On March 16, 2006, President Bush signed the Stop Counterfeiting In Manufactured Goods Act (“Stop Counterfeiting Act” or “SCA”), which expands current counterfeit law and is designed to target counterfeit labels and packaging, as well as equipment
used to make them.
Underpinning the SCA are the following findings by Congress: (1) counterfeiting is estimated to cost the U.S. $200 billion annually; (2) “counterfeit automobile parts, including brake pads, cost the auto industry alone billions of dollars in lost sales each year;” (3) “counterfeit products have invaded numerous industries, including those producing auto parts, electrical appliances, medicines, tools, toys, office equipment, clothing, and many other products; (4) counterfeiting is tied to terrorist activities; and (5) “counterfeiting of manufactured goods poses a widespread threat to public health and safety.”
Congress sought to address certain ambiguities in existing anticounterfeiting law, which helped counterfeiters avoid liability. For example, in United States v. Giles, 213 F.3d 1246 (10th Cir. 2000), the Tenth Circuit held that trafficking in counterfeit trademarks that are not actually attached to any “goods or services” was not a violation of the federal criminal infringement statute. Defendant Giles had been dealing in counterfeit “patch sets” of the Dooney & Bourke logo, which consisted of a leather patch and gold medallion bearing a logo and a leather strap used to attach the medallion to fake goods. The court noted that the statutory scheme indicated that “goods” were intended to be viewed as separate from the marks they carried. As a result, the statute prohibited trafficking in goods to which a counterfeit mark was attached, but it did not prohibit trafficking in counterfeit labels unattached to goods. Thus, under the old law counterfeiters were safe as long as they did not attach counterfeit marks to goods.
The Stop Counterfeiting Act closes the Giles loophole (and others) and expands the scope of protection and remedies available to trademark owners. The benefits to trademark owners are substantial. First, the SCA expands the definition of “counterfeit mark” to include goods and services as well as “labels, patches, stickers, wrappers, badges, emblems, medallions, charms, boxes, containers, cans, cases, hangtags, documentation, or packaging of any type or nature” that is either applied to or used in connection with counterfeit goods. Thus, it is now a crime to traffic in labels and various forms of packaging bearing a counterfeit mark that is likely to cause confusion.
Second, the SCA makes counterfeiting less profitable by imposing harsher, mandatory forfeiture and destruction penalties, such as the forfeiture and destruction of counterfeit goods including labels), the forfeiture of equipment and materials used to make counterfeit goods, and the forfeiture of assets derived from counterfeiting. In addition, the SCA requires convicted counterfeiters to pay restitution to the mark owner. Under the new law, counterfeiters will have a much more difficult time resuming counterfeiting operations without the equipment and money to do so.
Third, the SCA now broadly defines “traffic” and “financial gain” in a manner that prohibits distributing (including importing and exporting), or intending to distribute, counterfeit goods in exchange for the receipt or expected receipt of anything of value. Under the SCA, it is now illegal to give away counterfeit goods in exchange for some future benefit—i.e., the bartering of counterfeit goods is prohibited.
In short, the Stop Counterfeiting Act removes ambiguity used by counterfeiters to evade legal consequences and strengthens trademark law. By doing so, it serves as a valuable new weapon, protecting intellectual property owners and consumers alike, in the battle against counterfeits.
4.02.2006
4.01.2006
Rankings, Google Slight – Not Every Player Gets To Compete In This Search Engine Game
(This article was originally featured in Modern Practice, Findlaw’s Law and Practice Technology Magazine, in April 2006.)
Running parallel to the George Mason Cinderella story about its ability to move up in the ranks of the most preeminent college basketball tournament, is the lesser known story of a low ranking website that cannot get noticed on the world’s leading Internet search engine.
On March 17, 2006, to get back into the search engine game, KinderStart lodged a seven-count complaint against Google, based on its website being downgraded and virtually banished from Google since March 2005 for reasons unknown to KinderStart. The lawsuit centers on whether Google, a private company and the gateway (or gatekeeper) to vast Internet content, has the right to keep others out via its proprietary and secret search techniques. The question is whether this sad, yet compelling, story has more than a short, shaky leg to stand on under any theory of law.
Low Percentages, Rank
At one point, Google was the source of 70% of KinderStart’s Web traffic. Since March 2005, however, KinderStart has been denied a spot in the Google rankings, showing a mere 0.01% referral traffic from Google. As a result, the self-claimed “largest (and most popular) indexed directory and search engine focused on children zero to seven on the 'net” wants to force the world’s largest Internet search engine to recognize its website in private search rankings.
Harmful Blockage
In the complaint, KinderStart—along with other sadly situated plaintiffs hoping for class certification—alleges that Google violates federal and California constitutional laws, federal antitrust law, and state unfair trade, defamatory and good faith and fair dealing laws. KinderStart is really complaining about what it terms “Blockage.” In the complaint, “Blockage” is defined as Google’s unilateral and unreasonable acts of terminating KinderStart’s free speech, traffic and commerce otherwise available by virtue of “normal” search engine operation. Unlike the typical remedy sought for blockage, i.e., fiber, KinderStart seeks relief in the form of a declaration, an injunction, and money.
Kitchen Sink Offense & Pre-Game Gut Analysis
Below are brief summaries of counts alleged in the complaint, along with a pre-game gut analysis.
1. Violation of Free Speech Right Under the U.S. and California Constitutions. Google, a speech intermediary and cyber forum, denies KinderStart its right to the exercise of free speech by engaging in blockage, and it fails to exercise reasonable regulation of time, place, or manner of restriction to the exercise of KinderStart’s free speech right.
Gut Analysis: Google is not a state actor. Similar attempts to pin free speech violations on Internet companies have failed. This one also is likely to fail.
2. Sherman Act 2: Monopolization. Google abused its monopoly power in the search engine usage and search-driven Internet advertising markets by denying linking and referrals to KinderStart’s website and by artificially depressing KinderStart’s rank.
Gut Analysis: Does Google really have a monopoly on Internet searches? This claim seems specious: while Google has 36.5% of the U.S. Internet search market, Yahoo has 30.5%, MSN has 15.5%, AOL has 10%, Ask Jeeves has 6%, and InfoSpace has 1%.
3. Unfair Competition and Practices Under California Law. Google’s blockage practice is wrongful and without reasonable business justification. Google falsely and artificially calculated and presented the KinderStart website as a low rank, and it deceived, concealed, and omitted material facts as to the operation and execution of the AdSense Program. Google’s AdSense program wrongfully leads consumers to believe that they can realize adequate value and financial benefit by using AdSense. By engaging in blockage, Google also engages in price discrimination without business justification, which tends to destroy market competition.
Gut Analysis: KinderStart is likely to go farthest with its claim of “unfair competition,” but probably not all the way. Unfair competition under California law appears to provide broad-based protection against violations of public policy and acts injurious to consumers (or competitors, but then it starts to look more like an antitrust claim). If true, KinderStart’s claim that Google falsely touts objective search
methods may have some traction.
Google will likely argue that any blocking (by algorithm or human) is not unfair, is not prohibited by law, and is justified for business reasons given websites’ attempts to optimize search results. In addition, Google may argue that KinderStart is free to rely on one of the other search engines to drive traffic to its site. Although none of these defenses would directly refute inaccurate claims of objectivity, a court is likely to balance the benefits versus harm to consumers as a result of Google’s blocking practices. Of course, if Google’s stated policy that the order and content of its search results are completely automated is true, then KinderStart’s claim would likely fall apart.
The “unfair practices” claim concerns price discrimination and does not seem like it will make the cut. Of the three basic types of price discrimination prohibited in California, KinderStart relies on the “secret payments and discounts” type of price discrimination. Two predicates to this type of claim work against KinderStart. For one, KinderStart must prove that the discount or rebate is a “secret.” This is especially difficult were there is no misrepresentation to one purchaser that is getting the same pricing as favored purchasers. Second, KinderStart will have to prove intent. Specifically, it will have to prove that Google offered secret payments and discounts with the intention of injuring competitors or destroying competition.
4. Breach of Implied Covenant of Good Faith and Fair Dealing. Google has an affirmative duty not to deprive KinderStart benefit of the AdSense Program, which provides opportunity to increase the appeal of and traffic to websites. Blockage of KinderStart redirects web searchers to other websites, which may generate advertising revenues that may have gone to KinderStart were there no blockage.
Gut Analysis: This claim misses the mark. If KinderStart is a member of the AdSense Program, Google benefits by directing traffic to KinderStart’s website. Since Google is a source of generating potential customers for AdSense partners, which in turn may produce prospective customers for Google, it would not be in Google’s interest to deny itself this advertising opportunity. In addition, the fact that Google’s algorithm has somehow removed KinderStart’s website from search results would tend to support the idea that the algorithm operates objectively—i.e., Google’s AdSense Program managers would be unlikely to purposefully remove AdSense partners from the program.
5. Defamation and Libel. Google improperly lists (to the public) the KinderStart website as having a PageRank of “0,” which is
artificially depressed and mathematically impossible within the normal operation of Google’s search algorithm.
Gut Analysis: This claim scores “0.” At the most basic level, a defamation claim requires proof of a false statement. But Google defines the meaning of a zero rank—i.e., Google’s PageRank relies on its private and publicly unknown algorithm for determining how to rank pages. The public does not know what a zero rank means other than as Google defines it. For instance, if I say I assign KinderStart’s defamation claim a rank of zero, I have not defamed KinderStart. I have merely expressed an opinion, based on my own definition of zero, of how I rank KinderStart’s claim. Google has not made a false statement.
6. Negligent Interference with Prospective Economic Advantage. By participating in Google’s AdSense program, Google owed KinderStart a duty of care to permit search referrals, and corollary advertising revenues, to flow to KinderStart. Google’s blockage wrongfully interfered with this flow.
Gut Analysis: This claim seems baseless for the same reasons stated above regarding the breach of covenant of good faith and fair dealing claim.
A Non-Cinderella Ending
If CBS college basketball analyst Billy Packer were commenting on this case, he might say that KinderStart—like Search King and others before it—doesn’t have a chance in this contest. Despite the understandable desire of website owners to be ranked higher in Google’s system, they must remember that it is “Google’s” system. Until Google takes over as a form of government or controls the entire Internet search industry, it is not likely to violate any rights to free speech or antitrust laws, respectively. Likewise, to the extent that Google accurately describes its advertising and ranking policies (should it describe them at all), it is unlikely that it will be liable for denying certain websites a place in the Internet search results game.
Running parallel to the George Mason Cinderella story about its ability to move up in the ranks of the most preeminent college basketball tournament, is the lesser known story of a low ranking website that cannot get noticed on the world’s leading Internet search engine.
On March 17, 2006, to get back into the search engine game, KinderStart lodged a seven-count complaint against Google, based on its website being downgraded and virtually banished from Google since March 2005 for reasons unknown to KinderStart. The lawsuit centers on whether Google, a private company and the gateway (or gatekeeper) to vast Internet content, has the right to keep others out via its proprietary and secret search techniques. The question is whether this sad, yet compelling, story has more than a short, shaky leg to stand on under any theory of law.
Low Percentages, Rank
At one point, Google was the source of 70% of KinderStart’s Web traffic. Since March 2005, however, KinderStart has been denied a spot in the Google rankings, showing a mere 0.01% referral traffic from Google. As a result, the self-claimed “largest (and most popular) indexed directory and search engine focused on children zero to seven on the 'net” wants to force the world’s largest Internet search engine to recognize its website in private search rankings.
Harmful Blockage
In the complaint, KinderStart—along with other sadly situated plaintiffs hoping for class certification—alleges that Google violates federal and California constitutional laws, federal antitrust law, and state unfair trade, defamatory and good faith and fair dealing laws. KinderStart is really complaining about what it terms “Blockage.” In the complaint, “Blockage” is defined as Google’s unilateral and unreasonable acts of terminating KinderStart’s free speech, traffic and commerce otherwise available by virtue of “normal” search engine operation. Unlike the typical remedy sought for blockage, i.e., fiber, KinderStart seeks relief in the form of a declaration, an injunction, and money.
Kitchen Sink Offense & Pre-Game Gut Analysis
Below are brief summaries of counts alleged in the complaint, along with a pre-game gut analysis.
1. Violation of Free Speech Right Under the U.S. and California Constitutions. Google, a speech intermediary and cyber forum, denies KinderStart its right to the exercise of free speech by engaging in blockage, and it fails to exercise reasonable regulation of time, place, or manner of restriction to the exercise of KinderStart’s free speech right.
Gut Analysis: Google is not a state actor. Similar attempts to pin free speech violations on Internet companies have failed. This one also is likely to fail.
2. Sherman Act 2: Monopolization. Google abused its monopoly power in the search engine usage and search-driven Internet advertising markets by denying linking and referrals to KinderStart’s website and by artificially depressing KinderStart’s rank.
Gut Analysis: Does Google really have a monopoly on Internet searches? This claim seems specious: while Google has 36.5% of the U.S. Internet search market, Yahoo has 30.5%, MSN has 15.5%, AOL has 10%, Ask Jeeves has 6%, and InfoSpace has 1%.
3. Unfair Competition and Practices Under California Law. Google’s blockage practice is wrongful and without reasonable business justification. Google falsely and artificially calculated and presented the KinderStart website as a low rank, and it deceived, concealed, and omitted material facts as to the operation and execution of the AdSense Program. Google’s AdSense program wrongfully leads consumers to believe that they can realize adequate value and financial benefit by using AdSense. By engaging in blockage, Google also engages in price discrimination without business justification, which tends to destroy market competition.
Gut Analysis: KinderStart is likely to go farthest with its claim of “unfair competition,” but probably not all the way. Unfair competition under California law appears to provide broad-based protection against violations of public policy and acts injurious to consumers (or competitors, but then it starts to look more like an antitrust claim). If true, KinderStart’s claim that Google falsely touts objective search
methods may have some traction.
Google will likely argue that any blocking (by algorithm or human) is not unfair, is not prohibited by law, and is justified for business reasons given websites’ attempts to optimize search results. In addition, Google may argue that KinderStart is free to rely on one of the other search engines to drive traffic to its site. Although none of these defenses would directly refute inaccurate claims of objectivity, a court is likely to balance the benefits versus harm to consumers as a result of Google’s blocking practices. Of course, if Google’s stated policy that the order and content of its search results are completely automated is true, then KinderStart’s claim would likely fall apart.
The “unfair practices” claim concerns price discrimination and does not seem like it will make the cut. Of the three basic types of price discrimination prohibited in California, KinderStart relies on the “secret payments and discounts” type of price discrimination. Two predicates to this type of claim work against KinderStart. For one, KinderStart must prove that the discount or rebate is a “secret.” This is especially difficult were there is no misrepresentation to one purchaser that is getting the same pricing as favored purchasers. Second, KinderStart will have to prove intent. Specifically, it will have to prove that Google offered secret payments and discounts with the intention of injuring competitors or destroying competition.
4. Breach of Implied Covenant of Good Faith and Fair Dealing. Google has an affirmative duty not to deprive KinderStart benefit of the AdSense Program, which provides opportunity to increase the appeal of and traffic to websites. Blockage of KinderStart redirects web searchers to other websites, which may generate advertising revenues that may have gone to KinderStart were there no blockage.
Gut Analysis: This claim misses the mark. If KinderStart is a member of the AdSense Program, Google benefits by directing traffic to KinderStart’s website. Since Google is a source of generating potential customers for AdSense partners, which in turn may produce prospective customers for Google, it would not be in Google’s interest to deny itself this advertising opportunity. In addition, the fact that Google’s algorithm has somehow removed KinderStart’s website from search results would tend to support the idea that the algorithm operates objectively—i.e., Google’s AdSense Program managers would be unlikely to purposefully remove AdSense partners from the program.
5. Defamation and Libel. Google improperly lists (to the public) the KinderStart website as having a PageRank of “0,” which is
artificially depressed and mathematically impossible within the normal operation of Google’s search algorithm.
Gut Analysis: This claim scores “0.” At the most basic level, a defamation claim requires proof of a false statement. But Google defines the meaning of a zero rank—i.e., Google’s PageRank relies on its private and publicly unknown algorithm for determining how to rank pages. The public does not know what a zero rank means other than as Google defines it. For instance, if I say I assign KinderStart’s defamation claim a rank of zero, I have not defamed KinderStart. I have merely expressed an opinion, based on my own definition of zero, of how I rank KinderStart’s claim. Google has not made a false statement.
6. Negligent Interference with Prospective Economic Advantage. By participating in Google’s AdSense program, Google owed KinderStart a duty of care to permit search referrals, and corollary advertising revenues, to flow to KinderStart. Google’s blockage wrongfully interfered with this flow.
Gut Analysis: This claim seems baseless for the same reasons stated above regarding the breach of covenant of good faith and fair dealing claim.
A Non-Cinderella Ending
If CBS college basketball analyst Billy Packer were commenting on this case, he might say that KinderStart—like Search King and others before it—doesn’t have a chance in this contest. Despite the understandable desire of website owners to be ranked higher in Google’s system, they must remember that it is “Google’s” system. Until Google takes over as a form of government or controls the entire Internet search industry, it is not likely to violate any rights to free speech or antitrust laws, respectively. Likewise, to the extent that Google accurately describes its advertising and ranking policies (should it describe them at all), it is unlikely that it will be liable for denying certain websites a place in the Internet search results game.
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