10 June 2004
Key Points:
It is debatable whether a pop-up ad involves the use of a trade mark in the sense required for infringement, but section 52 of the Trade Practices Act might provide an answer.
In this, the second of a series of articles on new legal issues and the internet, we focus on pop-up ads, and whether creating them infringes the rights of the website owner over whose webpage they appear.
How do pop-up ads work?
Pop-up ads are the bane of many an internet user, constantly appearing over webpages that the user wants to see, while containing annoying advertisements that are of little or no interest. Usually, a pop-up ad is tied to the website it appears over. When that website is accessed, code will be triggered that causes the pop-up ad to appear over that website. Using this method, the owner of the website has control over what pop-up ads appear and when, and is able to gain advertising revenue by selling that pop-up advertising space.
However, pop-up ads may also be triggered by software installed on an individual's computer. This software, often known as "adware", is either installed by itself or bundled into other installed software such as Kazaa, other peer-to-peer applications or weather applications, which consumers use for free by agreeing to receive occasional ads. Once installed, this software monitors the computer user's web usage and triggers targeted pop-up ads based on the identity of the triggering website. For example, an ad for department store Myers might appear while a websurfer is visiting the internet auction site ebay.com.au. The control over the pop-up ad in this situation therefore lies with the company that makes the adware, and the advertising revenue is paid to that company.
Suing adware companies – the US experience
In a series of court cases in the United States involving the company WhenU.com plaintiffs have claimed that WhenU.com had been deliberately pushing pop-up ads to consumers visiting their websites, and that consumers are thereby deceived into believing a competitor's advertisement is connected to the plaintiffs. This, it has been alleged, amounts, among other things, to trade mark infringement.
The first case, brought by truck and trailer rental company U-Haul, Inc., was dismissed. The court held that despite the fact that the WhenU.com-generated pop-up ad may crowd out the U-Haul webpage, this did not amount to the "use" of U-Haul's trade marks, did not interfere with U-Haul's right to display its copyrighted webpage or amount to the creation of an infringing derivative work of U-Haul's webpage. Thus WhenU.com's acts did not constitute trademark or copyright infringement, or unfair competition. The court also held that the inclusion of the U-Haul trade mark (as part of the U-Haul URL in WhenU.com's directory of terms that trigger pop-up ads) did not constitute use of the trade mark in a trade mark sense, and thus, infringement of the U-Haul trade mark.
The second case, brought by Wells-Fargo & Co. in Michigan, had a similar result. In that case, Wells-Fargo tried to stop WhenU.com from presenting alternative offers to consumers considering loans and other Wells-Fargo services when they visited Wells-Fargo's banking website. In dismissing the case, the District Court for the Eastern District of Michigan held that WhenU.com was engaged in "legitimate comparative advertising", and did not use any Wells-Fargo trade marks in commerce (whether by way of causing a pop-up ad to appear over Wells-Fargo's website or using Wells-Fargo's trade mark as part of the URL in the WhenU.com directory that triggers the pop-up ad). It also held that an injunction against WhenU.com "would threaten the integrity of the competitive process", and that "WhenU.com's advertisements increase the choices available to consumers and thereby promote competition."
By contrast, a third case in December 2003 succeeded. It was brought by 1-800 Contacts, a maker and seller of replacement contact lenses. In granting the injunction sought, the court held that WhenU.com's activities (both in causing pop-up ads to appear over the 1-800-Contacts website and in using 1-800-Contacts' trade mark as part of the URL in the WhenU.com directory that triggers the pop-up ad) amounted to the use of 1-800-Contacts' trade marks in commerce and constituted trade mark infringement. The court also held that "WhenU.com’s advertisements [allowed] defendant VisionDirect to profit from the goodwill and reputation in plaintiff’s Web site that led the user to access plaintiff’s Web site in the first place." The court further held that WhenU.com's pop-up ads would confuse consumers into thinking that the defendants are somehow associated with the plaintiff or that the plaintiff has consented to their use of the pop-up ads. Similar actions have also been brought against WhenU.com by Overstock.com, Quicken Loans and Weight Watchers.
WhenU.com is not the only adware company to have experienced legal difficulties. Gator Corp., now Claria Corp., has faced legal action on several different fronts. The most highly publicised of these began in June 2002 when several large media companies including The New York Times Co. and The Washington Post Co. filed suit against Gator for copyright and trade mark infringement, unfair competition and unjust enrichment. In July 2002, the District Court for the Eastern District of Virginia issued a preliminary injunction prohibiting Gator from displaying its ads in connection with these websites. The case was later settled out of court on confidential terms before a full hearing on the matter could be held.
Gator is still facing several legal actions from companies including United Parcel Service, Six Continents Hotels Inc., Inter-Continental Hotels Corp., Extended Stay America Inc., Hertz, and L.L. Bean.
There have been different conclusions reached in the United States, and there are still appeals to be heard, so this is an area which is far from clear under US law. There have been some recent legislative developments in the United States aimed at resolving this uncertainty. Utah has a new law which came into effect on 3 May 2004 that makes it illegal to create or install adware. One effect of this Act is that it creates a private right of action for website and trademark owners subjected to unsolicited pop-up advertising. However, there have been some concerns that the Act is too broad and may have unintended consequences. These consequences include banning parental control software such as Net Nanny. Only time will tell if such concerns are well founded. Meanwhile, similar legislation is being considered at the federal level, with the Software Principles Yielding Better Levels of Computer Knowledge (SPYBLOCK) bill currently before the US Senate.
What about Australian law?
In order to establish infringement of a trade mark under Australian law, a person complaining about pop-ups would need to establish that the organisation pushing the pop-ups was using, as a trade mark, a sign that is substantially identical with, or deceptively similar to, a registered trade mark (or, in the case of an unregistered trade mark established by use and reputation, that there was deception of some kind arising from a use of the mark) and that this was occurring in Australia.
As is apparent from the US cases discussed above, such arguments lie at the fringes of trade mark law. It is debatable whether a pop-up ad involves the use of a trade mark in the sense required for infringement. On this basis, they cannot be said to have more than a fair chance of success in Australia.
A plaintiff might have a stronger argument under section 52 of the Trade Practices Act. Section 52 prohibits misleading or deceptive conduct in trade or commerce in Australia, or in trade or commerce between Australia and a place outside Australia. The expression "misleading or deceptive" has been very widely interpreted - but it does require more than mere confusion or uncertainty. It would be necessary for a person complaining of the conduct of organisations pushing pop-up advertisements to establish that relevant consumers were misled or deceived in fact, or likely to be so. Based upon the findings in the US cases, and giving some credit for intelligence to Australian consumers, this may not be easy – but it may be that the text or nature of the pop-up ads themselves will assist in this conclusion.
Analogous laws directed to regulating competitive behaviour have been relied upon successfully in other countries. In March 2003 a German regional court held certain pop-up ads to breach that country's unfair competition laws, the court analogizing such ads to unsolicited emails, which are unlawful under German law. One year later, a similar decision was handed down by the Court of First Instance in Cologne.
These cases demonstrate how legislation directed to the regulation of competitive behaviour, such as the Trade Practices Act, can be used against pop-up ads. It is yet to be seen whether an appropriate case arises for determination under Australian law.
