BW ONLINE DAILY BRIEFING

NEWS ANALYSIS	July 6, 1999

Hunting for information on Quixtar, Amway Corp.'s hush-hush E-commerce division that's scheduled to launch Sept. 1? You could zip to its official Web site, quixtar.com, which putters on vaguely about a unique "business model." But your search might also unearth dozens of seemingly related Quixtar outposts that go by such names as quixtar-info.com, my-quixtar.com, or quixtar1.com

None are Amway's, and that has the $6 billion company -- ever conscious of its public image -- on legal red alert. Since the Quixtar announcement last March, the company has aggressively pursued domain-name holders that it says compromise the Quixtar trademark. So far, reports the company, it has contacted more than 700 Web-site operators with complaints that they're misusing the Quixtar name.

And Amway has proven willing to back up its bluster, having just settled its first lawsuit against the registrant of Quixtaar.com, who was taking advantage of surfers who misspell the name to direct them to rivals of Amway products. "There are certain ways we want the trademark to be used," says Amway Deputy General Counsel Mike Mohr. Some Web-site operators contend, however, that the company has gone too far in its efforts to control how the Quixtar name is deployed on the Net.

COMPLEX SYSTEMS. Amway's situation is typical for corporations trying to protect their identities online. As many are distressed to discover, trademarks and domain names are doled out via two separate, complex systems. While companies get protection for a formal trademark via the U.S. Patent & Trademark Office, the mechanism for registering domain names goes unpoliced for trademark infringement. That has led to legal skirmishes between well-known companies and individuals who have -- sometimes unintentionally -- locked up similar-sounding or misspelled domain names.

"Anybody with a browser is in the publishing business," says Mark H. Hellman, intellectual property lawyer at Chicago's Holleb & Coff. "People used to be under the radar of most legal departments. Now they get on the Net, and everyone's aware of who they are."

The stakes are especially high for Amway, which has been battered by a gaggle of unflattering Web sites. It hopes the newly christened Quixtar can help it carve out a separate, well-received, Internet brand. In the recent suit against the operators of Quixtaar.com, for instance, Mohr says "people were complaining. They were being dragged there and realized this isn't Quixtar."

The coyly named Quixtaar did, in fact, sell offerings similar to Amway staples such as vitamins, health supplements, and hair-care products. In an 11-page complaint filed in a U.S. district court in Grand Rapids, Mich., Amway argued that the similar names "are likely to cause confusion, to cause mistake, or to deceive the relevant public…."

"OUT OF A MOVIE." Still, the suit came as a surprise to Brian L. Smith, a 22-year-old aircraft electrician for the New York Air National Guard, who concedes that he registered Quixtaar.com only after learning about Quixtar in May. "It was out of a movie," recalls Smith, a Saratoga Springs (N.Y.) resident. "Someone banged on the door, asked me my name, thrust the stuff in my hand and said 'you're served.'"

Thus began a brief tiff -- with Smith taunting Amway lawyers on his Web site, posting confrontational messages courtesy of naval legend John Paul Jones ("I have not yet begun to fight"), and the rock group Queen ("We Are the Champions"). Smith finally relented. Though he considered challenging the suit, he says he realized "it was going to be a pretty expensive fight," one he wanted "to get out of cheaply." Frivolity still intact, Smith has since renamed the site whoopdeedo.com.

Smith's hunch was right. While the law surrounding domain names is still evolving, courts are increasingly finding against domain-holders who use tricks to divert Web visitors from well-known entities. In April, a U.S. District judge issued a preliminary injunction against Miami's Rafael Fortuny, who shuttled Web traffic from the "wwwpainewebber.com" address to pornography sites. A month earlier, a Virgina court seized the domain "umbro.com" from a Canadian entrepreneur who demanded cash and free equipment from Umbro International, a maker of soccer apparel. "Courts have been really willing to pound the bad guys," says Courtney Bailey, an Internet-law attorney at Finnegan Henderson in Washington, D.C.

"FINE LINE." The issues get murkier for domain-name holders who aren't necessarily out to deceive or hold a company ransom. Take the case of Amwayfacts.com, a pro-Amway site run by James Eddy, a network analyst at Pennsylvania's Three Mile Island nuclear power plant. A three-year Amway distributor, Eddy hoped his information-only site would defend Amway against its Web critics. This May, however, he was asked by Amway to shut down the site, which attracted some 1,500 visitors per day. Though Eddy complied, he's still miffed. "They didn't want the Quixtar information to be disseminated wrongly," says the Enola (Pa.) resident. "I think there's a fine line, and in my opinion I don't feel I crossed it."

Like all Amway distributors, however, Eddy was bound by company rules governing how they can recruit new members, represent their earnings online, and use the Amway name. These rules state, for instance, that the Web sites of Amway representatives must be approved by Amway and must also be protected by a password. Nor is anyone allowed to sign up customers who'll buy Amway products via the separate, Web-only Quixtar, before the site's Sept. 1 debut. So far, says the company, only 150 sites have received Amway's blessing. It's all a matter of quality control that Mohr likens to an advertising agreement between a McDonald's franchise and the corporate parent. "We don't want them going out and saying something about a product that's not backed up by science," says Mohr.

Amway still has far less legal say over domain names at sites that simply exchange viewpoints, or present information on Amway and Quixtar, according to trademark and intellectual property attorneys. As long as such sites engage in legitimate speech, "it would be a fair use" to include the trademark in a domain name, says Bailey, citing a case in which a judge blocked Bally Fitness Centers' bid to close ballysucks.com, the work of an aggrieved customer.

Says Mohr: "If there's no commercial activity on the site and they're just using the site to discuss issues that are newsworthy and don't represent themselves falsely, I don't think we've got a legal problem." He adds, though, that the company would "have a problem" if a site broadcasts "false and misleading" news, as was alleged to have happened at a site titled "Amway: The Untold Story."

UNCONTROLLABLE? Perhaps Amway's greatest challenge will be to enforce its new standards once Quixtar opens its electronic doors. As the site is said to be designed, customers will be able to buy products only upon receiving a pass code from an Amway distributor, thus ensuring that the distributor gets credit for the sale.

Now, consider Amway's existing sales force, 3 million members strong. With each presumably scrambling to sign on as many new members as possible, the situation could prove an unruly, digital scrum, with each trying novel -- and not necessarily sanctioned ways -- to recruit customers. "People are going to get a hold of this [Quixtar], and it's going to be uncontrollable," says an Amway distributor who asked not to be named -- and who recently yanked a Quixtar-related site at Amway's request. For example, he said he could easily skirt the rules that prohibit signing up Quixtar members in advance of Sept. 1. "Let's say I develop a site on a server in Amsterdam. Are they going to come after me? You're supposed to be able to do what you want on the Internet." That's a lesson Amway is already learning.

By Dennis Berman in New York _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _

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