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The 2nd U.S. Circuit Court of Appeals has rejected a trademark infringement action brought against a company that causes “pop-up” advertisements to appear on a plaintiff’s Web site. A two-judge panel found in 1-800 Contacts Inc. v., 04-0026-cv, that causing pop-up ads, even ads for companies in direct competition with the business of the aggrieved plaintiff, does not amount to a “use” within the meaning of the Lanham Act. The circuit’s decision reverses that of Southern District of New York Judge Deborah A. Batts, who had granted a preliminary injunction against, an Internet marketing company that uses a propriety software that monitors a computer user’s Internet activity and then delivers advertising compatible with that activity. The case has been closely watched by Internet marketers and retailers, with several companies filing an amicus brief urging that Judge Batts be upheld and others, including Google and Electronic Frontier Foundation, weighing in with briefs arguing for reversal. Plaintiff 1-800 Contacts sells contact lenses and related products by mail, telephone and over the Internet. It filed suit challenging’s use of software called “SaveNow,” that caused visitors to the 1-800 Web site to see pop-up ads for a direct competitor, Vision Direct, Inc., also a named defendant in the lawsuit. The plaintiff, which had registered the 1-800 Contacts service mark and a specific design logo built around the same name, alleged that causing pop-up ads to appear on its Web site infringed its trademarks in violation of ��1114(1) and 1125(a)(1) of the Lanham Act. Batts first found that the inclusion of 1-800′s Web site address in SaveNow’s directory was a “prohibited use” within the meaning of the act. She then turned to the pop-up ads. “ is doing far more than merely ‘displaying’ Plaintiff’s mark,” she said. “WhenU’s advertisements are delivered to a SaveNow user when the user directly accesses Plaintiff’s website — thus allowing Defendant Vision Direct to profit from the goodwill and reputation in Plaintiff’s website that led user to access Plaintiff’s website in the first place.” The appeal was decided by Chief Judge John M. Walker, Jr. and Judge Chester J. Straub, with the court not only reversing the grant of injunctive relief but also dismissing the trademark claims completely. The court left other claims by 1-800 intact. DIFFERENT VIEWS OF ‘USE’ Judge Walker said that two other district courts, in other cases involving WhenU, have reached the opposite conclusion of Batts on the meaning of “use” under the Lanham Act. The Eastern District of Michigan found that inclusion of Wells Fargo’s trademarked Web site address in WhenU’s propriety directory of keywords was not a “use” under the act. And an Eastern District of Virginia judge found that the inclusion of U-Haul’s trademarked Web site address in the SaveNow directory was not a “use” because it was for a “pure machine-linking function.” Walker said the reasoning of both cases was persuasive. He first noted that WhenU does not reproduce or display 1-800′s trademarks “at all.” Instead, he said, it reproduces the Web site address, “which is similar, but not identical,” to the 1-800 Contacts trademark. Moreover, he said, “it is plain that WhenU is using 1-800′s website address precisely because it is a website address, rather than because it bears any resemblance to 1-800′s trademark, because the only place WhenU reproduces the address is in the SaveNow directory” — which is scrambled and therefore inaccessible to the computer user and the general public. It was important, the judge noted, that a WhenU pop-up ad cannot be triggered by the input of the 1-800 trademark by the computer user or the appearance of that trademark on a Web page accessed by the user. And it also mattered that, “in contrast” to some of its competitors, WhenU does not disclose to its advertising clients the propriety contents of the SaveNow directory or allow them to “request or purchase specified keywords to add to the directory.” “A company’s internal utilization of a trademark in a way that does not communicate it to the public is analogous to a individual’s private thoughts about a trademark,” he said. Addressing the pop-up ads, Walker said the “fatal flaw” in the district court’s holding was the “acceptance of 1-800′s claim that WhenU’s pop-up ads appear ‘on’ and affect 1-800′s website.” As explained by the court, the WhenU ads appear in a separate window on the screen that is “prominently branded with the WhenU mark; they have absolutely no tangible effect on the appearance or functionality of the 1-800 website.” “More important, the appearance of WhenU’s pop-up ad is not contingent upon or related to 1-800′s trademark, the trademark’s appearance on 1-800′s website, or the mark’s similarity to 1-800′s website address,” he said. “Rather, the contemporaneous display of ads and trademarks is the result of the happenstance that 1-800 chose to use a mark similar to its trademark as the address to its website and to place its trademark on its website.” Walker drew an analogy to the “routine” practice of vendors seeking “product placement” in stores to capitalize on their competitors’ name recognition. “For example, a drug store typically places its own store-brand generic products next to the trademarked products they emulate in order to induce a customer who has specifically sought out the trademarked product to consider the store’s less-expensive alternative,” he said. Terrence P. Ross, Rachel A. Clark, Prasanth R. Akkapeddi and Amy E. Barrier of Gibson, Dunn & Crutcher represented 1-800 Contacts, Inc. Celia Goldwag Barenholtz, Michael D. Paley, Jason M. Koral and Ian Ross Shapiro of Kronish Lieb Weiner & Hellman represented, Inc. Jeffrey E. Ostrow, Patrick E. King and Theodore J. McEvoy of Simpson Thacher & Bartlett represented Vision Direct, Inc.

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