites that sold counterfeit Louis Vuitton products LV made several demands that defendants either remove infringing content or require their customers to do so; No response from defendants; sites continued to operate LV sued for contributory trademark infringement s Argued that defendants had actual knowledge of sites activities, knowingly avoided learning full extent of those activities, and deliberately disregarded LV s demands, thereby knowingly enabling the infringing conduct by hosting the sites Jury found for LV, awarded statutory damages totaling $31.5 million
Web Hosting Providers Ø Louis Vuitton v. Akanoc Solutions Affirmed on appeal as to liability Issue: Whether defendants exercised direct control of third party s means of infringement Defendants: The websites selling counterfeit goods were to sole means of infringement Appeals court held that defendants physically host websites on their servers and route Internet traffic to and from those sites The Internet equivalent of leasing real estate. Defendants had direct control over the master switch that kept the sites online and available Reduced statutory damage award to $10.5 million
Payment Processors Ø Theory of liability Contributory infringement s Intentional inducement s Actual knowledge or willful blindness, while having sufficient control over the instrumentality used to infringe Ø Divergent case holdings Perfect 10 v. Visa, 494 F.3d 788 (9th Cir. 2007) s allegation that credit card processors can decide to stop processing payments to sites dealing in counterfeits was insufficient to state a claim (Judge Kozinski dissenting) Gucci v. Frontline Processing, 721 F.Supp.2d 228 (SDNY 2010) s control sufficiently alleged because credit card processing services are a necessary element for the transaction of counterfeit goods online; knowingly provide a financial bridge between buyers and sellers of counterfeit products
Social Media Ø Presents opportunities and challenges for brand owners Opportunities: s Build brand strength/loyalty by creating official company page and fan page s Register usernames consisting of your company s brands s Use social media pages commercially to provide new ways to reach consumers s Spread branding message instantaneously across numerous platforms
Social Media Challenges: s Improper suggestions of affiliation/sponsorship Brand appears in usernames pointing to sites containing false information about the company s products s Counterfeiting - Username points to sites selling counterfeit goods s Username squatting - New FB account created solely to take advantage of grabbing a username s Dilution - Blurring and tarnishment s Imposters - Possible parody defense; permissible on Twitter provided parody is clear
Social Media Ø Enforcement strategies in social media sites Assessment of infringing activity s Balance the need for brand protection vs. potential alienation of customers Must always be mindful of duty to police your marks How much of an issue does the activity create for your business? Does it interfere with any ongoing advertising or promotional campaigns? Is it an isolated, ephemeral instance or a concerted attack?
Social Media Ø Enforcement strategies in social media sites Consider free speech issues and potential public backlash of enforcement effort First Amendment to U.S. Constitution grants broad protection to political speech/ commentary/criticism, less protection to commercial speech Keep in mind that cease and desist letter may well be posted on social media sites to generate negative exposure for the brand» Adjust tone of enforcement depending on whether infringer is willful or simply innocent or misguided
Social Media Ø Enforcement strategies in social media sites Become familiar with the site s Complaint and Takedown Policies, Community Guidelines, and Terms of Use Develop takedown strategy and assess requirements s Copyright Infringement (DMCA) s Trademark Infringement s Unauthorized Impersonation s Repeat Offenders s Harassment, defamation, theft of confidential material Keep in mind that policies and requirements my change over time
Social Media Ø Enforcement strategies in social media sites s Expand your internal monitoring program to include social media sites s Develop consistent monitoring and enforcement procedures s Use search engines to find infringing/harmful content Google.com/alerts (generates alerts for use of company names and brands on the Web, blogs, news, discussion groups) s Consider vendors and software tools with social media monitoring capability s Keep tabs on what is being said about your brand in real time
Rogue Websites Ø What is a rogue website? A site that traffics in stolen movies, TV shows and music, or counterfeit goods Located throughout the world Appear legitimate by featuring brands and advertising of reputable companies and accepting major credit cards Enable site operators to profit from brands and other IP they had no role in creating A Web site that is set up to spread a virus, collect names for spammers or for some other illicit or repugnant purpose (PC Magazine Encyclopedia)
Rogue Websites Ø What type of threat do they present to brands? The counterfeit business model is shifting toward use of rogue websites s Seizures by U.S. Customs & Border Patrol jumped 24% in 2011, but overall value of goods seized decreased by 5% from previous year s Proliferation of rogue sites in part responsible s Difficult to stop counterfeit goods from entering US if purchased through rogue website s Hard to locate or identify operators of sites s Lack of any lasting remedy since sites are easily reestablished
A Rogue Website Case Study: Tory Burch An example of how brand owners can combat the sale and distribution of counterfeit goods through rogue websites under current U.S. laws
A Rogue Website Case Study: Tory Burch Ø Tory Burch brought suit in Dec. 2010 in SDNY against an interrelated group of anonymous counterfeiters Ø Defendants established over 200 websites to sell counterfeit Tory Burch products Ø The sites were in English, accept major credit cards, copy Tory Burch marks, designs and photos Ø Sites established at URLs containing the Tory Burch marks so they would rank highly web searches for Tory Burch name Ø Defendants used multiple fake names and addresses and submitted false WHOIS data to avoid detection Ø New sites quickly set up once existing sites disabled
A Rogue Website Case Study: Tory Burch
A Rogue Website Case Study: Tory Burch Ø Court granted Tory Burch s motion for default judgment and permanent injunction (Order dated May 13, 2011) Court had personal jurisdiction over the defendants based on their operation of fully-interactive websites through which they sold Tory Burch counterfeits s Recent 2d Cir. case upholding jurisdiction over nonresident counterfeiter based on sale/shipment of at least 1 counterfeit handbag into NY and its operation of highly-interactive website (Chloe v. Queen Bee (2d Cir. 2010)) Found that defendants went to great lengths to conceal themselves and their ill-gotten proceeds from Tory Burch s and this Court s detection by using multiple false identities and addresses as well as purposefully deceptive contact information Permanently enjoined 3 rd party service providers (ISPs, registries, registrars, online marketplaces) from providing any services to defendants Awarded Tory Burch $164 million in damages
A Rogue Website Case Study: Tory Burch Ø Court also granted ongoing injunctive relief tailored to suit the unique challenges presented by the anonymity of defendants and ease by which they are able to establish new sites Ø Order enables Tory Burch to disable additional rogue sites as they are established by defendants and discovered by Tory Burch To freeze and recover any additional newly-discovered financial accounts used in connection with defendants operation, such funds to be applied toward satisfaction of $164 million judgment To obtain transfers of additional domain names associated with any newly-discovered rogue sites Ø Ongoing mechanism avoids the need to institute a separate action each time a new rogue site is established
Conclusions and Predictions Ø The legality of using trademarks in keyword advertising is still unsettled Ø Greater challenges for brand owners in seeking to hold online service providers liable for trademark infringement, creating greater need for remedies against direct infringers, wherever located Ø Competitors will become more aggressive in marketing through social media sites, resulting in trademark disputes that will test adequacy of traditional trademark law in the social media context Ø Rogue websites will become more sophisticated in their operation and more difficult to identify
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