Cosmetics giant Mary Kay Inc. is taking Yahoo Inc. to court over the Internet search engine’s alleged insertion of links into certain e-mails to unauthorized sellers of Mary Kay products, court documents say.

In documents filed July 6 in federal district court in Dallas, Addison, Tx.-based Mary Kay alleges that when its employees and independent beauty consultants send e-mails to Yahoo Mail users, Yahoo sometimes inserts links and pop-up ads for both competing companies and unauthorized peddlers of Mary Kay cosmetics into the text of the e-mails.

Neither the Mary Kay employees nor the company’s independent sales agents were aware that Yahoo has been doing this, Mary Kay’s suit says. The lawsuit does not specify when Yahoo began the practice, or why, but contains printouts showing some of the ads and links that were inserted into e-mails.

Mary Kay is seeking a court order forcing Yahoo to stop the alleged practice, along with an award of any profits that Yahoo has reaped from it. Mary Kay’s suit claims that Yahoo is engaging in trademark infringement, trademark dilution and unfair competition, among other things, court records say.

In an e-mail, a Yahoo spokesperson declined to comment.

“When folks purchase Mary Kay products from an unknown source ... no one can verify the quality or freshness of what the customer is receiving” says Crayton Webb, a Mary Kay spokesman. “Our biggest concern is the unauthorized use of the Mary Kay trade name.”

Webb says there are “a number of dangers to the ultimate consumer” if Mary Kay products aren’t purchased from a member of the company’s sales force. For instance, he says, unauthorized sellers may not provide the company’s satisfaction guarantee. That, court documents say, provides for a replacement, exchange or full refund for any Mary Kay product sold by one of the company’s sales agents, dubbed “independent beauty consultants,” in the event the purchaser isn’t satisfied with the product.

Webb says he doesn’t have numbers to quantify the extent of the problem of unauthorized sellers of Mary Kay cosmetics, but adds that it is “of great concern to us.”

“This is about protecting our good will, our sales force, and, of course, the ultimate consumer,” he says.

According to court documents, Mary Kay is upset that Yahoo is inserting hyperlinks into the text of e-mails sent via its mail system. Hyperlinks are underlined words or phrases in the text of e-mails or Web pages that take the user to a new screen or Web page.

In addition to hyperlinks that jump to the Web pages of other cosmetics sellers, Yahoo has also inserted pop-up ads so that when the e-mail recipient rolls her computer mouse over the hyperlinks, ads appear, often touting products from unauthorized resellers or competitors, court records say.

No slam dunk

Outside lawyers say Mary Kay’s case is no slam dunk.

“My initial reaction is this is a pretty weak case,” says Charles “Trey” Branham, managing principal of the Law Offices of Charles W. Branham III in Dallas.

Branham says it’s not Yahoo’s job to police unauthorized sellers of Mary Kay products. “Yahoo is not a party to any contract. They’re just conveying information. I don’t see how Yahoo gets bound by what Mary Kay says its beauty consultants have to do.”

He adds that there are some court decisions that might weigh against the types of claims Mary Kay is making.

Matt Yarbrough, president of the Yarbrough Law Group in Dallas, thinks Mary Kay’s best argument is that Yahoo is contributing to the infringement of Mary Kay trademarks. Mary Kay’s lawsuit alleges that Yahoo reaps undisclosed revenue from the companies whose Web sites receive links via Yahoo

But the issue of whether Yahoo is infringing on trademarks is a question for a jury, Yarbrough adds.

Says Mary Kay’s Webb: “Yahoo is going through private e-mails, apparently looking for Mary Kay trademarks or the Mary Kay trade name and inserting advertisements into private e-mails,” Webb said. “The fact that they apparently are inserting advertisements for competitors or these Internet resellers is secondary to the fact that they’re infringing upon our trademarks.”

The case began on a tough note for Mary Kay. On July 8, U.S. Magistrate Judge Irma Carrillo Ramirez turned down Mary Kay’s request for sped-up “discovery,” or pre-trial exchange of information. Mary Kay had wanted a court order forcing Yahoo to turn over within 10 days certain documents, such as ones showing how many Yahoo Mail users had accessed competitors’ Web sites by clicking certain links, and how much revenue Yahoo had received from inserting those links.

Mary Kay had then wanted to force Yahoo officials to answer questions under oath 10 days after that.

Ramirez said in her ruling that Mary Kay had failed to show evidence of a need for sped-up discovery.

---

Jeff Bounds is a staff writer for the Dallas Business Journal.