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Lawyer: Estée Lauder’s German Court Win Won’t Help in U.S.

U. S. law may not support a German court’s decision last week banning Excite Inc. and cosmetics retailer iBeauty.com from using Estée Lauder Companies Inc. trademarks Estee Lauder, Clinique and Origins on their sites.

According to a lawyer who specializes in trademark issues, the ruling by the District Court of Hamburg that the use of the Estée Lauder trademarks as keywords to trigger iBeauty banner ads on Excite.com exploited the brands’ reputation would be hard to replicate in the United States.

“Here, all you’re doing with the banner advertising is you’re using that keyword just to make the advertising pop up,” said John C. Cain, partner at Houston-based law firm Howry Simon Arnold & White.

“You’re not diverting the person to you, you’re just advertising next door,” he said. “So under the current trademark law and under the current case law, there’s nothing that prevents that.”

In the judgment made public March 8, the German court banned the appearance of Estée Lauder or Clinique trademarks on iBeauty banner ads.

New York-based Estée Lauder is adamant that it has been wronged by the alleged infringement. It has pressed similar lawsuits against Excite and iBeauty, a Brentwood, NY-based cosmetics retailer formerly known as The Fragrance Counter Inc.

“Consumers can be misled into thinking that iBeauty is an authorized Estee Lauder site,” said Rachel Spevack, global communications manager at Estee Lauder. “It’s not an authorized retailer or distributor of Estee Lauder products.”

Estee Lauder manufactures and markets skin care, makeup, fragrance and hair care products under brand names such as Estee Lauder, Clinique, Origins, Donna Karan, Tommy Hilfiger, Aramis, Bobbi Brown, and La Mer.

Net sales for the company’s second fiscal quarter ended Dec. 31rose 13 percent to $1.24 billion. Estee Lauder brands retail worldwide in over 110 markets.

But it does not allow any third-party retailer except NeimanMarcus.com for the Bobbi Brown line to sell its cosmetics on the Internet. The marketer’s clinique.com, origins.com and bobbibrown.com sites are the sole online e-commerce purveyors of the namesake lines.

In an expansion, the company will next month launch its EsteeLauder.com site for the flagship brand. The site will initially offer only information, though plans are afoot for e-commerce.

Together with Lancome, the Estee Lauder and Clinique lines command a major chunk of the U. S. cosmetics market. All three brands boast a highly conservative retail distribution strategy, preferring to handle direct-to-consumer online sales themselves.

This leaves other online retailers with little choice but to stock smaller brands, or buy the prestigious ones at a higher cost from sources other than the manufacturer or its distributors.

While the German judgment is a win for Estee Lauder, European laws are known to be more conservative than the U. S. variants, especially in Germany where comparative advertising has come under tight scrutiny.

Excite points out that Estee Lauder has yet to win similar injunctions beyond the German market. Estee Lauder first sued Excite in January 1999 for selling the Estee Lauder and Origins keywords to Fragrance Counter. The New York suit is pending with the U.S. District Court for the Southern District in New York.

“Estee Lauder did not get the relief against Excite that it had sought in New York or Paris,” said Excite spokesman Melissa Walia, adding that the German judgment was “subject to appeal and we have intentions to appeal it.”

Last August Excite successfully defended itself and browser Netscape.com in a similar infringement suit from Playboy Enterprises Inc., the Chicago-based publisher of Playboy magazine and Playboy.com.

In that situation, searches on Excite or its sister Webcrawler service on the playmate or playboy words pulled up banner ads of non-Playboy sex sites.

“This is not a case where someone’s typing in … playmate and then they’re getting a banner ad for pails for the beach,” said Jeffrey Neuberger, partner at Playboy law firm Brown Raysman Millstein Felder & Steiner, at the time. “This is a type in playmate and you’re getting an ad for pornography.”

The Federal District Court in Santa Ana, CA, did not grant Playboy an injunction against Excite or Netscape. The court, however, has yet to rule whether Excite infringed the Playboy trademarks.

Around the same time, in August last year, Excite settled a 10-month-old non-legal conflict with Charlottesville, VA-based electronics cataloger Crutchfield Corp. Excite had sold the Crutchfield keyword to rival online retailer Roxy.com, a move that attracted the Crutchfield’s ire.

Crutchfield got ownership of its name on Excite.com in exchange for buying a few other keywords on the portal.

But Estee Lauder may not be so forgiving. The legal victory in Germany set a precedent that would help elsewhere, the spokesman said.

“We have a history of taking action against anyone who threatens our brands and trademarks,” Estee Lauder’s Spevack said. “Our brands and trademarks are the foundation of our company. We take them very seriously.”

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