• Portability of Investment

    15. September 2003

    On September 5, 2003, Judge Lee of the U.S. District Court for the Eastern District of Virginia issued a decision in U-Haul International, Inc. v. WhenU.com, Inc., et al. granting summary judgment in favor of WhenU, a company which provides software for promulgating pop-up advertising. The court found that WhenU's promulgation of pop-up advertisements does not constitute trademark infringement, unfair competition, trademark dilution, or copyright infringement under U.S. federal law.

    As we previously discussed in our September 19, 2002 Internet Alert, several newspapers, including the New York Times and the Wall Street Journal, filed suit in May 2002 against The Gator Corporation alleging that the delivery of pop-up advertisements when computer users accessed certain websites violated the Lanham Act and the Copyright Act. On July 12, 2002, the Eastern District of Virginia issued a preliminary injunction in that case, prohibiting Gator from displaying its advertisements in connection with these websites.

    WhenU Prevails at Summary Judgment

    On the claims of trademark infringement, unfair competition, and trademark dilution under the Lanham Act, Judge Lee found that U-Haul could not make out a basic element of all of these claims—"use in commerce." Under the Lanham Act, a mark is "used in commerce" in connection with goods when the mark is "placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, . . . or on the documents associated with the goods or their sales." 15 U.S.C. § 1127. A mark is "used in commerce" in connection with services when the mark is "used or displayed in the sale or advertising of services and the services are rendered in commerce . . ." .

    Although the pop-up ads did not, themselves, use any U-Haul trademark, U-Haul argued that the mere fact that the WhenU ads were displayed in connection with U-Haul's website constituted use by WhenU of U-Haul's marks (which appear on the U-Haul website) in commerce under the Lanham Act. The court rejected this argument based on the fact that WhenU's advertisements open in their own WhenU branded windows, and WhenU never used any of U-Haul's trademarks to designate the source of any good or service in its ads.

    U-Haul further contended that because WhenU included various forms of the name "U-Haul" as part of the directory that its software uses to generate contextually relevant advertisements, it used U-Haul's marks in commerce. However, the court concluded that use of the term "U-Haul" as part of a directory was nothing more than a "pure machine-linking function" that did not advertise or promote U-Haul's trademarks.

    The court also noted that WhenU's pop-up ads did not interfere or interact with U-Haul's computers or systems, and that consumers must make a conscious decision to download the WhenU software program. Because U-Haul could not establish "use in commerce" as a matter of law, it could not prevail on its claims of trademark infringement, unfair competition, and trademark dilution.

    In addition, the court found that the display of pop-up advertisements does not constitute copyright infringement. U-Haul argued that the display of pop-up ads infringed two of its rights protected by the Copyright Act—the right of display and the right to prepare a derivative work.

    In very basic terms, the right of display protects the right to show a copy of the copyrighted work. Since WhenU never "displayed" U-Haul's copyrighted work, there was no violation of U-Haul's display right.

    The court also found that the display of pop-up ads did not create an unauthorized derivative work. A derivative work (essentially a work based upon a previously copyrighted work) must be independently copyrightable. To be independently copyrightable, a work must be permanent or fixed. Because the display of a pop-up ad in connection with a copyrighted website is transitory, and may not be duplicated, there is no separate work that would be independently copyrightable.

    Finally, the Windows environment in which most computers today operate permits computer users to routinely open multiple windows at the same time. Judge Lee reasoned that it would be untenable to hold that the appearance of one window over another window containing a copyrighted work constituted copyright infringement.

    German Court Rejects Exit Pop-Ups

    A court in at least one other country was not as favorably disposed to pop-up advertisements.

    A German regional court decided on March 26, 2003, that certain exit pop-ups (which appear upon the user exiting a website) violated the German law against unfair competition as an unwanted disturbance to the user. T. v. Dr. R., LG Dusseldorf, No. 2a O 186/02 (March 26, 2003). In that decision, the court characterized these pop-up advertisements as an act of unlawful competition (according to Sec. 1 of the Unfair Competition Act). The court also analogized the situation to unsolicited emails, which are unlawful under German law.

    Pop-up advertisements that are displayed when a website is originally accessed (like those displayed by WhenU), may be treated differently. However, if many pop-up advertisements appear when a website is accessed, this practice may also be found to be unlawful. As this was a regional court decision, it remains to be seen whether it will be followed by other courts in Germany.

    Conclusion

    The WhenU decision may well be appealed, but at least for now, a U.S. federal court has silenced the claims that pop-up contextual advertising violates U.S. trademark or copyright laws. This decision will surely be addressed in the numerous other pop-up cases pending in other jurisdictions.