Typosquatting isn't false advertising

Lands' End, Inc. v. Remy, --- F.Supp.2d ----, 2006 WL 2521321 (W.D. Wis.)

Plaintiff sued for violations of the Lanham Act, ACPA, and state law based on its payment of commissions to defendants, as part of plaintiff's affiliate agreement, that allegedly turned out to be generated by typosquatting, in violation of that agreement.

Defendants operate websites such as www.savingsfinder.com, www.poshshops.com, and www.shopperseguide.com. They were Lands' End affiliates. When an internet user clicks on a link on an affiliate's website, connects to www.landsend.com and makes a purchase from plaintiff, the affiliate earns a 5% commission on the purchase. Along with agreeing not to use "infringing" content, affiliates agreed to use links provided by Lands' End network servers or other Lands' End-approved means; if they wanted to use other methods of generating traffic to Lands' End, including third-party serving mechanisms, they needed Lands' End's approval. They were also requried to disclose information about the websites they proposed to link to the Lands' End site, but here defendants didn't disclose their interests in www.lnadsend.com, www.klandsend.com, www.landsende.com, et cetera. (Defendants no longer own or operate these sites, but they did during the relevant periods.)

When a user mistyped the landsend.com URL and went instead to one of defendants' sites, s/he would be redirected to a URL associated with the affiliated website, thus ensuring that defendants got credit for any subsequent purchases. In other words, as far as Lands' End was concerned, those shoppers came from referrals from savingsfinder.com etc. and defendants got a commission for helping shoppers pick Lands' End.

Perhaps to avoid detection, this process occurred only when a user mistyped the www.landsend.com address for the first time. If the user mistyped the Lands' End domain name at any later time, a phony error message would be displayed on the browser, stating that the Lands' End site was "unavailable and may be experiencing technical difficulties." It was difficult for unsophisticated users to realize that they were being rerouted to the Lands' End website through the affiliate URLs.

Eventually, Lands' End "detected unusual referral patterns and payments" made to defendants. It discovered that many of defendants' referrals had originated from typosquatting domain names. By that time, it had made $190,000 in sales to customers directed to www.landsend.com through defendants' websites.

Unsurprisingly, the court denied defendants' summary judgment motion on the ACPA claims. Defendants claimed they lacked bad faith intent to profit because they didn't divert consumers away from Lands' End, but pointed them in the right direction. Still, the court pointed out, they profited from owning a domain name based on plaintiff's famous mark, took active steps to hide what they were doing, and failed to disclose their domain names when applying to become affiliates.

Defendants fared better on the state and federal false advertising claims. (Why false advertising and not trademark? Perhaps because consumers were not in any relevant sense confused by the relationship between plaintiff and defendants. They were looking for Land’s End and they found it; defendants collected a toll from plaintiff on the way, but consumers never knew about that. The second-time-unavailable trick might have prevented plaintiff from making some sales if any consumer mistyped the URL twice, but that would be hard to prove and still doesn’t resemble infringement.)

Anyway, the court found that the Lanham Act claims failed because defendants made no statements to consumers and sold no goods to plaintiff. This is bizarre reasoning towards the right outcome, since (1) omissions can be false advertising and (2) the issue isn’t whether defendants sell things to Land’s End but whether they’re competitors, which they don’t seem to be. The court also held that typosquatting of this sort isn’t “advertising.” Defendants profited, but they did so by not publicizing their activities.

The Wisconsin state law claim also foundered because defendants didn’t make any affirmative representations to the public about merchandise. Land’s End argued that defendants misled it about the source of their referrals, thus positioning itself as a member of the public. The court found an essential distinction between defendants’ behavior towards Land’s End and their behavior towards the public; it is the latter that the state law tries to govern, and defendants didn’t do anything bad to the public. Any misrepresentations directed at Land’s End weren’t statements to the public relating to merchandise.

The breach of contract and fraud claims, also unsurprisingly, survived defendants’ motion for summary judgment.

Defendants had the chutzpah to argue that plaintiff suffered no damages because, absent their activities, customers would have just given up when their mistyped URLs failed to produce a Land’s End website. The court commented that this reasoning was “specious, at best.” Consumers aren’t idiots; an error message would have led most, if not all, of them to recognize their typos and retype the correct address. Land’s End thus lost 5% of the sales made by consumers who initially made typos when it paid an unnecessary commission to defendants.