On to the Second Circuit:  A Monumental Impact
(No. 04-0026(L) (2d Cir. Feb. 6, 2004))

The upcoming Second Circuit decision on 1-800 Contacts will pose a defining moment in cyberspace law.  Given the recent arrival of pop-up advertising, the court must confront a difficult issue with obviously no real precedent.  Thus, any appellate decision resolving this conflict will have a significant impact on trademark use on the Internet, including not only the use of pop-up advertisements, but Internet advertising in general.  Furthermore, the Second Circuit's decision will likely delineate a legal standard for the "use" requirement for trademark infringement under the Lanham Act.
 
Once again, whether WhenU infringed 1-800 Contacts' trademarks will hinge on which definition of the "use" the court adopts.  The appellee, 1-800 Contacts, argues that the Second Circuit must broadly interpret “use in commerce” under the Lanham Act to prevent the exploitation of its trademarks on the Internet.  However, WhenU contends that the district court’s definition of “use” is too attenuated, and that there is no authority for finding the side-by-side display of marks use within the meaning of the Lanham Act. 

Furthermore, WhenU claims that it engages in a form of comparative advertising—a cyberspace equivalent of one company handing out leaflets in front of a competitor’s store or locating a store next door to a competitor’s premises.  Nonetheless, 1-800 Contacts asserts that the use of the registered trademark of another party as part of a comparative advertisement is only permitted when the trademark is used in such a manner that does not cause confusion as to source, sponsorship, affiliation or approval.  Comparative advertising that is likely to cause confusion as to the source of a product is not permitted.  Therefore, the Second Circuit faces the challenging task of interpreting the “use in commerce requirement” in which the contrary definitions advocated by the parties place two fundamental purposes of trademark law at odds with one another.

Historically, trademark law served two fundamental purposes:  to identify the source of goods and services; and to protect against competing producers free-riding on their rival’s trademarks.  The U-Haul and Wells Fargo courts’ interpretations of the “use in commerce” definition embodied the first trademark law purpose, as these courts held that in order to illegally use a trademark, that use must identify the source of goods or services in a way that is likely to cause confusion.  However, the 1-800 Contacts court rejected the findings of “use” by these previous decisions, and thereby rebuked a “use in commerce” definition that required source identification.  Although the 1-800 Contacts court relied on section 1127 to define trademark use, the underpinning of its holding reflected the second fundamental purpose of trademark law, as its definition of “use in commerce,” instead, prevented WhenU from free-riding on the good will and reputation of 1-800 Contacts’ trademarks.  Thus, this definition of “use” protects trademark holders from unfair competition.  The prevention of unfair competition is not only a general underlying premise of trademark law, but also an important purpose of the Lanham Act. Based upon this purpose and premise, the Second Circuit should affirm the 1-800 Contacts decision, and definitively hold that ad-server hosts, such as WhenU, illegally “use” another’s trademark in commerce, and therefore liable of trademark infringement.

Continue to Arguments

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Brief for Plaintiff-Appellee 1-800 Contacts, Inc., 1-800 Contacts, Inc. v. WhenU.com, Inc., 309 F. Supp. 2d 467 (2d Cir. 2004) (No. 04-0026(L)).
Brief for Appellant-Defendant WhenU.com Inc., 1-800 Contacts, Inc. v. WhenU.com, Inc., 309 F. Supp. 2d 467 (2d Cir. 2004) (No. 04-0026(L)).
David L. Hudson Jr., Ruling Pops Up Into Controversy, 3 No.2 ABA Journal E-Report 2, Jan. 16, 2004, at 3.
Neel Chatterjee & Connie E. Merriett, U-Haul International, Inc. v. WhenU.com, Inc., Wells Fargo & Co. v. WhenU.com, Inc., and 1-800 Contacts, Inc. v. WhenU.com, Inc.:  Pop-Up Advertising as ‘Use in Commerce’; Under the Lanham Act:  A Case Analysis, 20 Santa Clara Computer & High Tech. L.J. 1113, 1136 (2004); See generally 15 U.S.C. § 1125 (2001).

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