Chapter 6: Copyright Protection Against
Derivative-Work Versons of Computer
Programs and Web Pages —
Fair Use — Reverse Engineering

C. Pop-Up Advertising (Cont’d)


A second lawsuit against UWhen led to the following opinion, denying preliminary injunctive relief to two plaintiff web site proprietors. The opinion's findings of fact present a detailed explanation of the technology used for this form of advertising. (Only the copyright material is presented. The trademark material has mostly been edited out.)

Wells Fargo & Co. v. WhenU.com, Inc.
United States District Court
293 F. Supp. 734 (E.D. Mich. 2003)
2003 WL 22808692 (E.D. Mich. Nov. 19, 2003)
http://www.mied.uscourts.gov/_opinions/Edmundspdf/NGE03cv71906WhenU.pdf

MEMORANDUM OPINION AND ORDER DENYING
PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION


INTRODUCTION

Almost everyone who has surfed the Internet on his or her computer has encountered advertisements that pop-up from time to time. While the average Internet user may find the advertisements annoying, the question before the Court is whether they violate trademark or copyright law. Plaintiffs Wells Fargo & Co. and Quicken Loans, Inc. have asked the Court for a preliminary injunction against Defendant WhenU.com, Inc., whose business is Internet contextual advertising. For the reasons stated in this opinion, plaintiffs' motion for preliminary injunction is DENIED.

FINDINGS OF FACT

Wells Fargo is a financial services company offering customers online access to various financial services and products. Wells Fargo has offered financial products through the Internet since 1995.

WhenU delivers online ''contextual marketing" to computers via its proprietary software product, ''SaveNow." Contextual marketing technology endeavors to market products and services to consumers who have a demonstrable interest in those products and services. Traditionally, contextual marketing has been conducted by assembling large databases containing a wide variety of personal information about individual potential customers and their past purchasing behavior. WhenU's proprietary software allows WhenU to deliver contextually relevant advertising at the moment the consumer demonstrates an interest in the product or service, without any knowledge of the consumer's past history or personal characteristics. WhenU's participating consumers receive contextually relevant advertisements, delivered to their computer screens (also known as ''desktops").

SaveNow also makes available to participating consumers ''dollars off," ''percentage off" and other savings coupons for products and services at hundreds of online retail merchants. Such a coupon might remind a consumer, for example, of a free shipping offer that is available by using a particular product code when purchasing the product. A team of WhenU content researchers tests and updates these offers on a daily basis. The coupons offered by SaveNow afford participating consumers the opportunity to make significant savings while shopping online.

WhenU offers its software under two brand names: ''Save'' and ''SaveNow.'' The two applications are identical in function; they differ only in their identifying descriptions and method of distribution.

Consumers typically download the ''Save'' and ''SaveNow'' software in return for obtaining a free software application. In some cases, consumers are offered a choice between paying for a ''premium'' version of the desired application, or obtaining the desired application for free, but bundled with Save. For example, the Bearshare software application is marketed to consumers in two forms: a premium version that costs $19.95 to download, and a free version that comes bundled with Save. WhenU has also developed its own freeware applications, including an application called ''Weathercast,'' which are bundled with Save software.

The SaveNow software is also typically obtained as part of a ''bundle'' with another software program, such as the popular Living Coral or Living Waterfall screen savers, but the user is not obligated to keep SaveNow in order to use the free software.

WhenU shares the revenue generated from its bundled software with its bundling partners. The bundling of revenue-generating, advertising software (''adware'') with free software programs (''freeware'') is a common practice. Many software companies rely on the revenue generated by advertising software in order to offer freeware for free and to provide service and support for their freeware programs.

SaveNow is also available for download at WhenU's website, at the websites of WhenU's free applications such as www.getweathercast.com, and at certain third-party websites via a software download prompt screen that offers a user surfing the Internet the opportunity to download, for example, Weathercast and Save. Although many users claim not to be aware that SaveNow has been loaded on to their computer, the Court finds that some user assent is required before SaveNow is downloaded. The fact that assent may be in the form of a reflexive agreement required for some other bundled program does not negate the fact that the computer user must affirmatively ask for or agree to the download.

Although there are variations in the SaveNow download process, depending upon the other applications that the computer user is installing, certain key features of the download remain constant. For example, during the installation process, the consumer always receives a notice stating that SaveNow is part of the download, and explaining how SaveNow functions.

Regardless of the method of distribution, to proceed with the installation of SaveNow, the consumer must affirmatively accept a license agreement for SaveNow (the ''License Agreement''). The License Agreement is presented to the user in a text box with a scroll bar. This is the standard way in which license agreements are incorporated into software installations.

The License Agreement explains that the software generates contextually relevant advertisements and coupons, utilizing ''pop-up'' and various other formats. The software cannot be installed unless the consumer affirmatively accepts the terms of the License Agreement.

Plaintiffs' computer expert Benjamin Edelman testified about how he obtained WhenU's software via a software download prompt screen at a website called Lyricsdownload.com, using the phrase ''drive by download'' to describe this method of distribution. On cross-examination, Mr. Edelman conceded that the software download prompt screen offers the user the opportunity to read the License Agreement and tells the user that accepting the software is deemed to be an assent to its terms. Mr. Edelman also conceded that the distribution of software via a download prompt screen is a common practice, and is used by a variety of distributors for a variety of different purposes.

Consumers can uninstall WhenU's software from their computers if they no longer wish to have it. Once uninstalled, the software will cease to operate or show advertisements or coupons on the consumer's computer.

When a user removes or ''uninstalls'' a program bundled with Save, the Save software is automatically uninstalled along with it. The Save software supports the associated program and cannot be uninstalled without also uninstalling that associated program. SaveNow can be uninstalled separately from any freeware program with which it was downloaded.

Since 1996, millions of computer users have become regular users of the Internet and the World Wide Web. The Internet is a network of millions of interconnected computers, through which text, images and sounds are transported and displayed by an application called the World Wide Web (the "Web").

Much of the information on the Web is stored in the form of "web pages," which can be accessed through a computer connected to the Internet (available through commercial Internet service providers or "ISPs"), and viewed on a PC user's computer screen using a computer program called a "browser," such as Microsoft Internet Explorer or Netscape Navigator. Web pages are only perceivable by the user by viewing them on the computer screen through the use of a browser. "Websites" are locations on the World Wide Web containing a collection of web pages, much like pages of a book. The 3-dimensional metaphor of the computer screen as a "desktop" is often used to discuss the display of text and images on a user's computer screen.

The computer screen is composed of a series of picture elements (called "pixels"). Pixels are arranged in a single layer of horizontal and vertical rows that form a grid on the computer screen. The particular color of each individual pixel which, taken together, make up the image displayed on the 2-dimensional computer screen, is determined by instructions received from the underlying computer program.

A series of events must transpire in order for a user to view a web page via an Internet browser on his or her computer screen. First, the remote server on which the computer code for a particular website is maintained sends the code to the user's web browser. Second, the PC's browser then reads the code to determine how each pixel that makes up the computer screen should illuminate in order to create the specific on-screen display for that particular website. Third, the PC's browser then conveys specific instructions to the Windows operating system, which, in turn, will send these instructions to the PC's video card. These instructions are stored in the video memory frame buffer portion of the PC's video card. Finally, the video card, thereupon, causes each pixel on the computer screen to illuminate so as to create the specific 2-dimensional on-screen display of the website.

WhenU's software is designed to operate within the Windows computer operating system, popularized by Microsoft. Windows is the most widely distributed software application ever written, currently in use by roughly 95% of computer users.

In the Windows operating system, the computer ''desktop'' functions as a multi-tasking environment in which numerous software ''applications,'' such as spreadsheets, word processing programs, Internet browsing software, e-mail software and instant messaging software, may all run simultaneously. This graphical computer ''desktop'' was intentionally designed to represent what a user would experience when using an actual physical desktop, with virtual replicas of file folders, text, files, spreadsheets, calendars, rolodexes, and so on. The computer desktop thus gives the user the impression of operating in a three dimensional space in which items can be moved on top of and underneath each other. Accordingly, while a display on a computer screen is literally two dimensional, it can properly be viewed as a three dimensional presentation as a matter of user perception.

When a user opens a software application, it is launched in what is known as a ''window,'' a box on the user's desktop within which all of the functions of that application are displayed and operate. A window can be enlarged or ''maximized'' to fill the entire computer screen, or reduced to take up a smaller area. Over the past two decades, operating a computer by manipulating overlapping windows has become a familiar process to personal computer users everywhere.

To access the Internet in the Windows environment, a user must establish a connection to the Internet, either over a telephone modem or some other form of Internet connection. Once such a connection has been established, the user will typically launch a software application known as a ''browser,'' such as Internet Explorer or Netscape. A user can have multiple browser windows open simultaneously. When launched by the user, the browser, like any other Windows-based software application, opens in a new window. Within this window, the user interacts with the browser to access various websites on the Internet.

The user can directly access data contained in a particular website by entering the website's address (or ''URL'') into the address box in any such open browser window. Alternatively, the user may search for websites of interest by utilizing a search engine, such as Yahoo! or Google, and then access those websites by clicking on the resulting links displayed as listings. A user may also reach a particular website by clicking on a ''hyperlink'' embedded in the text or graphics of a webpage.

When a user attempts to access a webpage, the server hosting the webpage sends information in the form of a file back to the user's browser program. That file consists simply of lines of text written in Hypertext Markup Language or ''HTML.'' The browser then interprets the HTML code file, and taking that information in conjunction with the user's own browser settings, requests that the Microsoft Windows operating system open a window to display the webpage. The operating system, in turn, takes all that information from the browser, combines it with information concerning the user's hardware configuration and the competing claims of other software programs, and then displays content in a window.

The HTML code identifies various elements that help determine how the webpage will ultimately be rendered on a computer user's screen, but it does not provide an actual pixel-by-pixel mapping for rendering the webpage. A wide variety of other factors will have a significant effect on the ultimate appearance of the webpage on the user's screen, including the user's ability to customize the browser's settings.

The Windows environment permits a user to have multiple browser windows open simultaneously, each displaying a different webpage. As with other applications open on a user's desktop, each separate browser window can be opened or closed, minimized or maximized, and moved around the screen. The user can select which window appears in front of which other windows at any given time, in much the same way as a person can re-order a stack of papers on his or her desk.

There are many applications that a user can run while browsing the Internet that cause additional windows to appear automatically in front of an open browser window. For example, a user may be viewing a webpage (e.g., cnn.com), when the user's electronic mail or instant-messaging software (e.g., Microsoft Outlook or AOL Instant Messenger) launches a message in front of the browser window that the user is viewing.

Users have ultimate control over what programs run on their computers, when they are run, and what they are commanded to do. The user owns and controls the computer and the computer display, including the pixels that generate that display.

Advertisements shown by WhenU software are set up by WhenU's Advertising Operations team. The Advertising Operations Team receives creative copy from an advertiser, places the ad on a WhenU server, then ''maps'' the advertisement using an ad set-up table. Each advertisement is assigned a name and a variety of parameters such as size, priority, and frequency. The Advertising Operations Team ''maps'' the ad by determining the various categories in the Directory (such as ''Air Travel'') and keyword algorithms that will trigger the appearance of the advertisement, subject to priority and frequency limitations.

When the Advertisement Operations Team is done, the data is automatically recorded into the proprietary WhenU Directory (the ''Directory''). The Directory is delivered to and saved on the consumer's desktop when the consumer installs the software, and optimized and updated on a daily basis. As of July 1, 2003, the Directory contained approximately 32,000 URLs and URL fragments, 29,000 search terms and 1,200 keyword algorithms. The Directory categorizes these elements into various categories in much the same way as a local Yellow Pages indexes businesses into categories. These categories are the ''heart'' of WhenU's system for delivering advertisements.

As a participating consumer browses the Internet, the SaveNow software studies the user's browsing activity and compares it against the elements contained in the Directory. Simultaneously, the SaveNow software determines whether: (a) any of those elements are associated with a category in the Directory, and (b) whether those categories are associated with particular advertisements. If the software finds a match, it identifies the associated product or service category, determines whether appropriate ads are available to be displayed, and, if so, selects an ad based on the system's priority rules, subject to internal frequency limitations.

Web addresses and search terms are included in the WhenU Directory solely as an indicator of a consumer's interest. For example, the www.wellsfargo.com web address is included in the ''finance.mortgage'' category of the WhenU Directory in order to identify consumers who are potentially interested in mortgages. Thus, if a consumer were to enter into the address box in an open browser window or conduct a search using a search engine by typing in the words ''Wells Fargo,'' SaveNow would detect that activity and scan the proprietary directory for a match to a WhenU category such as ''finance.mortgage.''

The SaveNow software might also determine that the consumer is interested in a particular category of products or services if it found certain combinations of words (''keyword algorithms'') in the content of the webpage visited. For example, if a participating consumer accessed a webpage that contained two occurrences of the word ''buying,'' two occurrences of the word ''home'' and four occurrences of the word ''mortgage,'' the SaveNow software might determine that the consumer was interested in the ''finance.mortgage'' category.

Under WhenU's category system, any given ad will ultimately be mapped to scores of discrete elements (i.e., URLs, search terms, key word algorithms) that are related topically. Thus, WhenU advertisements do not specifically target individual websites such as Wells Fargo and Quicken Loans. For example, Mr. Edelman implied in his original declaration that an advertisement for ''GetSmart'' was specifically targeted at the Quicken Loans homepage. In fact, the complete mapping of that ad in the Directory reveals that it is mapped to 13 separate categories, each of which represents many URLs and search terms. The URL for the Quicken Loans homepage is only one of over hundreds, if not thousands, of URLs that could trigger this ad via the category system.

WhenUsells advertising to advertisers on the basis of sales categories, which are grouped into certain product and service categories. These sales categories are broader than the categories used for mapping advertisements. Although the sales categories are made public for marketing purposes, the categories used to map ads are known only to the WhenU Advertising Operations Team, and are not disclosed or in any way promoted to WhenU's advertisers, in-house sales team, or independent sales agents.

WhenU does not guarantee advertisers that their advertisements will appear when participating consumers access content from a particular website. WhenU guarantees only that advertisements will be shown to consumers who appear interested in a particular product or service sales category.

In sum, WhenU does not target specific websites either in its software or in selling its services to advertisers. Rather, WhenU's advertisements are displayed according to the product category in which the consumer is interested and limited by factors such as the number of advertisements the consumer has already seen. Thus, it is the user's actions on his or her desktop that ultimately determine whether that consumer will see a particular advertisement.

The advertisements and coupons that SaveNow delivers to a participating consumer's desktop appear in a window (the ''WhenU Window'') which is separate and distinct from any other window already open on the desktop.

SaveNow advertisements take various formats, such as: (1) a small format ''pop-up'' window that typically appears flush to the bottom right-hand corner of the consumer's desktop; (2) a larger ''pop-under'' window that appears behind some or all of the browser windows that the consumer is viewing; (3) a horizontal ''panoramic'' window that runs along the bottom of the user's computer screen. Regardless of the format used, the WhenU Window is a distinct, separate window unique to the SaveNow application.

Many SaveNow advertisements — approximately 50% of the total — are pop-under ads. WhenU's pop-under ads are designed not to be displayed to the user until after the user closes or minimizes the browser window containing the webpage that the user was viewing when the ad was triggered by the SaveNow software. Thus, unless manipulated by the user, a SaveNow pop-under ad triggered by a Wells Fargo or Quicken Loans URL will not be displayed on the user's screen at the same time as the webpage with that URL.

SaveNow pop-up ads appear as a small box in the bottom right hand corner of the user's computer screen. Depending on the site visited, the browser size, and the user's screen resolution configuration, a SaveNow pop-up ad may or may not appear in front of content in the underlying website.

If the underlying webpage (or any other underlying windows, such as a Word document) is clicked on after the pop-up format advertisement is displayed, the pop-up will no longer appear at the front of the screen. At any time a user may make any form of SaveNow advertisement disappear permanently by clicking on the ''X'' box at the top right hand corner of the ad. The ''X'' box is a standard feature of the Windows operating system and Internet users are generally familiar with its function.

The WhenU Window is labeled as such. All SaveNow advertisements contain a notice stating: ''This is a WhenU offer and is not sponsored or displayed by the website you are visiting. When the consumer clicks on the word ''More...,'' a dialog box opens that contains information about SaveNow and a direct link to the ''Frequently Asked Questions'' page of WhenU's website.

SaveNow does not automatically cause any advertiser's webpage to be displayed on a user's desktop. After the WhenU advertisement is displayed, the user can elect to access the advertiser's website by clicking on the WhenU Window. The user also can elect not to access the advertiser's webpage, and can easily close the WhenU window or minimize it for later viewing.

Plaintiffs take the position that SaveNow advertisements appear ''on'' the plaintiffs' websites. Such usage misconstrues the technical reality of the Internet. A ''website'' is a series of related webpages, whose program code is located in separate, distinct servers controlled by the owners of the website. At that point, there is no connection between the individual user's computer and the website.

Having caused the computer to display a page from one website, the user may request the computer to simultaneously display a page from a different website. The user will then have pages from two different websites on his desktop. If the user has called the second website page up in a new browser window, it will appear in front of the page from the first website. However, as discussed above, the user can easily size his browser windows to cause pages from both websites to appear on his screen, in windows that overlap or not, as the user chooses. Nothing that an individual does in the window displaying one website interferes with data transmitted to or from another website. Likewise, nothing that an individual does in a window displaying a different application (e.g., a word processing or instant messenger program) interferes with data transmitted to or from a website which the user has accessed. A website resides on its own servers where it is protected from tampering by ''firewalls'' and other Internet security procedures.

SaveNow interacts only with the web servers of WhenU or WhenU's advertisers. It has nothing to do with plaintiffs' web servers. As plaintiffs' own expert acknowledged, SaveNow cannot and does not access the servers where plaintiffs' websites are physically located.

Defendant's SaveNow software has no physical relationship to any other software application that may be open on a user's desktop, including, but not limited to, windows in which images associated with plaintiffs' websites are displayed. The fact that a window containing a SaveNow ad and the windows in which plaintiffs' websites may be displayed may be visually stacked on top of each other on the user's screen is purely a function of a computer's graphical interface which is designed to make a computer ''desktop'' look and act like a real desk.

SaveNow does not transmit, display or reproduce images of plaintiffs' websites. All SaveNow does is display an image of an advertisement which contains a link to a site designated by the advertiser. The participating consumer may access that site, if the consumer chooses, by clicking on the link embedded in the advertisement.

Plaintiffs contend that because the appearance of a SaveNow advertisement alters the current content of video memory, plaintiffs' webpages are ''modified'' whenever a SaveNow ad appears while a user is also displaying one of their webpages. The Court rejects this contention. Once a computer browser renders a webpage on a window, a copy of the HTML code file associated with that webpage is saved into the computer's general random access memory or ''RAM.'' The RAM copy of the HTML file is used to help the computer instantly redisplay the webpage image in the event that some other window has subsequently obscured all or part of the webpage image. The appearance of a SaveNow ad does not interfere with the storage of another webpage's HTML code in RAM memory or erase another webpage's HTML code.

In addition to ordinary RAM memory, a computer maintains a temporary form of memory called video memory that forms part of the computer's display system. The video memory simply contains a pixel-by-pixel ''snapshot'' of whatever happens to be displayed on a computer screen at any given instant.

Plaintiffs contend that because the appearance of a SaveNow advertisement alters the current content of video memory, plaintiffs' webpages are ''modified'' every time a SaveNow ad appears while a user is also displaying one of their webpages. However, these pixels are part of the user's physical computer, and are not part of any webpage that the user might happen to be viewing at the time. Further, because the pixel display is the means by which any image on a computer screen is generated, whenever the display changes, there is a corresponding change in the content of video memory. Video memory is modified when a user opens a new application, receives an instant message, or uses his mouse to move the cursor across the screen. As long as a user is actively using the computer, the content of video memory is altered and updated every 1/70th of a second. Accordingly, the alteration of video memory is an ephemeral occurrence, and does not constitute a modification of the plaintiffs' webpages.

The Court rejects the contention that SaveNow ''frames'' plaintiffs' websites. Framing occurs when one webpage displays the content of another webpage within its own borders. If the outer window is moved, the framed page moves with it simultaneously; if the outer window is closed or minimized, the framed page closes or minimizes as well. The purpose of framing is to create a single seamless presentation that integrates the content of the two webpages into what appears to be single webpage.

SaveNow ads appear in entirely separate windows that can be moved independently without moving any other webpage, and can be closed without closing or in any way affecting any other webpage. Hence, SaveNow ads do not ''frame'' and are not ''framed by'' any other window, such as the window in which one of plaintiffs' webpages might be displayed.

Plaintiffs assert that a WhenU ad displayed on a computer screen at the same time as a consumer is viewing a page from one of their websites is inherently confusing to the consumer who, according to plaintiffs, believes it emanates from the plaintiffs' websites. However, plaintiffs have not presented any evidence of actual consumer confusion.

Entry of a preliminary injunction would seriously harm WhenU. A court opinion casting doubt on the legality of WhenU's core business model would result in the loss of many of WhenU's largest advertisers, costing WhenU millions of dollars in lost revenue. Because of the long planning cycles involved in the advertising business, this damage could not be recouped even if WhenU eventually prevailed on the merits.

Harm to WhenU would harm the public as well. WhenU benefits participating consumers by improving access to relevant, useful and money-saving information about products and services that interest them. WhenU's advertisements increase the choices available to consumers and thereby promote competition. A preliminary injunction could also chill the efforts of other companies seeking to develop forms of ''push technology'' -- technology that delivers information to the desktop without need for consumers to make an active request each time they see the information.

CONCLUSIONS OF LAW

Plaintiffs Have Not Shown Strong Likelihood of Success
on the Merits of Their Copyright Claim of Infringement
of Their Right to Prepare Derivative Works

Plaintiffs claim that WhenU violates their exclusive right to prepare ''derivative works.'' To prevail on this claim, plaintiffs would have to show that WhenU has incorporated the plaintiffs' websites into a new work. 17 U.S.C. § 101 (defining derivative work as ''[a] work based on one or more preexisting works'' that is ''recast, transformed or adapted''). Plaintiffs have not made the necessary showing as to WhenU because WhenU merely provides a software product to computer users. The SaveNow software does not access plaintiffs' websites; therefore, it does not incorporate them into a new work. Accordingly, plaintiffs' claim that the defendant violates their right to create derivative works can only be understood as a contributory copyright infringement theory.

Moreover, SaveNow users do not infringe plaintiffs' right to prepare derivative works because consumers who cause the display of WhenU advertisements or coupons on their screens do not alter plaintiffs' websites. Plaintiffs' websites reside on separate servers. The WhenU Window has no physical relationship to plaintiffs' websites, and does not modify the content displayed in any other open window. Even if the presence of an overlapping window could be said to change the appearance of the underlying window on a computer screen, the mere alteration of the manner in which an individual consumer's computer displays the content sent by plaintiffs' websites does not create a ''derivative work.'' Lewis Galoob Toys v. Nintendo of Am., 780 F. Supp. 1283, 1291 (N.D. Cal. 1991) (indicating that ''the consumer may experiment with the product and create new variations of play, for personal enjoyment, without creating a derivative work''), aff'd, 964 F.2d 965 (9th Cir. 1992).

New York Times Co., Inc. v. Tasini, 533 U.S. 483 (2001), does not hold to the contrary. Unlike the publisher in Tasini, WhenU is not copying or making additions to or deletions from plaintiffs' actual copyrighted works. Contrary to plaintiffs' claim, WhenU has not added anything to plaintiffs' web pages. If one were able to look at the HTML code of plaintiffs' sites, one would not see any changes as a result of WhenU's advertisements. In this respect, the effect of WhenU's advertisements on plaintiffs' sites is more akin to the effect of a video game accessory in Lewis Galoob Toys. See also U-Haul v. UWhen, 279 F. Supp. 2d at 730 (Tasini not applicable where no reproduction of plaintiff's work occurs).

In Lewis Galoob Toys, the seller of a video game accessory known as the ''Game Genie" filed an action seeking a declaratory judgment that it was not violating or contributing to the violation of the defendant's video game copyrights. The defendant, Nintendo, markets and sells a home video game hardware system known as the Nintendo Entertainment System (''NES'') and compatible video game cartridges. The plaintiff markets and sells the Game Genie, which fits between the NES control desk and compatible video game cartridges and allows players to temporarily alter certain attributes of video games. Nintendo argued that the attachment of the Game Genie to its copyrighted works created a derivative work.

The district court rejected Nintendo's argument, finding that a consumer utilizing the Game Genie for noncommercial, private enjoyment ''neither generates a fixed transferable copy of the work, nor exhibits or performs the work for commercial gain.'' The court explained,

[I]inherent in the concept of a ''derivative work'' is the ability for that work to exist on its own, fixed and transferable from the original work . . . [o]nce the Game Genie and its attached game cartridge are disconnected from the NES, or the power is turned off, those changes disappear and the video game reverts to its original form.

WhenU's conduct affects plaintiffs' sites in a comparable manner. It only temporarily changes the way the sites are viewed by consumers. As soon as the advertisements are ''disconnected'' — that is closed or minimized — plaintiffs' sites revert to their original form. If anything, WhenU's advertisements modify their sites far less that the Game Genie altered users' NES video game experience.

The Court also finds irrelevant a series of cases cited by plaintiffs in which copyrighted material was not merely altered, but also publicly re-transmitted in the altered form. See, e.g., WGN Cont'l Broad. Co. v. United Video, Inc., 693 F.2d 622 (7th Cir. 1982) (re-broadcast of television program with integrated text deleted); Gilliam v. Am. Broadcasting Cos., Inc., 538 F.2d 14 (2d Cir. 1976) (public television broadcast of edited work); Nat'l Bank of Commerce v. Shaklee Corp., 503 F. Supp. 533 (W.D. Tex. 1980) (distribution of books with addition of unauthorized advertising materials). In marked contrast, plaintiffs here do not allege any general or public re-transmission of the alleged derivative work by computer users.

Plaintiffs base their allegations of copyright violation on the assertion that, because WhenU ads modify the pixels on a computer user's on-screen display, this modification creates a ''derivative work.'' The Court finds this argument unpersuasive in light of plaintiffs' expert's admission that pixels form part of the hardware of a computer and are owned and controlled by the computer user who chooses what to display on the screen. Plaintiffs do not have any property interest in the content of a user's pixels, much less a copyright interest.

Further, in order for a work to qualify as a derivative work, it must be independently copyrightable. Woods v. Bourne Co., 60 F.3d 978, 990 (2d Cir. 1995). To be independently copyrightable, it must be ''fixed'' — that is, it must be ''sufficiently permanent or stable to permit it to be . . . reproduced.'' See 17 U.S.C. §§ 101, 102; Medforms, Inc. v. Healthcare Mgmt. Solutions, Inc., 290 F.3d 98, 107 (2d Cir. 2002). See also Lewis Galoob Toys, 964 F.2d at 967 (noting that ''[a] derivative work must incorporate a protected work in some concrete or permanent form''); Micro Star v. Formgen, Inc., 154 F.3d 1107, 1111 n.4 (9th Cir. 1998) (noting, by way of example, that covering a television screen with pink cellophane, while modifying the appearance of the copyrighted programs, would not create a derivative work ''because it does not incorporate the modified image in any permanent or concrete form'').

The pixels on a computer screen are updated every 1/70th of a second. The alteration of pixels is therefore far too transitory an occurrence to form a basis for a copyright violation. The appearance of a WhenU advertisement on a consumer's computer screen at the same time as one of the plaintiffs' web pages is also a transitory occurrence that might never be duplicated exactly on that or another person's computer screen. U-Haul, 279 F. Supp. 2d at 731. Accordingly, the WhenU advertisement does not create a work that is sufficiently permanent to be independently copyrightable, and hence does not create a derivative work. Since SaveNow users do not infringe the plaintiffs' right to prepare derivative works, WhenU is not liable for contributory infringement. See Matthew Bender & Co. v. West Pub., 158 F. 3d 693, 706-07 (2d Cir. 1998).

Irreparable Injury and Other Factors

In this matter, plaintiffs have not demonstrated irreparable or even substantial injury. Although they argue that WhenU is ''free-riding'' on their reputation and goodwill, to the extent plaintiffs could demonstrate that WhenU took advantage of their marks to benefit itself without compensation, plaintiffs' injury would be purely monetary in nature, and compensable by paying damages for the alleged unjust enrichment.

Issuance of a preliminary injunction would significantly harm WhenU's business. Injunctive relief would disrupt WhenU's established relationships with advertisers and harm WhenU's ability to obtain new advertisers. Moreover, the harm to WhenU would not only include the loss of client business that would take years to regain, but also the potential, permanent loss of talented and specially trained staff. Issuance of a preliminary injunction would also cause harm to WhenU advertisers, who would lose the ability to have their competitive offers delivered to potential customers by SaveNow simply because those customers view content from the plaintiffs' websites.

Granting an injunction to protect plaintiffs from the rigors of competition also threatens the integrity of the competitive process. Plaintiffs' objection to WhenU's advertising is that it presents customers with alternative choices for procuring the services offered by plaintiffs, increasing the chance that prospective customers will entertain more attractive offers. Federal policy has long favored such comparative advertising and disfavored restrictions on such advertising.

The Court concludes that, based on the evidence presented, a preliminary injunction will cause significant harm to defendant, defendant's clients and users, and the general public. Denying the motion will not damage plaintiffs other than in a manner compensable by an award of monetary damages in the event plaintiffs eventually prevail on the merits. Accordingly, the Court finds that the balance of the equities weighs against granting plaintiffs' motion.

CONCLUSION

Based on all of the foregoing, Plaintiffs' motion for preliminary injunction is DENIED.

November 19, 2003


Notes

l. For news stories about the Wells Fargo decision, see the links shown below in the iframe. To bring back to life dead (a/k/a broken) links, learn to use the Wayback Machine at Archive.Net. Put the URL of the dead link into the window and click on the Take Me Back button.


2. The Wells Fargo court stated:

Plaintiffs base their allegations of copyright violation on the assertion that, because WhenU ads modify the pixels on a computer user's on-screen display, this modification creates a ''derivative work.'' The Court finds this argument unpersuasive in light of plaintiffs' expert's admission that pixels form part of the hardware of a computer and are owned and controlled by the computer user who chooses what to display on the screen. Plaintiffs do not have any property interest in the content of a user's pixels, much less a copyright interest.

In what sense does an end user own the pixels on her computer's screen display? How significant is pixel ownership in determining whether a derivative work is created?



Still another WhenU decision, 1-800 Contacts v. WhenU, is presented below. This decision gives considerable technical detail about how the WhenU system operates.


1-800 Contacts, Inc. v. WhenU.com, Inc.
United States District Court
69 U.S.P.Q.2d 1337 (S.D.N.Y. 2003)
2003 WL 22999270 (S.D.N.Y. Dec. 22, 2003)

BATTS, J.

Before the Court is a Motion for a Preliminary Injunction by Plaintiff 1-800 Contacts to enjoin Defendants from delivering to computer users competitive “pop-up” Internet advertisements, in violation of federal and state copyright, trademark, and unfair competition laws. For the reasons set forth herein, Plaintiff’s motion is GRANTED in part.

BACKGROUND

The Parties

Plaintiff 1-800 Contacts, Inc. (“1-800 Contacts”) sells and markets replacement contact lenses and related products through its web site, located at http://www.1800Contacts.com, and also through telephone and mail orders. Plaintiff has registered the “WE DELIVER, YOU SAVE” mark with the USPTO, and has filed for registration of the mark “1-800 CONTACTS” and the 1-800 CONTACTS logo. Plaintiff has expended considerable sums on marketing these marks. Plaintiff’s sales have grown from $3.6 million in 1995 to $169 million in 2001.

Plaintiff is the sole owner of the 1-800Contacts.com web site. Plaintiff registered its copyright to the 1- 800Contacts.com web site with the Copyright Office of the United States Library of Congress in October 2000. Over 221,800 people visited Plaintiff’s web site in the month of September 2002.

Defendant Vision Direct, Inc. sells and markets replacement contact lenses and related products through its web site, located at http://www.visiondirect.com. Vision Direct and 1-800 Contacts are competitors.

Defendant WhenU.com is a software company that has developed and distributes, among other products, the “SaveNow” program, a proprietary software application.

The Internet and the Windows Operating Environment

Since Plaintiff’s claims arise from alleged anti-competitive and infringing action by Defendants through the Defendants’ use of proprietary software that is distributed to computer users, a brief explanation of the Internet, the computer operating environment and associated terms and definitions is helpful. These facts are not in dispute.

The Internet is a global network of millions of interconnected computers. With a computer that is connected to the Internet, a computer user can access computer code and information that is stored on the Internet in repositories called “servers.” Much of the information stored in servers on the Internet can be viewed by a computer user in the form of “web pages,” which are collections of pictures and information, retrieved from the Internet, and assembled on the user’s computer screen. “Web sites” are collection of web pages that are organized and linked together to allow a computer user to move from web page to web page easily. A single web site may contain information or pictures that are stored on many different servers.

To gain access to the Internet, a computer user generally connects to the Internet using an internet service provider (“ISP”). The ISP provides access to the Internet, which allows the user’s computer to communicate with the Internet. Once a connection to the Internet has been established through an ISP, a user may “browse” or “surf” the Internet by using a software program called an Internet browser (“browser”). Microsoft Internet Explorer is one example of a browser program. Through the browser, a user retrieves information located on Internet servers.12

  12.     With appropriate software, any computer that is connected to the Internet can act as a server, by providing access, via the Internet, to other computer users who are connected to the Internet. Thus, there are many, many servers acting as “hosts” for information that is found on the Internet.

To retrieve information from the Internet, a user may type the address13 of a web site into the web browser – the user’s computer will then request information from the server or servers on which the web site resides, and then will access the pertinent information on those servers.

  13.     The Second Circuit has explained that

Web pages are designated by an address called a domain name. A domain name consists of two parts: a top level domain and a secondary level domain. The top level domain is the domain name’s suffix. Currently, the Internet is divided primarily into six top level domains: (1) .edu for educational institutions; (2) .org for non-governmental and non-commercial organizations; (3) .gov for governmental entities; (4) .net for networks; (5) .com for commercial users, and (6) a nation-specific domain, which is . us in the United States. The secondary level domain is the remainder of the address, and can consist of combinations of letters, numbers, and some typographical symbols. To take a simple example, in the domain name “cnn.com,” cnn (“Cable News Network”) represents the secondary level domain and .com represents the top level domain. Each domain name is unique.

Sporty’s Farm L.L.C. v. Sportsman’s Market, Inc., 202 F.3d 489, 492-93 (2d Cir. 2000).

Many computer users (“users”) access the Internet with computers that use the Microsoft Windows operating system (“Windows”). Windows allows a user to work in numerous software applications simultaneously. In Windows, the background screen is called the “desktop.” When a software program is launched, a “window” appears on the desktop, within which the functions of that program are displayed and operate. A user may open multiple windows simultaneously, allowing the user to launch and use more than one software application at the same time. Individual windows may be moved around the desktop, and because the computer screen is two-dimensional, one window may obscure another window, thus appearing to be “in front of” another window.

A “search engine” is a web site (or in some cases, a software program) that a computer user can use to find information on the Internet.15 Typically, a computer user will type in a word or words describing what is sought, and the search engine will identify web sites and web pages that contain those words.16

 15. Examples of search engines are www.Google.com, www.Yahoo.com and www.AskJeeves.com.

  16.     The Second Circuit has defined the term “search engine” operationally:

A search engine will find all web pages on the Internet with a particular word or phrase. Given the current state of search engine technology, that search will often produce a list of hundreds of web sites through which the user must sort in order to find what he or she is looking for.

Sporty’s Farm L.L.C. v. Sportsman’s Market, Inc., 202 F.3d 489, 493 (2d Cir. 2000).

The SaveNow Program

The following description of the operation and function of the SaveNow software is not in dispute. The SaveNow program is computer software that only operates in the Microsoft Windows operating system. The SaveNow software, if installed, resides on individual computer users’ computer desktops. When a computer user who has installed the SaveNow software (a “SaveNow user”) browses the Internet, the SaveNow software scans activity conducted within the SaveNow user’s Internet browser, comparing URLs, web site addresses, search terms and web page content accessed by the SaveNow user with a proprietary directory,17 using algorithms contained in the software.

  17.     The directory is stored on the SaveNow user's computer as a part of the SaveNow application.

Entering an URL into the browser can “trigger” the SaveNow software to deliver a “pop-up” advertisement. When a user types a search word or URL into the Internet browser, the SaveNow software looks to see what category of products or services the address belongs to. In general, if the SaveNow user’s Internet usage “matches” information contained in the SaveNow directory, the SaveNow software will determine that an ad should be shown, will retrieve a pop-up advertisement from a server over the Internet, and will display that pop-up ad in a new window appearing on the user’s computer screen. More pertinent to this case, when a user types in “1800contacts.com,” the URL for Plaintiff’s web site, the SaveNow software recognizes that the user is interested in the eye-care category, and retrieves from an Internet server a pop-up advertisement from that category. Mr. Naider described the functioning of the proprietary directory contained in the SaveNow program:

[E]ssentially, the program contains a directory of the Internet, and ... has over 40,000 elements in this directory. Elements such as URL’s, but many other elements, such as search terms, something we call key-word algorithms. So an example of a key-word algorithm would be, the software processes the content of the page and if I’m reading an article where the word “diabetes” appears four times and the word “type I” or “type II” in conjunction with that, that would be an example of a key-word algorithm. All of those elements, the URL’s, the search terms, the key-word algorithms, are processed and compared against this directory of 40,000, and growing, elements. And then a decision is made that says, OK, this user is engaged in activity in a particular category – again, it may be hotel travel or air travel, in this case contact lenses or eye care – and the ad units themselves are basically associated with categories, such that if the software detects, by looking at these elements, activity in a category, it may display an ad that’s relevant to that category.

If a SaveNow user who has accessed the 1-800 Contacts web site and has received a WhenU.com pop-up advertisement does not want to view the advertisement or the advertiser’s web site, the user can click on the visible portion of the window containing the 1-800 Contacts web site, and the 1-800 Contacts web site will move to the front of the screen display, with the pop-up ad moving behind the web site window. Or, if the user recognizes that a different web site has appeared on the screen, the user can close the pop-up web site by clicking on its “x,” or close, button. If the user clicks on the pop-up ad, the main browser window (containing the 1-800 Contacts web site) will be navigated to the web site of the advertiser that was featured inside the pop-up advertisement.

The contents of the SaveNow proprietary directory are automatically updated. When a SaveNow user connects to the Internet, the SaveNow software receives information and updates itself without any prompting or conscious choice by the user. The SaveNow software does not store any information about the individual computer user, or track the user’s usage of the computer. Once installed, the SaveNow software requires no action by the user to activate its operations; instead, the SaveNow software responds to a user’s “in-the-moment” activities by generating pop-up advertisement windows that are related to the content of the web sites a user has accessed.

Computer users typically install the SaveNow software as part of a “bundle”19 of other software applications that consumers download at no cost. A user who installs a typical software “bundle” clicks through four screens,20 and to proceed with installing the software “bundle,” is required to approve a license agreement with WhenU, by clicking “I Agree” on the installation window.21 There have been approximately 100 million downloads of the SaveNow program. The SaveNow software can be uninstalled from a user’s computer, and Mr. Naider testified that approximately 75 million people have uninstalled the program.

  19.     E.g. if a user wants a free cartoon character screensaver, in order to get it the user has to accept also the other programs it is bundled with. The screensaver is the lure that hooks the user into downloading the bundled software.

  20.   As demonstrated at the hearing, the first screen encountered by a user installing a typical software bundle is a welcome screen, the second screen contains a license agreement for a screensaver software program (not related to WhenU.com’s software), the third screen contains an opportunity to join an email list for the screensaver program, and the fourth screen describes where on the computer the software will be installed.

  21.     A “typical” SaveNow License Agreement states, in pertinent part:

SaveNow shows users relevant contextual information and offers as they surf the Web. There are a vast number of offers and services available to Internet users that SaveNow may display. In addition, WhenU.com negotiates exclusive offers to maximize value for users. The software’s goal is to show users information about these offers and services – right at the moment when they need it. Offers and information are provided to users by showing a limited number of relevant ads in the form of interstitials (“pop-up ads”) and other ad formats. These offers and ads are shown when users visit various sites across the Internet, based on URLs visited by the user and/or search terms typed into search engines and/or the HTML content of the page viewed by the user. SaveNow ads/offers are delivered independently from the site the user happens to be visiting when they see a SaveNow ad/offer and are not endorsed or affiliated with anyone other than WhenU.com.

The SaveNow software generates at least three kinds of ads – an ad may be a small “pop-up” advertisement appearing in the bottom right-hand corner of a user’s screen; it may be a “pop-under” advertisement that appears behind the web page the user initially visited; or it may be a “panoramic” advertisement that stretches across the bottom of the user’s computer screen.

One of the elements contained in the SaveNow proprietary software directory is the URL, “1800Contacts.com,” which is the Internet web site address for Plaintiff 1-800 Contacts. Since at least the Summer of 2002, when computer users who had the SaveNow software installed on their computers (“SaveNow users”) accessed Plaintiff’s web site, pop-up or pop-under advertisements for Defendant Vision Direct would appear on the user’s screen.

WhenU.com’s clients “buy categories” of goods or services, paying for delivery of their advertisements or coupons to SaveNow users’ screens when the SaveNow users are working in relevant categories. Under some of WhenU.com’s contracts, advertisers pay WhenU.com to deliver pop-up advertisements to SaveNow users’ screens; under other contracts, advertisers pay WhenU.com based on the number of people who click on the pop-up advertisements; still other advertisers pay WhenU.com based on the number of actual purchases made by SaveNow users from pop-up ads that have been delivered to their computers. Thus, WhenU.com has a fee relationship with the advertisers who pay it to deliver pop-up advertisements, and a free relationship with consumers who install the SaveNow software on their computers, but no relationship with the companies on whose web sites the pop-up advertisements appear.

Plaintiff’s Theory of the Case

Plaintiff argues that it has been harmed by the creation of an “impermissible affiliation between Plaintiff and Defendant,” since because of Defendants’ pop- up advertising, users “are likely to have the impression that the pop-up advertisements operate in cooperation with, rather than in competition against, the Plaintiff.” Plaintiff argues the “pop-up advertisements also interfere with and disrupt the carefully designed display of content” on Plaintiff’s copyrighted web site. Plaintiff argues further that the pop-up advertising enables Defendants to “profit illegally from unauthorized pop-up advertisements delivered to Plaintiff’s web site, and that through the pop-up advertisements, “Defendants are free-riding on the name, reputation, and goodwill that Plaintiff has worked so hard to attain.” Plaintiff argues that, by causing pop-up advertisements to appear on the copyrighted 1-800 Contacts web site, Defendants have altered the copyrighted web site, and in so doing, have infringed Plaintiff’s exclusive rights to display its copyrighted works and to prepare derivative works. Plaintiff also argues that Defendants’ pop-up advertising has created a likelihood of confusion between Defendant Vision Direct and Plaintiff, and that since Plaintiff has a valid trademark, Defendants have infringed Plaintiff’s trademark.

Defendant WhenU’s Theory of the Case

According to Avi Naider, CEO of WhenU.com, the SaveNow software was conceived to “revolutionize marketing from implied interest, interests that are deducted [sic] based on who a consumer is and what their personal information is, to actual interests, when you shop, when you travel, when you invest. And that’s why we named the company WhenU.com.” Mr. Naider testified that the way the SaveNow software works is that

the software runs in the background, and it doesn’t require anything of the user. That’s the point. Meaning if the user actually has to go and start saying to the software, OK, fine, offers on travel, they can do that through a search engine. This is a piece of software that is designed to remind the user, to push information to the user. So the user is on the Internet, they’re looking at, let’s say, travel or any other type of activity. The software, in a separate window, will deliver, or it may deliver, an ad to them that’s relevant based on their in-the-moment activity.

Mr. Naider testified that the SaveNow program performs “contextual marketing,” which Mr. Naider defined as “delivering something to a consumer when they need it.” As an example of contextual marketing, Mr. Naider discussed a receipt he had received after completing a grocery-store purchase of, among other things, a lactose-free, non-dairy milk product. Printed at the bottom of the store receipt was a coupon for a lactose-free, non-milk product, which Mr. Naider testified he received because a marketing company had identified his potential preferences from his purchasing behavior.

Mr. Naider analogized the operation of the pop-up windows generated by the SaveNow software to the functioning of several other common software programs. Specifically, using images from computer screen captures, Mr. Naider demonstrated that, in Windows, it is possible to have multiple windows, containing unrelated program applications, running at the same time. Mr. Naider continued, by demonstrating that windows generated by a Windows “instant messaging” application would pop up without warning while he was working in an unrelated spreadsheet program, in order to deliver messages sent over the Internet by friends. Mr. Naider also testified that on his home computer he received messages and alerts from programs, that he had not triggered through any action of his own. Mr. Naider testified that, in general, computer users in the Windows operating environment expect to be working in multiple windows simultaneously, and that in “pushing” information to the user, the SaveNow software was acting much like other software applications that opened new “pop-up” windows. Mr. Naider also testified that the pop-up windows had “no physical relationship with the main browser window,” that the SaveNow software had “absolutely no knowledge” of where the main browser window was, and that the pop-up advertisements did not alter the main browser window in any way.

At the hearing, Professor John Deighton, an expert in interactive marketing, testified that as a result of the structure of the Internet, a new publishing and retailing model has developed. Professor Deighton said the economic investment required to publish on the Internet is much lower than in traditional publishing industries (Professor Deighton testified that “[c]reating a web site is within the reach of a child.”) and that, although 60 percent of the population of the United States is part of the Internet “audience,” “no significant group of that audience is in any one place at any one time.” As a result, Professor Deighton said that a new model has emerged, wherein publishing and retailing have “conjoined,” and that individual web sites are “a combination of publisher and marketplace,” since it is expected that the web sites will be read like a publication, but also an expectation that there will be competition, as in a marketplace. Professor Deighton said that the WhenU software is an example of a model for retailing and publishing that “will return to the Internet some of the cost that was made to build the Internet.”

Professor Deighton also testified that a preliminary injunction in this case would have “some short-term immediate impacts and some chilling long-term impacts.” Specifically, Professor Deighton testified that consumers who had elected to use the WhenU.com software would be frustrated in their attempts to continue to use it, and that competition in the advertising sector might be chilled. Dr. Deighton testified further:

The Internet is not a decade old and we have seen enormous fortunes made and lost. That process must be allowed to continue if the right model to support this wonderful institution is going to be discovered. I think that unnecessarily harsh restrictions on this initiative would discourage others from similar initiatives or improved initiatives.

Avi Naider, the president of WhenU.com, testified that a preliminary injunction would result in damage to his company in excess of $10,000,000 over twelve months. His estimate of this amount was based on current or future advertisers who would cancel their advertising orders in order to avoid negative publicity or possible litigation.

DISCUSSION

Copyright Claims

Plaintiff has filed as an exhibit to its Complaint a certificate of registration with the United States Copyright Office of the “1800 Contacts Web site”; this serves as prima facie evidence of valid ownership of a copyright. This protection extends to both the computer code for the web site and the screen displays of the web site. Harbor Software, Inc. v. Applied Systems, Inc., 925 F. Supp. 1042, 1045 (S.D.N.Y.1996) (finding sufficient expressive choices in the selection and arrangement of information compiled in screen reports and displays to satisfy the minimal requirement of originality to warrant protection).

Plaintiff alleges that Defendants have “copied” constituent elements of Plaintiff’s web site in the “broad sense of invasion of one of the exclusive rights secured to copyright owners under the Copyright Act.” Plaintiff argues that the 1-800 Contacts web site, as perceived by a SaveNow user, appears differently than the copyrighted web site, and that the web site’s appearance has therefore been “modified and that Defendants’ pop-up scheme caused this modification.” Specifically, Plaintiff alleges that Defendants have invaded Plaintiff’s exclusive right to display the 1-800 Contacts web site, in violation of 17 U.S.C. § 106, and its exclusive right to prepare derivative works based on the 1-800 Contacts web site, secured to Plaintiff under 17 U.S.C. § 106(2).

1. Display Right

Plaintiff alleges that Defendants have invaded Plaintiff’s exclusive right to display the 1-800 Contacts web site. Plaintiff argues it gives computer users a license to “use and display” its web site, but does not give them a license to alter the web site or change its appearance in any way. Plaintiff argues that, by delivering pop-up advertisements to a SaveNow user’s computer while the user views Plaintiff’s web site, Defendants create a new screen display that incorporates Plaintiff’s copyrighted work, thereby infringing Plaintiff’s exclusive right to display its copyrighted work.

For this Court to hold that computer users are limited in their use of Plaintiff’s web site to viewing the web site without any obstructing windows or programs would be to subject countless computer users and software developers to liability for copyright infringement and contributory copyright infringement, since the modern computer environment in which Plaintiff’s web site exists allows users to obscure, cover, and change the appearance of browser windows containing Plaintiff’s web site.

Without authority or evidence for the claim that users exceed their license to view the copyrighted 1-800 Contacts web site when they obscure the web site with other browser windows (including pop-up ads generated by the SaveNow program), Plaintiff has little basis for its claim that Defendants have infringed its display right.

2. Derivative Works Right, 17 U.S.C. § 106(2)

Plaintiff also alleges that Defendants have invaded Plaintiff’s exclusive right to prepare derivative works based on the 1-800 Contacts web site, secured to Plaintiff under 17 U.S.C. § 106(2).

Section 106 of the Copyright Act provides that “the owner of copyright under this title has the exclusive right to ... prepare derivative works based upon the copyrighted work.” However, Plaintiff has failed to show that Defendants have created a “derivative work” that infringes Plaintiff’s exclusive rights under § 106(2).

Plaintiff argues that, by delivering pop-up advertisements to a SaveNow user’s computer while the user views Plaintiff’s web site, Defendants are adding a Vision Direct advertisement to Plaintiff’s copyrighted screen display, thus creating a derivative of the Plaintiff’s copyrighted screen display, and in the process violating “two fundamental tenets of copyright law – exceeding the license granted and destroying the author’s control over the manner in which its work is presented.”

For the reason set forth above, to the extent Plaintiff’s derivative work argument relies on a theory that Defendants cause or contribute to copyright infringement by a SaveNow user when viewing Plaintiff’s copyrighted screen display, in excess of the license granted by Plaintiff, this argument fails.

Plaintiff’s second theory is that Defendants have created a derivative work by adding to or deleting from Plaintiff’s copyrighted web site, and therefore have transformed or recast the web site, in derogation of Plaintiff’s exclusive derivative work right. Plaintiff argues that to infringe their derivative work right, Defendants need not have made a copy of the original work in order to create a derivative work, and that to violate its protected right to prepare derivative works, Defendants “need only transform or recast the copyrighted work in some way,” as by “adding to or deleting from” Plaintiff’s copyrighted web site. Plaintiff analogizes the pop-up ads in this case to advertisements added to and interspersed throughout the text of a copyrighted book in National Bank of Commerce v. Shaklee Corp., 503 F.Supp. 533 (W.D. Tex. 1980), which were found to be “unauthorized additions” to the book text, in violation of the book author’s copyright. Plaintiff’s argument fails because Defendants have not created a “derivative work.”

In order for Plaintiff’s derivative work right to have been infringed, the Court must find that the screen display of the 1-800 Contacts web site, with Defendant’s pop-up ads, is in fact a “derivative work,” as defined at 17 U.S.C. § 101.

A “derivative work” is:

. . . a work based upon one or more preexisting works, such as a translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation, or any other form in which a work may be recast, transformed, or adapted. A work consisting of editorial revisions, annotations, elaborations, or other modifications which, as a whole, represent an original work of authorship, is a ‘‘derivative work’’.

In general, copyright protection is limited to protection of

. . . original works of authorship fixed in any tangible medium of expression, now known or later developed, from which they can be perceived, reproduced, or otherwise communicated, either directly or with the aid of a machine or device. 17 U.S.C. § 102(a).

A work is “fixed” in a tangible medium of expression:

. . . when its embodiment in a copy . . . by or under the authority of the author, is sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration. 17 U.S.C. § 101.

Applying the “fixation” requirement here, Plaintiff has failed to show that its web site, and Defendants’ pop-up advertisements are “sufficiently permanent or stable to permit it to be perceived, reproduced or otherwise communicated for a period of more than transitory duration.” Indeed, Defendants’ pop-up ad windows may be moved, obscured, or “closed” entirely – thus completely disappearing from perception, with a single click of a mouse. 40

  40.     The lack of any “fixation” here explains why Plaintiff errs in its assertion that this case is analogous to National Bank of Commerce v. Shaklee Corp., 503 F. Supp. 533 (W.D. Tex. 1980). While in this case any “derivative” work created when a computer user views Plaintiff’s copyrighted web site as modified by Defendants’ pop-up advertisements is not fixed in any tangible medium of expression, the books published with unauthorized interspersed advertisements in Shaklee were clearly “fixed” in print.

Given that the screen display of the 1-800 Contacts web site with Defendant’s pop-up ads is not “fixed in any medium,” it is not sufficiently “original” to qualify as a derivative work under the second sentence of 17 U.S.C. § 101.

The first sentence of 17 U.S.C. § 101 also allows “non-original” works to qualify for “derivative” work status. Since the screen display of the 1-800 Contacts web site with Defendant’s pop-up ads is not a “translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgment, condensation,” for Plaintiff’s to prevail, it must show that Defendants have “recast, transformed, or adapted” the 1-800 Contacts web site. None of these three actions seems to describe what is done to Plaintiff’s web site by Defendants’ pop-up ads, since Plaintiff’s web site remains “intact” on the computer screen. Defendants’ pop-up ads may “obscure” or “cover” a portion of Plaintiff’s web site – but they do not “change” the web site, and accordingly do not “recast, transform or adapt” the web site. Lee v. A.R.T. Co., 125 F.3d 580, 582 (7th Cir.1997) (mounting plaintiff’s art works on ceramic tiles did not create “derivative work,” and therefore did not infringe plaintiff’s copyright). Moreover, if obscuring a browser window containing a copyrighted web site with another computer window produces a “derivative work,” then any action by a computer user that produced a computer window or visual graphic that altered the screen appearance of Plaintiff’s web site, however slight, would require Plaintiff’s permission. A definition of “derivative work” that sweeps within the scope of the copyright law a multi-tasking Internet shopper whose word-processing program obscures the screen display of Plaintiff’s web site is indeed “jarring,” and not supported by the definition set forth at 17 U.S .C. § 101. See id.

Since Plaintiff has failed to demonstrate that Defendants have invaded the exclusive rights secured to Plaintiff under the Copyright Act, there is little likelihood that Plaintiff will succeed on the merits of its copyright claims. In view of this finding, there is no need to address the question of irreparable injury on these grounds.

Accordingly, Plaintiff’s motion for a preliminary injunction based on the Defendants’ alleged infringement of Plaintiff’s copyrights is DENIED.

Trademark Infringement

. . . In sum, as discussed above, the factors weigh heavily in favor of the Plaintiff’s showing a likelihood of both source confusion and initial interest confusion. Having established a likelihood of confusion, Plaintiff has established both a likelihood of success on the merits and irreparable harm on its trademark infringement claim.

. . . Remedies

Defendant uses Plaintiff’s mark within the meaning of the Lanham Act by causing pop-up advertisements to appear when SaveNow users have specifically attempted to find or access Plaintiff’s web site, by either typing Plaintiff’s web address into the browser bar or by typing the Plaintiff’s mark into a search engine. Defendant also uses Plaintiff’s mark by including Plaintiff’s mark and confusingly similar terms as elements in the proprietary SaveNow directory. These uses are likely to cause source confusion and initial interest confusion.

Enjoining the Defendants from triggering pop-up advertisements when SaveNow users type in Plaintiff’s web site address and/or type Plaintiff’s mark into a search engine will prevent Defendants from capitalizing on the goodwill and reputation that Plaintiff has earned through its own investment. Such an injunction will eliminate the likelihood that a SaveNow user will be confused as to the source of the pop-up advertisements that appear when the 1-800 Contacts web site is accessed; it will also eliminate the likelihood that a SaveNow user would be lured from Plaintiff’s web site to Defendant Vision Direct’s web site in the initial phases of the user’s attempts to shop for contact lens products on Plaintiff’s web site.

Of course, an injunction should not impede traffic in the more general free- for-all of the Internet superhighway, where general information is often sought. For example, a SaveNow user who enters a generic term such as “contact lenses” into a search engine is clearly looking for general information, and has not exhibited any preference for 1-800 Contacts. Plaintiff’s web site, as well as Defendant Vision Direct’s web site, may appear on the results page of the search engine along with other contact lens retailers and manufacturers. In this environment, all contact lens retailers including Plaintiff and Defendant Vision Direct, are “on the same page,” and the unique interplay of publishing and marketing provided by the technology of the Internet should be given free reign.

Accordingly, it is appropriate that Defendants be preliminarily enjoined from using Plaintiff’s mark or confusingly similar terms as an element in the SaveNow proprietary directory. It is also appropriate that Defendants be preliminarily enjoined from causing pop-up advertisements to appear when a computer user has made a specific choice to access or find Plaintiff’s web site by typing Plaintiff’s mark into the URL bar of a web browser or into an Internet search engine.

CONCLUSION

For the foregoing reasons, 1-800 Contacts’ Motion for a preliminary injunction is GRANTED in part and in DENIED in part.

Defendants are preliminarily enjoined from: 1) including the 1-800 Contacts mark, and confusingly similar terms, as elements in the SaveNow software directory, and 2) displaying Plaintiff’s mark “in the . . . advertising of” Defendant Vision Direct’s services, by causing Defendant Vision Direct’s pop-up advertisements to appear when a computer user has made a specific choice to access or find Plaintiff’s web site by typing Plaintiff’s mark into the URL bar of a web browser or into an Internet search engine.

Plaintiff’s Motion for preliminary injunctive relief on its copyright claims is DENIED.

Notes

1. 1-800 Contacts did not appeal its defeat on the copyright claim to the Second Circuit 414 F.3d 400 (2d Cir. 2005). But WhenU appealed its loss on the trademark claim. The court of appeals reversed the grant of preliminary injunction on the trademark issues. This is the first court of appeals decision on pop-ups. (There is none on copyright.)

2. The plaintiffs in these cases make the argument against pop-ups and other contextual advertising that piggy-backs or "free-rides" on the content that other Web sites provide. The plaintiffs typically are Web site proprietors who have investment-based expectations in selling viewers the goods or services that their sites feature. Other aggrieved Web site proprietors have investment-based expectations in inducing viewers to click on links to their "sponsored links" – i.e., companies that pay the Web site proprietors ten cents or more each time a viewer clicks on one of the sponsored links that the Web site features. (The lengendary $50 per-click top word is said to be mesothelioma, lung cancer from asbestos – apparently popular with Web-based ambulance chasers and now past $60. For a more recent list of top words, see this site.) Jimmy Wilson of one such Web site encapsuled his grief over having his investment-backed expectations dashed by contextual advertisers in this statement:

When someone comes to [my Web site] Jimworld and the banner is replaced by one sold by Gator, then I have just been cheated out of the revenue that comes from that advertising. Why pay to advertise on my Web site when you can pay these bozos to hack into my content and send you some cheap, stolen traffic. To add insult to injury, they deface my sites with their ugly yellow background colors.

In much the same vein, newspapers that filed a complaint against Gator said that it is "a parasite on the Web that free rides on the hard work and investments of Plaintiffs and other website owners." Like Jimmy, they argue that when Gator delivers pop-ups to the newspaper Web site viewers, Gator diminshes their ability to sell their own advertising.

Would John Locke and Jeremy Betham agree with Jimmy? How would you describe his protected interest that contextual advertisers invade? Does Willow River help you formulate an answer?

3. Is there another side to this? It's always a triangle, isn't it: plaintiff, defendant, and the public? Three sides. OK, what's the other side or sides? Does When-U or Gator have investment-based expectations? Is there a public interest at stake?

4. Here is a Chicago School type of analysis, adapted and borrowed from Professor Stacey Dogen of Northeastern University Law School (speaking about trademark infringement claims based on contextual advertising using trademarks fed into search engines – a slightly different context): What about reducing costs to consumers in obtaining product information, and reducing costs of sellers in identifying and reaching potential customers? Should our legal model (say, in considering fair use) acknowledge the existence of the information that contextual advertising provides and its potential role in reducing one form of information costs in the marketplace? If, as appears to be so, allowing consumer access to this information would reduce producers' costs of accurately targeting their customers, would not marketplace competition benefit? Any improvement in information flows between buyers and sellers, in other words, should make a marketplace more competitive. This approach considers information costs more broadly from both the buyer's and the seller's perspective. Is that better than simply considering Web site proprietors' investment-backed expectations?

5. What if "allowing" consumer access to this information (that is, holding the conduct noninfringing) will make things worse, rather than better, by making it more cumbersome for consumers to find products they're looking for? Suppose that gatoring and the like has the effect of increasing consumer search costs in an amount that outweighs the reduction in information costs for them and producers. Certainly, that could happen if the text of ads creates confusion. But would that really happen or is it just a half-baked idea? Do you suppose that you could figure out a methodology to ascertain and balance off these costs?
 



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