9th Cir.: Keyword ads misleading; “splash screen” portal with bold disclaimer conditionally approved

TrafficSchool.com, Inc. v. Edriver Inc., No. 08-56518 (9th Cir. July 28, 2011), involved the folks who own DMV.org (and also display several “[state].dmv.org” domains that resolve to DMV.org) – a website that is designed to assist people in renewing licenses, buying car insurance, registering vehicles, drivers’ ed classes, dealing with traffic tickets, and other car-related issues. Competitors complained that DMV.org’s domain names, which were prominently displayed in sponsored ads when Google users searched for certain government/vehicle related terms, fooled users into thinking that DMV.org was a state entity and clicking on the links. The plaintiffs alleged that they lost revenues, such as click-through referral fees, because of the deception and sued under the false advertising provisions of the Lanham Act.

The 9th Circuit affirmed standing primarily because the parties competed for click-through referral revenues with overlapping service providers and because lots of people were tricked into thinking DMV.org was a government entity. The 9th Circuit also affirmed conditionally approved the district court’s injunction requiring a “splash screen” that immediately appeared when users clicked on DMV.org’s sponsored ads, and which clearly warned that DMV.org was not a government website.  The 9th Circuit thought that requiring the splash screen in perpetuity implicated First Amendment commercial speech concerns.  It therefore remanded so that the district court could either (a) explain what conditions the defendant needed to fulfill to have the splash screen requirement lifted or, in the alternative, (b) simply enjoin the defendants from making false or misleading statements on their website.

As to money, the 9th Circuit refused to award profits because the plaintiffs produced no evidence of past monetary injury or causation. But the court remanded for a determination whether the plaintiffs should get attorneys’ fees, primarily because the court viewed the plaintiffs as having paid a lot of money to ameliorate a concrete harm to the public caused by DMV.org’s deceptive practices.

(NB:  subsequent corrections to initial post made by strikethrough and underlining, except in the title, where Blogger doesn't permit strikethrough and underlining.)