Best of 2008: “‘Diversion’: Threat or Menace?” (June)

This was posted on June 25th:
We have written before (as have some judges) about the dubious concept of “diversion,” usually used to rationalize the equally dubious concept of “initial interest confusion,” as well as in cases where claims for tortious interference with contract have been used as a way to protect distribution networks from Internet-based competition. Regarding the former, we’ve argued as follows:

Professor McCarthy, whose views on the topic were relied on in early initial interest infringement cases, is (not surprisingly) aware of this issue. He acknowledges that his original metaphor—a misleading sign on the highway that beckons a driver to an Exxon station, only to deliver the driver, after turning off the main road, to a “Brand X” pump— has been criticized as inapplicable to the Internet context. Consider the metatag case Bihari v. Gross as follows:

Use of the highway billboard metaphor is not the best analogy to a metatag on the Internet. The harm caused by a misleading sign on the highway is difficult to correct. In contrast, on the information superhighway, resuming one’s search for the correct website is relatively simple. With one click of the mouse and a few seconds delay, a viewer can return to the search engine’s results and resume searching for the original website.

McCarthy’s response is that “this is a difference of degree, not of kind,” because of the “unearned advantage” being gained by the one misusing the trademark to get unearned attention in the first place. McCarthy’s point may be a nice one standing alone in a trademark infringement context. But in a broadband trademark dilution world, it proves too much and has given trademark owners too powerful of a weapon to silence dissent or unwished attention. By and large, the main engine of trademark enforcement on the Internet is via what Siegrun Kane calls “the Dilution Solution.” It enables owners of “famous” marks to score damages and attorneys’ fees regardless of whether any harm is done to the trademark owner or even the mark itself.

As to the distribution cases, as we wrote in a brief point that was completely ignored a while back by the Central District of California (it just happens to be what’s handy):

As the court said in John Paul Mitchell Systems, in which it rejected a tortious interference claim based on so-called “diversion,” courts across the country “have been suspicious of the claim that disruption of these exclusive distribution arrangements causes any pecuniary injury . . .”, citing H.L. Hayden Co. v. Siemens Medical Sys., Inc., 879 F.2d 1005, 1024 (2d Cir.1989), Graham Webb Int’l Ltd. Partnership v. Emporium Drug Mart, Inc., 916 F.Supp. 909, 918 (E.D.Ark.1995) (“no basis for concluding that [any] lost sales would be greater than the increased revenue resulting from the availability of the product in ordinary retail outlets”), Matrix Essentials, Inc. v. Cosmetic Gallery, Inc., 870 F.Supp. 1237, 1250 (D.N.J.1994) (rejecting “diversion” claims against purchasers from retailers).

So our view over here is that “diversion” is baloney. And the above completely spontaneous BlackBerry Pearl street photograph lays it all out perfectly — the menacing threat, or threatening menace, of DIVERSION: A woman in a sandwich board standing in front of Sacks Fifth Avenue during summer sale week (we did rather well, thank you) trying to entice buyers to a second-floor deep-discount suit emporium a few blocks downtown. Full disclosure requires that we admit that the moment that resulted in the picture actually motivated us to revisit the topic here.

Look at her diverting people! Wrongfully! Confusingly! They think they’re going to Sacks but she’s saying no, come to Fernando’s Suit-A-Rama for a better buy! They hardly know what to do!

Diversion, right? Riiiiiight.

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Author:Ron Coleman

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