Second Circuit finds no trademark 'use' in WhenU pop-up ads

The US Court of Appeals for the Second Circuit held last week that WhenU.com Inc's use of 1-800 Contacts Inc's name in pop-up advertisements does not constitute trademark use under the Lanham Act. This ruling, which is the first appellate court decision addressing issues raised by pop-up advertising, reverses a district court's entry of a preliminary injunction in 1-800 Contacts' favour.

The US District Court for the Southern District of New York had found that pop-up ad provider WhenU used the 1-800 CONTACTS trademark in two ways. First, WhenU included 1-800 Contacts' website address 'www.1800contacts.com' in a directory of terms that triggered delivery of pop-up ads relevant to websites being viewed by computer users. Second, the pop-up ads appeared above, below or along the bottom edge of the 1-800 Contacts website window. The district court concluded that this use created a likelihood of source and initial interest confusion (see WhenU floored by pop-up ad u-turn). Accordingly, it enjoined WhenU from displaying pop-up ads. WhenU appealed.

The Second Circuit reversed. It noted at the outset that WhenU did not use 1-800 Contacts' mark in the manner ordinarily at issue in an infringement claim, in that it did not place the mark on any goods or services in order to pass them off as emanating from or authorized by the mark owner. Indeed, the court observed that WhenU did not reproduce or display 1-800 Contacts' trademark at all, or cause it to be displayed to computer users.

The court then addressed the two instances of use found by the district court. With respect to inclusion in WhenU's directory of terms for triggering pop-up ads, the court concluded that it was 1-800 Contacts' web address ('www.1800contacts.com'), not its trademark (1-800 CONTACTS) that was included in the directory. However, the court also noted that it did not intend to suggest that inclusion of the trademark itself would necessarily be an infringing use. The court also observed that a company's internal use of a mark in a way that does not communicate it to the public is analogous to an individual's private thoughts about a trademark, which "simply does not violate the Lanham Act".

Turning to the second use - placement of pop-up ads contemporaneously with 1-800 Contacts' website - the court stressed that the pop-up ads did not display the 1-800 CONTACTS mark and appeared in a separate window that was prominently branded with the WhenU mark. The court also rejected the district court's suggestion that there was anything improper in WhenU's alleged effort to capitalize on a computer user's specific attempt to access 1-800 Contacts' website. The court said that it is routine for vendors to seek product placement in retail stores precisely to capitalize on their competitors' name recognition. The court also commented that 1-800 Contacts':

"claim that [users] will likely be confused into thinking that [1-800 Contacts] has sponsored its competitor's pop-up ads is fairly incredulous given that [users] who have downloaded the [WhenU] software receive numerous WhenU pop-up ads - each displaying the WhenU brand - in varying contexts and for a broad range of products."

The court brushed aside 1-800 Contacts' argument that WhenU's pop-up ads were not authorized, noting that there was:

"no legal authority for the proposition that advertisements … that can appear on a [user's] computer screen must be authorized by the owner of any website that will appear contemporaneously with that image."

The court concluded that neither of the uses described by the district court constituted trademark use, which is a prerequisite for a Lanham Act trademark infringement claim.

Without trademark use, the court concluded that it need not consider the district court's finding that WhenU's pop-up ads created a likelihood of source and initial interest confusion. Instead, the Second Circuit (i) directed the district court to dismiss the trademark infringement claim, and (ii) ordered that the case proceed on other federal and state claims that had not formed the basis for the district court's decision and were not at issue on appeal.

For a further discussion of the current legal status of pop-up ads, see Pop-ups similar to offline ads, claims amicus brief and Law on pop-up ads remains unclear.

David S Fleming, Brinks Hofer Gilson & Lione, Chicago