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For Internet search engines, the “pay for placement” business model seemed like sheer marketing genius: Let businesses bid for search terms like “weight loss” or “auto repair,” and program the engine so that the links popping up point to the highest bidder. But when search engines auction off trademarks, Allen Baden calls the business model something else: Internet piracy. Earlier this week, Baden’s client, a diet supplement producer, filed suit against four search engine firms in Texas federal court. Mark Nutritionals Inc., which produces and markets the Body Solutions weight-loss program, accused AltaVista, Kanoodle, FindWhat and Overture of selling the placement rights to “body solutions” to competitors. “We find it to be extortion that we have to pay for our own name,” said Baden, an intellectual property partner with San Jose, Calif.’s Kenyon & Kenyon. His client is seeking $440 million — $10 million in actual damages and $100 million in punitive damages against each firm. Baden said his suit is the latest in a series that could put a stop to the “pay for placement” practice. A handful of other trademark holders — including Playboy and Estee Lauder — have launched similar suits against search sites over banner ads. Still other companies, including Sprint, have publicly complained, saying users typing in “Sprint” see results for its competitors. But trademark attorneys outside the case say that to be successful, Mark Nutritionals’ attorneys will have to navigate fair-use exceptions and prove that consumers are confused by the search engine’s latest business model. “It’s a question of consumer expectation,” said Joshua Paul, a New York partner with Morgan, Lewis, & Bockius who represented Estee Lauder. “What sort of expectation, if any, do Internet users have when they enter a brand name as a search query on a search engine? Do users think the brand owner endorses or sponsors the Web sites that receive prominent placement on the search results page? Or do consumers understand that the search results are akin to Yellow Pages listings — that the listings have been bought and paid for.” Baden, who is representing Mark Nutritionals along with San Antonio-based Loeffler, Jonas & Tuggey, said that when Web surfers search with the trademarked “body solutions” on AltaVista, 35 competing companies appear before his client’s site. The company’s site didn’t show up at all during a Kanoodle search, according to its lawyers. The suits, filed in U.S. District Court in San Antonio, where Mark Nutritionals is based, allege trademark infringement, unfair competition and trademark dilution under the Lanham Act. The suits also allege violations under Texas’ Business and Commerce code. The search engines themselves “are exercising control and directly profiting from it,” said Karen Lee Johnson, an associate with Loeffler, Jonas & Tuggey. “They are facilitating the infringement.” “They are not the neutral gatekeeper,” added Baden. “They are the infringer.” A TOUGH SELL Body Solutions, which thrives on phone and Internet sales, has gone after as many as 10 competing companies that have paid for better placement for “body solution” searches. An Overture spokesman said the company had not seen the suit and could not comment. But Overture touts what it calls its “pay for performance” business model, which it has patented and aggressively enforced. In January, Pasadena, Calif.-based Overture filed a suit against rival search engine FindWhat.com for patent infringement. New York-based FindWhat also touts the “pay for placement” model, citing a study conducted at Georgia Tech, which found that “87 percent of Internet users begin their time online with a search engine and 75 percent end their search with the first page of results.” Representatives for the other search engines either declined comment or did not return calls. Internet law expert Professor Mark Lemley, of University of California, Berkeley’s Boalt Hall School of Law, said the complaints could be a tough sell. “With the exception of Google, people understand they get a lot of noise from their search-engine results. The key to trademark infringement is consumer confusion. If you can’t prove consumers are confused, you can’t win the case,” Lemley said. Lemley said Playboy Enterprises lost a similar trademark suit filed in 1999 when a federal trial judge dismissed the case on summary judgment. Playboy sued Excite and Netscape for selling banner ads programmed to appear when words such as “playboy” were used as search terms. The company’s appeal is now pending at the 9th U.S. Circuit Court of Appeals. Estee Lauder launched a similar suit against competitor Fragrance Counter and Excite At Home in 1999 over Fragrance Counter banner ads triggered by searches for Estee Lauder’s trademarked brands. In August 2000 Estee Lauder announced a settlement with Fragrance Counter, which agreed not to use trademarked brands. Estee Lauder later settled with Excite in the United States, and won an injunction in similar suits filed in France and Germany. A CUTTING-EDGE THEORY Body Solutions also faces a fair-use exception hurdle, attorneys say. “One thing they are going to have to deal with is you are allowed to fairly compare products and services and do comparison advertising,” said Susan Hollander, the partner heading up Manatt, Phelps & Phillips’ trademark division in Palo Alto, Calif. Hollander said that at first blush, it looks like that’s what Body Solutions’ competitors are doing. Cooley Godward partner John Crittenden in San Francisco compares companies vying for space on search engines to companies wanting a billboard next to their main competitors or grocery stores that program registers to spit out a coupon for a competing orange juice when a customer buys the leading brand. “There has been a tradition to try to get your message next to the competitor’s product especially when you are not as big as your competitor. It’s really not that different from targeted advertising,” Crittenden said. “When it crosses the line into infringement is when there is a likelihood of confusion.” “One of the other problems for Body Solutions is that I don’t know how distinctive and well known their trademark is,” Crittenden said. Paul, who represented Estee Lauder, couldn’t comment specifically about the suit but said that companies in Body Solutions’ shoes might look beyond trademark infringement causes of action. “The cutting-edge theory that plaintiffs of this sort might pursue has nothing to do with consumer confusion. It’s a matter of unfair competition.” Paul said. “Under this theory trademarks might be viewed holistically as property rights. The question would be, is it fair for someone other than the owner of a given trademark to exploit the name recognition of the mark as the basis for drawing attention to its Web site?” While Baden said Body Solutions is the first to file suit over “pay for placement,” Ralph Nader’s consumer activist group Commercial Alert filed a complaint in July with the Federal Trade Commission. The complaint named eight search engines — MSN, Netscape, Directhit, Hotbot, Lycos, AltaVista, LookSmart and iWon — alleging that the search engines are duping consumers into thinking results are ranked by relevance. The Body Solutions cases have been assigned to U.S. District Judges Edward Prado and Orlando Garcia in San Antonio.

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