Digital Equipment Corp. v. Altavista Technology, Inc.
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U.S. District Judge Nancy Gertner
MEMORANDUM AND ORDER
I. INTRODUCTION
This case involves a dispute between two corporations over rights and commercial interests on the Internet. Both parties operate electronic services and distribute software over the Internet. The plaintiff, Digital Equipment Corporation ("Digital"), has brought suit against defendant AltaVista Technology, Incorporated ("ATI"), for breach of a trademark licensing agreement, trademark and servicemark infringement, unfair competition, and trademark dilution.
Digital owns an Internet and World Wide Web "search-engine" service known as AltaVista. Digital purchased ATI's rights in its trademark "AltaVista"; Digital then licensed back to ATI the right to use "AltaVista," in certain defined ways, as part of both ATI's corporate name and its Uniform Resource Locator ("URL"), "http://www.altavista.com." The license precludes ATI from using AltaVista as "the name of a product or service offering."
Digital seeks a preliminary injunction, claiming that ATI's Web-site breaches its licensing agreement and infringes its trademark rights in "AltaVista." ATI opposes Digital's motion on the merits and moves to dismiss for lack of personal jurisdiction.
First, I find that this Court has jurisdiction over ATI, whose Web-site, in the context of the specific facts of this case, meets both the statutory and constitutional standards. Second, I find that Digital has met the requisite standards for a preliminary injunction.
ATI is hereby ENJOINED from using the trademark AltaVista in any way that does not comport with the specific terms of the licensing agreement, as set forth in the opinion below and the accompanying Order.
II. BACKGROUND
In December, 1995, Digital, a Massachusetts corporation, launched an Internet search service using the servicemark "AltaVista." Since that time, Digital's AltaVista Internet search service has become one of the leading search services on the Internet and, indeed, one of the most frequently visited sites on the World Wide Web ("Web"). Currently, Digital's AltaVista Web-site receives millions of "hits" (or visits) per day. Digital also markets and sells computer software products and services related to the Internet under names such as AltaVista Directory, AltaVista Firewall, AltaVista Forum, AltaVista Mail, etc. Its marketing strategy, however, did not then include soliciting advertising revenues from advertisers on its Web-site.
At the same time, Digital claims two sources for its right to use the service and trademark "AltaVista": its own use of the mark under common law, and its acquisition by assignment of ATI's trademark rights in AltaVista.
ATI is a California corporation, formerly known as Tree Full of Owls, Inc.; it changed its name to AltaVista Technology, Inc., by amendment to its Articles of Incorporation, in May of 1994. In March of 1996, Digital paid for an assignment of ATI's rights to the trademark AltaVista; it immediately licensed-back to ATI the right to use AltaVista both as part of ATI's corporate name, AltaVista Technology, Inc., and as part of ATI's Web-site address "www.altavista.com." The license agreement, however, precludes ATI from using "AltaVista" as "the name of a product or service offering."
The scope and meaning of this license are hotly contested by the parties. ATI contends that its agreement with Digital was formed with the specific intention of allowing it to benefit from the popularity of Digital's AltaVista, and the strong brand identity the "AltaVista" search service had created. In contrast, Digital maintains that ATI's licensing agreement strictly limited ATI's ability to use "Altavista" -- as part of its corporate name and its URL -- and not as "the name of a product or service offering."
Consistent with its broad interpretation of the agreement, ATI dramatically changed the appearance of its Web-site, moving it markedly closer to the appearance of Digital's AltaVista Web-site. By the time this lawsuit was brought by Digital, ATI's Web-site looked like, and could effectively function as, Digital's AltaVista search service.
As of May 22, 1996, less than two months after the Digital-ATI agreement, a visitor to "www.altavista.com," ATI's Web-site, would see the word "AltaVista" by itself at the top of the page, apparently not attached to ATI's corporate name. One would see an offer of free ATI software. Using a link, one could "click" to receive "demo versions of AltaVista software." One would also have been offered a link to an unnamed "Search Engine" where one could "Search the Internet. . ." This link was to Digital's AltaVista search service.
By August 8, 1996, ATI's page changed again. Again, the visitor would see the word "AltaVista" at the top of the page, again not as part of ATI's corporate name. Below that there was a banner ad selling an unrelated party's products. This time, however, directly beneath the "Search Engine" line were the words "Digital's Alta Vista," rather than merely "Search the Internet. . ."
On the same date as these changes were implemented, Digital's trademark counsel, Lawrence Robins ("Robins") sent ATI's president, Jack Marshall, a letter claiming that the appearance of ATI's Web-site constituted a breach of Clause 1.1 of their license agreement. The letter states:
Use of the "AltaVista" logo, without the additional language "Technologies, Inc." is a violation of Paragraph 1.1 of the Agreement. The sole license granted therein is to use "AltaVista" as part of the corporate name "AltaVista Technologies, Inc." and as part of the URL "http://www.altavista.com."Robins claimed that any use by ATI of "Altavista," including using it as the name of a product or service on ATI's Web-site, and apart from its use as part of ATI's corporate name and as the URL of ATI's Web-site, constituted a breach of Clause 1.1.
Clause 1.1 of the license agreement says:
Digital hereby grants to ATI a nonexclusive, nontransferable license to use the trademark "ALTAVISTA" (the "Mark") as part of the corporate name "Altavista Technologies, Inc." and as part of the URL "http://www.altavista.com," and in accordance with and subject to the terms and conditions of this Agreement, provided that nothing in this agreement shall prohibit Digital or any of its direct or indirect majority-owned subsidiaries from using the Mark or from offering products or services under such Mark to third parties. This License does not grant ATI the right to use the Mark as the name of a product or service offering.
At the same time, Robins put ATI on notice of the possible termination of their license agreement pursuant to Clause 3.1. Clause 3.1 of the licensing agreement deals with quality control: "all products sold and services rendered while using the Mark shall be . . . of such style, appearance and quality as to protect and enhance the Mark and the goodwill associated therewith."
A month later, on September 5, 1996, a visitor to ATI's Web-site would have been greeted by "AltaVista" in large, bold letters at the top of the page, with "Technology" immediately under it in smaller, plain type; beneath this was a banner ad and link through which one could "Search the Net with AltaVista" (again, presumably, but not explicitly, Digital's search service) by "Clicking here." In addition, the site retained a second, clearly designated link to Digital's AltaVista search site, as well as ATI's AltaVista logo by itself in bold near the bottom of the page.
By October 28, 1996, three days before Digital brought its present motion for preliminary injunction, ATI's Web-site had been altered again: beneath the AltaVista logo in big, bold letters (with a small, plain "Technology" placed immediately below it) sat a "banner ad" for an unrelated product; beneath the banner ad is a solicitation encouraging one to "Click here for advertising information-reach millions every month!" Immediately below that sits an almost identical graphical representation of Digital's AltaVista search engine interface (i.e. the appearance of Digital's AltaVista Web-site, including the logo, etc.). Below that is a statement informing users that they can "Search with Digital's AltaVista" (using Digital's AltaVista search engine while still, to all appearances, being at the ATI Web-site). In short, a visitor to ATI's site could easily have the impression that they were actually at Digital's AltaVista site.n12
By October 28, 1996, ATI's Web-site was designed to look, feel, and function very much like Digital's AltaVista Web-site. At the same time, ATI derived revenues from the site and its ties to Digital's Altavista. It displayed banner ads and solicited other advertisers, who could get information about how they, too, could reach millions of users everyday by advertising on ATI's Web-site. Digital expressly eschewed providing advertising space to others for its Web-site at that time.
Digital claims that ATI's Web-site is now a service that provides both a search engine, and advertising space. ATI thus breaches the license agreement by attaching the word "AltaVista" to both of these services. Digital further contends that ATI's Web-site infringes Digital's trademark rights in AltaVista, and that the ATI site constitutes unfair competition both under the Lanham Act § 43(a) and at common law. ATI argues its usage of AltaVista is permitted by its license with Digital. . . .
. . . .
IV. PRELIMINARY INJUNCTION
A. Preliminary Injunction Standard
The granting of a preliminary injunction in actions for trademark infringement under § 43(a) of the Lanham Act requires a showing that: (1) the plaintiff may suffer irreparable injury absent an injunction; (2) equitable balancing weighs in favor of plaintiff when measuring the harm the injunction would do to defendants; (3) plaintiff is likely to succeed on the merits; and (4) public interest favors granting the preliminary injunction.
In the context of trademark infringement, if Digital can show it is likely to prevail on the merits of its infringement claims (and hence has shown it is likely to prevail on the breach of license claim), two consequences follow. First, there is a presumption that plaintiff will suffer irreparable injury absent an injunction. Second, the preliminary injunction will be held to be beneficial, and in the public interest, "given the societal value of full disclosure and fair competition, together with the policy of the law to provide at least minimal protection to established trade names. . . ." Hypertherm, Inc. v. Precision Products, Inc., 832 F.2d 697, 700 (1st Cir. 1987); see also Calamari Fisheries, Inc. v. The Village Catch, Inc., 698 F. Supp. 994, 1015 (D. Mass. 1988) ("Preventing consumer confusion is clearly in the public interest.").
Thus, in the trademark context, the "heart of this test [for preliminary injunctions] is the second and third steps, which present the question whether the harm caused plaintiff without the injunction, in light of the plaintiff's likelihood of eventual success on the merits, outweighs the harm the injunction will cause defendants." Calamari Fisheries, 698 F. Supp. at 1005 (noting that this test applies "particularly in actions arising out of the Lanham Act").
For purposes of this motion, the Court accepts that if the plaintiff can make an adequate showing of likelihood of success on the merits for both its breach of license and trademark infringement claims, it has suffered and may continue to suffer irreparable harm absent an injunction; further, an injunction would be in the public interest, to prevent consumer confusion.
B. Breach Of The Trademark License
The first question is whether Digital has demonstrated that it is likely to prevail on its claim that ATI has breached the licensing agreement concerning "AltaVista." Any "sales of goods or services under the mark which are outside the area of consent granted in the license are regarded as infringements of the mark." McCarthy on Trademarks and Unfair Competition, § 25.06, at p. 44 (3d ed. 1996).n31
1. Terms Of The "AltaVista" License Agreement
On March 19, 1996, Digital entered into an assignment and license-back arrangement with ATI, whereby ATI assigned "all right, title and interest in and to said trademark" in exchange for valid consideration; on that same day Digital granted a license to ATI to use the "AltaVista" mark in two clearly specified ways: as part of ATI's corporate name, "Altavista Technologies, Inc.," and as the domain name of its Web-site "www.altavista.com." The license states ATI shall have the right to use the mark in these two ways "and in accordance with and subject to the terms and conditions of this agreement." The parties dispute the meaning and import of this "and in accordance" clause of the AltaVista "License Grant."
ATI argues that the "and in accordance" language allows for a third category of permitted uses of "AltaVista" in addition to the two specified uses. Digital disagrees; it contends the "and" clause is not permissive, but rather a limitation on the two specified uses. I agree. ATI can use "AltaVista" only in the two specified ways, and then only so long as these uses are in accordance with and subject to the terms and conditions of the license agreement.
. . . .
2. ATI's Breach(es) Of The Licensing Agreement
As of May 22, 1996, on its Web-site ATI used "AltaVista" three times: None of these uses was as part of its corporate name. One use was at the top of the page, in the ATI "AltaVista" logo; a second use was the offer of free demo versions of "AltaVista software"; and below that the third use was a smaller "AltaVista" logo standing alone. All three of these uses likely breached the licensing agreement, as "AltaVista" was used apart from ATI's full corporate name, and as both a trade and service mark. Similarly, on August 8, 1996, there were three uses of "AltaVista" on the ATI Web-site, each of which likely constituted a breach. On September 5, 1996, ATI's Web-site still had three likely breaches, for even though it now included the word "Technology" after "AltaVista" twice, it did not do so as part of the corporate name "AltaVista Technology, Inc." The word "AltaVista" itself was in large, bold type, suggesting it was functioning as a trade or service mark, since it conveyed a commercial, source-identifying impression. The same apparent breaches were in evidence on ATI's Web-site on October 28, 1996.
By November 15, 1996, there was some indication that ATI was attempting to cure these breaches: As of this date, ATI's Web-site used "AltaVista" only as part of its full corporate name; "AltaVista" itself, however, was presented to the user in such large, bold, distinctive letters that "AltaVista" may still have served to function as a trade or service mark, in breach of the license agreement.
C. Trademark Infringement And Unfair Competition
Since it likely breached its license, ATI cannot use that license as a defense to an action for trademark infringement. Having concluded its use of "AltaVista" may well be unauthorized, I now analyze ATI's use of the "AltaVista" mark to determine whether it constituted trademark infringement and unfair competition.n40
The relevant portion of the Lanham Act, 15 U.S.C. § 1125(a), involves false representations:
Under this section, plaintiff is required to prove the following three elements to succeed in an infringement suit: (1) the ownership of a distinctive mark entitled to trademark protection; (2) the use of that name in interstate commerce; and (3) its use by another in a manner likely to cause confusion as to the origin of the goods or services.Calamari Fisheries, 698 F. Supp. at 1006 (citation omitted).
Digital has clearly satisfied the first two of these requirements: It is the owner by use and assignment of the distinctive mark "AltaVista," a mark used in commerce both by Digital and ATI. I turn then to the likelihood of confusion caused by any unlicensed, unauthorized uses of "AltaVista."
"Likelihood of confusion is 'an essential element of a claim of trademark infringement,' whether it arises under state or federal law." Astra Pharmaceutical Products, Inc. v. Beckman Instruments, Inc., 718 F.2d 1201, 1205 (1st Cir. 1983) (quoting Pignons S. A. de Mecanique de Precision v. Polaroid Corp., 657 F.2d 482, 486-87 (1st Cir. 1981)).n41 In Pignons, the First Circuit established the following non-exhaustive list of factors used in assessing the "likelihood of confusion" between marks:
the similarity of the marks; the similarity of the goods; the relationship between the parties' channels of trade; the relationship between the parties' advertising; the classes of prospective purchasers; evidence of actual confusion; the defendants' intent in adopting its mark; and the strength of the plaintiff's mark.Id. at 487. I turn then, to an application of Pignons' eight factors to the trade and servicemark "AltaVista."
1. Similarity Of The Two "AltaVista" Marks
The two marks at issue are remarkably similar; "similarity is determined on the basis of the total effect of the designation, rather than a comparison of individual features." Pignons, 657 F.2d at 487 (internal quotation marks and citation omitted). The Pignons court held:
We and other courts have indicated that in certain circumstances, otherwise similar marks are not likely to be confused where used in conjunction with the clearly displayed name and/or logo of the manufacturer.Id. at 487 (citations omitted). Here, however, ATI's logo, a mountain range through which runs the word "AltaVista," is markedly similar to Digital's "AltaVista" logo. The total similarity between the two marks as they are used on the parties' respective Web-sites is unmistakable.
Courts consider the totality of circumstances surrounding the use of the marks: "Similarity of the marks must be considered in light of what occurs in the marketplace, taking into account the 'circumstances surrounding the purchase of the goods' or services." Calamari Fisheries, 698 F. Supp. at 1009 (citation omitted). Both parties use "AltaVista" as integral parts of Web-sites, both in the context of offering Web search services.
Digital has satisfied its burden of demonstrating that the two marks evaluated in the context of their use on Internet Web-sites offering similar services are strikingly similar in "total effect."
2. Similarity Of The Goods And Services
Both companies provide search engine services, Digital its own, and ATI, Digital's (via a "framed" link thereto). Both companies sell computer software under the "AltaVista" mark. Both companies utilize their Web-sites to advertise: Digital its own products and services, ATI, others'. Their goods and services are for all intents and purposes the same.
3. Channels Of Trade/Advertising/Marketing
"The overlap between the parties' trade channels, advertisers, and markets are three factors conventionally analyzed together." Copy Cop, Inc. v. Task Printing, Inc., 908 F. Supp. 37, 45 (D. Mass. 1995). Here, again, there can be no serious dispute that both parties are now direct competitors in the same trade, selling computer software and Internet services, and that they compete for the same class of prospective purchasers, namely users of the Web. Both Digital and ATI also advertise their own products and services on their respective Web-sites.
4. Actual Confusion
"Actual confusion is often taken to be the most persuasive possible evidence that there is a likelihood of confusion." Id. (citation omitted). Digital has introduced evidence of actual confusion, including a Wall Street Journal article of October 18, 1996, that observes inter alia: "Every day, hundreds of thousands of Web users looking for Digital's AltaVista (www.altavista.digital.com) accidentally call up the home page for Jack Marshall's AltaVista (www.altavista.com)." David Kirkpatrick, Tale of Two AltaVista WebSites Teaches Useful Marketing Lesson, WALL ST. J. (October 18, 1996), at B18. This may be serious actual confusion of users. Advertisers may have also been confused; according to the same article:
There are some advertisers who thought they were buying space on the popular Digital site-which boasts some 20 million "hits" each day. Auto-by-Tel's Mr. Davis says he believed that the two sites were related--until a Wall Street Journal reporter explained the distinction. "Frankly, I wasn't aware" there was any difference, he says.Id. The evidence of actual confusion of both advertisers and consumers obviously weighs strongly in Digital's favor.
5. ATI's Intent In Adopting The "AltaVista" Mark
ATI has attested to the fact that it uses "AltaVista" in anticipation of benefiting from Digital's use of the mark. The license agreement, however, specifies that "any and all use of the Mark shall inure to the benefit of Digital" which is "the sole and exclusive owner of the Mark, and the goodwill associated therewith." I find that ATI has used and uses AltaVista as a trade and service mark precisely to capture some of the benefits of Digital's use of the mark, and goodwill associated therewith.
6. The Strength Of The "AltaVista" Mark
In trademark law, the spectrum of categories into which any mark involving words may fall, "in their ascending order of eligibility for protection. . . are: (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary and fanciful." S.S. Kresge Co. v. United Factory Outlet, Inc., 598 F.2d 694, 696 (1st Cir. 1979). Generic marks are entitled to the least protection (if any), while arbitrary and fanciful marks, such as Kodak or Polaroid, and suggestive marks, like American Express or Visa, are entitled to the most protection against infringement. AltaVista is a suggestive mark, a strong and well known mark into which significant amounts of money and energy have been invested, and as such it is entitled to very strong protection. Again, this factor strongly favors Digital.
All told, there is a strong likelihood of confusion between ATI's AltaVista Web-site and Digital's. ATI's Web-site is a service, one that sells advertising space and software, and also functions as a gateway to Digital's AltaVista search service site. ATI's uses of the "AltaVista" mark on its Web-site are unauthorized and may cause tremendous confusion among Web users, both consumers and advertisers alike.
V. CONCLUSION
Digital has met its burden of proving the likelihood that ATI has breached its license to use the "AltaVista" mark. Preliminary injunctive relief, designed to stop irreparable harm that could be caused by such confusion, is therefore appropriate here. Any harm to ATI caused by this injunction does not outweigh harm that might be done to Digital by the ongoing infringement of its mark.
The World-Wide Web is growing at a tremendous pace, with new sites and multitudes of new users everyday. Digital has acquired the right to control the use of the AltaVista mark, and nothing in its license with ATI allows the defendant to capitalize on Digital's significant investments of time, energy, and money in creating one of the most recognized marks in use on the Web. Moreover, in the Internet arena, where "surfing" (moving quickly from Web-page to Web-page) is a prevalent activity the harm to Digital may be exacerbated. A user "surfing" sites may easily be confused into thinking ATI's "AltaVista" Web-site belongs to Digital. Moreover, it is a harm that may be felt especially in Massachusetts, where Digital is located and where Internet users are therefore more likely to be aware of AltaVista, and correspondingly more likely to be confused by ATI's Web-site.
Confusion may well be lessened by express compliance with the license agreement: ATI's recent efforts at compliance with the license agreement, however, are a classic case of too little, too late.
ATI is therefore ENJOINED as set forth in the accompanying ORDER.
SO ORDERED.
ORDER
After hearing on plaintiff Digital Equipment Corporation's ("Digital") motion for preliminary injunction, it is hereby ORDERED that, until final adjudication of this matter, defendant Altavista Technology, Inc. ("ATI") and its officers, directors, employees, agents, subsidiaries, distributors, dealers, and all persons in active concert or participation with any of them are hereby restrained and enjoined from:
(1) using the AltaVista mark in any fashion other than as part of the URL (i.e., Internet address) "http://www.altavista.com" and as part of ATI's full corporate name "AltaVista Technology, Inc." in which each element of the full corporate name is displayed in the same form including but not limited to size, typeface, and color;
(2) using the AltaVista mark as permitted in subpart (1) above unless ATI's Web page at http://www.altavista.com and every other web page at that site prominently displays the following disclaimer in font size that is at least 4 points larger than the font size of 80% of the text on the Web page and is visible when each such page is accessed:
Altavista Technology, Inc. is not affiliated with Digital Equipment Corporation, AltaVista Internet Software, Inc. or the AltaVista Internet Search Service. The AltaVista Internet Search Service may be found at http://www.altavista.digital.com.
(3) using the AltaVista mark as a trademark or service mark to identify any product or service offering, including but not limited to software products and advertising services;
(4) using on its Web page at http://www.altavista.com or elsewhere, a link (without any search boxes), direct or indirect, to Digital's AltaVista Internet Search Service that creates the false impression that ATI's Web site is Digital's AltaVista Search Service; and
(5) otherwise infringing or diluting in any manner the AltaVista mark or making any unauthorized use of the AltaVista mark.
FOOTNOTES
12 This impression is created by a Web technique known as "framing." Framing refers to the process whereby one Web site can be visited while remaining in a previous Web site. Thus, while still appearing to be at ATI's site, and while still able to view its advertising, one could now have traveled to Digital's site, which would appear inside the "frame" of ATI's site. See Maura Welch, Framing the News, BOSTON GLOBE, February 27, 1997, at D4.
31 It is axiomatic that a valid, licensed use of another's mark would not constitute trademark infringement. See McCarthy, § 18.14, at pp. 64-65. The corollary, that a non-licensed use could automatically constitute trademark infringement, is suggested by Professor McCarthy in the context of licensees not protecting the quality of the products or services sold under the mark. See id., § 25.06, at pp. 44-45 (collecting cases). Digital alleges that the quality of ATI's Web-site, as well as its style and appearance, fail to protect the "AltaVista" mark and the goodwill associated therewith. Accordingly, it contends that the services and products being offered for sale by ATI are non-authorized.
If the license has been breached, it is obviously not a valid defense against a claim of trademark infringement. I turn next to the question of whether ATI's unauthorized uses of "AltaVista" are likely to constitute infringements of Digital's mark.
40 "Unfair competition is almost universally regarded as a question of whether the defendant is passing off his goods or services as those of the plaintiff by virtue of substantial similarity between the two, leading to confusion on the part of potential customers." Boston Professional Hockey Ass'n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004, 1010 (5th Cir.), cert. denied 423 U.S. 868, 46 L. Ed. 2d 98, 96 S. Ct. 132 (1975). Since "the same facts which would support an action for trademark infringement would also support an action for unfair competition," id., I will deal with the two claims in combined fashion, referring to them for the remainder of this opinion as trademark infringement claims.
41 Since servicemarks (which "distinguish one's services from those offered by others") and trademarks are for the most part functional equivalents, "the distinction between the two types of marks is irrelevant... [and] cases discussing either apply." Boston Athletic Ass'n v. Sullivan, 867 F.2d 22, 23, n.1 (1st. Cir. 1989). For the present case it is irrelevant that ATI has used AltaVista as both a servicemark for its Web-site and as a trademark for its software products.
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