Network Ad Provider Accused of Deceptive Free-Trial Ads, Trademark Abuse
‘Tis the season for litigation involving free-trial offers online. Only a week after the Senate Commerce Committee held a hearing on its investigation into “mystery charges” associated with purchases at Web retailers, and shortly following a lawsuit against Facebook and Zynga for in-game offers, another suit has popped up, this time involving a network advertising provider. Teeth-whitening manufacturer Dazzlesmile accused Epic Advertising and its Azoogle division of placing ads for its product in a manner that would maximize Epic’s immediate revenue but result in many returned purchases, owing to deceptive ad copy and unfriendly consumer terms.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Trademark allegations are also thrown in, owing to the use of Dazzlesmile’s mark in connection with that of a competitor who is allegedly tied to Epic. Google, Yahoo and Microsoft are named as defendants as well for running that competitor’s ads. Epic’s campaigns focus on cost-per-acquisition sales, meaning it gets paid when Internet users click one of its ads and buy the resulting product.
Epic reached out to Dazzlesmile, pointing to its campaign success with a competing company and promising its methods were above board, the suit said. In particular Epic said it blocked from association with ads “link farms, fraud, websites with objectionable content, and those that spawn exit pop-ups”, and said it wouldn’t use “misleading terms” such as “free” or engage in trademark infringement. Epic talked the company into doing a cost per acquisition campaign where Epic would receive $43 per order and customers would be billed monthly for products if they didn’t cancel within a 14-30 day trial window, earning back Dazzlesmile’s costs, the suit said. Epic designed the ads, including the placement of terms such as the automatic monthly billing.
But the ads resulted in an influx of more than 2,500 orders in a week, from a single publisher out of the 40,000 publishers Epic said were in its network, the suit said. Epic immediately demanded $100,000 in payment from Dazzlesmile, despite the companies’ having agreed to a 15-day payment term. Dazzlesmile reviewed the Epic ads and found its publishers and affiliates were sending spam, posting “fake consumer blogs” and placing other deceptive ads online, the suit said. It also found some ads were “posed as a one-two combination product” that included a Dazzlesmile competitor, resulting in purchasers getting two trials and incurring subscription charges from two companies.
Dazzlesmile started getting 50 to 75 angry calls a day from customers who complained about “reoccurring charges on their credit cards and automatically shipped product,” the suit said. Epic conceded the publisher responsible for those sign-ups had a “smash and grab mentality” but did nothing to change the publisher’s behavior, and Epic resisted Dazzlesmile’s request that the ad landing pages include a prominent “I agree” button and full terms, according to the suit. Contrary to its stated policy, Epic also pressured Dazzlesmile to include an exit pop-up trying to get customers to reconsider when they clicked away, and warned that the publisher responsible for all orders wouldn’t run ads with the proposed changes, the suit said. The companies parted ways less than two months later.
But in the midst of Dazzlesmile’s arguments with Epic, another company was started in Cyprus that Dazzlesmile said had ties to Epic. Farend was created by Jesse Willms, who has settled at least three lawsuits over false advertising and counterfeiting claims, and his 1021018 Alberta Ltd., which does business as Just Think Media, the suit said. The company was a “new public front” for similar but inferior whitening products, and after Dazzlesmile’s campaign was canceled, Farend bought several Web sites incorporating its trademark, such as DazzlesmilePro.com. They included a pen-shaped applicator labeled “DazzleSmile” that’s manufactured in China and lacked mandatory FDA disclosures, the suit said. Farend ran ads touting the “DazzleSmile” products, resulting in the actual Dazzlesmile receiving those returned products from “disgruntled customers.”
Epic actively marketed the infringing sites after Dazzlesmile dropped its campaign, the suit said. “Epic had seamlessly switched from advertising legitimate” products to marketing infringing products, and “copied and replicated a substantial portion” of Dazzlesmile’s site and trial-offer landing pages, “including verbatim text and the general layout” such as fonts and text colors.
Google, Yahoo and Microsoft come in because they carried sponsored ads for the infringing sites and products, the suit said. Though all received a cease-and-desist from Dazzlesmile, ads triggered by the company’s keywords still point to Epic and Farend ads. Ads for the infringing sites are still showing up on sites owned by Epic affiliates and publishers, the suit said. Dazzlesmile said it has received more than 10,000 complaints since its Epic campaign was started, and five to 10 returned products -- many of which “apparently have burned the gums” of purchasers -- that came from the Willms-controlled sites. State attorneys general have also investigated Dazzlesmile over consumer confusion, it said.
Defendants’ conduct has, “in the span of just a few months, destroyed” Dazzlesmile’s name and goodwill, the suit said. Dazzlesmile said the defendants violated federal unfair-competition, trademark infringement, “cyber piracy” and racketeering laws, and also included the search companies under a claim for vicarious infringement -- having profited from the infringing ads. It asked for monetary damages “greatly in excess” of $75,000 for the cost of handling angry customers and for punitive damages.