[Random-bits] CARL S. KAPLAN: Playboy Ruling Recognizes Limits to Online Rights of Trademark Holders

[James Love]

http://www.nytimes.com/2000/09/15/technology/15CYBERLAW.html                                                        
                                                            
September 15, 2000


         CYBER LAW JOURNAL
   Playboy Ruling Recognizes Limits to Online Rights of
   Trademark Holders

         By CARL S. KAPLAN

           In an important decision that recognizes limits
           to intellectual property rights online, a federal
           judge earlier this week ruled that a company's
         well-known trademarks may be used without
         authorization by search engines in some
         programming and sales practices. 

         The four-page decision, published Tuesday by
         Judge Alicemarie H. Stotler of the United States
         District Court in Santa, Ana, California,
         dismissed a lawsuit brought by Playboy
         Enterprises against Excite, Inc. and its search
         engine licensee, Netscape Communications. 

         The summary judgment ruling, if not reversed on appeal, may
serve as a precedent to safeguard a common but controversial Internet
advertising practice known as "keying," said lawyers who were familiar
with the decision. Under the scheme, a search engine offers advertisers
the ability to display specific banner ads whenever users enter selected
search terms, including trademarks. 

Playboy sued Excite and Netscape last year, claiming that the search
engines displayed banner ads from pornography companies whenever
"playboy" or "playmate" were used as a serch term. Both words are
trademarks owned by the Bunny Empire. 

The decision, which has already touched off some disagreement among
intellectual property experts, may also remind companies that their
rights to capitalize on their trademarks on the Internet are subject to
traditional restrictions. 

Barry G. Felder, Playboy's lead lawyer in the case, said that his client
plans to appeal. "We're essentially puzzled by the decision," he said.
He added that under the reasoning expressed by Judge Stotler, some sales
of trademarks "have been essentially legitimized." 


  [snip]

"Search engines do engage in selling keyword advertising -- it's an
important business model," he said. Riffer, who works at Jeffer,
Mangels, Butler & Marmaro, a Los Angeles law firm, said search engines
can continue to offer their services to consumers for free only because
of robust advertising revenues. 

Excite is one of many search engine portals that, for a premium rate,
cause a pre-selected banner ad to pop up when certain search terms are
used. Often a generic search term, such as "car," will trigger related
ads. But sometimes search engine companies take the more controversial
approach of displaying a company's banner ad whenever a competitor's
trademark is used as a search term. Marissa Gluck, an online advertising
analyst with Jupiter Communications, estimated that portals garner about
20 to 30 percent of theirad revenues from keyword banner ads. 

   [snip]

In her most recent decision dismissing Playboy's case, Judge Stotler
essentially found that in its advertising scheme Excite did not use the
trademarks "playboy" and "playmate" in an unlawful manner. She suggested
that rather than using the words to identify its own goods and services
--  which might be illegal -- Excite merely used the terms in an
appropriate manner to refer to Playboy. This "non-trademark use of a
mark," she said, is a use to which the infringement laws do not apply. 

Moreover, said Judge Stotler, even if there were a trademark use, there
could be no finding of infringement because there was no evidence that
consumers confused Playboy products with the services of defendants.
Elsewhere in the opinion, Judge Stotler said that Playboy's claim for
dilution could not be sustained because there was no evidence that
either Excite or Netscape "on its products" made use of Playboy's marks. 

Jessica Litman, a law professor at Detroit's Wayne State University
School of Law who specializes in intellectual property and the Internet,
said that Judge Stotler was "clearly right" on the infringement point. 

    [snip]

"It's a short decision and it's hard to know how far it will extend,"
she said. "But given the increasing tendency among some courts to grant
trademark owners expansive rights over the use of their marks on the
Net, it's always nice to see a court applying traditional principles. In
that sense it's a sounddecision." 

Jeffrey R. Kuester, an Internet law expert at Thomas, Kayden,
Horstemeyer & Risley, an Atlanta law firm, said in an interview that he
disagreed with the court's ruling. 

"I come back to a basic premise," he said. "Excite is making money using
Playboy's trademarks to send people to Playboy's competitors. Doesn't
something sound wrong with that?" 

Kuester said that if the court's ruling held sway, then Fuji Film would
be able to key its banner ads to the search term "Kodak" and Pepsi to
"Coke." More likely, he said, the search engines would approach the
trademark holders and offer, for a fee, to not sell keyword-linked
banners to competitors. 

"You shouldn't have to pay to keep your own name," he said. 

The Playboy case is not the only lawsuit that challenges keyed banner
ads. Last year, three subsidiaries of the Estee Lauder Companies, Inc.
filed lawsuits against Excite and an online cosmetics company, Fragrance
Counter, Inc., in the U.S., France and Germany. The Lauder Companies
claimed, among other things, that when a consumer used the Excite search
engine and typed in the search term "Estee Lauder," a Fragrance Counter
banner ad appeared. 

Earlier this month, the Estee Lauder Companies and iBeauty, a successor
to the Fragrance Company, announced a settlement under which iBeauty
voluntarily agreed to refrain from using the Estee Lauder trademarks as
Internet keywords. But the multi-national lawsuit against Excite is
still pending, said Joshua Paul, a lawyer for the Estee Lauder
Companies.