Press Room

AVOIDING POT HOLES ON THE INTERNET SUPERHIGHWAY:
Merging Smoothly and Cruising into the 21^st Century

by Douglas A. Chaikin | April 1999

The Internet presents a new setting for several traditional areas of intellectual property and jurisdiction law. This new "cyberspace" setting, combined with the technologies and policies that have developed to administer it, has led lawmakers and lawyers alike to create new law to recognize the novelties or to work within conventional spectrums already established in the law. This paper briefly reviews these developments and presents solutions for some future issues.

The Internet originates from a project developed by the Department of Defense Advanced Research Projects Administration (ARPA). In 1969, ARPA established the ARPANET. ARPANET was a network connecting four major universities and defense contractors for the purpose of exchanging defense-related information. Similar networks began appearing between other universities, and the TCP/IP protocol became a standard in 1983. Growth came quickly in the late 1970s and early 1980s.

Another government organization, the National Science Foundation (NSF), developed a network similar to the ARPANET in the mid-1980s. This network was called the NSFNET. NSF began developing and encouraging private means of funding and operation of NSFNET, soon to become the Internet. NSF handed contracts to Merit (one of the original research facilities), IBM, MCI, and the State of Michigan to develop networks. Originally, there were 13 networks.

By the early 1980s, the military portion of the ARPANET became the Defense Data Network. ARPANET’s civilian segment was phased out. By that time, NSFNET had developed a strong enough backbone to support itself. In 1992, NSF announced a policy to have commercial entities arrange backbones and phase NSFNET out. Originally, NSFNET was educational and military-related in nature. It precluded commercial uses through an "acceptable use" policy.

Today, we know the ultimate spin-off of these projects, the Internet. Private companies now support the Internet. The NSFNET backbone was dissolved in April 1995 and replaced with a new architecture, vBNS (very high speed backbone network system). However, NSF continues to support research and development for the Internet. Interestingly, there are more commercial entities registered on the Internet now than there ever were educational entities. These commercial entities are now Internet law clients, with concerns new to many of us.

Trademark Law Issues

The mere reference to another’s mark, even if a comparison, is acceptable use on a web site. However, an Indiana court found that the web site holder could not overstep the boundaries of holding itself out as another entity or person. Such holding out as another entity or person could happen by use of trademark on a site. However, such use could go beyond the apparent and obvious use of trademark on the face of a physical web page.

META Tags

META tags are key words Internet web site owners attach to their sites to describe the contents or relations of their web sites. The web site owners send these same key words to Internet search engines. The search engines then use these META tags to match web sites with descriptions of sites sought by the search engine user.

Use of a trademark among other names as META tags may be found appropriate under fair use when the trademark may be associated with aspects of the site. For example, a former Playboy model used the Playboy mark in the META tag designations for her web site, among other names. The court found that the model’s use of the trademark legitimately reflected her one-time association with Playboy.

On the other hand, in 1997, Playboy sued another web site, Calvin Designer Label. The Northern District of California found the META tags containing "playboy" attached to Calvin’s domain name constituted false advertising and unfair competition. Calvin had used the tag to designate his adult-only site. Although he had no association with Playboy, the designations would have drawn site surfers to the site when they were searching for Playboy-associated sites.

Likewise, more recently in a Massachusetts case, a court found that the abusive use of META tags by a competitor to send a user to the competitor’s site is likely to be false advertising. In Niton v. Radiation Monitoring Devices, both Niton and RMD manufactured and sold x-ray fluorescence instruments. Niton had a web site, as did RMD. However, RMD set its META tags to include "radon" and "Niton Corporation." Hence, when a user desired to see Niton’s site, the user was led to pages on RMD’s web site. The court enjoined use of the web site.

Domain Names

Internet domain names have also raised serious legal questions in the trademark and related areas of the law. Domain names are the recognizable word form for an Internet address. The address is generally found as a number, but attached to words. Web site owners generally endeavor to simplify the search for their web site. The use of a corporate name, trademark or service mark as a company’s web site addresses this interest and aids the web surfer’s search.

While the face of registration of domain names is about to change, the law applicable likely will be the same. At present, Network Solutions, Incorporated (NSI) registers all the domain names under .net, .org, .com, and .gov under exclusive contract with the U.S. government. It registers those domain names onto the Internet directory, interNIC. Registration applications are made via e-mail, and in more than 90% of registrations no human intervention takes place. On average, a new registration occurs approximately once every 20 seconds. Soon, NSI will lose its exclusive ability to register domain names as the government moves to privatize registration of domain names.

However, at present, the NSI policy applies. NSI’s registration policy is to register any domain name, including domain names containing, in whole or in part, registered trademarks. The catch is that the registering party must certify to the best of her or his knowledge that the domain name does not contain a registered trademark. However, once the owner of a registered trademark becomes aware of the domain name, the trademark owner may write a letter to NSI informing them that the domain name contains a registered trademark and that such action by the domain name holder is causing harm to the trademark owner. Unless the domain name holder files suit to declare ownership of the domain name or can demonstrates prior right over the trademark owner to the name, the domain name holder stands to have its domain name confiscated by NSI.

This policy has been challenged in a few different ways, although NSI has generally prevailed. In Beverly v. Network Solutions, Inc., Beverly challenged NSI’s discontinuation of its domain name based on a trademark owner’s complaint. Beverly’s theory, although not articulated clearly, was antitrust, but this theory failed. The court found that Beverly failed to show agreement between NSI and the trademark owner or that the purpose of the suspension was unlawful.

Owners of registered trademarks have also challenged NSI’s policy. In Academy of Motion Picture Arts and Sciences v. Network Solutions, Inc. , the Academy argued NSI’s actual registration of federally registered trademarks in domain names was a violation of trademark anti-dilution law. The Academy contested NSI’s registration of its registered marks, "OSCARS" and "ACADEMY AWARDS", for another party besides the Academy. NSI as defendant prevailed in the suit for a preliminary injunction under the Trademark Anti-dilution Act. The Act provides that "[t]he owner of a famous mark shall be entitled ... to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark...." The court found that NSI only registered the names, and did not use the trademarks in commerce. Hence, there could be no dilution.

That does not mean that trademark owners may not sue domain name owners themselves for dilution or infringement. Courts have found that the mere registration of a trademarks as a domain name, without more, is not a commercial use of the trademark. Therefore such use is not within the prohibitions of the Lanham Act.

However, actions beyond mere registration may be found to be infringement or dilution. The Northern District of California found a likelihood of success on the merits when it granted Playboy a preliminary injunction enjoining a porn site operator from use of the web sites "playboyxxx.com" and "playmatelive.com". Other cases have ended in similar standings (enjoining use of "candyland.com" in issuing preliminary injunction); (enjoining use of "juris.com").

However, the cases indicating infringement generally involve a defendant competitor of plaintiff’s seeking to usurp plaintiff’s audience or consumers. Even where a plaintiff does not hold a federally registered trademark, if a colorable service or trademark may be found, infringement may be found in a domain name containing the infringing mark. The first significant case for domain name disputes also involved two test preparation service competitors. In the end, Princeton Review Company surrendered the domain name "kaplan.com" to Kaplan Education Center out of court. Other cases soon followed. Sprint eventually gave the name that it had registered, "mci.com" to its competitor, MCI, bearing the same name. In the same light, former MTV disc jockey Adam Curry gave up his use of the "mtv.com" domain name.

On the other end of the spectrum, courts have found neither dilution nor infringement in instances where an the owner of an Internet domain name containing a trademark does not further the same services or goods as the trademark owner. In Interstellar Starship, trademark owner Epix, Inc. dealt in software. The domain name holder of "epix.com" dealt in consulting services and a theater group. The court reasoned that although there is some confusion, it is only initially, and therefore no infringement. Likewise, an on-line service provider, Juno Online, itself had a domain name "juno.com". Juno Online did not succeed in an infringement action against a lighting manufacturer, Juno Lighting, with the domain name "juno-online.com".

There are a few steps we could follow to protect and enforce trademark and other intellectual property rights on the Internet that we can gather from the case law.

As a traditional fallback in intellectual property law, it is always good etiquette to seek permission before you link a page with your own. Secondly, advise clients to use META tags that apply to them, and not their competitors. Third, if your client and their competitors have similar or the same names, the META tags to designate your client’s company should give the full name of the company in order to distinguish it from others. Fourth, register the domain name with the USPTO. A number of companies have already begun applying to have their domain names themselves registered with the USPTO. Domain names must meet the same requirements as all other trade or service marks for registration.

Lastly, as you would manage trademark portfolios for clients, watch for use by competitors or others of your client’s trade name either in domain names or in META tags.

Copyright protection

In concurrence with the World Intellectual Property Organization’s rules, Congress passed a set of copyright guidelines for the Internet. The Digital Millennium Copyright Act stands to protect copyrights for works traditionally protected by the Copyright Act of 1976. It also criminalizes the creation, selling, and use of technology to break copyright protection devices over the Internet in addition to the technology itself.

Although there has not been much litigation merely on copyright and the Internet, a few recent cases signify that following traditional notions of copyright will be helpful. Postings on the Internet are treated with the same level of copyright protection as traditional "works" as defined by the Copyright Act. These "works" include art work, clip art, and publications. An Illinois court found direct infringement by a defendant who placed a plaintiff’s copyrighted clip art on defendant’s web site. As rules of thumbs in copyright law, help your clients to obtain permission from copyright owners to use their works on your clients’ sites.

For clients who are copyright owners, help them enforce copyrights in works on their sites or in their sites themselves by registering these works with the Copyright Office. Also, provide a copyright notice as to all the tangible contents of the web site. Place a clause requesting anyone who wishes to use the work should seek your clients’ permission. New technologies such as encryption should also help in enforcing or protecting your client’s copyright. Should permission from your client not be sought from a daring infringer, the works would become scrambled or not copied when encryption codes have been applied.

Patents

The face of patent law changed last summer with State Street Bank & Trust Co. v. Signature Financial Group. That case permitted the patenting of business methods, which previously, the USPTO. as a general policy did not know whether to patent. The patented invention in State Street related to a system that allows an administrator to monitor and record the financial information flow and make all calculations necessary for maintaining a partner fund financial services configuration. The patenting of business methods for conventional commercial arenas such as offices has carried over to the Internet.

Last year, a number of studies revealed the potential for business over the Internet. The Yankelovitch Monitor Studied found that Americans bought $2.6 billion worth of goods over the Internet in 1997. When services are included, the total reaches $8 billion according to Forrester research. International Data Corp. says that e-commerce, by 2002, will be a $220 billion industry, while Forrester says it will reach $327 billion.

Businesses have capitalized on this burgeoning market, and have begun to patent methods for conducting business over the Internet. Cybergold, for example, has patented a method to pay consumers to look at advertisements on the Internet. In exchange for consumer time and viewing, Cybergold gives consumers cash, points, frequent-flyer miles, or other forms of compensation.

Other firms have taken familiar business concepts and patented solutions for conducting business over the new Internet medium. AT & T has patented a method for making payments and authenticating transactions over the Internet, as have others. Most Internet consumers are familiar with the "shopping cart." A consumer desiring to make purchases at a web site use the "shopping cart". The consumer selects the desired item to be placed in the "shopping cart." Sun Microsystems holds the patent to this well-used business method. Another contemporary to coupons in circulars is the electronic coupon, patented late last year.

The battle to maintain these patents has been heated. Patent lawyer Thomas Woolston claims that his company, MercExchange invented and patented the business method of reverse auctions over the Internet. The well-known website, Priceline, received its patent over a year later. Woolston has now licensed his patent rights to Cheapfares, a Priceline competitor. He has also requested that the USPTO review Priceline’s patent to determine whether it was legitimately granted.

Another recently filed lawsuit comes from a California inventor and concerns Microsoft’s Seattle website. In 1996, the inventor claims he received a patent for a "computerized method to provide ‘shortest elapsed time route information’ that can help motorists negotiate congested areas." The Microsoft website has a similar feature to give directions.

The global implications for these patents are significant. International patent protection treaties, such as the Patent Cooperation Treaty, cover these patents under the guise of traditional patent law. However, the Internet is far reaching and far more accessible to nations not signatory to such treaties. As with other forms of intellectual property, advise clients that such international infringement on patents is possible. However, as with other forms of intellectual property, clients may be able to sue foreign residents to enforce their rights, although this alternative would be costly.

Jurisdictional Issues

Again, the global impact of intellectual property on the Internet is more far reaching than other forms of intellectual property. Even at home in the States, the Internet has caused more than simple eye strain in distinguishing boundaries for jurisdictional purposes. California has found that contracts negotiated through e-mail correspondence subject nonresidents to personal jurisdiction in plaintiff’s state, even though defendant is never physically present. Previously, interstate telephone exchange had not been enough to draw a nonresident to California for purposeful availment.

Curious Aspects of NSI’s Domain Name Dispute Policy

NSI’s Domain Name Dispute Policy has had a hand in clouding the lines of jurisdiction. As discussed earlier, the policy effectuates NSI’s ability to confiscate a domain name when a trademark owner not holding the domain name approaches NSI with their federally-registered trademark. The domain name holder has three alternatives: give up the domain name, produce a prior trademark registration, or file suit to declare ownership of the name. The third alternative, filing suit, has presented jurisdictional questions for which NSI has failed to assume responsibility.

Personal jurisdiction comprises a satisfaction of requirements of constitutional due process requirements and state long-arm statutes and minimum contacts such that traditional notions of fair play and substantial justice would not be offended. In order to file a successful suit, personal jurisdiction must be found over the defendant trademark holder. Somehow, to protect its intellectual property, the domain name holder must demonstrate personal jurisdiction over the defendant trademark owner.

Although there is no case directly on point, traditional jurisdiction law and present Internet law sets guidance. General jurisdiction may be found over a defendant who has substantial, continuous, and systematic contacts in a forum state. On the other hand, specific jurisdiction arises directly out of a non-resident’s contacts with the forum state. Specific jurisdiction requires a non-resident to have purposefully availed itself in the forum state, that the immediate suit arises out of those forum-related acts, and that jurisdiction must be reasonable under a balancing test.

More often than not, courts are more likely to confer specific jurisdiction over non-resident defendants. Generally, courts look to the level of interactivity on the web site or to other accompanying factors for jurisdiction. A passive website, with little or no interactivity with web surfers, does not rise the level of purposeful availment for specific jurisdiction. However, a web site that encourages web surfers to input their names to the web site’s mailing list, essentially subscribing the surfers to the service, or other types of interaction merits specific jurisdiction.

Simple advertising or maintenance of a web site is not sufficient to support personal jurisdiction. However, a court may find "something more" does warrant personal jurisdiction. For example, Internet advertisers may be hailed into a state for employing other forms of advertising in the jurisdiction such as newspaper or broadcast. Selling subscriptions to forum residents and entering contracts with Internet Service Providers within a state to download electronic messages also merit personal jurisdiction. Similarly, an Internet business could be properly brought into a jurisdiction for also opening a physical business in the forum. For suits alleging tort, or actions akin to a tort, specific jurisdiction may be found. Some courts have given credence to the number of "hits" received by a web page from residents in the forum state, and to other evidence that Internet activity was directed at, or bore fruit in, the forum state.

On the other side of domain name disputes, the trademark owner’s response to a domain name holder’s suit should ensure that the trademark owner reserves its intellectual property and litigation rights. Where a domain name holder initiates a suit against a non-resident trademark owner for declaratory judgment as a result of NSI’s rules, the non-resident trademark owner should tread cautiously in its responses. While again, lines of jurisdiction are unclear, opposing a motion to dismiss for lack of personal jurisdiction precludes the trademark owner from filing suit itself in that forum to enforce its trademarks. This point is especially important to remember where a domain name holder has contacts only with his own state and not at all with the trademark owner’s forum.

Protecting clients from other fora

Minimizing the level of interactivity between a client’s web site and the web site user would protect against personal jurisdiction. Furthermore, a client could be protected from being hailed into another jurisdiction by precluding nonresidents from using or interacting with the site. One possible method is by creating firewalls or other blocks or requesting certification that a user is a resident of the state.

Other legal disclaimers should help protect a client from purposeful availment. A web site operator or owner also should disclaim its intent to purposefully avail itself in any other forum but the owner’s state. The web site owner also should place a forum-selection clause specifying the owner’s state where it would resolve all disputes arising out of the web site. In addition to the forum-selection clause, a web site owner should include a choice-of-law clause on its site. It is a good idea to be broad when specifying the forum-selection and choice of law clauses to apply to all disputes. A recent case in Texas haled in a California defendant where the California defendant’s site isolated its forum-selection clause to include only "arbitration." Such a selection, the court found, did not frustrate the Texas plaintiff’s ability to file suit in Texas.

Bypassing Jurisdiction: New Moves by Clever Lawyers

Some lawyers have found clever means to overcome jurisdictional concerns, although the outcome of their clients’ cases has yet to be revealed. Porsche Cars North America Inc. filed suit for trademark infringement for use of the name, "porsch.com" on January 6, 1999. Interestingly, the suit was not filed against the domain name owner. Instead, Porsche filed an in rem suit, by bringing suit against the domain name itself. Interestingly, this suit was filed where the domain name is located, by registration with NSI – the Eastern District of Virginia. In effect, Porsche North America bypassed a number of messy jurisdictional issues in favor of a clever new approach whose results are anxiously awaited.

Internet Intellectual Property and Jurisdiction Issues Tomorrow

The Internet makes it possible to conduct business throughout the world entirely from a desktop. With this global revolution looming on the horizon, the development of the law concerning the permissible scope of personal jurisdiction based on Internet use is in its infant stages.

As clientele post more of their businesses over the Internet, it is especially important to gather the wide-reaches of intellectual property protection to protect clients from infringement or other harms to intellectual property. As important as it is to protect intellectual property, it is also important to protect clients from being subjected to foreign jurisdictions. Although the law of the Internet concerning these topics is young, it is certainly active. By taking proactive measures from traditional jurisdiction and intellectual property law for clients wishing to engage in business on the Internet, attorneys reduce their clients’ business risks and encourage the growth of a powerful new business medium.

 

Douglas A. Chaikin, Esq. and Mona J. Qureshi, a law clerk, of the Peninsula Intellectual Property Group (PIPG), prepared this article. The contents of this article are not intended to be legal advice. The contents of this article are intended to be informational and for attorneys’ use only. PIPG is a full service intellectual property law firm located in San Jose, CA.