AOL Claim To Ad.com Is Based More On A Pending Trademark: The Inside Story
DomainNameWire.com broke the news today that the owner of Ad.com, Marcos Guillen filed a lawsuit against Directi and Skenzo for refusing to close on the purchase of the domain name Ad.com at the Moniker.com TRAFFIC show auction.
I have know about the situation for quite a while, and even alluded to it yesterday in my nominations for Domainer of the year.
As way of background, AOL bought advertising.com back in 2004 for $435 Million dollars.
This is where this problem started.
AOL claim on the domain ad.com, is based on much more than a pending trademark application.
The problem is that advertising.com has become to be commonly known, in the advertising industry, as ad.com.
Here are just a few examples of what I’m talking about:
From a Media Week article from last month:
“”"Dave Katz, head of trading at Media Contacts:
“The decision to change it to AOL Advertising was clearly a decision to realign itself back to Ad.com, which is part of the division and a brand more people recognise and a way to make the division clearer to understand.”"”"
From a Business Week Artcile back in 2006:
“”"On Aug. 2, Time Warner is expected to announce a plan to tie AOL’s fate even more tightly to advertising, phasing out $2 billion a year in already-shriveling subscription revenue. Such a radical move would be unthinkable without Ad.com, which provides almost 20% of AOL’s ad revenue. Its sales doubled to $259 million between 2003 and 2005.
Even with Ad.com, AOL’s plan is a stretch. Ad.com will need phenomenal growth to cover just half the lost subscription profits. But without it, AOL would be toast. “If AOL had not purchased Ad.com, I don’t think there would be an AOL today,” says Jeff Lanctot, general manager of Avenue A/Razorfish, the largest Internet ad agency.”"
From the Baltimore Business Journal in an article from this year:
“”"”Some industry analysts said the companies will be received favorably despite the fact AOL’s revenue — including that from ads — has been falling.
But even though Ad.com was a strong foundation for a once growing advertising business model for AOL, the company has taken a large brunt of the recession’s impact because its ad network is less profitable than others, one analyst said.
It could take a less significant role within AOL regardless of whether Time Warner ultimately goes through with a sale.
Ad.com runs a network of ad space across the Internet, through which it sells to advertisers access to particular demographics. It also earns money when its ads prompt consumers to take actions such as requesting more information about a product.
AOL said the company was a significant piece of its strategy when it formed a new ad unit, Platform-A, in 2007. Ad.com’s network makes up a large chunk of AOL’s online ad space.
It’s unlikely Ad.com would be parceled out from Platform-A and AOL and sold on its own again.”"”
There are a lot of stories, just like these in the media world, where AOL’s advertising.com is referred to as ad.com.
My understanding of the case, is that AOL, based on industry “usage”, believes it has a claim to ad.com as advertising.com has been commonly known as ad.com in the industry.
As you know you can obtain trademark rights by filing a application, or by common law usage.
Although harder to prove a common law usage claim is eligible for protection under the Lanham Act.
The fact that many third parties acknowledge that common law usage, will certainly be a factor in determining the validity of the claim.
My further understanding of the case is that AOL will claim it notified the owner of Ad.com, well before the Moniker.com auction, of its claim of right to ad.com, but the owner of ad.com, may or may not have gotten the notice.
Obviously it’s a very unfortunate situation for all parties.
The Seller, the Buyer, the auction house (Moniker.com) , the show organizer and the domain industry as a whole.
I would look for someone, in this suit, most likely the defendant, to bring AOL, which is owned by Time Warner, into the suit as a third party defendant.
Look for this to be a very long, drawn out expensive litigation.
I have been telling domainers for a while, that claims of trademark and rights in and to generic words is going to be a huge issue for them.
This case, is one of the reasons and examples of why I have been warning domainers.
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There is one and only one correct fact that will define (and decide) this entire case regardless of how protracted the battle. Advertising.com is NOT, and was not, Ad.com. AOL can make all the insinuations and claims they want. They owned Advertising.com only. They do not have rights to Ad.com.
Fast forward to the end. They have no rights, no claim.
Max
Let’s face it, Divyank is one of the smartest guys I have ever met, and certainly one of the brightest guys in the domain world.
So lets not minimize the very difficult decision he made to forgo a domain he really wanted, and was willing to pay $1.4 Million for, knowing he would face huge legal fees, by simply saying AOL has no rights or claims to the domain.
Like every cola soft drink is asked for by Coke. Ridiculous but you can’t waste years of your life and hard earned money fighting a 200 lb. guerilla.
AOL’s problem is that AD is a term used by everyone on order forms and contracts for what advertisers buy. Are they going to prevent Google from using the word Ad in describing what they sell? It’s like a QUART of milk or a PINT of beer. Everyone uses PINT to order Beer so can one person own it.
Mike you are right. If you plan to keep what’s yours you need to build retainers for top legal talent into the budget the way Frank and Electra do.
Owen
Just to be clear, my understanding is that AOL would not say they have a right to the term “ad” but they would claim their product, advertising.com is known in the media world as “Ad.com”
You can read the articles I cited, there are probably hundreds more.
Some of the questions that will have to be answered in this suit are:
Why did the owner of the domain ad.com, allow the AOL advertising.com product to be called ad.com, interchangeably in media publications?
Did AOL send the the owner of ad.com notice prior to the auction of AOL claim to the domain?
Did the owner of ad.com have constructive notice of AOL’s claim prior to the auction?
AOL will lose this case if it goes to trial (regardless of who the owner is at that time).
Sadly; and unfairly; it’s going to cost Marcos plenty to hold on to what’s rightly his … and given what a trial will cost AOL, they ought to just buy it for the 1.4 mill.
Very unfortunate situation for all parties.
The only question I have is if you were going to spend 50K, 500K, or 1.4 million wouldn’t you have done due dilligence prior to buying it.
I think the buyer made a mistake and should accept responsibility for it. Regardless of the issues surrounding the name, the issues were there prior to the sale.
Steven
Maybe
Yet if the AOL notified the Seller of its claim before the auction, the Seller may have responsibility as well for putting it in auction without disclosing the claim.
I think you will find out this is going to be a pretty complicated case full of “factual issues”.
Is the trademark really the issue here? Ad.com is a generic domain name, a “prima facie case of genericness”, like Hotels.com (http://legalblogwatch.typepad.com/legal_blog_watch/2009/07/at-last-we-know-hotel-is-generic.html). There is no trademark, the AOL trademark application remained refused by the USPTO.
$1.4M is a lot of money, perhaps someones got cold feet?
AOL has just filed a suit against Advertise.com:
http://dockets.justia.com/docket/court-vaedce/case_no-1:2009cv00910/case_id-245380/
It’s hard to predict which way the letter of the law will weigh in. With some of the recent decisions made on generic TM for Hotels and the opendental.com blunder, who knows what’s going to happen. It’s like rolling the dice.
MHB,
The seller was not notified; as per Moniker’s Terms the seller had a duty to inform Moniker of any such claim prior to listing the domain for sale, it obviously didn’t happen. They would have offer the domain name to AOL otherwise, it’s much easier, and cheaper.
RTH
The notice the owner of the domain might have received from AOL, might just have been a demand for the domain, not allowing the owner to sell the domain to AOL.
Moreover, there maybe in issue as to whether the owner of the domain actually received the notice that AOL sent to him.
I really do not believe it is a case of the buyer getting cold feet.
The notion that someone can just start using your generic domain name without your permission, claiming it later as a “common law trademark” will make domain owners blood boil.
So, is Divyank endorsing that view? Is Directi endorsing that view? Really? OK, but I wonder who would want to park a domain name with Directi after the dust settles on this. What if Big Corp wants your domain namet? Kiss it good bye, Directi will stick it to the little guy. Breach of contract? Good luck suing them in India.
So much for Directi motto, “intelligent people, uncommon ideas”. Breaching contracts when it suits you is not that intelligent, not that uncommon.
Karl
Personally I think that your looking at this the wrong way.
“The notion that someone can just start using your generic domain name without your permission, claiming it later as a “common law trademark” will make domain owners blood boil.”"
Sure but where was the Seller when this was happening.
If you own a domain and businessweek or mediaweek or plenty of other publications say that your domain is owned by someone else, shouldn’t you object?
Why blame Div in this?
He never owned the domain, it wasn’t his responsibility to defend a domain he never owned.
Didn’t the owner have a duty to disclose a claim on the domain?
It seems to me that the lawsuit is misdirected. The Seller should be suing AOL for tortious Interference with a business contract, especially when there is not only no trademark involved, but the trademark was DENIED by the USPTO.
Howard
I think the Seller would have a much tougher case against AOL and a much more expensive one.
AOL now that is has filed suit against advertise.com (see George’s comments above) would have counter-sued the owner of ad.com for sure if they were sued.
Directi and Skenzo will have to bring AOL into it.
MHB,
I’m not following you. Is the seller a businessweek reader? Is he an advertising professional? No, but Div is.
Div owns an advertising company, Skenzo, and he certainly knew what he was doing when he was buying that domain name.
@MHB – “Divyank is one of the smartest guys I have ever met”. Definitely agree Mike. Actually, my statement was not about Divyank at all. Him deciding to not proceed, in my mind, is a completely separate issue vs. dishonest parties seeking a trademark on Ad.com.
To clarify, my position is that the seller of ad.com is the only one with a legitmate claim to that domain. The branding and marketing under Advertise.com does in no way confer rights to the domain, AD.COM. I understand that people in the industry may have referred to advertise.com as “ad.com” as sort of a convenient slang term.
I am almost certain that such use WILL NOT be determined by a court as sufficient to assign rights to the word “ad” … and by extension rights of registration to the domain AD.COM.
For a court to strip the registrant of Ad.com of his registration rights based on some slang, unofficial use of that term by a small subgroup is unthinkable. I don’t mean to trivilize the complexity of the case, but I do not see any defensible legal right for Advertise.com to legitimately claim & forcibly take AD.COM.
The two are not synonymous. They have existed as separate entities. So all of this is a legal manipulation to steal a property to which they have no right.
The needless damage is being done to the seller, and the buyer, as well as Moniker who provided the auction. The other parties appear to be exploiters and manipulators of the trademark and legal system. Correct me if I have it wrong.
Also, there are other questions, did AOL notify ‘Ad.com’ registrar prior to the auction? It was Directi, Divyank’s company. If AOL failed to reach the original domain owner, it follows that they would have try reaching Directi, as per ICANN rules. Did they?
Divyank may have walked into the auction room knowing full well about the claim before the auction. The AOL claim may be baseless, but as a get-me-out-of-here card it’s priceless.
Karl
You want to lay all the blame on the Buyer, the one that had no control over the situation and lay none of the blame on the Seller, who was the only one in position to stop AOL from establishing common law rights to the term ad.com.
Interestingly, the creation date of both Ad.com and Advertise.com pre-dateAdvertising.com. That alone should be proof that AOL is over-reaching here. If there was any real justice, the court would strip AOL of its trademarks and hand Advertising.com to the respondent just for shits and giggles. Chances are though that AOL will turn this into another Nissan.com, costing the owner a fortune in unrecoverable legal fees. At least in most countries, outside of the U.S., the winner is awarded legal costs, which is a good deterrent to big business badgering the little guy for eternity.
Max
The owner of ad.com, may have sat back for years and allowed the media, in story after story to refer to advertising.com as ad.com.
Maybe the owner of Ad.com notified each of these media outlets that he owned the domain ad.com and not AOL but it appears he did not.
I think if Div thought there was no way in hell that AOL would win the suit he would have went through with the purchase.
I do not think there is a zero percent chance that AOL could win this.
Now they have gone after advertise.com and in that complaint they clearly state they have a common law trademark in ad.com.
“they ought to just buy it for the 1.4 mill.”
We’ren’t they a bidder at the auction? If I remember rightly one of the bidders was said to be a big advertising company.
Buying it for $1.4million may well be the plan. Get the buyer out of the picture with legal threats, then “settle” for $1.4million.
Chris
I agree with you on the attorney fees issue.
Here is the US someone can sue anyone for anything and you have to pay to defend it.
In a case like this your looking at hundreds of thousands of dollars in fees to start doing battle with AOL.
Snoopy
If that was the case, then your saying, AOL bid up to $1.3 but wouldn’t go to $1,450,000? I don’t think so.
Everyone, please start calling me G.com !
G.com
Now that I have read through the advertise.com suit, its clear that my initial post on ad.com was correct.
AOL is claiming a common law trademark in ad.com and an actual registered trademark in advertising.com
How long before AOL sues Ad.com?
The over/under is tomorrow
MHB
Of course I lay blame on the Buyer. He run-up the price of the domain name agaist other buyers, perhaps against AOL itself. Divyank is an industry professional, “one of the smartest guys” you have ever met. He knew what he was getting into, a fight with the big guys, and when the big guys answered they tried to get away. But when the hammer falls the sale is final, period.
LOL @ G.com
Another benefit of the winner being awarded legal fees is that attorneys can choose to represent a client on a success=payment basis. That is, if the client has no money for a legal battle, but the attorney believes they have a strong case, he might represent the client and only take his fees if they win. Even if the court doesn’t award any monetary damages, the lawyer will still get paid.
AOL claiming common law rights to Ad.com is asinine. It’s obviously an internet domain that they have never owned. Clear over-reaching.
This case is about outspending the lawful registrant of ad.com in a financial war of attrition. What is crystal clear here is that AOL will rape and pillage, and have zero concern with their public image.
For a Federal court to validate AOL’s claim would be a trademark Armageddon unprecented.
Karl
I disagree with you that its always “buyer beware” and seller has no responsibility.
It depends on all the facts and circumstances with neither one of us know at this point.
Max
Just to be clear I do not believe the court should buy the argument of AOL, I’m just saying that I think they have a better than zero percent chance of winning.
What’s your take on the advertise.com suit?
MHB
Are you the buyer’s lawyer?
Seriously, you must realize how serious this is. This goes well beyon Directi or AOL.
Should AOL succeed preventing the sale of Ad.com, the whole domain name industry is toast. Auctions? toast. My-generic-name.com? It’s as good as gone if someone with financial muscle wants it.
Directi coward response to AOL claims could put a halt to the domain name tradingindustry until resolved. This can not be allow to happen, parties like Directi can’t not be allow to breach contracts just because AOL lawyers are overexcited. Directi, the big company should say ‘No’ to AOL, pay up, and meet AOL in court, not the seller. After all, how many of us depend on Directi to hold to our domain names? We expect better from them
AOL is in desperate mode and grasping at last straws. With Google selling the its’ shares and taking loses. This may be the beginning of the end for AOL.
Karl
This is extremely serious and I have been warning domainers for some time about over reaching by trademark holders, just to be told I was trying to unfairly invoke fear in domainers.
Read through some of my ICA posts and comments to ICANN.
What should have happened here, is that the Seller and Buyer should have joined together and sued AOL, as Howard said above, for interference with a contractual relationship.
All I’m saying is between the Seller and Buyer, there are many issues and I’m not going to lay 100% fault on the buyer’s doorstep without having all the facts.
Dan
This is not the beginning of the end for AOL, Time Warner the parent company of AOL, announced plans to spin AOL back off this fall as a separate operating entity.
This is no doubt what is behind AOL’s action:
http://www.thedomains.com/2009/05/28/time-warner-to-spin-off-aolcom-later-this-year/
“What’s your take on the advertise.com suit?”
Pure speculation on my part, but my hunch is AOL is desperate financially. AOL subscribers dwindling, and PC World ranked AOL as LAST place in search engines. This maneuver on their part seems to me a last ditch gamble to salvage what’s left of AOL by trying to stay relevant in online advertising. No one gives a sh*t about AOL and they are headed for the exit door pretty soon. They know online advertising is the future and they’re lunch has been eaten. So AOL are trying to go after what they consider smaller, weaker players to bolster their future online ad position. Sickening.
They’re trying to steal money & high profile domains (Advertise.com & Ad.com) in a attempt to retain some online relevance.
I read this as not a viable threat, but a pathetic desperation play based on analysis of shrinking numbers within AOL.
I’m sure lots of details I’m missing. But the bigger picture is AOL have no claim and most everyone knows that or will very soon. Like George said, he’s claiming G.com! LOL. AOL have always been bottom of the barrell, and this is their new low.
Max
As I said above I think this is related to the AOL spin off later this year
I agree with Max – AOL is circling the drain and this is their last-ditch effort to reposition themselves in the advertising industry before they’re in the sewer. My guess is that TimeWarner split with AOL to distance themselves from the impending implosion.
What impact does the recent hotels.com ruling play into this, would it be fair to say that this is in the same classification for trying to trademark a generic name?
MHB,
Do we know if Divyank knew about this situation prior to the auction?
Do we know if Moniker knew about this situation prior to the auction?
What did the seller know or didn’t know prior to the auction?
I think answering these questions will tell us who is to blame.
Yaron
Exactly
We don’t know who knew what when, so you can’t lay this on anyone’s door right now.
However we do know that there were plenty of articles in publication while the seller owned the domain that called AOL product ad.com.
We do not know what the Seller did about this, but if they did nothing then (which is logical to conclude as media outlets like businessweek.com would typically publish a correction, if they made a misstatement of fact) then the Seller bears a good degree of responsibility.
Don, I’d say that the Hotels.com ruling is a very important precedent – if Hotels.com lost on appeal to a federal circuit court, surely that must have some weight here. I really hope AOL has its trademark revoked, as has happened in a couple of cases in the past.
Don
I agree with Chris the Hotels.com decision is very important for this case.
Well, I would assume this should weigh in the favor of ad.com and advertise.com and would guess their legal teams could probably use this as an attempt to have the cases quickly discharged, this would be my legal course of action as I think it such a recent/relevant case and cant imagine a better legal comparison
Don
Except this is not the same case.
Hotels.com was an appeal of the trademark board not allowing a registration to be made.
AOL claim here is trademark infringement of a registered mark, advertising.com and a common law mark in the term ad.com.
Not the same
Devils advocate….
So you think corporate lawyers and their law firms and parent company general counsel would launch lawsuits that had no merrit? of course, cause this marcos guy is a saint, right?
Archive.org shows ad.com used to go to an artificial inteligence website. Surely aol doesn’t have a probelm with that….but if someone started putting advertising related stuff on it then its infringing on common law rights. If ad.com was bought by a non-advertising company because it was their initials then there probably wouldn’t be a problem.
And this guy marcos…something tells me he knew what was going on before the auction…maybe the auction folks too. Publicity anyone???
will be interesting to see all the facts and have real trademark lawyers chime in.
OK lets sum up
What is Div losing now:
reputation
cost for two lawsuits
chance to become a famous hero fighting (and winning) AOL
What he could lose if he went on with the sale:
about one month of his income (low probability of actual loss)
costs for possible litigation against AOL
Whats interesting the domain has been in previous auction with reserve less than $500K and it DID NOT SELL. I was laughing my arse off how Schwartz & comp. pumped naive Div into 1.4M bid, I saw on his face immediately after the auction how he realized he was manipulated like a small kid.
I don’t think AOL is trying to get this domain name, looks like they’re just protecting their space which they should be allowed to.
Doesn’t look like there were sites on ad.com or advertise.com while advertising.com has long been known in the industry. If its confusingly similar to the end user, then it could be a problem in the same space.
Where are the TM lawyers at?
Isn’t Howard Neu biased? Like a partner with Oversee or something?
D
I think your underestimating Div’s potential loss.
Legal fees in this type of case against a company like AOL, will easily be in the hundreds of thousands and could get into the seven figures.
He could also lose the domain and the $1.4 M.
Remember he is a different position than the Seller, especially if he was placed on notice by AOL before the sale closed