Is it possible to infringe a trademark when you never display it to the public but use it only as a hidden trigger for pop-up ads?

Three federal courts have struggled with this question in the last seven months but have been unable to reach unanimity on the answer. These cases represent the newest issue to confront the courts in the battle over trademark protection on the Internet, and they illustrate how technological developments on the Internet continue to outstrip the ability of the law to keep pace.

The World Wide Web is a network based on links, and since the Internet first went mainstream in the mid-1990s there has been no shortage of cases brought by content owners attempting to impose “linking liability” on those who profit at their expense. Legal theories behind these cases have included trademark infringement, dilution, “cybersquatting,” copyright infringement and violations of the Digital Millennium Copyright Act. Factual scenarios have varied from claims of trademark infringement based on “deep linking” to allegations of copyright infringement for linking to an unauthorized copy of a secret religious text.

The fact is, as the Web grows and the software technologies supporting it become more sophisticated, so do the linking technologies and the legal theories devised in attempts to counter them.

The most recent example has arisen in the context of interactive pop-up ads distributed by WhenU.com. WhenU distributes a downloadable software program called “SaveNow,” which is bundled with free software, including screensaver programs.

However, nothing comes without a cost; to install the “free” software, users must agree to install SaveNow as well. As explained in WhenU's clickwrap license agreement, the SaveNow software will (invisibly to the user) continuously monitor the user's Internet browser to determine whether content accessed by the user matches key words stored in WhenU's client directory. When the software finds a match for an associated key word—often a trademark or service mark—it triggers the SaveNow program to transmit a WhenU-branded pop-up ad to the user's computer.

The pop-up ad is selected from a list supplied by WhenU's advertising client, who may be a competitor of the owner of the mark that triggered the pop-up. The pop-up ad provides a hyperlink to the Web site of WhenU's client; if the user clicks on the ad, the competitor's Web site opens on the user's computer.

To date, WhenU has been sued by U-Haul, 1-800 CONTACTS and Wells Fargo for trademark infringement and other claims. Each has brought suit separately, in a different federal court.

The suit brought by U-Haul illustrates how the WhenU software works in practice. If a user who has installed SaveNow goes to the U-Haul Web site, the SaveNow software matches the term “U-Haul” against 40,000 elements (including URLs, search terms and key word algorithms) contained in the SaveNow directory, located on a Web server controlled by WhenU.

The SaveNow software will recognize that the user is interested in the “do-it-yourself moving” category, and it will select a pop-up advertisement from (for example) U-Haul's competitor, Budget Truck Rental. Budget (in this hypothetical example) will have paid WhenU to launch this pop-up ad when users access the “do-it-yourself moving” category. The user may decide to click on the link in the pop-up ad, which would direct the user to Budget's site, possibly causing U-Haul to lose a sale to Budget. Of course, the user also has the choice of closing the pop-up ad.

U-Haul argued that the use of its trademark in this manner was a violation of its trademark rights. Trademark law is premised on consumer confusion; U-Haul argued that the user might confusedly think that the Budget pop-up ad was sponsored by U-Haul and that U-Haul wanted to encourage the user to go to the Budget Web site.

Former President Clinton may go down in history for quibbling over the meaning of the word “is,” but the key question in the WhenU cases has revolved around the meaning of the word “use.”

Federal trademark law requires that an infringer must have “used” the infringed mark “in commerce.” The federal trademark statute is clear that “use” means putting the trademark on goods, or their containers, or on displays, tags, labels or documents associated with the goods. Nothing in the law appears to support the argument that use of a trademark in a proprietary database, which is never viewed by consumers, constitutes a “use” that would violate the rights of a trademark owner.

In the first two cases brought against it—the cases brought by U-Haul and Wells Fargo—WhenU used this argument successfully. It argued that its use of trademarks in a database for the purpose of triggering a pop-up ad (a practice WhenU characterized as “comparative advertising”) was not “use” under federal trademark law.

WhenU argued that it used the trademarks “U-Haul” and “Wells Fargo” solely for their “machine-linking function”; that it never displayed these trademarks to the users of SaveNow; and that, therefore, it never made “use” of the U-Haul or Wells Fargo trademarks in a way that could give rise to trademark infringement. The public might be confused by the source of the pop-up ad, but this was not confusion actionable under trademark law. Although this defense succeeded in the cases brought in Virginia and Michigan, the third federal judge to hear the issue brushed it aside with almost no discussion at all. This case was brought in New York by online contact lenses retailer 1-800 CONTACTS. The New York federal judge issued a preliminary injunction against WhenU, holding that WhenU had illegally “used” the 1-800 CONTACTS trademark.

The court held that the mere fact that WhenU included “www.1800contacts.com” in the WhenU database was enough to constitute an illegal use of the 1-800 CONTACTS trademark. The court also held that the act of triggering a pop-up ad when users attempt to access the 1-800 CONTACTS URL constituted an illegal use of the trademark.

So what's the bottom line?

The expression “hard cases make bad law” may be a legal cliché, but it seems to be the best way to describe the rapidly evolved law on the treatment of pop-up ads. The types of legal issues raised in the WhenU cases could not have been envisioned when the trademark laws were enacted, and therefore the courts are forced to fit a square peg in a round hole, with imperfect results.

The issue of “confusion in the marketplace” is the driving force behind trademark law, and although not expressly addressed in any of these cases, WhenU's means of delivering its software to users likely was a concern for all of the judges. Although WhenU argued that every user of its software consented to the installation of the SaveNow software when he or she first downloaded it and installed the free screensaver—and therefore understood that the pop-up ads were being generated by the SaveNow software—user consent is mostly an illusion in this context.

How many users can be expected to read a clickwrap license and understand that they are agreeing to intrusive pop-up ads? Once the software is installed, how many users are capable of removing the software from their systems? One can presume that as WhenU devised its business model it gambled that the answer to both questions is “few” or “none.”

WhenU has appealed the New York decision, but the outcome of that appeal is difficult to predict. The Second Circuit could either uphold the decision by interpreting the trademark statute to accommodate the facts of this case (a difficult stretch, in our opinion) or apply the law conventionally and reverse the decision in favor of WhenU.

Either way, as soon as legal doctrine on this technology becomes settled, there is certain to be a new technology that the courts will be asked to figure out all over again.