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No Legal Recourse for Targets of 'Gripe Sites'

Stephen M. KramarskyAll Articles

New York Law Journal

January 19, 2012

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The internet is rapidly overtaking traditional advertising media as the most important marketing tool for many retail brands. But the rapid, open communication that makes social media such a powerful marketing tool can be a double-edged sword. A critical review, customer complaint or harmful press item that goes "viral" can instantly and irreparably destroy years of reputation-building -- and experience shows that once such damage is done in the court of internet opinion, it is all but impossible to reverse.

Unsurprisingly, then, companies are always searching for ways to prevent the dissemination and spread of harmful material over the internet. Where the content at issue contains trade secrets, copyrighted material, or other well-codified intellectual property, there are established legal procedures to have it removed. But where the content is merely harmful -- even if it is false and presented in a manner that defies all conventional business ethics -- targeted companies may find themselves without legal recourse. The law in this area seeks to strike a balance between the need to provide a free flow of information and the need to protect reputation and goodwill. A recent case from the federal court in the U.S. District Court for the Eastern District of New York, Ascentive, LLC v. Opinion Corp., demonstrates the complexities inherent in assessing that balance.

In Ascentive, the court denied plaintiffs' application for a preliminary injunction prohibiting the continued publication of harmful reviews by defendants, even though it found some aspects of defendants' web-based business "troubling and perhaps unethical." The court held that it was "unable to find a legal remedy for conduct that may offend generally accepted standards of behavior."[FOOTNOTE 1] Where a court is forced to reach the conclusion that "unethical" conduct is nonetheless without legal remedy, it is worth looking carefully at the case and the underlying law to understand the disconnect between the law and the marketplace.

THE BACKGROUND TO 'ASCENTIVE'

Plaintiffs in Ascentive were two companies -- Ascentive (a software company) and Classic Brands (a mattress company with a product called Dormia). According to plaintiffs, substantial portions of their sales are driven by their online marketing. Defendants were Opinion and three of its officers, operators of a consumer review website called www.PissedConsumer.com (PissedConsumer). PissedConsumer invites consumers -- anonymous and identified -- to post reviews of businesses. It does not attempt to determine whether posted complaints are legitimate, and does not claim to do so. Its logo and general tone, as well as its name, make it clear that this is a "gripe site" -- a site devoted to customer complaints about specific companies -- not a place for positive or even unbiased reviews. Defendants did not appear to dispute this.

One interesting wrinkle in defendants' business model is that defendants create a "subdomain" for each business they "review." Thus, complaints about Dormia mattresses appear on "dormia-mattress.pissedconsumer.com" or "dormia.pissedconsumer.com"; complaints about Ascentive appear on "ascentive.pissedconsumer.com" or "finallyfast.pissedconsumer.com" (FinallyFast is the name of Ascentive's software product). These addresses include plaintiffs' registered trademarks.

On these subsites, defendants provide a description of the company and its products and display advertising through a Google program. The subsites are tailored to display ads for competitor's products. In addition, the subsites enable defendants to link directly to customer complaints about a particular company, which plaintiffs alleged was one way (among many) to improperly improve the gripe site's ranking in search engines and increase defendants' ad revenues. This process is called search engine optimization, or SEO. All of these practices, discussed in detail below, formed bases for plaintiffs' Lanham Act and related state law trademark claims.

Plaintiffs complained that the reviews were inaccurate (in some cases) and that they created misleading impressions. More importantly, they alleged that defendants used their trademarks to engage in improper SEO techniques such as

(1) creating websites with no content and using them solely to create links to PissedConsumer's site; (2) making excessive use of brand names (and trademarks) in website text, web addresses, and webpage code; (3) reposting the same consumer complaints on multiple websites so that the complaints appear new when in fact they are outdated; and (4) creating Twitter accounts that simply post links to outdated reviews at PissedConsumer.[FOOTNOTE 2]

Plaintiffs alleged that these controversial (though not necessarily uncommon) techniques constituted unfair business practices as well as violations of their trademark rights under state and federal laws.

Finally, plaintiffs brought a RICO action based on alleged acts of commercial bribery and extortion by defendants. This claim was based on PissedConsumers' so-called "premium reputation management services" (RMS), which defendants described as a service "to allow companies 'to tell [their] side of the story and address complaints received from consumers.'"[FOOTNOTE 3] In order to sign up for RMS, a company must first sign a non-disclosure agreement regarding the terms of the program. If it does so, it learns that, for a fee of $120,000, it will be allowed to address complaints before they appear, remove anonymous complaints, alter the posting of complaints in a way that highlights the resolution only (and only shows the complaint on a click-through), and change the page title and product description. Plaintiffs alleged that, if they did not pay the $120,000, they would have no ability to address negative reviews.

Based on these facts, plaintiffs sued for violations of the Lanham Act as well as state trademark, unfair competition and consumer protection laws and also brought the above-described RICO claims. They sought a preliminary injunction to take down the websites containing their trademarks and the complaints about their companies. Despite its concerns over defendants practices, the court denied the application on the grounds that plaintiffs were unlikely to succeed on the merits of their claims.

THE TRADEMARK CLAIMS

The court evaluated plaintiffs' Lanham Act trademark infringement claims under a number of different theories. The first was a standard infringement claim in which the issue is whether a defendant's use of plaintiff's marks is likely to mislead customers as to the source of the goods in question. In the 2nd U.S. Circuit Court of Appeals, this test is governed by seven factors called the Polaroid factors,[FOOTNOTE 4] and the upshot of the Ascentive court's analysis was that no source confusion could occur here largely because PissedConsumer does not offer anything like the same products or services offered by Classic or Ascentive. Defendants do not sell mattresses or software, so there can be no traditional consumer confusion relating to the sale of those goods and no traditional trademark infringement. More generally, consumers arriving at a website containing only complaints are unlikely to be "confused" into thinking that the website was sponsored by the target company.

A more complex issue is that of "initial interest confusion." Initial interest confusion occurs when an infringer improperly uses a competitor's mark to generate interest in its product, for example by posting a sign bearing a competitor's logo in front of its store. Even if the customer quickly recognizes the switch, the infringer has already benefitted by getting the customer's attention. In the internet context, some courts have found that the improper use of a trademark on a website or in a Web address can cause initial interest confusion when a customer ends up at the wrong website. In a 1999 decision, Brookfield Communications v. West Coast Entertainment Corp.,[FOOTNOTE 5] the 9th U.S. Circuit Court of Appeals held that the use of a trademark in webpage metadata could influence search results and thus constitute infringement based on an initial interest theory.

Here, the court explicitly rejected Brookfield, noting again that gripe sites are so obviously not sponsored by the mark owners that any initial confusion would quickly pass. The court also held that the entire concept of "initial interest" might have less meaning in the context of the Web (where clicking away from a page requires almost no effort) than in the physical world (where a diverted customer might be inclined to stay and browse). Finally, the court noted -- in a technical aside -- that search engines no longer rely on metadata, so the Brookfield decision may no longer be relevant law.

Plaintiffs also asserted that defendants had used their trademarks in other improper ways to improve the search engine rankings of the PissedConsumer pages. These SEO tactics allegedly included creating dummy websites consisting solely of links to PissedConsumer; making excessive use of plaintiffs' brand names in website text, Web addresses, and webpage code; reposting old or outdated complaints to make them look like new content; and creating Twitter accounts to re-Tweet those links over and over.

SEO is a thorny area and one in which there is very little current law. In a world where an enormous percentage of Web traffic originates with a Google search, it may be perfectly legitimate to understanding and even manipulating Google's search algorithms to make sure that people searching for a product are able to find it. But at some point, that process goes from a good-faith effort to provide information to an unethical attempt to game the system. The line can be hard to define precisely, but if plaintiffs' allegations are true, defendants certainly crossed it.

Nonetheless, the court could find no legal remedy for these sharp practices. It noted that "it may be -- and likely is -- the case that PissedConsumer's SEO practices are intended to make its webpages seem more relevant to search engines than they actually are and these methods may indeed violate the search engines' terms of service,"[FOOTNOTE 6] but the court found that that issue should be taken up with the search engines, not the court. It therefore found that plaintiffs were unlikely to succeed on any of their Lanham Act claims.

STATE LAW CLAIMS AND THE CDA

In addition to their federal trademark claims, plaintiffs also brought a variety of state law claims, including claims for state law trademark infringement and violation of the Pennsylvania consumer protection laws, as well as common law claims for unfair competition, false designation of origin and unfair trade practices. The court analyzed these claims in the context of the Communications Decency Act (CDA), a federal statute that immunizes a provider of an "interactive computer service" from all tort claims for content provided by third parties unless it is also an "information content provider."[FOOTNOTE 7]

The CDA has been read broadly to preempt all state tort claims of any kind, and the court found that all of plaintiffs' state law claims were included in its bar. The concept of a "provider of interactive computer services" has also been construed broadly to include, among other things, any system that allows multiple users to have access to a server to upload and review content. The court found that defendants fell squarely within that definition. The critical question, then, was whether defendants were also a "content provider" -- that is, whether their management and editorial control of the PissedConsumer, including the RMS program, rose to the level of providing substantive content.

The CDA defines an "information content provider" as anyone responsible "in whole or in part, for the creation or development of information provided" through the service. It offers no guidance as to what "development" means. The court found that defendants plainly did not "create" content, but then undertook an extensive review of the case law to determine whether their activities rose to the level of "developing" it. The court found that transformative editing of comments or adding new commentary would constitute "development," but that merely inviting comments from others or even making selections about what comments to "publish or withdraw" and where to place them, did not rise to the level of content development.

This interpretation of the CDA is likely right, though it can be frustrating to target companies: The CDA is designed to encourage the free flow of information by protecting entities acting as "publishers." With that in mind, defendants' tactics, at least in terms of its publication of content, were properly deemed protected. The court therefore found plaintiffs' state law claims not likely to succeed on the merits.

The court also found that defendants conduct -- including the RMS program -- did not constitute commercial bribery or extortion, largely because PissedConsumer does not claim to be providing an impartial service and there is nothing illegal about presenting just one side of an argument. The court thus found that it is not extortion, under the relevant statute, to demand payment before presenting the other side. Plaintiffs' RICO claims were therefore also unlikely to succeed and the court denied the preliminary injunction.

CONCLUSIONS

Although Ascentive is only an opinion on a preliminary injunction, it is lengthy, technical and well reasoned and researched. As the court noted, PissedConsumer clearly crossed the line of business ethics, but it is hard to fault the court's conclusion that these issues cannot be addressed under current law.

In one instance, however, the court may have narrowed its focus too far. If the doctrine of initial interest confusion can only address sales lost by the mark's owner due to customer confusion, then the decision is correct, as there cannot have been confusion here. If, however, it can be used to prevent the infringer from "cashing in" on the mark in other ways, then it should be applicable to this case. Although PissedConsumer's SEO tactics did not give it "sales" at the expense of plaintiffs, they likely did improve its search engine placement, thus generating page views, which are the primary revenue generation tool of ad-supported sites. PissedConsumer thus benefited (through ad revenues) from the uses of plaintiffs' marks, even if consumers immediately clicked away after hitting the page. If that benefit can permissibly be addressed by a Lanham Act claim, it should have been available here. Otherwise, as the court noted, these issues may have to find resolution outside the courts.

::::FOOTNOTES::::

FN1 10 CIV. 4433 ILG SMG, 2011 WL 6181452, at *23 (E.D.N.Y. Dec. 13, 2011).

FN2 2011 WL 6181452, at *2.

FN3 Id. at *3.

FN4 See Polaroid Corp. v. Polarad Elec. Corp., 287 F.2d 492, 495 (2d Cir. 1961).

FN5 174 F.3d 1036 (9th Cir. 1999).

FN6 2011 WL 6181452, at *13.

FN7 47 U.S.C. §230.

Stephen M. Kramarsky, a member of Dewey Pegno & Kramarsky, focuses on complex intellectual property litigation.

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