LAUDER PROTECTS ITS ONLINE TURF
Byline: Vicki M. Young / Kristi Ellis
LOS ANGELES — Is Estee Lauder Cos. going to build an online mall for all its brands? Or will the beauty giant continue its selective approach to e-commerce?
Jeanette Sarkisian Wagner, Lauder’s vice chairman, wasn’t giving away any specifics Tuesday night in Los Angeles at the Fashion Institute of Design & Merchandising, where she gave a presentation titled, “Building and Maintaining a Cosmetic Brand in the 21st Century.”
“We are developing our own concept for e-commerce and we are looking at the possibility of having a site that has all of our brands,” Wagner said. “We will do nothing to put any of our brands on any highway that does not preserve our brand equity in terms of control of the product.”
Wagner stressed that stores remain Lauder’s prime partner when it comes to selling cosmetics. Many Internet users, she added, aren’t surfing the Web to shop, but to gather information to use when visiting brick-and-mortar locations. “They want the contact with the store,” she said.
In an interview after the presentation, Wagner noted that Fred Langhammer, Estee Lauder’s president and chief executive officer, is leading the development of the e-commerce strategy and that it would “evolve over time.”
So far, Lauder has sites for Jane, Aveda, Clinique, Origins and Bobbi Brown Essentials. Only Clinique, Origins and Bobbi Brown have e-commerce components.
The long-awaited Esteelauder.com is slated to go live March 21. Lauder is keeping details about the site under wraps, but it did give beauty editors a sneak preview earlier this week as part of a promotional mailing for its Futurist makeup line.
Included with lipstick, eye shadow, foundation and mascara was a DigiCard, a silver credit card that fits into CD-Rom players. Those who viewed it and clicked the online option were zoomed to a preview site that featured grainy black and white footage of spokesmodel Elizabeth Hurley frolicking on a beach.
Meanwhile, in a decision that could have far-reaching implications for the protection of brands on the Internet, a German court has agreed that use of three Estee Lauder Cos. names as keywords infringed on the company’s trademark rights.
The German court ruled in Lauder’s favor in a trademark infringement suit against Ibeauty.com and Excite Inc., which involved the unauthorized sale of Lauder trademarks by Excite as advertising “keywords.” Similar suits were filed in Manhattan federal court and in a French court.
The trademarks, when used as search terms online, cause banner ads to appear prominently on the user’s computer screen. The ads usually contain hyperlinks to the advertiser’s Web site.
The District Court of Hamburg, according to a press release issued by Estee Lauder, concluded that the sale of the trademarks “improperly exploited the brands’ reputations and constituted unfair competition under German law.” In addition to the e-commerce aspects of the suit, the court also permanently barred Ibeauty from “shipping diverted Estee Lauder and Clinique products from the U.S. to Germany,” the release noted.
The suit, according to a Lauder spokeswoman, was filed in January 1999, and involved the Estee Lauder, Clinique and Origins trademarks. Lauder charged that Excite sold the Lauder trademarks to Fragrance Counter Inc. as keywords to trigger the company’s Internet banner ads. Subsequent to the filing of the suit, Fragrance Counter was acquired by Ibeauty.
The court’s ruling, effective only within Germany, is subject to appeal by the defendants. The court, according to Lauder, granted the company’s request for a permanent injunction barring the defendants from “causing” any of the banner ads to be triggered even if any of the three trademarks appear within the ads. In addition, the court also barred the defendants from displaying either the Estee Lauder or Clinique trademarks within the Ibeauty ads themselves.
Langhammer said in a statement, “We devote significant resources to protecting the value of our brands and trademarks, which are the foundation of our company.”
He added, “We believe this decision sets a precedent in recognizing a trademark owner’s right to control the use of its brands as keywords on the Internet.”
A senior executive for Ibeauty said Thursday, “The decision of the German court prohibiting Ibeauty.com from shipping Estee Lauder’s products to Germany will have little to no effect on Ibeauty’s business, since Ibeauty does not ship these products internationally. Our strategy has been focused on building the premier online prestige beauty site in the U.S.”
The executive added, “We won’t comment on pending litigation,” but pointed out that “German trademark law differs significantly from U.S. trademark law.”
A source said the beauty company had made no decision on whether to appeal the German court ruling.
Excite plans to appeal.
The U.S. and French lawsuits are still pending. The Manhattan suit involves the same three trademarks as the German suit. The French suit excludes the Origins trademark, according to the spokeswoman. Both suits were also filed in January 1999.