The Strange Case of Kachingle v. The NYT

Last month I wrote a piece about Kachingle, a micropayment service for news websites that launched last year; although some smaller local papers and several personal blogs have signed up, the service hasn’t really caught on with any major news organization. When I spoke to founder Cynthia Typaldos for my piece, she insisted that “People have to be patient. It’s going to start slow…. Now, obviously, if we got a really big site, that would completely jump-start this. You know, like The Huffington Post or The New York Times or something.”

Well, apparently she wasn’t willing to wait. Because this month, Typaldos started a campaign to “Stop the Paywall,” directed specifically at The New York Times’s blogs. “Did you hear about the looming paywall at the New York Times?,” she wrote in an October 13 press release. “We did. Here at Kachingle, we are committed to keeping the web open and social.” It went on:

And now you can support the New York Times blogs you love directly, with a voluntary contribution of just $5/month. You simply install a Firefox or Chrome browser extension, which puts a small Kachingle bar medallion at the top of each NYTimes blog page. Sign up once and then you are instantly providing financial support to your favorite blog every day you visit. It’s that easy. And with the real-time Leaderboard, it’s fun!

In other words, since the Times didn’t want to put a Kachingle medallion on their homepage, Typaldos did it for them, offering a “browser extension” that would allow her users to donate to the Times blogs through Kachingle. The users would reward their favorite blogs with visits, and in turn, with portions of their $5 per month subscription. From that, Kachingle would collect its usual 15 percent fee (half of which pays for the PayPal transaction), and the remaining 85 percent would go to the Times blogs’ authors. The “Leaderboard” page on the new “KachingleX” site ranks the Times blogs on a scoreboard, showing which ones have the most support from “Kachinglers.”

The only problem? The Times never agreed to the arrangement. This would prove to be a kink in the plan. In the press release, Typaldos writes that “A strong response will show Janet Robinson and the rest of the New York Times executives that paywalls are ‘fundamentally a retrenchment approach…,” seemingly implying that although the Times isn’t quite on board yet, it might actually be willing to “stop the paywall” if Kachingle would just sign up enough users and collect enough money on its behalf. An informational Q & A published on the KachingleX site has this exchange:

Q: Did the New York Times agree to this?

Sign up for CJR's daily email

A. Our KachingleX browser extension works independently from the New York Times site. In a word, no. But we hope they will like it!

(The Q & A also explains that the payments will be going directly to the bloggers, rather than to the Times Company, and “How that person chooses to share is up to them.”)

Another, probably more significant, problem? The new KachingleX site is obviously designed to mimic the style, layout, and typeface of nytimes.com and its blogs. That seemed to be, for the Times Company, the final straw. As Typaldos wrote on her site on October 14, the day after KachingleX launched, she got an urgent phone call from the VP of Digital (probably Martin Nisenholtz) and two other executives (“I promised I would not reveal their names so I will call them Mr. Legal and Mr. Paywall,” Typaldos wrote), who informed her that they found the campaign “annoying” and that she had “ruined their day.” Typaldos expressed surprise that the executives were unhappy with her efforts “to save the NYTimes Blogs from obscurity.” She continued:

The VP Digital said he was deeply disappointed that I had not called him first to get their approval, because if I had he would have said “no”. Hmmmm…I used to work at Sun Microsystems and we had a popular mantra — “to ask permission is to seek denial”. Anyway, it never crossed my mind to ask for their approval. Our “Stop the Paywall” campaign is a completely independent effort based solely on our new KachingleX browser extension and the Kachingle.com website.

The Times team then asked her to stop the campaign, and, when she did not, called back a few hours later and told her a cease and desist order was on its way in the mail. Typaldos and her CEO Fred Dewey got a lawyer. “We believe paywalls are the enemy of democracy,” she wrote. “We believe in our mission, and we will not back down.”

On Monday, the New York Times Company filed an injunction against Kachingle in federal court and stated it was suing the company for violating its trademarks and intellectual property rights. The filing actually went up online on Scribd, via The Trademark Blog, before Kachingle received a copy of it. The main thrust of the complaint is that Kachingle is misrepresenting its relationship with the New York Times Company by using its signature design and “a confusingly similar imitation of The Times Trademarks” to persuade users to contribute money, in the false hopes that the company will accept that money, and that it will have any bearing on their already-decided decision to install a paywall on nytimes.com in the future. The filing also delineates previous conversations between the Times Company and Typaldos, starting in early 2009, in which the Times made it clear “that it was not interested in pursuing any business relationship with Kachingle.” Here are some more highlights from the filing (see pages six-eight):

26. Contrary to the representations made on the Kachingle websites, Kachingle’s interest in the ‘Stop the Paywall’ campaign against The Times is not to prevent The Times from instituting a paid subscription program. On information and belief, the purpose…is to piggy-back off the Times’ goodwill, reputation, and popularity, and to use the reputation and popularity of The Times’ blogs for Kachingle’s financial gain.

And:

27. Kachingle further misleads consumers on its website under the ‘Q&A’ section when it asks whether The Times agreed to this arrangement. In response, Kachingle says no, ‘But we hope they will like it!’ See Exh. D. Kachingle already knew, at the time the website was launched, that The Times did not ‘like’ the business model that Kachingle had proposed….

I bet the Times lawyers had a chuckle over that one.

The filing goes on to explain how Kachingle’s conduct constitutes unfair competition and false advertising, and that “The Times has been and absent injunctive relief will continue to be, irreparably harmed.”

Steve Outing, a journalist who has been very vocal in his support of Kachingle (and whose blog is signed up with the service), calls the whole thing “a good-natured guerilla marketing campaign” and is optimistic that the scuffle with the Times will do Kachingle “a potentially big favor” by getting it some attention in the blogosphere. I am inclined to disagree.

Having spoken to Cynthia Typaldos and several people who have done business with Kachingle, I disagree with the Times’s accusation that Kachingle is misleading people for Typaldos’ own financial gain. True, Kachingle might benefit from the publicity, and if it got more people to sign up by virtue of its implied relationship with the Times, it obviously does stand to gain financially from the transaction fees. But the damages from this lawsuit will surely wipe out any small gains they’ve made.

All that leads me to believe that the Kachingle team simply did not know what it was getting itself into here. I think that their intentions have always been noble, and that they really don’t understand why news sites wouldn’t want to partner with them to start getting money for their content, from the loyal readers eager to contribute. But this “Stop the Paywall” clearly should have been thought through a little more, and Kachingle would definitely have benefited from some legal advice before it launched a site that looked just like a Times blog and led people to believe a partnership was forthcoming.

Kachingle has not yet directly addressed the complaints in the Times’s filing. At the conclusion of the document, Times demands a jury trial and asks to be awarded all the profits Kachingle has received from using their trademarks (which judging by the Leaderboard results will not be a lot of money), plus legal fees (which one can assume will be a ton of money). I’m not a lawyer, but it’s hard for me to see how this little start-up is going to get out of this thing alive.

Lauren Kirchner is a freelance writer covering digital security for CJR. Find her on Twitter at @lkirchner