AOL owns trademark registrations covering various stylized representations of the mark “ADVERTISING.COM.” On August 17, 2009, AOL filed a complaint against Advertise.com, followed by a motion for a preliminary injunction, alleging that the Advertise.com domain and name were infringing upon the ADVERTISING.COM mark held by AOL. The district court granted AOL’s motion for a preliminary injunction and enjoined Advertise.com from using “any design mark or logo that is confusingly similar to the stylized forms of AOL’s ADVERTISING.COM marks” and from using the designation and trade name Advertise.com, but not from using the existing domain. The district court’s decision was based upon a finding that AOL was likely to show that the ADVERTISING.COM marks are descriptive and therefore protectable under trademark law. Advertise.com appealed the decision and the grant of the preliminary injunction with an argument that AOL’s marks are generic; the Court of Appeals agreed with Advertise.com and reversed the lower court’s decision and vacated the preliminary injunction.

Because ADVERTISING.COM is a registered trademark, there is “a presumption of validity,” which “places the burden of proving genericness upon the defendant,” Advertise.com. Filipino Yellow Pages, Inc. v. Asian Journal Publ’ns Inc., 198 F.3d 1143, 1146 (9th Cir. 1999). In order to show that the associated marks are generic, Advertise.com is required to show that the terms refer to “the genus of which the particular product or service is a species,” i.e., the name of the product or service itself. The services offered by AOL under the ADVERTISING.Com marks are (1) developing relationship with web publisher for the placement of third-party ads on publisher’s sites, and (2) selling online advertising space and marketing campaigns to web marketers. According to the court, “advertise” is concededly generic and the term “.com” refers generically to an online organization or any internet component of an existing business. The two components of AOL’s marks therefore are generic by themselves. While two generic terms brought together may create a distinctive mark, the court went on to find that this was not the case for AOL after applying the “who-are-you/what-are-you” test.

A valid and protectable trademark answers the buyer’s questions “Who are you?” and “Where do you come from?” Alternatively, a generic mark answers the question “What are you?” In applying this test the court determined that AOL’s marks were largely generic. If any of AOL’s competitors

Defendant Trambert, a resident of California, listed a Toyota SUV for sale to the highest bidder on eBay in November of 2008. Defendant was later notified that Plaintiff MacNeil, a resident of Illinois, was the winning bidder, and the two made arrangements for payment and delivery. As part of the eBay Terms and Conditions, MacNeil was responsible for pick-up or shipping of the vehicle. In December, Plaintiff’s agent in California inspected the vehicle and accepted title and possession, and delivered Plaintiff’s cashier’s check, which was drawn on an Illinois bank. After personally inspecting the vehicle Plaintiff discovered that there was no satellite radio and no DVD screens in the headdress, as had been indicated in the eBay listing. In February of 2009, Plaintiff filed an Illinois small claims court action for $2,546 and Defendant moved to dismiss for lack of personal jurisdiction. The trial court granted defendant’s motion and the appellate court affirmed.

A plaintiff has the burden of establishing a prima facie case for jurisdiction when seeking jurisdiction over a nonresident defendant. Bolger v. Nautica International, Inc., 269 Ill. App. 3d 947, 949 (2007). Illinois has a long-arm statute that permits jurisdiction over foreign defendants that comports with the due process requirements of the Constitution. To satisfy federal due process, a defendant must have minimum contacts with the forum state such that defending a lawsuit there would not offend “ ‘ “traditional notions of fair play and substantial justice.” ‘ “ Spartan Motors, Inc. v. Lube Power, Inc., 337 Ill. App. 3d 556, 560 (2003), quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 102, 66 S. Ct. 154, 158 (1945), quoting Milliken v. Meyer, 311 U.S. 457, 463, 85 L. Ed. 278. 283, 61 S. Ct. 339, 343 (1940). In deciding the question of jurisdiction a court will determine whether there was purposeful availment of the benefits and protections of the forum state.

Plaintiff’s complaint averred that the had only seen Defendant’s ads for the vehicle on eBay and that was insufficient to establish general jurisdiction. Plaintiff argued, however, that the court had personal jurisdiction over Defendant because, after listing the car on eBay, which is accessible worldwide, Defendant should have anticipated being brought to court in Illinois if the winning bidder was a resident of Illinois. The appellate court rejected this argument and cited the case of Foley v. Yacht Management Group, Inc., No. 08 – -C – - 7254 (N.D. Ill. July 9, 2009), which also dealt with a failed eBay sale. In Foley, the Defendant refused to accept payment from the winning bidder and the Plaintiff brought suit. In determining whether the court had jurisdiction, the court ruled that Defendant had no tied to the forum state other than the fact that the winning bidder lived there. The Foley court held the Defendant, as an eBay seller, had no control over where the buyer of its item would live and therefore there was no purposeful availment.

While Plaintiff argued that the various telephone calls and emails that occurred between the parties was enough to establish minimum contacts, the court disagreed. Plaintiff also sought to establish jurisdiction based on precedent involving the use of “interactive websites.” Not only does Defendant not run the eBay site, nothing in the record indicated that Defendant’s listings or personal eBay pages were interactive enough to trigger jurisdiction. Plaintiff’s final argument for jurisdiction, that Defendant committed tortuous conduct in the forum, was similarly rejected by the appellate court; the so-called “Effects Doctrine” applies only to intentional torts, and not to breach of contract.

Ultimately Defendant’s business contacts with Illinois were nothing more than random and attenuated and therefore the court was unable to assert jurisdiction in this case.

Around September of 2007, two laptops were stolen from a Gap office in Chicago, which contained personal information and social security numbers for approximately 750,000 job applicants, including Plaintiff Ruiz who had applied for a job online. Gap sent a letter to the affected individuals 11 days after the breach and offered 12 months of credit monitoring at no cost as well as advice regarding additional precautions to take. Ruiz did not accept Gap’s offer and brought a class action lawsuit against Gap and Vangent, Inc., the company contracted by Gap to process the online applications. The district court granted Gap’s motion to dismiss Ruiz’ claims for negligence, breach of contract, unfair competition, invasion of privacy, and violation of California Civil Code §1798.85 and the appellate court affirmed.

The primary problem with Ruiz’ claims appears to be that his alleged harm from this situation did not rise to the level required under his causes of action and was only sufficient to give him standing.

A claim for negligence in California requires (1) the existence of a duty to exercise due care, (2) breach of that duty, (3) causation, and (4) damages. Both the district court and the court of appeals held that to establish sufficient harm under California law, the damage must not be nominal, speculative, or a mere threat of future harm. Ruiz was unable to establish that his identity had actually been stolen or that he had expended any money on monitoring (or really that the credit monitoring offered by Gap was insufficient to protect him). Monitoring costs may have been sufficient, as they have been in cases dealing with exposure to toxic chemicals, but Ruiz had no such costs.

Similarly, there was no harm required for a claim for breach of contract by Gap’s vendor or unfair competition against Gap. While California has recognized nominal damages for contract actions, damages must still be appreciable and actual rather than Ruiz’ claim for an increased likelihood of damage through identify theft now that his personal information has been exposed.

A plaintiff alleging an invasion of privacy must establish each of the following: (1) a legally protected privacy interest; (2) a reasonable expectation of privacy in the circumstances; and (3) conduct by defendant constituting a serious invasion of privacy. This conduct must be “sufficiently serious in . . . scope, and actual or potential impact to constitute an egregious breach of the social norms underlying the privacy right.” Hill v. Nat’l Collegiate Athletics Ass’n, 865 P.2d 655, 657 (Cal. 1994). While there is explicit requirement for intentional conduct, the appellate court noted that no California court has yet extended the application of this claim to a situation involving accidental or negligent conduct such as the case in the present matter.

California Civil Code § 1798.85 provides that a person or entity may not “[r]equire an individual to use his or her social security number to access an Internet Web site, unless a password or unique personal identification number of other authentification device is also required to access the Internet Web site.” Ruiz’ attempt to bring a claim under this section ignores the plain language of the code, which is clearly directed at the act of logging onto a website and not the transmission of information through a website for the purpose of applying for a job.

Appellant Zuccarini registered the domain name “officdepo.com” and Office Depot subsequently brought, and won, an action against Zuccarini under the Anticybersquating Consumer Protection Act of 1999 (“ACPA”). Office Depot obtained a judgment against appellant, which it assigned to DSH. DSH sought to levy upon some of the other 248 domains owned by appellant and registered the judgment in the district court for the Northern District of California. The district court denied DSH’s request to compel the domain registrars to transfer Zuccarini’s property, holding that under California Code of Civil Procedure § 699.040, it could not order a third party to turn over property. DSH then moved for the appointment of a receiver who would obtain and sell the domains to satisfy the judgment. The district court granted the motion and Zuccarini appealed.

A district court can obtain quasi in rem jurisdiction over property held within its geographical borders, including intangible property. Under §§ 695.010(a) and 699.710 of the California Code of Civil Procedure, all property of a judgment debtor can be used to satisfy a writ of execution. The applicable state and federal provisions declare that if the domain names are property subject to execution, and if they are located in the Northern District of California, then the district court is an appropriate location to execute judgment on them through the appointment of a receiver.

“[A]ttaching a situs to intangible property is necessarily a legal fiction; therefore, the selection of a situs for intangibles must be context-specific, embodying a ‘common sense appraisal of the requirements of justice and convenience in particular conditions.’” Af-Cap Inc. v. Republic of Congo, 383 F.3d 361 (5th Cir. 2004). While California law does not specifically address the location of domain names, the ACPA states that a trademark owner in a cybersquatting action can proceed in rem against a squatter “in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain is located . . . “ 15 U.S.C. § 1125(d)(2)(A).

The court found the language of the ACPA persuasive and concluded that under California law, domain names are located where the registry is located for the purpose of asserting quasi in rem jurisdiction.

A foreign state can exercise personal jurisdiction over a non-resident for non-forum related activities when the individual or business has engaged in “systematic and continuous” activities in the forum state. This type of jurisdiction is known as general jurisdiction and can be exercised when a company does targeted business in a state, such as by opening a store or sending employees to make sales or perform services. A foreign state can exercise specific jurisdiction, however, when an entity’s activity within the state create sufficient “minimum contacts” with the state. Specific jurisdiction is what is invoked when a state exercises jurisdcition based on a website.

To satisfy the “minimum contacts” requirement, websites are divided into 3 categories:

Commercial Websites – which do a substantial volume of business over the internet, and through which customers in any location can immediately engage in business with the business owner;

Interactive Websites – which merely provide information, will almost never provide sufficient minimum contacts for jurisdiction. Such a website will only provide a basis for jurisdiction if there is an intentional tort such as defamation on the website, and if it is directed at the jurisdiction in question

Passive Websites – which permit the exchange of information between the website owner and visitors, may be subject to jurisdiction, depending on the website’s level of interactivity and commerciality, and the amount of contacts which the website owner has developed with the forum due to the availability of the website within the jurisdiction.

If you’re not sure which category your website falls into it may be time to consult with a local internet and e-commerce attorney.. For a quick and easy answer, the Minnesota District Court poses this question, is your website more of “less sophisticated than a typical teenager’s Facebook page”? If it is less sophisticated then chances are you are not subjecting yourself, or your company, to foreign jurisdiction.

Here are some simple steps you can follow to ensure that your contract will be seen by your customers and enforced by the court if a problem does arise:

1. Don’t Hide Your Terms

This step should be fairly obvious but too many website operators choose to bury their terms of service either on unrelated pages that customers are unlikely to visit, or at the very bottom of a page in a small font. No matter what size font you use, if your users have to scroll way down a page to view the terms (and they don\’t have to do the same amount of scrolling to make a purchase) chances are you’re running an unnecessary risk

2. Have Plenty of Links

This step is really a continuation of your efforts NOT to hide the terms of a website. If you have multiple pages required to finalize an order, have a link to the terms on each page, and have each link be visible. This doesn’t mean that your website needs to be plastered with links but one visible link per page should suffice without disrupting the look and feel of your site.

3. Use Blue, Underlined Links

This may sound silly, but courts like consistency and precedent and while you may like the look of a yellow hyperlink for your terms in italic, courts are familiar with standard blue, underlined links. Chances are your customers are familiar with blue links as well so make it as easy as possible for them to recognize the links to your terms by showing them the convention they’re used to.

4. Consider a Clickwrap Agreement

Clickwrap agreements require a user to check a box or push a button signifying that they have seen and read the terms before making a sale. Browsewrap on the other hand, assumes that users have read and agreed to terms because they have been conspicuously posted. While both types of agreements will be enforced under the right conditions, if the organization and structure of your site permits a clickwrap agreement it is always best to have an affirmative action that shows a manifestation of intent to enter into an agreement.

For more information about e-commerce and online contracts visit the WLF Lawyers website: http://www.wlflawyers.com.

Why should you prepare a term sheet?
This document, which will outline the basic points of your intended agreement, will not only make dealing with your attorney easier, and faster, it might even save you some money.

Identify the parties
Identifying the parties to an agreement is one of the most important steps to proper contract formation. Who signs an agreement and possibly more important, what their position in a company is, determines the extent of your ability to enforce the rights and obligations memorialized in the contract. If you will be signing this agreement, will you be signing as an individual or the representative of a company? Will your counterpart in another company be signing as well or, if this is going to be a form contract, will the other party be a customer?

What is the purpose of the contract?
Telling your attorney why you’re entering into this agreement will do more than help him/her write a title, it will give insight into the circumstances or industry surrounding the agreement. Write a short description of the type of agreement, such as “contract for marketing services related to local doctor’s office.” You may know what terms and provisions should be in your contract but an attorney will likely do some research before starting to draft the agreement to make sure it complies with industry standards and any applicable laws.

How long will the contract last?
The term of an agreement is another extremely important provision that is often overlooked in informal conversations between the parties before seeking legal advice. Will this contract be for a set length of time? A few months? A few years? Or will it continue until the parties agree to terminate the relationship? While your attorney can advise you on a favorable term for your position it is best to come prepared with at least some idea of how long the agreement should last.

How will payment be made?
Most contracts involve payment and, if everything goes well, payment will be made. If you are the party who will be receiving payment consider what form you would prefer payment to take. If you are the party who will be making payments discuss this with the other party to make sure their preferred method is reduced to writing. The method of payment will not only affect the physical act of payment it will also have an impact on terms that address late payments and possibly even penalties. Wire transfers and credit card or check payments over the phone can be made almost instantly but payments by check must be sent in advance.

Will there be penalties for late payment?
If payment is being made by check it might be reasonable to allow a few days for receipt because mail is often delayed, however if payment is made by wire transfer it might be reasonable to incur late fees even 24 hours after payment was due. If your business is depending on funds from the sale of goods or performance of services covered under an agreement any delay can negatively impact your livelihood. Late fees act not only as a deterrent to prevent late payment they can also compensate one party for expenses incurred for obtaining credit to continue operation of the business or even lost profits due to halted operation.

Can this contract be transferred?
If you’re contracting for the specific services of an individual or company you may not want to allow a transfer of the rights and obligations of the agreement but what about if one of the parties is sold?

What is the location of the parties and where will the contract be carried out?
If both parties reside in the jurisdiction where the contract will be carried out this information may not be necessary but when dealing with an entity in another state it is important to decide on the forum for legal disputes and the applicable law to be applied. Additional information, such as where the contract will be carried out, will help your attorney determine your leverage for making the forum convenient to you and your interests.

Will you be exchanging sensitive information?
Most contracts require at least one party to disclose sensitive information and trade secrets. Some of this information, such as client information may be protected by privacy statutes and any disclosure should be carefully guarded. Alerting your attorney to the possibility of such an exchange will allow him/her to include provisions to prevent unnecessary disclosure and to properly penalize any breaches.

Summary
Even a short list of key terms or contract expectations faxed to your lawyer in advance of a meeting or conference call will make your consultation much more productive.

The First Sale Doctrine – Sales of Copyrighted Software Online

Copyright protection gives exclusive control over the sale and distribution of copyrighted works to the copyright holder. Sales by an unauthorized party are considered piracy. There is an exception to this protection, which applies to rightful purchasers of a work, called the “first sale doctrine.” Under this theory, if you buy a book, for example, while you don’t own any portion of the copyright, you are the exclusive owner of that copy, and are free to keep it or sell it as you wish. The entire “used goods” market, which is a large portion of the eBay marketplace, is dependent on the first sale doctrine.

Many “purchasers” of software are aware that when they buy software what they are actually buying is a license for its use from the seller. Software is handled that way to allow developers to have more control over the use of their products once they are transferred. In 2007 Autodesk, Inc., the developer of the AutoCAD software package, sent a takedown notice to eBay after discovering the sale of several AutoCAD packages by Timothy Verner. Mr. Verner acquired the software packages from a Seattle architecture firm (CTA), and not Autodesk, Inc.

According to Autodesk, it still owned the AutoCAD packages in Mr. Verner’s possession because it never transfered ownership to CTA and under the terms of the software license CTA was barred from transferring rights to a third party. Thus, Verner’s sales constituted copyright infringement, or at least contributory infringement, according to Autodesk. The District Court attempted to reconcile two lines of precedent regarding this issue but was ultimately unable leading it to side with the oldest precedent among the competing options. Ultimately Mr. Verner’s sale was held to be privileged by the first sale doctrine regardless of how restrictive Autodesk’s “license” was because the intent of the parties had been to transfer ownership. Autodesk never sought to reclaim ownership of any of its software packages, the packages were merely licensed to extend unenforceable control over its products in the stream of commerce.

Forum Selection Clause – Plan Your Trip to California

In Tricome v. eBay, Inc., the plaintiff argued that eBay’s forum selection clause naming California as the forum for disputes is unconscionable and should not be enforced. The plaintiff further argued that as a “form contract,” eBay’s terms of use constituted a procedurally and/or substantively unconscionable agreement.

While plaintiff contended that the user agreement containing the forum selection clause was a contract of adhesion since the plaintiff never had the opportunity to discuss or negotiate its terms, numerous courts have held that not to be the standard for deeming a contract to be one of adhesion. Additionally, even the terms of an admitted adhesion contract are enforced unless they are “so one-sided as to be oppressive.” eBay operates worldwide and it is not shocking for it to focus its legal defense in a particular forum rather than having to litigate in potentially hundreds or thousands of other jurisdictions.

So, if you’re an eBay seller, selling software in compliance with eBay’s terms is probably not going to cause you any trouble with the copyright holder but if you run afoul eBay’s rules prepare for a trip to California.