Thursday, July 07, 2005

2d Circuit Absolves WhenU's Pop-up Ad Program

In a noteworthy (but in my view conceptually muddled) decision, the 2d Circuit recently held that WhenU--an Internet marketing company--didn't violate the Lanham Act through its pop-up ad & coupon program.

WhenU sells pop-up advertising. The pop-ups appear on computer screens of Internet users who have installed the WhenU program on their computers. The ads vary in size, shape, and placement, but they all are framed by a border displaying the words "A WhenU Offer--click?" The advertisers are usually competitors of, or in a business related to, the company whose website the computer user is on or the search result screen on which the company appears. Advertisers can't sign up to always have their ads appear when a user is on a competitor's site, but they sign up to be included in group of several advertisers whose pop-ups are randomly chosen for display when the triggering event happens.

The pop-ups are triggered by a database of web addresses, search terms, and key word algorithms kept by WhenU in an unseen directory maintained by When U.

One of the triggering web addresses in the WhenU directory was, the web address of a company that used 1-800CONTACTS as a service mark for selling contact lenses.

The 2d Circuit reversed the district court's entry of a preliminary injunction against WhenU's "use" of the web address as a trigger for competitors' pop-up ads. The 2d Circuit believed that WhenU did not "use" the plaintiff's mark by either maintaining the web address in WhenU's hidden directory or by causing the corresponding pop-up ad to appear.

As to the secret directory, the court said that (a) the inclusion of the plaintiff's web address was not the same thing as inclusion of the plaintiff's mark (even though they're similar), and (b) in any event, the fact that it was secret was not a "use" in connection with the sale of goods, in that the use was hidden from the purchasing public. I think the first reason is pretty flimsy, but the second reason goes to the heart of the matter, and I think gets it right.

As to the pop-ups themselves, the court again found no "use" as required by the Lanham Act. It again rested its decision in part on the flimsy distinction between the triggering address and mark itself. In another unconvincing section, the 2d Circuit pointed out that there was no "use" because other search terms (like "eye care") triggered 1-800CONTACTS' competitor's pop-up ads. More solidly, I think, however, the court also pointed out that the pop-up ads themselves don't actually use the plaintiff's mark or anything like it. And, of course, as a result, the pop-ups themselves are clearly marked as something other than the web page on which they are superimposed, and they're not themselves confusing. My own view is that the Court therefore should have rested its analysis of the pop-up ads themselves on the ground that they were unlikely to cause confusion, rather than lack of "use."

The 2d Circuit also pointed out that WhenU's program isn't different from vendors who pay retail stores to place their competing, but not confusingly similar, brands, right next to a well-known competing brand. Of course, this begs the question whether THAT practice is legal, but even so, it's a decent analogy.

Overall, I think this is probably the right result, but the analysis leaves something to be desired.

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