[Fredslist] FW: Lodging Law - April 2007

Fri Apr 27 15:59:55 EDT 2007

Enclosed please find my article entitled "Keyword Confusion" which
appears in the April 2007 issue of Lodging Law.  Please let me know what
you think. 

Peter M. Ripin, Esq. 
Davidoff Malito & Hutcher LLP 
605 Third Avenue 
New York, New York 10158 
(212) 557-7200 
Fax: (212) 286-1884 

________________________________

From: Maccaro, Jessica [mailto:Jmaccaro at ahla.com] 
Sent: Friday, April 27, 2007 1:03 PM
To: Ripin, Peter M.
Subject: Lodging Law - April 2007

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LEGAL ISSUES + TRENDS - A MEMBER BENEFIT OF THE AMERICAN HOTEL + LODGING
ASSOCIATION 	
WASHINGTON, D.C.
	April 2007 / VOLUME 8 / ISSUE 12 

KEYWORD CONFUSION
ADA UPDATE
CAREER CENTER
CONTACT LODGING LAW

KEYWORD CONFUSION

In Technology & Marketing Law Blog, Eric Goldman lamented that 2006 was
"a bit of a jurisprudential disaster on the question of whether buying
and selling [Internet] keywords constitutes a trademark use...Basically,
courts can't agree..." Fortunately, experts do agree on a few moves
hoteliers can take to protect their valuable keywords.

IT'S A COMMON SCENARIO: A family seeking a vacation at a Best Western in
Miami runs a search on Google by typing in the words "Best Western
Miami". A search results page appears with bold, highlighted listings at
the top and a separate column of listings on the right side of the page
entitled "Sponsored Links". If the family clicks on a Sponsored Link
listing, it will be transported not to the official Best Western Website
but, rather, to an online travel company which also has listings for
other nearby Miami hotels including Best Western's competitors. If the
family decides to book a room at one of these other hotels, Best Western
loses a customer. Even if the family does book with Best Western, the
hotel's profit margin will be significantly reduced because Best Western
will have to pay a commission of approximately 18-30% to the online
travel agency. 

Is this a deceptive business practice? Or simply smart marketing? 

In our example, the reason why the online travel company's Website
appears as a sponsored link when the family types in the search term
"Best Western" is because the online travel company was one of the
highest bidders on the "Best Western" trademarked keywords. As a result,
the online travel agency obtained the right to have its paid listing
appear whenever someone enters Best Western as a search term. Whenever a
consumer clicks through on this sponsored link, the online travel agency
pays the search engine its bid price for the keyword. This industry
known as paid search, "pay-per-click" or keyword advertising has become
a huge money making enterprise on the Web and has accounted for about 99
percent of Google's $6.1 billion in revenues in 2005. 

The question for hoteliers: if a competitor's paid advertisement appears
when someone runs a search on Google using your hotel's trademark, is
this trademark infringement or fair competition? 

The answer is far from academic. PhoCusWright's U.S. Online Travel
Overview predicts that in 2007, for the first time ever, online travel
bookings will actually surpass offline bookings. In addition, Internet
advertising is the fastest growing category of advertising in the United
States with revenues totaling over $12.5 billion in 2005, according to
Internet Advertising Revenue Report. An estimated 50 million U.S.
consumers research travel online every month resulting in online travel
revenues exceeding $60 billion, according to Comscore 2006b. DoubleClick
states that nearly three out of four travel buyers consult search
engines before making a purchase. Indeed, marketing experts have aptly
called search engines the "gatekeepers" for online travel consumers. 

Keyword advertising has dramatic implications for the hotel industry.
Since a hotel's own branded Website produces the highest average daily
rate, it is clearly in the hotel's best interest to drive Internet
business to its own site rather than to an online travel agent.
Accordingly, hotels are increasingly focused on selling their rooms
directly on their own Websites by offering best rate guarantees and
other incentives to avoid the cost of sales through third party
intermediaries. On the other hand, online travel agents seek to divert
customers away from on-line brands to their own Websites to maximize
their profits at the hotels' expense. 

Court decisions on the topic have been far from uniform. In one recent
case, Edina Realty, the largest real estate brokerage firm in the
midwest, sued its competitor, TheMLSonline.com, alleging that it
unlawfully used Edina's mark by purchasing it as a keyword search term
from Google and Yahoo, using it in the text of ads that appear on the
search engines and using it in the hidden links and text on its Website.
In response to TheMLSonline.com's assertion that this alleged conduct
did not constitute a "use in commerce", the Court stated: "While not a
conventional 'use in commerce,' defendant nevertheless uses the Edina
Realty mark commercially. Defendant purchases search terms that include
the Edina Realty mark to generate its sponsored link advertisement." 

In addition, the Court rejected TheMLSonline.com's assertion that its
use of Edina Realty's mark was permitted under a "fair use" defense
known as the nominative fair use doctrine because TheMLSonline.com
allegedly used the mark to advertise the fact that it legitimately
included Edina Realty's listings on its Website. The Court stated that
none of it's uses required the Edina Realty mark; that TheMLSonline.com
could easily describe the contents of its Website by saying that it
includes all real estate listings in the Twin Cities; and that it could
rely on other search terms such as Twin Cities real estate to generate
its advertisement. In addition, the Court stated that the use of the
mark did not reflect the true relationship between the parties. 

Thus, the Court noted that TheMLSonline.com's advertisement placed the
Edina Realty mark in the headline which was underlined and in bold font
while the name of TheMLSonline.com company was listed in much smaller
font at the bottom. The Court concluded that TheMLSonline.com could have
done more to prevent an improper inference regarding the relationship. 

Literally ten days after the decision in Edina Realty, the Court in
Merck & Co., Inc. v. Mediplan Health Consulting, Inc., reached the exact
opposite result. Merck sued a number of online pharmacies alleging
trademark infringement based on the purchase of the keyword "Zocor",
Merck's popular anticholesterol medication, which triggered the display
of sponsored links to Mediplan's Websites. 

The Court held that such purchases did not constitute the requisite use
in commerce of Mediplan's mark stating, "Here, in the search engine
context, defendants do not "place" the ZOCOR marks on any goods or
containers or displays or associated documents, nor do they use them in
any way to indicate source or sponsorship. Rather, the ZOCOR mark is
"used" only in the sense that a computer user's search of the keyword
"Zocor" will trigger the display of sponsored links to defendants'
Websites. This internal use of the mark "Zocor" as a key word to trigger
the display of sponsored links is not use of the mark in a trademark
sense." 

In support of its holding, the Court relied upon decisions in cases
involving 1-800 Contacts, U-Haul, and Wells Fargo but also acknowledged
contrary decisions in GEICO, American Blind, and Playboy. In addition,
the Court noted that it was significant that defendants actually sold
Zocor (manufactured by Merck's Canadian affiliates) on their Websites.
Under these circumstances, the Court concluded that there was nothing
improper in Mediplan's purchase of sponsored links to their Websites
from searches of the keyword "Zocor". 

Although the Court held that Mediplan made trademark use of Merck's
marks in the Google keyword advertising program, it concluded that this
use did not create a likelihood of confusion and, accordingly, dismissed
the complaint. 

As several recent cases demonstrate, the law pertaining to Internet
keywords can be characterized as in a state of uncertainty and flux, if
not total disarray. As courts continue to grapple with these issues, it
appears that, at least for the present, a plaintiff is better off
bringing its trademark infringement lawsuit in California, not in New
York, and is more likely to succeed if its competitor uses its trademark
in the headings or text of its sponsored ad without describing or
comparing the competing product and without offering it for sale. Under
this scenario, a hotel is more likely to prevail in an action against
its competitor than against an online travel agent who is reselling its
rooms. 

In view of these legal uncertainties, what actions, if any, should
hoteliers take to protect their online brands? 

First, they should recognize that while online travel agents are among
the biggest offenders when it comes to keyword advertising, they're also
contractual partners of the hotels. With the dramatic improvement of
fortunes in the hotel industry, hotels no longer find themselves saddled
with a large excess room inventory and are not as dependent upon online
travel companies to sell their rooms as they used to be. Hotels should
take advantage of their improved bargaining position by insisting that
online travel companies respect their trademarks. Specifically, they
should prohibit keyword advertising in their contracts with these
companies and make sure that those prohibitions are enforced. 

In 2004, InterContinental Hotels became the first chain to adopt new
standards requiring its third party distributors to agree, among other
things, not to bid on or purchase placement rights for
InterContinental's trademarks. When it was unable to reach an agreement
with Expedia and Hotels.com on these standards, InterContinental took
the drastic step of severing its relationship with them. 

In November 2005, Marriott International also introduced sweeping new
standards and guidelines for its third party distributors concerning the
use of Marriott's online trademarks. Among other things, the rules
provide that online travel companies "may not bid on keyword terms
containing Marriott trademarks, whether alone or in conjunction with
other terms" and "may not use any Marriott trademark in the text or
title of ANY paid search ad". Online travel companies are given thirty
days notice to correct initial violations. Subsequent violations may
result in the possible suspension or permanent revocation of
authorization to sell Marriott rooms, loss of commissions and/or legal
action. 

Other proactive steps which hotels should take include tracking and
monitoring the use of their trademarks on the Web; becoming the high
bidder on their own trademarks; and when an infringing use is
discovered, complaining to both the search engine and the competitor.
Although Google originally honored requests from trademark owners to
discontinue keyword advertising sales triggered by trademarks, it
changed its policy in April 2004. Presently, Google permits this
practice although if it does receive a complaint, it may require the
advertiser to remove the trademarked term from the text of the ad. In
contrast, in February 2006, Yahoo announced that it would no longer
permit competitor keyword trademark bidding. 

The bottom line is that keyword advertising poses a serious threat to a
hotel's profitability. Since the law in this area is changing as rapidly
as the technology, it's essential that hoteliers obtain sound legal
advice to protect their online brands. 

Peter M. Ripin is a partner with the law firm of Davidoff Malito &
Hutcher LLP in New York City where he practices in the areas of business
litigation and dispute resolution. He has represented numerous
institutions and individuals in the hospitality industry. In February
2007, he presented the first comprehensive survey of law and guidelines
for protecting keywords at the 5th Annual Hospitality Law Conference. He
may be reached at 212-557-7200 or pmr at dmlegal.com. 

ADA Update

THE AMERICANS WITH DISABILITIES ACT was created in 1992 to provide a
federal layer of protection for individuals with disabilities from
discrimination. ADA regulations require public accommodations and
commercial facilities to be designed, built and altered to comply with
accessibility standards. In addition to federal standards, individual
states may have their own disability regulations. 

In one industry case, the Department of Justice reached two agreements
with Bass Hotels & Resorts (BHR) and 20 separate agreements with
individual hotel franchise owners to resolve ADA violations throughout
BHR's Holiday Inn and Crowne Plaza hotel chains. The agreement with BHR
on reservations and rental policies requires that each hotel in the two
chains must: guarantee reservations for accessible rooms as they
guarantee other types of reservations; hold all accessible rooms for
persons with disabilities until 6p.m., at which time they can release
all but two rooms; and compile a list of accessibility features to be
kept at the hotel's front desk, made available to anyone who calls the
hotel. 

The second agreement required BHR to make modifications in three hotels
it currently owns or manages and pay $75,000 to the Key Bridge
Foundation to establish a mediation program for ADA complaints. BHR also
paid a total of approximately $75,000 to the United States and the
complainants to resolve all outstanding issues. Twenty other agreements
with Holiday Inn and Crowne Plaza franchisees were made to resolve
similar accessibility complaints in numerous states. 

The ADA has prompted numerous lawsuits throughout the nation, but
California, Hawaii, and Florida seem the favorite venues. In 1992,
shortly after the introduction of the Americans with Disability Act
(ADA), there were 29 ADA related lawsuits in California. Since that date
there have been over 14,000 ADA lawsuits filed in California federal
courts. 

Like California, other states have laws to protect the disabled, in
addition to the federal ADA regulations. According to Elizabeth Gaudio,
Senior Executive Counsel for the National Federation of Independent
Business (NFIB); Colorado, Texas, Hawaii, Massachusetts, New York,
Oregon, and Florida all have some form of monetary damages provision.
There is no consistency nationwide and in states without companion laws,
businesses are still concerned about compliance and litigation. 

Even the Midwest has witnessed legal action by third party complaints.
In 2005, twenty-six small Wisconsin businesses were targeted for ADA
violations. The law firm behind the lawsuits was based in Florida, and
one of the co-plaintiffs was a Florida disability rights group. A
majority of the businesses hired an attorney, paid for a Wisconsin ADA
expert to evaluate their facilities, made the necessary changes to
remove the barriers, and settled out of court. 

On any given day, a business may be in compliance when its doors open,
but by the close of business, be in violation. All it may take is an
impromptu change; a table is moved to seat a large party at a restaurant
or a paper towel holder falls down and is reattached at a slightly
different height in a hotel bathroom. 

Owners complain that there is no consistency in enforcement. Standards
can change without notice, and local governments often do not check for
or enforce the ADA. However, if a facility is evaluated for
noncompliance, it will be examined by very exacting standards-down to
the inches and degrees. Businesses worry that once an accommodation has
been adjusted there is no certification that indicates compliance to
ADA, and there is no immunity from future suits once a violation is
settled. 

Lawsuits can be brought without prior notification, frustrating business
owners who aren't given a chance to rectify the complaint. On June 8,
2005, a house bill was introduced by Rep. Mark Foley to amend title III
of the ADA, requiring advance notice before filing suit. However, the
bill has not made it out of committee. Advocates suggest that requiring
advance notice will give businesses a chance to work out the dispute
amicably without taking it to the next level and avoiding costly legal
fees for both parties. Critics complain that giving a business prior
notification fuels complacency and does nothing to encourage voluntary
ADA accommodation. 

Insurance companies offer several types of coverage to protect against
third party discrimination and harassment lawsuits. Which option is best
depends on the business. While it is unlikely that any insurance company
will pay the cost of making accommodation repairs, it is quite possible
to purchase a policy that will pay for defense or any fines levied.
Although third party discrimination and harassment coverage is
relatively new it is a necessary component of a comprehensive insurance
program. The expense of new coverages can be discouraging, but the risks
from third parties are not going away and only seem to be increasing in
number and variety. 

Karen Harris is a marketing consultant for Quadrant Insurance Managers
(www.quadrant-us.com), a managing general agency available to agents for
specialty products. She may be reached at kharris at quadrant-us.com. 

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EDITOR 
JESSICA MACCARO <mailto:jmaccaro at ahla.com>  

LEGAL CONSULTANT
BANKS BROWN, ESQ.
MCDERMOTT, WILL & EMERY (NEW YORK)

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