The purchasing of branded or trademarked keywords by an entity other than the owner of the keywords in a paid advertising medium is a practice that commonly occurs.  The extent to which it occurs is impossible to know.   But one can look at the legal landscape and get some idea of the pervasiveness of the practice.   The best indicator of its prevalence is that Google has been vigorously defending a number of trademark suits over the past five years that stem from its Adword product.

Google had proven successful in a majority of the suits but last year Google was delivered a bit of a setback in the case of Rescuecom Corp. v. Google Inc., 562 F.3d 123 (2d Cir. April 3, 2009).   There the Second Circuit reversed the lower court and said that Rescuecom properly alleged that Google’s keyword ad practices constituted a “use in commerce”. Given the fact that Google is fighting so tenaciously the lawsuits filed against it one could assume that the practice is widespread, and Google is making considerable amount of money from it.  The Rescuecom Corp, ruling may have opened the door for many other suits against Google, and revivified others that were “on the mat”.   It is not clear that Google is going to lose any of them, but the momentum has shifted.

Notwithstanding whether Google has any liability, from an on-line marketer’s perspective one should ask the following two questions before diving into the purchasing of another company’s trademarked keyword: is it legal and what are the risks?

As to whether it is legal, stated simply, the law is not settled in this area.  Assuming that there is an enforceable trademark interest, the analysis then turns to whether the trademark was actually infringed upon.   Under the standard infringement analysis, if a party owns the rights to a particular trademark, that party can sue subsequent parties for trademark infringement. The standard is “likelihood of confusion.  The plaintiff would also have to show that the trademark had acquired a secondary meaning, and was used in commerce.

In an advertiser on advertiser suit, however, the courts are looking primarily at what has come to be called “initial interest confusion”.  (Although there are a few district cases that do not reach the initial interest confusion doctrine analysis because the courts held that there was no “use in commerce” in the first instance.)  Unlike the likelihood of confusion test that is found in section 43 of the Lanham Act, the courts created the initial interest confusion test in the 1970’s.   An amorphous legal concept it has generally been used to prove actual confusion by implying the confusion occurred more quickly on the part of the consumer.

In branded keyword suits, the courts have looked to see whether the branded keyword was used in the ad.  If it was not, then there appear to be no plaintiffs who have been successful in bringing a trademark infringement suit—of course that is not to say that suit have not been brought and settled out of court.  If the branded keyword is used to not only trigger the ad but also the branded keyword is used in the advertisement, the few courts that have looked at this issue then determine whether the consumer was diverted from the search in which he was interested, thereby creating possible confusion as to the origination of product.

One of the primary cases in advertiser-on-advertiser (competitor v. competitor) trademark infringement suits is Storus Corp. v. Aroa Marketing Inc., 2008 WL 449835 (N.D. Cal. Feb. 15, 2008).  In Storus, a federal district court held that displaying a competitor’s trademark in an Adwords ad copy constitutes impermissible initial interest confusion, leading to a summary judgment win for the trademark owner. This is one of the few advertiser-on -advertiser search advertising cases where the plaintiff has won the trademark claims.

The commentary on this case from the legal community has generally been rather critical.  See generallyhttp://blog.ericgoldman.org/archives/2008/03/adwords_ad_crea.htm.

It is so because the defense’s challenge is problematic where a court places the burden on the defendant to disprove that consumers experienced initial interest confusion. What the initial interest confusion doctrine requires is for the defense to undertake the task of proving that a “diversion” did not occur.   (As an aside, the initial interest confusion doctrine is a legal example of exactly what Karl Popper was criticizing in science with his exposition on the concept of falsifiability.)

This case is also instructive in so far as the fact pattern demonstrates why these advertiser-on-advertiser cases are not likely to proliferate—it does not make economic sense to do so.   As Professor Goldman points out, in Storus the court determined that over 11 months Aroa (defendant) got 1,374 clicks on its ads (from 36,164 ad impressions, yielding a 3.7% rate). If you value each click at $1/click, Storus could have acquired the “diverted” clicks for $1,374.   $1,374 would amount to a fraction of the cost to litigate a case like this.

Therefore, if one decides that there is a sufficient ROI on the branded keyword purchase one might also reasonably assume that even if one was to receive a cease and desist letter from the trademark owner, the likelihood that an actual suit would result from the infringement is minimal.  At the end of the day, however, if one buys another company’s branded keyword and the trademark name is displayed in the ad and/or copy text there exists a violation of the Lanham Act and one is subject to the penalties set forth in same.

If, however, one wants to roll the dice and ignore the cease and desist letter because there is a tremendous ROI on the purchase of the branded keyword, well, then that is an option.  But it does not come without risks. For at the end of the day, if the ROI is high for the purchase of trademarked keywords then the owner of the trademark has more incentive to see that the infringement cease AND be paid for the damage to its brand.

Franchisee and Franchisor are faced with a similar legal issue: when an employee becomes pregnant what type of work place accommodations may she demand?

The answer to this question depends largely on the individual fact pattern of each case. It also depends as to whether the facts are being analyzed under state or federal law. Broadly speaking, however, under federal law an employer does not owe a pregnant employee special accommodations simply because she is pregnant. At the same time, an employer may not withhold an accommodation that normally would have been granted to a non-pregnant employee simply because the employee is now pregnant.

An analysis of the facts begins with an understanding of the laws that affect and impact the analysis. [For purposes of this brief article, I will primarily analyze the federal laws. A few states such as California have laws that provide additional protection to the employee.] The primary federal statute in this are is the Pregnancy Discrimination Act (“PDA”). Claims have also been brought under the American with Disabilities Act and the Family Medical Leave Act. The PDA is the one most often utilized by plaintiffs. The PDA amended Title VII of the Civil Right Act. In pertinent part the PDA states:

“(k) The terms ‘because of sex’ or ‘on the basis of sex’ include, but are not limited to, because of or on the basis of pregnancy, childbirth, or related medical conditions; and women affected by pregnancy, childbirth, or related medical conditions shall be treated the same for all employment-related purposes, including receipt of benefits under fringe benefit programs, as other persons not so affected but similar in their ability or inability to work, and nothing in section 703(h) of this title shall be interpreted to permit otherwise….

In Armindo v. Padlocker, Inc., 209 F. 3d 1319 (11th Cir. 2000) the plaintiff argued that she was discriminated against on account of her pregnancy when she was terminated in from her job as an entry level clerical employee after three months of probationary employment. The employer contended that the plaintiff was terminated because of her poor attendance record. The court framed the issue thusly:

“The issue, generally stated, is whether the PDA requires an employer to treat favorably a pregnant employee whose pregnancy caused her to miss work, as compared to a non-pregnant employee who missed work on account of a different medical condition.”

The court held that “the clear answer is that the PDA does not require favorable treatment in this respect.” Citing the case of Armstrong v. Flowers Hosp., 33 F.3d 1308 (11th Cir.1994), the court stated that

“although the language of the statute does not address whether employers are required to give favorable treatment to pregnant employees, statements in the legislative history “make it clear that the PDA does not require employers to extend any benefit to pregnant women that they do not already provide to other disabled employees.” See Armstrong, 33 F.3d at 1316-17. In support of its holding, the panel cited the Seventh Circuit case of Troupe v. May Dept. Stores Co., 20 F.3d 734, 737-39 (7th Cir.1994), drawing from it the principle that while the PDA requires the employer to ignore the pregnancy, the employer need not ignore absences, unless the employer likewise ignores the absences of nonpregnant employees.” [emphasis added] See Armstrong, 33 F.3d at 1317. Read the rest of this entry »

“Out here a man settles his own problems”–Tom Doniphon from The Man Who Shot Liberty Valance.

While it may be true that the civil court dockets have seen a increase in activity on account of the recession it remains the case that for many disputes the courts are not being utilized to the degree intended by the legislature. Whereas the judges bemoan the “clogging” of the state court calendars the “small claims” calendars are many times underutilized by small business as far too many a small business simply writes off debt without attempting to collect through the courts.

In many instances if the claim is under $10,000 the business makes the sound economic decision that it makes little sense to pay a lawyer thousands of dollars simply to just to get the chance to collect the money that is already owed to it. And so many a small businesses turns their over 120 day aged receivables list to a collection agency where the small business will only have to pay if, and when, any money is ever collected. The problem with this scenario is that while any one $10,000 claim may not bankrupt a small business enough thousand dollar bad debt accounts strung together over a couple of year period will retard the growth of the company by lessening cash flow. While collection agencies are an option (although the statistics clearly show that collection agencies at best collect on 25% of the bad debt accounts) they are not always the best option. Collection agencies control the process. There is little, if any, involvement, by the small business. Granted, that is one of the benefits to the turning over collectables to a collection agency. But the control of the case that one would have with hiring an attorney is all but gone once the cases is assigned to the agency. Read the rest of this entry »

E-mail is ubiquitous. And it is here to stay. But regardless of whether you are a luddite or “crackberry” junkie the rules surrounding the use of e-mail for commercial purposes can be confusing. Lawyer, franchisor, and franchisee alike are familiar with the relatively strait forward requirements of the CAN-SPAM Act. But the federal government is not the only e-mail sheriff in town, so to speak. In fact, there are more than 35 other state sheriffs–all of whom have laws and rules about commercial e-mail marketing.

I recently posted a blog at iMedia Connection regarding the the state anti-spam statutes. Many of these state statues are simply restatements of the CAN- SPAM Act. But more than a few go beyond the rules set by Congress in the CAN- SPAM Act and in doing so impose additional burdens on e-mail marketers. With a federal statute and no less than 37 state statutes, how should a responsible e-mail marketer approach his job? The answer revolves around who has the right to bring an action, should an e-mail marketer run afoul of anti-spam legislation.

I wrote the blog entry at iMedia Connection with e-mail marketers in mind. But given that e-mail is put used more and more by franchisors and franchisees, and the fact that these anti-spam rules impact our entire economy, I thought it might be helpful to link to it here. Spam Litigation: A Guide for E-mail Marketers

Georgia continues to be a hot-bed for franchising. Of the more than 75,000 prospective franchise owners that submitted their information to the Franchise Opportunities Network in 2009 the number submitting from Georgia ranked 5th nationally. Thus the laws related to transacting business in Georgia should be of an elevated interest to both current franchisors/franchisees and prospective franchisors/franchisees. Toward that end, one case in particular caught my attention last year.

In the case of Wachovia Ins. Servs. v. Fallon, 299 Ga. App. 440 (2009) the Georgia Court of Appeals took up the issue of whether a customer/client list was protected under the Georgia Trade Secrets Act, OCGA § 10-1-760. The facts presented at trial showed that Fallon left his job with Wachovia and went into business for himself in the same line of work. Wachovia alleged that Fallon misappropriated Wachovia’s client list and thereafter profited from the list to the Fallon’s benefit and Wachovia’s detriment.

The Court pointed out that in order for a client/customer list to be given protection as a trade secret under OCGA § 10-1-761 the information must

(A) Derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

(B) Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Wachovia sought to obtain relief inter alia under Georgia’s trade Secret Act.

The interesting part of the opinion was the Court’s ultimate determination that because the client list was obtainable from sources other than Wachovia, Fallon could not be said to have missappropriated the information under Georgia law. Specifically, the Court held:

“In order to prevail on its claim regarding misappropriation of this client contact information under the Georgia Trade Secrets Act, Wachovia Insurance must show that the client contact information in its former employees’ Blackberries was a “list of actual or potential customers or suppliers which is not commonly known by or available to the public.” OCGA § 10-1-761 (4). The record shows without dispute that a public website titled “freeERISA.com” contains all of the information about the customers of an employee benefit broker such as Wachovia Insurance, including the name and contact information of the customer’s decision-maker. Indeed, a Wachovia Insurance representative (Benjamin) testified that “all of the employee benefits work that Wachovia Insurance Services does in Atlanta” could be obtained from this website. He described it as “a great prospecting tool to go out and find out who might be writing an account.”

Going forward franchisors and franchisees need to be aware that clients lists that they assume to be protectable under Georgia law might well not be. For if the party who “misappopriates” the client list can demonstrate that the list was readily obtainable from some other source, then the company may not have a colorable claim in Georgia under Georgia Trade Secret Act.

No one wants to spend the money to hire an attorney just like no one wants to visit the dentist. But if one is to have healthy teeth one must visit the dentist; and so to if one is to have a healthy business then one must at some point consult a lawyer.

If one’s business is a franchise then it is very wise to consult a lawyer early on in the process—be it the process of starting a franchise or buying a franchise. Franchise law is not easily labeled. It is actually a collection of many different types of law –including agency law, ant-trust law, employment law, contract law, administrative law, trademark and patent law, debtor/creditor law, tort law, trade secrets law, financial services law, and international law.

Everybody loves a good lawyer joke. And people have coffee mugs adorned with the Shakepearean quote: “The first thing we do, let’s kill all the lawyers.” But the fact of the matter is that what everybody loves even more than a good lawyer joke is to be secure in the knowledge that he/she has a good lawyer. Lamentably the cost of legal services has risen significantly in the last decade. This has driven some people to take a pro se approach to their legal needs. Undoubtedly this pro se approach works for many. What is also equally true is that it does not work for a great many others as well. And the aggregate cost to those who failed to spend money on the front-end in forfeited rights and missed business and legal opportunities dwarfs the amount of money that was “saved”. Read the rest of this entry »

Welcome to the New FranchisingLaw.com. As with the old format, we will continue to provide information for both franchisor and prospective franchisee. In addition, we will be blogging about all things related to franchise law. What exactly does that entail you ask? Well, FranchisingLaw.com aims at being a repository of information and insights on all aspects of franchising. As franchising law is not one type of law but rather a collection of many different areas of the law so to does Franchising Law aspire to explore the myriad disciplines that comprise franchising.