Utah lawmakers take another stab at regulating Web commerce

HB450 » Bill would make it easier for companies to stop competitors from taking advantage of trademarks in search engine results.
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State legislators once again are venturing into the thorny realm of trying to regulate Internet commerce with a measure proponents say protects Utah companies from unfair practices.

Opponents say it misses the mark and hurts consumers.

HB450 would allow Utah companies that feel their trademark is being used in bad faith to seek an injunction and attorneys fees in state court. Trademarks are already protected in federal court, but the Utah bill would set up new standards to give companies an easy way to get a remedy and would set a low bar for obtaining an injunction.

After intense lobbying throughout the week, the bill passed the House by a single vote Friday and is headed to the Senate, where a feverish battle is expected.

The bill is being pushed aggressively by Draper-based 1-800 Contacts, which has been the driving force behind some of Utah's other efforts to limit online advertising practices.

The company, which gave about $73,000 to Utah political candidates in 2008, says its competitors are paying Internet search engine providers like Google and Yahoo! to allow them to use 1-800 Contacts' trademark name as a search term. That means a customer who types "1-800 Contacts" into a search might get a handful of competitors listed in the "sponsored links" section of the results.

Joe Zeidner, general counsel for 1-800 Contacts, says that steals business away from the company and harms the company's trademark that it has spent $250 million building and promoting.

"This bill is about protecting Utah companies. It's about protecting property," said Rep. Brad Last, R-St. George, the sponsor of the bill.

But some legislators argued the bill misses the mark by going after the upstart companies buying the rights to the trademark rather than the massive Internet search companies selling the rights.

"We should be going after the Googles that are creating this problem. They're the villains," said Rep. Stephen Clark, R-Provo. "If we're going to use the strength and resources of the state to go after businesses, then we ought to go after the business that is causing the harm. … We ought to go after the Googles with the state's resources and reputation."

But Last said that is impractical.

"Could we go after Google? Yes," he said. "How much would it cost? … We might not have enough money in the state budget."

Over the past five years, Utah lawmakers have tried repeatedly to craft legislation that would restrict the use of trademarks on the Internet. Their efforts have sparked heated legal battles. A 2004 law was struck down and a 2007 law was largely reworked to avoid a lawsuit.

"This is a much better bill," because it is more narrowly targeted says Eric Goldman, director of the High Tech Law Institute at Santa Clara University. But, he says, "it's still a really bad idea, because I'm not clear what problem they're trying to solve."

"We have no evidence that competitive advertising based on a competitor's trademark harms consumers one bit," says Goldman. "This has never been about protecting consumers. Then we come to the question of, 'Should we still restrict competition even though we have no evidence that consumers will benefit?' and normally the answer is no."

Several Utah companies, like Lehi-based XanGo, support the legislation. The Utah Technology Council, which comprises hundreds of Utah technology companies, wrote to legislators opposing the bill, arguing that the bill "will severely hamper Internet commerce in Utah."

Dozens of lobbyists are working on both sides of the legislation. One lawmaker, Salt Lake City Democratic Rep. Jennifer Seelig, is employed as a lobbyist for 1-800 Contacts, although she has said in the past she does not lobby the Utah Legislature.