Can Hidden Internet Data Violate the Lanham Act

Copyright 2009.  All rights reserved. 

The Lanham Act prohibits trademark infringement and false advertising-conduct that is often immediately apparent because it occurs out in the open in the public forum of advertising.  With the surging popularity of the internet over the last decade, new Lanham Act issues have arisen including whether website metadata-information that consumers never see-can infringe a trademark and violate the Lanham Act.

According to the United States Court of Appeals for the First Circuit, the answer is yes.  In Venture Tape v. McGills Glass Warehouse, 540 F.3d 58, 59 (2008), McGills Glass Warehouse embedded a competitor's trademarks in the metadata for the McGills website to "attract people using internet search engines to the McGills website."  Competitor Venture Tape claimed a Lanham Act violation for trademark infringement; McGills defended saying that since consumers never saw the metadata there could be no likelihood of consumer confusion.[1]

The First Circuit rejected McGills' defense because under the Lanham Act:

Proof of actual confusion is not essential to finding likelihood of confusion . . . . McGills' admissions. . . particularly [its owner's] admission that his purpose in using the Venture marks was to lure customers to his site, permit us to conclude that no genuine dispute exists regarding the likelihood of confusion.

The First Circuit concluded that the misdirection of consumers by the inclusion of Venture Tape's marks in the McGills website's metatags was sufficient to show a likelihood of confusion and upheld summary judgment for Venture Tape. [2]

The district court had awarded Venture Tape all of McGills' profits for the infringement period.  McGills argued to the First Circuit that Venture Tape should not be allowed to recover all of McGills' profits under the Lanham Act.  The Court rejected this plea, finding that if willfulness is required to award profits, it was not clear error to find it in this case.  An award including all of McGills' profits was allowed as a "rough measure" of the harm incurred by Venture Tape.[3] 

The First Circuit also noted that its past decisions place the burden on the trademark infringer to show that the damages it caused were less than the amount of the infringer's sales during the infringing period.  McGills had not carried that burden and so on the evidence, the First Circuit upheld the district court's award to Venture Tape of McGills' net profits of $230,339 during the infringement period.  The First Circuit also upheld the district court's finding under the Lanham Act that this was an "exceptional" case of willful infringement justifying the district court's award of attorney fees.[4]

Venture Tape illustrates how the Lanham Act and state trademark laws may apply to the new forms of advertising created by the internet.  Venture Tape serves as a reminder that the internet is not beyond the reach of the Lanham Act-a point previously made when Congress amended the Lanham Act in 1999 to prevent "cybersquatting."  Cybersquatting is the practice of registering internet domain names identical to or confusingly similar to a protected mark.

Commentators have on occasion criticized the broad application of the Lanham Act - criticism that goes back to the Supreme Court's 1952 decision in Steele v. Bulova Watch Co., 344 U.S. 280 (1952).[5]  In Steele, the Supreme Court imposed Lanham Act liability on a U.S. citizen manufacturing watches in Mexico which infringed on the Bulova trademark even though the manufacturing occurred in another country.[6]  Despite some criticism, Steele remains good law.

Congressional enactment of the anti-cybersquatting amendment reflect some congressional intent to apply the Lanham Act broadly to internet trademark infringement.  Prior federal circuit decisions applying the Lanham Act to infringing internet website metatags also reflect this intent.  These cases suggest that the Lanham Act may prove a powerful tool for curbing internet mark infringement-even when infringement occurs in the shadows of the internet's hidden metadata.

[1] Venture Tape, 540 F.3d at 61.
[2] Venture Tape, 540 F.3d at 62.
[3] Venture Tape, 540 F.3d at 63.
[4] Venture Tape, 540 F.3d at 63.
[5] See Bradley, Territorial Intellectual Property Rights in an Age of Globalism, 37 Va. J. Int'l Law 505 (1997); Clowers, On International Trademark and the Internet:  The Lanham Act's Long Arms, 13 Rich. J. Law & Tech. 11 (2006).
[6] The defendant had obtained trademark registration in Mexico for the Bulova mark.  Mexico subsequently revoked the registration and the Supreme Court found a Lanham Act violation.  Steele, 244 U.S. at 282; see also Levi Strauss & Co. v. Sunrise Int'l Trading, 51 F.3d 982, 984 (11th Cir. 1995)(Lanham Act liability arising from foreign manufacturing).