v.

UNIVERSAL TEL-A-TALK, INC., ADULT DISCOUNT TOYS, and STANLEY HUBERMAN

Civil Action No. 96-6961
November 2, 1998
Filed: November 3, 1998

MEMORANDUM OF DECISION

AND NOW, this 2nd day of November 1998, in accordance with the Findings of Fact and Conclusions of Law filed herewith, it is hereby ORDERED: 1. Defendants, Tel-A-Talk and Stanley Huberman, their agents, servants, employees, successors, attorneys, and all those subject to their control are hereby ENJOINED from using the PLAYBOY trademarks or any colorable facsimile thereof in connection with their business, products, services or Web site and from providing a link to Plaintiff’s Web site “Playboy.com.”

2. Defendants, their agents, emplyees, successors, attorneys and alI persons in active concert and participation with it or them, are hereby ENJOINED from:

(a) using in any manner the PLAYBOY Trademarks or any term or terms likely to cause confusion therewith as Defendants’ domain name, directory, or other such computer address, as the name of their Web site service, on their home page, on computer diskettes or in connection with the retrieval of data or information or on other goods or services, or promotion thereof so long as such goods or services do not emanate from or originate with PEI;

(b) using any manner the PLAYBOY Trademarks in connection with Defendants’ goods or services in such a manner that is likely to create an erroneous belief that said goods or services are authorized by, sponsored bp, licensed by or are in some way associated with PEI;

(c)disseminating, using or distributing in any Web site pages or other promotional materials whose appearance so resembles the Web site pages used by PEI as to create a likelihood of confusion, mistake or deception; or

(d) linking Defendants’ Web site or services to PEI’s Web site at “Playboy.com”; e) otherwise engaging in any other acts or conduct which would cause consumers to erroneously believe that Defendants’ goods or services are somehow sponsored by,  authorized  by,  licensed by, or in any other way asaassociated with PEI.

3. Defendants, their officers, agents, servants, employees, attorneys, parent companies, subsidiaries and related companies and all persons acting for, with, by, through or under them, are ENJOINED from diluting the distinctive quality of the PLAYBOY Trademarks.

BY THE COURT

JOSEPH L. McGLYNN, JR.

ENTERED: 11/4/98
CLERK OF COURT

This is an Internet domain name [FN1] dispute. At this stage of the controversy, we must decide the constitutionally permissible reach of Pennsylvania’s Long Arm Statute, 42 Pa.C.S.A. 5322, through cyberspace. Plaintiff Zippo Manufacturing Corporation (“Manufacturing”) has filed a five count complaint against Zippo Dot Com, Inc. (“Dot Com”) alleging trademark dilution, infringement, and false designation under the Federal Trademark Act, 15 U.S.C.  1051-1127. In addition, the Complaint alleges causes of action based on state law trademark dilution under 54 Pa.C.S.A. 1124, and seeks equitable accounting and imposition of a constructive trust. Dot Com has moved to dismiss for lack of personal jurisdiction and improper venue pursuant to Fed.R.Civ.P. 12(b)(2) and (3) or, in the alternative, to transfer the case pursuant to 28 U.S.C. 1406(a). For the reasons set forth below, Defendant’s motion is denied.

I. BACKGROUND

The facts relevant to this motion are as follows. Manufacturing is a Pennsylvania corporation with its principal place of business in Bradford, Pennsylvania. Manufacturing makes, among other things, well known “Zippo” tobacco lighters. Dot Com is a California corporation with its principal place of business in Sunnyvale, California. Dot Com operates an Internet Web site [FN2] and an Internet news service and has obtained the exclusive right to use the domain names “zippo.com”, “zippo.net” and “zipponews.com” on the Internet. [FN3]

Dot Com’s Web site contains information about the company, advertisements and an application for its Internet news service. The news service itself consists of three levels of membership–public/free, “Original” and “Super.” Each successive level offers access to a greater number of Internet newsgroups. A customer, who wants to subscribe to either the “Original” or “Super” level of service, fills out an on-line application that asks for a variety of information including the person’s name and address. Payment is made by credit card over the Internet or the telephone. The application is then processed and the subscriber is assigned a password which permits the subscriber to view and/or download Internet newsgroup messages that are stored on the Defendant’s server in California.

Dot Com’s contacts with Pennsylvania have occurred almost exclusively over the Internet. Dot Com’s offices, employees and Internet servers are located in California. Dot Com maintains no offices, employees or agents in Pennsylvania. Dot Com’s advertising for its service to Pennsylvania residents involves posting information about its service on its Web page, which is accessible to Pennsylvania residents via the Internet. Defendant has approximately 140,000 paying subscribers worldwide. Approximately two percent (3,000) of those subscribers are Pennsylvania residents. These subscribers have contracted to receive Dot Com’s service by visiting its Web site and filling out the application. Additionally, Dot Com has entered into agreements with seven Internet access providers in Pennsylvania to permit their subscribers to access Dot Com’s news service. Two of these providers are located in the Western District of Pennsylvania.

The basis of the trademark claims is Dot Com’s use of the word “Zippo” in the domain names it holds, in numerous locations in its Web site and in the heading of Internet newsgroup messages that have been posted by Dot Com subscribers. When an Internet user views or downloads a newsgroup message posted by a Dot Com subscriber, the word “Zippo” appears in the “Message-Id” and “Organization” sections of the heading. [FN4] The news message itself, containing text and/or pictures, follows. Manufacturing points out that some of the messages contain adult oriented, sexually explicit subject matter.

III. DISCUSSION

A. Personal Jurisdiction

1. The Traditional Framework

Our authority to exercise personal jurisdiction in this case is conferred by state law. Fed.R.Civ.P. 4(e); Mellon, 960 F.2d at 1221. The extent to which we may exercise that authority is governed by the Due Process Clause of the Fourteenth Amendment to the Federal Constitution. Kulko v. Superior Court of California, 436 U.S. 84, 91, 98 S.Ct. 1690, 1696, 56 L.Ed.2d 132 (1978).

Pennsylvania’s long arm jurisdiction statute is codified at 42 Pa.C.S.A.  5322(a). The portion of the statute authorizing us to exercise jurisdiction here permits the exercise of jurisdiction over non-resident defendants upon: (2) Contracting to supply services or things in this Commonwealth. 42 Pa.C.S.A.  5322(a). It is undisputed that Dot Com contracted to supply Internet news services to approximately 3,000 Pennsylvania residents and also entered into agreements with seven Internet access providers in Pennsylvania. Moreover, even if Dot Com’s conduct did not satisfy a specific provision of the statute, we would nevertheless be authorized to exercise jurisdiction to the “fullest extent allowed under the Constitution of the United States.” 42 Pa.C.S.A.  5322(b).

The Constitutional limitations on the exercise of personal jurisdiction differ depending upon whether a court seeks to exercise general or specific jurisdiction over a non-resident defendant. Mellon, 960 F.2d at 1221. General jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for non-forum related activities when the defendant has engaged in “systematic and continuous” activities in the forum state. Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16, 104 S.Ct. 1868, 1872-73, 80 L.Ed.2d 404 (1984). In the absence of general jurisdiction, specific jurisdiction permits a court to exercise personal jurisdiction over a non-resident defendant for forum-related activities where the “relationship between the defendant and the forum falls within the ‘minimum contacts’ framework” of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945) and its progeny. Mellon, 960 F.2d at 1221. Manufacturing does not contend that we should exercise general personal jurisdiction over Dot Com. Manufacturing concedes that if personal jurisdiction exists in this case, it must be specific.

A three-pronged test has emerged for determining whether the exercise of specific personal jurisdiction over a non-resident defendant is appropriate: (1) the defendant must have sufficient “minimum contacts” with the forum state, (2) the claim asserted against the defendant must arise out of those contacts, and (3) the exercise of jurisdiction must be reasonable. Id. The “Constitutional touchstone” of the minimum contacts analysis is embodied in the first prong, “whether the defendant purposefully established” contacts with the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528 (1985) (citing International Shoe Co. v. Washington, 326 U.S. 310, 319, 66 S.Ct. 154, 159- 60, 90 L.Ed. 95 (1945).

2. The Internet and Jurisdiction

In Hanson v. Denckla, the Supreme Court noted that “[a]s technological progress has increased the flow of commerce between States; the need for jurisdiction has undergone a similar increase.” Hanson v. Denckla, 357 U.S. 235, 250-51, 78 S.Ct. 1228, 1237-39, 2 L.Ed.2d 1283 (1958). Twenty seven years later, the Court observed that jurisdiction could not be avoided “merely because the defendant did not physically enter the forum state.” Burger King, 471 U.S. at 476, 105 S.Ct. at 2184. The Court observed that:

[I]t is an inescapable fact of modern commercial life that a substantial amount of commercial business is transacted solely by mail and wire communications across state lines, thus obviating the need for physical presence within a State in which business is conducted. Id.

Enter the Internet, a global “‘super-network’ of over 15,000 computer networks used by over 30 million individuals, corporations, organizations, and educational institutions worldwide.” Panavision Intern., L.P. v. Toeppen, 938 F.Supp. 616 (C.D.Cal.1996) (citing American Civil Liberties Union v. Reno, 929 F.Supp. 824, 830-48 (E.D.Pa.1996)). “In recent years, businesses have begun to use the Internet to provide information and products to consumers and other businesses.” Id. The Internet makes it possible to conduct business throughout the world entirely from a desktop. With this global revolution looming on the horizon, the development of the law concerning the permissible scope of personal jurisdiction based on Internet use is in its infant stages. The cases are scant. Nevertheless, our review of the available cases and materials [FN5] reveals that the likelihood that personal jurisdiction can be constitutionally exercised is directly proportionate to the nature and quality of commercial activity that an entity conducts over the Internet. This sliding scale is consistent with well developed personal jurisdiction principles. At one end of the spectrum are situations where a defendant clearly does business over the Internet. If the defendant enters into contracts with residents of a foreign jurisdiction that involve the knowing and repeated transmission of computer files over the Internet, personal jurisdiction is proper. E.g. CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996). At the opposite end are situations where a defendant has simply posted information on an Internet Web site which is accessible to users in foreign jurisdictions. A passive Web site that does little more than make information available to those who are interested in it is not grounds for the exercise personal jurisdiction. E.g. Bensusan Restaurant Corp., v. King, 937 F.Supp. 295 (S.D.N.Y.1996). The middle ground is occupied by interactive Web sites where a user can exchange information with the host computer. In these cases, the exercise of jurisdiction is determined by examining the level of interactivity and commercial nature of the exchange of information that occurs on the Web site. E.g. Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996).

Traditionally, when an entity intentionally reaches beyond its boundaries to conduct business with foreign residents, the exercise of specific jurisdiction is proper. Burger King, 471 U.S. at 475, 105 S.Ct. at 2183- 84. Different results should not be reached simply because business is conducted over the Internet. In CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996), the Sixth Circuit addressed the significance of doing business over the Internet. In that case, Patterson, a Texas resident, entered into a contract to distribute shareware [FN6] through CompuServe’s Internet server located in Ohio. CompuServe, 89 F.3d at 1260. From Texas, Patterson electronically uploaded thirty-two master software files to CompuServe’s server in Ohio via the Internet. Id. at 1261. One of Patterson’s software products was designed to help people navigate the Internet. Id. When CompuServe later began to market a product that Patterson believed to be similar to his own, he threatened to sue. Id. CompuServe brought an action in the Southern District of Ohio, seeking a declaratory judgment. Id. The District Court granted Patterson’s motion to dismiss for lack of personal jurisdiction and CompuServe appealed. Id. The Sixth Circuit reversed, reasoning that Patterson had purposefully directed his business activities toward Ohio by knowingly entering into a contract with an Ohio resident and then “deliberately and repeatedly” transmitted files to Ohio. Id. at 1264- 66.
In Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1328 (E.D.Mo.1996), the defendant had put up a Web site as a promotion for its upcoming Internet service. The service consisted of assigning users an electronic mailbox and then forwarding advertisements for products and services that matched the users’ interests to those electronic mailboxes. Maritz, 947 F.Supp. at 1330. The defendant planned to charge advertisers and provide users with incentives to view the advertisements. Id. Although the service was not yet operational, users were encouraged to add their address to a mailing list to receive updates about the service. Id. The court rejected the defendant’s contention that it operated a “passive Web site.” Id. at 1333- 34. The court reasoned that the defendant’s conduct amounted to “active solicitations” and “promotional activities” designed to “develop a mailing list of Internet users” and that the defendant “indiscriminately responded to every user” who accessed the site. Id. at 1333-34.

Inset Systems, Inc. v. Instruction Set, 937 F.Supp. 161 (D.Conn.1996) represents the outer limits of the exercise of personal jurisdiction based on the Internet. In Inset Systems, a Connecticut corporation sued a Massachusetts corporation in the District of Connecticut for trademark infringement based on the use of an Internet domain name. Inset Systems, 937 F.Supp. at 162. The defendant’s contacts with Connecticut consisted of posting a Web site that was accessible to approximately 10,000 Connecticut residents and maintaining a toll free number. Id. at 165. The court exercised personal jurisdiction, reasoning that advertising on the Internet constituted the purposeful doing of business in Connecticut because “unlike television and radio advertising, the advertisement is available continuously to any Internet user.” Id. at 165.

Bensusan Restaurant Corp., v. King, 937 F.Supp. 295 (S.D.N.Y.1996) reached a different conclusion based on a similar Web site. In Bensusan, the operator of a New York jazz club sued the operator of a Missouri jazz club for trademark infringement. Bensusan, 937 F.Supp. at 297. The Internet Web site at issue contained general information about the defendant’s club, a calendar of events and ticket information. Id. However, the site was not interactive. Id. If a user wanted to go to the club, she would have to call or visit a ticket outlet and then pick up tickets at the club on the night of the show. Id. The court refused to exercise jurisdiction based on the Web site alone, reasoning that it did not rise to the level of purposeful availment of that jurisdiction’s laws. The court distinguished the case from CompuServe, supra, where the user had “‘reached out’ from Texas to Ohio and ‘originated and maintained’ contacts with Ohio.” Id. at 301.

Pres-Kap, Inc. v. System One, Direct Access, Inc., 636 So.2d 1351 (Fla.App.1994), review denied, 645 So.2d 455 (Fla.1994) is not inconsistent with the above cases. In Pres-Kap, a majority of a three-judge intermediate state appeals court refused to exercise jurisdiction over a consumer of an on- line airline ticketing service. Pres-Kap involved a suit on a contract dispute in a Florida court by a Delaware corporation against its New York customer. Pres-Kap, 636 So.2d at 1351-52. The defendant had leased computer equipment which it used to access an airline ticketing computer located in Florida. Id. The contract was solicited, negotiated, executed and serviced in New York. Id. at 1352. The defendant’s only contact with Florida consisted of logging onto the computer located in Florida and mailing payments for the leased equipment to Florida. Id. at 1353. Pres-Kap is distinguishable from the above cases and the case at bar because it addressed the exercise of jurisdiction over a consumer of on-line services as opposed to a seller. When a consumer logs onto a server in a foreign jurisdiction he is engaging in a fundamentally different type of contact than an entity that is using the Internet to sell or market products or services to residents of foreign jurisdictions. The Pres-Kap court specifically expressed concern over the implications of subjecting users of “on-line” services with contracts with out-of-state networks to suit in foreign jurisdictions. Id. at 1353.

3. Application to this Case

First, we note that this is not an Internet advertising case in the line of Inset Systems and Bensusan, supra. Dot Com has not just posted information on a Web site that is accessible to Pennsylvania residents who are connected to the Internet. This is not even an interactivity case in the line of Maritz, supra. Dot Com has done more than create an interactive Web site through which it exchanges information with Pennsylvania residents in hopes of using that information for commercial gain later. We are not being asked to determine whether Dot Com’s Web site alone constitutes the purposeful availment of doing business in Pennsylvania. This is a “doing business over the Internet” case in the line of CompuServe, supra. We are being asked to determine whether Dot Com’s conducting of electronic commerce with Pennsylvania residents constitutes the purposeful availment of doing business in Pennsylvania. We conclude that it does. Dot Com has contracted with approximately 3,000 individuals and seven Internet access providers in Pennsylvania. The intended object of these transactions has been the downloading of the electronic messages that form the basis of this suit in Pennsylvania.

We find Dot Com’s efforts to characterize its conduct as falling short of purposeful availment of doing business in Pennsylvania wholly unpersuasive. At oral argument, Defendant repeatedly characterized its actions as merely “operating a Web site” or “advertising.” Dot Com also cites to a number of cases from this Circuit which, it claims, stand for the proposition that merely advertising in a forum, without more, is not a sufficient minimal contact. [FN7] This argument is misplaced. Dot Com has done more than advertise on the Internet in Pennsylvania. Defendant has sold passwords to approximately 3,000 subscribers in Pennsylvania and entered into seven contracts with Internet access providers to furnish its services to their customers in Pennsylvania.

Dot Com also contends that its contacts with Pennsylvania residents are “fortuitous” within the meaning of World-Wide Volkswagen, 444 U.S. 286, 100 S.Ct. 559 (1980). Defendant argues that it has not “actively” solicited business in Pennsylvania and that any business it conducts with Pennsylvania residents has resulted from contacts that were initiated by Pennsylvanians who visited the Defendant’s Web site. The fact that Dot Com’s services have been consumed in Pennsylvania is not “fortuitous” within the meaning of World- Wide Volkswagen. In World-Wide Volkswagen, a couple that had purchased a vehicle in New York, while they were New York residents, were injured while driving that vehicle through Oklahoma and brought suit in an Oklahoma state court. World-Wide Volkswagen, 444 U.S. at 288, 100 S.Ct. at 562-63. The manufacturer did not sell its vehicles in Oklahoma and had not made an effort to establish business relationships in Oklahoma. Id. at 295, 100 S.Ct. at 566. The Supreme Court characterized the manufacturer’s ties with Oklahoma as fortuitous because they resulted entirely out the fact that the plaintiffs had driven their car into that state. Id.

Here, Dot Com argues that its contacts with Pennsylvania residents are fortuitous because Pennsylvanians happened to find its Web site or heard about its news service elsewhere and decided to subscribe. This argument misconstrues the concept of fortuitous contacts embodied in World-Wide Volkswagen. Dot Com’s contacts with Pennsylvania would be fortuitous within the meaning of World-Wide Volkswagen if it had no Pennsylvania subscribers and an Ohio subscriber forwarded a copy of a file he obtained from Dot Com to a friend in Pennsylvania or an Ohio subscriber brought his computer along on a trip to Pennsylvania and used it to access Dot Com’s service. That is not the situation here. Dot Com repeatedly and consciously chose to process Pennsylvania residents’ applications and to assign them passwords. Dot Com knew that the result of these contracts would be the transmission of electronic messages into Pennsylvania. The transmission of these files was entirely within its control. Dot Com cannot maintain that these contracts are “fortuitous” or “coincidental” within the meaning of World-Wide Volkswagen. When a defendant makes a conscious choice to conduct business with the residents of a forum state, “it has clear notice that it is subject to suit there.” World-Wide Volkswagen, 444 U.S. at 297, 100 S.Ct. at 567. Dot Com was under no obligation to sell its services to Pennsylvania residents. It freely chose to do so, presumably in order to profit from those transactions. If a corporation determines that the risk of being subject to personal jurisdiction in a particular forum is too great, it can choose to sever its connection to the state. Id. If Dot Com had not wanted to be amenable to jurisdiction in Pennsylvania, the solution would have been simple–it could have chosen not to sell its services to Pennsylvania residents.

Next, Dot Com argues that its forum-related activities are not numerous or significant enough to create a “substantial connection” with Pennsylvania. Defendant points to the fact that only two percent of its subscribers are Pennsylvania residents. However, the Supreme Court has made clear that even a single contact can be sufficient. McGee, 355 U.S. at 223, 78 S.Ct. at 201. The test has always focused on the “nature and quality” of the contacts with the forum and not the quantity of those contacts. International Shoe, 326 U.S. at 320, 66 S.Ct. at 160. The Sixth Circuit also rejected a similar argument in CompuServe when it wrote that the contacts were “deliberate and repeated even if they yielded little revenue.” CompuServe, 89 F.3d at 1265.

In the instant case, both a significant amount of the alleged infringement and dilution, and resulting injury have occurred in Pennsylvania. The object of Dot Com’s contracts with Pennsylvania residents is the transmission of the messages that Plaintiff claims dilute and infringe upon its trademark. When these messages are transmitted into Pennsylvania and viewed by Pennsylvania residents on their computers, there can be no question that the alleged infringement and dilution occur in Pennsylvania. Moreover, since Manufacturing is a Pennsylvania corporation, a substantial amount of the injury from the alleged wrongdoing is likely to occur in Pennsylvania. Thus, we conclude that the cause of action arises out of Dot Com’s forum-related activities under the authority of both Tefal and Indianapolis Colts, supra.

IV. CONCLUSION

We conclude that this Court may appropriately exercise personal jurisdiction over the Defendant and that venue is proper in this judicial district.

FN1. Domain names serve as a primary identifier of an Internet user. Panavision Intern., L.P. v. Toeppen, 938 F.Supp. 616 (C.D.Cal.1996). Businesses using the Internet commonly use their business names as part of the domain name (e.g. IBM.com). Id. The designation “.com” identifies the user as a commercial entity. Id.

FN2. A “site” is an Internet address that permits the exchange of information with a host computer. Bensusan Restaurant Corp. v. King, 937 F.Supp 295 (S.D.N.Y.1996). The “Web” or “World Wide Web” refers to the collection of sites available on the Internet. Id.

FN3. Dot Com has registered these domain names with Network Solutions, Inc. which has contracted with the National Science Foundation to provide registration services for Internet domain names. Once a domain name is registered to one user, it may not be used by another.

FN4. For example, a typical message heading might appear as:

Subject: subject of the message
From: name of person posting message
Date: date posted
Message-Id: identifying#@news.zippo.com
Reference: reference#
Organization: Zippo
Newsgroups: news groups to which sender has subscribed

The italicized text represents a generic description of specific information appearing in the message.

FN5. See, generally, Robert A. Bourque and Kerry L. Konrad, Avoiding Jurisdiction Based on Internet Web Site, New York Law Journal (Dec. 10, 1996); David Bender, Emerging Personal Jurisdiction Issues on the Internet, 453 PLI/Pat 7 (1996); Comment, Richard S. Zembek, Jurisdiction and the Internet: Fundamental Fairness in the Networked World of Cyberspace, 6 Alb.L.J.Sci. & Tech. 339 (1996).

FN6. “Shareware” is software which a user is permitted to download and use for a trial period, after which the user is asked to pay a fee to the author for continued use. CompuServe, 89 F.3d at 1260.

FN7. Defendant has cited to: Gehling v. St. George’s School of Medicine, Ltd., 773 F.2d 539 (3rd Cir.1985); Fields v. Ramada Inn Inc., 816 F.Supp. 1033 (E.D.Pa.1993); and Garofalo v. Praiss, 1990 WL 97800 (E.D.Pa.1990). We note that these cases all involve the issue of whether advertising can rise to the level of “systematic and continuous” contacts for the purpose of general jurisdiction.

Digital Equipment Corp Vs Alta Vista Technology

United States District Court for the District of Massachusetts

Decided March 12, 1997

MEMORANDUM AND ORDER

I. Introduction

This case involves a dispute between two corporations over rights and commercial interests on the Internet. (1) Both parties operate electronic services and distribute software over the Internet. The plaintiff, Digital Equipment Corporation (“Digital”), has brought suit against defendant AltaVista Technology, Incorporated (“ATI”), for breach of a trademark licensing agreement, trademark and servicemark infringement, unfair competition, and trademark dilution.

Digital owns an Internet and World Wide Web “search-engine” service known as AltaVista. (2) Digital purchased ATI’s rights in its trademark “AltaVista”; Digital then licensed back to ATI the right to use “AltaVista,” in certain defined ways, as part of both ATI’s corporate name and its Uniform Resource Locator (“url”), “http://www.altavista.com.” (3) The license precludes ATI from using AltaVista as “the name of a product or service offering.”

Digital seeks a preliminary injunction, claiming that ATI’s Web-site breaches its licensing agreement and infringes its trademark rights in “AltaVista.” ATI opposes Digital’s motion on the merits and moves to dismiss for lack of personal jurisdiction.

First, I find that this Court has jurisdiction over ATI, whose Web-site, in the context of the specific facts of this case, meets both the statutory and constitutional standards. Second, I find that Digital has met the requisite standards for a preliminary injunction.

ATI is hereby ENJOINED from using the trademark AltaVista in any way that does not comport with the specific terms of the licensing agreement, as set forth in the opinion below and the accompanying Order.

II. Background

In December, 1995, Digital, a Massachusetts corporation, launched an Internet search service using the servicemark “AltaVista.” Since that time, Digital’s AltaVista Internet search service has become one of the leading search services on the Internet and, indeed, one of the most frequently visited sites on the World Wide Web (“Web”). Currently, Digital’s AltaVista Web-site receives millions of “hits” (or visits) per day. Digital also markets and sells computer software products and services related to the Internet under names such as AltaVista Directory, AltaVista Firewall, AltaVista Forum, AltaVista Mail, etc. Its marketing strategy, however, did not then include soliciting advertising revenues from advertisers on its Website.

At the same time, Digital claims two sources for its right to use the service and trademark “AltaVista”: its own use of the mark under common law, and its acquisition by assignment of ATI’s trademark rights in AltaVista.

ATI is a California corporation, formerly known as Tree Full of Owls, Inc.; it changed its name to AltaVista Technology, Inc., by amendment to its Articles of Incorporation, in May of 1994. In March of 1996, Digital paid for an assignment of ATI’s rights to the trademark AltaVista; it immediately licensed-back to ATI the right to use AltaVista both as part of ATI’s corporate name, AltaVista Technology, Inc., and as part of ATI’s Web-site address “www.altavista.com.” The license agreement, however, precludes ATI from using “AltaVista” as “the name of a product or service offering.”

The scope and meaning of this license are hotly contested by the parties. ATI contends that its agreement with Digital was formed with the specific intention of allowing it to benefit from the popularity of Digital’s AltaVista, and the strong brand identity the “AltaVista” search service had created. In contrast, Digital maintains that ATI’s licensing agreement strictly limited ATI’s ability to use “Altavista” — as part of its corporate name and its url — and not as “the name of a product or service offering.”

Consistent with its broad interpretation of the agreement, ATI dramatically changed the appearance of its Website, (4) moving it markedly closer to the appearance of Digital’s AltaVista Web-site. (5) By the time this lawsuit was brought by Digital, ATI’s Website looked like, and could effectively function as, Digital’s AltaVista search service.

As of May 22, 1996, less than two months after the Digital-ATI agreement, a visitor to “www.altavista.com,” ATI’s Web-site, would see the word “AltaVista” by itself at the top of the page, apparently not attached to ATI’s corporate name. One would see an offer of free ATI software. Using a link, (6) one could “click” (7) to receive “demo versions of AltaVista software.” (8) One would also have been offered a link to an unnamed “Search Engine” where one could “Search the Internet. . .” This link was to Digital’s AltaVista search service.

By August 8, 1996, ATI’s page changed again. Again, the visitor would see the word “AltaVista” at the top of the page, again not as part of ATI’s corporate name. Below that there was a banner ad (9) selling an unrelated party’s products. This time, however, directly beneath the “Search Engine” line were the words “Digital’s Alta Vista,” rather than merely “Search the Internet. . .”

On the same date as these changes were implemented, Digital’s trademark counsel, Lawrence Robins (“Robins”) sent ATI’s president, Jack Marshall, a letter claiming that the appearance of ATI’s Web-site constituted a breach of Clause 1.1 of their license agreement. The letter states: Use of the ‘AltaVista’ logo, without the additional language ‘Technologies, Inc.’ is a violation of Paragraph 1.1 of the Agreement. The sole license granted therein is to use “AltaVista” as part of the corporate name ‘AltaVista Technologies, Inc.’ and as part of the url ‘http://www.altavista.com.’ Robins claimed that any use by ATI of “Altavista,” including using it as the name of a product or service on ATI’s Web-site, and apart from its use as part of ATI’s corporate name and as the url of ATI’s Web-site, constituted a breach of Clause 1.1.

Clause 1.1 of the license agreement says: Digital hereby grants to ATI a nonexclusive, nontransferable license to use the trademark ‘ALTAVISTA’ (the “Mark”) as part of the corporate name ‘Altavista Technologies, Inc.’ and as part of the url ‘http://www.altavista.com, and in accordance with and subject to the terms and conditions of this Agreement, provided that nothing in this agreement shall prohibit Digital or any of its direct or indirect majority-owned subsidiaries from using the Mark or from offering products or services under such Mark to third parties. This License does not grant ATI the right to use the Mark as the name of a product or service offering.

At the same time, Robins put ATI on notice of the possible termination of their license agreement pursuant to Clause 3.1. Clause 3.1 of the licensing agreement deals with quality control: “all products sold and services rendered while using the Mark shall be. . .of such style, appearance and quality as to protect and enhance the Mark and the goodwill associated therewith.” (10)

A month later, on September 5, 1996, a visitor to ATI’s Website would have been greeted by “AltaVista” in large, bold letters at the top of the page, with “Technology” immediately under it in smaller, plain type; beneath this was a banner ad and link through which one could “Search the Net with AltaVista” (again, presumably, but not explicitly, Digital’s search service) by “Clicking here.” (11) In addition, the site retained a second, clearly designated link to Digital’s AltaVista search site, as well as ATI’s AltaVista logo by itself in bold near the bottom of the page.

By October 28, 1996, three days before Digital brought its present motion for preliminary injunction, ATI’s Web-site had been altered again: beneath the AltaVista logo in big, bold letters (with a small, plain “Technology” placed immediately below it) sat a “banner ad” for an unrelated product; beneath the banner ad is a solicitation encouraging one to “Click here for advertising information-reach millions every month!” Immediately below that sits an almost identical graphical representation of Digital’s AltaVista search engine interface (i.e. the appearance of Digital’s AltaVista Web-site, including the logo, etc.). Below that is a statement informing users that they can “Search with Digital’s AltaVista” (using Digital’s AltaVista search engine while still, to all appearances, being at the ATI Web-site). In short, a visitor to ATI’s site could easily have the impression that they were actually at Digital’s AltaVista site. (12)

By October 28, 1996, ATI’s Web-site was designed to look, feel, and function very much like Digital’s AltaVista Web-site. At the same time, ATI derived revenues from the site and its ties to Digital’s Altavista. It displayed banner ads and solicited other advertisers, who could get information about how they, too, could reach millions of users everyday by advertising on ATI’s Web-site. Digital expressly eschewed providing advertising space to others for its Web-site at that time.

Digital claims that ATI’s Web-site is now a service that provides both a search engine, and advertising space. ATI thus breaches the license agreement by attaching the word “AltaVista” to both of these services. Digital further contends that ATI’s Web-site infringes Digital’s trademark rights in AltaVista, and that the ATI site constitutes unfair competition both under the Lanham Act   43(a) and at common law. ATI argues its usage of AltaVista is permitted by its license with Digital. It also contends this Court lacks personal jurisdiction over it.

III. Personal Jurisdiction

A. Burden Of Proof

ATI has moved under Fed.R.Civ.P. 12(b)(2) to dismiss for lack of personal jurisdiction over it. Digital, as the plaintiff, bears the burden of demonstrating both that ATI’s conduct satisfies Massachusetts’s (the forum state’s) Long-Arm statute, and that the exercise of jurisdiction pursuant to this statute “comports with the strictures of the Constitution.” Foster-Miller, Inc. v. Babcock and Wilcox Canada, 46 F.3d 138, 144-45 (1st Cir. 1995) (quoting Pritzker v. Yari, 42 F.3d 53, 60 (1st Cir. 1994); other citations omitted). (13) Though ATI acknowledges that it has a contract with Digital, a Massachusetts corporation, which contract gives rise to this litigation, it contends that in toto it has insufficient “minimum contacts” with Massachusetts to allow this Court to assert jurisdiction over it. I disagree. Digital has met its burden.

B. Personal Jurisdiction And The Internet

Regardless of whether this is a diversity case based on breach of contract, or a case involving a federal question such as trademark infringement, (14) I find the assertion of jurisdiction over ATI by this Court to be entirely appropriate. I so conclude under the traditional approaches dictated by the Supreme Court and First Circuit precedents, approaches which have been characterized as “territorially based.” (15) I have evaluated the totality of ATI’s minimum contacts with Massachusetts — a contract with a Massachusetts corporation, reflecting an agreement to apply Massachusetts law, soliciting business through its Web-site, including Massachusetts business, and three sales to Massachusetts residents, etc.

At the same time, I cannot ignore the fact that the medium through which many of the significant Massachusetts contacts occurred is anything but traditional; it is a site in cyberspace, a Web-site. It has been said that the Courts have had to re-evaluate traditional concepts of personal jurisdiction in the light of the increasing globalization of the economy. See CompuServe v. Patterson, 89 F.3d 1257, 1262 (6th Cir. 1996). The commercial use of the Internet tests the limits of these traditional, territorial-based concepts even further.

The Internet has no territorial boundaries. To paraphrase Gertrude Stein, as far as the Internet is concerned, not only is there perhaps “no there there,” the “there” is everywhere where there is Internet access. When business is transacted over a computer network via a Web-site accessed by a computer in Massachusetts, it takes place as much in Massachusetts, literally or figuratively, as it does anywhere. As one commentator noted: The Internet breaks down barriers between physical jurisdictions. When a buyer and seller consummate a commercial transaction through a World Wide Web site, there is no need for the traditional physical acts that often determine which jurisdiction’s law will apply and whether the buyer or seller will be subject to personal jurisdiction in the courts where the other is located.

Bradley A. Slutsky, Jurisdiction over Commerce on the Internet, available at http://www.kslaw.com/menu/jurisdic/html, (page 2). (16) On the Internet, “messages can be transmitted from any physical location to any other location . . . without any physical cues or barriers that might otherwise keep certain geographically remote places and people separate from one another.” Law and Borders, 48 Stan. L. Rev. at 1370-71.

The change is significant. Physical boundaries typically have framed legal boundaries, in effect creating signposts that warn that we will be required after crossing to abide by different rules. Id. To impose traditional territorial concepts on the commercial uses of the Internet has dramatic implications, opening the Web user up to inconsistent regulations throughout fifty states, indeed, throughout the globe. It also raises the possibility of dramatically chilling what may well be “the most participatory marketplace of mass speech that this country — and indeed the world — has yet seen.” ACLU v. Reno, 929 F. Supp. 824, 881 (E.D. Pa. 1996). As a result courts have been, and should be, cautious in applying traditional concepts.

Given the very new and unique nature of the technology, this Court will take heed of a Supreme Court plurality’s recent recognition “of the changes taking place in the law, the technology, and the industrial structure, related to telecommunications, [that] we believe [make] it unwise and unnecessary definitively to pick one analogy or one specific set of words now.” Denver Area Education Telecommunications Consortium, Inc. v. FCC, 135 L. Ed. 2d 888, 116 S. Ct. 2374, 2385 (1996) (Breyer, J., plurality opinion) (citation omitted); see also Cass R. Sunstein, Forward: Leaving Things Undecided, 110 Harv. L. Rev. 6, 30-33 (1996) (approving of Justice Breyer’s refusal to lay down a broad rule in Denver Area Consortium as an example of a reasonable, “minimalist” judicial approach to contentious questions regarding rapidly changing technologies).

While this case raises some of these concerns, they are not, in the final analysis, dispositive. There is no issue of inconsistent regulations suddenly imposed on Web users without notice. There is no issue of parties being haled into the courts of a given jurisdiction solely by virtue of a Web-site, without meaningful notice that such an outcome was likely. Nor is there a great risk of chilling the Internet’s “participatory marketplace” by affirming jurisdiction here.

The parties at bar are corporations who have attempted to tame the “Wild West” of the Internet through their private ordering. They have entered into a contract governing their commercial activities on the Internet. Digital sought (and indeed bought) all rights to a trademark identifying its search engine, with certain express exceptions; ATI agreed to enter into a licensing agreement. They both agreed that Massachusetts law would apply to its provisions. While ATI may have tried to structure its relationship with Digital so that it would not be susceptible to jurisdiction in Massachusetts, its subsequent Web activities bring ATI “over the line,” and render jurisdiction appropriate.

This case does not reach the issue of whether any Web activity, by anyone, absent commercial use, absent advertising and solicitation of both advertising and sales, absent a contract and sales and other contacts with the forum state, and absent the potentially foreseeable harm of trademark infringement, would be sufficient to permit the assertion of jurisdiction over a foreign defendant. While it raises some troubling issues, and while the traditional analyses must be informed by this new technology, ultimately, this is not the day nor the forum to resolve them.

C. Methods Of Determining Personal Jurisdiction

The First Circuit has outlined three approaches to a motion to dismiss for want of personal jurisdiction. Foster-Miller, 46 F.3d at 145. The prima facie facie standard, obliges the plaintiff “to adduce evidence of specific facts,” beyond the pleadings which the court accepts “as true for the purpose of determining the adequacy of the prima facie jurisdictional showing.” Id. The approach is particularly appropriate when the facts which would support personal jurisdiction are not disputed. See id.; Boit v. Gar-Tec Products Inc., 967 F.2d 671, 676 (1st Cir. 1992).

At the other extreme lies the “preponderance-of-the-evidence standard,” which “necessitates a full-blown evidentiary hearing at which the court will adjudicate the jurisdictional issue definitively before the case reaches trial.” Foster-Miller, 46 F.3d at 145-46. The problem with this approach is that it “contemplates a binding adjudication . . . [with] preclusive effect . . . [which] can all too easily verge on a deprivation of the right to trial by jury.” Id. at 146.

The First Circuit has offered this Court a “middle course” which I will follow: To engage “in some differential factfinding, limited to probable outcomes as opposed to definitive findings of fact. . .” in order to determine whether “the plaintiff has shown a likelihood of the existence of each fact necessary to support personal jurisdiction.” Id. at 146 (quoting Boit, 967 F.2d at 677). Since the preliminary injunction motion presently before me also requires findings of fact based on a comparable standard, and since some facts supporting jurisdiction may be “bound up with the claim on the merits,” id., the intermediate test seems a particularly appropriate course. See Boit, 967 F.2d at 677-78; Foster-Miller, 46 F.3d at 146.

I find the following jurisdictional facts necessary and sufficient to support personal jurisdiction over ATI are likely to exist: (17) ATI entered into a contract with Digital that includes a clause requiring this contract to be interpreted “under and in accordance” with the laws of Massachusetts; this contract (the “AltaVista” license) and ATI’s alleged breach of it gives rise to the present litigation; ATI operates a Web-site accessible to Massachusetts computer-users; it solicits advertising and its own products through the site; it made at least three sales to Massachusetts residents of software products in the course of and related to its operation of a Web-site; finally, Digital alleges ATI’s Web-site has infringed its trademark and caused considerable confusion in Massachusetts

D. The Massachusetts Long-Arm Statute

The Massachusetts Long-Arm statute, M.G.L. ch. 223A   3 (“Section 3″), provides several bases for asserting jurisdiction. Section 3 reads in pertinent part: A court may exercise personal jurisdiction over a person, who acts directly or by an agent, as to a cause of action in law or equity arising from the person’s (a) transacting any business in this commonwealth;. . . (c) causing tortious injury by an act or omission in this commonwealth; (d) causing tortious injury in this commonwealth by an act or omission outside this commonwealth if he regularly does or solicits business, or engages in any other persistent course of conduct, or derives substantial revenue from goods used or consumed or services rendered, in this commonwealth. . . .

M.G.L. ch. 223A   3(a, c-d). Any one of these grounds would be sufficient. The facts which I have found could be construed to confer personal jurisdiction over ATI based on all three: (1) ATI’s transacting business in the Commonwealth of Massachusetts; (2) ATI’s Web-site allegedly causing tortious injury by acts or omissions in this Commonwealth; or (3) ATI allegedly causing tortious injury in this Commonwealth based on the act of maintaining a Web-site outside Massachusetts, while engaging in what I consider to be a persistent course of conduct here.

1. ATI’s Transaction Of Business In Massachusetts

Section 3(a) requires that the defendant must have transacted business in Massachusetts and that the plaintiff’s claim must have arisen from the transaction of such business. Tatro v. Manor Care, Inc., 416 Mass. 763, 767, 625 N.E.2d 549 (1994). At the outset, the Massachusetts Supreme Judicial Court, however, reminds us that Section 3(a) “has been construed broadly.” Id. (citation and internal quotation marks omitted). That court held that “although an isolated (and minor) transaction with a Massachusetts resident may be insufficient [to satisfy Section 3(a)], generally the purposeful and successful solicitation of business from residents of the Commonwealth, by a defendant or its agent, will suffice to satisfy this requirement.” Id. (citations omitted). The “purposeful and successful solicitation of business” from Massachusetts residents may be manifested by a contract with such a resident. Where, as here, such a contract is “associated with other forum-related activities,” the transacting business requirement of section 3(a) is met. Id. at 768 (citations omitted).

The license-agreement to use the trademark “AltaVista” is a contract entered into by ATI with Digital, a Massachusetts corporation. Without more, it may not be sufficient to comprise transacting business under section 3(a). The “more” is the following:

First, the contract at issue is an integral part of ATI’s transaction of business in Massachusetts. ATI initially sold Digital all of its rights in “AltaVista”; it then contracted to “license-back” the use of “AltaVista” in its url. Any use of this Web-site in Massachusetts “arises from” the contract ATI executed with Digital. Second, ATI’s contract with Digital, which governed the use of the Web-site with the address “www.altavista.com,” was the vehicle through which it solicited business from Massachusetts residents. Its Web-site solicited both sales of software and advertising. Finally, ATI admits that its solicitations were in fact successful; it has made at least three sales to Massachusetts residents. (18)

ATI claims that its contacts with Digital in Massachusetts are relatively minor. Digital apparently solicited the contract from ATI; the negotiations were conducted by phone or in California; the contract itself was not signed by ATI in Massachusetts; neither the defendant nor its physical agents have traveled to Massachusetts, nor does ATI maintain any presence here apart from its Web-site.

Nevertheless, those contacts, especially when viewed in the context of ATI’s conduct after the contract with Digital was executed — the increasing similarities between the appearance of Altavista’s Web site and Digital’s, ATI’s apparent belief that the licensing agreement gave it free rein to capitalize on Digital’s Altavista’s popularity in Massachusetts and elsewhere, the sales to Massachusetts residents — make it clear that its “contract with the plaintiff was one part of a broader range of activities that, literally, amounted to the transaction of business in Massachusetts.” Tatro, 416 Mass. at 769.

ATI also minimizes its contacts by claiming that all it was doing was selling general advertising space on its Web-site, which only incidentally reached Massachusetts residents. (19) While general advertising may not suffice to confer jurisdiction, in this case, ATI’s selling of advertising space (and advertising its own products) on a Web-site is related to the very contract it signed with a Massachusetts company, and integral to the cause of action. (20) Here ATI’s advertising (of its own products and services) on its Web-site in part creates the cause of action. Moreover, when juxtaposed next to its other contacts with this state, it suffices under 3(a).

In short, Digital’s suit “arises from” an alleged breach of a contract with a Massachusetts corporation, and ATI’s resulting Internet activities, including sales and advertising to Massachusetts residents taken together constitute transacting business here. The requirements of Section 3(a) have thus been satisfied.

2. ATI’s Alleged Tort Caused By Acts In Massachusetts

Misrepresentations made “in” Massachusetts can be an alternative basis for jurisdiction under Section 3(c). See, e.g., Ealing Corp. v. Harrods LTD., 790 F.2d 978, 982 (1st Cir. 1986) (holding that a misrepresentation in a telex sent to Massachusetts would provide the basis for Section 3(c) jurisdiction, citing First Circuit and Massachusetts cases). More recently, the Massachusetts Appeals Court held that intentional misrepresentations made by an attorney by phone and mail were sufficient to provide jurisdiction under Section 3(c). See Rye v. Atlas Hotels, Inc., 30 Mass. App. Ct. 904, 906, 566 N.E.2d 617 (1991) (quoting Murphy v. Erwin-Wasey, Inc., 460 F.2d 661, 663-64 (1st Cir. 1972)). See also Burtner v. Burnham, 13 Mass. App. Ct. 158, 163, 430 N.E.2d 1233 (1982) (“where a defendant knowingly sends into a state a false statement, intending that it should be relied upon to the injury of a resident of that state, he has, for jurisdictional purposes, acted within that state.”) (21)

Using the Internet under the circumstances of this case is as much knowingly “sending” into Massachusetts the allegedly infringing and therefore tortious uses of Digital’s trademark as is a telex, mail, or telephonic transmission; (22) the only difference is that the transmission is not “singularly” directed at Massachusetts, in the way that a letter addressed to this state, or a telephone or fax number with a Massachusetts area code would be. But ATI “knows” that its Web-site reaches residents of Massachusetts who choose to access it, just as surely as it “knows” any letter or telephone call is likely to reach its destination. And it presumably “knows” the contents of its Web-site. ATI is a corporation whose primary business is providing Internet software; it is charged with the knowledge that its Web-site is accessible through the Internet in Massachusetts. It not only took no steps to prevent the alleged infringements from reaching this state’s residents — assuming there were steps to take – it plainly intended to market its wares here.

Again, this lawsuit “arises from” ATI’s allegedly tortious acts or omissions, and Section 3(c)’s requirements are thus satisfied.

3. Alleged Tort Caused By Acts Outside Massachusetts

Section 3(d) requires a tort committed in Massachusetts based on acts committed elsewhere, coupled with either regular solicitation of business, or continuing contacts, or the derivation of substantial revenue from Massachusetts. (23)

As noted above, Digital alleges that a tort — trademark infringement — was committed in Massachusetts. The question under Section 3(d) is whether ATI’s activities also amount to regularly “soliciting business” in this Commonwealth or constitutes “engaging in any other persistent course of conduct” within the meaning of the Section.

ATI’s Web-site, generally accessible twenty-four hours a day and seven days a week to all Massachusetts residents who can access the Web, plainly solicits business in Massachusetts. It also constitutes continuing contacts with this state insofar as ATI sells advertising space and software through the Web site to citizens of Massachusetts. When software is sold (or even given away so that users will visit the site) through the Web-site, the software can be transmitted via the Internet directly to a computer located in Massachusetts; as such, it plainly comprises doing business here. At least three such sales have taken place. ATI further “solicits” business by offering advertising space to Massachusetts citizens for a fee.

Maintaining a Web-site that can be accessed by Massachusetts citizens, coupled with the other contacts described above, is engaging in a persistent course of conduct sufficient to satisfy the requirements of Section 3(d). See Keds Corp. v. Renee Int’l Trading Corp., 888 F.2d 215, 218-19 (1st Cir. 1989); (24) Landmark Bank v. Machera, 736 F. Supp. 375, 384 (D. Mass. 1990). Digital’s cause of action arises from ATI’s continuing course of conduct on a Web-site that allegedly causes torts inside Massachusetts.

E. Constitutional Due Process Concerns

United States District Court – Central District of California
Case No. CV 99-12980 DDP (Mcx)
Decision of March 23, 2000
89 F. Supp. 2d 1154

The defendant’s motion to dismiss and the plaintiffs’ motion for a preliminary injunction came before the Court for oral argument on March 13, 2000. After reviewing and considering the materials submitted by the parties and hearing oral argument, the Court adopts the following order.

I. Background

Plaintiff Nissan Motor Co., Ltd., is a large Japanese automaker. Its subsidiary, plaintiff Nissan North America, Inc.,

markets and distributes Nissan vehicles in the United States. Nissan Motor Co. owns, and Nissan North America is the exclusive licensee of, various registered trademarks using the word “Nissan” in connection with automobiles and other vehicles. (Rinek Decl. 4-5.) The first such trademark was registered in 1959. (Id.) Nissan North America also operates an Internet website at “www.nissan-usa.com.”

The defendant, Nissan Computer Corporation, is a North Carolina company in the business of computer sales and services. The company was incorporated in 1991 by Uzi Nissan, its current president. (Nissan Decl. re: Prelim. Inj. 6.) Mr. Nissan has used his surname in connection with various businesses since 1980. (Id. 2-3.) Nissan is also a term in the Hebrew and Arabic languages. (Id. 2 & Ex. 38.) In 1995, the defendant registered a trademark for its Nissan Computer logo with the state of North Carolina. (Id. Ex. 45.)

The defendant registered the Internet domain names “nissan.com” and “nissan.net” in May 1994 and March 1996, respectively. (Compl. Exs. B, C.) For the next several years, the defendant operated websites at these addresses providing computer-related information and services. In July 1995, the plaintiffs sent the defendant a letter expressing “great concern” about use of the word Nissan in the defendant’s domain name. (Nissan Decl. re: Prelim. Inj. 15 & Ex. 44.)

In August 1999, the defendant altered the content of its “nissan.com” website. (Davis Decl. Ex. E.) The website was captioned “nissan.com,” and displayed a “Nissan Computer” logo that is allegedly confusingly similar to the plaintiffs’ “Nissan” logo. (Id. Exs. E, G.) In addition, the website displayed banner advertisements and web links to various Internet search engines and merchandising companies. (Id. Ex. E.) These advertisements included links to automobile merchandisers, such as “cartrackers.com” and “1StopAuto.com;” links to auto-related portions of search engines; and links to topics such as “Car Quotes,” “Auto Racing,” and “Off Road.” (Id. Ex. E; Schindler Decl. re: Prelim. Inj. Ex. E.)

In October 1999, the parties met to discuss the possible transfer of the nissan.com domain name. (Nissan Decl. re: Mot. Dism. 9-10; Davis Decl. 11-12.) In the course of these discussions, Mr. Nissan admittedly stated that he would not sell the domain name except for several million dollars, and made a proposal involving monthly payments in perpetuity. (Davis Decl. 11; Def.’s Opp’n re: Prelim. Inj. at 9-10.) Negotiations were unsuccessful.

On December 10, 1999, the plaintiffs filed a complaint in this Court alleging: (1) trademark dilution in violation of federal and state law; (2) trademark infringement; (3) domain name piracy; (4) false designation of origin; and (5) state law unfair competition. Also on December 10, the Court denied the plaintiffs’ request for a temporary restraining order and scheduled the matter for a preliminary injunction hearing. The Court also approved limited expedited reciprocal discovery.

The plaintiffs’ motion for a preliminary injunction came before the Court for oral argument on February 7, 2000. The plaintiffs seek an order, inter alia, enjoining the defendant from displaying advertisements and links on its websites and requiring the defendant to display a disclaimer and link to the plaintiffs’ website. Alternatively, the plaintiffs seek an order restraining the defendant from using the nissan.com and nissan.net websites pending resolution of this action.

The defendant now moves to dismiss for lack of personal jurisdiction or, in the alternative, for improper venue. The Court deferred ruling on the preliminary injunction pending settlement discussions and briefing on the defendant’s motion.

II. Defendant’s Motion to Dismiss for Lack of Personal Jurisdiction

A. Legal Standard

A federal court’s exercise of personal jurisdiction must comport both with the long-arm statute of the state in which it sits and with the constitutional requirement of due process. California’s long-arm statute is coextensive with due process requirements. See Cal. Civ. Proc. Code § 410.10; Data Disc, Inc. v. Systems Tech. Assocs., Inc., 557 F.2d 1280, 1286 (9th Cir. 1977). Due process requires that the nonresident defendant have “certain minimum contacts with [the forum] such that the maintenance of the suit does not offend ‘traditional notions of fair play and substantial justice.’” International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945) (internal citation omitted).

As discussed further below, a federal court may exercise either general or specific personal jurisdiction. The plaintiff bears the burden of establishing the necessary jurisdictional facts. See Flynt Distrib. Co., Inc. v. Harvey, 734 F.2d 1389, 1392 (9th Cir. 1984). To survive a motion to dismiss for lack of personal jurisdiction, however, the plaintiff need only make a prima facie showing of jurisdiction. See Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995). In determining whether the plaintiff has met this burden, the Court must take the allegations in the plaintiff’s complaint as true and resolve disputed jurisdictional facts in the plaintiff’s favor. See AT&T Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 588-89 (9th Cir. 1996).

B. General Personal Jurisdiction

General personal jurisdiction may be exercised as to any cause of action, if the defendant is domiciled in the forum state or if its activities there are “substantial” or “continuous and systematic.” Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16 (1984).

In this case, the plaintiffs do not argue that the Court has general personal jurisdiction over the defendant. (Opp’n at 12 n.5.) Moreover, there is no evidence that the defendant has “substantial” or “continuous and systematic” contacts with California. The defendant has offices and employees only in North Carolina, offers only local Internet access, and apparently limits its sales and advertising to the East Coast. (Nissan Decl. re: Mot. Dism. 4-5.) Accordingly, the Court finds that the plaintiffs have not established a basis for general personal jurisdiction over the defendant.

C. Specific Personal Jurisdiction

Specific personal jurisdiction may be exercised when the “nature and quality” of the defendant’s contacts with the forum state are significant in relation to the specific cause of action. Data Disc, 557 F.2d at 1287. Specific jurisdiction requires a showing that: (1) the nonresident defendant purposefully directed its activities toward the forum state; (2) the plaintiff’s claim arises out of or results from the defendant’s forum-related activities; and (3) the forum’s exercise of personal jurisdiction is reasonable. See Burger King Corp. v. Rudzewicz, 471 U.S. 462, 477-78 (1985); Lake v. Lake, 817 F.2d 1416, 1421 (9th Cir. 1987).

1. Purposeful availment

To establish purposeful availment, the plaintiffs must show that the defendant has deliberately engaged in “significant activities” within a state or has created “continuing obligations” between himself and the forum. See Gray & Co. v. Firstenberg Mach. Co., 913 F.2d 758, 760 (9th Cir. 1990) (quoting Burger King, 471 U.S. at 475-76). In the Internet context, alleged trademark infringement in connection with the domain name of a passive website does not itself subject the defendant to personal jurisdiction in the plaintiff’s forum state. See Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414, 419 (9th Cir. 1997). Rather, there must be “’something more’ to indicate that the defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state.” See id. at 418.

A. Transaction of Business

The plaintiffs contend that the defendant’s transaction of business in California establishes purposeful availment. The general rule is that merely contracting with a resident of the forum state is insufficient to confer specific jurisdiction over a nonresident defendant. See Burger King, 471 U.S. at 479; Ziegler, 64 F.3d at 473. However, solicitation of business in the forum state may constitute purposeful availment “if that solicitation results in contract negotiations or the transaction of business.” Shute v. Carnival Cruise Lines, 897 F.2d 377, 381 (9th Cir. 1990), rev’d on other grounds, 499 U.S. 585 (1991).

The plaintiffs submit evidence that the defendant contracted with five companies based in California: Asimba, Inc.; Ask Jeeves, Inc.; CNET, Inc.; GoTo.com, Inc.; and RemarQ Communities, Inc. (Schindler Decl. re: Mot. Dism. Exs. 1-5.) The defendant displayed advertising banners and links from these companies on the nissan.com website, and received a commission each time a visitor clicked through to an advertiser’s website. According to the plaintiffs, more than 90,000 customers clicked through from the nissan.com website to the websites of the California advertisers between August and December 1999. (Id. 19.) In addition, the plaintiffs submit evidence that the defendant directly solicited auto-related advertising business from another California-based company, Autoweb.com, although this solicitation did not result in the transaction of business. (Id. Exs. 15-16.)

The defendant responds that it arranged the advertising on its website through a Massachusetts-based intermediary, Be Free, and that it never knowingly reached out to California companies. The Court rejects this argument. The plaintiffs submit evidence that the defendant contracted directly with the five California-based advertisers. Specifically, by enrolling with advertisers on Be Free’s website, the defendant agreed to be bound by contracts with those advertisers. (Schindler Decl. re: Mot. Dism. Exs. 6-12; Greenstein Decl. in Reply to Mot. Dism., Ex. 85 at 21.) In each case, the defendant also received e-mail acceptance notices directly from the California advertisers. (Id. Exs. 18-24.) Finally, the plaintiffs submit evidence that each of the defendant’s contracts with the California advertisers provided that the contract would be governed by California law. (Id. Exs. 8-12.) This factor alone is sufficient to establish purposeful availment. See Decker Coal Co. v. Commonwealth Edison Co., 805 F.2d 834, 840 (9th Cir. 1986).

The Court finds that the defendant purposefully directed its activity in a substantial way toward California. Accordingly, the plaintiffs have met their burden to show purposeful availment.

B.Effects Doctrine

]]> http://cyberlawsconsultingcentre.com/nissan-motor-co-ltd-v-nissan-computer-corp.html/feed 0 http://cyberlawsconsultingcentre.com/satyam-infoway-ltd-v-siffynet-solution-pvt-ltd.html http://cyberlawsconsultingcentre.com/satyam-infoway-ltd-v-siffynet-solution-pvt-ltd.html#comments Sat, 20 Sep 2008 13:49:31 +0000 admin http://cyberlawsworld.com/?p=1196 Satyam Infoway Ltd Vs Siffynet Solution Pvt Ltd.

In a domain disputes case, the Supreme Court of India has held that trademark laws and legal principles can be applied to disputes involving Domain Names.

The case:

Satyam Infoway Ltd, a leading IT service company, incorporated in 1995 for doing business of software development, software solution and connected activities, registered several domain names like ‘www.sifynet’, ‘www.sifymall.com’, ‘www.sifyrealestate.com’ in June 1999 with ICANN and WIPO by coining the word ‘Sify’ by using elements of its corporate name “Satyam Infoway” and therefore claimed wide reputation and goodwill in the name “SIFY”. Siffynet Solutions Pvt Ltd began doing business of network marketing in 2001 under the domain names, ‘www.siffynet.net’ and ‘www.siffynet.com’, having also registered its domain names with ICANN.

After becoming aware of Siffynet’s use of the name “SIFFY”, Satyam Infoway filed a suit before the City Civil Court Judge and obtained temporary injunction on the ground that it was the original user of the “SIFY” trademark.

However, after hearing the appeal from the district court’s order, the High Court of Karnataka reversed the district court’s order, saying that merely because Satyam Infoway was incorporated first and had earned goodwill in respect of domain name ‘Sify’, no order can be granted in its favour without considering where the balance of convenience lies. The High Court also found that there was no similarity between the two businesses, and hence there was no question of customers getting confused or misled. Satyam Infoway filed an appeal to the Supreme Court.

SC verdict:

The Supreme Court held that while the original role of a domain name was to provide an electronic address for businesses on the Internet, the Internet has developed from a mere means of communication to a mode of carrying on commercial activity, and acts as a business identifier. Thus, a domain name could qualify as services and be entitled to protection under section 2(z) of the Trade Marks Act. Furthermore, on the issue of passing off, the Supreme Court found that use of a similar domain name even for different services could result in confusing the consumers. The user may mistakenly access one domain name instead of another.

The Supreme Court allowed the appeal and confirmed the injunction order earlier granted by the district court.

IN THE SUPREME COURT OF INDIA

Civil Appeal No. 5751 of 2007 (Arising out of Special Leave Petition (C) No. 12405 of 2006)
Decided On: 10.12.2007
Appellants: Laxman Prasad
Vs.
Respondent: Prodigy Electronics Ltd. and Anr.

JUDGMENT
C.K. Thakker, J.
Page 4573

1. Leave granted.

2. The present appeal is directed against the judgment and order passed by the High Court of Delhi on April 26, 2006 in I.A. No. 9562 of 2005 in Civil Suit (OS) No. 819 of 2005. By the said order, the High Court dismissed an application filed by the appellant herein under Order VII, Rules 10 and 11 of the Code of Civil Procedure, 1908 (hereafter referred to as ‘the Code’).

3. Shortly stated the facts are that ‘Prodigy Electronics Ltd.’-plaintiff (respondent No.1 herein) (‘the Company’ for short) was formed and incorporated under the laws of Hong Kong and is engaged in the business of trading electronic goods under the name and style ‘Prodigy Electronics’, Hong Kong. The main area of business of the Company is Printed Circuit Board (PCB). The business carried on by the Company involves keen understanding of the requirements of the customers in order that the products may be manufactured to the specific needs of the customers and they may be made available at competitive prices. The Company is, therefore, required to take care of the consumer- complaints, if any. It also involves a reach into the market identifying the potential consumers of the products which involves substantial investment of time, effort and finance. According to the Company, it has developed solid reputation in India under the trade name and trade mark ‘Prodigy Electronics’ in the field of electronics generally and PCBs particularly.

4. According to the plaintiff-Company, on July 22, 2002, the defendant (appellant herein) joined Prodigy Electronics in India as a representative for marketing PCB products of the Company in India. An employment contract Page 4574 was entered into on October 2, 2003 between the defendant-employee and the plaintiff-Company. Under the said contract, the defendant was given full-time employment in the Company at Hong Kong in the capa

CASE NO.: Appeal (crl.) 1659 of 2007
PETITIONER: Sanjay Kumar Kedia
RESPONDENT:
Narcotics Control Bureau & Anr
DATE OF JUDGMENT: 03/12/2007
BENCH: S.B.SINHA & HARJIT SINGH BEDI
JUDGMENT: JUDGMENT
O R D E R
CRIMINAL APPEAL NO. 1659 OF 2007 (@SLP (Crl.) No. 3892 of 2007)
HARJIT SINGH BEDI, J.

1. Special Leave granted.

2. The appellant Sanjay Kumar Kedia, a highly qualified individual, set up two companies M/s. Xponse Technologies Limited (XTL) and M/s. Xponse IT Services Pvt. Ltd. (XIT) on 22.4.2002 and 8.9.2004 respectively which were duly incorporated under the Indian Companies Act, 1956. On 1.2.2007 officers of the Narcotics Control Bureau (NCB) conducted a search at the residence and office premises of the appellant but found nothing incriminating. He was also called upon to appear before the NCB on a number of occasions pursuant to a notice issued to him under Section 67 of the Narcotic Drugs and Psychotropic Substances Act, 1985 (hereinafter referred to as the “Act”) and was ultimately arrested and the bank accounts and premises of the two companies were also seized or sealed. On 13.3.2007 the appellant filed an application for bail in the High Court which was dismissed on the ground that a prima facie case under Sections 24 and 29 of the Act had been made out and that the investigation was yet not complete. The appellant thereafter moved a second bail application before the High Court on 16.4.2007 which too was dismissed with the observations that the enquiry was at a critical stage and that the department should be afforded sufficient time to conduct its enquiry and to bring it to its logical conclusion as the alleged offences had widespread ramifications for society. It appears that a bail application was thereafter filed by the appellant before the Special Judge which too was rejected on 28.5.2007 with the observations that the investigation was still in progress. Aggrieved thereby, the appellant preferred yet another application for bail before the High Court on 4.6.2007 which too was dismissed on 7.6.2007. The present appeal has been filed against this order. 3. Notice was issued on the Special Leave Petition on 30.7.2007 by a Division Bench noticing a contention raised by Mr. Tulsi that service providers such as the two companies which were intermediaries were protected from prosecution by Section 79 of the Information Technology Act, 2000. An affidavit in reply has also been filed on behalf of the respondent : NCB and a rejoinder affidavit in reply thereto by the appellant. 4. We have heard learned counsel for the parties at length. 5. Mr. Tulsi has first and foremost argued that the allegations against the appellant were that he had used the network facilities provided by his companies for arranging the supply of banned psychotropic substances on line but there was no evidence to suggest that the appellant had been involved in dealing with psychotropic substances or engaged in or controlled any trade whereby such a substance obtained outside India had been supplied to persons outside India and as such no case under section 24 of the Act had been made out against the appellant. Elaborating this argument, he has submitted that the two drugs which the appellant had allegedly arranged for supply were phentermine and butalbital and as these drugs were not included in Schedule-I of the Narcotic Drugs or Psychotropic Substances Rules 1987 in terms of the notification dated 21.2.2003 and were also recognized by the Control Substances Act, a law applicable in the United States, as having low potential for misuse and it was possible to obtain these drugs either on written or oral prescription of a doctor, the supply of these drugs did not fall within the mischief of Section 24. He has further argued that in the circumstance, the companies were mere network service providers they were protected under Section 79 of the Technology Act from any prosecution. 6. Mr. Vikas Singh, the learned Additional Solicitor General for the respondents has however pointed out that the aforesaid drugs figured in the Schedule appended to the Act pertaining to the list of psychotropic substances (at Srl. Nos. 70 and 93) and as such it was clear that the two drugs were psychotropic substances and therefore subject to the Act. It has also been pointed out that the appellant had been charged for offences under Sections 24 and 29 of the Act which visualized that a person could be guilty without personally handling a psychotropic substance and the evidence so far collected showed that the appellant was in fact a facilitator between buyers and certain pharmacies either owned or controlled by him or associated with the two companies and that Section 79 of the Technology Act could not by any stretch of imagination guarantee immunity from prosecution under the provisions of the Act. 7. It is clear from the Schedule to the Act that the two drugs phentermine and butalbital are psychotropic substances and therefore fall within the prohibition contained in Section 8 thereof. The appellant has been charged for offences punishable under Sections 24 and 29 of the Act. These Sections are re-produced below: 24. ” Punishment for external dealings in narcotic drugs and psychotropic substances in contravention of section 12.- Whoever engages in or controls any trade whereby a narcotic drug or a psychotropic substance is obtained outside India and supplied to any person outside India without the previous authorization of the Central Government or otherwise than in accordance with the conditions (if any) of such authorization granted under section 12, shall be punishable with rigorous imprisonment for a term which shall not be less than ten years but which may extend to twenty years and shall also be liable to fine which shall not be less than one lakh rupees but may extend to two lakh rupes:
Provided that the court may, for reasons to be recorded in the judgment, impose a fine exceeding two lakh rupees”.

29. Punishment for abetment and criminal conspiracy. – (1) Whoever abets, or is a party to a criminal conspiracy to commit an offence punishable under this Chapter, shall, whether such offence be or be not committed in consequence of such abetment or in pursuance of such criminal conspiracy, and notwithstanding anything contained in section 116 of the Indian Penal Code (45 of 1860), be punishable with the punishment provided for the offence.

(2) A person abets, or is a party to a criminal conspiracy to commit, an offence, within the meaning of this section, who, in India abets or is a party to the criminal conspiracy to the commission of any act in a place without and beyond India which :

(a) would constitute an offence if committed within India; or

(b) under the laws of such place, is an offence relating to narcotic drugs or psychotropic substances having all the legal conditions required to constitute it such an offence the same as or analogous to the legal conditions required to constitute it an offence punishable under this Chapter, if committed within India.
8. A perusal of Section 24 would show that it deals with the engagement or control of a trade in Narcotic Drugs and Psychotropic Substances controlled and supplied outside India and Section 29 provides for the penalty arising out of an abetment or criminal conspiracy to commit an offence under Chapter IV which includes Section 24. We have accordingly examined the facts of the case in the light of the argument of Mr. Tulsi that the companies only provided third party data and information without any knowledge as to the commission of an offence under the Act. We have gone through the affidavit of Shri A.P. Siddiqui Deputy Director, NCB and reproduce the conclusions drawn on the investigation, in his words.

“(i) The accused and its associates are not intermediary as defined under section 79 of the said Act as their acts and deeds was not simply restricted to provision of third party data or information without having knowledge as to commission of offence under the NDPS Act. The company (Xponse Technologies Ltd. And Xpose IT Services Pvt. Ltd. Headed by Sanjay Kedia) has designed, developed, hosted the pharmaceutical websites and was using these websites, huge quantity of psychotropic substances (Phentermine and Butalbital) have been distributed in USA with the help of his associates. Following are the online pharmacy websites which are owned by Xponse or Sanjay Kedia.

(1) Brother Pharmacy.com and LessRx.com: Brothers pharmacy.com, online pharmacy was identified as a marketing website (front end) for pharmaceutical drugs. LessRx.com has been identified as a “back end” site which was being utilized to process orders for pharmaceutical drugs through Brotherspharmacy.com. LessRx.com’s registrant and administrative contact was listed True Value Pharmacy located at 29B, Rabindra Sarani, Kolkata, India-700073. Telephone No.033-2335-7621 which is the address of Sanjay Kedia. LessRx.com’s IP address is 203.86.100.95. The following websites were also utilizing this IP address:
ALADIESPHARMACY.com, EXPRESSPHENTERMINE.com,

FAMILYYONLINEPHARMACY.com ONLINEEXPRESSPHARMACY.com,

SHIPPEDLIPITOR.com Domain name Servers for LessRx.com (IP address: 203.86.100.95) were

NS.PALCOMONLINE.com and NS2PALCOMLINE.com.

The LessRx.com’s website hosting company was identified as Pacom Web Pvt Ltd, C-56/14,1st Floor, Institutional Area, Sector 62, Noida-201301. Sanjay Kedia entrusted the hosting work to Palcom at VSNL, Delhi. These servers have been seized. Voluntary statement of Shri Ashish Chaudhary, Prop. Of Palcom Web Pvt Ltd.indicates that He maintained the websites on behal of Xponse.

According to the bank records, funds have been wired from Brothers pharmacy, Inc’s Washington Mutual Bank Account #0971709674 to Xponse IT services Pvt Ltd, ABN AMRO bank account

No.1029985, Kolkata.

(2) Deliveredmedicine.com : A review of the Xponse’s website-XPONSEIT.com was conducted and observed and advertisement for XPONSERX. That XPONSERX was described as a software platform developed for the purpose of powering online pharmacies. Xponserx was designed to process internet pharmacy orders by allowing customers to order drugs. Drug Enforcement Administration (DEA), USA conducted a “whois” reverse lookup on domain name XPONSERX.COM was at domaintools.Com and it revealed that XPONSERX.COM was registered to Xponse IT Services Pvt Ltd, Sanjay kedia,

29B, Rabindra Sarani, 12E, 3rd floor, Kolkata, WB 70073. Telephone no.+91- 9830252828 was also provided for Xponse. Two websites were featured on the
XPONSEIT.COM websites as featured clients. And these were
DELIVEREDMEDICINE.COM AND TRUEVALUEPRESCRIPTIONS.COM. Review indicated that these two websites were internet pharmacies.

Consequently a “whois” reverse look-up on domain name DELIVEREDMEDICINE.COM at domainstools.com conducted by DEA revealed that it was registered to Xponse Inc.,2760 Park Ave.,Santa Clara, CA, USA which is the address of Sanjay Kedia.

(3) Truevalueprescriptions.com: Review of this website indicated that this website was a internet pharmacy. In addition TRUEVALUEPRESCRIPTIONS listed Phentermine as a drug available for sale. It appeared that orders for drugs could be made without a prescription from the TRUEVALUE website, it was noted that orders for drugs could be placed without seeing a doctor. According to the website, a customer can complete an online questionnaire when placing the order for a drug in lieu of a physical exam in a physician’s office. Toll free telephone number 800-590-5942 was provided on the TRUEVALUE website for customer Service.

DEA, conducted a “whois” reverse look-up on domain name TRUEVALUEPRESCRIPTIONS.COM at domaintools.com and revealed that IP address was 203.86.100.76 and the server that hosts the website was located at Palcom, Delhi which also belongs to Xponse.

From the above facts it is clear that the Xponse Technologies Ltd and Xponse IT Services Pvt Ltd were not acting merely as a network service provider but were actually running internet pharmacy and dealing with prescription drugs like Phentermine and Butalbital.”

9. We thus find that the appellant and his associates were not innocent intermediaries or network service providers as defined under section 79 of the Technology Act but the said business was only a fagade and camouflage for more sinister activity. In this situation, Section 79 will not grant immunity to an accused who has violated the provisions of the Act as this provision gives immunity from prosecution for an offence only under Technology Act itself. 10. We are therefore of the opinion that in the face of overwhelming inculpatory evidence it is not possible to give the finding envisaged under Section 37 of the Act for the grant of bail that there were reasonable grounds for believing that the appellant was not guilty of the offence alleged, or that he would not resume his activities should bail be granted. 11. For the reasons recorded above, we find no merit in this appeal, which is accordingly dismissed. We however qualify that the observations made above are in the context of the arguments raised by the learned counsel on the bail matter which obligated us to deal with them, and will not influence the proceedings or decision in the trial in any manner.

No. B179005. Second Dist., Div. Two. Aug. 16, 2006.]

AMERICAN INTERNATIONAL SPECIALTY LINES INSURANCE COMPANY et al., Plaintiffs and Appellants, v. CONTINENTAL CASUALTY INSURANCE COMPANY et al., Defendants and Respondents.

(Superior Court of Los Angeles County, No. BC261838, James R. Dunn, Judge.)

(Opinion by Ashmann-Gerst, J., with Boren, P. J., and Doi Todd, J., concurring.)

COUNSEL

McCormick, Barstow, Sheppard Wayte & Carruth, James P. Wagoner, Jay A. Christofferson and David W. Burnett for Plaintiffs and Appellants.

Woolls & Peer, John E. Peer and Beth E. Yoffie for Defendant and Respondent Continental Casualty Insurance Company.

Greenan, Peffer, Sallander & Lally, James S. Greenan, John P. Makin and Nelson S. Hsieh for Defendant and Respondent Gulf Underwriters Insurance Company.

Gray & Prouty, Malcolm D. Schick and David J. Gittelman for Defendant and Respondent Admiral Insurance Company. {Slip Opn. Page 2}

OPINION

ASHMANN-GERST, J.-

The question presented is whether respondents Continental Casualty Company (Continental), Gulf Underwriters Insurance Company (Gulf), and Admiral Insurance Company (Admiral) (collectively objecting insurers) are liable for equitable indemnity or equitable contribution to appellants American International Specialty Lines Insurance Company (American) and Lexington Insurance Company (Lexington) (collectively settling insurers). The settling insurers paid $21.5 million to fund a settlement and $3,214,612 in defense costs on behalf of Walt Disney Company (Disney) (the insured of Continental, American and Lexington) in connection with an action by Goto.Com, Inc. (Goto.com) against Disney and Infoseek Corporation (Infoseek) (the insured of Gulf and Admiral). The settling insurers sued the objecting insurers, who then moved for summary judgment, inter alia, due to lack of notice of the Goto.com action and settlement to Continental, and lack of coverage on the part of Gulf and Admiral. Summary judgment was entered for the objecting insurers and the settling insurers appeal. We find no error and affirm the judgment.

CONTENTIONS

According to the settling insurers:

1. Even if Continental did not have notice of the Goto.com action, there is a triable issue as to whether notice was required. Under Continental’s insurance policy, Disney was excused from providing notice of the Goto.com action if it had a reasonable belief that the occurrence, injury or offense was not covered. Disney reasonably believed it was not covered, so notice was not required.

2. The trial court erred when it ruled that Continental did not receive notice of the Goto.com action prior to Disney’s settlement. There was a triable issue as to whether Continental received constructive notice of the Goto.com action through AON Risk Services, Inc. (AON).

3. Because Continental had no right to control Disney’s defense, notice would not have changed the settlement. As a result, Continental cannot avoid its equitable duty to contribute to the settlement. {Slip Opn. Page 3}

4. The trial court improperly relied on Truck Ins. Exchange v. Unigard Ins. Co. (2000) 79 Cal.App.4th 966 (Unigard) in ruling that Continental’s nonvoluntary payment clause was a defense to the settling insurers’ claims. Unigard is distinguishable and should not be applied to this case.

5. The trial court erroneously applied the provision in Gulf’s insurance policy that excluded coverage if Infoseek had prepolicy knowledge of circumstances that could lead to an insurance claim. There are triable issues as to Gulf’s duty to defend because Infoseek might not have known of a prior wrongful act before the February 12, 1999, inception date of Gulf’s insurance.

6. Even if Infoseek was not entitled to coverage for prior wrongful acts, Gulf was required to provide a defense for wrongful acts occurring within the policy period. The trial court erred when it concluded that all Infoseek’s wrongful acts should be treated as one prior wrongful act.

7. Admiral, which issued an excess policy that followed form to Gulf’s insurance, breached a contractual duty to conduct an investigation and determine coverage. Admiral must contribute to the settlement because the allegations of the Goto.com action triggered Admiral’s insurance policy.

FACTS

Goto.com

In December 1997, Goto.com began operating a search engine with the internet address “www.goto.com.” Goto.com’s word marks were GOTO and GOTO.COM and its design mark (mark) displayed the words Go and To in white letters in the center of a green circle on a yellow background.

Continental, American and Lexington issue policies to Disney

Continental issued a $2 million general liability policy (the Continental policy) to Disney for the policy period June 30, 1997, through June 30, 2000. The Continental policy provided coverage for advertising injury. Lexington issued a $10 million media wrap up policy (the Lexington policy) to Disney for the period June 30, 1998, through June 30, 2001, and promised to pay all loss that Disney became legally obligated to pay {Slip Opn. Page 4} resulting from, inter alia, misappropriation or unauthorized use of a trademark or service mark, and unfair competition involving the misuse of matter. Under the Lexington policy, it was Disney’s duty to defend against claims brought against it. Finally, American issued a $50 million excess liability policy (the American policy) to Disney for the period June 30, 1998, through June 30, 2001. With respect to media professional liability, the American policy contained an endorsement stipulating that the insurance it provided followed form to the Lexington policy and the Continental policy.

The Continental policy required Disney to notify Continental of any claim for advertising injury if Disney estimated that the defense costs and liability exceeded 50 percent of the retention. The retention was $250,000 for each occurrence with respect to advertising injury.

Infoseek obtains an application for insurance with Gulf

Infoseek’s agent solicited insurance from Media/Professional Insurance. Media/Professional Insurance wrote back and requested, inter alia, that Infoseek sign and date an application. A copy of Gulf’s specialty errors and omissions plan application was forwarded.

Disney acquires Infoseek stock; they launch the go.com search engine

Disney acquired 43 percent of the stock of Infoseek and an option to obtain a majority interest. On December 13, 1998, Disney and Infoseek launched a beta test version of a search engine called go.com. They promoted the search engine with the word mark GO and a design mark with GO appearing in the center of a green circle against a yellow background (infringing mark). The words were in white and used the same font used in the mark. Disney’s Buena Vista Internet Group (Buena Vista) worked with Infoseek on go.com.

Goto.com’s cease and desist demand and the parties’ subsequent negotiations

Because the mark and infringing mark were similar, an attorney for Goto.com wrote to the Business and Legal Affairs department of Buena Vista. The attorney informed Buena Vista that Goto.com was the owner of the mark and the GOTO and GOTO.COM word marks, and that the mark and infringing mark were confusing to {Slip Opn. Page 5} consumers. According to the attorney for Goto.com: “Disney’s use of the GO word mark and [infringing mark] in connection with its [internet] services constitutes, among other things, a violation of Section 43(a) of the Lanham Act, [title 15 United States Code sections] 1051, et seq., as well as violations of applicable state statutory and common law.   We therefore demand, on behalf of [Goto.com], that Disney provide us with written assurances by no later than the close of business on Friday, January 8, 1999, that it will immediately cease and desist from all use of the GO word mark, the [infringing mark] and any similar marks.   [Goto.com] will take any and all steps to protect its intellectual property rights. If we do not receive the requested written assurances by Friday, January 8, 1999, [Goto.com] will reasonably assume that Disney does not intend to comply with the request, and [Goto.com] will feel free to pursue any and all remedies available to it under applicable federal and state law to protect its intellectual property rights.” (Italics omitted.)

On January 11, 1999, a Goto.com attorney spoke to Buena Vista, which revealed that personnel at Disney were adamant that they try to find a business solution to the dispute. According to Buena Vista, they needed to sit down and talk to Infoseek’s chief executive officer and Disney.

On January 15, 1999, Disney sent an e-mail to the chief executive officer of Goto.com. The e-mail stated that Disney was “coordinating availability of the appropriate Infoseek people so we can set up a meeting for next week.” A subsequent e-mail from the Goto.com chief executive officer to Goto.com addressees forwarded a draft discussion document that was received from Larry Shapiro. That e-mail stated: “The next step is to meet with InfoSeek [sic] on Monday to hammer out an agreement along the lines of this document.”

The “Go Network and [Goto.com] Partnership Opportunities Discussion Document,” which was dated January 15, 1999, set forth a nonbinding outline of discussions regarding potential business partnership opportunities between Disney’s Buena Vista and Infoseek on one hand, and Goto.com on the other hand. The discussion document provided, in part, (1) “[s]everal potential product integration and business {Slip Opn. Page 6} opportunities are being discussed, which will be further explored with the Infoseek product and business development team”; (2) “[a]ny business opportunity is subject to successful negotiation with Infoseek”; (3) “[Goto.com] and [Infoseek and Buena Vista] will explore potential revenue sharing from the services provided by [Goto.com] within the Go Network or other joint economic incentives around these opportunities”; and (4) “[Goto.com] [Buena Vista] and Infoseek will meet to explore these and other opportunities to integrate [Goto.com] products and/or technologies into the Go Network as appropriate.”

Eric Bochner (Bochner) of Infoseek attended discussions between the parties about forming a business relationship. Goto.com indicated that it would consider litigation to enforce its rights.

Goto.com sent Disney an e-mail on February 4, 1999, and said “it is looking unlikely that we will reach a business solution to our mutual problem.” Disney personnel replied with an e-mail on February 5, 1999, that stated: “I was at an Infoseek board meeting today. I heard from my team that they were awaiting your response to our proposal.” Bochner sent a nonbinding proposal to Goto.com on February 8, 1999, that proposed, among other things, that Infoseek and Goto.com create Go Network Commercial Listing Service. One of the provisions provided: “Any agreement arising out of this proposal would be by and among [Goto.com], Infoseek and [Disney] and would be subject to mutual written agreement among the parties (settlement of all potential claims, releases, etc. . . . ).”

Goto.com, Disney and Infoseek began working on a tolling agreement. The first draft, signed by Infoseek on February 10, 1999, stated in part: “On December 22, 1998, [Goto.com] wrote a letter to [Disney], alleging infringement (the ‘Claim’) of [Goto.com's] trademark rights by the Go Network, which is a venture of Disney, [Infoseek], and their related companies. . . .   In the month since January 8, 1999, [Goto.com], Disney and Infoseek have engaged in settlement discussions in an effort to achieve a mutually acceptable business solution to the dispute. The parties desire to continue these discussions. At the same time, [Goto.com] desires to preserve its right to {Slip Opn. Page 7} seek preliminary injunctive relief if the continuing discussions do not succeed in resolving the dispute.” The first draft of the tolling agreement set forth a 14-day extension and provided that Goto.com would give Disney and Infoseek 24 hours notice of the filing of any lawsuit. Subsequently, Infoseek signed another draft of the tolling agreement on February 12, 1999.

The Goto.com action

No. 00 C 1738.
United States District Court, N.D. Illinois.
May 3, 2000.

MEMORANDUM OPINION AND ORDER
ASPEN, Chief J.

Defendant Armitage Hardware (Armitage) owns a number of internet domain names that plaintiff Weber-Stephen Products Company (Weber) alleges intentionally and in bad faith use Weber’s registered trademarks and service marks in a deceptive, confusing, and misleading manner. Weber initiated an administrative proceeding before the World Intellectual Property Organization (WIPO), pursuant to the Uniform Domain Name Dispute Resolution Policy of the Internet Corporation for Assigned Names and Numbers (ICANN Policy), requesting that the administrative panel issue a decision transferring Armitage’s domain names to Weber or canceling Armitage’s domain names. The following day, Weber also filed suit in this Court, alleging ”cyberpiracy” as well as other claims, such as trademark infringement. Weber told this Court that it had commenced an ICANN proceeding to resolve the issue of whether Armitage was using its domain names in bad faith, which is the only issue that the ICANN administrative panel has power to decide under the Policy. Weber also said that because it expected a decision from the panel within 45 to 50 days from the filing of its ICANN complaint (the Policy provides for expedited review), it would not be seeking injunctive relief in this Court with respect to Armitage’s registration of the Weber domain names unless the panel declines to cancel and/or to transfer the domain names to Weber.

We understand that the panel is scheduled to issue a decision as soon as May 5, 2000. Before us now is Armitage’s motion to declare the administrative proceeding non-binding and to stay this case in favor of the administrative action, or alternatively—should we find the other proceeding to be binding—to stay it while we consider whether Armitage’s participation in that proceeding can be compelled. Armitage’s concern is that if the panel’s arbitration decision is binding on this Court, Armitage will suffer irreparable harm because our review of the panel’s decision will necessarily be circumscribed pursuant to the deference accorded arbitrators’ decisions under the Federal Arbitration Act.

The ICANN is a new, quasi-governmental internet-regulating body, and its Policy (approved on October 24, 1999) provides for a ”mandatory administrative proceeding” in disputes between domain name owners and trademark owners and purportedly applies to every domain name registrant who registers its domain names through an ICANN-accredited registrar.1 Armitage contends that it did not agree to the administrative proceeding and thus cannot be compelled to participate in it. However, Armitage will participate if we declare that the proceeding is non-binding, that we owe no deference to the proceeding, and that WIPO, ICANN, and Network Solutions, Inc. (Armitage’s ICANN-accredited registrar) cannot take any action adverse to Armitage until this matter is resolved in this Court.

No federal court has yet considered the legal effect of a WIPO proceeding. However, the ICANN Policy and its accompanying rules do contemplate the possibility of parallel proceedings in federal court. First, the Policy provides that ICANN will cancel or transfer domain name registrations upon ”our receipt of an order from a court … of competent jurisdiction, requiring such action; and/or … our receipt of a decision of an Administrative Panel requiring such action in any administrative proceeding … conducted under this Policy.” ICANN Policy at 3. Also, the procedural rules governing the Policy provide that if legal proceedings are initiated prior to or during an administrative proceeding with regard to a domain name dispute that is the subject of the administrative complaint, the panel has the discretion to decide whether to suspend or terminate the administrative proceeding or whether to proceed and make a decision. Uniform Domain Name Dispute Resolution Rules, at 18.2 And the language of the Policy suggests that the administrative panels’ decisions are not intended to be binding on federal courts. For example, under the heading ”Availability of Court Proceedings,” the ICANN Policy provides:

The mandatory administrative proceeding requirements set forth in Paragraph 4 shall not prevent either you or the complainant from submitting the dispute to a court of competent jurisdiction for independent resolution before such mandatory administrative proceeding is commenced or after such proceeding is concluded. If an Administrative Panel decides that your domain name registration should be canceled or transferred, we will wait ten (10) business days … before implementing that decision. We will then implement the decision unless we have received from you during that ten (10) business day period official documentation (such as a copy of a complaint, file-stamped by the clerk of the court) that you have commenced a lawsuit against the complainant in a jurisdiction to which the complainant has submitted … If we receive such documentation within the ten (10) business day period, we will not implement the Administrative Panel’s decision, and we will take no further action, until we receive (i) evidence satisfactory to us of a resolution between the parties; (ii) evidence satisfactory to us that your lawsuit has been dismissed or withdrawn; or (iii) a copy of an order from such court dismissing your lawsuit or ordering that you do not have the right to continue to use your domain name.

ICANN Policy at 4(k).3 Furthermore, Armitage’s counsel sent an e-mail inquiry to , and the response from the WIPO Arbitration and Mediation Center said that the administrative panel’s determination would be binding on the registrar of the domain name, but that ”[t]his decision is not binding upon a court, and a court may give appropriate weight to the Administrative Panel’s decision.” Albeit a vague and rather unhelpful interpretation, Weber does not take issue with this WIPO statement.

We conclude that this Court is not bound by the outcome of the ICANN administrative proceedings. But at this time we decline to determine the precise standard by which we would review the panel’s decision, and what degree of deference (if any) we would give that decision. Neither the ICANN Policy nor its governing rules dictate to courts what weight should be given to a panel’s decision, and the WIPO e-mail message stating that ”a court may give appropriate weight to the Administrative Panel’s decision” confirms the breadth of our discretion.

Because both parties to this case have adequate avenues of recourse should they be unhappy with the administrative panel’s imminent decision, we find no need to stay the pending ICANN administrative action. Instead, we hereby stay this case pending the outcome of those proceedings. It is so ordered.

1 The term ”registrar” refers to the entity (such as Network Solutions, Inc. or America Online) through which a company or individual can register a domain name.

2 In this case, the panel has not yet suspended or terminated the ICANN proceedings.

3 The Policy continues: ”All other disputes between you and any party other than us regarding your domain name registration that are not brought pursuant to the mandatory administrative proceeding provisions … shall be resolved between you and such other party through any court, arbitration or other proceeding that may be available.” ICANN Policy at 5.

NETWORK SOLUTIONS, INCORPORATED,
Defendant.

Appeal from the United States District Court
for the Eastern District of Virginia, at Alexandria.
Claude M. Hilton, Chief District Judge.
(CA-99-1289-A)

Argued: October 30, 2000
Decided: January 22, 2001
Before WILKINSON, Chief Judge, and MICHAEL and
TRAXLER, Circuit Judges.
Affirmed by published opinion. Chief Judge Wilkinson wrote the
opinion, in which Judge Michael and Judge Traxler joined.

COUNSEL

ARGUED: William Herbert Bode, BODE & BECKMAN, L.L.P., Washington, D.C., for Appellant. Thomas Rex Lee, HOWARD, PHILLIPS & ANDERSEN, P.C., Salt Lake City, Utah, for Appellees. ON BRIEF: Gregory D. Phillips, HOWARD, PHILLIPS & ANDERSEN, P.C., Salt Lake City, Utah; John F. Anderson, RICHARDS, MCGETTIGAN, REILLY & WEST, Alexandria, Virginia, for Appellees.

OPINION

WILKINSON, Chief Judge:

Volkswagen challenges Virtual Works, Inc.’s use of the domain name vw.net under the 1999 Anticybersquatting Consumer Protection Act (ACPA). Volkswagen claims that Virtual Works registered vw.net with the purpose of one day selling it to Volkswagen. The district court agreed, holding that Virtual Works had a bad faith intent to profit from the vw.net domain name and that its use of vw.net diluted and infringed upon the VW mark. Virtual Works, Inc. v. Network Solutions, Inc., 106 F. Supp.2d 845 (E.D. Va. 2000). The district court therefore ordered Virtual Works to relinquish to Volkswagen the rights to vw.net. Because the district court did not err in holding that Virtual Works violated the ACPA, we affirm the judgment.

I.

On October 23, 1996, Virtual Works registered the domain name vw.net with Network Solutions, Inc. (NSI). At that time, NSI was the only company authorized by the government to serve as a registrar for Internet domain names. A domain name tells users where they can find a particular web page, much like a street address tells people where they can find a particular home or business. Domain names consist of two parts: the top level domain name (TLD) and secondary level domain name (SLD). The TLD is the suffix, identifying the nature of the site. The SLD is the prefix, identifying the site’s owner. Thus in the domain name Duke.edu, “.edu” is the TLD, identifying the site as affiliated with an educational institution. “Duke” is the SLD, identifying the owner as Duke University. There are various other TLDs. The most common are .com, .net, and .org for commercial users and .gov for governmental entities. At one point there was a distinction between the .com, .org, and .net TLDs. The .net TLD was reserved for Internet service providers (ISPs). The .org TLD was reserved for non-commercial or non-profit users. In September 1995, however, NSI stopped enforcing these distinctions. Thus, after 1995, commercial businesses could register domain names with the .net, .org, or .com TLD.

At the time Virtual Works registered vw.net, two of its principals, Christopher Grimes and James Anderson, were aware that some Internet users might think that vw.net was affiliated with Volkswagen. According to Grimes, he and Anderson “talked about Volkswagen and decided that [they] would use the domain name for [the] company, but if Volkswagen offered to work out a deal for services or products, that [they] would sell it to [Volkswagen] for a lot of money.” When Virtual Works registered vw.net , many other domain names were available for its use. For instance, vwi.net, vwi.org, virtualworks.net, and virtualworks.org, were still available.

Virtual Works used the vw.net domain name for approximately two years as a part of its ISP business. In December 1998, various Volkswagen dealerships contacted Virtual Works and expressed an interest in purchasing the rights to the vw.net domain name. Virtual Works, in turn, called Volkswagen, offering to sell vw.net. The terms of Virtual Works’ offer, however, were somewhat unusual. Anderson left a voice mail message for Linda Scipione in Volkswagen’s trademark department. In the message, Anderson stated that he owned the rights to vw.net. He also said that unless Volkswagen bought the rights to vw.net, Virtual Works would sell the domain name to the highest bidder. Anderson gave Volkswagen twenty-four hours to respond.

In response to what it perceived as a threat to the VW mark, Volkswagen invoked NSI’s dispute resolution procedure. NSI in turn told Virtual Works that Virtual Works would lose the vw.net domain name unless it filed a declaratory judgment action against Volkswagen. Virtual Works complied. Volkswagen subsequently counterclaimed, alleging trademark dilution, infringement, and cybersquatting under the ACPA. 15 U.S.C. ďż˝ 1125(d). The district court granted Volkswagen’s motion for summary judgment on its cybersquatting, dilution, and infringement counterclaims and dismissed Virtual Works’ cross-motions on the same. Accordingly, the district court ordered Virtual Works to relinquish to Volkswagen the rights to the vw.net domain name. Virtual Works appeals.

II.

A. The ACPA was enacted in 1999 in response to concerns over the proliferation of cybersquatting — the Internet version of a land grab. According to the Senate Report accompanying the Act:”Trademark owners are facing a new form of piracy on the Internet caused by acts of `cybersquatting,’ which refers to the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners.” S. Rep. No. 106-140, at 4 (1999). Cybersquatting is the practice of registering “well-known brand names as Internet domain names” in order to force the rightful owners of the marks “to pay for the right to engage in electronic commerce under their own brand name.” Id. at 5. See also H.R. Rep. No. 106-412, at 5-7 (1999). Cybersquatting is profitable because while it is inexpensive for a cybersquatter to register the mark of an established company as a domain name, such companies are often vulnerable to being forced into paying substantial sums to get their names back. Sporty’s Farm, L.L.C. v. Sportsman’s Market, Inc., 202 F.3d 489, 493 (2d Cir. 2000).

Congress viewed the practice of cybersquatting as harmful because it threatened “the continued growth and vitality of the Internet as a platform” for “communication, electronic commerce, education, entertainment, and countless other yet-to-be-determined uses.” S. Rep. No. 106-140, at 8. New legislation was required to address this situation because then-current law did not expressly prohibit the act of cybersquatting and cybersquatters had started to take the necessary precautions to insulate themselves from liability under the Federal Trademark Dilution Act. Id. at 7. Accordingly, Congress passed, and the President signed, the ACPA in 1999. Pub. L. No. 106-113, 113 Stat. 1536 (codified at 15 U.S.C.ďż˝ 1125(d).

B. Under the ACPA, a person alleged to be a cybersquatter is liable to the owner of a protected mark if that person:

(i) has a bad faith intent to profit from that mark . . .; and

(ii) registers, traffics in, or uses a domain name that- (I) in the case of a mark that is distinctive . . ., is identical or confusingly similar to that mark;

(II) in the case of a famous mark . . ., is identical or confusingly similar to or dilutive of that mark;
15 U.S.C. ďż˝ 1125(d)(1)(A). With respect to the bad faith determination, the statute provides that:
(B)(i) In determining whether a person has a bad faith intent . . . a court may consider factors such as, but not limited to

(I) the trademark or other intellectual property rights of the person, if any, in the domain name;

(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;

(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;

(IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;

(V) the person’s intent to divert consumers from the mark owner’s online location to a site . . . that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish or disparage the mark . . .;

(VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used . . . the domain name in the bona fide offering of any goods or services . . .;

(VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name . . .;

(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others . . .; and

(IX) the extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous . . . .

15 U.S.C. 1125(d)(1)(B)(i). In addition to listing these nine factors, the Act contains a safe harbor. The safe harbor provision states that bad faith intent “shall not be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was fair use or otherwise lawful.” 15 U.S.C.ďż˝ 1225(d)(1)(B)(ii).

A court is not limited to considering these nine factors when determining the presence or absence of bad faith. 15 U.S.C. ďż˝ 1125(d)(1)(B)(i). The Second Circuit, in the first court of appeals case addressing the ACPA, noted that the most important grounds for finding bad faith “are the unique circumstances of th[e] case, which do not fit neatly into the specific factors enumerated by Congress but may nevertheless be considered under the statute.” Sporty’s Farm, 202 F.3d at 499.

The remedies available under the ACPA depend on when the unlawful activity took place. A person who unlawfully registers, traffics in, or uses a domain name after the ACPA’s date of enactment, November 29, 1999, can be liable for monetary damages under 15 U.S.C.1117(d) and can have the domain name transferred to the owner of the mark or canceled under 15 U.S.C. 1125(d)(2)(D)(i). The only remedy available for ACPA violations that occurred before November 29, 1999, however, is to have the domain name transferred to the owner of the mark or canceled. Anticybersquatting Consumer Protection Act, Pub. L. No. 106-113, ďż˝ 3010, 113 Stat. 1536. Since Virtual Works’ alleged cybersquatting occurred before the ACPA’s date of enactment, Volkswagen sought only the right to use vw.net for itself.

III.

Having discussed the statutory purpose and framework of the ACPA, we must now determine whether Virtual Works violated the Act. The district court found that a number of the ACPA’s nine bad faith factors supported Volkswagen’s claim that Virtual Works’ registration of vw.net constituted cybersquatting under the Act. Virtual Works, 106 F. Supp.2d at 848. With respect to the first and second factors, for example, the district court held that Virtual Works had no right to or interest in the VW mark and that Virtual Works had never been referred to or done business under the name VW. Id. at 847. With respect to the fifth factor, the district court held that the disparaging comments posted by Virtual Works harmed the goodwill of the VW mark. Id. Finally, the district court found that, under the ninth factor, the famousness of the VW mark also favored Volkswagen. Id. The district court thus granted summary judgment to Volkswagen, which we review de novo.

A.

The first inquiry under the ACPA is whether Virtual Works acted with a bad faith intent to profit from a protected mark. 15 U.S.C. ďż˝ 1125(d)(1)(A)(i). Virtual Works claims that the district court erred in holding that it did. We need not, however, march through the nine factors seriatim because the ACPA itself notes that use of the listed criteria is permissive. As the Second Circuit noted in Sporty’s Farms, the factors are “expressly described as indicia that `may’ be considered along with other facts.” 202 F.3d at 498 (citing 15 U.S.C. ďż˝ 1125(d)(1)(B)(i).

We are mindful that the instant case comes to us on summary judgment and involves a contested determination of Virtual Works’ intent. Unfortunately for Virtual Works, however, there is both circumstantial and direct evidence establishing bad faith. The following uncontested facts all provide circumstantial evidence of Virtual Works’ bad faith with respect to the VW mark: 1) the famousness of the VW mark; 2) the similarity of vw.net to the VW mark; 3) the admission that Virtual Works never once did business as VW nor identified itself as such; and 4) the availability of vwi.org and vwi.net at the time Virtual Works registered vw.net. Notably, either of these domain names would have satisfied Virtual Works’ own stated criterion of registering a domain name that used only two or three letters and would have eliminated any risk of confusion with respect to the VW mark.

We consider such circumstantial factors cautiously, however. We do not suggest that these four facts would alone resolve the question of Virtual Works’ intent on summary judgment. The fact that a domain resembles a famous trademark, for example, hardly in and of itself establishes bad faith. Moreover, domain names that are abbreviations of a company’s formal name are quite common. To view the use of such names as tantamount to bad faith would chill Internet entrepreneurship with the prospect of endless litigation.

Volkswagen, however, points to direct evidence regarding Virtual Works’ intent — the statements made at registration. Grimes’ deposition reveals that when registering vw.net, he and Anderson specifically acknowledged that vw.net might be confused with Volkswagen by some Internet users. They nevertheless decided to register the address for their own use, but left open the possibility of one day selling the site to Volkswagen “for a lot of money.” Volkswagen claims that this is sufficient to establish bad faith registration in violation of the ACPA.

Viewing the facts in the light most favorable to Virtual Works, as we must on summary judgment, the statement at registration establishes that Virtual Works had a dual purpose in selecting vw.net. Contrary to Virtual Works’ claim, the fact that it used vw.net for two years as a part of an ISP business is not dispositive of the question of intent. Virtual Works chose vw.net over other domain names not just because “vw” reflected the company’s own initials, but also because it foresaw the ability to profit from the natural association of vw.net with the VW mark. Indeed, it is obvious even to a casual observer that the similarity between vw.net and the VW mark is overwhelming.

Moreover, the facts in the summary judgment record affirmatively support the claim that Virtual Works had a bad faith intent to profit when it attempted to sell vw.net to Volkswagen. It is true that a mere offer to sell a domain name is not itself evidence of unlawful trafficking. H.R. Conf. Rep. No. 106-464, at 111 (1999). The ACPA was not enacted to put an end to the sale of all domain names. This case, however, involves much more than a plain vanilla offer to sell a domain name.

Indeed, the second piece of direct evidence regarding Virtual Works’ intent is the terms of its offer to Volkswagen. Virtual Works told Volkswagen that vw.net would be sold to the highest bidder if Volkswagen did not make an offer within twenty-four hours. Virtual Works also stated that others would jump at the chance to own a valuable domain name like vw.net because Internet users would instinctively associate the site with Volkswagen. Virtual Works knew, both when it registered vw.net and when it offered to sell the site, that consumers would associate vw.net with Volkswagen. It sought to maximize the advantage of this association by threatening to auction off the site. And it hoped that in an effort to protect its mark, Volkswagen would respond with a hefty offer of its own.

Likewise, Virtual Works cannot take refuge in the ACPA’s safe harbor provision. The safe harbor is only available when the defendant both “believed and had reasonable grounds to believe that the use of the domain name was fair use or otherwise lawful.” 15 U.S.C. ďż˝ 1125(d)(1)(B)(ii). The openly admitted hope of profiting from consumer confusion of vw.net with the VW mark disqualifies Virtual Works from the ACPA’s safe harbor. A defendant who acts even partially in bad faith in registering a domain name is not, as a matter of law, entitled to benefit from the Act’s safe harbor provision. Virtual Works knew it was registering a domain name bearing strong resemblance to a federally protected trademark. And it did so, at least in part, with the idea of selling the site “for a lot of money” to the mark’s owner.

Just as we are reluctant to interpret the ACPA’s liability provisions in an overly aggressive manner, we decline to construe the safe harbor so broadly as to undermine the rest of the statute. All but the most blatant cybersquatters will be able to put forth at least some lawful motives for their behavior. To hold that all such individuals may qualify for the safe harbor would frustrate Congress’ purpose by artificially limiting the statute’s reach. We do not think Congress intended the safe harbor to protect defendants operating, at least in part, with unlawful intent.

The ACPA allows a court to view the totality of the circumstances in making the bad faith determination. 15 U.S.C.ďż˝ 1125(d)(1)(B)(i). Here, that means looking at the purely circumstantial indicia of bad faith, as well as the direct evidence of the statements made at the time of registration and the direct evidence regarding terms of the sale. Whether our decision would be the same in the absence of any particular piece of evidence is a question we need not address. Viewed in its totality, the evidence establishes that at the time Virtual Works proposed to sell vw.net to Volkswagen, it was motivated by a bad faith intent to profit from the famousness of the VW mark. This is the sort of misconduct that Congress sought to discourage.

B.

The second inquiry under the ACPA is whether Virtual Works 1) registered, trafficked in, or used a domain name; 2) that is identical or confusingly similar to a distinctive mark; or 3) is identical, confusingly similar to, or dilutive of a famous mark. 15 U.S.C. ďż˝ 1125(d)(1)(A)(ii). There is no dispute that Virtual Works registered, trafficked in, and used vw.net. There is also no dispute that the VW mark is famous. The sole point of contention is whether vw.net is identical, confusingly similar to, or dilutive of Volkswagen’s famous VW mark.

Virtual Works claims it is not similar because there is a distinction between the .net and .com TLD. According to Virtual Works, Volkswagen could not have registered vw.net in October of 1996 because it is an automaker and not an Internet service provider. This claim, however, is unavailing in light of the fact that NSI stopped enforcing the .com/.net distinction over a year before Virtual Works registered vw.net. The claim is also undermined by Virtual Works’ admission that at the time of registration it was aware of the potential confusion with the VW mark, and by its statement to Volkswagen that users would instinctively use the vw.net address to link to Volkswagen’s web site. Cf. Shade’s Landing, Inc. v. Williams , 76 F. Supp.2d 983, 990 (D. Minn. 1999) (“Because all domain names include one of these extensions, the distinction between a domain name ending with `.com’ and the same name ending with `.net’ is not highly significant.”). The district court was correct, therefore, in holding that vw.net is confusingly similar to the famous VW mark.

IV.

The remedy that Volkswagen sought in district court was the right to use vw.net for itself. The ACPA allows a court to order “the transfer of the domain name to the owner of the mark” if the Act is violated. 15 U.S.C. 1125(d)(2)(D)(i). Because Virtual Works’ violation of the ACPA supports the remedy Volkswagen seeks, we need not address Volkswagen’s claims of trademark infringement or dilution.

The ACPA was not enacted to give companies the right to fence off every possible combination of letters that bears any similarity to a protected mark. Rather, it was enacted to prevent the expropriation of protected marks in cyberspace and to abate the consumer confusion resulting therefrom. The resolution of this case turns on the unique facts and circumstances which it presents. Ultimately, we believe the evidence is sufficient to establish that, as a matter of law, Virtual Works attempted to profit in bad faith from Volkswagen’s famous mark. 15 U.S.C. ďż˝ 1125(d)(1)(A). The district court thus did not err in ordering Virtual Works to turn over vw.net to Volkswagen. For the foregoing reasons, we affirm the judgment.

AFFIRMED

v.

STEPHEN KAUFMAN, TRAVELER’S CHOICE, INC. and NETWORK SOLUTIONS, INC., APPEARANCES;

____________________________________________________________________________________________________________

96 CV 4503 (JG)

May 22, 1997

REPORT AND RECOMMENDATION

POLLAK, United States Magistrate Judge:

On September 12,1996, plaintiffs Travel Impressions Ltd. (“Travel Impressions’) and Empress Travel, L.P. (“Empress”) brought this action against defendants Stephen Kaufman (“Kaufman”), Traveler’s Choice, Inc. (collectively, `Travelers”) and network Solutions, Inc. (“NSI”), alleging violations of the Lanham Act, as amended, 15 U.S.C.     1114 et. seq., in connection with Travelers’s use of plaintiffs’ registered trademarks “TRAVELIMPRESSIONS.COM” and “EMPRESSTRAVEL.COM,” and in a toll-free telephone number, 1-800-367-7377 (1-800-EMPRESS). [1]

On December 9, 1996, plaintiffs moved for a preliminary injunction barring defendants from using the domain names and the toll-free telephone number, and on December 16, 1996, defendant NSI moved to dismiss plaintiffs’ complaint as to NSI. By order dated December 31, 1996, the Honorable John Gleeson, United States District Judge, referred both motions to the undersigned for Report and Recommendation.

Following oral argument held on February 7, 1997, and based on a review of all the parties’ submissions, this Court respectifully recommends that: 1) plaintiffs’ motion for preliminary injunction as to the Internet registration of EMPRESSTRAVEL.COM be denied; 2) plaintiff’s motion for a preliminary injunction as to the use of the toll-free telephone number, 1-800-367-7377, be denied; and 3) NSI’s motion to dismiss be granted in its entirety, contingent on NSI’s stated intention to deposit into the Registry of the Court the original domain name declaration for EMPRESSTRAVEL.COM.

FACTUAL BACKGROUND

Empress is in the business of developing retail travel agency franchises and Travel Impressions is a travel wholesaler that assembles tour packages. Empress owns United States Trademark No. 837,303 for use of the mark “EMPRESS” in connection with its travel services. Travel Impressions owns United States Trademark Registration No. 1,362,504 for use of the mark “TRAVEL IMPRESSIONS.” in connection with its travel services. [2]

On October 5, 1989, defendant Kaufman, as principal of defendant Travelers, entered into a franchise agreement (“Franchise Agreement”) with Empress Travel Franchise Corp., the predecessor of plaintiff Empress. Pursuant to the Franchise Agreement, Travelers was authorized to furnish retail travel agency services at one location in Bedminister, New Jersey, using the Empress trademark and the name Empress Travel. The Franchise Agreement provides that Travelers “shall operate its retail travel agency and advertise only under the name Empress” (Franchise Agreement,    II.C.11) and that the “(f)ranchisee’s retail travel agency shall be exclusively identified by and use Empress’ name and proprietary marks.” (Franchise Agreement,    V.B.2). The Franchise Agreement further states that “Franchise shall use exclusively the proprietary marks, logos, trade styles, color combinations, designs, signs, symbols and slogans of Empress and only in the manner and to the extent specifically permitted by this Agreement. Franchisee shall not use any confusingly similar proprietary marks in connection with its franchise … ” (Franchise Agreement,    II.C.5). However, the Franchise Agreement makes clear that Travelers is authorized to use the mark “solely at the [Bedminister] Location,” (Franchise Agreement,    II.C.2), a geographic limitation imposed by the franchisor in order to protect the rights and interests of each of its approximately 88 franchisees.

1. The Toll-Free Telephone Number

According to the declaration of defendant Kaufman, Travelers has, pursuant to the 1989 Franchise Agreement, used the EMPRESS mark and the Empress Travel name in various forms of advertising, including window signs and handouts, as well as advertising in publications distributed in New Jersey and direct mailings of promotional material. Since 1989, Travelers has also used a toll-free telephone number, 1-800-367-7377, the last seven digits of which correspond to the spelling of “Empress.” According to the Kaufman declaration, another franchisee of Empress Travel Franchise Corp. located in Washington, D.C. had previously used this toll-free number until its franchise was terminated. Thereafter, the telephone number became available to any entity who might wish to apply for it, such as the Empress Travel agency in Budd Lake, New Jersey or the Empress riverboat casino located in St. Louis. [3] Accordingly, Travelers acquired the newly available telephone number from the telephone company in 1989, but since then has only used its numeric form, not its vanity form.

In approximately 1993, plaintiff Empress succeeded Empress Travel Franchise Corp. as franchisor under the agreement with Travelers. At that time, plaintiff issued a certificate to Travelers providing that “Traveler’s … is licensed to use the name of Empress Travel by the owner of the trademark, Empress Travel L.P. … ” (December 13, 1997 Declaration of Stephen Kaufman,    4 and Exh. A). According to the Kaufman declaration, Empress and Travelers began to negotiate in August 1993 for the acquisition of the toll-free number from Travelers, but they failed to reach an agreement. Nonetheless, it is undisputed that until the filing of this lawsuit over three years later, plaintiffs never took steps to object to Travelers’ use of this toll-free number. Indeed, during oral argument, plaintiffs’ counsel conceded that “we did not want to go through the expense to burden everyone, including the Court, with a litigation over that number, when we felt that at that point we could deal with the damages.” (Transcript of Feb. 7, 1997 oral argument (“Tr.”), at p. 62).

2. The Internet Registration

The nominal defendant in this action, NSI, provides registration of Internet domain names, which are alphanumeric names that identify each entity on the Internet and essentially serve as “addresses” on the Internet for that entity. [4] By accessing a domain name, an individual can use the Internet to obtain information or even purchase goods and services from the entity registered under that domain name.

According to the affidavit of David M. Graves, Internet Business Manager for NSI, “[d]omain names are arranged in a hierarchial structure in which .COM is a top-level domain. Network Solutions is the world-wide registrar of second-level domain `.COM.’” [ 5] (Dec. 13, 1996 Aff. of David M. Graves.    7-8). NSI assigns second-level domain names on a first-come, first-served basis, but requires its applicants to certify, among other things, that the applicant has the right to use the domain name and that its registration does not interfere with or infringe the rights of any third party’s trademark, service name, company name or other intellectual property right.

According to the Kaufman declaration, in approximately October 1995, Kaufman urged plaintiffs to establish a site on the Internet to promote the travel agency services provided by Empress franchisees. Although plaintiffs indicated that they would be doing so shortly, by March 1996, plaintiffs still had not obtained a web site nor had they registered the name EMPRESSTRAVEL.COM as their domain name. Concerned that the domain name might be acquired by another franchisee or an entity unrelated to the Empress franchise system, travelers acquired and registered the name through NSI for its own website on March 4, 1996.

According to the affidavit of Bradley J. Tolkin, the President of Empress and Co-President and Chief Executive Officer of Travel Impressions, plaintiff Empress sought to register EMPRESSTRAVEL.COM with NSI in the summer of 1996 but was advised that the domain name had already been registered as an exclusive domain name by Travelers. Plaintiffs claim that by registering the name EMPRESSTRAVEL.COM, Travelers has prevented Empress from registering this name as its domain name and thus has violated those sections of the Franchise Agreement which provides that plaintiff is the “sole and executive owner” of the service mark “Empress” (Franchise Agreement, Preamble, at 1), and which authorize Travelers to use the Empress mark “solely at the [Bedminister] Location.” (Id. at    II.C.2). Moreover, plaintiffs alleges that in order for Travelers to have registered the domain name EMRESSTRAVEL.COM with NSI, Travelers had to make material misrepresentations to NSI regarding Traveler’s authority to use the Empress mark on the Internet.

Plaintiff’s seek a preliminary injunction against Travelers, claiming that they will suffer irreparable injury if Travelers is permitted to use the Empress mark on the Internet and in connection with the toll-free telephone number, based both on the impact on the public’s perception as to the ownership of the mark and on plaintiffs’ inability to comply with its obligations to its other franchisees.

DISCUSSION

1. Standard for Preliminary Injunction

In the Second Circuit, it is well-settled that in order to obtain a preliminary injunction, “a party must demonstrate (1) that it will suffer irreparable harm if the preliminary injunction is not issued, and (2) that it is likely to succeed on the merits of its claims or, in the alternative, has demonstrated sufficiently serious questions regarding the merits of the claims and the balance of hardships tips decidedly in its favor.” L. & J.G. Stickley, Inc, v. Canal Dover co., Inc., 79 F.3d 258, 261-62 (2d Cir. 1996); see also Jackson Dairy, Inc. v. H. P. Hood & Sons, Inc., 596 F.2d 70, 72 (2d Cir. 1979) (per curiam). It is eqully well-established that a preliminary injunction is “an extraordinary remedy” that “should issue not upon a plaintiff’s imaginative, worst case scenario of the consequences flowing the defendant’s alleged wrong but upon a concrete showing of imminent irreparable injury.” USA Network v. Jones Intercable, Inc., 704 F.Supp. 488, 491 (S.D.N.Y. 1989).

A showing of probable irreparable harm is “the single most important prerequisite” to the granting of preliminary injunctive relief; thus, the moving party must first demonstrate that irreparable harm is likely to occur in the absence of injunctive relief. Reuters Ltd. v. United Press Int’l. Inc., 903 F.2d 904, 907 (2d Cir. 1990). The mere possibility of irreparable harm is insufficient. Borey v. National Union Fire Ins. Co., 934 F.2d 30, 34 (2d Cir. 1991). The claimant must show that the alleged injury is likely and imminent, not remote or speculative, and that it cannot be fully remedied by monetary damages. Reuters Ltd. v. United Press Int’l. Inc., 903 F.2d at 907; see also Borey v. National Union Fire Ins. Co., 934 F.2d at 34 (observing that “when a party can be fully compensated for financial loss by money judgment, there is simply no compelling reason why the extraordinary equitable remedy of a preliminary injunction should be granted”).

2. The Lanham Act

Defendants.
No. 98 Civ. 2780(AGS).
United States District Court,
S.D. New York.
Oct. 28, 1998.

Paul Fields, Kandis M. Kahn, Darby & Darby P.C., New York City, for plaintiffs.
Richard Feinberg, defendant pro se.

ORDER

SCHWARTZ, District Judge.

Plaintiffs Toys “R” Us, Inc. and Geoffrey, Inc., licensee and owner respectively of the Toys “R” Us trademark, bring this action against defendants, appearing pro se, in connection with defendants’ use of the trade names “Guns Are Us,” “Guns are We,” and the internet domain name “gunsareus.com.” The action states claims arising under the Lanham Act, 15 U.S.C. §§ 1114(1), and 1125(a), and New York commercial and trademark law. Plaintiffs move for summary judgment. For the reasons stated herein, plaintiffs’ motion is denied in its entirety, and summary judgment is granted in favor of defendants.

BACKGROUND

Plaintiff Geoffrey, Inc. is a wholly owned subsidiary of Toys “R” Us, Inc. (Complaint at 3.) Geoffrey owns the rights to the Toys “R” Us and related trademarks, licensing their use to Toys “R” Us and its various subsidiaries. (Id. at 11.) Plaintiffs have been making use of the Toys “R” Us mark for over 35 years. (Plaintiffs’ Statement of Material Facts Pursuant to Local Rule 56.1 (“Pl.’s 56.1″) at 1.) The range of products sold in Toys “R” Us stores has grown and now includes, in addition to toys, over 11,000 different items such as clothing, lamps, telephones, stereos, calculators, computers, audio and visual tapes, pools, and sporting goods. (Id. at 2.) The Toys “R” Us mark is prominently featured in national and regional advertising, and throughout Toys “R” Us stores. (Id. at 4.) Since 1983, Toys “R” Us has owned and operated a chain of retail children’s clothing stores under the mark Kids “R” Us. (Id. at 5.) There are 698 Toys “R” Us stores in the United States, and 443 in foreign countries, with annual sales over $11 billion. (Id. at 6, 7, 11.) As a result of over $100 million in advertising annually, and an intensive effort to maintain high quality goods and services, Toys “R” Us has become one of the most famous and widely known marks in the world. (Id. at 9, 10, 12.)

Toys “R” Us has also worked diligently to maintain its reputation as a family oriented store with a wholesome image. (Id. at 15.) Toys “R” Us has sought to project the image of a store where children are the first concern, and was one of the first stores to refuse to carry or sell toy guns–a fact widely publicized. (Id. at 16.)

Plaintiff Geoffrey, Inc., in addition to the Toys “R” Us mark which it licenses to its co-plaintiff, owns a number of federal trademark registrations containing the phrase ” ‘R’ Us.” (Id. at 18.) For example, Geoffrey has registered Babies “R” Us, Bikes “R” Us, Books “R” Us, Computers “R” Us, Dolls “R” Us, Games “R” Us, Mathematics “R” Us, Movies “R” Us, Parties “R” Us, Portraits “R” Us, Shoes “R” Us, and Sports “R” Us. (Id. at 18.) Plaintiffs also own common law rights over various other “R” Us marks, such as Treats “R” Us, Gifts “R” Us, and 1-800-Toys-R-Us, by virtue of the exclusive use of those marks. (Id. at 19.)

Finally, Geoffrey also owns various internet domain names including tru.com, toysrus.com, kidsrus.com, boysrus.com, dollsrus.com, galsrus.com, girlsrus.com, babiesrus.com, computersrus .com, guysrus.com, mathematicsrus.com, moviesrus.com, opportunitiesrus.com, partiesrus.com, poolsrus.com, portraitsrus.com, racersrus.com, supervaluesrus.com, treatsrus.com, tykesrus.com, sportsrus.com, giftsrus.com, and toysrusregistry.com. (Id. at 20.) Toys “R” Us operates an internet web site located at www.toysrus.com. (Id. at 21.)

Plaintiffs make use of various of these marks and others through ownership or licensing, resulting in the extensive use of the “R” Us family of marks, under the control and supervision of plaintiffs.

Defendant Richard Feinberg is the sole proprietor of codefendant We Are Guns, a firearms store doing business at 15 Farm Lane, Norton, Massachusetts. Feinberg runs his business predominantly in Massachusetts, but also sells products on the internet and has, “on occasion, shipped products to New York firearms dealers.” (Answer at 7.) Feinberg’s business had been previously known as “Guns Are Us.” (Complaint, 6; Answer, 6.) The business’s name was changed to “Guns are We” and then to “We Are Guns” in response to objections by plaintiffs. (Id.; Pl.’s 56.1 at 33.) Feinberg maintains a website located at www.gunsareus.com and has registered the domain name “gunsareus.com” with InterNIC. (Pl.’s 56.1 at 35, 36.)

Plaintiffs brought this suit seeking damages and an injunction prohibiting defendants from operating the website at gunsareus.com and from reverting back to either of the trade names “Guns are Us” or “Guns Are We.”

DISCUSSION

Summary judgment is appropriate only where “there is no genuine issue as to any material fact and … the moving party is entitled to judgment as a matter of law.” Federal Rule of Civil Procedure (“Fed.R.Civ.P.”) 56(c). The moving party bears the initial burden of showing the absence of any genuine issue of material fact, which may be met either by affirmative evidence or by pointing out a lack of evidence pertaining to an essential element of the non-moving party’s claim. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In viewing the evidence presented on a summary judgment motion, “the inferences to be drawn from the underlying facts contained in affidavits, pleadings, depositions, answers to interrogatories, and admissions, must be viewed in the light most favorable to the party opposing the motion.” Fling v. Hollywood Travel & Tours, 765 F.Supp. 1302, 1304 (N.D.Ohio 1990) (citing United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962)). However, speculative and conclusory allegations by the non-movant are insufficient to prevent a summary judgment motion from being granted. Allen v. Coughlin, 64 F.3d 77, 80 (2d Cir.1995). The non-movant is required to “do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 582, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

When deciding a summary judgment motion, the Court is not restricted to either granting or denying the motion with respect to the moving party. Under certain circumstances, the Court is entitled, sua sponte, to grant summary judgment to the non-moving party. See Local 33, Intern. Hod Carriers Bldg. & Common Laborers’ Union of America v. Mason Tenders Dist. Council of Greater New York, 291 F.2d 496, 505 (2d Cir.1961). The Court may take this course of action when the papers, affidavits and other proofs submitted by the parties illustrate that there are no disputed issues of material fact and that judgment as a matter of law is required for the non-moving party. See Id.

I. The Requested Injunction Against the Names “Guns Are Us” and “Guns Are We.”

Although defendants have changed both the trade name of the firearms shop and of the website to “We Are Guns,” plaintiffs request that this Court enjoin defendants from returning to the previously-used names of “Guns Are Us” and “Guns Are We.” A federal court’s power to hear a particular case, and to grant injunctive relief can survive a discontinuance of the illegal conduct. See Goshen Mfg. Co. v. Hubert A. Myers Mfg. Co., 242 U.S. 202, 37 S.Ct. 105, 61 L.Ed. 248, (1916) Under certain circumstances, a suit for an injunction may be maintained in order to prevent future violations. See Swift & Co. v. United States, 276 U.S. 311, 326, 48 S.Ct. 311, 72 L.Ed. 587 (1928). However, the party requesting such relief must show the court that the relief is needed. “The necessary determination is that there exists some cognizable danger of recurrent violation, something more than the mere possibility which serves to keep the case alive.” See United States v. W.T. Grant Co., 345 U.S. 629, 633, 73 S.Ct. 894, 97 L.Ed. 1303 (1953).

The Court finds no such danger of a recurrence of illegal conduct, because it is unlikely that the defendant will change his trade name back to “Guns Are Us” or “Guns Are We.” Mr. Feinberg has changed the name voluntarily, and no doubt has no interest in continually changing the name of his proprietorship, and, potentially, inciting further litigation by plaintiffs which defendant, a small retail store, can ill afford. Should the names “Guns Are Us” or “Guns Are We” be used again by defendants, this ruling would not be a bar to another suit by plaintiffs pursuing injunctive relief against those names. Until then, this Court must take care not to issue an “advisory opinion.” See Flast v. Cohen, 392 U.S. 83, 97, 88 S.Ct. 1942, 20 L.Ed.2d 947 (1968).

II. The Requested Injunction Against the Domain Name “gunsareus.com”

Plaintiffs do not challenge the defendants’ use of the trade name “We Are Guns” at the store or on the website. Therefore, the only case or controversy that remains at issue is defendants’ use of the domain name gunsareus.com.

A. Plaintiff’s Counts I, II and III

The Court finds an absence of any material issue of fact with regard to the first three counts of plaintiffs’ complaint, (1) federal trademark infringement, (2) federal false designation of origin, and (3) New York common law infringement and unfair competition. All three of these claims require a demonstration of “likelihood of confusion” in order to succeed. (Plaintiff’s Memorandum of Law in Support of Summary Judgment at 8.) Gruner + Jahr USA Publ’g v. Meredith Corp., 991 F.2d 1072, 1075 (2d Cir.1993); Clinique Laboratories, Inc. v. Dep Corp., 945 F.Supp. 547, 550, 558 n. 13 (S.D.N.Y.1996); Rosenfeld v. W.B. Saunders, 728 F.Supp. 236, 249 (S.D.N.Y.1990).

Plaintiffs are required to demonstrate that “numerous ordinary prudent purchasers are likely to be misled or confused as to the source of the product in question because of the entrance in the marketplace of defendant’s mark.” See Gruner, 991 F.2d at 1077, quoting Western Pub. Co. v. Rose Art Industries, Inc., 910 F.2d 57, 59 (2d Cir.1990). The record on this motion reflects the absence of any likelihood of confusion between defendants’ and plaintiffs’ products.

Further, the Court finds any allegation of such confusion by consumers to be unlikely. It is doubtful that prudent purchasers would be misled into thinking that Toys “R” Us sponsored, approved, or endorsed defendants’ firearm products, sold out of a small shop in Massachusetts and on his website. Application of the Polaroid factors confirms this conclusion. See Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir.1961). The eight factors used by the Polaroid court in determining any likelihood of confusion are: (1) the strength of plaintiff’s mark, (2) the degree of similarity between the marks, (3) the competitive proximity of the products or services, (4) the existence of actual confusion, (5) the likelihood that plaintiff will enter defendant’s product market and “bridge the gap,” (6) the defendant’s good faith in adopting its mark, (7) the quality of defendant’s product, and (8) the sophistication of the purchasers. See Id.

The Court finds that, under factor (2), the marks are not similar. The absence of the use of plaintiffs’ trademark “R” makes any association with plaintiffs’ business implausible. Plaintiffs incorrectly state that “defendants have taken one of Plaintiff’s most famous marks, Toys ‘R’ Us, and merely replaced the term ‘Toys’ with ‘Guns’.” (Pl.’s Mem. Law at 9.) However, there is no allegation that defendant Feinberg ever called his business “Guns ‘R’ Us” but rather “Guns Are Us,” and currently uses the internet domain name “gunsareus.com” rather than “gunsrus.com.” (Complaint at 53.)

Factor (3), competitive proximity, weighs heavily in defendants’ favor. Plaintiffs sell mostly products oriented towards children such as toys and childrens’ clothes. The sale of firearms could hardly be further from plaintiffs’ market. Further, the image of plaintiffs as a family-oriented and children-friendly business, (Pl.’s 56.1 at 23 – 26), makes any likelihood of confusion, if anything, more remote. Plaintiffs even note that Toys “R” Us recently decided not to sell toy guns at its stores. (Id. at 23.) The Court is thus convinced that factor (5), the likelihood of plaintiffs entering defendants’ product market, also weighs heavily towards the defendants.

The Court also finds that factor (8), consumer sophistication, inclines heavily towards a finding of no likelihood of confusion. The consumers exposed to defendants’ marketing are sophisticated enough to distinguish between plaintiffs’ and defendants’ products. Defendant’s sales and marketing efforts outside Massachusetts are directed towards firearms dealers. (Defendants’ Response to Plaintiff’s First Request for Admissions at 12). Consumers looking at defendants’ website are internet users and, presumably, sophisticated. See Planned Parenthood Federation of America Inc. v. Bucci, 42 U.S.P.Q.2d 1430, 1439 (S.D.N.Y.1997). The remaining Polaroid factors do not weigh heavily in either direction.

The preceding discussion illustrates why this case is a far cry from Toys “R” Us, Inc. v. Canarsie Kiddie Shop, Inc., 559 F.Supp. 1189 (E.D.N.Y.1983). In Canarsie, the defendant’s shop Kids “R” Us competed in a similar product area as Toys “R” Us, and also made use of the single letter “R.” Under those circumstances, it becomes more likely that a prudent consumer might believe that Kids “R” Us was sponsored by or affiliated with Toys “R” Us. This is simply not comparable, however, to a small, unincorporated firearms shop in Massachusetts doing business in a product area that no one would associate with plaintiffs’ business, and without using plaintiffs’ trademark single letter “R.”

For the same reasons, the Court is convinced that there was no intentional copying of the Toys “R” Us mark such that “the second comer [should] be presumed to have intended to create a confusing similarity of appearance and … be presumed to have succeeded.” Perfect Fit Indus., Inc. v. Acme Quilting Co., 618 F.2d 950, 954 (2d Cir.1980). Here, whatever intentional copying existed was not done with the intent to deceive the public or to divert business from plaintiffs.

In sum, the Court finds an absence of any material issue of fact with regard to the likelihood of purchasers being confused as to the source of defendants’ products. Because likelihood of confusion is a required element of plaintiffs’ first three Counts, the Court finds that the defendants are entitled to judgment as a matter of law, and awards summary judgment in favor of the defendants on Counts I, II, and III.

B. Plaintiff’s Dilution Claims (Counts IV and V)

The Court finds no issue of material fact as to whether defendants’ use of the internet domain name gunsareus.com can serve as the basis for a dilution claim under either Count IV of the complaint, § 43(c) of the Lanham Act, 15 U.S.C. § 1125(c), or Count V of the Complaint, New York’s Antidilution Act, New York General Business Law § 368-d. [FN1] There are two types of dilution claims, (1) blurring, and (2) tarnishment. As a matter of law, plaintiff has failed to present a prima facie case under either theory.
The owner of a famous mark is entitled to an injunction “against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark.” See Toys “R” Us, Inc. v. Akkaoui, 1996 WL 772709 (N.D.Cal., Oct.29, 1996) (barring the use by defendants of the name “Adults “R” Us”), citing 15 U.S.C. § 1125(c)(1). [FN2] Dilution does not depend on a showing of either likelihood of confusion between the marks, or competition between the owner of the mark and other parties. See 15 U.S.C. § 1127.

First, plaintiffs have failed to establish the existence of a triable issue of fact as to whether maintaining a website with the domain name “gunsareus.com” will blur, or lessen the capacity of plaintiffs’ marks to identify and distinguish their goods or services. While it is conceivable that the proliferation of trade names ending in ” ‘R’ Us,” unassociated with plaintiffs, might cause such blurring, this case is nowhere near such a situation. This case involves a website that merely uses the letters “gunsareus” as its internet domain name. Defendants neither make use of the single letter “R” nor do they space or color the letters and words in a manner remotely related to plaintiffs. The name “gunsareus” appears in all lower case letters with no spaces in between the letters. The Court finds that the use of such an internet domain name, without naming the website itself “Guns ‘R’ Us” or “Guns Are Us,” will not, as a matter of law, blur the distinctiveness of plaintiffs’ “R” Us family of marks.

Second, the Court also finds an absence of a triable issue of fact as to whether defendants have diluted plaintiffs’ mark by tarnishment. Dilution by tarnishment occurs when “a famous mark is improperly associated with an inferior or offensive product or service.” See Ringling Bros., 937 F.Supp. at 209 (citing Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, 506 (2d Cir.1996). Courts have found such negative connotations in situations where a mark was used in the context of drugs, nudity, and sex. See e.g., Dallas Cowboys Cheerleaders, Inc. v. Pussycat Cinema, Ltd., 467 F.Supp. 366 (S.D.N.Y.1979) (pornography); Coca-Cola Co. v. Gemini Rising, Inc., 346 F.Supp. 1183 (E.D.N.Y.1972) (cocaine); Eastman Kodak Co. v. Rakow, 739 F.Supp. 116, 118 (W.D.N.Y.1989) (crude comedy routine).

The Court, however, finds it unlikely that defendants’ website will be associated with plaintiffs’ stores and products at all. As stated earlier, the differing product areas, absence of the single letter “R” in the name, and peculiarities of an internet domain name make any association with plaintiffs’ products extremely unlikely. In addition, defendant does not sell to the general public outside of Massachusetts. Its internet site is used almost exclusively to sell to firearms dealers.

In sum, the parties have demonstrated an absence of any material issues of fact, requiring judgment to be issued as a matter of law. Defendants’ decision to cease using the trade names “Guns Are Us” and “Guns Are We” eliminates the need or basis for the Court to decide whether those trade names infringe on or dilute plaintiffs marks. Defendants’ website, entitled Guns Are We, but with the domain name gunsareus.com, does not violate any of plaintiffs’ rights under federal or state trademark and unfair competition law.

CONCLUSION

For the reasons set forth above, plaintiffs’ motion for summary judgment is denied in its entirety, and summary judgment is granted in favor of defendants. The Clerk of the Court is directed to enter judgment dismissing the complaint and to close the file in this action.

SO ORDERED.

FN1. This provision was recently re-numbered to General Business Law § 360.
FN2. Federal and New York antidilution laws are very similar in this context. See e.g., Exquisite Form Industries, Inc. v. Exquisite Fabrics of London, 378 F.Supp. 403, 414 (S.D.N.Y.1974). Unless otherwise noted, the arguments in this opinion regarding dilution apply to both the Lanham Act and New York state anti-dilution provision.
— F.Supp.2d —-, 1998 WL 760219 (S.D.N.Y.)

vs.

ELE-TECH COMPANY, INC., a Kentucky Corporation; and DOES 1 THROUGH 100, Defendants.

CASE NO. 96-8377 MRP (RCx)

FINDINGS OF FACT AND CONCLUSIONS OF LAW

On April 21, 1997, Plaintiff’s Motion for Preliminary Injunction came before the Court for hearing. Jeffrey N. Mausner of Berman, Blanchard, Mausner & Resser appeared for Plaintiff, Michael D. Harris of Oppenheimer Poms Smith appeared for Defendant. After considering the papers filed by the parties and the arguments presented at the hearing, the Court grants Plaintiff’s Motion for Preliminary Injunction and makes the following findings of fact and conclusions of law:

FINDINGS OF FACT

I. Facts Relating to the Plaintiff’s Business

1. Plaintiff TeleTech Customer Care Management (California), Inc. (“TeleTech” or “Plaintiff”) is the owner of the federally registered service mark TELETECH®, United States Service Mark Registration No. 1,996,498. The Service Mark Registration is valid and current. Plaintiff has used the mark TELETECH® in commerce since 1982.

2. TeleTech Holdings, Inc. is the parent company of the Plaintiff, as well as several other entities whose names begin with “TeleTech”: TeleTech Customer Care Management (Colorado), Inc.; TeleTech Services Corporation; TeleTech Health Services Management, Inc.; TeleTech Financial Services Management, Inc.; TeleTech Facilities Management (Postal Customer Support), Inc.; TeleTech Facilities Management (Parcel Customer Support), Inc.; TeleTech Customer Care Management (New York), Inc.; TeleTech Customer Care Management (West Virginia), Inc.; TeleTech Customer Care Management (Texas), Inc.; TeleTech International Pty Ltd.; TeleTech Limited [NZ]; TeleTech Limited [UK], as well as other corporations. TeleTech Holdings, Inc. owns 100% of the shares of all of the corporations of set forth above. All of these corporations shall be referred to collectively as the TeleTech Companies. TeleTech Holdings, Inc. is a publicly traded company, whose stock is listed on the NASDAQ stock exchange.

3. Plaintiff has shown that the TeleTech Companies may be the largest provider of primarily inbound integrated telephone and Internet customer care worldwide. The main business of the TeleTech Companies is providing “customer care” for the customers of TeleTech’s clients, including receiving and responding to telephone and Internet inquiries from customers of TeleTech’s clients. “Customer care” provided by the TeleTech Companies includes answering questions asked by the clients’ customers before a sale, providing information on new products offered by TeleTech’s clients, enrolling customers in clients’ programs, arranging product shipments to customers of TeleTech’s clients, providing 24-hour technical and help desk support for customers of TeleTech’s clients, resolving customer complaints, and conducting satisfaction surveys. The TeleTech Companies handle service calls from customers of many types of businesses, including airlines, the United States Postal Service, telephone companies, banks, computer companies, utility companies, a package delivery service, and other types of businesses. Airline reservations, tracking of packages, bank transactions, and many other customer service calls are handled by TeleTech employees.

4. It appears that the TeleTech Companies have spent hundreds of thousands of dollars promoting their services and advertising under the TELETECH® Service Mark. In 1996 alone, the TeleTech Companies appear to have spent in excess of nine hundred thousand dollars promoting their services and advertising under the TELETECH® Service Mark. The TeleTech Companies have sold millions of dollars worth of services under the TELETECH® Service Mark. As a result of these efforts, it appears that TeleTech has built up and now owns valuable goodwill symbolized by the TELETECH® Service Mark.

II. FACTS RELATING TO THE DEFENDANT’S BUSINESS

5. Defendant Tele-Tech Company, Inc. (“Tele-Tech” or “Defendant”) is a contractor providing engineering and installation services to the telecommunications industry. Defendant began using the name Tele-Tech (with a hyphen) in 1978.

6. Defendant has not registered the service mark TELE-TECH. Defendant has not been authorized or licensed by TeleTech to use the TELETECH® Service Mark (without a hyphen). Defendant is not affiliated with or sponsored by TeleTech.

III. FACTS RELATING TO THE DEFENDANT’S USE OF THE DOMAIN NAME “TELETECH.COM“

7. Defendant Tele-Tech is using Plaintiff’s federally registered service mark (TELETECH, without a hyphen) as an Internet domain name, “teletech.com”.

8. Plaintiff has used the TELETECH® service mark for approximately fifteen years, and began using the TELETECH® service mark long before Defendant’s first use of “teletech.com” (without the hyphenation which distinguishes Defendant’s name from Plaintiff’s TELETECH® service mark).

9. Only one entity may use the domain name “teletech.com.” As a result, Defendant’s use of the “teletech.com” domain name prevents Plaintiff TeleTech from using its registered service mark and company name as its domain name.

10. Plaintiff’s inability to use the TELETECH® company name and registered service mark as its domain name is causing hardship to Plaintiff. Customers and potential customers of Plaintiff are unable to locate Plaintiff’s website by typing in “teletech.com” as part of the Uniform Resource Locator (URL).

11. An Internet domain name may include a hyphen.

12. Use of a hyphen would distinguish the domain name “tele-tech-com.” from the domain name “teletech.com.” Domain names such as “teletech.com” are used to identify the location of servers on the Internet. Because the hyphen is an additional character in the domain name, its inclusion or omission changes the location of the server to which an inquiry is made.

13. Tele-Tech is not precluded from using its own name, “Tele-Tech,” with its distinctive hyphenation, as its domain name. In fact, Tele-Tech appears to have established a second website that uses the domain name “tele-tech.com.”

IV. FACTS RELATING TO THE BALANCE OF HARDSHIP

14. Injunctive relief will probably not have great negative impact on Defendant. Defendant is free to use, and in fact already appears to be using, the domain name “tele-tech.com” (which includes the hyphenation), in a second website that Defendant maintains. In fact, it may be easier for Defendant’s customers to locate Defendant’s website under the domain name “tele-tech.com,” since that is the way the Defendant spells its name.

15. Defendant is “attempting to inform its customers to use `tele-tech.com’ for e-mail.”

16. Defendant suggests that Plaintiff’s presence on the Internet is not hindered by Defendant’s use of Plaintiff’s name and registered service mark as its domain name, because Internet users can locate Plaintiff’s website using Internet “search engines,” rather than typing in Plaintiff’s name as part of the URL. That method of searching the Internet appears to generate as many as 800 to 1000 matches, however. That number of locations is likely to deter web browsers from searching for Plaintiffs particular website.

17. TeleTech appears to have incurred a great deal of expense over a long period of time developing recognition of its TELETECH® mark, and users of the Internet who have become familiar with that mark will probably assume that TeleTech’s website will be found at “teletech.com.”

18. The balance of hardships tips sharply in Plaintiff’s favor.

V. FACTS RELATING TO THE LIKELIHOOD OF CONFUSION

19. Consumers and others are likely to be confused by the Defendant’s unauthorized use of “teletech.com” as its domain name, because persons who attempt to locate the Plaintiff’s website by typing in “teletech.com” as the domain name will instead be connected to the Defendant’s website. While reading the Defendant’s website may dispel this confusion, there is at least the initial confusion as to the source of the website that the user has accessed.

20. Plaintiff has made an adequate showing that the TELETECH® mark is strong.

21. Since Defendant’s “teletech.com”® domain name does not include a hyphen, it is identical to Plaintiff’s registered service mark and company name.

22. Defendant continued to use Plaintiff’s registered mark as its domain name even after Plaintiff demanded that Defendant stop doing so,

VI. FACTS RELATING TO DILUTION

23. The TELETECH® mark is most likely very well recognized within the teleservicing industry, because TeleTech appears to be a large provider of integrated telephone and Internet customer care worldwide and because of the extensive promotion and advertising that TeleTech has apparently undertaken.

24. The TELETECH® mark has been continuously used in commerce by TeleTech since 1982. The mark is registered on the Principal Register.

25. The TELETECH® mark appears to be famous.

VII. FACTS RELATING TO THE FILING OF THIS MOTION

26. Plaintiff first wrote to Defendant in October 1996, demanding that Defendant cease use of the “teletech.com” domain name.

27. Plaintiff filed this lawsuit in December 1996.

28. Plaintiff moved for a preliminary injunction in February 1997.

To the extent that any Conclusions of Law set forth below are deemed to be Findings of Fact, they are incorporated herein.

CONCLUSIONS OF LAW

I. JURISDICTION AND VENUE

1. This Court has jurisdiction of this matter pursuant to 15 U.S.C. 1121 and 1125(a), and 28 U.S.C. 1331, 1338(a) and 1338(b) and pursuant to the principles of supplemental jurisdiction.

2. Venue is proper in this district pursuant to 28 U.S.C. 1391(b).

II. THE STANDARD FOR GRANTING A PRELIMINARY INJUNCTION.

3. To obtain a preliminary injunction, a party must demonstrate either: (1) a combination of probable success on the merits and the possibility of irreparable injury if the requested relief is not granted, or (2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in its favor. First Brands Corp. v. Fred Meyer, Inc., 809 F.2d 1378, 1381 (9th Cir. 1987). The Ninth Circuit explained the balance of hardships test as follows: “The critical element in determining the test to be applied is the relative hardship to the parties. If the balance of harm tips decidedly toward the plaintiff, then the plaintiff need not show as robust a likelihood of success on the merits as when the balance tips less decidedly.” State of Alaska v. Native Village of Venetie, 856 F.2d 1384, 1389 (9th Cir. 1988) (quoting Aguirre v. Chula Vista Sanitary Serv., 542 F.2d 779 (9th Cir. 1976)). As explained below, because the balance of hardships tips decidedly toward Plaintiff and because it is likely that Plaintiff will be successful on the merits, TeleTech is entitled to the requested injunction on both grounds.

III. THE BALANCE OF HARDSHIPS TIPS DECIDEDLY IN PLAINTIFF’S FAVOR AND DEFENDANT’S USE OF THE TELETECH® SERVICE MARK AS ITS DOMAIN NAME RAISES SERIOUS QUESTIONS GOING TO THE MERITS.

A. The Balance of Hardships Tips Sharply in Favor of Teletech.

4. Only one entity can have the Internet domain name “teletech.com.” As stated by the court in Intermataic Inc. v. Toeppen, 947 F.Supp. 1227, 1230 (N.D. Ill. 1996), “[t]he `fully qualified domain name’ may not be repeated in the Internet.” “A given domain name, the exact alphanumeric combination in the same network and using the same suffix, can only be registered to one entity.” Id at 1232. See also Panavision Int’l, L.P.v. Toeppen, 945 F.Supp. 1296, 1302 (C.D. Cal. 1996) (“[T]he current organization of the Internet permits only one use of a domain name … [O]nly one business can operate on the Internet with the domain name `acme.com’”).

5. In this case, the balance of hardships tips sharply in Plaintiff’s favor and in favor of the issuance of an injunction. Defendant’s use of the domain name “teletech.com” prevents Plaintiff from using its company name and registered service mark as its domain name, while Defendant is free to use, and has in fact started using, the domain name “tele-tech.com” as an alternative domain name.

B. Defendant’s Use of the TELETECH® Service Mark as Its Domain Name Raises Serious Questions Going to the Merits of this Action.

6. In Intermatic v. Toeppen, the court considered a similar situation. The defendant Toeppen had reserved “intermatic.com” as a domain name; INTERMATIC® was the name and registered trademark of the plaintiff. The court noted that “[t]he practical effect of Toeppen’s conduct is to enjoin Intermatic from using its trademark as its domain name on the Internet.” Intermatic, 947 F.Supp. at 1234. The court enjoined Toeppen from using the domain name INTERMATIC, from taking any action to prevent Intermatic from obtaining the Internet domain name intermatic.com, and from asserting any further interest in the domain name “intermatic.com.” See also Panavision, 945 F.Supp. at 1296.

7. As in Intermatic and Panavision, Defendant here has taken TeleTech’s properly registered TELETECH® service mark and adopted it as its domain name, thereby preventing TeleTech from using its registered service mark, and the name by which it is generally known, as its domain name. Defendant’s use of Plaintiff’s exact name and registered service mark, with the omission of the hyphenation which is contained in Defendant’s name and which distinguishes Defendant’s Tele-Tech name from Plaintiff’s TeleTech name, at a minimum, raises serious questions which go to the merits of TeleTech’s claim. Since the balance of hardships tips so sharply in TeleTech’s favor, the Court grants the preliminary injunction.

IV. PLAINTIFF IS LIKELY TO SUCCEED ON THE MERITS.

A. Irreparable Injury Is Presumed If Plaintiff Is Able to Establish a Likelihood of Success on the Merits.

8. “[T]here is always irreparable injury when trademark infringement exists.” Dep Corporation v. Opti-Ray, Inc., 768 F.Supp. 710, 717 (C.D. Cal. 1991) (citing Apple Computer, Inc. v. Formula International Inc., 725 F.2d 521, 526 (9th Cir. 1984)). See also 15 U.S.C. §1116 (providing for injunction as one remedy for trademark infringement or violation of Section 43(a)); Dr. Suess Enter., L.P. v. Penguin Book USA, Inc., 924 F.Supp. 1559, 1574 (S.D. Cal. 1996) (“In copyright and trademark cases, irreparable injury is presumed upon a showing of likelihood of success.”), aff’d, 109 F.3d 1394 (9th Cir. 1997). As discussed below, since TeleTech is able to establish a likelihood of success on the merits, irreparable injury is presumed.

B. TeleTech Has Demonstrated a Likelihood of Success on the Merits of Its Dilution Claims.

9. TeleTech has demonstrated a likelihood of success on the merits of its dilution claims under Section 43(c) of the Lanham Act and California Business and Professions Code §14330. Neither of those statutes requires proof of a likelihood of confusion to impose an injunction.

10. Section 43 (c) of the Lanham Act, 15 U.S.C. §1125(c), provides:

“(c) Remedies for dilution of famous marks.

(1) The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection. In determining whether a mark is distinctive and famous, a court may consider factors such as, but not limited to:

(A) the degree of inherent or acquired distinctiveness of the mark;

(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

(C) the duration and extent of advertising and publicity of the mark;

(D) the geographical extent of the trading area in which the mark is used;

(E) the channels of trade for the goods or services with which the mark is used;

(F) the degree of recognition of the mark in the trading areas and channels of trade used by the mark’s owner and the person against whom the injunction is sought;

(G) the nature and extent of use of the same or similar marks by third parties; and

(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.”

11. Section 45 of the Lanham Act, 15 U.S.C. §1127, defines “dilution” as follows: “The term ‘dilution’ means the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of –

(1) competition between the owner of the famous mark and other parties, or

(2) likelihood of confusion, mistake, or deception.” (Emphasis added.)

12. TeleTech has demonstrated that its mark is probably famous under this statute. The evidence submitted by the Plaintiff strongly suggests that the TeleTech Companies are the largest provider of integrated telephone and Internet customer care worldwide. The TeleTech Companies appear to have spent hundreds of thousands of dollars promoting their services and advertising under the TELETECH® Service Mark. The TeleTech Companies seem to have sold hundreds of millions of dollars worth of services under the TELETECH® Service Mark. TeleTech Holdings, Inc. is a publicly traded company which is listed on the NASDAQ stock exchange. The TELETECH® mark is probably very well recognized and famous within the teleservicing industry, because TeleTech is probably the largest provider of integrated telephone and Internet customer care worldwide and because of the extensive promotion and advertising that TeleTech appears to have undertaken. The TELETECH® mark has been continuously used in commerce by TeleTech since 1982. The mark is registered on the Principal Register.

13. TeleTech is entitled to an injunction, under Section 43(c) of the Lanham Act, even without a showing of a likelihood of confusion. See Intermatic, 947 F.Supp. at 1234-41, and Panavision in which the court found that Toeppen had diluted the plaintiffs’ marks by using the plaintiffs’ registered trademarks as his domain names. In those cases, Toeppen obtained the domain names in order to force the plaintiffs to pay him money to assign those names to them. This case is somewhat different, in that Defendant claims that it obtained the “teletech.com” domain name, because it was unaware that a hyphen could be used as part of a domain name. However, Defendant in this case also demanded that Plaintiff pay money to the Defendant in order for Defendant to stop using the “teletech.com” domain name. In any event, for purposes of this motion, the reason why Defendant adopted the diluting domain name is not relevant. Plaintiff is the owner of the registered mark TELETECH®, that mark is probably famous, and Defendant’s use of the “teletech.com” domain name most likely dilutes Plaintiff’s mark.

14. The legislative history of Section 43(c) of the Lanham Act indicates that it was intended, in part, to address the very issue raised in this case. Senator Leahy, in discussing this provision, stated:

“it is my hope that this anti-dilution statute can help stem the use of deceptive Internet addresses taken by those who are choosing marks that are associated with the products and reputations of others.”

[0]Remarks of Senator Leahy in the United States Senate, December 29, 1995, Cong. Rec. S. 19312 (104th Cong. 1995). See also Intermatic, 947 F.Supp. at 1238.

15. Plaintiff is therefore entitled to an injunction under Section 43(c) of the Lanham Act.

16. California Business & Professions Code Section 14330 provides as follows:

“Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark registered under this chapter, or a mark valid at common law, or a trade name valid at common law, shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.”

17. Plaintiff is entitled to an injunction under this statute as well.

C. TeleTech Has Not Demonstrated a Likelihood of Success on the Merits of Its Service Mark Infringement and False Designation of Origin Claims.

18. Section 32 of the Lanham Act, 15 U.S.C. §1114, provides:

“(1) Any person who shall, without the consent of the registrant-

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; or

(b) reproduce, counterfeit, copy, or colorably imitate a registered mark and apply such reproduction, counterfeit, copy, or colorable imitation to labels, signs, prints, packages, wrappers, receptacles or advertisements intended to be used in commerce upon or in connection with the sale, offering for sale, distribution, or advertising of goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive,

shall be liable in a civil action by the registrant for the remedies hereinafter provided.”

19. Section 43(a)(1) of the Lanham Act, 15 U.S.C. §1125(a)(1), provides:

“Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.”

20. TeleTech is the owner of the service mark TELETECH®, which is registered on the Principal Register of the United States Patent and Trademark Office, and is valid. “A certificate of registration of a mark upon the principal register provided by this chapter shall be prima facie evidence of the validity of the registered mark and of the registration of the mark, of the registrant’s ownership of the mark, and of the registrant’s exclusive eight to use the registered mark in commerce … .” Section 7(b) of the Lanham Act, 15 U.S.C. 1057(b).

21. Teletech has not presented sufficient evidence to demonstrate a likelihood of confusion under the trademark laws. Teletech thus far has only demonstrated an initial confusion on the part of web browsers using the domain name “teletech.com” but finding the Defendant’s website. This brief confusion is not cognizable under the trademark laws.

V. CONCLUSION.

22. Plaintiff TeleTech will likely be successful on the merits of its service mark infringement, Lanham Act §43(a), unfair competition, federal dilution, and state dilution claims; that irreparable injury will result to Plaintiff in the absence of the requested Order; and that the balance of hardships tips sharply in Plaintiff’s favor.

23. Network Solutions, Inc. (NSI), the organization that registers Internet domain names in the top level domain “.com,” has deposited complete control and authority over the disposition and use of the “teletech. com” domain name to this Court.

To the extent that any Findings of Fact are deemed Conclusions of Law, they are incorporated herein.

Date May 9, 1997

By: /s/ HON. MARIANA R. PFAELZER

UNITED STATES DISTRICT JUDGE

On April 21, 1997, Plaintiff’s Motion for Preliminary Injunction came before the Court for hearing. Jeffrey N. Mausner of Berman, Blanchard, Mausner & Resser appeared for Plaintiff, Michael D. Harris of Oppenheimer Poms Smith appeared for Defendant. After considering the papers filed by the parties and the arguments presented at the hearing, the Court grants Plaintiff’s Motion for Preliminary Injunction in accordance with the Findings of Fact and Conclusions of Law.

It is therefore ORDERED, pursuant to Federal Rule of Civil Procedure 65, that during the pendency of this action, DEFENDANT TELE-TECH COMPANY, INC., ITS AGENTS, SERVANTS, EMPLOYEES, OFFICERS, DIRECTORS, ATTORNEYS, SUCCESSORS, ASSIGNS, ALL SUBSIDIARIES AND RELATED COMPANIES OR ENTITIES, THEIR INDEPENDENT SERVICE PROVIDERS, AND THEIR BULLETIN BOARD SERVICES, AND ALL PERSONS ACTING UNDER THEM, ON THEIR BEHALF, OR IN CONCERT, CONSPIRACY, OR PARTICIPATION WITH THEM, ARE RESTRAINED AND ENJOINED from:

a. using the domain name “teletech” or “teletech. com” on the Internet;

b. engaging in any conduct or taking any action to prevent Plaintiff TeleTech from obtaining the Internet domain name “teletech.com;”

c. engaging in any conduct or taking any action that has the effect of precluding Plaintiff TeleTech from using the domain name “teletech.com;”

Until October 31, 1997, the Defendant may, however, establish a “link” from the “teletech.com” website to the “tete-tech.com” website, or any other website the Defendant employs. The Defendant must bear the cost of any such link.

Dated: May 9, 1997

By: /s/ HON. MARIANA R. PFAELZER

1998 WL 760219 (S.D.N.Y.)

-against-

VERIO, INC.,Defendant.

BARBARA S. JONES
UNITED STATES DISTRICT JUDGE

Introduction

Plaintiff Register.com, a registrar of Internet domain names, moves for a preliminary injunction against the defendant, Verio, Inc. (“Verio”), a provider of Internet services. Register.com relies on claims under Section 43 (a) of the Lanham Act, 15 U.S.C.   1125(a); the Computer Fraud and Abuse Act of 1986, 18 U.S.C.   1030, as amended; as well as trespass to chattels and breach of contract under the common law of the State of New York. In essence Register.com seeks an injunction barring Verio from using automated software processes to access and collect the registrant contact information contained in its WHOIS database and from using any of that information, however accessed, for mass marketing purposes.

I. Findings of Fact

The Parties

Plaintiff Register.com is one of over fifty domain name registrars for customers who wish to register a name in the .com, .net, and .org top-level domains. As a registrar it contracts with these second-level domain (“SLD”) name holders and a registry, collecting registration data about the SLD holder and submitting zone file information for entry in the registry database. In addition to its domain name registration services, Register.com offers to its customers, both directly and through its more than 450 co-branded and private label partners, a variety of other related services, such as (i) web site creation tools; (ii) web site hosting; (iii) electronic mail; (iv) domain name hosting; (vi) domain name forwarding, and (vi) real-time domain name management. Register.com has invested over $15 million dollars in equipment, software, service fees, and human resources in designing, developing, and maintaining its website and the computer systems necessary to host Register.com’s Internet -based services. (See Gardos Decl.   6). It has also spent in excess of $25 million on advertising and brand promotion in the year 2000 alone, including through print, radio, and television media. (See Mornell Decl.   31).

In order to give its customers control over their receipt of commercial solicitations, Register.com provides them with the opportunity to “opt – in” during the domain name registration process to receiving sales and marketing communications from Register.com or its co-brand or private label partners. Customers who do not opt-in to such communications are not solicited by Register.com or its co-brands. Significantly, Register.com’s co-brand and private label partners have contracted with Register.com for the right, to have their services featured on the www.register.com website. (See Mornell Decl.   18).

Defendant Verio is one of the largest operators of web sites for businesses and a leading provider of comprehensive Internet services. Although not a registrar of domain names, Verio directly competes with Register.com and its partners to provide registration services and a variety of other Internet services including website hosting and development. Verio recently made a multimillion dollar investment in its computer system and facilities for its expanded force of telephone sales associates in its efforts to “provide recent domain name registration customers with the services they need, at the time they need them.” (Eden Decl.   31).

The WHOIS database

To become an accredited domain name registrar for the .com, .net, and .org domains, all registrars, including Register.com are required to enter into a registrar Accreditation Agreement (Agreement) with the Internet Corporation for Assigned Names and Numbers (ICANN).¹ Under that Agreement, Register.com, as well as all other registrars, is required to provide an on-line, interactive WHOIS database. This database contains the names and contact information – - postal address, telephone number, electronic mail. address and in some cases facsimile number – - for customers who register domain names through the registrar. The Agreement also requires Register.com to make the database freely accessible to the public via its web page and through an independent access port called port 43. These query-based channels of access to the WHOIS database allow the user to collect registrant contact information for one domain name at a time by entering the domain name into the provided search engine.²

The primary purpose of the WHOIS database is to provide necessary information in the event of domain name disputes, such as those arising from cybersquatting or trademark infringement. (See Rony Decl.   18, Ex. B to McPherson Decl. at 13). The parties also agree that the WHOIS data may be used for market research.
Specifically, section II.P.5 of Register.com’s Accreditation Agreement with ICANN requires that:

In providing query-based public access to registration data as required by Sections II.F.l and II.F.d, Registrar shall not impose terms and conditions on use of the data provided except as permitted by ICANN-adopted policy. Unless and until ICANN adopts a different policy, Registrar shall permit use of data it provides in response to queries for any lawful purposes except to: (a) allow, enable, or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via e-mail (spam); or (b) enable high volume, automated, electronic processes that apply to Registrar (or its systems).

(Ex. E to McPherson Decl.) (emphasis added).
Originally Register.com’s terms and conditions for users of its WHOIS database wore substantially the same. In April 2000, however, Register.com implemented the following more restrictive terms of use governing its WHOIS database:

By submitting a WHOIS query, you agree that you will use this data only for lawful purposes and that, under no circumstances will you use this data. to: (1) allow, enable or otherwise support the transmission of mass unsolicited, commercial advertising or solicitations via direct mail, electronic mail, or by telephone; or (2) enable high volume, automated, electronic processes that apply to Register.com (or its systems). The compilation, repackaging, dissemination or other use of this data in expressly prohibited without the prior written consent of Register.com. Register.com reserves the right to modify these terms at any time. By submitting this query, you agree to abide by these terms.

(Ex. 27 to Pl ’s Sept. 8, 2000 Motion) (emphasis added).³

Verio’s Project Henhouse

In late 1999, to better target their marketing and sales efforts toward customers in need of web basting services and to reach those customers more quickly, Verio developed an automated software program or “robot”.⁴ With its search robot, Verio accessed the WHOIS database maintained by the accredited registrars, including Register.com, and collected the contact information of customers who had recently registered a domain name. Then, despite the marketing prohibitions in Register.com’s terms of use, Verio utilized this data in a marketing initiative known as Project Henhouse and began to contact and solicit Register.com’s customers, within the first several days after their registration, by e-mail, regular mail, and telephone.

Verio’s Search Robots

In general, the process worked as follows: First, each day Verio downloaded, in compressed format, a flat of all currently registered domain names, of all registrars, ending in .com, .net, and .org. That list or database is maintained by Network Solutions, Inc. (“NSI”) and is published on 13 different “root zone” servers. The registry list is updated twice daily and provides the domain name, the sponsoring registrar, and the nameservers for all registered names. Using a computer program, Verio then compared the newly downloaded NSI registry with the NSI registry it downloaded a day earlier in order to isolate the domain names that had been registered in the last day and the names that had been removed. After downloading the list of new domain names, only then was a search robot used to query the NSI database to isolate the name of the accredited registrar of each new name.⁵ That search robot then automatically made successive queries to the various registrars’ WHOIS databases, via the port 43 access channels, to harvest the relevant contact information for each new domain name registered (See Eden Depo. at   26-30; Eden Decl. 36-38). Once retrieved, the WHOIS data was deposited into an information database maintained by Verio. The resulting database of sales leads was then provided to Verio’s telemarketing staff.

Marketing History

Beginning in January, 2000, Register.com learned that Verio was e-mailing its customers to solicit business. Register.com through its Director of Strategic Initiatives Lauren Gaviser complained to Eric Eden, Director of Sales and Channel Operations of Verio, citing an e-mail received by a customer which identified Verio as the sender but stated “[b]y now you should have received an email from us confirming the registration of your domain name(s) … you have taken the first step towards having your own website . . . the next step is to set up a hosting account . . .” (Ex. 4 to Pl.’s Sept. 8, 2000 Motion). Gaviser advised Eden that the e-mail had misled the customer into thinking that Verio had an affiliation with or sponsorship from Register.com. (See Ex. 5 to Pl.’s Sept. 8, 2000 Motion). Eden replied that “our intention is not to mislead people. The e-mail that was sent resulted from a system problem.” Id. He promised to correct it.

Register.com continued to get complaints about e-mail and telephone solicitations by Verio from its customers and co-brand partners through January. In March 2000 Gaviser again contacted Eden to complain that Register .com was still receiving numerous complaints, including that a number of telephone messages similar to the following were left with Register.com customers: “This is [name of telemarketer] calling from Verio regarding the registration of [customer' s domain name]. Please contact me at your earliest convenience.” (Ex. 44 to Pl.’s Sept. 8 2000 Motion).

On May 5, 2000 Register.com’s lawyers wrote to Verio’s General Counsel requesting that Verio immediately cease and desist from this marketing conduct. Register.com complained generally that the use of Its mark as well as the timing of the solicitations was banning its good will and specifically warned Verio that it was violating the terms of use it had agreed to in submitting its WHOIS queries by sending “mass unsolicited, commercial advertising or solicitations via e-mail (spam).” (Ex. E to McPherson Decl.)

On May 9, 2000 Verio, through an Associate Counsel, communicated that it had stopped using the Register.com mark or any other similar mark or phrase which would lead to confusion and had ceased accessing the WHOIS database for the purpose of marketing through e-mail. (See Ex. 7 to Pl.’s Sept. 8, 2000 Motion). In an effort to confirm settlement of the dispute, Register.com’s lawyers sent Verio a terms letter far it to sign and acknowledge. In that letter Register.com specifically required Verio to cease use of the WHOIS database for not just email marketing, but also direct mail and telemarketing. Verio refused to sign and although it ceased e-mail solicitation, it continued to use the WHOIS contact information for telemarketing purposes into July 2000. (See Ex. 14 to Pl.’s Sept. 8, 2000 Motion, Ayers Depo. at 56).

Accordingly, Register.com commenced this lawsuit and moved for a temporary restraining order and preliminary injunction on August 3, 2000. On August 4, 3000, Verio sought expedited discovery and agreed on August 9, 2000 to enter into a stipulated temporary restraining order with Register.com which prevents it from accessing Register.com’s WHOIS database by using a search robot and prevents Verio from using any data obtained from Register.com to solicit Register.com’s customers. Prior to the Court’s September 15, 2000 hearing, the Court asked ICANN to submit an amicus curiae brief outlining its position with respect to the parties’ dispute. The Court granted the parties’ request to respond to ICANN’s brief, which responses were received on September 20, 2000.

II. Discussion

This matter came before the court on December 8 and December 11, 2000, on the plaintiff’s motion for preliminary injunction. Based upon the testimony taken, exhibits entered, submissions made, arguments of counsel, and the file in this matter, the court finds as follows.

1. Plaintiff, Referee Enterprises, Inc., (hereinafter “Referee Enterprises”), a Wisconsin corporation, brings this action under the Trademark Laws of the United States, and, more particularly, under the Lanham Act §32 and 43(a) (1), (c) and (d) (15 U.S.C. §1114 and 1125 (a)(1), (c) and (d).

2. The complaint alleges that the defendants are infringing plaintiff’s registered trademark, REFEREE®, with the extensions .com .org and .net with regard to the domain names. The plaintiff charges further that defendants’ use of these domain names is likely to cause confusion or mistake or to deceive the public as to the affiliation, connection or association of defendants with plaintiff, Referee Enterprises as well as the origin, sponsorship or approval of defendants’ goods, services and activities under the Lanham Act.

3. The complaint adds that the defendants are using and thereby infringing the plaintiff’s rights so as to cause confusion, mistake or deception to the public as to the origin, sponsorship or approval of defendants’ goods and services under the Lanham Act as well as actual false designation of goods and services and dilution of plaintiff’s Referee® mark under the Lanham Act.
At this stage of the proceedings, it appears that jurisdiction is conferred on this court pursuant to Lanham Act §39(a) (15 U.S.C. §1121(a)) and 28 U.S.C. § §1338(a) and (b). Furthermore, its appears to the court that defendant Planet Ref, Inc., (hereinafter “PRI”) is a Texas corporation with its principal place of business at 101 Windmill Road, San Antonio, Texas 78231, and the defendant Right Sports, Inc., (hereinafter “RSI”) is also a Texas corporation with its principal place of business at 16034 Luxembourg Drive, Houston, Texas 77070-2073.

4. The proofs submitted to this court as well as the acknowledgements of defendants in their pleadings and at the hearing on this matter satisfy the court that plaintiff is likely to succeed on the merits of this action and prove one or more of its claims against one or both of the defendants. This includes establishing that the plaintiff, Referee Enterprises, adopted the REFEREE trademark for a new publication, REFEREE® Magazine, and has used the mark on such magazine and in connection with providing related news and information services in interstate commerce continuously since 1975. Furthermore the plaintiff is likely to establish that it is threatened with dilution, trademark infringement, unfair competition and false designation of origin by defendants’ use one or more domain names and logos, including referee.com, referee.org. referee.net and Whistle/Stripes Logo® Trademark appearing in the plaintiff’s magazine.
The plaintiff has no adequate remedy at law with respect to the defendants’ actions, the balance of harm weighs in favor of the plaintiff and a preliminary injunction is in the public interest for multiple reasons, including confusion and false designation or origin.

Now, therefore,

IT IS ORDERED as follows:

1. Defendants, their officers, agents, sales representatives, servants, employees, associates, attorneys, successors and assigns, and all persons acting by, through, under, or in active concert or participation with any of them, are preliminary enjoined from:

A. Using the mark REFEREE or any other mark confusingly similar to Referee Enterprise’s REFEREE trademark, either alone or in combination with other words, specifically including, but not limited to: eReferee, ereferee.com, ereferee.net, ereferee.org, refereecamp.com, refereecamps.com, refereeclinics.com, refereeforum.com, refereeinsurance.com, refreemail.com and refereeresume.com; as a mark, domain name or highlighted term or in any way other than in common textual reference, any other mark or second-level domain name including the term “referee” in any form;

B. Using the mark imitation Whittle/Stripes logo or any other mark confusingly similar to Referee Enterprises’s Whistle/Stripes Logo® trademark;

C. Selling, offering for sale, advertising, promoting, importing or exporting any goods bearing the infringing mark Referee, the imitation Whistle/Stripes mark, or any other mark confusingly similar to the REFEREE® trademark or the Whistle/Stripes Logo® trademark;

D. Using the word “Referee,” or any other term likely to cause confusion with the REFEREE® trademark, as any of defendants’ domain names, directory names, or other such computer addresses, or otherwise in connection with the retrieval of date or information;

E. Engaging in any other acts or conduct which would cause consumers to erroneously believe that any of the defendants’ goods or services are somehow sponsored by, authorized by, licensed by, or in any way associated with, Referee Enterprises; or

F. Otherwise infringing rights in Referee Enterprises’s REFEREE® trademark, Whistle/Stripes Logo® trademark, or competing unfairly with Referee Enterprises.

Dated at Milwaukee, Wisconsin, this 24th day of January, 2001.

BY THIS COURT

C.N. CLEVERT
U.S. District Judge

v.

MAPHIA, a business of unknown structure; Parsac, a business of unknown structure; Psychosis, a business of unknown structure; Chad Scherman aka Chad Sherman aka “Brujjo Digital,” and Does 2-6 aka “Operator,” “Firehead,” “Lion,” “Hard Core,” “Candyman,” all individually and d/b/a Maphia and Parsac; Howard Silberg by his mother and next friend Ilene Silberg, aka “Caffeine,” and Does 14-18 aka “Apache,” “Maelstrom,” “Gazzer,” “Paranoid/Chryseis,” “Doom” all individually and d/b/a Psychosis and Parsac; Does 7-12; Does 19-25, Defendants.

No. C 93-4262 CW.
857 F.Supp. 679

United States District Court, N.D. California.
March 28, 1994.

Marilyn C. Siegel, Siegel and Siegel, Baltimore, MA, for defendants.
Neil A. Smith, Limbach & Limbach, San Francisco, CA, for plaintiffs.

FINDINGS OF FACT AND CONCLUSIONS OF LAW IN SUPPORT OF PRELIMINARY INJUNCTION, AND CONFIRMATION OF SEIZURE

This is an action for copyright infringement (under 17 U.S.C. Section 101 et seq.), federal trademark infringement (under 15 U.S.C. Section 1051 et seq.), federal unfair competition/false designation of origin (under 15 U.S.C. Section 1125(a)), California trade name infringement (under California Business & Professions Code Section 14400 et seq.), and California unfair competition law (under California Business and Professions Code Section 14210, 17200-17203) against Defendant Chad Scherman and several other individuals operating on-line computer bulletin boards, and the MAPHIA and other bulletin boards as businesses of unknown origin. On December 9, 1993, the Court, the Honorable Fern M. Smith presiding, issued an ex parte Temporary Restraining Order, Seizure Order, and Order to Show Cause Re Why a Preliminary Injunction Should Not Issue enjoining Defendants’ use of Plaintiffs’ SEGA trademark and the direct and/or contributory infringement of Plaintiffs’ copyrights.

A hearing was held before Judge Smith on December 17, 1993, on Plaintiffs’ motion for a preliminary injunction, pursuant to the order to show cause. At that hearing, Judge Smith continued the temporary restraining order in effect until further order of the Court. Thereafter, Defendant Paolo Rizzi, individually, filed a written stipulation to a preliminary injunction and confirmation of the seizure. Defendants Scherman and MAPHIA filed an opposition.

Following reassignment of this action to the undersigned, a further hearing was held on February 25, 1994. The Court now determines, having considered the pleadings, all papers filed by the parties, and the parties’ oral arguments, that a preliminary injunction should issue against Defendants Scherman and MAPHIA as ordered separately. Pursuant to F.R.C.P. 65(d), the Court makes the following Findings of Fact and Conclusions of Law in support of the preliminary injunction and confirmation of the seizure order:

FINDINGS OF FACT

I. FINDINGS SUPPORTING PRELIMINARY INJUNCTIVE RELIEF

A. The parties and their activities

1. Plaintiff Sega Enterprises, Ltd. (“SEL”), is a corporation organized and existing under the laws of Japan.Compl. P 1.

2. Plaintiff Sega of America, Inc. (“SOA”), is a California corporation with a principal place of business in this district in San Mateo, California. SOA is a wholly-owned subsidiary of SEL. SOA and SEL are hereinafter sometimes collectively referred to as “Sega” or “Plaintiffs.” Compl. P 2.

3. Defendant MAPHIA is a business of unknown structure doing business and located in San Francisco, California, within this District, engaged in the business of running a computer bulletin board and related activities. Yang Decl. P 12.

4. Defendant Chad Scherman (aka Chad Sherman, aka “Brujjo Digital”) is an individual residing in this district in San Francisco, California. Chad Scherman is in possession and/or control of the MAPHIA Bulletin Board, which is run from his residence where the computer and memory comprising the bulletin board are located, and does business as MAPHIA or Maphia Trading Company on such bulletin board. He is also one of the “system operators” of the MAPHIA bulletin board. Keene Decl. PP 2, 11.

B. The Business of Plaintiffs

5. Sega is a major manufacturer and distributor of computer video game systems and computer video games which are sold under the SEGA trademark, a registered trademark of Sega Enterprises, Ltd. (Federal Registration No. 1,566,116, issued November 14, 1989) owned by Sega. Yang Decl. P 3, Exh. A.

6. Sega’s computer video game programs are the subject of copyright under the laws of the United States. Yang Decl. P 5; Compl. Exh. B.

7. Sega creates and develops its games and ensures the quality and reliability of the video game programs and products sold under SEGA trademarks. Yang Decl. P 4.

8. The Sega game system consists of two major components sold by Sega: the game console and software programs stored on video game cartridges which are inserted into the base unit. Each cartridge contains a single game program. The base unit contains a microcomputer which, when connected to a television, permits individuals to play the video game stored on the inserted cartridge. Yang Decl. P 6.

9. The computer programs for the Sega video games are stored on a cartridge in a Read-Only Memory (“ROM”) chip. Sega’s video games cannot be copied using the game console. However, as noted below, running devices, called “copiers,” are designed to copy the video game programs from a Sega game cartridge onto other magnetic media such as hard and floppy disks. Yang Decl. PP 6, 21, 23.

C. Defendants’ Activities on the MAPHIA Bulletin Board

10. An electronic bulletin board consists of electronic storage media, such as computer memories or hard disks, which is attached to telephone lines via modem devices, and controlled by a computer. Yang Decl. P 12.

11. Third parties, known as “users,” of electronic bulletin boards can transfer information over the telephone lines from their own computers to the storage media on the bulletin board by a process known as “uploading.” Uploaded information is thereby recorded on the storage media. Third party users can also retrieve information from the electronic bulletin board to their own computer memories by a process known as “downloading.” Video game programs, such as Sega’s video game programs, are one kind of computer programs or information which can be transferred by means of electronic bulletin boards. Yang Decl. PP 18-19.

12. Defendants MAPHIA and Chad Scherman operate an electronic bulletin board called MAPHIA (hereinafter “the MAPHIA bulletin board”). The MAPHIA bulletin board is open to the public and, according to Defendant Scherman’s Opposition Memorandum, has approximately 400 users. Users of the MAPHIA bulletin board communicate using aliases or pseudonyms. “Brujjo Digital” appears as the alias used by Defendant Chad Scherman as the system operator of the MAPHIA bulletin board, and in communicating with others. Keene Decl. PP 2, 11; Yang Decl. P 33.

13. Data from the MAPHIA bulletin board indicates that the MAPHIA bulletin board is economically linked to another electronic bulletin board called PSYCHOSIS. This data also indicates that Defendant Scherman and the MAPHIA bulletin board are part of or linked to a network of bulletin boards, called PARSEC, for business purposes. Keene Decl. PP 12-16, Exh. 5A.

14. The evidence establishes that Sega’s copyrighted video games are available on and transferred to and from the MAPHIA bulletin board by users who upload and download games. Once a game is uploaded to the MAPHIA bulletin board it may be downloaded in its entirety by an unlimited number of users: Keene Decl. PP 7, 9; Yang Decl. PP 18, 24.

15. It appears that the copies of Sega’s video game programs on Defendants’ bulletin board are unauthorized copies of Sega’s copyrighted video games, having been uploaded there by users of Defendant’s bulletin board. Keene Decl. P 9.

16. It has been shown by evidence in the form of printouts from the data on Defendant’s bulletin board which was seized pursuant to this Court’s Order and on-line data captured from Defendant’s bulletin board, that the uploading and downloading of unauthorized copies of Sega’s copyrighted video games is particularly known to Defendant Scherman and the MAPHIA bulletin board. This evidence also indicates that Defendant specifically solicited this copying and expressed the desire that these video game programs be placed on the MAPHIA bulletin board for downloading purposes. Keene Decl. PP 7-16.

17. Notwithstanding contrary assertions of Defendant Scherman, there is evidence that MAPHIA directly or through an affiliate sometimes charges a direct fee for downloading privileges, or barters for the privilege of downloading Sega’s games. Information on the MAPHIA bulletin board includes the following passage: Thank you for purchasing a Console Back Up Unit [copier] from PARSEC TRADING. As a free bonus for ordering from Dark Age, you receive a COMPLEMENTARY Free Download Ratio on our Customer Support BBS. This is if you cannot get a hold of SuperNintendo or Sega Genesis games. You can download up to 10 megabytes, which is equal to approximately 20 normal-sized SuperNintendo or Genesis games. After your 10 megabytes is used, you can purchase full months of credit for only $35/month. You can also prepay and order either 1 year of free downloads for $200/year, or a lifetime of free downloads for only $500. Keene Decl. Exh. 5B at 2.

18. Defendant thus provides downloading privileges for Sega games to users in exchange for the uploading of Sega games or other programs or information or in exchange for payment for other goods, such as copiers, or services, such as the provision of credit card numbers to users. See Keene Decl. PP 7-21.

19. By utilizing the MAPHIA bulletin board, users are able to make and distribute one or more copies of Sega video game programs from a single copy of a Sega video game program, and thereby obtain unauthorized copies of Sega’s copyrighted video game programs. Yang Decl. P 24.

20. This unauthorized copying of Sega video game programs works to decrease Sega’s sales of video game cartridges. This unauthorized copying and distribution further deprives Sega of control over the quality of video games bearing its SEGA and other trademarks. The effect on Sega’s reputation and market for video game cartridges may be substantial and immeasurable. See Yang Decl. PP 4-6, 17, 30-32.

21. Defendant has challenged the preliminary injunction on the basis that he has not profited from the distribution of Sega’s programs. However, it appears Defendant profits from the operation of the MAPHIA bulletin board through direct payment and/or barter. There are also several ways Defendant indirectly profits. First, the existence of this distribution network for Sega video game programs increases the prestige of the MAPHIA bulletin board, and Defendant’s distribution of Sega games naturally leads to an increased market for the video game copiers and other goods or services sold by Defendant. Keene Decl. P 9.

22. Defendant further profits from the distribution of Sega programs on the MAPHIA bulletin board because the bulletin board gives rise to a need for telephone communications which naturally leads to an increased market for telephone calling card numbers sold by the Defendant Scherman. Keene Decl. PP 10-21.

23. The copies of Sega’s programs uploaded to and downloaded from the MAPHIA Bulletin board are substantially similar to Sega’s video game programs as stored in the cartridges sold by Sega. Yang Decl. P 17.

24. Plaintiffs’ SEGA trademark appears on the screen whenever a Sega game which has been downloaded from the MAPHIA bulletin board is subsequently played, and Sega’s trademark is used on the file descriptors by the MAPHIA bulletin board with the knowledge and consent of Defendant Scherman. Yang Decl. PP 18-19, 29.

25. The copies of Sega’s video game programs downloaded by users from the MAPHIA bulletin board, according to instructions and facilitated by Defendant Scherman, are further unauthorized copies of Sega’s copyrighted video games, which, in addition bear unauthorized use of Sega’s registered trademarks.

26. The Sega game programs maintained and distributed through the MAPHIA bulletin board include “pre-release” versions of games which are not available to the public. Yang Decl. P 30.

27. The directory of video game programs available on MAPHIA also contain numerous references to video game programs containing “patches,” “fixes,” and problems which may have been introduced in the copying process. Yang Decl. P 31.

28. Bulletin board users and/or parties who may receive copies of Sega games from bulletin board users are likely to confuse the unauthorized copies downloaded and transferred from the MAPHIA bulletin board with genuine Sega video game programs.

29. Because Sega is unable to control the quality of the games distributed under its trademarks on the MAPHIA bulletin board as the MAPHIA has altered or may have the opportunity to alter such game programs, and the copies distributed by the MAPHIA bulletin board do not contain the packaging and instruction used by Sega, the Defendants’ operation of the MAPHIA bulletin board is likely to damage Sega’s reputation and the substantial goodwill which Sega has built up in its trademarks.

D. Infringing Sales and Distribution of “Copiers”

30. There is substantial evidence that Defendant Scherman and the MAPHIA bulletin board are engaged in advertising, distribution and selling video game copiers, such as the so-called “Super Magic Drive” and/or “Multi Game Hunter.” See generally, Keene Decl.

31. Defendant’s business plan as described by Defendant Scherman’s alias “Brujjo Digital,” states: As you know we have PARSEC TRADING CO. as our business that sells everything from Copiers to Modems to Hard Drives to Calling Cards (off the record, hehe), and even Pentium Chips now. So, the next step is a MEDIA BLITZ! Time to post advertisements ASCIIS on every bbs you log onto! I’ll have some Advertisements ready … Also, we are selling Super Wild Cards, Pro Fighter Q’s and Super Magic Drives for AKIRA and that part of PARSEC will be dedicated for him but me and CAFFEINE will handle all the business side of that and paying him the money and dealing with the customers, etc. Keene Decl. P 15, Exh. 5A at 3.

32. These copiers by Defendant’s own admission are used for the making of unauthorized copies of Sega’s video game programs and some purchasers thereof use them so as to avoid purchasing Sega’s game cartridges from Sega. See generally, Def.’s Mem. in Opp. to Prelim. Injunction. Users or others who receive copies of the Sega video games on disk do not need to purchase any genuine Sega games, but can play the games directly from the disks using the copiers.

33. The copiers sold and advertised by Defendant come with downloading privileges to the purchaser, giving the purchaser free Sega video game copyrighted programs, so as to be able to duplicate, distribute and play the games without purchase of Sega game cartridges. Keene Decl.Exh. 5B.

34. The copiers thus supplant the need to purchase the genuine Sega video games.

35. Defendant states without support that the copiers are also capable of being used for other purposes, such as game development or making back-up copies, but such incidental capabilities have not been shown to be the primary use of such copiers.

36. There is no need to make archival copies of ROM game cartridges. This is because the ROM cartridge format is not susceptible to breakdown and because defective cartridges are replaced by Sega. Yang Decl. 25-28.

37. The copiers are advertised and sold by Defendant’s MAPHIA bulletin board for $350. Keene Decl.Exh. 3. The video game programs advertised by Sega sell for between $30 and $70. Compl. P 15. It is unlikely that customers would purchase a copier to back-up games, which are on reliable cartridges, for this price.

38. The only substantial use of video game copiers is to avoid having to buy video game cartridges from Sega by copying the video game program.

II. FINDINGS SUPPORTING COLLECTION AND SEIZURE OF EVIDENCE

On February 27, 1998, plaintiff Playboy Enterprises, Inc. (PEI) filed a Complaint against defendant Terri Welles. The Complaint consists of five causes of action.. 1) trademark infringement pursuant to 15 U.S.C, § 1114(1); 2) false designation of origin and unfair competition under 15 U.S.C § 1125(a); 3) dilution of trademarks pursuant to 15 U.S.C. 125(c); 4) trademark infringement and unfair competition under California common law; 5) unfair competition in violation of Cal. Bus. & Prof Code § 17200, et seq.

On March 18, 1998, plaintiff filed a Motion for Preliminary Injunction. Defendant filed an Opposition on April 6, 1998. Plaintiff filed its Reply on April 13, ]998. The Court heard oral arguments on April 20, 1998.

I. BACKGROUND

The following background facts are taken from the parties’ contentions in their papers, but the court does not make any ultimate findings of fact with respect to this case. Plaintiff Playboy Enterprises, Inc. (PEI) is an international publishing and entertainment company. Since 1953, PEI has published Playboy magazine, a widely popular magazine with approximately ten (10) million readers each month. PEI also publishes numerous specialty magazines such as Playboy’s Playmate Review, Playboy’s Playmates of the Year, and Playboy’s Calendar Playmates among other publications. In addition to its publishing ventures, PEI produces television programming for cable and direct-to-home satellite transmission and sells and licenses various goods and services including videos.

PEI has established two websites. According to plaintiff, its free website, http://www.playboy.com, has become one of the most popular sites on the Web and is used to promote its magazine, goods, and services. Its other website, called the Playboy Cyber Club, http://www.cyber.playboy.com, is devoted to promoting current and former PEI models.

PEI owns federally registered trademarks for the terms Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playmate of the Year is sometimes abbreviated ‘PMOY’. PEI does not have a federally registered trademark in the abbreviation PMOY, although PEI argues that “PMOY” is worthy of trademark protection because it is a well-known abbreviation for the trademark Playmate of the Year.
Defendant Terri Welles is a self-employed model and spokesperson, who began her modeling career with Playboy/I> magazine in 1980. In May of 1980, Ms. Welles appeared on the cover of Playboy/I> magazine and was subsequently featured as the Playmate of the Month in the December 1980 issue. Ms. Welles received the Playmate of the Year award in June of 1981. Since 1980, Ms. Welles has appeared in no less than thirteen (13) issues of Playboy/I> magazine and eighteen (18) newsstand specials published by PEI. Defendant claims that she has always referred to herself since 1980 as a Playmate or Playmate of the Year with the knowledge of PEI.

On June 29, 1997, Ms. Welles opened a website, http://www.terriwelles.com, which includes photographs of herself and others (both nude and clothed), a fan club posting board, an autobiography section, and a listing of current events and personal appearances. The domain name for defendant’s site is “terriwelles,” the heading for the website is “Terri Welles–Playmate of the Year 1981,” and title of the link page is “Terri Welles–Playboy Playmate of the Year 1981.” Each of the pages uses “PMOY ‘81″ as a repeating watermark in the background. According to defendant, eleven (11) of the fifteen (15) free web pages include a disclaimer at the bottom of the pages, in varying font sizes depending on the page, which indicates that the website is not endorsed by PEI; the disclaimer reads as follows. “This site is neither endorsed, nor sponsored by, nor affiliated with Playboy Enterprises, Inc. PLAYBOY, PLAYMATE OF THE YEAR and PLAYMATE OF THE MONTH are registered trademarks of Playboy Enterprises, Inc,” Defendant uses the terms Plavboy and Playmate along with other terms within the keywords section of the meta tags, which constitutes the internal index of the website used by some search engines.

The site contains link pages to other erotic, adult-oriented websites. It also contains advertising “banners” for those types of websites.

Since May of 1997, defendant has been in contact with plaintiff about the design and creation of her website. Defendant claims that plaintiff, through Marcia Terrones, the director of the “Rights and Permission” department at PEI, informed her that she could identify herself as the Playmate of the Year 1981 but that she could not reproduce the rabbit head logo on her proposed website. Various communications between defendant and plaintiff ensued. According to defendant, PEI, through Hugh Hefner, initially complimented her website and encouraged her use of the title Playmate of the Year 1981. However, Mr. Hefner later informed defendant that use of PEI’s trademarks were restricted; instead, he invited defendant to join PEI’s new Cyber Club. Defendant refused this invitation, and PEI continued to demand that defendant remove the Playmate of the Year title from the home page as well as remove the PMOY watermark from the background.

Plaintiff has moved for a preliminary injunction which would enjoin defendant from 1) using the trademarked term Playmate of the Year in the title of the home page and the link page; 2) from using the watermark PMOY ‘81 in the background; and 3) from using the trademarked terms Playboy and Playmate in the meta-tagging of defendant’s site. Therefore, the task before the court is to determine whether a preliminary injunction against defendant is warranted in this instance.

II. STANDARD OF LAW

To be entitled to a preliminary injunction, a party must show either (1) a combination of probable success on the merits and a possibility of irreparable harm, or (2) the existence of serious questions on the merits and the balance of hardships weighing heavily in its favor. Vision Sports v. Melville, 888 F.2d 609, 612 (9th Cir. 1988). These are not two distinct tests, but ends of a continuum in which the required showing of harm “varies inversely with the required showing of meritoriousness.” Rodeo Collection v. West Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987) (citation omitted). “Thus, a moving party need not demonstrate that [it] risks irreparable injury, but [it] must at least show that [it] will suffer a degree of hardship that outweighs the hardship facing the opposing party if the injunction is not issued. Similarly, a moving party need not demonstrate that [it] will succeed on the merits, but must at least show that [its] cause presents serious questions of law worthy of litigation.” Topanga Press. Inc. v. City of L.A., 989 F.2d 1524, 1528 (9th Cir. 1993).

III. DISCUSSION

In general, plaintiff argues that defendant’s use of the Playboy and Playmate trademarks in conjunction with her website is likely to cause confusion, mistake or deception. See Complaint at 32. Specifically, PEI avers that these alleged infringements are harming it and its trademarks since websurfing consumers are likely to believe that defendant’s website is authorized, sponsored or otherwise approved of by PEI when it is not. Id. Defendant, on the other hand, contends that her use of the title Playmate of the Year and the abbreviation PMOY is merely a descriptive use of those terms so as to identify herself to her customers. She argues that any other use of PEI’s trademarked terms is merely used in an editorial fashion.

In this motion, plaintiff concentrates on defendant’s use of the Playmate of the Year title in Ms. Welles’ web page heading and link page, her use of the PMOY’81 term as a watermark in the web page background, and her use of the Playboy and Playmate marks as meta tags. These appear to be the only infringements alleged by PEI; accordingly, the court will focus on these three particular issues in this order.

Based on these alleged infringements, plaintiff states five causes of action against defendant in its Complaint. However, in this motion, PEI moves for a preliminary injunction on the basis of only three of those causes of action: (First Cause of Action) federal trademark infringement; (Second Cause of Action) false designation of origin under section 43(a) of the Lanham Act; and (Third Cause of Action) dilution under section 43(c) of the Lanham Act. Defendant refers to these two causes of action as the trademark causes of action and can be treated together. Plaintiff does not make direct reference to the remaining causes of action which are related state law causes of action. Therefore, the court will not address those issues. The court will now address whether a preliminary injunction is warranted in this case.

A. Irreparable Harm

“In copyright and trademark cases, irreparable injury is presumed upon a showing of likelihood of success.” Dr. Seuss Enters. v. Penguin Books USA. Inc., 924 F. Supp. 1559, 1574 (S.D. Cal. 1996), aff’d, 109 F.3d 1394 (9th Cir. 1997). Thus, the court will examine the plaintiff’s likelihood of success on the three causes of action upon which it relies.

B. Likelihood of Success in Trademark Causes of Action

Plaintiff asserts that defendant is infringing on its registered trademarks in violation of Section 32(1) of the Lanham Act, 15 U.S.C. § I 114(1), and that said infringement is causing confusion, mistake, or deception which constitutes false designation of origin and unfair competition in violation of Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a). The purpose of trademarks is to allow for customer identification of the manufacturer or sponsor of a good or the provider of a service. See New Kids on the Block v New Am. Pub Inc., 971 F.2d 302, 305 (9th Cir. 1992).

It is undisputed that PEI owns federally-registered trademarks for the words Playboy, Playmate, Playmate of the Month, and Playmate of the Year. The term Playboy has gained widespread public recognition and is distinctive due in large part to the long-standing success and popularity of Playboy magazine and related publications from PEI. See Playboy Enters. Inc. v. Chuckleberry Publishing Inc., 687 F.2d 563, 566-67 (2d Cir. 1982) (holding that the Playboy mark is distinctive, widely recognized, and of great value). However, the other trademarks such as Playmate are not only trademarks related to Playboy magazine, but they are titles bestowed upon particular models who appear in that magazine. From the papers submitted and the oral arguments, it appears that the terms Playmate, Playmate of the Month, and Playmate of the Year are titles which Playboy magazine awards to certain Playboy models, who then use the title to describe themselves. Much like Academy Award winners, all the crowned Miss Americas, and the Heisman Trophy winners, Playboy Playmates are given a title which becomes part of their identity and adds value to their name. Indisputably, these winners represent the awarding organization or sponsor, but the title becomes part of who they are to the public.

In the case of Playboy Playmates, PEI encourages these select models to use their titles for their self-promotion and the promotion of its magazines and assorted goods and services. In the case of Ms, Welles, it appears that PEI had no objection to her use of the terms Playmate of the Year or Playboy Playmate until she launched her competing website. In oral argument, PEI conceded that these models may use their title for their own benefit, as in the title of an autobiography. PEI also admitted that Ms. Welles is not contractually restricted from using the terms Playmate of the Month or Playmate of the Year based on her previous contracts with PEI. However, it contends that Ms, Welles may not trade on PEI’s marks so as to compete with PEI; specifically, PEI argues that the prominent use of its marks to attract the attention of potential customers is a trademark infringement as well as a dilution of its marks.

In the papers submitted, the parties engage in an extensive analysis of whether defendant’s use of PEI’s trademarks creates confusion among websurfers. Indeed, the dispositive legal issue in the standard trademark case concerns “customer confusion” See WCVB-TV v. Boston Athletic Ass’n, 926 F.2d 42, 44 (1st Cir. 1991). The Ninth Circuit has articulated an eight-factor test which the Court may consider in determining the likelihood of confusion: 1) the strength of the mark; 2) proximity or relatedness of the goods; 3) similarity in appearance, sound, and meaning of the marks; 4) evidence of actual confusion; 5) degree to which the marketing channels converge; 6) type of good and degree of care customers are likely to exercise in purchasing them; 7) evidence of the intention of defendant in selecting and using the alleged infringing name; and likelihood that the parties will expand their product lines. See Metro Pub. Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir 1993); see also Century 21 Real Estate Corp.,. v. Sandlin, 846 F.2d 1175,1178-79 (9th Cir. 1988) (applying a similar six-factor test). These factors are simply helpful guidelines for the determination of potential customer confusion. See Metro Pub., 987 F.2d at 640.

This case, however, is not a standard trademark case and does not lend itself to the systematic application of the eight factors. In the case at bar, defendant has used the terms Playmate of the Year and its abbreviation PMOY on her website. She has also used the terms Playboy and Playmate as meta tags for her site so that those using search engines on the Web can find her website if they were looking for a Playboy Playmate. The problem in this case is that the trademarks that defendant uses, and the manner in which she uses them, describe her and identify her. This raises a question of whether there is a “fair use” of these marks pursuant to 15 U.S.C. §§ 1115(b)(4) and 1125(c)(4). See New Kids, 971 F.2d at 306 (noting that the “fair use” defense arises when the trademark also describes a person, a place or an attribute of a product). Terri Welles was and is the “Playmate of the Year for 1981.” Plaintiff has conceded this fact and has not submitted any evidence for the Court to conclude that PEI may prevent defendant from using that term to identify herself and her award; as noted above, PEI conceded that there are no contractual agreements between it and defendant which restrict her use of any of the marks. Thus, defendant has raised a “fair use” defense which must be overcome by the plaintiff before a potential infringement under Section 43(a) of the Lanham Act or trademark dilution under Section 43(c) of the Lanham Act may be found.

In a case where the “mark is used only to describe the goods or services of [a] party, or their geographic origin,” trademark law recognizes a “fair use” defense. Id. (quoting 15 U.S.C. § 1115(b)(4)). Title 15 U.S.C. § 1115(b)(4) states the following:

That the use of the name, term, or device charged to be an infringement is a use, otherwise than as a mark, of the party’s individual name in his own business, or of the individual name of anyone in privity with such party, or of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party, or their geographic origin.

Id. ‘”The ‘fair use’ defense, in essence, forbids a trademark registrant to appropriate a descriptive term for his exclusive use and so prevent others from accurately describing a characteristic of their goods.’” New Kids, 971 F.2d at 306 (quoting Soweco Inc. v. Shell Oil Co., 617 F.2d 1l78, 1185 (5th Cir. 1980)). In the case at bar, Ms, Welles has used the trademark term Playmate of the Year to identity and describe herself. As the court noted above, Ms. Welles earned the title of “Playboy Playmate of the Year” in 1981 and has used that title ever since, without objection from PEI.

From the exhibits submitted with the parties’ papers and presented at oral argument, it is evident that Ms, Welles has minimized her references to Playboy on her website and has not attempted to trick consumers into believing that they are viewing a Playboy-endorsed website. In Volkswagenwerk Aktiengesellschaft v. Church, 411 F.2d 350, 352 (9th Cir. 1969), the Ninth Circuit held that the defendant was able to advertise that he repaired Volkswagen vehicles as long as he did not do so in a manner “which is likely to suggest to his prospective customers that he is part of Volkswagen’s organization of franchised dealers and repairmen.” Id. In the case at bar, Ms. Welles has not created a Playboy-related website. She does not use Playboy or Playmate in her domain name, she does not use the classic Playboy bunny logo, she inserted disclaimers which clearly state that the website is not endorsed by PEI, and the font of the Playmate of the Year 1981 title is not recognizable as a Playboy magazine font.

It is clear that defendant is selling Terri Welles and only Terri Welles on the website. There is no overt attempt to confuse the websurfer into believing that her site is a Playboy-related website. In this case, then, defendant’s use of the term Playmate of the Year 1981 “is descriptive of and used fairly and in good faith only to describe [herself].” 15 U.S.C. § 11 15(b)(4). As such, the use of the abbreviation PMOY ‘81 is also permissible since it makes reference to her title as Playmate of the Year 1981. Since the court finds that PMOY 81 ‘is a fair description of Ms. Tern Welles, it is not necessary to rule on whether the abbreviation PMOY is a protected trademark.

With respect to the meta tags, the court finds there to be no trademark infringement where defendant has used plaintiffs trademarks in good faith to index the content of her website. The meta tags are not visible to the websurfer although some search engines rely on these tags to help websurfers find certain websites. Much like the subject index of a card catalog, the meta tags give the websurfer using a search engine a clearer indication of the content of a website. The use of the term Playboy is not an infringement because it references not only her identity as a “Playboy Playmate of the Year 1981,” but it may also reference the legitimate editorial uses of the term Playboy contained in the text of defendant’s website. Plaintiff conceded, both in its papers and in oral argument, that defendant may properly use the term Playboy in an editorial fashion (i.e. in reference to the Playboy Mansion). Therefore, the court finds that defendant has not infringed on defendant’s trademarks by using them in her website meta tags.

Since defendant is entitled to the fair use” defense pursuant to 15 U.S.C. § 1115(b)(4), it is not necessary to determine the likelihood of confusion in this case. However, even if the Court were to determine the likelihood of confusion in this case, it does not appear that there is a likelihood that websurfers would think that Ms. Welles’ website is endorsed or sanctioned in any way by PEI. Even if Ms. Welles were not entitled to the fair use defense, plaintiff has failed to demonstrate that there is a likelihood of confusion for websurfers. Certainly, the PEI trademarks are strong and are used by PEI to sell adult entertainment on the Internet. Defendant claims she is selling a different class of goods since she is offering her promotional services and related goods like her line of cigars. However, it appears that PEI and Terri Welles are in competition for websurfers who pay money for on-line erotica, regardless of what the underlying promotion is.

Other factors weigh in defendant’s favor. Though she is using the trademarks, she has done nothing else to make her use identical to the Playboy trademark. There is no bunny logo, the font for the terms is different, and there is no other indication that PEI is sponsoring the website. Plaintiff has presented no empirical evidence to show that there is actual confusion among consumers. Though not necessary, the lack of any such demonstration weighs in defendant’s favor. Finally, it appears that defendant has used the trademarks in good faith. She has removed some of the references per PEI’s request, has not used the bunny logo, and has added a disclaimer to the vast majority of her free web pages. See Consumers Union of U.S. v. General Signal Corp., 724 F.2d 1044, 1053 (2d Cir. 1983)

(“Disclaimers are a favored way of alleviating consumer confusion as to source or sponsorship.”). This indicates good faith in the use of the trademarks and weighs in favor of defendant. Hence, even if the court were to apply the Ninth Circuit’s eight-factor test, plaintiff has failed to demonstrate that it would likely succeed in proving that defendant’s use of the trademarks causes a likelihood of confusion for the consumer. As the court has already noted, the Terri Welles web page appears to promote Terri Welles only and makes no attempt to connect itself with Playboy or PEI.

C. Dilution Claim

Given that the court has found that defendant is entitled to the “fair use” defense pursuant to 15 U.S.C. § 1115(b)(4), plaintiff cannot make a sufficient dilution claim under 15 U.S.C. § 1125(c) to warrant the granting of a preliminary injunction. Dilution is defined as “the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of… (2) likelihood of confusion, mistake, or deception.” 15 U.S.C. § 1127. Title 15 U.S.C. § 1125(c)(1) provides the following:
The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person’s commercial use in commerce of a mark or trade name, if such use begins after the mark has become and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection.

Id. The section provides factors the court may consider in determining whether a mark is distinctive and famous. See 15 U.S.C. § 125(c)(1)(A-H). Though PEI’s marks are arguably famous, their distinctiveness does not preclude defendant from the fair use of those items.

Under the Federal Trademark Dilution Act, a dilution claim is not actionable if there is a “[f]air use of a famous mark by another person in comparative commercial advertising or promotion to identify the competing goods or services of the owner of the famous mark.” 15 U.S.C. § 1125(c)(4)(A). As the court has indicated, Ms. Welles’ use of the terms Playmate and Playmate of the Year constitute identification of herself. The use of those terms, in the website and in the meta tags, allows websurfers and potential customers to identify her services, whether it be her line of cigars, her promotional services, or her nude photographs. Given that Ms. Welles is the “Playmate of the Year 1981,” there is no other way that Ms. Welles can identify or describe herself and her services without venturing into absurd descriptive phrases. In cases where the trademarked term must be used to identify the individual or a good, infringement and dilution laws do not apply. See New Kids, 971 F.2d at 306 (“In such cases, use of the trademark does not imply sponsorship or endorsement of the product because the mark is used only to describe the thing, rather than to identify its source.”). Accordingly, plaintiff has failed to show that there is a likelihood of success on the merits of its dilution claim.

IV. CONCLUSION

In Prestonettes v. Coty, 264 U.S. 359, 368 (1924), Justice Holmes explained the purpose of trademark protection and noted that “[w]hen the mark is used in a way that does not deceive the public, we see no such sanctity in the word as to prevent its being used to tell the truth. It is not taboo.” In this case, Ms. Welles has used PEI’s trademarks to identify herself truthfully as the Playmate of the Year 1981. Such use is not “taboo” under the law. Based on the foregoing analysis, the court finds that plaintiff has failed to demonstrate that a preliminary injunction is warranted since there is not a strong likelihood of success on the merits. Consequently, the Court cannot find that the balance of harm tips strongly enough in plaintiff’s favor to overcome the lack of meritoriousness the court has found. See Stokely-Van Camp Inc. v. Coca-Cola Co., 2 U.S.P.Q. 2d 1225, 1227 N.D. Ill.1987). In addition, it is unclear that irreparable harm would ensue from the continued operation of Ms. Welles’ website since plaintiff has not demonstrated that there is a likelihood of confusion, As such, the court, hereby DENIES plaintiff’s Motion for a Preliminary Injunction.

IT IS SO ORDERED.

/s/Judith N Keep
United States District Court, Southern District of California

Civil Action No. 96-6961
November 2, 1998
Filed: November 3, 1998

MEMORANDUM OF DECISION

McGlynn, J.

Plaintiff, Playboy Enterprises, Inc. (ŇPEIÓ) filed this action on October 2, 1996, alleging trademark infringement and related causes of action under the Lanham Act, 15 U.S.C. ¤¤ 1114-1125 and PennsylvaniaŐs anti-dilution law, 54 Pa.C.S.A. ¤ 1124, et seq. at defendantŐs web site Ňadult-sex.com/playboy.Ó The Court entered a temporary restraining order and later a consent decree enjoining the defendants use of PEIŐs trademarks. Thereafter, te complaint was amended to include a counterfeiting claim under 15 U.S.C. ¤ 1116(d).

The matter came here for a final hearing and bench trial on October 8th and 13th, 1998

Upon consideration of the evidence and the briefs and arguments of counsel, the court makes the following

FINDINGS OF FACT

1. Plaintiff Playboy Enterprises, Inc. (PEI), is a Delaware corporation having offices at 730 Fifth Avenue, New York, New York and a principal place of business in Chicago, Illinois.

2. Defendant Universal Tel-A-Talk, Inc. is a Pennsylvania corporation having a principal place of business in Philadelphia, Pennsylvania. Defendant Stanley Huberman is the president [PAGE 2] and sole shareholder.

3. Defendant Adult Discount Toys is a business entity having a principal place of business in Philadelphia, Pennsylvania and is owned by defendant Stanley Huberman.[FN1]

4. Defendant Stanley Huberman is a citizen and resident of the Commonwealth of Pennsylvania.

5. Since 1953, PEI has published Playboy magazine. Playboy magazine is read by approximately 10 million readers each month and is published worldwide in 16 international editions.

6. Playboy magazine is known for its display of erotic and provocative pictorials of PEI models and adult entertainment material.

7. PEI and its licenses have sold a wide variety of merchandise; such as, wearing apparel, cosmetics, sunglasses, watches, and other personal accessories under the trademark PLAYBOY, in interstate commerce, including the Commonwealth of Pennsylvania.

8. PEI is the owner of a number of U.S. trademark registrations for the mark PLAYBOY, including the following registrations: U.S. Reg. No. 600,018 (monthly magazine); U.S. Reg. No. 1,040,491 (sunglasses); U.S. Reg. No. 1,308,905 (watches and clocks); U.S. Reg. No. 1,328,611 (clothing articles, including ties, t-shirts and visors); U.S. Reg. No. 1,320,822 (footwear); and U.S. Reg. No. 755,301 (cigarette lighters).

9. Over the years, PEI has sold merchandise bearing the PLAYBOY trademark [PAGE 3] Through its licensees, products bearing the PLAYBOY trademark are sold throughout the United States and in more than 50 countries around the world. PEI and its licensees have and continue to spend considerable time and money promoting the PLAYBOY trademark. As a result of PEIŐs longstanding use of the PLAYBOY trademark, the PLAYBOY trademark has become well known and has developed a secondary meaning, such that the public has come to associate it with PEI.

10. In addition to the PLAYBOY trademark, PEI also utilizes a Rabbit Head Design trademark (hereafter the ŇRABBIT HEAD DESIGNÓ) in connection with Playboy magazine and a wide variety of goods sold by PEI and/or its licensees. Since 1954, PEI has used the RABBIT HEAD DESIGN mark in connection with Playboy magazine. The RABBIT HEAD DESIGN mark traditionally appears in the masthead of Playboy magazine. PEI has also use the RABBIT HEAD DESIGN in connection with a wide variety of merchandise and services.

11. PEI also owns a number of U.S. trademark registrations for the RABBIT HEAD DESIGN mark, including U.S. Reg. No. 643,926 (monthly magazine); U.S. Reg. No. 871,533 (billfolds, pocket secretaries and card cases); U.S. Reg. No. 1,058,294 (sunglasses); U.S. Reg. No. 759,207 (cuff links, tie tacks, earrings, necklaces, key chains, bracelets and pins); U.S. Reg. No. 728,889 (ties and menŐs and womenŐs shirts); U.S. Reg. No. 1,276,287 (clothing articles, including hats, caps and t-shirts); U.S. Reg. No. 764,819 (perfume).

12. In addition to the PLAYBOY trademarks and RABBIT HEAD DESIGN, the mark ŇBUNNYÓ has been registered by PEI with the United States Patent and Trademark Office.

13. PEI is the owner of U.S. Trademark Registration No. 810,555 for the mark BUNNY.

14. Over the years, PEI has sold merchandise bearing the RABBIT HEAD DESIGN [PAGE 4] mark. Through its licensees, products bearing the RABBIT HEAD DESIGN mark are sold throughout the United States and in more than 50 countries around the world. Products bearing the RABBIT HEAD DESIGN mark are available worldwide by mail order catalog and through PLAYBOY specialty boutiques, department stores, art galleries and museum shops. PEI and its licensees have spent considerable time and money promoting products bearing the RABBIT HEAD DESIGN mark nationwide and throughout the world. As a result of PEIŐs longstanding use of the RABBIT HEAD DESIGN mark, the RABBIT HEAD DESIGN mark has become famous and has developed significant goodwill and secondary meaning, such that the public has come to associate it exclusively with PEI.

15. As a result of PEIŐs use and promotion of the RABBIT HEAD DESIGN mark, the mark BUNNY has also become associated with PEI in connection with adult entertainment services. Indeed, the RABBIT HEAD DESIGN trademark is commonly referred to by the public as the ŇPlayboy Bunny.Ó

16. The Internet is an international computer Ňsuper-networkÓ of over 15,000 computer networks which is used by 30 million or more individuals, corporations, organization and educational institutions worldwide. Users of the Internet can access each others computers, can communicate directly with each other (by means of electronic mail or Ňe-mailÓ), and can access various types of data and information. Each Internet user has an address, consisting of one or more address components, which address is otherwise commonly referred to within the Internet as a ŇdomainÓ or Ňdomain name.Ó

17. Domain names serve as an address for sending and receiving e-mail and for posting information or providing other services. On the Internet, a domain name serves as the primary [PAGE 5] identifier of the source of information, products or services. It is common practice for companies to form internet domain names by combining their trade names or one of their famous trademarks as a prefix and their business category as a suffix. The suffix “.com” (usually pronounced Ňdot comÓ) identifies a service provider as commercial in nature.

18. The domain name is one component of the ŇUniform Resource LocatorÓ (ŇURLÓ). The URL may also include root directories and subdirectories which serve as a guide to the contents of a Web site.

19. In August, 1994, PEI launched http://www.playboy.com on the Internet on the World Wide Web. The website currently receives approximately six million ŇhitsÓ a day. The trademark http://www.playboy.com offers access to some of PEIŐs copyrighted images and other contents from Playboy magazine and other PEI publications. Http://www.playboy.com has also been registered with the U.S. Patent and Trademark Office.

20. PEI also operates http://cyber.playboy.com, a subscription and pay per visit website (the ŇPLAYBOY CYBER CLUBÓ) which allows members access to individual PLAYMATE home pages, video clips from PLAYMATE home pages, video clips from PLAYBOY home video and PLAYBOY TV and contents of Playboy magazine.

21. Both http://www.playboy.com and http://cyber.playboy.com are used by PEI to promote subscriptions to its monthly Playboy magazine, to display erotic pictorials of PEI models, and to advertise and sell PEIŐs merchandise and other services under PEIŐs trademarks. PEIŐs websites prominently feature the PEI trademarks PLAYBOY and RABBIT HEAD DESIGN, as well as photographs, articles of interest, PEI merchandise, videos and subscription information for Playboy magazine. PEIŐs Website contains electronic versions of Playboy [PAGE 6] magazine in that it displays the contents of Playboy magazine on-line. An Internet user is able to view the contents of Playboy magazine by visiting www.playboy.com or the PLAYBOY CYBER CLUB.

22. Defendant Universal Tel-A-Talk, Inc. created and is maintaining several Internet World Wide Web sites which may be accessed throughout the United States, including the Commonwealth of Pennsylvania.

23. On or about October 2, 1996, PEI learned that Universal Tel-A-Talk, Inc. was using PEI’s registered trademarks PLAYBOY and BUNNY in conjunction with their website to advertise on-line a collection of photographs, which both plaintiff and defendant describe as “hard core.” However, neither side has defined that term, at least on this record, except as a modifier of the term sexually explicit photographs.

24. Defendant Universal Tel-A-Talk, Inc.’s website advertises and offers a subscription service called “Playboy’s Private Collection” (located at http://www.adult-sex.com hereafter “Defendant’s website”) for a charge of $3.95 per month, which features hard core photographs. The PLAYBOY trademark is prominently featured in defendant’s website. Defendants also used the term “Bunny” on the navigation bar of the introductory screens and web pages. When a user clicks onto one of six “Bunny” segments of the navigation bar on the introductory page, the user becomes connected to another level of hard core on-line services offered by Defendants.

25. A subscriber to defendants’ “Playboy’s Private Collection” service is greeted by a “home page” which is the equivalent of the cover and table of contents page of a magazine in [PAGE 7] that it displays the name of the site and a menu of information that is available for review. A subscriber to defendants’ Playboy subscription service, upon assessing the URL “adult-sex.com/playboy/members” is welcomed by defendants’ home page which reads: “Welcome to PLAYBOY’S PRIVATE COLLECTION.” Defendants’ website http://www.adult-sex.com is an on-line collection of “hard core” photographs sold under the PLAYBOY and BUNNY trademarks and portrayed as an extension of PEI’s Playboy magazine. Defendants’ unlawful use of the PLAYBOY trademark also appears at least twice on every printed page. “Playboys Private Collection” appears on the upper left-hand corner and the URL “adult-sex.com/playboy/members/pictures” appears in the right-hand corner.

26. Subscribers can then “click” onto a portion of the home page that reads: “Let me see the pictures in Playboys Private Collection” and obtain a lengthy list of hard core photographs on a variety of topics which may be viewed on screen, downloaded to disk or printed.

27. Defendants also provided an electronic mail address which utilizes the PLAYBOY trademark in the text of defendants’ website. The home page of defendants’ service invites subscribers to “Send E-mail to Playboy@adult-sex.com.”

28. Defendant has also “linked” their adult-sex website to PEI’s website at “Playboy.com.” A “link” is a connection from one website to another.

29. Defendants are not now and never have been authorized by PEI to use the PLAYBOY trademark or the BUNNY trademark in connection with any business or service.

30. Defendants consented to the entry of a Preliminary Injunction on Consent on November 29, 1996.

31. Defendants had 1,363 subscribers to its adult-sex.com website between July 13, 1990 [PAGE 8] and October 12, 1996.

32. Defandants used the terms PLAYBOYS PRIVATE CO?LLECTION and PLAYBOY in connection with the adult?-sex.com website for approximately three (3) months.

33. Defendant Huberman personally made the decision to use the term PLAYBOY in connection with the adult-sex.com website and a?uthorized its implementation in the website. Defendant Huber?man personally made the decision to use the term BUNNY in connection with the adult-sex.com website and authorized its implementation in the website.

34. Defendant Universal Tel-A-Talk was on-line for only? four months — July 1996 to October 1996.

35. The contents of Plaintiff’s website during this period of time did not display the words “Registered in U.S. Patent and Tradamark Office” or “Reg. – U.S. Pat. TM Off” or the letter R enclosed in a circle.

36. Plaintiff did not prove any actual loss or injury.

37. Defendant Universal Tel-A-Talk, Iost money on the operation of its website.

DISCUSSION

This is a civil action for trademark infringement, false designation of origin, dilution and trademark counterfeiting under the Trademark Act of 1946, as amended, 15 U.S.C. ¤¤ 1051-1127; trademark infringement and unfair competition under the Commonwealth of Pennsylvania, and dilution under the statutory law of Pennsylvania, 54 Pa. C.S.A. ¤ 1124 et seq.

PEI has alleged infringement of the PLABOY trademark under Section 32 of the Lanham Act (Count I), Section 43(a) of the Lanham Act (Count II) and the common law of the Commonwealth of Pennsylvania (Count IV). The test for infringement is the same for each [PAGE 9] count, namely, whether the allegod infringement creates a likelihood of confusion. ?See Scott Paper Co. v. Scott’s Liquid Gold, 589 F.2d 1225 (3d Cir. 1978).

In order to succeed on the merits, a plaintiff? must establish that: (1) the marks are valid and legally protecable; (2) the marks are owned by the plaintiff; and (3) the defendants’ use of the marks to identify goods or services is likely to create confusion concerning the origin of the goods and services.” Opticians Ass’n v. Independent Opticians, 920 F.2d 187, 192 (3d Cir. 1990).

The trademark PLAYBOY has attained incontestable status pursuant to 15 U.S.C. ¤1065. PEI’s ownership of incontestable U.S. registrations for the PLAYBOY trademark constitutes prima facia evidence of PEI’s ownership of the PLAYBOY trademark and the validity of the mark, Opticians Ass’n v. Independent Opticians, 920 F.2d at 194,

In determining whether a likelihood of confusion exists, the court may take into account

(1) the degree of similarity between the owner’s mark and the alleged infringing mark; (2) the strength of owner’s mark; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels? of trade and advertised through [sic] the same medium: (8) the extent to which the targets of the parties’ sales efforts are the same; (9) the relationship of the goods in the minds of the public because of the similarity of function; (10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant’s market.
Scott Paper Co. v. Scott’s Liquid Gold, supra at 1229.

Defendants’ use of the words “Playboy” and “Bunny” in their website and in the [PAGE 10] identifying directories of defendants’ URL’s are identical to PEI’s registered ?trademarks PLAYBOY and BUNNY. PEI’s registered tradrmarks have previously been adjudicated as very strong. See, Playboy Enterprises, I?nc. v. Chuckleberry Pub. Inc., 687 F.2d 563 (2d Cir. 1982). Suggestive marks are entitled to protection without proof of secondary meaning. See e.g., Dominion Bankshares Corp. v. Devon Holding Co., Inc., 690 F. Supp. 338, 345 (E.D, Pa. 1988); American Diabetes Assn. v. National Diabetes Ass’n, 214 U.S.P.Q. 231, 233 (E.D. Pa. 1981).

Even if secondary meaning were reqired, PEI has established that the PLAYBOY trademark and the RABBIT HEAD DESIGN trademark for adult entertainment goods and services have became famous, and have acquired significant secondary meaning, such that the public has come to associate these tradmarks with PEI.

Defendants intentionally adopted PLAYBOY and BUNNY tradamarks in an effort to capitalize on PEI’s established reputation in the PLAYBOY and RABBIT HEAD DESIGN marks. This is evidenced by defendant’s establishment of a “link” between their website and PEI’s actual PLAYBOY website at “Playboy?.com” and their appropriation of the words “Playboy” and “Bunny” to advertise their own on-line service.

Evidence of actual confusion is not required. It has long been recognized that because evidence of confusion Is notoriously difficult to obtain, it is not necessary to find a likelihood of confusion, See, e.g., Coach Leatherware Co. v. Ann Taylor, Inc., 933 F.2d 162 (2d Cir. 1991); Lois Spatsware U.S.A., Inc. v. Levi Strauss & Co., 631 F. Supp. 735, 743 (S.D.N.Y.), aff’d, 799 F?2d 867 (2d Cir. 1986); Brookum Co. v. Bl?aylook, 729 F. Supp 438, 445 (E.D. Pa. ?1990) (lack of evidence of actual confusion is not a bar to injunctive relief). PEI and defendant market their services through the same channel of trade: the Internet. The consuming publi?c is likely to [PAGE 11] believe that PEI is connected with defendants’ hard ?core.
With respect to the dilution claim, dilution refers to the lessening of a mark’s distinctiveness, factors to be considered by the Court are: (1) similarity of the marks; (2) similarity of the products covered by the marks; (3) sophistication of customers; (4) predatory intent; (9) renown of senior mark; 16) renown or the junior mark; (7) the duration and extent of advertising of the ma?rk; (8) the geographical extent of the trading? area in which the mark is used; and (9) the nature and extent of the use of the mark by third parties,” 15 U.S.C. ¤ 1125(c)(1); ?Wawa, Inc. v. Haaf, 40 U.S.P.Q. 2d 1629 (E.D. Pa. 1996) (citing Mead Data, Inc. v. Toyota Motor Sales, 875 F.2d 1026, 1035 (2d Cir. 1989) (Sweet, J. Concurring)). Applying the foregoing factors, the Court concludes that PEI? has established its dilution claims with respect to the PLAYBOY trademark.

PEI has also alleged that defendants’ activi?ties constitute counterfeiting of PEI’s registered trademark PLAYBOY in violation of 15 U.S.C. ¤ 1116(d), In order to prove counterfeiting, ?a plaintiff must establish that the defendant (1) infringed a registered tr?ademark in violation of 15 U.S.C. ¤1114(1)(a). (2) intent?ionally use the trademark knowing it was counterfeit or was willfully blind to such use. 15 U.S.C. ¤¤ 1116(d), 1117(b); ?Nintendo of America, Inc. v. Brown, No. 95-15954, 1996 U.S. App LEXIS 21373 (9th Cir. Aug, 12, 1996); Babbitt Electronics, Inc. v. Dynascan Corporation, 38 F.3d 1161, 1181 (11th Cir. 1994); Interstate Battery System v. Wright. 811 F. Supp. 237, 244-45 (N.D. Tex. 1993).

“Counterfeiting is the act of producing or selling a product with a sham trademark that is an intentional and calculated reproduction of the genuine trademark.”" 3 J. THOMAS McCARTHY, McCAR?HY ON TRADEMARKS ¤25:10 (36 ed. 1997), ?A ”counterfeit mark” [PAGE 12] means:

a counterfeit mark that is registered on the principal register in the United Statss Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered.

15 U.S.C. ¤1116(d)(l)?(B)(I); See Electronic Laboratory Supply Co. v. Motorola, Inc., Civ. No. 88-4494, 1989 U.S. Dist L?EXIS 16475, *6 (E.D. Pa. Sept. 20, 1989).

A “counterfeit” is a “spurious mark which is identical with, or substantially indistinguishable from, a registered mark.” 15 U.S.C. ¤1127; Babbitt Electronics, supra at 1181.

Defendant Huberman contends that he cannot be held personally liable because he wa?s acting as an officer of defendant Universal Tel-A-Talk and that it is defe?ndant Univenal Tel-A-Talk which committed the infringing acts complained of by PEI. However, the law is clear that “[a] corporate officer is “individualIy liable for the torts he commits and cannot shield himself behind a corporation when he is an actual participant in the tort.” Donseco, Inc. v. Casper Corp., 587 F.2d 602, 606 (36 Cir. 1978).

This principle is applicable in cases brought under the Lanham Act. See, e.g., Donseco at 606 (unfair competition); Max Daetwyler Corp. v. Input Graphics, Inc., 541 F. Supp. 115 (E.D. Pa 1982) (false advertising); Polo Fashions, Inc. v. BDB, Inc., 273 U.S.P.Q. 43,44 (D.S.C. 1983) (counterfeiting).
The liability of a corporate officer who actively participates in the infr??inging acts is “distinct from the liabillry resulting t?from the ‘piercing of the corporate veil’ as that term is commonly used.” Donseco, 587 F.?2d at 609; BDB, Inc. 223 U.S.P.Q. at 44. Moreover, “it is immaterial whether the o?fficer knows that his acts will result in an infringement” Polo Fashions, [PAGE13] Inc. v. Branded Apparel ?Merchandising, Inc., 592 F. Supp. 848, 652-53 (D. Mass. 1984).

The defendant Huberman actively participated in the infringing acts. Although Huberman did not physical?ly type the html code for the website, he did make the decision to use the mark PLAYBOY and BUNNY and approved of all work done by Mr. Merkel on the website. In addition, Huberman approved all requests for subscriptions to the PLAYBOYS PRIVATE COLLECTION service.

The Lanham Act provides that a prevailing plaintiff who establishes infringement of its registered tradmark is, subject to the principles of equity, entitled to recover (1) profits; (2) plain?tiff’s actual damages; and (3) costs of the action?. 15 U.S.C. ¤1117(a);? see Ferrero U.S.A., Inc. v. Ozark Trading, Inc., 952 F.2d 44, 47 (3d Cir. 1991); Automated Tool & Connector Co. v. Amphanol Corp., Civ. No. 96-3249, 1997 U.S. Dist LEXIS 22720, *1 (D.N.J. Nov. 17, 1997) (permitting accounting of profits even when defendant is “‘innocent” infringer). Here, defendants did not have any profits and plaintiff has failed to prove actual damages.
Nevertheless, when a violation of 15 U.S.C, ¤1116(d) is involved, plaintiff may elect t??o statutory damages. Statutory damages for counterfeiting are (1) not less than $500 or more than $100,000 per countefeit mark per type of goods or services sold; or (2) if the Court finds that the use of the counterfeit mark was willful, not more than $1,000,000 per counterfeit mark per type of goods or services sold. IS U.S.C. ¤1117(c).

Defendants’ use of PEI’s registered trademark PLAYBOY in connection with the sale and offering for sale of adult entertainment images on the PLAYBOYS PRIVATE COLLECTION portion of defendant’s adult-sex.com website is a is a counterfeit use under 15 U.S.C. ¤1116(d) and ¤1117(d) entitling plaintiff to an award of statutary damages.

[PAGE14] Trademark policies are designe?d to “(1) to protect consumers from being misled as to the enterprise or enterprises, from which the goods or services emanate or with which they are associated; (2) to prevent an impairment of the value of the enterprise which owns the ?trademark; and (3) to achieve these ends in a manner consistent with the objectives of free competition.” Intel Corp. v. Terabyte International, Inc., 6 F.3d 614, 618 (9th Cir, 1993) (quoting Anti? Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 300-01 (9th Cir. 1979).

To the extent this discussion contains findings of fact not specifically mentioned under that headings they are to be regarded as though they were.

Accordingly, the Court arrives at the following

CONCLUSIONS OF LAW

1. This court has jurisdiction over the parties and the subject matter of this action. 15 U.S.C. ¤1121, 28 U.S.C. 1331, 28 US.C. ¤1332 and 18 U.S.C. 1338.

2. Defendants have infringed on Plaintiff’s PLAYBOY trademark.

3. Defendants have violated the anti-dilution provision of the Lanham Act, 15 U.S.C. 1125(c) and Pennsylavia’s anti-dilution provision statute, 54 Pa.C.S. 1125.

4. Defendants’ activities constituted counterfeiting of plaintiff’s registered trademark in violation of 15 U.S.C, ¤1116(d).

5. PEI is entitled to judgment against Universal Tel-A-TaIkand Stanley Huberman.

6. Defendant Adult Discount Toys is entitled to Judgment against plaintiff PEI.

7. PEI is entitled to recover statutory damages, reasonable counsel fees and costs.

8. PEI is entitled to an injunction permanently enjoining Universal Tel-A-Talk and Stanley Huberman fr?om using the PLAYBOY ?trademark as more ?specifically spelled out in a [PAGE 15] seperate order filed herewith.

9. The court awards statutory damages in the amount of $10,000.

10. Plaintiff is entitled to recover reasonable attorney’s fees.

Entered: 11/4/98.

Clerk of Court

FOOTNOTES:

FN1. As noted below, there is no evidentiary basis for holding Adult Discount Toys liable for the events that are at isue here. Accordingly, Adult Discount Toys will be dismissed. Hereinafter, the use of the word “defendants” applies only to Universal Tel-A-Talk and Stanley Huberman.

v.

CHUCKLEBERRY PUBLISHING, INC., TATTILO EDITRICE, S.p.A., PUBLISHERS DISTRIBUTING CORPORATION, and ARCATA PUBLICATIONS GROUP, INC.,
Defendants.

79. Civ. 3525 (SAS)

Date Filed 6-19-96

OPINION AND ORDER

For the reasons enunciated below, the motion is granted. Tattilo must, within two weeks of the date of this Order: (1) either shut down its Internet site completely or refrain from accepting any new subscriptions from customers residing in the United States; (2) invalidate the user names and passwords to the Internet site previously purchased by United States customers; (3) refund to its United States customers the remaining unused portions of their subscriptions; (4) remit to PEI all gross profits earned from subscriptions to its PLAYMEN Pro Internet service by customers in the United States; (5) remit to PEI all gross profits earned from the sale of goods and services advertised on its PLAYMEN Internet service to customers in the United States; (6) revise its Internet site to indicate that all subscription requests from potential United States customers will be denied; and (7) remit to PEI its costs and attorney’s fees incurred in making this application. If these conditions have not been met within the stated two-week period, Tattilo shall pay to PEI a fine of $1,000 per day until it complies with this Order.

I. Facts

In 1967, Tattilo began publishing a male sophisticate magazine in Italy under the name PLAYMEN. Although the magazine carried an English title, it was written entirely in Italian. In July 1979, Tattilo announced plans to publish an English language version of PLAYMEN in the United States. Shortly thereafter, PEI brought suit against Tattilo to enjoin Tattilo’s use of the name PLAYMEN in connection with a male sophisticate magazine and related products. PEI has published the well-known male entertainment magazine “PLAYBOY” since 1953, which is sold throughout the world in a multitude of foreign languages. Plaintiff’s suit for injunctive relief alleged trademark infringement, false designation of origin, unfair competition based on infringement of Plaintiff’s common law trademark rights, and violations of the New York Anti-Dilution Statute.[1]

A permanent injunction was awarded on April 1, 1981, and a judgment subsequently entered on June 26, 1981, permanently enjoining Tattilo from:

a. using the word “PLAYMEN” or any word confusingly similar therewith as or in the title, as or in the subtitle, or anywhere else on the cover of a male sophisticate magazine, published, distributed or sold in the United States;
b. publishing, printing, distributing or selling in the United States and importing into or exporting from the United States an English language male sophisticate magazine which uses the word “PLAYMEN” or any word confusingly similar therewith as or in the title, as or in the subtitle, or anywhere else on the cover of such magazine;
c. using “PLAYBOY”, “PLAYMEN” or any other word confusingly similar with either such word in or as part of any trademark, service mark, brand name, trade name or other business or commercial designation, in connection with the sale, offering for sale or distributing in the United States, importing into or exporting from the United States, English language publications and related products. Declaration of David R. Francescani, Attorney for Playboy, dated February 27, 1996 (“Francescani Decl.”) Ex. 1.

PEI was similarly successful in enjoining the use of the PLAYMEN name in the courts of England, France and West Germany. However, the Italian courts ruled that “lexically” PLAYBOY was a weak mark and not entitled to protection in that country. See Playboy Enters., Inc. v. Chuckleberry Publishing, Inc., 687 F.2d 563, 569 n.3 (2d Cir. 1982) . The publication of PLAYMEN in Italy continues to the present day.

On approximately January 22, 1996, PEI discovered that Tattilo had created an Internet site featuring the PLAYMEN name.[ 2] This Internet site makes available images of the cover of the Italian magazine, as well as its “Women of the Month” feature and several other sexually explicit photographic images. Users of the Internet site also receive “special discounts” on other Tattilo products, such as CD ROMs and Photo CDs. Tattilo created this site by uploading these images onto a World Wide Web server located in Italy. These images can be accessed at the Internet address “http://www.playmen.it.”[3]

Two distinct services are available on the PLAYMEN Internet site. “PLAYMEN Lite” is available without a paid subscription, allowing users of the Internet to view moderately explicit images via computer. It appears that the main (if not sole) purpose of the PLAYMEN Lite service is to allow prospective users to experience a less explicit version of the PLAYMEN product before committing to purchasing a subscription. In addition, the PLAYMEN Internet site offers the more sexually explicit service called “PLAYMEN Pro.” PLAYMEN Pro is available only to users who have paid the subscription price.

In order to access the Lite version of the PLAYMEN Internet service, the prospective user must first contact Tattilo. The user will then receive a temporary user name and password via e-mail. To subscribe to PLAYMEN Pro, the prospective user must fill out a form and send it via fax to Tattilo. Within 24 hours, the user receives by e-mail a unique password and login name that enable the user to browse the PLAYMEN Pro service.

The PLAYMEN Internet site is widely available to patrons living in the United States. More to the point, anyone in the United States with access to the Internet has the capacity to browse the PLAYMEN Internet site, review, and obtain print and electronic copies of sexually explicit pages of PLAYMEN magazine. Francescani Decl.   4. All that is required to establish the account is the brief contact with Tattilo outlined above.

II. The Standard for Holding a Party in Contempt

It is well settled that “[t]he power to punish for contempts is inherent in all courts.’” Chambers v. Nasco, Inc., 501 U.S. 32, 44 (1991) (quoting Ex parte Robinson, 19 Wall. 505, 510 (1874)). This inherent power “reaches both conduct before the court and that beyond the court’s confines, for “[t]he underlying concern that gave rise to the contempt power was not … merely the disruption of court proceedings. Rather, it was disobedience to the orders of the Judiciary, regardless of whether such disobedience interfered with the conduct of trial.’” Id. (quoting Young v. U.S. ex rel Vuitton et Fils S.A., 481 U.S. 787, 798 (1987)); see also In re Weiss, 703 F.2d 653, 660 (2d Cir. 1983) (“acts of willful disobedience to clear and unambiguous orders of the court constitute contempt of court”).

An order of contempt “is a potent weapon, to which courts should not resort where there is a fair ground of doubt as to the wrongfulness of the defendant’s conduct.” King v. Allied Vision, Ltd., 65 F.3d 1051, 1058 (2d Cir. 1995) (citations omitted). A contempt order is warranted only where the moving party establishes by clear and convincing evidence that the alleged contemnor violated the district court’s edict. Id.; see also Hart Schaffner & Marx v. Alexander’s Dep’t Stores, Inc., 341 F.2d 101, 102 (2d Cir. 1965).

Generally, the purpose of holding a party in civil contempt is “to enforce compliance with an order of the court or to compensate for losses or damages.” Powell v. Ward, 643 F.2d 924, 931 (2d Cir. 1981) (citation omitted). A court has the power to hold a party in civil contempt when (1) there is a “clear and unambiguous” court order; (2) there is clear and convincing proof of noncompliance; and (3) the party has not attempted to comply in a reasonably diligent manner. New York State Nat’l Org. for Women v. Terry, 886 F.2d 1339, 1351 (2d Cir. 1989), cert. denied, 495 U.S. 947 (1990); see also McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949). A “clear and unambiguous” order is one “specific and definite enough to apprise those within its scope of the conduct that is being proscribed.” Terry, 886 F.2d at 1352 (citation omitted). The alleged contemnor “must be able to ascertain from the four corners of the order precisely what acts are forbidden.” Dyywall Tapers and Pointers of Greater New York, Local 1974 v. Local 530 of Operative Plasterers and Cement Masons Int’l Ass’n, 889 F.2d 389, 395 (2d Cir. 1989), cert. denied, 494 U.S. 1030 (1990). Finally, failure to comply with the court order need not be willful. Canterbury Belts, Ltd. v. Lane Walker Rudkin, Ltd., 869 F.2d 34, 39 (2d Cir. 1989).

III. Discussion

Civil Action No. C-97-3204 CAL
Sept. 8, 1997

ORDER OF PRELIMINARY INJUNCTION

Judge: Charles A. Legge

This cause has been presented to the Court, upon the motion of Plaintiff Playboy Enterprises, Inc. (“PEI”), seeking an Order of Preliminary Injunction during the pendency of this action, from infringing PEI’s trademarks on Defendants’ Internet World Wide Web sites.

PEI’s motions supported by a Complaint; a Memorandum of Points and Authorities; the Declaration of Michelle A. Kaiser, Staff Attorney of PEI; and the Declarations of Maryann Heyes and two Declarations of Neil A. Smith, outside intellectual property counsel to PEI.

This Court having given full consideration to all of PEI’s papers and the relevant authorities, and in accordance with Federal Rule of Civil Procedure 65(b), makes the following Order:

IT IS HEREBY ORDERED AND ADJUDGED as follows:

1. This Court has subject matter jurisdiction under 28 U.S.C. paragraphs 1331 and 1332.

2. This Court has personal jurisdiction over Defendants by virtue of their California citizenship and tortious acts within this Judicial District.

3. PEI owns Federal Trademark Reg. No. 721,987 for the mark PLAYMATE, and Federal Trademark Reg. Nos. 2,020,389, 2,011,646, for the mark PLAYBOY, and other registrations for the marks PLAYMATE and PLAYBOY.

4. Defendants have used the marks PLAYBOY and PLAYMATE as part of their domain names on the Internet and used the marks PLAYMATE and PLAYBOY within the Internet Web pages offered at the sites at Internet addresses www.playboyxxx.com and www.playmatelive.com, all without PEI’s authority.

5. Plaintiff PEI has demonstrated a sufficient (i) likelihood of success on the merits of its trademark infringement, unfair competition and dilution claims, (ii) irreparable harm if it is not granted a temporary restraining order pending hearing on its motion for a preliminary injunction, (iii) the balance of hardships tipping in its favor, (iv) and the absence of any public interest factors militating against the interim relief sought in its application, to merit and constitute good cause for the issuance of a Preliminary Injunction Order as more particularly described herein.

6. The Court finds that Plaintiff PEI is likely to succeed on the merits in proving inter alia trademark infringement, unfair competition, including a false designation of origin and false representation, in Defendants’ use of the domain names “playboyxxx.com” and “playmatelive.com”, the use of the name “Playmate Live Magazine” which include Plaintiff’s PLAYMATE registered trademark, the use of “Get it all here @ Playboy” which includes Plaintiff’s PLAYBOY registered trademark, and the repeated use of the PLAYBOY trademark in machine readable code in Defendants’ Internet Web pages, so that the PLAYBOY trademark is accessible to individuals or Internet search engines which attempt to access Plaintiff under Plaintiff’s PLAYBOY registered trademark.

IT IS THEREFORE FURTHER ORDERED that:

1. Defendants, their officers, agents, servants, employees, attorneys, parents, subsidiaries and related companies, and all persons acting for, with, by, through or under them having notice of this Order by personal service, electronic mail, or otherwise, and each of them, shall be immediately preliminarily enjoined and restrained during the pendency of this action, from:

a. using in any manner the PLAYMATE or PLAYBOY trademarks, and any other term or terms likely to cause confusion therewith, including PLAYMATELIVE or “playboyxxx.com” or “playmatelive.com”, as Defendants’ domain name, directory name, or other such computer address, as the name of Defendants’ Web site service, in buried code or metatags on their home page or Web pages, or in connection with the retrieval of data or information or on other goods or services, or in connection with the advertising or promotion of their goods, services or web sites;

b. using in any manner the PLAYMATE or PLAYBOY trademarks in connection with the Defendants’ goods or services in such a manner that is likely to create the erroneous belief that said goods or services are authorized by, sponsored by, licensed by or are in some way associated with PEI;

c. disseminating, using, or distributing any Web site pages, advertising or Internet code words or titles, or any other promotional materials whose appearance so resembles the Web site pages or trademarks used by PEI, so as to create a likelihood of confusion, mistake or deception;

d. otherwise engaging in any other acts or conduct which could cause consumers to erroneously believe that Defendants’ goods or services are somehow sponsored by, authorized by, licensed by, or in any other way associated with PEI; and

2. Defendants shall preserve and retain in hard copies or digital copies, all evidence and documentation relating in any way to their use of the domain names “playboyxxx.com” or “playmatelive.com” and the trademarks PLAYMATE and PLAYBOY in any form, including all records relating to such Web site or any other Web sites or subscription magazines or services where such names or marks have been used, all records relating to the names, addresses (e-mail or otherwise) of any parties with whom Defendants have communicated, and all financial records relating to such Web sites, services, magazines, or any products or services, advertising, on or offered on or through such Internet Web sites, and shall deliver back-up copies of all of the aforementioned files to Plaintiff’s counsel, Neil A. Smith, Limbach & Limbach, L.L.P., 2001 Ferry Building, San Francisco, California, 94111.

3. Defendants shall immediately cease using and claiming ownership of the marks “playboy”, “playmate”, “playboyxxx” or “playmatelive” on the Internet. That Defendants shall immediately discontinue using the Internet Web site addresses or domain names “http://playboyxxx.com” and “http://www.playmatelive.com” and Defendants shall immediately request Network Solutions, Inc. to cancel all such domain name restrictions.

4. That if Network Solutions, Inc. delegates complete control regarding the disposition of the registration and use of these domain names to this Court, the domain names are hereby cancelled. that Plaintiffs shall notify Network Solutions, Inc. of this Court’s cancellation of the domain names “playboyxxx.com”, and “playmatelive.com”.

5. That Defendants shall file with the Court and serve upon Plaintiff’s counsel within thirty (30) days of the entry of such Order of Preliminary Injunction an affidavit or declaration attesting to and detailing Defendants’ compliance with it.

6. It is further ordered that Plaintiff shall maintain the bond previously posted in the amount of $1000.00 for this Order.

SO ORDERED:

Charles A. Legge
United States District Judge

Dated: San Francisco, California
September 8, 1997

The above-captioned matter came before the Court on October 20, 1997 on defendant Anthony DeBartoIo’s motion for summary judgment, defendant Gateway Marine’s motion to vacate the stipulated preliminary injunction, and defendant Gateway Marine’s motion for entry ofjudgment. Since the Court took these motions under submission, plaintiff Patmont Motor Werks filed three additional motions: a motion to supplement the record, a motion for a permanent injunction, and a motion for an order compelling arbitration.

FACTUAL BACKGROUND

Patmont Motor Werks, Inc. (“Patmont”) manufactures small, motorized scooters under the federally registered trademark “Go-Ped.” Gateway Marine, Inc. (“Gateway”), a Missouri corporation, sells power boats to customers in the St. Louis area. In January of 1996, Patmont learned of a World Wide Web site (“website”) offering Go-Peds for sale. The website advertisement directed interested customers to mail payment to Gateway’s office in St. Louis.

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On February 1, 1996, Patmont sent a cease and desist letter to Gateway. alleging that the website and its associated Uniform Resource Locator (“URL”),[FN1] as well as certain e-mail addresses, infringed on Patmont’s Go-Ped mark. Patmont also objected to the website’s endorsement of the unsafe practice of “popping wheelies” while riding Go-Peds. Gateway’s founder and principal shareholder, Ronald DeBartolo, responded by explaining that he had no knowledge of the website. He informed Patmont that his son, Anthony DeBartolo, had been purchasing and reselling Go-Peds in California since the summer of 1995, and that Anthony DeBartolo may have utilized Gateway’s name and address without authorization. Further investigation revealed that Anthony DeBartolo was indeed responsible for the website in question, which operated under the URL “www.idiosync.com.” After Ronald spoke with Anthony, Anthony removed the offending pages from his website.

Anthony DeBartolo and Patmont subsequently entered into negotiations regarding Anthony’s desire to market and promote Go-Peds in addition to reselling them. On March 19, 1996, Anthony DeBartolo and Patmont executed a non-exclusive licensing agreement.[FN2] Among other things, the agreement prohibited the licensee from using the Go-Ped mark “in any E-mail address, or any Key Word designation on any internet server.” Complaint, Exh. D, Para. 3(c).

Shortly after signing the agreement, the professional relationship between Anthony DeBartolo and Patmont deteriorated. Anthony revived his practice of using his website to advertise his Go-Peds for sale, and he also began to use the website as a forum for disparaging Patmont management. Patmont became aware that the Go-Fed mark was being used in Anthony DeBartolo’s website again, and on June 27, 1996 it canceled the licensing agreement. Patmont averred that Anthony DeBartolo’s continued use of its trademark on the internet website violated the terms of the license.

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On July 31, 1996, Patmont filed suit against both Anthony DeBartolo and Gateway, assering numerous federal and state trademark claims, as well as claims for breach of contract and libel. The parties stipulated to a temporary preliminary injunction, which was designed to afford a brief respite from litigation in order to facilitate settlement. However, no such settlement ensued. On March 5, 1997, the Court dismissed Gateway for lack of personal jurisdiction, leaving Anthony DeBartoio as the lone named defendant. The instant motions were filed in September of 1997.

DISCUSSION

I. Motion to Supplement the Record.

Patmont candidly admits that it presented to the Court its evidence in opposition to summary judgment “in conclusory fashion,” and it now moves to supplement the record with an additional declaration by Steven Patmont. Importantly, this new declaration does not contain any information of which Patmont was unaware at the time it filed its opposition. Patmont relies on Rules 56(e) and 56(f) of the Federal Rules of Civil Procedure as authority for this extraordinary request.

The Court fails to comprehend how Rule 56(e) helps Patmont. Patmont is correct that Rule 56(e) allows the court to “permit affidavits to be supplemented or opposed by depositions, answers to interrogatories, or further affidavits.” But nothing in that authorizes Patmont to file supplementary materials at any time it chooses. To the contrary, Rule 56(e) unambiguously defines a nonmoving party’s burden in its “response” to a summary judgment motion, and it provides that ” [i]f the [nonmoving] party does not so respond, summary judgment . . . shall be entered against the adverse party.” FED. R. CIV. PROC. 56(e). Patmont’s response– i. e., its opposition– was filed on October 1 and included the affidavits of Gabriel Patmont and Steven Patmont. Rule 56(e) entitles Patrnont to the Court’s consideration of those affidavits, but nothing more.

Nor does Rule 56(f) help Patmont. That provision affords trial courts the discretion to postpone summary judgment proceedings where the opposing party demonstrates, for [PAGE 4] reasons specified in an affidavit, that it needs more time to obtain information that is necessary to oppose to the motion. The rule provides that:

Should it appear from the affidavits of a party opposing [summary judgment] that the party cannot for reasons stated present by affidavit facts essential to justify the party’s opposition, the court may . . . order a continuance to permit [further] discovery to be had . . . .
FED. R. CIV. PROC. 56(f). The purpose of this rule is to preclude summary judgment where the other side has not had a fair opportunity to gather relevant evidence. However, rule 56(f) was not intended to absolve a party opposing summary judgment of its affirmative rule 56(e) obligation to set forth the evidence it does have at the time its opposition is due. As the Ninth Circuit has held, this Court should exercise its discretion to grant a Rule 56(f) application where the applicant “makes a timely application which specifically identifies relevant information” that can be obtained through further discovery. Church of Scientoiogy of San Francisco v. IRS, 991 F.2d 560, 562 (9th Cir. 1993) (emphasis added), vacated in part on other grounds, 30 F.3d 101 (9th Cir. 1993).

Patmont’s motion is not timely, for it should have been filed before Patmont submitted its opposition. Patmont’s “new” evidence arises from the depositions of Steven Patrnont and Anthony DeBartolo, which were taken on September 23 and 26, respectively. Although Patmont’s counsel apparently did not receive transcripts of these depositions until the first week of October, he certainly was aware of his plan to rely on evidence contained therein when he filed Patmont’s opposition on October l.[FN3] Had Patmont filed a Rule 56(f) motion then, the Court happily would have postponed summary judgment proceedings long enough for Patmont to obtain transcripts of the recent depositions. At this point, however, in order to accommodate Patmont the Court would have to vacate submission, allow defendant the opportunity to respond substantively to the newly proffered evidence, and schedule a second hearing. Patmont has offered no explanation whatsoever– much less a compelling [PAGE 5] explanation– as to why it is entitled to such extraordinary and disruptive relief from established procedure. Accordingly, the motion to supplement the record is DENIED.

II. Motion for Summary Judgment

Defendant Anthony DeBartolo has moved for summary judgment on all eight of Patmont’s causes of action. Six of these claims are trademark-related, one is for breach of contract, and one is for libel.

A. Legal Standard

Summary judgment is appropriate when there is no genuine dispute as to material facts and the moving party is entitled to judgment as a matter of law. Jung v. FMC Corp., 755 F.2d 708, 710 (9th Cir. 1985); Fed. R. Civ. P. 56. Material facts are those that may affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is genuine if there is sufiicient evidence for a reasonable jury to return a verdict for the non-moving party. Id. The court may not weigh the evidence, and is required to view the evidence in the light most favorable to the non-moving party. Id.

A party seeking summary judgment bears the initial burden of informing the court of the basis for its motion, and of identifying those portions of the pleadings and discovery responses that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party will have the burden of proof on an issue at trial, he must aftirmatively demonstrate that no reasonable trier of fact could find other than for the moving party. However, on an issue for which the nonmoving party will have the burden of proof at trial, the moving party can prevail merely by “pointing out to the District Court . . . that there is an absence of evidence to support the nonmoving party’s case.” Id.

If the moving party meets its initial burden, the opposing party must then “set forth specific facts showing that there is some genuine issue for trial” in order to defeat the motion. Anderson, 477 U.S. at 250; FED. R. CIV. P. 56(e).
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B. Trademark Claims

Patmont’s complaint alleges six distinct trademark-related claims: (1) trademark infringement under 15 U.S.C. Section 1114; (2) common law trademark infringement; (3) false designation of origin under 15 U.S.C. Section 1125(a); (4) trademark dilution under CAL. BUS. & PROF. CODE Section 14320; (5) unfair trade practices under CAL. BUS. & PROF. CODE Section 17200.

Defendant Anthony DeBartoro urges that he is entitled to summary judgment on all of these claims because “likelihood of confusion” is an element of each one, and because Patmont has not created a genuine issue of fact regarding whether the website was likely to cause confusion about the source of origin of Go-Ped scooters. The Court declines to address the likelihood of confusion issue, however, because it finds that this case “involv[es] a non-trademark use of a mark– a use to which infringement laws simply do not apply . . . .” New Kids on the Block 971 F.2d 302, 307 (9th Cir. 1991).

In New Kids, the Ninth Circuit recognized a “nominatve fair use” defense to infringement claims.[FN4] This defense has three recluirements:

First, the product or service in cluestion must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.
Id. at 308.

Anthony’s website obviously satisfies the first factor. Go-Peds simply are not identifiable without using the word “Go-Ped,” and it would be impossible for Anthony to do business if the law of trademark forced him to advertise his inventory as, for instance, “small, motorized scooters manufactured by a well-known corporation.” Indeed, it is no more possible to refer to Go-Ped scooters without using the Go-Ped mark “than it is to refer to the Chicago Bulls, Volkswagens or the Boston Marathon without using the[ir] [PAGE7] trademark[s].” Id., see also Volkswagenwer Aktiengesellschaft v. Church, 411 F.2d 350 (9th Cir. 1969) (no infringement where repair shop used the words “Volkswagen” and “VW” in advertisements merely to convey information about the types of cars he repaired).

The second factor is likewise satisfied because the website in cluestion, see Complaint, Exh. E, refers to the Go-Ped mark only to the extent necessary for Anthony to identify the particular brand of scooter that he had for sale. The website does not, for example, make use of any distinctive Go-Ped logo. See New Kids 971 F.2d at 308 n.7 (soft drink competitor would be entitled to compare its product to Coca-Cola or Coke, but would not be entitled to use Coca-Cola’s distinctive lettering).[FN5]

The third and final requirement is met because nothing in Anthony DeBartolo’s website could possibly be construed to indicate Patmont’s sponsorship or endorsement. Indeed, the Court would find incredible any argument to the contrary given the website’s disparagement of Go-Peds as unsafe and of Patmont management as criminally anti-competitive. Cf. In re Dual-Deck Video Cassette Recorder Antitrust Litigation, 11 F.3d 1460, 1466-67 (9th Cir. 1991) (holding that use of the registered receiver was fair-use as a matter of law because no possibility existed that one of the receivers would be confused with plaintiff’s products). [FN6]

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Because all three New Kids factors are satisfied, the Court finds that defendant’s use of ths Go-Ped mark in his website was fair use as a matter of law.[FN7] Accordingly, defendant’s motion for summary judgment is GRANTED with respect to claims 1-6.

B. Breach of Contract

Defendant is also entitled to summary judgment on plaintiff’s breach of contract claim. The licensing agreement executed by defendant DeBartolo, which is appended to the [PAGE 9] complaint as exhibit D, prohibits him from using plaintiff’s mark “in any E-mail address.” Plaintiff’s claim that defendant breached the contract by using the Go-Ped mark in his e-mail address is erroneous. Although defendant clearly used the Go-Ped mark in the URL of his website, an e-mail address and a URL are simply two totally different things. Whereas a URL is a pointer to a particular piece of information that can be accessed through a web server, an e-mail address is a designated location in cyberspace to which messages for particular individuals or groups can be sent. Whereas an e-mail address involves “one-to-one messaging,” a URL involves “remote information retrieval.” See, American Civil Liberties Union v. Reno, 929 F. Supp. 824, 834 (E.D. Pa. 1996), aff’d, 117 S. Ct. 2329 (1997). The Court finds as a matter of law that Anthony DeBartolo’s use of the Go-Ped mark in the URL of his website does not constitute a breach of his agreement not to use the mark “in any e- mail addIess.”

Plaintiff argues that, even if DeBartolo did not breach the contract by using the Go-Ped mark in his e-mail address, he still breached the part of the contract that requires him to use “a high level of quality behavior . . . while representing resale of Patrnont Products.” First, this language comes from the preamble to the contract and is not from an actual covenant to which DeBartolo agreed to be bound. Moreover, plaintiff did not plead in its complaint that defendant breached the contract by failing properly to behave himself; rather, plaintiff alleged only that defendant improperly used the Go-ped mark in his e-mail address. See Complaint Par. 61. Therefore, plaintiff cannot rely on this theory to survive defendant’s summary judgment motion.

Accordingly, the Court GRANTS defendant’s motion for summary judgment with respect to plaintiff’s breach of contract claim.

C. Libel

The Court declines to entertain defendant’s motion for summary judgment on plaintiff’s libel claim, because the Court concludes that it should not exercise subject matter jurisdiction over that state-law cause of action. There is no diversity jurisdiction over the libel claim under 28 U.S.C. Section 1332, because, as Patmont conceded at oral argument, both [PAGE 10] Patmont and Anthony DeBartolo are domiciled in California. Thus, jurisdiction over the libel claim can only be supplemental to the trademark claims under 28 U.S.C. Section 1367.[FN8] The Court has discretion to decline to exercise supplemental jurisdiction where, as here, it has dismissed all claims over which it has original jurisdiction. See 28 U.S.C. Section 1367(c)(3). Because plaintiff’s libel claim is purely a creature of state law, and because it is factually independent from the federal trademark claims, the Court declines to exercise supplemental jurisdiction. Accordingly, plaintiffs libel claim is DISMISSED WITHOUT PREJUDICE.

III. Motion for Entry of Judgment

Defendant Gateway, which the Court previously dismissed for lack of personal jurisdiction, now moves for an entry ofjudgment pursuant to FRCP 54. Rule 54(b) provides that, although entry of judgment in favor of dismissed parties normally is withheld until all claims have been resolved against all remaining parties, the court may direct the entry of a final judgment as to one party if it finds expressly that “there is no just reason for delay.” Gateway’s motion is now moot, however, because this Order, which dismisses all eight claims against the sole remaining defendant, constitutes a final judgment in this action.

IV. Motion to Vacate Stipulated Preliminary Injunction

In August of 1996, the parties consented to (and this Court approved) a stipulated preliminary injunction, which was designed to delay the proceedings for one month in order to accommodate settlement negotiations. The stipulated injunction prohibited the defendants from referring to plaintiff’s trademark during the settlement negotiation period. Defendant Gateway has now moved to vacate the injunction. Given that this Order grants summary jud?ment against plaintiff on each of its trademark claims, it follows that the siipuiated preliminary injunction must be vacated. Accordingly, Gateway’s motion in GRANTED.
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V. Motion for Permanent Injunction

The Court finds it difficult to take seriously Patmont’s ludicrous motion for a permanent injunction. As Patmont itself points out in its brief supporting the motion, permanent injunctions are issued after a full adjudication of the parties’ rights. Thus, even if the Court were not granting summary judgment against Patmont on each of its trademark- related claims, it would be nonsensical for the Court to issue a permanent injunction in advance of trial. Accordingly, Patmont’s motion is DENIED.

VI. Petition for Order Compelling Arbitration

Patmont has moved for an order compelling arbitration based on language in the licensing agreement. Patmont’s motion is moot, because, in light of the instant Order, there is nothing left to arbitrate.

CONCLUSION

For the reasons stated above, the Court DENIES Patmont’s motion to supplement the record; GRANTS Anthony DeBartolo’s motion for summary judgment with respect to claims 1-6 (trademark-related claims) and claim 8 (breach of contract); DISMISSES WITHOUT PREJUDICE claim 7 (libel); GRANTS Gateway’s motion to vacate the stipulated preliminary injunction; and DENIES Patmont’s motion for a permanent injunction. The Court declines to consider Gateway’s motion for entry of judgment and Patmont’s motion for an order compelling arbitration because those motions are MOOT.

IT IS SO ORDERED.

DATED 12/17/97
THELTON E. HENDERSON
UNITED STATES DISTRICT JUDGE

FOOTNOTES:

1. Every document available via the World Wide Web has an address known as a “URL” See Shea v. Reno, 930 F. Supp. 916, 929 (S.D.N.Y. 1996)(describing the World Wide Web), aff’d, Reno v. Shea, 117 S. Ct. 2501 (1997).

2. Although Anthony purported to sign the agreement on behalf of Gateway, Anthony was not in fact authorized to represent Gateway. See Order of March 5, 1997, at 7-9.

3. The Court assumes, of course, that Patmont’s counsel prepared his client for the deposition, was present for it, and was aware of what was said and done and the deposition.

4. Whereas the Lanham Act codifies a “fair use” defense against a plaintiff’s claim that its mark was used to promote someone else’s product, see 15 U.S.C. Section 1115(b)(4), the New Kids defense applies to a plaintiff’s claim that its mark was used to promote the plaintiffs own product. See New Kids, 971 F.2d at 308.

5. Curiously, Patmont suggests in its opposltion that Anthony used the Go-Ped mark to label scooters that were not Go-Peds. See Declaration of Gabriel Patmont, n 2 (“he used our trademark in the body of his advertisements to advertise other scooters”). However, a printout of the allegedly offending website, which Patmont has appended to its complaint as exhibit E, conclusively disproves this allegation. The Court has reviewed this printout carefully, and it demonstrates unambiguously that there was no mislabelling. DeBartolo certainly advertised that he had Go-Ped scooters for sale, but all of the Go-Ped pictures were clearly labeled as such. Gabriel Patmont’s concIusory statement to the contrary– in light of Patmont’s own hard evidence– cannot satisfy plaintiff’s summary judgment burden on this issue.

6. The Court is aware that the word “goped” appears at a secondary level in the Idiosync website’s URL: “www.idiosync.com/goped.” However, the Court finds as a matter of law that such use does not suggest Patmont’s sponsorship or endorsement, because the Go-Ped mark did not appear in the website’s “domain name.” Every computer that is connected to the internet is assigned an alphanumeric designation– such as “whitehouse.gov”– known as a domain name. A website’s domain name signifies its source of origin, and is therefore an important signal to internet users who are seeking to locate web resources. See ONLINE LAW 229 (Thomas Smedinghoff ed., 1996). Because of the importance of a domain name in identifying the source of a website, many courts have held that the use of a trademark within the domain name of a URL can constitute a trademark violation. See, e.g. Cardservice International v. McGee, 950 F. Supp. 737 (E.D. Va. 1997), aff’d, 1997 WL 716186 (4th Cir. 1997); Panavision International v. Toeppen, 945 F. Supp. 1296 (C.D. Cal. 1996). Thus, if Anthony DeBartolo had offered Go-Peds for sale on a website with the URL “www.goped.com, Patmont may have had a strong trademark claim despite the New Kids “nominative fair use” doctrine.
However, the text that follows the domain name in a URL– in other words, the text that comes after the slash– serves a different function. This additional text, often referred to as the “path” of the URL, merely shows how the website’s data is organized within the host computer’s files. See THE WORLD WIDE WEB UNLEASHED 334-36 (Jahn December and Neil Randall eds., 1995). Nothing in the post-domain path of a URL indicates a website’s source of origin, and Patmont has cited no case in which the use of a trademark within a URL’s path formed the basis of a trademark violation. Therefore, the fact that the Go-Ped mark appeared in the path of Anthony DeBartolo’s website’s URL– “www.idiosync.com/goped”– does not affect the Court’s conclusion that the website does not imply Patmont’s sponsorship or endorsement.
Moreover, even if the Court were to shy away from such a broad holding regarding the use of a trademarks in URL paths, Patmont still has not created a genuine issue of fact regarding whether the use of a its [sic] mark in this URL suggested its sponsorship or endorsement. The only shred of evidence that Patmont has proffered is the affidavit of Steven Patmont, who swears that “in [his] testimony given last Friday, [he] indicated the numerous instances of actual dealer and consumer confusion as to source of origin of the motor scooters offered for sale” on the website. Decl. of Steven Patmont, Paragraphs E(a), E(e). This conclusory statement does not point the Court to the supposedly relevant portions of Steven Patmont’s deposition, nor is that deposition even anywhere in the record. Thus, it cannot satisfy Patmont’s burden of “set[ting] forth specific facts showing there is a genuine issue for trial” FED. R. CIV. PROC. 56(e) (emphasis added).

7. Plaintiff seems also to be arguing that defendant is Liable for trademark infringement because he “inserted” the Go-Ped mark into internet search engines in order to lure web surfers to the Idiosync website instead of the Patmont website. See Plaintiff’s Opposition to Summary Judgment Motion at 3. However, even assuming that such conduct is actionable in trademark, plaintiff has not met its summary judgment burden of demonstrating that there is a genuine issue for trial. Plaintiff offers the conclusory statements of Steven and Gabriel Patmont that DeBartolo used the Go-Ped mark “in such a way” that websurfers were lured away from the Patmont site, but neither of these declarants specifies how. The Court is left wondering into which search engines DeBartolo “inserted” the Go-Ped mark, how that resulted in luring websurfers away from the Patmont site, when all of this took place, etc.. The summary judgment rule is clear that plaintiff “may not rest upon the mere allegations [of its] pleading . . . . [It] must set forth specific facts showmg there Is a genuine issue for trial.” FEDERAL RULE OF CIvn PROCEDURE 56(e). Plaintiff has not met this burden.

8. In its complaint, Patmont erroneously asserts that the Court has jurisdiction over the libel claim under 28 U.S.C. Section 1338(b). Section 1338(b) pertains to unfair competition claims and has no bearing on the Court’s junsdiction to adjudicate the libel claim

MEMORANDUM AND ORDER This matter is before the Court on the motion of plaintiff for a preliminary injunction [document #9], on the motions of defendant to compel [documents #30 and 37], and on the motion of defendant for reconsideration.

Plaintiff Maritz, Inc., has brought this action alleging that defendant Cybergold, Inc., is violating Section 43(a) of the Lanham Act, 15 U.S.C. Sec. 1125(a), in connection with Cybergold’s internet activities. Plaintiff seeks both permanent injunctive relief and monetary damages. Plaintiff seeks a preliminary injunction to enjoin Cybergold’s alleged trademark infringement and unfair competition. On August 22, 1996, this Court held a hearing at which both parties presented evidence on plaintiff’s motion for preliminary injunction.

In considering whether a motion for preliminary injunction should be granted, the Court must consider (1) the threat of irreparable harm to the movant; (2) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; (3) the probability that the movant will succeed on the merits; and (4) the public interest. Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109, 113 (8th Cir. 1981) (en banc). The movant must show a threat of irreparable harm, and the absence of such showing is alone sufficient ground for denying a preliminary injunction. Id. at 114 n.9. The Court has discretion to rant or deny a motion for preliminary injunction. Id. at 113-14.

Also, the burden on a party moving for preliminary injunction is a heavy one where granting the preliminary injunction will give the movant substantially the relief it would obtain after a trial on the merits. Sanborn Mfg. Co., Inc., v. Campbell Hausfeld/Scott Fetzer Co., 997 F.2d 484, 486 (8th Cir. 1993). Here, plaintiff seeks both a permanent injunction enjoining defendant from “[u]sing the name ‘CyberGold’ or any confusingly similar designation”; similarly, plaintiff’s preliminary injunction motion seeks to enjoin defendant from “using the name ‘CyberGold’ in connection with its planned Internet service.”

I. Balance of Hardships

This factor requires a court to consider the balance between the harm to the party seeking an injunction and the injury that granting the injunction will inflict on other interested parties. Sanborn Mfg. Co., 997 F.2d at 489; Dataphase, 640 F.2d at 114. Plaintiff seeks to enjoin defendant from using the mark CYBERGOLD, asserting that it will suffer “irreparable harm” from the “ongoing confusion” between the internet services of the two parties. Plaintiff argues that the harm to defendant would be minimal because defendant’s service is not yet operational and has not yet begun enrolling members. As of the date plaintiff filed its motion for preliminary injunction,[1] defendant had already expended considerable effort in the development of its internet service under the CYBERGOLD mark CyberGold had developed extensive computer demonstrations and software for its anticipated online service. CyberGold had also made releases to the national press using the CYBERGOLD mark. CyberGold had also made numerous contacts and solicitations to potential advertisers who are potential customers of CyberGold. Thus, enjoining CyberGold’s use of it’s name would undoubtedly cause considerable harm to CyberGold, forcing it to modify its computer designs and graphics and more importantly, requiring it to redo many of its advertising and promotional efforts in obtaining customers and an internet audience. Even assuming that, as of the date this action was filed, CyberGold had not yet enrolled any internet users as members to its service, the record shows that CyberGold had already expended considerable effort and money in soliciting companies and businesses to advertise on its service.

Any harm to plaintiff would arise as a result of the “ongoing confusion” caused by the alleged similarity between the two marks. Any harm caused simply as a result of confusion due to the fact that the functions and operation of plaintiff’s internet service are similar to the functions and operation of defendant’s internet service or as a result of the fact that both services are new to the public is not the type of harm relevant to analyzing this Dataphase factor. Rather, the Court properly considers only the harm that would be caused by conduct of defendant that would constitute a violation of the Lanham Act. Thus, whether plaintiff will suffer harm depends upon whether there is a “likelihood of confusion” that exists due to the similarity of the two marks. The Court must turn to the next Dataphase factor–the probability of plaintiff’s success on the merits–to resolve this issue.

II. Probability of Success on the Merits

Section 43(a) provides owners of an unregistered trademark or trade name, such as plaintiff’s unregistered GOLDMAIL mark, a right of action against infringement. 15 U.S.C. Sec. 1125(a); Centaur Communications Ltd. v. A/S/M Communications. Inc., 830 F.2d 1217, 1220 (2d Cir. 1987). As an essential element to a trademark infringement action, regardless of whether the trademark or trade name is registered or unregistered, a plaintiff must prove that a defendant’s use of a particular name “creates a likelihood of confusion, deception, or mistake among an appreciable number of ordinary buyers as to the source of or association” between the two names. Duluth News-Tribune v. Mesabi Publishing Co., 84 F.3d 1093, 3096 (8th Cir 1996); Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 871 (2d Cir. 1986). Similarly, the Second Circuit articulates the “likelihood of confusion” test as a “likelihood that an appreciable number of ordinarily prudent purchasers are likely to be mislead, or indeed simply confused, as to the source of the goods in question.’” Centaur Communications, 830 F.2d at 1225 (quoted case omitted). Factors pertinent to a finding of likelihood of confusion include: (1) the strength of the trademark; (2) the similarity between the plaintiff’s and defendant’s marks; (3) the competitive proximity of the parties’ products; (4) the alleged infringer’s intent to confuse the public; (5) evidence of any actual confusion,. (6) the degree of care reasonably expected of plaintiff’s potential customers. Anheuser-Busch, Inc. v. Balducci PubPublications, 28 F.3d 769, 774 (8th Cir. 1994); see also Centaur Communications, 830 F.2d at 1225. These factors do not operate in a mathematically precise formula, but are to be used as a guide in determining whether a likelihood of confusion exists. Duluth News-Tribute, 84 F.3d at 1096.

In the first factor–the strength of the trademark–the Court must classify the plaintiff’s mark as either 1) arbitrary or fanciful, 2) suggestive, 3) descriptive, or 4) generic in order to determine whether the mark is entitled to trademark protection. Id. Unlike marks that are merely descriptive or generic, suggestive, arbitrary end fanciful marks are deemed inherently distinctive and are thus entitled to protection because their intrinsic nature serves to identify a particular source of a product. Two Pesos, Inc. v. Taco Cabana, 505 U.S. 763, 768 (1992). The Court, finds that the GOLDMAIL mark is at least suggestive. See Duluth News-Tribune, 84 F.3d at 1096 (“A suggestive mark is one that requires some measure of imagination to reach a conclusion regarding the nature of the products”). It requires some use of one’s imagination that the GoldMail service is an internet service to provide financial incentives and rewards for reading electronic mail. Because the GOLDMAIL mark is suggestive, it is eligible for trademark protection without requiring any proof of secondary meaning. Two Pesos Inc., 505 U.S. at 773.

The next factor requires consideration of the similarity between the defendant’s and the plaintiffs marks. “The use of identicall even dominant words.in common does not automatically mean that two marks are similar.” General Mills, Inc. v. Kellog Co., 824 F.2d 622, 627 (8th Ch. 1987). Rather, in analyzing the similarities of sight, sound, and meaning between the two marks, a court must: look to the overall impression created by the marks and not merely compare individual features. Id. The two marks, GOLDMAIL and CYBERGOLD, have internet addresses of “www.goldmail.com” and “www.cybergold.com,” Initially, the Court finds that the two marks are not phonetically similar in sound other than the use of the word “gold.” An obvious difference is that “gold” appears at the beginning of one mark and at the end the other; the other words–”Cyber” and “Mail” are not similar in sound or meading, Cf. Squirtco v. Seven-Up Co., 620 F.7d l086, 1069 (8th Cir. 1980) (finding similarity in sound between SQUIRT and SQUIRST). Nor do the marks present a similar appearance. At the hearing, both parties presented demonstrations of their services as they would appear on the internet. The computer graphics of each and the appearance of their marks were not similar. The closest similarity in visual appearance between the two occurs when the generic type internet addresses of “www.goldmail.com” and “www.cybergold.com” are compared, but that is largely a product of the function of the internet and its presentation of addresses. Both marks make use of the word “gold” in their name, an apparent reference to the fact that their internet services are to provide financial rewards for reading advertisements. Thus, there is some similarity in meaning.

It is relevant that gold is a common word, one that likely appears in many products and names, both on and off the internet. It is not unique in the sense that it is a seldom or infrequently used word in modern society. Consumers would be less likely to conclude that a product was from the same origin simply because a very common word was used on the product. On the whole, the Court finds that the two marks, while similar in their suggestive meaning, are not closely similar aurally or visually, and thus, overall, there is limited similarity between the two marks. Cf. General Mllls, Inc., 824 F.2d at 627 (discussing overall comparison of “Apple Raisin Crisp” with “Oatmeal Raisin Crisp”).

The third factor is the competitive proximity of the two parties, products. Considerable evidence presented at the hearing showed that the two services are or will be in direct competition with each other. Each seeks to capture an audience of consumers who use the internet. Both seek to target advertisements to these internet users. Both seek to reach the entire internet audience. Nothing in the record suggests that the parties will be targeting advertisements in areas exclusive to the other. Thus, there is a close competitive proximity between the two products, increasing the opportunity for confusion by consumers.
The fourth factor examines the alleged infringer’s intent to confuse the two products. The evidence at the hearing suggests that neither party knew of the name or existence of the other party’s internet service until approximately May or June of 1996. Robert Johnson testified that plaintiff first proposed using the GOLDMAIL mark for its internet service in the fall of 1995 and that it actually decided to use the mark in February or March of 1996. Plaintiff publicly announced its Goldmail service in May of 1996 and its online service began enrolling internet users on June 5 or 6 of 1996. Johnson testified that plaintiff began working on the concept for its internet service several years ago.

Nat Goldhaber is the CEO and founder of a corporation named Cyber-Bucks, Inc., which was incorporated on October 13, 1994. On December 5, 1995, Cyber-Bucks changed its name to CyberGold, Inc. Goldhaber testified that he formed this corporation to develop the concept and product for his internet service CyberGold. He testified that he first began to use the CYBERGOLD mark in March, 1995; that he first began business presentations using the CYBERGOLD mark in late March, 1995. Goldhaber testified that he made presentations to Intel Corporation in July and August of 1995. At these presentations he presented a computer demonstration of the planned CyberGold internet service and its features. On October 11, 1995, Cyber-Bucks, Inc. filed an intent-to-use trademark application regarding the CYBERGOLD mark. The evidence presented at the evidentiary hearing shows that CyberGold continued its efforts to develop its CyberGold internet service throughout 1996.

Based upon the chronological developments of the two competing internet services of CyberGold and GoldMail, there is no evidence that the CYBERGOLD mark was adopted or used in connection with the CyberGold internet service with any intent to cause confusion between the two products. Rather, it appears that the concept for both services and the adoption of the trademarks occurred without knowledge of the existence of the other.

The fifth factor looks at any evidence of actual confusion. “Proof of actual damages is necessary for an award of damages. In order to obtain injunctive relief, proof of likelihood of confusion is required.” Woodsmith Publishing Co. v. Meredith Corp., 904 F.2d 1244, 1247 (8th Cir. 1990). Evidence of actual confusion may be had from evidence of likelihood of confusion, however it is not conclusive evidence and the court may find such evidence insufficient to establish the existance of a genuine issue of material fact regarding the likelihood of confusion. Id. at 1250.

Plaintiff did not provide any admissible evidence of confusion among internet users who are or would likely be customers of plaintiff.[2] Plaintiff did provide evidence of an individual named Andres Blasquez-Ceballos, who was an acquaintance of a Maritz employee. Upon reading an article in the USA Today newspaper, Blasquez-Ceballos apparently inquired of the Maritz employee as to whether CyberGold was connected with GoldMail. The Court finds that this is not strong evidence of actual confusion. While Blasquez-Ceballo’s inquiry may suggest that he was not completely clear as to whether GoldMail was associated with CyberGold, Blasquez-Ceballos’s only knowledge of CyberGold was through a short newspaper article; he had not viewed a CyberGold advertisement or the CyberGold internet site. Further, the source of Blasquez-Ceballos’s confusion is not clear and his inquiry suggests that he drew some distinction between the two names.

Plaintiff also presented evidence of confusion by Greg Koerner, an advertising sales representative who met with GoldMail employees. Koerner testified that he learned about CyberGold [[[scanner error]]] Cybergold and GoldMail and the similarity of the products they offered. The Court finds that, similar to Blasquez-Caballos, Koerner’s only knowledge of CyberGold was through a short newspaper article and not through any advertisement of CyberGold. Nonetheless, Koerner’s testimony is evidence of confusion between the two trademarks and is entitled to some weight in evaluating this factor.

Plaintiff also presented evidence that a writer for the New York Times was confused as to whether GoldMail was a different service than CyberGold. Again, the person who was confused only had knowledge of CyberGold through what he read in a newspaper article. Also, it is unclear that the source of the writer’s confusion was the result of the similarity between the two trademarks.

On the whole, plaintiff has provided only one substantial incident of confusion–that of Greg Koerner, who testified that the similarity of the trademarks was, in part, the source of his confusion. The Court notes that each instance of alleged actual confusion presented by plaintiff arose solely from each individual’s reading of an article in a newspaper article. Underthe circumstances, this value of such actual confusion towards evaluating the “likelihood of confusion” is questionable because these individuals did not view any advertisement or product with the CyberGold name. Unlike the print newspaper articles which these individuals read, the CyberGold advertisements, releases, demonstrations, and its presently operating website whlich were presented to the Court, all convey a more complete picture of the CyberGold name and its visual appearance. In addition, these individuals are not the ordinary, typical customers of plaintiff who would be subscribers to the GoldMail service.

On the other hand, it is unlikely that considerable evidence of actual confusion would exist at this time, as both CyberGold and GoldMail have only recently been introduced to the public. Thus, while entitled to some weight, the Court cannot place too substantial weight on plaintiff’s evidence of actual confusion.
The final factor to evaluate is the degree of care reasonably expected of the plaintiff’s potential ordinary customers. Duluth News-Tribune, 84 F.3d at 1099. The Court looks at “the ordinary purchaser, buying under the normally prevalent conditions of the market and giving the attention such purchasers usually give in buying that class of goods.’” Ceneral Mlls. Inc., 824 F.2d at 622 (quoting Scott v. Mego Int’l Inc., 519 F.Supp. 1118, 1133 n.l7 (D.Minn. 1981)). Internet users who subscribe to the CyberGold and GoldMail service are ordinary currtomers. Because these customers can or will subscribe to the two internet services free of any cost, to them, it follows that the degree of care used by the ordinary customers will likely be minimal, increasing the potential for confusion.

After careful consideration of each of the above factors, the Court concludes that plaintiff has not shown that defendant’s use of the CYBERGOLD mark creates a likelihood of confusion, deceptlion, or mistake among an appreciable number of ordinary buyers as to the source or association of the internet services of the two parties. The Court places limited weight in plaintiff’s evidence of actual confusion. The marks are limited in similarity and there is no evidance of intent to cause confusion on the part of defendant. Because plaintiff has not made a showing of likelihood of confusion, the Court concludes that plaintiff has not shown a probability of success on the merits as required by Dataphase.

To prevail in its trademark infringement claim, plaintiff must also prove that it: actually adopted and used “a word, phrase, logo, or other device” to identify its particular goods or services prior to defendant. See First Bank v. First Bank Sys., Inc., 84 F.3d 1040, 1044 (8th Cir. 1996). The evidence presented at the preliminary injunction was conflicting as to whether either party’s internet service was actually fully operational. Each party’s services were developed during similar time frames. Each party has only recently attempted to actually launch operational services on the internet. Thus, it is unclear to the Court as to whether plaintiff will be able to prove this element of its infringement claim.[3]

III. Threat of Irreparable Harm

To obtain a preliminary injunction, a plaintiff must show a threat of irreparable harm. Id.; see also Jeffrey Milstein, Inc. v. Greger, Lawler, Roth, Inc., 58 F.3d 27, 31 (2d Cir. 1995) Dataphase, 640 F.2d at 114 n.9, In a Lanham Act case under section 43 (a), a court can presume that irreparable injury will occur absent an injunction if the court finds a “‘prabable success in proving likelihood of confusion.’” Sanborn Mfg. Co., 997 F.2d at 489 (quoting Calvin Klein Cosmetics Corp. v, Lenox Lab., Inc., 815 P.2d 500, 505 (8th Cir. 1987). As discussed above, the issue of “likelihood of confusion” is an element of showing a trademark infringement under section 43(a), The Court necessarily resolved this issue in concludling that plaintiff has not shown a probability of success on the merits because plaintiff did not show a likelihood of confusion existed. Thus, plaintiff has not shown irreparable harm.

IV. The Public Interest

This factor considers whether granting a preliminary injunction will be in furtherance and protection of the public interest. In a Lanham Act case, the Court should consider the consumer’s right not to be confused as to the origin or source of goods. Calvin Klein Cosmetics Corp,. 815 F.2d at 505, The Court should also consider the consuming public’s interest in the ability to obtain the lowest priced goods. To this extent, the public interest is in favor of furthering competition, as long as the competition is within the legal parameters of the Lanham Act. ;Id. Because the Court’s above findings with respect to the likelihood of confusion among ordinary consumers and because competition would likely further the public interest in this new, developing area, the Court finds that the public interest would not be furthered by the grant of a preliminary injunction.

Based on the above analysis of the Dataphase factors, the Court concludes that plaintiff’s motion for preliminary injunction should be denied. Plaintiff has not shown the probability that itwill succeed on the merits at trial as required byDataphase. Because plaintiff has not shown that a likelihood of confusion exiets, plaintiff has not met the reguired showing of irreparable harm.

At the hearing on the motion for preliminary injunction, defendant made an oral motion for reconsideration of the Court’s August 19, 1996 memorandum and order determining that subject matter jurisdiction exists. Defendant’s motion is a factual challenge to this Court’s subject malter jurisdiction. Defendant also moved for reconsideration of the Court’s order determining that personal jurisdiction existed over defendant in Missouri. For the reasons presented in this Court’s August, 19 memorandum and order, the Court finds that both subject matter jurisdiction and personal jurisdiction exist in this action. Thus, defendant’s motion for reconsideration will be denied.

Also, defendant had filed motions to compel discovery. At the preliminary injunction hearing, defendant moved to withdraw such motions, as plaintiff represented that the discovery sought had been produced. Thus, the motions to compel will be denied as moot.

Accordingly,

IT IS HEREBY ORDERED that the motion of plaintiff for a preliminary injunction [document #9] is DENIED.

IT IS HEREBY ORDERED, that the motions of defendant to compel [documents #30 and 37] are DENIED as moot.

IT IS HEREBY ORDERED, that the motion of defendant for reconsideration is DENIED

Dated this 29th day of August, 1996.

FOOTNOTES:

FN1. The evidence pyresented at the preliminary injunction hearing suggested some actions taken by defendant CyberGold subsequent to the date plaintiff filed the present action and filed its motion for preliminary injunction were taken in an effort to ekpedite CyberGold’s launching of its internet service from developmental stages to actual implementation. The Court makes no finding that these actions by CyberGold were actually taken for purposes of affecting the outcome of this action. However, because the purpose of a preliminary injunction is to preserve the status quo until, upon final hearing, a court may grant full effective relief, see Rathman Group v. Tanenbaum, 889 F.2d 787, 789-90 (8th Cir. 1989), the Court will look at the “harm” defendant would likely have suffered as of the date that this action was filed.

FN2. Plaintiff did present a copy of an e-mail message from an XXXXXXX internet user under (XX Ex. 7), however that document, upon objection, was not admitted into evidence. Even if the document was admissible, it does not show confusionn arising from the similarity of the two trademarks. Rather, the content of the e-mail shows that the internet user recognized that a distinction existed between the cGoldMail, and CyberGold services.

FN3. Defendant argues that its application for an intent-to-use trademark should have a bearing on whether plaintiff’s have a comman-law trademark with priority over defendant’s mark and whether a preliminary injunction should be issued. Defandant filed an application for an intent-to-use trademark with Unitd United States Patent and Trademark Office (the PTO) regarding the CYBERGOLD mark on October 11, 1995. If CyberGold’s mark is eventually registered upon the principal register, CyberGold will be issued a certificate of registration. 15 U.S.C. Section 1057(a). Such certificate will be prima facie evidence of the validity of the registered mark and of the regitrant’s exclusive right to use the registered mark in commerce on or in connection with the goods or services specified in the certificate. ” 15 U.S.C. 1057(b) If a registration certificate is issued on the principal register, the person holding the registration certificate for the mark has a nationwide right of priority in using such mark, dating back to the date the person filed its application to register the mark. 15 U.S.C. Section 1057(e). Such right of priority exists as to all persons except those who, prior to the date such person filed the application to register, have used the mark or have filed an application to register the mark which is pending or has been registered. Id.

If eventually registered, to prevail in its action against defendant, plaintiff, claiming a common-law trademark, will be required to prove that it had a common-law trademark antedating the registration of defendant’s mark. First Bank, 84 F.3d 1040, 1044 (8th Cir. 1996). Based upon the dating back provision of the Lanham Act, 15 U.S.C. Sec. 1057(c), if registration of defendant’s mark is completed, plaintiff will be required to prove that its trademark antedates October 11, 1995. Plaintiff would have to prove that it actually used the GoldMail mark in connection with its internet service prior to that date. See First Bank, 84 F.3d at 1044.

Defendant’s argument that, based upon the statutory scheme for registration of intent-to-use trademarks, its pending application should be considered in whether to grant a preliminary injunction is not without some merit, although contrary case law exists. See Talk To Me Products, v. Larami Corp., 804 F.Supp. 555, 558-60 (S.D.N.Y. 1992). While the Court’s decision to deny a preliminary injunction does not rest upon consideration of defendant’s application for an intent-to-use trademark, the Court notes that, if registration is completed, plaintiff’s case regarding its prior use of its common-law trademark may be substantially more difficult to meet.

v.

JUNO LIGHTING, INC.,
Defendant.

Case No. 97 C 791

MEMORANDUM OPINION AND ORDER

I. BACKGROUND

The following information is taken from plaintiff’s amended complaint. Juno Online, a Delaware limited partnership with its principle place of business in New York City, is an online provider with approximately 1.5 million subscribers. Juno Lighting, a Delaware corporation with its principal place of business in Des Plaines Illinois, is a manufacturer and retailer of recessed and track lighting. Juno Lighting has used the Juno name in its logo since 1976 and holds two federal trademarks for the name “Juno.”

The current dispute revolves around the Internet and the use of the domain name “juno.com”. The Internet is a network of computers that are linked together, allowing computer users to share information and data. See generally, Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 1230-32 (N.D. Ill. 1996). Each computer that is linked to the Internet contains a numeric address called an Internet protocol address, or IP address. The numeric IP address has four parts, each separated by a decimal point. An example of such an address would be 123.112. 101.1. Am. Compl.    8. However, since it is easier to use, each computer is given an alphanumeric address, called a domain name, that corresponds to the IP address. When an Internet user types in the domain name, the user’s computer reads the name as the numeric IP address and contacts the appropriate computer. An example of such a domain name is “juno.com”.[1]

To send electronic mail (“e-mail”), the user addresses the message to the domain name of the recipient’s e-mail provider. America Online, for instance, is an e-mail provider, whose domain name is “aol.com”. Each user of the America Online service is given a user name to use with the domain name (e.g., “harrysmith”).Therefore, if a person wants to contact Harry Smith, an America Online subscriber, the user would send an e-mail message to “harrysmith@aol.com”. The computer would read “aol.com”, translate this into the corresponding numeric IP address, and deliver the message to the American Online computer, which would then deliver the message to Harry Smith.

The domain name also functions as a “World WideWeb” address, if preceded by the letters www (i.e., www.aol.com). Web sites are pages of electronic information that a company, organization, or person wants to advertise to Internet users. Entities and people such as Sports Illustrated, Duke University, the National Basketball Association, and certain individual politicians have web sites that allow Internet users to look up information.

In December of 1994, Juno Online registered the domain name “juno.com” with Network Solutions, Inc. (“NSI”) and, subsequently, began providing free e-mail service to customers on April 22, 1996. Those who use Juno Online’s e-mail service are given their own user name to use together with Juno Online’s domain name (e.g., harrysmith@juno.com). According to Juno Online, its service has been quite popular, with 250,000 new accounts having been opened in January of 1997 alone. Juno Online currently services more than one out of every twenty United States e-mail addresses. Since July 5,1995, Juno Online has also been using the World WideWeb address “www.juno.com” and, currently, its web page is “visited” thousands of times a day. By virtue of a government contract with the National Science Foundation, NSI is the exclusive registrar of Internet domain names. Therefore, once Juno Online registered the domain name “juno.com” with NSI, no other business or person could obtain that address.

NSI’s general policy is to register a specific domain name to the first person or entity to apply for registration. However, in 1995, NSI instituted a “Domain Name Dispute Policy” that allows a third party to challenge a registrant’s domain name, despite the “first come, first serve” general rule. According to the policy, to challenge a domain name, the third party must notify the registrant that the use of the domain name violates the third party’s intellectual property rights. The third party must also file with NSI a certified copy of a trademark registration indicating that the third party owns a trademark that is the same as the contested domain name. If the domain name registrant cannot produce a similar trademark registration, NSI’s policy requires it to suspend the use of the domain name until the issue is resolved. However, if either the registrant or third party files suit against the other before the suspension takes effect, NSI allows the registrant to continue using the domain name and leaves it for the court to decide which party should be allowed to use the domain name.[2]

In July, 1995, D. E. Shaw & Co., L.P., an affiliate of Juno Online, began applying for federal service mark and trademark protection for the word “Juno”, as well as for various designs, slogans, and phone numbers related to “Juno”. Juno Lighting sent a letter to Juno Online in June of 1996 stating their opposition to the Juno Online trademark applications. Juno Lighting also sent a letter to NSI on August 28, 1996 requesting that NSI cancel Juno Online’s domain name “juno.com”.

After NSI received Juno Lighting’s letter, pursuant to its dispute policy, NSI sent Juno Online a letter dated September 19, 1996, stating that, unless Juno Online transferred the domain name “juno. com” to Juno Lighting or filed a declaratory judgment action in federal court by October 26, 1996, NSI would suspend the operation of the domain name “juno.com”. In response, Juno Online filed this action in the Eastern District of Virginia, naming Juno Lighting and NSI as defendants. However, after NSI agreed not to suspend the use of “juno.com” until the case has been resolved, Juno Online agreed voluntarily to dismiss NSI from the suit and the case was transferred to the Northern District of Illinois. Subsequently, Juno Lighting obtained, by registering with NSI, the domain name “juno-online.com”. According to Juno Lighting, this was done in order to prevent other’s from obtaining the name, thus allowing Juno Lighting to transfer the domain name to Juno Online to help resolve this dispute.

In Count I of the amended complaint, plaintiff seeks a declaration that its use of the domain name “juno.com” does not infringe or dilute Juno Lighting’s trademark. In Count II, labeled “trademark misuse,” Juno Online seeks a declaration that defendant misused the Juno Lighting trademarks, as well as injunctive relief, monetary damages, and cancellation of Juno Lighting’s trademark registration. Count III alleges a Lanham Act violation arising from Juno Lighting’s registration of the domain name “juno-online.com”. Count IV speaks in state unfair competition and deceptive trade practices law. Defendant has counterclaimed for trademark infringement and dilution, unfair competition, and violations of Illinois state law. Juno Lighting now moves to dismiss Counts II, III, and IV of plaintiff’s amended complaint and to strike all claims for monetary relief. For the following reasons, the court grants defendant’s motion.

II. STANDARD

In ruling on a motion to dismiss pursuant to Federal Rule of Civil Procedure 12 (b) (6), the court must accept “the well-pleaded allegations in the complaint as true and draw[ ] all reasonable inferences in favor of the plaintiff.” Porter v. DiBlasio, 93 F.3d 301, 305 (7th Cir. 1996) (citing Travel All Over the World, Inc. v. Kingdom of Saudi Arabia, 73 F.3d 1423, 1429 (7th Cir. 1996)). Dismissal is only appropriate if there is no set of facts that, if proven true, would entitle plaintiff to relief. Id. (citing Travel All Over, 73 F.3d at 1429-30). Where the court considers evidence outside the pleadings, as the court has in deciding the motion to dismiss Count II, the motion is treated as a motion for summary judgment. FED.R.CIV.P. 12(b). Summary judgment will be granted only if, viewing the facts and inferences in the light most favorable to the non-moving party, the party moving for summary judgment proves the absence of a genuine issue of material fact and establishes its right to judgment as a matter of law. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356 (1986).

III. TRADEMARK MISUSE

In Court II, plaintiff has asserted a claim for trademark misuse, arguing that Juno Lighting misused its trademark by attempting to put Juno Online out of business. Pl.’s Mem. in Opposition at 6-7. According to plaintiff, Juno Lighting not only tried to have NSI cancel Juno Online’s domain name, but it also tried to confuse the public and “extract concessions” from plaintiff by obtaining the domain name “juno-online.com”. Defendant, however, has pointed out that trademark misuse is not a recognized affirmative claim. In the past, it has been confined to being asserted as a defense to a suit for trademark infringement or as an element of a separate tort action.

In light of the novel issues presented by this claim, the court heard oral arguments from both parties on August 12, 1997. The court limited the arguments to the issue of whether this court should recognize an affirmative claim for trademark misuse. After hearing the arguments and considering the briefs and evidence filed, the court finds that, if, as plaintiff claims, in light of new technology and novel issues surrounding the Internet, an affirmative claim for trademark misuse should be recognized, this is not the proper case in which to do so.

A. Background History of the Misuse Defense

In 1942, the Supreme Court recognized the defense of patent misuses in Morton Salt Co. v. G.S. Suppiger Co., 314 U.S. 488, 62 S.Ct. 402 (1942). In that case, the plaintiff sued arguing that the defendant’s salt depositing machine infringed the plaintiff’s patent. However, the Court found that the plaintiff was leasing its own salt depositing machines to canners on the condition that the licensees use a certain unpatented salt tablet produced by the plaintiff’s subsidiary, id. at 491, 62 S.Ct. at 404, and that this typing arrangement was an attempt on the plaintiff’s part to use the government granted monopoly to acquire another monopoly in an unpatented product. Id. The Court decided that, if it allowed the plaintiff to invoke successfully its patent in the infringement suit, it would be assisting the plaintiff in acquiring a second monopoly and, thus, hurting competition and the public. Id. at 493, 62 S.Ct. at 405. Therefore, invoking the “clean hands” doctrine, the Court held that the patentee was not allowed to invoke the protection of the law through an infringement suit, at least until it stopped the offending practice. Id. Although courts have continued to apply the patent misuse defense, see, e.g., Senza-Gel Corp. v. Seiffhart, 803 F.2d 661 (Fed. Cir. 1966); Transitron Elec. Corp. v. Hughes Aircraft Co., 487 F.Supp. 885, 892-93, 904-05 (D. Mass. 1980), aff’d, 649 F.2d 871 (1st Cir. 1981), in 1988, Congress limited the reach of this defense. See The Patent Misuse Reform Act of 1988, Pub. L. No. 100-703, 102 Stat. 4676 (1988) (codified at 35 U.S.C.    271(d)(4) & (5)) (conditioning, in part, the misuse defense on a showing of market power in the relevant market).

The misuse defense has also been extended to other forms of intellectual property. For instance, while courts are split on whether a copyright misuse defense exists, in 1990, the Fourth Circuit recognized the defense in Lasercomb America, Inc. v. Reynolds, 911 F.2d 970 (4th Cir. 1990). The court reasoned that, since patent and copyright have similar origins and purposes, and since the Supreme Court had recognized a patent misuse defense in Morton Salt, a misuse defense should also be recognized in copyright law. Id. at 976. Summing up the defense, the court stated that “[t]he question is not whether the copyright is being used in a manner violative of antitrust law … but whether the copyright is being used in a manner violative of the public policy embodied in the grant of a copyright.” Id. at 978.

The misuse defense has also enjoyed a substantial history in the field of trademarks. However, courts have taken different approaches in applying the defense in this field. See generally Stephen J. Davidson and Nicole A. Engisch, Trademark Misuse in Domain Name Disputes, The Computer Lawyer, Aug. 1996, at 13. Some courts have applied trademark misuse in situations where the mark is being used to violate the antitrust laws. See, e.g., Carl Zeiss Stiftung v. V.E.B. Carl Zeiss, Jena, 298 F.Supp. 1309, 1315 (S.D.N.Y. 1969) (“An essential element of the antitrust misuse defense in a trademark case is proof that the mark itself has been the basic and fundamental vehicle required and used to accomplish the violation.”). For example, In Phi Delta Theta Fraternity v. J.A. Buchroeder & Co., 251 F.Supp. 968, 975-80 (W.D. Mo. 1966), the court held that, if the defendant could prove that a group of fraternities had conspired with certain companies to restrain trade by (1) scheming to obtain trademarks that allowed the fraternal organizations to control the sale of insignia goods, and (2) granting only a few companies licenses to sell insignia goods, defendant would have shown a valid misuse defense to infringement. In ruling, the court relied significantly on 15 U.S.C.    1115(b)(7), which explicitly states that a defense to the presumption granted to incontestable marks is “[t]hat the mark has been or is being used to violate the antitrust laws of the United States.” Phi Delta Theta, 251 F.Supp. at 978-80.

Other courts have relied on the “clean hands” doctrine and found misuse even where there was no antitrust violation. Plaintiff, for instance, points to Clinton E. Worden & Co. v. California Fig Syrup Co., 187 U.S. 516, 539-40, 23 S.Ct. 161, 168 (1903), in which the Supreme Court held that the maker of a certain laxative could not enforce its trademark in “Syrup of Figs”, since the laxative did not actually contain fig juice. According to the Court, such deception deprived the trademark holder of the right to enforce the trademark in a court of equity.

Over the years, in applying the copyright misuse defense, courts have also differed on whether the defendant must show a relationship or nexus between the alleged misuse and the acquisition or use of the trademark. See generally Stephen J. Davidson and Nicole A. Engisch, Trademark Misuse in Domain Name Disputes, The Computer Lawyer, Aug. 1996, at 13 (discussing relevant cases). Some courts have required such a nexus, see, e.g., Tveter v. AB Turn-O-Matic, 633 F.2d 831, 839 (9th Cir. 1980), cert. denied, 451 U.S. 11, 10 1 S.Ct. 1983 (1981) (“What is material is not that plaintiff’s hands are dirty, but that he dirtied them in acquiring the rights he now asserts, or that the manner of dirtying renders inequitable the assertion of such rights against the defendant.”) (quoting Republic Molding Corp. v. B.W. Photo Utilities, 319 F.2d 347, 349 (9th Cir. 1963)), while others have found misuse despite the fact that the misconduct is unrelated to the mark. See, e.g., United States Jaycees v. Cedar Rapids Jaycees, 794 F.2d 379 (8th Cir. 1986) (refusing to enjoin local Jaycees affiliate from using the trademark “Jaycees” since the national organization was seeking the injunction for an improper reason, even though the improper reason, that the local chapter admitted woman, had nothing to do with the acquisition or use of the trademark).

B. Misuse As An Affirmative Claim

v.

Dennis Toeppen,
Defendant.

No. 96 C 1982
Dated: Nov. 26, 1996

Hon. Ann C. Williams

Order

The court has carefully reviewed Magistrate Judge Denlow’s report and recommendation (“R&R”), the objections of defendant Toeppen, and responses of plaintiff Intermatic Inc. Toeppen’s main objection is that the R&R failed to consider whether a domain name has inherent attribute of a trademark. Defendant’s objection rests on the underlying fact that the internet is a new medium of communication. Although it is a new medium, courts must still apply traditional trademark law, while also considering the policy implications. Magistrate Judge Denlow’s R&R does just that. By applying the law of trademarks to the internet, Magistrate Judge Denlow strikes an appropriate balance between trademark law and the attendant policy concerns raised by the defendant. See Panavision International, L.P., v. Toeppen, No. 96 C 3284, 1996 WL 653726 (C.D. Cal. Nov. 5, 1996).

Additionally, the court grants Intermatic’s motion to strike the declaration of Patricia L. Gruber because a party may not hold back in the proceeding before the magistrate judge on the basis that additional affidavits or exhibits will be submitted to the district judge. The referral of the motion to the magistrate requires all parties to make the same presentation they would have submitted to the district judge. See Schaap v. Executive Industries, Inc., 760 F. Supp. 725, 728 n.3 (n.D. Ill. 1991); Anna Ready Mix, Inc. v. N.E. Pierson Const. Co., 747 F. Supp. 1299, 1303 (S.D. Ill. 1990) (citing Patterson-Leitch Company, Inc., v. Massachusetts Municipal Wholesale Electric Company, 840 F.2d 985, 990-91 (1st Cir. 1988)); 7 James Wm. Moore, Moore’s Federal Practice para. 72.04, p. 72-63 (2d ed. Sept. 1996). Assuming arguendo that the court allowed the declaration of Patricial L. Gruber to stand it would not change the court’s decision.

Magistrate Judge Denlow’s report and recommendation dated October 28, 1996 is adopted in full and supplemented by this Minute Order. Intermatic’s motion for summary judgment is granted in part as to counts III and IV, denied as to counts I, II, V, VI, and VII, and Toeppen’s motion for summary judgement is denied as to all counts. The court also grants Intermatic’s motion to strike the declaration of Patricia L. Gruber. The parties are instructed to discuss settlement before the next status hearing scheduled in this case.

Dated: Oct. 3, 1996

Judge Ann C. Williams
Magistrate Judge Morton Denlow

TO: THE HONORABLE ANN C. WILLIAMS
UNITED STATES DISTRICT JUDGE

REPORT AND RECOMMENDATION

Welcome to cyberspace! This case presents the Court with the increasingly important issue of whether and how federal and state trademark laws apply to govern names selected by users for their Internet website. As the Internet grows in prominence as a venue for business, the courts will be called upon to apply traditional legal principles to new avenues of commerce. This is such a case.

Plaintiff Intermatic Incorporated (“Intermatic”), brings this action in seven counts against defendant Dennis Toeppen (“Toeppen”). Intermatic alleges that Toeppen’s use of the Internet domain name “Intermatic.com” violates sections 32(1) (Federal Trademark Infringement) (count I), 43(a) (Federal Unfair Competition) (count II), and 43(c) (Federal Trademark Dilution Act of 1995) of the Lanham Act (count III). 15 U.S.C. Section 1114(1); 15 U.S.C. Section 1125(a); and 15 U.S.C. Section 1125(c) respectively. Intermatic also alleges that Toeppen’s conduct violates the Illinois Anti-Dilution Act, 765 ILCS 1035/1 et. seq. (count IV); the common law of unfair competition (count V); the Uniform Deceptive Trade Practices Act, 815 ILCS 510/1 et. seq . (count VI); and the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2. (count VII). Toeppen denies that his conduct is unlawful.

Intermatic and Toeppen have filed cross-motions for summary judgment on all seven counts. The Court held extensive oral argument on August 29, 1996 and has reviewed the briefs, stipulations, affidavits and exhibits submitted by the parties. For the reasons set forth below, the Court recommends that Intermatic’s motion for summary judgment be granted as to counts III and IV (the “Dilution counts”) and be denied as to the remaining counts. The Court recommends that Toeppen’s motion be denied as to all counts.

I. BACKGROUND FACTS

A. The Parties.

Intermatic is a Delaware corporation having a place of business in Spring Grove, Illinois. Intermatic has been doing business under the name INTERMATIC since 1941. Intermatic has 37 offices throughout the United States and has been in business in Illinois since 1892. Intermatic is a manufacturer and distributor of a wide variety of electrical and electronic products, including computerized and programmable timers and other devices which are sold under the name and trademark INTERMATIC.

Intermatic’s sales and advertising of INTERMATIC labeled products have been continuous since the 1940’s. (SF para. 6).[1] In the last 8 years, its sales in the U.S. have exceeded $850 million. Id . Intermatic’s products prominently bear the INTERMATIC name and trademark, and well over 100 million units have been installed in homes and businesses throughout the United States. (SF paras. 6, 9).

Advertising and promotional expenditures for products bearing the INTERMATIC mark for the last 8 years have exceeded $16 million. (SF para. 7). Intermatic’s co-op advertising consists of approximately 700 print ads per year, with each displaying the INTERMATIC mark. Intermatic also advertises and promotes its INTERMATIC products, mark and name by way of trade shows throughout the United States, magazines, point-of-purchase displays, brochures, radio, and television. (12 M paras. 12, 31, 32).

Defendant Toeppen resides in Champaign, Illinois, where he operates an Internet service provider business known as Net66. Toeppen has registered approximately 240 Internet domain names without seeking the permission from any entity that has previously used the names he registered, because he contends that no permission was or is necessary. Among the domain names which he has registered are the following well known business names:

deltaairlines.com
greatamerica.com
britishairways.com
neiman-marcus.com
crateandbarrel.com
northwest airlines.com
ramadainn.com
ussteel.com
eddiebauer.com
unionpacific.com

One of Toeppen’s business objectives is to profit by the resale or licensing of these domain names, presumably to the entities who conduct business under these names.

B. Intermatic’s Trademarks.

Intermatic owns five incontestable trademark registrations issued by the U.S. Patent and Trademark Office for its INTERMATIC mark. (SF para. 4, Ex. 2). Intermatic is the exclusive owner of the INTERMATIC trademark and trade name, and there are no known third party uses of INTERMATIC in the U.S. (SF paras. 4, 11, Ex. 2). Prior to registering the intermatic.com domain name, Toeppen had never used the term intermatic for any purpose.

C. The Internet.

1. Domain Names.

The Internet is a vast and expanding network of computers and other devices linked together by various telecommunications media, enabling all the computers and other devices on the Internet to exchange and share data.

The Internet provides information about a myriad of corporations and products, as well as educational, research and entertainment information and services. An estimated 30 million people worldwide use the Internet with 100 million predicted to be on the “net” in a matter of years.[2]

A computer or device that is attached to the Internet is often referred to as a “host.” In order to facilitate communications between hosts, each host has a numerical IP (Internet protocol) address.[3] The IP address is comprised of four groups of numbers separated by decimals. For example, the IP address of one of Toeppen’s host computers is 206.139.80.66. Each host also has a unique “fully qualified domain name.” The “fully qualified domain name” may not be repeated in the Internet. In the case of 206.139.80.66, the “fully qualified domain name” is “winslow. net66.com”.

In its most generic form, a fully qualified domain name consists of three elements. Taking “winslow.net66.com” as an example, the three elements are the hostname (“winslow”), a domain name (“net66″) and a top level domain (“com”). A given host looks up the IP addresses of other hosts on the Internet through a system known as domain name service.

Domain name service is accomplished as follows: The Internet is divided into several “top level” domains. For example, “edu” is a domain reserved for educational institutions, “gov” is a domain reserved for government entities and “net” is reserved to networks. Although “com” is short for “commercial,” it is a catchall domain and the only one generally available to Internet users that have no special attributes i.e., they are not a school or a government office or a network. Each domain name active in a given top-level domain is registered with the top level server which contains certain hostname and IP address information.

In order to access the Internet, most users rely on programs called “web browsers.” Commercially available web browsers include such well-known programs as Netscape and Mosaic. If an Internet user desires to establish a connection with a web page hosted at winslow.net66.com, the Internet user might enter into a web browser program the URL “http://www.net66.com.” (URL stands for uniform resource locator.) The first element of the URL is a transfer protocol (most commonly, “http” standing for hypertext transfer protocol). The remaining elements of this URL (in this case, “www” standing for World Wide Web and “net66.com”) are an alias for the fully qualified domain name of the host winslow.net66.com. Once a URL is entered into the browser, the corresponding IP address is looked up in a process facilitated by a “top-level server.” In other words, all queries for addresses are routed to certain computers, the so-called “top level servers”. The top level server matches the domain name to an IP address of a domain name server capable of directing the inquiry to the computer hosting the web page. Thus, domain name service ultimately matches an alphanumeric name such as www.net66.com with its numeric IP address 206.139.80.66.

2. Registration of Domain Names.

Domain names using the suffix “.com” are established by registration with an organization called Network Solutions, Inc. (“NSI”). Registration of the other available top-level domain names, “edu,” “gov” and “net”, is handled by other organizations. With some limitations, NSI will register any combination of up to 24 alphanumeric characters as a domain name on a first-come, first-served basis to anyone who has access to at least two domain name servers. A domain name server is a host computer with software capable of responding to domain name inquiries and accessible on a full-time basis to other computers on the Internet. Registering a domain name is the step that allows the top-level servers within the Internet to know where the domain name servers or hosts associated with those domain names are located in the Internet. The cost for a domain name registration is currently $100. Domain name service can be operated by the domain name holder or obtained from any entity with the proper computer equipment, including hundreds of Internet service providers.

3. Web Pages.

One way to establish a presence on the Internet is by placing a web page, which is, ultimately, a computer data file on a host operating a web server within a given domain name. When the web server receives an inquiry from the Internet, it returns the web page data in the file to the computer making the inquiry. The web page may comprise a single line or multiple pages of information and may include any message, name, word, sound or picture, or combination of such elements. Most web browsers will show somewhere on the screen the domain name of the web page being shown and will automatically include the domain name in any printout of the web page. There is no technical connection or relationship between a domain name and the contents of the corresponding web page.

There are a number of ways for an Internet user to find a web page. Web browsers feature access to various indexes, commonly referred to as search engines. Well-known indexes include InfoSeek Guide, Lycos, Magellan, ExCite and Yahoo. These indexes will allow the user to enter a name or a word or a combination of words, much like a Lexis or WestLaw search, and will return the results of the search as a list of “hyperlinks” to webpages that have information within or associated with the document comprising the page responding to the search.

4. Hyperlinks.

A hyperlink is a link from one site on the Internet to a second site on the Internet. “Clicking” on a designated space on the initial page which references the subsequent site by a picture, by some highlighted text or by some other indication will take a person viewing the initial web page to a second page. In addition to their use in indexes, hyperlinks are commonly placed on existing web pages, thus allowing Internet users to move from web page to web page at the click of a button, without having to type in URLs.

Hyperlinks can be and commonly are established without reference to the domain name of the second site. A hyperlink for the Champaign-Urbana map page might be a picture of a map or a statement such as “a map of Champaign-Urbana” or, more simply, “Champaign-Urbana.” A hyperlink is not technically related to a domain name and therefore it can be identical to an existing domain name without conflicting with that domain name. For example, were Intermatic to establish an Intermatic home page at http://www.xyz.com, any number of indexes could be employed and hyperlinks could be established to bring up the page through use of the word INTERMATIC.

D. The Dispute.

In December of 1995, Toeppen applied for registration of the domain name http://www.intermatic.com (“intermatic.com”) and NSI registered the domain name to Toeppen’s domain name servers. A given domain name, the exact alphanumeric combination in the same network and using the same suffix, can only be registered to one entity. Intermatic subsequently attempted to register the same domain name and was prevented from registering “intermatic.com” as its domain name because of Toeppen’s prior registration of that domain name.

Intermatic also became aware that Toeppen was using the mark “Intermatic” in connection with the sale of a computer software program. Upon discovery of Toeppen’s prior registration and use of the Intermatic mark, Intermatic made a written demand on Toeppen that he relinquish or assign the “intermatic.com” domain name registration and discontinue use of the Intermatic mark. Toeppen agreed to discontinue using the Intermatic mark for his software product but refused to give up the “intermatic.com” domain name registration. In response to a formal request by Intermatic, NSI put Toeppen’s registration on hold in April of 1996.

As long as Mr. Toeppen is allowed to retain the “intermatic.com” registration, Intermatic will be unable to acquire “intermatic.com” as an Internet domain name or use “intermatic.com” as an e-mail address on the Internet. However, Intermatic is technically capable of establishing its web page at another domain name, including, for example, “intermatic-inc.com” and it is technically capable of establishing at any available domain name a web page featuring the INTERMATIC mark and any other Internet-related marketing or business information. To date, Intermatic has not chosen to reserve any other domain name or to take any other action to establish a presence on the Internet. However, some of its distributors have placed Intermatic information on the Internet.

Until NSI placed the intermatic.com domain name on hold, Toeppen maintained intermatic.com as an active domain name on the Internet. Although he initially set up a web page regarding a software program he was developing and intended to call “Intermatic,” Toeppen removed that page (which was available for less than a week) and dropped the proposed name for his software in response to demand from Intermatic. No software programs were ever sold. He then instituted as a web page a map of Champaign-Urbana, the community where Toeppen resides.

When Toeppen became aware of Intermatic’s efforts to have the intermatic.com domain name placed on hold, he changed the web page associated with intermatic.com to bear the caption “Champaign-Urbana Map Page/has Moved To www.c-u.com.” Toeppen moved the map and put the forwarding address on the intermatic.com page so that Internet users could update relevant hyperlinks before the NSI freeze simply locked them out of the page, as is now the case. Presently, entering intermatic.com will return a message that there is no functional domain name server at that domain name.

At no time did Toeppen use intermatic.com in connection with the sale of any available goods or services. At no time has Toeppen advertised the intermatic.com domain name in association with any goods or services. Presently, the intermatic.com domain name is not available for use by any party. Toeppen did not seek permission from Intermatic to use the intermatic.com domain name because he believes that no permission was or is necessary. Intermatic disagrees. This litigation ensued.

II. SUMMARY JUDGMENT STANDARD

PRELIMINARY INJUNCTION

DWYER, U.S. District Judge

On February 5, 1996, the application of plaintiff Hasbro, Inc. (“Hasbro”) for a temporary restraining order came on for hearing by the court. Plaintiff appeared through Kenneth B. Wilson and Lisa G. Meckfessel of the law firm of Wilson, Sonsini, Goodrich & Rosati, and Jill D. Bowman of the law firm of Stoel Rives LLP. Defendants Internet Entertainment Group, Ltd., Brian Cartmell and Internet Entertainment Group, Inc. appeared through John D. Lowery and E. Russell Tarleton of the law firm of Graham James LLP/Riddell Williams P.S. After the oral decision was announced, the parties agreed that the ruling should be entered on a preliminary injunction rather than merely as a temporary restraining order.

Having considered all papers submitted in support of said motion and in opposition thereto, and having heard oral argument in open court, the court finds that:

1. Hasbro is the owner of the trademark “CANDY LAND,” which has been registered on the Principal Register of the United States Patent and Trademark Office since 1951,

2. Hasbro has demonstrated a probability of proving that defendants Internet Entertainment Group, Ltd., Brian Cartmell and Internet Entertainment Group, Inc. (collectively referred to as “defendants”) have been diluting the value of Hasbro’s CANDY LAND mark by using the name CANDYLAND to identify a sexually explicit Internet site, and by using the name string “candyland.com” as an Internet domain name which, when typed into an Internet-connected computer, provides Internet users with access to that site.

3. Hasbro has demonstrated a likelihood of prevailing on its claims that defendants conduct violates the federal trademark anti-dilution statute, 15 U.S.C. section 1125(c), and the Washington State trademark anti-dilution statute, RCW 19.77.160.

4. Hasbro has shown that defendants’ use of the CANDY LAND name and the domain name candyland.com in connection with their Internet site is causing irreparable injury to Hasbro.

5. The probable harm to Hasbro from defendants’ conduct outweighs any inconvenience that defendants will experience if they are required to stop using the CANDYLAND name.

6. The public interest favors entry of a preliminary injunction on the facts of this case.

THEREFORE, IT IS HEREBY ORDERED that Hasbro’s motion for preliminary injunction is granted. Defendants Internet Entertainment Group, Ltd., Brian Cartmell, and Internet Entertainment Group, Inc., and their officers, agents, servants, employees and attorneys, and those persons in active concert and participation with defendants who receive actual notice of this preliminary injunction, are enjoined from directly or indirectly using the name CANDYLAND or the Internet domain name “candyland.com,” or any similar name which is likely to dilute the value of Hasbro’s CANDYLAND mark, in connection with the advertising, operation or maintenance of any Internet site, including but not limited to any Internet-site containing sexually explicit material or other pornographic content. Defendants are directed to immediately make affirmative efforts to stop, cancel or discontinue any previously purchased advertising which refers to the name CANDY LAND or the Internet domain name “candyland.com.”

IT IS FURTHER ORDERED that defendants shall immediately remove all content from the “candyland.com” site. However, defendants shall be allowed to post a “referral notice” at the URL address “http: www.candyland.com” until May 5, 1996, which shall provide the new location of defendants’ Internet site. The referral notice shall not contain any hyperlink to defendants’ new site or sites, or to any other site. After the expiration of the 90 day referral period, defendants must remove the referral notice and thereafter discontinue any use, either direct or indirect, of the name domain name “candyland.com.”

IT IS FURTHER ORDERED that Hasbro shall not be required to post a bond pursuant to Federal Rule of Civil Procedure 65(c) in connection with this preliminary injunction, as defendants expressly waived any bond requirement relating to this order at the preliminary injunction hearing.

The clerk is directed to send copies of this order to all counsel of record.

-against-

HALL & ASSOCIATES, DENISE HALL, and MINDSPRING ENTERPRISES, INC.,
Defendants.

00 Civ. 549 (RMB)

DECISION AND ORDER

I. Background

Plaintiff owns the trademark and trade name “GUCCI” which is utilized on and in connection with various articles of jewelry, fashion accessories, wearing apparel and related services (the “Gucci Trademark”). (Compl.   4.) Mindspring, an Internet Service Provider (“ISP”), provides Web page hosting services to Hall,[FN4] (at least) at the Uniform Resource Locator(“URL)[FN5] www.goldhaus.com (the “goldhaus website”). (Id. 3C.)[FN6] By e-mail communications dated-March 26, 1999 and March 27. 1999. Mindspring alledgedly was twice notified by Plaintiff that Hall was using Mindspring’s services to aid in acts of trademark infringement and unfair competition, including the advertising of jewelry on the goldhaus website which bore (and infringed) the Gucci Trademark. (Id.) Plaintiff alleges that, despite the emails, Mindspring continued to permit Hall to use Mindspring’s Internet services to infringe Plaintiff’s trademark rights, with actual knowledge of, or in reckless disregard of, Plaintiff’s rights and Hall’s infringement. (Id.) “The activities of Mindspring … constitute willful and intentional infringement of plaintiff Gucci’s registered trademark, are in total disregard of plaintiff Gucci’s rights and were commenced and have continued in spite of Mindspring’s knowledge that the use of the Gucci Trademark or a copy or a colorable imitation thereof was and is in direct contravention of plaintiff Gucci’s rights.” (Id. 33.)

Plaintiff asserts claims against Mindspring for direct and contributory trademark infringement under Section 32(l) of the Trademark Act of 1946 (the “Lanham Act”), 15 U.S.C.    1114(l), false designations of origin and false descriptions and representations under Section 43(a) of the Lanham Act, 15 U.S.C.   1125(a), and trademark infringement and unfair competition under New York common law. (See Compl.     1, 18, 23, 31-35.) Mindspring’s instant motion is premised upon two grounds: (i) that the Communications Decency Act of 1996, 47 U.S.C.   230 (“Section 230″), immunizes Mindspring from liability for information posted (on the goldhaus website] by [Hall],” Mindspring’s Mem. at 3); and (ii) that “Plaintiff’s theory of trademark infringement is barred by the First Amendment,” (Id. at 10).

II. Standard of Review

“[A] complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.” Conley v. Gibson, 355 U.S. 41, 45-46 (1957). “In reviewing a (Fed. R. Civ. P.) 12(b)(6) motion, this Court must accept the factual allegations of the complaint as true and must draw all reasonable inferences in favor of the plaintiff.” Bernheim v. Litt, 79 F.3d 318, 321 (2d Cir. 1996) (citing Hernandez v. Coughlin, 18 F.3d 133, 136 (2d Cir.), cert. denied, 513 U.S. 836 (1994)). The movant’s burden is very substantial, as “[t]he issue is not whether a plaintiff is likely to prevail ultimately, ‘but whether the claimant is entitled to offer evidence to support the claims.’” Gant v. Wallingford Bd. of Educ., 69 F.3d 669 (2d Cir. 1995) (quoting Weisman v. LeLandais, 532 F.2d 308, 311 (2d Cir. 1976) (per curiam)). In sum, “[t]he motion to dismiss for failure to state a claim is disfavored and is seldom granted.” Bower v. Weisman, 639 F. Supp. 532, 539 (S.D.N.Y. 1986) (citing Arfons v. E.I. Dupont de Nermours & Co., 261 F.2d 434,435 (2d Cir. 1958)).

III. Analysis

A. Mindspring Is Not immune From Plaintiff’s Claims

As Mindspring acknowledges in its motion papers, the interpretation of Section 230 as applied to the (intellectual property) facts presented here is an issue of first impression. (See Mindspring’s Mem. at 6.) Mindspring argues that Section 230(c)(1) “immunizes [it] from liability for information posted [on the goldhaus website] by [Hall].” (Mindspring’s Mem. at 3.) Section 230(c)(1) provides: “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.” 47 U.S.C.    230(c)(1). Section 230(f)(2) defines “interactive computer service” as “any information service, system, or access software provider that provides or enables computer access by multiple users to a computer server, including specifically a service or system that provides access to the Internet and such systems operated or services offered by libraries or educational institutions.” Id. 230(f)(2). Section 230(f)(3) defines “information content provider” as “any person or entity that is responsible, in whole or in part, for the creation or development of information provided through the Internet or any other interactive computer service.” Id. 230(f)(3).

Plaintiff does not dispute that Mindspring, as an ISP, is an “interactive computer service.” (See Compl.   3C.) Moreover, the complaint clearly identifies Hall as the “information content provider.” (See Compl.      3C, 14-16.) Rather, Plainfiff argues that Mindspring is not immune under    230(c)(1) from Plaintiff’s claims because of the language of Section 230(e)(2), (see Pl.’s Mem. at 3-4): “Nothing in this section shall be construed to limit or expand any law pertaining to intellectual property.” 47 U.S.C.    230(e)(2). The “law[s] pertaining to intellectual property”, under which Plaintiff contends that Mindspring is liable, are “a straightforward application of long-established printer-publisher liability and contributory infringement under the Lanham Act”, (Pl.’s Mem. at 14). The Court believes that the pivotal issue for consideration here is whether Plaintiff’s complaint would withstand a motion to dismiss even in the absence of   230. The Court believes that the answer to this question is “yes.”[FN7]

1. Plain Language Of Section 230(e)(2)

“It is axiomatic that the plain meaning of a statute controls its interpretation . . .” Lee v. Bankers Trust Co., 166 F.3d 540, 544 (2d Cir. 1999) (citing Greenery Rehabilitation Group-Inc. v. Hammon, 150 F.3d 226, 231 (2d Cir. 1998)). “[W]hen looking at its language, a court should presume that the statute says what it means.” Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1072-73 (2d Cir. 1993) (citing Connecticut Nat’l Bank v. Germain, 503 U.S. 249, 254 (1992)); accord United States v. Piervinanzi 23 F.3d 670, 677 (2d Cir. 1994). “Unless otherwise defined, individual statutory words are assumed to carry their ordinary, contemporary, common meaning.” Hammon, 150 F.3d at 231 (quotation and citations omitted); accord Perrin v. United States, 444 U.S. 37, 42 (1979). “Indeed, when the words of a statute are unambiguous, this first cannon is also the last [and] judicial inquiry is complete”, Piervinanzi, 23 F.3d at 677 (quotations and citations omitted).

Section 230(e)(2) unambiguously constrains the Court to construe Section 230(c)(1) in a manner that would neither “limit or expand any law pertaining to intellectual property.” 47 U.S.C.    230(e)(2). Thus, the inquiry involves the application of existing intellectual property law. Under existincy intellectual property law, publishers may, under certain circumstances, be held liable for infringement. See 15 U.S.C.    1114(2)(A)(B); see also Centrury 21 Real Estate Corp. of Northern Illinois v. R.M. Post, Inc., No. 88 C 0077,1988 WL 84741 (N.D. Ill. Aug. 9, 1988) (denying motion to dismiss where yellow pages’ publishers were alleged to have infringed by listing trademark of (former) licensee who no longer had right to use trademark). Moreover, the United States Supreme Court has held, under the doctrine of contributory infringement, that “if a manufacturer or distributor … continues to supply its product to one whom it knows or has reason to know is engaging in trademark infringement”, the manufactum or distributor itself may held be liable fbr infringement. Inwood Labs, Inc. v. Ives Labs, Inc., 456 U.S. 844, 854 (1982); see also Religious Technology Ctr. v. Net-Com Online Communication Servs., 907 F. Supp. 1361, 1375 (N.D. Cal. 1995) (holding that an ISP with knowledge of the infringement may be held liable for contributory copyright infringement). Immunizing Mindspring from Plaintiff’s claims, therefore, would “limit” the laws pertaining to intellectual property in contravention of    230(e)(2). See Mirriam-Webster’s Collegiate Dictionary 676 (10th ed. 1998) (defining “limit,” when used as a verb, to mean “to restrict the bounds or limits of “).[FN8] The plain language of Section 230(e)(2) precludes Mindspring’s claim of immunity.

Although Mindspring recognizes the “appeal” of the Court’s reading of Section 230(e)(2), (Mindspring’s Mem. at 6), Mindspring nevertheless argues that immunity from Plaintiff’s claims “would not ‘limit’ any law pertaining to intellectual property, since liability for trademark infringement has never previously been imposed on an ISP in this sitmtion”, (id.). Mindspring Rather contends that the inclusion of the words “or expand” in Section 230(e)(2), and the omission of “or expand” from the other subsections of Section 230(e),[FN9] suggests that Mindspring’s interpretation is the “most reasonable interpretation” because “[o]therwise, the language ‘or expand’ has no purpose.” (Mindspring’s Reply at 4.)

The Court respectfully disagrees for the reason that Mindspring’s reading is in conflict with the plain language of the statute. Mindspring argues that Section 230(e)(2) directs courts to leave “the state of the law … as it was when the law was enacted – neither ‘limited’ nor ‘expanded.’” (Mindspfing’s Reply at 3.) However, nowhere does Section 230 state that the laws to which it refers are, as Mindspring suggests, limited to the intellectual property laws as they existed in 1996.[FN10] The Court declines to incorporate or read into the statute a temporal limit. See Grin v. Shine, 187 U.S. 181, 186 (1902) (“[W]e are not bound to import words into the statute which are not found there….”), cited with approval in Austin v. Healey, 5 F.3d 598, 602 (2d Cir. 1993) (declining to import a special delegation requirement into a statute).

The Court rejects the suggestion that the words of Section 230(e)(2) are ambiguous and, therefore, finds no need to resort to other cannons of statutory construction. See Lee, 166 F.3d at 544 (‘Legislative history and other tools of interpretation may be relied upon only if the terms of the statute are ambiguous.”) (citing Aslanidis, 7 F.3d at 1073). [FN11]

Although the plain meaning of Section 230(e)(2) ends the instant inquiry with respect to Mindspring’s motion to dismiss, the Court explains below its disagreement with Mindspring’s remaining arguments. See Hammon, 150 F.3d at 233 (“Although our review of the plain meaning of [the statute] ends our inquiry, we note that we do not believe that [the related regulation] or its history provide any support for the [appellee's] conclusion . . .”).

2. Case Law

Mindspring contends that the case law interpreting Section 230 – but not specifically subsection (e)(2) – supports its’ interpretation. (See generally Mindspring’s Mem. at 5-10.)[FN12] Mindspring quotes the Court of Appeals in Zeran v. America Online, Inc., “the plain language of Section 230 ‘creates a federal immunity to any cause of action that would make service providers liable for information originating with a third-party user of the service.’” 129 F.3d 327, 330 (4th Cir. 1997) (See Mindspring’s Mem. at 5 (emphasis in original).) The quoted language is not apposite here. In Zeran, plaintiff brought a negligence action against America Online (“AOL”) alleging that AOL had “unreasonably delayed in removing defamatory messages posted by an unidentified third party, refused to post retractions of those messages, and failed to screen for similar posting thereafter.” 129 F.3d at 328. The District Court “granted judgment for AOL on the grounds that [Section 230] bars Zeran’s claims.” Id. In affmning, the Court of Appeals stated:

Zeran seeks to hold AOL liable for defamatory speech initiated by a third party….

By its plain language,    230 creates a federal immunity to any cause of action that would make service providers liable for information originating with a third party user of the service. Specifically,   230 precludes courts from entertaining claims that would place a computer service provider in a publisher’s role. Thus, lawsuits seeking to hold a service provider liable for the exercise of a publisher’s traditional editorial functions–such as deciding whether to publish, withdraw, postpone or alter content–are barred.

The purpose of this statutory immunity is not difficult to discern. Congress recognized the threat that tort-based lawsuits pose to freedom of speech in the new and burgeoning Internet medium. The imposition of tort liability on service providers for the communications of others represented, for Congress, simply another form of intrusive government regulation of speech ….

Congress made a policy choice … not to deter harmful online speech through the separate route of imposing tort liability on companies that serve as intermediaries for other parties’ potentially injurious messages.

Id. at 330-31 (emphasis added). The Zeran quotation, in context, refers to defamation and other forms of tort liability. The instant claims are grounded in the law of intellectual property and, therefore, do not, on a motion to dismiss, implicate Section 230 immunity.[FN13] Mindspring also argues that Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949 (C.D. Cal. 1997), aff’d, 194 F.3d 980 (9th Cir. 1,999), “rejected the application of contributory [trademark] infringement in the Internet context.” (Mindspring’s Mem. at 9.) Plaintiff counters that Lockheed Martin held only that a “domain name registrar could not be held liable [for trademark infringement) because its involvement is limited to the registration of the domain name and not its use in commerce . . ." Id. at 13.) "Indeed," argues Plaintiff, "Lockheed Martin contrasted the domain name registrar's role with that of ISPs and indicated that the latter may well be liable for contributory trademark iriftingement." Id. at 14.)

The Court agrees that Lockheed Martin does not foreclose the possibility that ISPs may be liable for contributory trademark infringement:

(Network Solutions, Inc.'s] role in the Internet is distinguishable from that of an Internet service provider whose computers provide the actual storage and communications for infringing material, and who therefore might be more accurately compared to the flea market vendors in [Fonovisa Inc. v. Cherry Auction, Inc., 76 F.3d 259 (9th Cir. 1996)) and Hard Rock Cafe Licensing Corp. v. Concession Servs., Inc., 955 F-2d 1143 (7th Cir. 1992)].[FN14]

985 F. Supp. at 962. Moreover, in a footnote to the above passage, reprinted in part below, the District Court specifically described Section 230 as providing “tort immunity”, and distinguished claims asserted under the law of intellectual property:

The Court notes, however, that the tort law analogy used in Fonovisa and Hard Rock probably would not apply to Internet service providers any better than it applies to NSI. … See Zeran v. America Online, Inc., 129 F.3d 327, 330-31 (4th Cir. 1997) (noting the Congress created a tort immunity for Internet service providers in [Section 2301 ... ); but see [Section 230(e)(2)] (providing that the tort immunity does not Unit or expand any law pertaining to intellectual property).

985 F. Supp. at 962 n.7 (emphasis added).[FN15]

Mindspring suggests that certain copyright law developments, for which “[t]here have been no comparable developments in the area of trademark law,” (Mindspring’s Mem. at 8), support its contention that “immunizing Mindspring under Section 230 does not Emit existing trademark law in any way,” (id. at 10.) Specifically, Mindspring argues that the principles of Religious Technology Ctr. v. Netcom On-Line Communication Serys., Inc., 907 F. Supp. 1361 (N.D. Cal. 1995) “were incorporated into statutory law when Congress adopted … the Digital Millennium Copyright Act [of 1998]” (“DMCN) (Mindspring’s Mem. at 8).[FN16] Mindspring concludes that Congress, having had the opportunity (when enacting the DMCA) to alter the extent to which ISPs may assert statutory immunity from trademark infringement, “has not done so.” (Id. at 10.)

The Court respectfully disagrees with Mindspring’s conclusion and finds that Congress’ enactment of the DMCA — pertaining only to copyright infringement — two years after Section 230 was passed, lends further support to the proposition that Section 230 does not automatically immunize ISPs from all intellectual property infringement claims. To find otherwise would render the immunities created by the DMCA from copyright infringement actions superfluous. See Lojuk v. Johnson, 770 F.2d 619, 623 (7th Cir. 1985) (affirming District Court where interpretation of statute as providing absolute immunity would render superfluous a narrower immunity authorized in a later added subsection of the statute).

3. Legislative History

No. C-97-177-MJM.

United States District Court,
N.D. Iowa,
Cedar Rapids Division.

Sept. 25, 1997.

Mark T. Hamer, Charles A. Meardon, Meardon Sueppel Downer & Hayes, Iowa City, IA, Ralph H. Lane, Pattishall McAuliffe Newbury Hilliard & Geraldson, Chicago, IL, for Plaintiff.

Donald G. Thompson, Bradley & Riley, Cedar Rapids, IA, for Defendant.

OPINION AND ORDER ON PLAINTIFF’S MOTION FOR PRELIMINARY INJUNCTION

MELLOY, Chief Judge.

The sole issue before the Court is whether to compel Independence Corn By-Products Co. (ICBP) to convey the domain name “greenproducts.com” to the plaintiff, Green Products Co. (Green Products), for its use during the pendency of this litigation.

Green Products claims that ICBP violated Section 43(a) of the Lanham Trademark Act, 15 U.S.C. § 1125(a), as well as state laws, when ICBP registered the domain name “greenproducts.com” as one of its own domain names on the internet. [FN1]  Green Products moved for a preliminary injunction:  (1) to enjoin ICBP from using the domain name “greenproducts.com”, (2) to enjoin ICBP from using the expressions “green products” and “green pet products” as the whole or part of a trademark, trade name, or domain name, and (3) to compel ICBP to convey the ownership of the domain name “greenproducts.com” to Green Products. [FN2]

FN1. As of August 6, 1997, an internet domain search of all web sites owned by ICBP revealed that ICBP had registered a total of nine domain names.  Carter Decl. (Doc # 6).

FN2. In full, Green Products moves this Court for an order: “preliminarily enjoining use of the domain name greenproducts.com and from using the expressions GREEN PRODUCTS and GREEN PET PRODUCTS, or any of them, as the whole, or any part of a trademark, a trade name, or a domain name on or in connection with its products made of corncobs, including litter or bedding for caged birds or for small animals;  and compelling them, or such of them as may own or control the domain name greenproducts.com, to convey the domain name greenproducts.com to Green  Products Co.” (Pl.’s Mot. for Prelim.  Inj., at 1, Doc # 3.)

In response, ICBP agreed to the first and second parts of Green Products’ request, but it resisted the third part.  During the pendency of the litigation, ICBP has consented (1) not to use the domain name “greenproducts.com”, and (2) not to use the expressions “green products” and “green pet products” as the whole or part of any trademark, trade name, or domain name, but ICBP will continue to use those names “in ways that do not constitute trademark infringement, such as comparative advertising.” [FN3] (See Def.’s Mem., at 7, Doc # 15.)  In order to analyze the merits of Green Products’ motion to compel ICBP to transfer ownership of the domain name “greenproducts.com” during the pendency of the litigation, the Court will begin with a brief background of relevant language and information.

FN3. At a hearing on the preliminary injunction, held September 11, 1997, Green Products agreed that the only issue before the Court was whether to compel ICBP to relinquish ownership of the domain name “greenproducts.com” to Green Products during the pendency of the litigation.  With this acceptance, GreenProducts seemingly agreed that ICBP should be able to use the name “Green Products” or “Green Pet Products” for “comparative advertising” purposes.  Later in the hearing, however, ICBP used the phrase “comparative advertising” in a way that did not comport with traditional notions of comparative advertising (discussed infra ). Because ICBP relies on this expanded notion of comparative advertising in refusing to relinquish the domain name “greenproducts.com” to Green Products, this Court finds it necessary to clarify what it understands that both parties have agreed to accept as suitable preliminary relief:
ICBP will refrain from using the names “Green Products” or “Green Pet Products” as any part of ICBP’s trademark, trade name, or domain name, but ICBP may compare its products to those of Green Products by referring to the name “Green Products” in advertisements or informational brochures. For example, ICBP may compare its products to those of Green Products, and thereby use the name Green Products, in a comparative advertisement designed on ICBP’s own web page, accessed through ICBP’s domain names “icbp.com” or “bestcob.com”.

Background

The Internet is an international network of interconnected computers.  Reno v. ACLU, — U.S. —-, —-, 117 S.Ct. 2329, 2334, 138 L.Ed.2d 874 (1997). The best known method of communication over the Internet is the World Wide Web (the web), which allows users to search for and retrieve information stored in remote computers.  Id. Documents known as “web pages” (or “web sites”) contain whatever information the site designer has decided to put there.  These sites generally contain “links”–known as “hyperlinks”–to other documents created by that site’s designer, or to other related sites.  Id., at 2235.

To navigate the web, an internet user can type an alphanumeric “domain name” such as “microsoft.com” to view the web site that is linked to that domain name.  Internet domain names are “similar to telephone number mnemonics, but they are of greater importance, since there is no satisfactory Internet equivalent to a telephone company white pages or directory assistance, and domain names can often be guessed.”  MTV v. Curry, 867 F.Supp. 202, 203 n. 2 (S.D.N.Y.1994).  In addition to domain names, another way to navigate the web is to enter one or more keywords into a commercial “search engine” in an effort to locate specific sites.

Because the web is filled with a vast array of sites, from the user’s standpoint the web is comparable to both a “vast library of information and to a sprawling mall offering goods and services.”  Reno, — U.S. at —-, 117 S.Ct. at 2335.  From the designer’s viewpoint, the web is a “platform from which to address and hear from a world-wide audience[ ] … of readers, viewers, researchers, and buyers.”  Id.

In the case before this Court, Green Products and ICBP are direct competitors in the corncob by-products industry.  On May 30, 1997, ICBP registered two domain names, “icbp.com” and “bestcob.com”, [FN4] with the goal of eventually designing a web site that users could find through either domain name.  On June 9, 1997, ICBP registered seven other domain names–five of which are formed by using the trade names of ICBP’s competitors:  e.g., “greenproducts.com.” On July 16, 1997, Green Products tried to register “greenproducts.com” and “freshnest.com” (a sister company’s name), but was told that ICBP had already registered those two domain names. [FN5]  Green Products then filed a complaint and a motion for a preliminary injunction against ICBP.

FN4. According to Green Products, “Bestcob” is a claimed trademark of ICBP. (Pl.’s Mem., at 2, Doc # 4)

FN5. ICBP and Green Products have resolved through negotiation the ownership of the “freshnest.com” domain name, resulting in ICBP’s relinquishing ownership of “freshnest.com” to Green Products.  Schryver Decl.  8.

Discussion
A. Preliminary Injunction Standards

To decide whether to grant the motion for a preliminary injunction, the Court must consider:  (1) the probability that Green Products will succeed on the merits;  (2) the threat of irreparable harm to Green Products;  (3) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties;  and (4) the public interest.  See Dataphase Sys., Inc. v. CL Sys., Inc., 640 F.2d 109, 113 (8th Cir.1981) (en banc);  see also Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 503 (8th Cir.1987);  Sports Design and Dev., Inc., v. Schoneboom, 871 F.Supp. 1158 (N.D.Iowa 1995).  When weighing these factors, “no single factor is itself dispositive;  in each case all factors must be considered to determine on balance whether they weigh towards granting the injunction.”  Calvin Klein, 815 F.2d at 503.

The primary function of a preliminary injunction is to preserve the status quo until, upon final hearing, a court may grant full, effective relief.  Sanborn Mfg. Co., Inc. v. Campbell Hausfeld/Scott Fetzer Co., 997 F.2d 484, 489 (8th Cir.1993);  Ferry-Morse Seed Co. v. Food Corn, Inc., 729 F.2d 589, 593 (8th Cir.1984).  Even though “preserving the status quo” is the primary function of a preliminary injunction, there are certain circumstances in which the Court has discretion to issue a preliminary injunction that does more than simply preserve the status quo.  For example, when the moving party proves that simply preserving the status quo would still cause irreparable harm, the Court can use its discretion to order the parties to take some kind of affirmative action.  See, e.g., Ferry-Morse, 729 F.2d at 593 (ordering company to deliver seed corn). [FN6]  Additionally, where granting the preliminary injunction would grant essentially the same relief that the moving party would obtain if it won at trial, the movant’s burden to prove that the balance of factors weighs in its favor is a “heavy one.”  See Sanborn, 997 F.2d at 486, citing Dakota Indus., Inc. v. Ever Best Ltd., 944 F.2d 438, 440 (8th Cir.1991).  Ultimately, the Court has discretion to grant or deny the motion, and its decision may not be disturbed absent a clearly erroneous factual determination, an error of law, or an abuse of discretion. Calvin Klein, 815 F.2d at 503.  With this standard in mind, the Court will address each factor in turn.

FN6. In Ferry-Morse, the Eighth Circuit also noted that “where the status quo is a condition not of rest, but of action, and the condition of rest … will cause irreparable harm, a mandatory preliminary injunction is proper.”  Ferry-Morse, 729 F.2d at 593. To understand what this means, it is helpful to know some of the specific facts of Ferry-Morse.  Ferry- Morse was a seed corn company that had contracted to market Food Corn’s seed corn.  729 F.2d at 593.  Ferry-Morse had been marketing Food Corn’s seed corn for awhile, when a disagreement developed over the terms of its contract with Food Corn. Id., at 590.  While they were disagreeing about the terms of the contract, Food Corn refused to give Ferry-Morse several  thousand bags of seed corn.  Id., at 590. The Court issued a preliminary injunction ordering Food Corn not to market the hybrid seed corn to any other party but Ferry-Morse, and to compel Food Corn to deliver the seed corn to Ferry-Morse.  Id., at 591.  The Court found, inter alia, that the status quo was a condition of action (Ferry-Morse’s marketing of the seed corn, as it had been before the disagreement developed), and that the condition of rest was Food Corn’s refusal to deliver the seed corn. Id., at 593.  Because the Court found that the condition of rest would cause irreparable harm, it held that the mandatory injunction of compelling Food Corn to give Ferry-Morse the seed corn was proper.  Id., at 593.

B. Analysis of Dataphase Factors

1. Probability that Green Products will succeed on the merits

In deciding whether to grant a preliminary injunction, the Court’s initial estimation of the strength of the plaintiff’s case plays a role, but it is not determinative.  The probability of success does not require that the party seeking relief prove a greater than fifty percent likelihood that it will succeed on the merits.  Dataphase Sys. Inc., 640 F.2d at 113.  Instead of a rigid measuring stick, the Court flexibly weighs the particular circumstances of the case to determine “whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined.”  Calvin Klein, 815 F.2d at 503, quoting Dataphase, 640 F.2d at 113.

An essential element to a trademark infringement action is that the plaintiff must prove that a defendant’s use of a particular name ” ‘creates a likelihood of confusion, deception, or mistake among an appreciable number of ordinary buyers as to the source or association’ between the two names.” Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1338, 1339 (E.D.Mo.1996) (quoting Duluth News-Tribune v. Mesabi Publ’g Co., 84 F.3d 1093, 1096 (8th Cir.1996)).  Factors relevant to determine the likelihood of confusion or deception are:
(1) the strength of the trademark;
(2) the similarity between the plaintiff’s and defendant’s marks;
(3) the competitive proximity of the parties’ products;
(4) the alleged infringer’s intent to confuse the public;
(5) evidence of any actual confusion;  and
(6) the degree of care reasonably expected of the plaintiff’s potential customers.
Maritz, 947 F.Supp. at 1340, citing Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d 769, 774 (8th Cir.1994), cert. denied, 513 U.S. 1112, 115 S.Ct. 903, 130 L.Ed.2d 787 (1995).  The Court will next examine each of these factors in turn, although not all of the factors are applicable in this case.

In order to determine whether the trademark is entitled to protection, the Court examines the first factor–strength of the trademark–and classifies the plaintiffs mark as either (1) arbitrary or fanciful, (2) suggestive, (3) descriptive, or (4) generic.  See Cellular Sales, Inc. v. Mackay, 942 F.2d 483, 485 (8th Cir.1991);  see also Duluth News-Tribune, 84 F.3d at 1096.  An arbitrary or fanciful mark is the strongest type of mark and is afforded the highest level of protection.  Cellular, 942 F.2d at 486.  At the other end, a generic term is used by the general public to identify a category of goods, so it does not receive trademark protection.  Duluth News-Tribune, 84 F.3d at 1096, citing Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75, 79-81 (7th Cir.1977) (holding “Lite Beer” to be generic).  “Suggestive and descriptive marks fall somewhere in between.  A suggestive mark is one that requires some measure of imagination to reach a conclusion about the nature of the product.”  Id. (citation omitted).  In contrast, a descriptive mark “immediately conveys the nature or function of the product and is entitled to protection only if it has become distinctive by acquiring a secondary meaning.”  Id. (citation omitted) (“Cozy Warm ENERGY- SAVERS” is descriptive).  Here, the Court finds that Green Products’ trademark [FN7]–the name “Green Products”–is at least suggestive.  The name “Green Products” requires at least some imagination to connect it with corncob by- products. [FN8]

FN7. While the name “Green Products” is both a trade name and a trademark, the Court will use the term “trademark” to refer to both the trade name and trademark.  (See Pl.’s Mem., at 4) (stating that the “domain name greenproducts.com … is derived from Green Products’ trademark, service mark, or trade name GREEN PRODUCTS and/or the salient part of its corporate name (hereinafter referred to collectively as the ‘trademark GREEN PRODUCTS’)).”

FN8. In addition, the Court also finds that the name Green Products has acquired second meaning meriting trademark protection.  See Duluth News- Tribune, 84 F.3d at 1096.  The Court bases this finding on the following facts:  Green Products first began using the trademark “Green Products” in 1947, in connection with its alfalfa products, then after it began selling corncob by-products in 1985, the trademark “Green Products” became associated with that new enterprise.  Schryver Decl.  4-5.  Since 1947, Green Products has spent in excess of $225,000 to advertise and promote its trademark “Green Products” and has earned a cumulative retail value in excess of $30 million.  Schryver Decl.  4-6.  The trademark is prominently displayed on its product bags and trucks.  (See Pl.’s Exhibits  1, 2 & 3, Hearing held Sept. 11, 1997.)

The next factor requires the Court to consider the similarity between the plaintiffs and defendant’s marks.  ICBP concedes that its domain name “greenproducts.com” is “undisputedly similar to the mark Green Products Co.” (Def.’s Mem., at 15, Doc # 15.)  However, ICBP also argues that its use of the mark must be viewed in the context of the marketplace, and that the “domain name only has meaning as an Internet address linking to ICBP’s future web site and the web site will take every precaution to ensure there is no consumer confusion.”  (Def.’s Mem., at 15.)

In essence, ICBP’s argument is that the Court should only compare the similarity of domain names and web sites linked to those domain names–not the similarity of ICBP’s domain name and Green Products’ trademark–because ICBP is not “selling a product on store shelves using the mark ‘greenproducts.com’.” (Def.’s Mem., at 15.)

The Court finds ICBP’s argument clever, but ultimately unpersuasive.  ICBP’s argument is analogous to saying that ICBP has the right to hang a sign in front of its store that reads, “Green Products.”  When customers enter the store expecting to be able to see (and possibly, to buy) products made by Green Products, ICBP then announces, “Actually, this store isn’t owned by Green Products;  it’s owned by ICBP. We don’t sell anything made by Green Products, but as long as you’re here, we’ll tell you how our products are better than Green Products.”  In essence, ICBP is capitalizing on the strong similarity between Green Products’ trademark and ICBP’s domain name to lure customers onto its web page.

Turning to the third factor, the competitive proximity of the parties’ products, ICBP concedes that ICBP and Green Products are both competitors in the corncob byproducts industry.  (Def.’s Mem., at 16.)  Despite being direct competitors, ICBP argues that this Court should not focus on their similar corn by-products, but on domain names and their respective web sites:  “the relevant ‘products’ for the likelihood of confusion analysis are not corncob products because ICBP does not sell any corncob products with the mark ‘greenproducts.com’ on a label or package design.”  (Def.’s Mem., at 16.) Instead, ICBP suggests, the Court should analyze whether a web site located at “greenproducts.com” is proximate to a web site located at “green-products.com” or “greenproductsco.com.” (Def.’s Mem., at 16.)  ICBP believes that these domain names are not proximate, because anyone who knows Green Products’ domain name can use that name to go directly to Green Products’ web site and “will likely never even see ICBP’s web site.”  (Def.’s Mem., 16.)  ICBP does, however, concede that the web sites are “proximate in the sense that a person guessing at Green Product Co.’s domain name might access ICBP’s web site if it first tries ‘greenproducts.com’ ….” (Def.’s Mem., at 16.)

ICBP’s argument basically boils down to the idea that the Court should view the domain names as mere addresses which–along with the web sites attached to each name–are products in and of themselves.  The Court disagrees.  There is a close competitive proximity between the products that the two companies sell, and there is also a close competitive proximity between the domain name “greenproducts.com” and the trademark “Green Products”.  The domain name “greenproducts.com” identifies the internet site to those who reach it, “much like a person’s name identifies a particular person, or, more relevant to trademark disputes, a company’s name identifies a specific company.” Cardservice, 950 F.Supp. 737, 42 U.S.P.Q.2d at 1853.  Because customers who do not know what a company’s domain name is will often guess that the domain name is the same as the company’s name, a “domain name mirroring a corporate name may be a valuable corporate asset, as it facilitates communication with a customer base.”  MTV Networks, 867 F.Supp. at 203-204 n. 2.

Alternatively, even if this Court were persuaded that it should only compare the alphanumeric domain names (and not the products that each company sells, nor the similarity between ICBP’s domain name and Green Products’ trademark), this Court would still find a close proximity between the domain name “greenproducts.com” and any of the alternative domain names that ICBP suggests, such as “green-products.com”, “greenproductsco.com”, or “greenproducts-co.com.” Under either analysis, there is a close competitive proximity, and that close competitive proximity further increases the opportunity of consumer confusion.  See Maritz, 947 F.Supp. at 1341.

Fourth, this Court examines whether ICBP intended to cause consumer confusion by creating an ICBP web site accessed through the domain name “greenproducts.com.” ICBP maintains that it had no intent to “pass off” its products as those of Green Products, and that its only intent was to distinguish ICBP’s products from those of Green Products through comparative advertising.  McMorris, Aff.  7-8.  ICBP believes that there will be no consumer confusion because internet users will immediately know that the web site belongs to ICBP once the actual web page appears on the screen (after users have typed the domain name “greenproducts.com”).  To support this argument, ICBP distinguishes its planned web site from that in Planned Parenthood Fed. of Am., Inc. v. Bucci, 42 U.S.P.Q.2d 1430 (S.D.N.Y.1997), where an anti-abortion activist who registered the domain name “plannedparenthood.com” to lure pro-abortion internet users onto his web site designed a web page that deceptively announced that it was “Planned Parenthood’s” site–instead of clearly announcing that the Planned Parenthood Federation of America had nothing to do with it.

While it is true that the Planned Parenthood court discussed how the graphics and design of the web page misled users into believing that the Planned Parenthood Federation was operating an anti-abortion web page, see 42 U.S.P.Q.2d at 1432, ICBP overlooks the fact that the Planned Parenthood court also found that a disclaimer would not have cured the confusion caused by the domain name:
Due to the nature of Internet use, defendant’s appropriation of plaintiffs mark as a domain name and home page address cannot adequately be remedied by a disclaimer.  Defendant’s domain name and home page address are external labels that, on their face, cause confusion among Internet users and may cause Internet users who seek plaintiffs web site to expend time and energy accessing defendant’s web site.  Therefore, I determine that a disclaimer on defendant’s home page would not be sufficient to dispel the confusion induced by his home page address and domain name.
Planned Parenthood, 42 U.S.P.Q.2d at 1441.

Because ICBP’s web site has not been designed yet, this Court will make no finding as to whether ICBP’s web page is likely to cause consumer confusion between the products of ICBP and those of Green Products.  However, based on the briefs, affidavits, and evidence presented at the hearing, this Court finds that the use of plaintiff’s trademark as defendant’s own domain name is likely to cause consumer confusion as to who owns the site.  Just as customers entering a store that advertises “Green Products” as its store name would be initially confused to find, upon entering the store, that ICBP actually owned it, so will customers typing the domain name “greenproducts.com” be initially confused to find that ICBP owns the web site.

The Court acknowledges that such an interpretation of “consumer confusion” is somewhat different than that typically used to find consumer confusion in trademark infringement cases.  Typically, the courts examine whether a company intended to confuse consumers into thinking that its own products were made by a competitor company.  See, e.g., SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir.1980) (“Intent on the part of the alleged infringer to pass off its goods as the product of another raises an inference of likelihood of confusion, but intent is not an element of a claim for trademark infringement.”).

Here, ICBP did not intend to sell its corn by-products by passing them off as having been made by Green Products.  However, ICBP did intend to pass off its domain name as though it belonged to Green Products.  As a result of the confusion in thinking that Green Products’ web site could be found through the “greenproducts.com” domain name, ICBP could deceptively lure potential customers onto its own turf, where customers would be told how ICBP is better than Green Products.  This Court finds that such a deceptive use of a competitor’s trademark as a way to lure customers away from the competitor is a kind of consumer confusion.

Moreover, even if such an interpretation of “consumer confusion” is not the relevant mode of inquiry, this Court also finds that ICBP’s ownership of the domain name “greenproducts.com”–even without an adjoining web site–could cause consumer confusion about the corporate status of Green Products. Currently, if internet users browsing the web type the domain name “greenproducts.com”, they are told that “[n]o documents match the query.” After reading this message, users might randomly input other domain names, guessing that Green Products is registered under some variation of its trademark.  Other users might try to find out who owns the domain name “greenproducts.com” by using various functions on the web where people can type specific domain names and find out who owns them.  (See Carter Decl., attached exhibit;  discussed in further detail at the hearing held Sept. 11, 1997.) Users who do this will learn that ICBP owns the “greenproducts.com” web site, and they will also learn the address and phone number of ICBP. Potential customers who see this information may be confused into thinking that ICBP has taken over Green Products, or that Green Products has merged into ICBP. As a result, customers may decide to buy from ICBP, believing that Green Products no longer exists or that ICBP now owns it.  The consumer confusion thereby caused by ICBP’s ownership of the domain name “greenproducts.com” during the pendency of litigation would cause Green Products to lose customers.

The fifth factor is incidents of actual confusion.  Green Products concedes that because the web site is not yet operational, there have been no incidents of actual confusion (Pl.’s Mem., at 6, Doc # 4), so the Court need not examine this factor further.

The last factor is the degree of care reasonably expected of Green Products’ potential customers.  To determine this, the Court looks at the “ordinary purchaser, buying under the normally prevalent conditions of the market and giving the attention such purchasers usually give in buying that class of goods.”  General Mills, Inc. v. Kellogg Co., 824 F.2d 622, 627 (8th Cir.1987) (quotation omitted).  In contrast to focusing on how ordinary purchasers buy products, Green Products and ICBP speculate about the care with which ordinary internet users will search for Green Products’ web site– presumably as a means by which to decide whether to buy its products.  Green Products argues that customers “who would like to use Green Products’ Internet services but do not know its domain name are likely to assume that ‘greenproducts.com’ belongs to Green Products.”  (Pl.’s Mem., at 7.) In response, ICBP argues that even though an internet user “may have some reasonable expectation that typing in a famous mark of a huge corporation like ‘nike.com’ or ‘ibm.com’ will lead to those corporate web sites, the same cannot be said for ‘greenproducts.com’, which is not a famous mark and which is made up of common generic words that are used in many contexts.”  (Def.’s Mem., at 17.)

ICBP’s argument fails in its analysis of the relevant market, as well as in its insistence that Green Products is not a famous mark.  This Court has found that Green Products’ trademark is not generic, and is at least suggestive. (See discussion, supra.)  Furthermore, Green Products presented evidence at the hearing that within the corncob by-products industry, Green Products and ICBP are two of approximately five major players, and ICBP did not dispute this evidence. [FN9]  Thus within the relevant market (i.e., the corncob by-products industry), Green Products’ trademark is well known.

FN9. Moreover, ICBP maintains that one of the main purposes of its web page will be to distinguish itself from Green Products.  (Def.’s Mem., at 16.)  If Green Products were not a major competitor, ICBP would probably not expend so much energy trying to establish a web site to distinguish itself from Green Products.

Despite the fact that Green Products’ trademark is well known, ICBP argues that a consumer is just as likely to type “greenproductsco.com”, “green- products.com”, or “greenproducts-co.com” as it is to type “greenproducts.com”. (Hearing, Sept. 11, 1997.)  ICBP uses this hypothesis to suggest that Green Products could easily register “greenproductsco.com” as its domain name.  It is interesting that ICBP makes this argument in light of the fact that ICBP’s full name is “Independence Corn By-Products, Company,” and that ICBP chose “icbp.com”–not “icbpco.com”–as its own domain name.  Furthermore, the fact that ICBP chose to register “greenproducts.com” and not “greenproductsco.com” as the domain name for its “comparative advertising” plan could be viewed as further evidence that ICBP believed that potential customers would more likely type “greenproducts.com” than “greenproductsco.com”.

Based on all the evidence before it at this point in the proceedings– including the finding that Green Products is at least a suggestive mark and that within the corncob by-products industry, Green Products’ name is well known–this Court finds that ordinary internet users do not undergo a highly sophisticated analysis when searching for domain names.  Because of the low level of care used to search for domain names, an ordinary internet user trying to find Green Products’ web site would likely guess that Green Products’ domain name was the same as its trademark, and thus type “greenproducts.com”. [FN10]

FN10. This finding is further supported by ICBP’s own evidence.  According to ICBP, an AltaVista search for the words “green+products” retrieved 876 web sites, and the query “green+product” retrieved 418 web sites.  Kraus Aff.  3-4.  Thus even if an ordinary internet user began to search for Green Products’ web site by typing key words into a search engine (instead of starting the search by guessing at what Green Products’ domain name is), the number of web sites the search engine would retrieve may encourage the  internet user to try to guess the domain name by typing Green Products’ trademark, instead of muddling through the eight-hundred some sites that the search engine retrieved.

In summary, despite the fact that neither Green Products nor ICBP can present or refute evidence of actual consumer confusion because ICBP’s web site is not yet operational, this Court also considers the strength of Green Products’ trademark, the strong similarity between Green Products’ trademark and ICBP’s domain name “greenproducts.com”, the close competitive proximity, the likelihood that ICBP intended to capitalize on consumer confusion as a strategy to lure potential customers onto ICBP’s web site (even though the actual web site will announce that Green Products does not own the site), and the degree of care that Green Products’ potential customers will reasonably exercise in browsing the web to find Green Products’ site.  Based on this overall balancing, this Court finds a substantial probability that Green Products will prevail on the merits.

2. Irreparable harm to Green Products

The Court next analyzes the degree of harm, if any, that Green Products would suffer if not granted a preliminary injunction.  The Eighth Circuit has held that a district court can presume irreparable injury from a finding of probable success on the merits of a Section 43(a) Lanham Trademark Act case. Sports Design, 871 F.Supp. at 1165, citing Sanborn Mfg., 997 F.2d at 489.  While this Court could thus presume irreparable injury based on its finding of probable success on the merits, it will also examine the specific circumstances of this case in order to decide whether allowing ICBP to retain ownership of the domain name “greenproducts.com” during the pendency of litigation would cause irreparable harm to Green Products.

Although ICBP has consented to putting the domain name “greenproducts.com” on hold until the final merits are determined, Green Products is concerned that even though ICBP would not have an actual web site that could be viewed by typing the domain name “greenproducts.com”, customers could use other functions on the web to discover that ICBP owns that domain name.  (Hearing, Sept. 11, 1997.)  As a result, potential or actual customers might mistakenly conclude that ICBP has purchased the Green Products corporation, or that Green Products has merged with ICBP. This confusion could result in Green Products losing both customers and revenue during the pendency of the litigation, and it would be impossible to calculate how much money or how many customers were lost.

For these reasons, in addition to the fact that the Court believes that Green Products is likely to succeed on the merits, the Court finds that it would cause Green Products irreparable harm if ICBP were allowed to retain ownership of the domain name “greenproducts.com” during the pendency of the litigation.

3. Balance between this harm and the injury that granting the injunction will inflict on other parties

ICBP has not finalized what its web page will look like, has not advertised that it owns a web page that can be viewed by typing the domain name “greenproducts.com”, and has not listed “greenproducts.com” as one of its domain names in the Thomas Register. [FN11]  If ICBP is compelled to relinquish ownership of the domain name “greenproducts.com” to Green Products during the pendency of the litigation, ICBP would still be able to launch its own web site via its registered domain names “icbp.com” or “bestcob.com”. Furthermore, the act of transferring ownership of “greenproducts.com” would not hinder ICBP’s ability to launch a web site that compares its products to those of Green Products:  ICBP could still design and implement a web site that compares the products of ICBP to those of Green Products, and internet users could access this web site through ICBP’s other registered domain names.

FN11. The Thomas Register of Manufacturing is one of the methods by which both Green Products and ICBP advertise their products.  Green Products has received substantial orders for its corncob products as a direct result of advertising in the Thomas Register.  Schryver Decl.  10.

While these factors weigh in support of compelling ICBP to transfer ownership of the domain name, there are also certain factors that weigh against the transfer.  For example, if ICBP were to prevail at trial, Green Products would have to transfer the “greenproducts.com” domain name back to ICBP. This could cause some initial confusion, and possibly hostility, from customers who might have become accustomed to accessing Green Products’ web site through the “greenproducts.com” domain name.  In addition, because Green Products would like to advertise its domain name “greenproducts.com” in the Thomas Register, and because final changes to the printed version of the Thomas Register must be made by November 1, 1997, neither Green Products nor ICBP will be able to change the 1998 edition of the printed Thomas Register if ICBP prevails at trial. [FN12]  As a result, ICBP worries that it “would risk incurring the anger of these customers if that domain name was suddenly switched….” (Def.’s Mem., at 13.)

FN12. At the hearing held September 11, 1997, ICBP also said that the Thomas Register is available on-line on the web, and that ICBP presumes that on-line Thomas Register information can be updated more frequently than information can be updated in the printed version.

After weighing the potential harm that ICBP would experience by not being able to use its competitor’s trademark as its own domain name, against the harm Green Products would experience by not being able to use its own trademark as its domain name, this Court finds that the harm to Green Products is more extensive and severe than the harm to ICBP. Although ICBP would experience some harm by transferring ownership of the domain name during the pendency of litigation, the transfer is not irreversible;  if ICBP ultimately prevails on the merits, the Court will transfer ownership of the domain name back to ICBP. Additionally, even though some customers who may have become accustomed to finding Green Products’ web page through the “greenproducts.com” domain name may be initially upset when they find that the domain name “greenproducts.com” has become the domain name for ICBP’s web page (if ICBP prevails at trial), any harm that ICBP may experience because of Green Products’ temporary ownership of the domain name could be tempered by a carefully designed web page or by hyperlinks to Green Products’ web page.  Moreover, given ICBP’s goal of distinguishing its products from those of Green Products, the opportunity for ICBP to establish a comparative advertising web site located through the “greenproducts.com” domain name could be even more advantageous to ICBP if Green Products has already attracted customers to the “greenproducts.com” domain name.

For all of the above reasons, and especially considering the fact that the transfer of ownership is not irreversible because the Court will order the domain name transferred back to ICBP if ICBP prevails in litigation, the Court finds that the harm to Green Products is more extensive and severe than the harm to ICBP.

4. Public interest

In a trademark infringement action, the Court must balance the interest of protecting the public from confusion and deception against the interest of facilitating a competitive market.  Woodroast Sys., Inc. v. Restaurants Unlimited, Inc., 793 F.Supp. 906, 919 (D.Minn.1992), affd, 994 F.2d 844 (8th Cir.1993).  Green Products argues that the public interest is best served by: (1) preventing trademark infringement and unfair competition;  (2) enjoining ICBP from being able to capitalize on the “confusion or ensnarement of potential purchasers browsing the web”;  and (3) helping consumers to avoid being “seduced into unwanted advertising messages, which is, in essence, what ICBP’s homepage would be.”  (Pl.’s Mem., at 9-10.)  ICBP argues that the public interest is best served by keeping the domain name on hold during the pendency of litigation, and that compelling ICBP to relinquish ownership of the domain name would “actually foster public confusion” if ICBP were ultimately awarded ownership of the domain name through trial and the domain name reverted to ICBP. (Def.’s Mem., at 21.)

Because this Court believes that Green Products is likely to prevail at trial, this Court is not convinced that the public confusion which could result in the unlikely event that the domain name reverts to ICBP is so great as to prevent Green Products from obtaining immediate ownership of the domain name. Furthermore, even though one way to achieve a competitive market is through comparative advertising, the public interest is not well served when potential customers are lured onto a competitor’s web site under the guise of comparative advertising.  If ICBP were to prevail at trial and be awarded ownership of the domain name “greenproducts.com”, such a result would have far-reaching consequences for both internet browsers and for companies seeking to advertise on the web. [FN13]

FN13. The seriousness with which some courts and large corporations have viewed such ramifications can be partially seen by the trend in recent arbitration, settlements, and court judgments to award domain names to the companies which own the trademark.  For example, other corporations which faced a similar situation to that faced by Green Products ultimately prevailed in the right to own the domain name containing their trademark: The Princeton Review Company relinquished the domain name “kaplan.com” to Kaplan Education Center;  Sprint relinquished “mci.com” to MCI;  an anti- abortion activist relinquished “plannedparenthood.com” to Planned Parenthood;  a New York journalist relinquished “mcdonalds.com” to McDonalds, Corp.;  an ex-disc jockey relinquished “mtv.com” to MTV;  and The Lectric Law Library relinquished “inter-law.com” to Interlaw, Ltd.

Based on the above analysis of the Dataphase factors, the Court concludes that Green Products has shown a probability that it will succeed on the merits at trial, that Green Products would suffer irreparable harm if it were not allowed to use its trademark as its domain name during the pendency of the litigation, that the harm that Green Products would experience if it cannot own the domain name “greenproducts.com” is more severe than any harm ICBP would experience in being forced to relinquish it, and that the public interest is best served by compelling ICBP to relinquish ownership of the domain name “greenproducts.com” during the pendency of litigation.  Within this analysis, the Court has also considered that the transfer of ownership of the domain name is not irreversible, so if ICBP does prevail at trial, the Court can order Green Products to transfer ownership back to ICBP.

Additionally, the Court finds that Green Products has met a “heavy” burden of proof in establishing that not only will Green Products probably win at trial, but that the harm that Green Products would suffer if it were not allowed to use its own trademark as its domain name during the pendency of the litigation is severe enough to warrant affirmative action to compel ICBP to transfer ownership of the domain name.

Accordingly, it is ORDERED:

Green Products’ motion for a preliminary injunction shall be GRANTED, as follows:
During the pendency of litigation,
(1) ICBP shall not use the domain name “greenproducts.com”;
(2) ICBP shall not use the expressions “green products” and “green pet products” as the whole or part of a trademark, trade name, or domain name;  and
(3) ICBP shall transfer the ownership of the domain name “greenproducts.com” to Green Products.
To transfer the domain name “greenproducts.com” to Green Products, this Court will provide an additional certified copy of this Order to Green Products, so that Green Products may send the Order to Network Solutions, Inc., thereby informing Network Solutions of the Court’s judgment and authorizing Network Solutions to transfer ownership of the domain name to Green Products.

No. 97-5802
Appeal from the United States District Court
for the Middle District of Tennessee at Nashville.
No. 96-00429–Thomas A. Higgins, District Judge.
Submitted: June 18, 1998
Decided and Filed: August 5, 1998
Before: MERRITT, BOGGS, and SUHRHEINRICH, Circuit Judges.

COUNSEL

ON BRIEF: E. Andrew Norwood, James W. White, Walter H. Crouch, WALLER, LANSDEN, DORTCH & DAVIS, Nashville, Tennessee, for Appellant. Scott K. Haight, Charles G. Walker, BAKER, DONELSON, BEARMAN & CALDWELL, Memphis, Tennessee, for Appellee.
BOGGS, J., delivered the opinion of the court, in which SUHRHEINRICH, J., joined. MERRITT, J. (pp. 14-15), delivered a separate concurring opinion.

OPINION

BOGGS, Circuit Judge. Appellant, Data Concepts, Inc. (“Data”), sued Appellee, Digital Consulting, Inc. (“Digital”), and Network Solutions, Inc.(“NSI”) to enjoin NSI from reassigning to Digital the Internet address that Data was using, “DCI.COM.” Data also sought a declaratory judgment that its Internet address was its unregistered trademark and that such use of that unregistered trademark did not infringe on Digital’s registered trademark. Digital counterclaimed, alleging trademark infringement under section 32 of the Lanham Act, 15 U.S.C. 1114, violation of section 43(a) of the Lanham Act, 15 U.S.C. 1125, dilution of a mark pursuant to Tenn. Code Ann. section 47-25-512, and common law unfair competition. Digital also requested an injunction against Data’s use of the “DCI.COM” Internet address.

Data and Digital each filed motions for summary judgment on their respective claims. The motions were referred to a magistrate judge, who issued a report and recommendation (“R&R”) recommending that the district court deny Data’s motion and grant Digital’s motion to enjoin Data’s use of the “DCI.COM” Internet address and find that Data had infringed on Digital’s registered trademark. The district court adopted the magistrate judge’s R&R. Data filed a timely notice of appeal.

I
A. The Parties and Their Dispute

Data is a Tennessee corporation with its principal place of business in Nashville, Tennessee. Data provides performance software for data management and process control. In 1982, Data began using the stylized mark , which is allegedly comprised of the letters “d,” “c,” and “i” in lower case. When Data started transacting business over the Internet in 1993, it registered the Internet address “DCI.COM” with NSI.

Digital is a Massachusetts corporation, with its principal place of business in Andover, Massachusetts. Digital provides consulting and training related to database management, software development, computer networks, mobile computing, and Internet and world wide web technologies. In 1987, Digital obtained a federal trademark registration for the mark “DCI.” Digital also conducts business on the Internet through the Internet address “DCIEXPO.COM.”

NSI is a District of Columbia corporation operating out of Herndon, Virginia. All electronic mail addresses for the Internet must be registered with NSI. In April 1996, Data received a letter from NSI stating that Digital had complained to NSI about allowing Data to use the Internet address “DCI.COM,” because Digital claimed that this address infringed on Digital’s registered mark DCI. In this letter, NSI informed Data that under the NSI domain name policy, Data had the following options: (1) it could retain use of “DCI.COM” if it could provide a copy of a valid federally- registered trademark or service mark that was the same as the domain name; (2) it could relinquish the “DCI.COM” address to Digital and get a new one; or (3) “DCI.COM” could be placed on hold so that no one could use it until the dispute was resolved. The present action followed. The parties agreed to dismiss NSI for purposes of this appeal.

B. The District Court’s Ruling

In its opinion adopting the conclusion of the magistrate judge’s R&R, the district court held that “the registered trademark of Digital is superior to the unregistered trademark of Data, and that Data’s use of the “DCI.COM” Internet address infringes upon Digital’s registered trademark.” The district court also ruled that “since Data Concepts’ Internet address is identical to Digital Consulting’s trademark, Data Concepts is precluded from using Digital Consulting’s trademark in its Internet address.” The district court found that “there is a likely confusion of sponsorship that Data Concepts’ initial Internet address is associated with Digital Consulting.” Thus, Data was “permanently enjoined from operating or suffering the operation of the address of DCI.COM on the Internet.”

II

On appeal, Data argues that the district court should not have granted Digital summary judgment and that the district court erred by concluding that Digital’s mark is superior to Data’s unregistered stylized mark. Data claims it is the senior user of the mark “DCI” because it used the stylized mark , which allegedly consists of the lower case letters “d,” “c,” and “i,” before Digital registered the mark “DCI,” which consists of the capital letters “D,” “C,” and “I.” Data also contends that the district court did not properly apply the eight factors used to determine likelihood of consumer confusion.

A. Data is not a Senior User

Since Digital registered the “DCI” mark in 1987, Data’s claim that it is the senior user of the mark “DCI” relies on its ability to “tack” its prior use of the mark from 1982 until 1993 onto its use of the “DCI” mark as part of its Internet address beginning in 1993. The use of an earlier mark can be tacked onto the use of a subsequent mark only if the previously used mark is “the legal equivalent of the mark in question or indistinguishable therefrom” such that consumers “consider both as the same mark.” Van Dyne-Crotty , Inc. v. Wear-Guard Corp., 926 F.2d 1156, 1159 (Fed. Cir. 1991). Furthermore, tacking should be permitted “only in rare circumstances.” Id. at 1160.

Whether a later mark is the legal equivalent of an earlier one is a question of law. Id. at 1159. Legal equivalence for tacking purposes does not exist simply because the two marks a party seeks to tack are “confusingly similar.” Ibid. Rather, the marks sought to be tacked “must create ‘the same continuing commercial impression.’” Ibid. A determination of legal equivalence may be based on “the visual or aural appearance of the marks themselves.” Ibid.

In view of cases in which legal equivalence was held not to exist, we cannot find that Data’s mark is a legal equivalent of “DCI.” To begin with, the two marks do not look alike. It does not matter that Data’s unregistered stylized mark allegedly consists of the letters “d,” “c,” and “i.” Courts regularly reject efforts to tack the use of two marks that are much more similar. For example, the mark “CLOTHES THAT WORK” was held, as a matter of law, not to be the legal equivalent for tacking purposes of “CLOTHES THAT WORK FOR THE WORK YOU DO.” Id. at 1160. In another case, the marks “Pro-Kut” and “Pro-Cuts” were held not to be legal equivalents that could be tacked. Pro-Cuts v. Schilz-Price Enters., Inc., 27 USPQ2d 1224 (TTAB 1993). Thus, we hold that Data’s prior use of its unregistered stylized mark cannot be tacked onto its subsequent use of the “DCI” mark and that Data did not begin using the mark “DCI” until it incorporated the mark into its Internet address in 1993. Since Digital registered the mark “DCI” in 1987, Data is not a senior user of the mark.

B. Likelihood of Confusion

Data’s second argument on appeal is that the district court should not have granted Digital summary judgment on its infringement claim. According to Data, the district court erroneously concluded that Data’s use of the DCI mark in its Internet address created a likelihood of confusion as a matter of law. Data contends that the district court did not consider all of the factors that go into determining whether a likelihood of confusion exists and that the district court improperly applied the likelihood of confusion factors it did consider. These alleged errors in the district court’s analysis, according to Data, caused the district court to conclude improperly that there is no triable issue of fact as to likelihood of confusion and, thus, as to the fact of infringement.

Whether a likelihood of confusion exists is a mixed question of law and fact. Little Caesar Enters., Inc. v. Pizza Caesar, Inc., 834 F.2d 568, 570 (6th Cir. 1987). This court has enumerated eight factors that are to be considered to determine whether a likelihood of confusion exists. The eight factors are: (1) the strength of the plaintiff’s mark; (2) the relatedness of the goods or services; (3) the similarity of the marks; (4) evidence of actual confusion; (5) the marketing channels used; (6) the likely degree of purchaser care; (7) the defendant’s intent in selecting the mark; and (8) the likelihood of the expansion of the product lines. Frisch’s Restaurants, Inc. v. Elby’s Big Boy, 670 F.2d 642, 648 (6th Cir. 1982). “These factors imply no mathematical precision, but are simply a guide to help determine whether confusion is likely . . . . and not all of these factors may be particularly helpful in any given case.” Homeowners Group, Inc. v. Home Marketing Specialists, Inc., 931 F.2d 1100, 1107 (6th Cir. 1991). If the facts relevant to the applicable factors are contested, factual findings must be made with respect to each of these factors and these findings are subject to review for clear error. Little Caesar, 834 F.2d at 570. However, the balancing of these findings to determine the ultimate issue of likelihood of confusion is a question of law. Ibid.

To defeat a motion for summary judgment “in a case [such as this one] where the likelihood of confusion is the dispositive issue, a nonmoving party must establish, through pleadings, depositions, answers to interrogatories, admissions and affidavits in the record, that there are genuine factual disputes concerning those of the [eight] factors which may be material in the context of the specific case” Homeowners, 931 F.2d at 1107. In determining whether a genuine issue of material fact exists, a court must review the evidence in a light most favorable to the nonmovant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).

The magistrate judge considered seven of the likelihood of confusion factors in his R&R. He determined that the following factors weighed in favor of finding that a likelihood of confusion existed: strength of mark, similarity of the marks, marketing channels, and intent in the selection of the mark. The likely degree of purchaser care factor was deemed to cut against finding a likelihood of confusion. And the evidence of actual confusion and relatedness of services factors were determined to be inconclusive. The magistrate judge did not separately consider the factor of the likelihood of expansion, but did discuss it in his analysis of marketing channels. The magistrate further determined that, on balance, these factors tipped the scales, as a matter of law, in favor of finding a likelihood of confusion. The five points(1)

upon which the district court relied in affirming the magistrate judge’s determination that a likelihood of confusion existed and that Digital’s motion for summary judgment on the infringement claim should be granted were clearly drawn from the magistrate judge’s analysis. Accordingly, our analysis will focus on the magistrate judge’s discussion of the likelihood of confusion factors.

1. Strength of the Mark

We agree with Data that the magistrate judge’s (and thus the district court’s) assessment of the strength of the mark was flawed because he did not properly assess the significance of evidence of numerous other instances of third-party use of the DCI mark. A mark that has been registered and uncontested for five years, as Digital’s was, is entitled to a presumption that it is a strong mark. Wynn Oil Co. v. American Way Serv. Corp., 943 F.2d 595, 600 (6th Cir. 1991). However, a mark is weakened outside of the context in which it is used if there is third-party use of the mark. Ibid. This court cannot evaluate the magistrate judge’s determination that these other marks were different in ways that make them distinctive from Digital’s mark because the other marks are not in the record. However, there is an affidavit by the president of Data that he found over ninety web sites incorporating DCI into their domain names.(2) Neither the magistrate judge nor the district court addressed this evidence and whether it overcame the presumption that DCI was a strong mark. Therefore, the analysis of the strength of the mark was inadequate. See Homeowners, 931 F.2d at 1108. (finding district court analysis of strength of mark insufficient because it failed to consider probative evidence weakening mark).

2. Relatedness of Services

We also find that the magistrate judge’s analysis of the relatedness of services offered by Data and Digital was premised on the erroneous factual determination that both companies are “involved in database systems and development of software.” Data correctly asserts that there is no support in the record for finding that Digital is involved in the development of software. In its answer and counterclaim, Digital expressly denied that it “offers software for business management.” The president of Digital stated in his affidavit that Digital provides “educational services in the fields of database management systems, software productivity, application development, client/server technologies, and distributed computing . . . .” (emphasis added). His affidavit says nothing about software development. Furthermore, the record contains no evidence that Data is involved in database systems in any way other than that it “suppl[ies] computer software for data management.” Accordingly, we hold that the magistrate judge’s analysis of the relatedness of services factor was premised on mistaken factual determinations. This factor must be re-evaluated in light of evidence in the record indicating that Digital is not involved in software development and that Data is not involved in database systems beyond providing software for them.

3. Similarity of Marks

The record leads us to conclude that the magistrate judge’s analysis of this issue was also flawed. This is because the magistrate judge appears to have done nothing more than a “side-by-side comparison” of the marks. In Homeowners, 931 F.2d at 1109, this court stated that a side-by-side comparison “is not the test” for similarity of marks. Rather we said that the marks “must be viewed in their entirety and in context [and a] court must determine, in light of what occurs in the marketplace, whether the mark will be confusing to the public when singly presented.” Ibid. It does not appear that such an analysis was undertaken in this case.

4. Evidence of Actual Confusion

The magistrate judge drew no conclusion as to this factor. Review of the record indicates no actual evidence on this issue. However, we wish to clarify that Data’s contention that the absence of past confusion indicates that there is no likelihood of future confusion has no merit. In Wynn, 943 F.2d 601-02, this court explained that the lack of evidence of actual confusion is not significant unless the circumstances indicated that such evidence should have been available. This does not appear to be such a case. Little time elapsed from the date Data started using the DCI mark as part of its web address and the instigation of this litigation. Thus, there was only a brief period of time during which consumers had the opportunity to be confused by Data’s use of this Internet address before the court considered this issue. This is not a case where the complained-of use occurred over a long period of time and the lack of complaints about actual confusion can be viewed as implying that consumers are not in fact confused.

5. Likely Degree of Purchaser Care

Data does not contest the magistrate judge’s finding that the sophistication of Digital’s customers and the cost of Digital’s services cause this factor to weigh heavily against finding a likelihood of confusion. Digital, however, points out a problem with the magistrate judge’s analysis of this factor. The problem is that the magistrate judge considered only whether a buyer might accidentally purchase Data’s products and services because they mistakenly believed they are Digital’s products and services.
Our case law makes clear that a court must also consider whether a potential buyer might mistakenly believe that the software sold by Data through its “DCI.COM” Internet address is affiliated with Digital. See Champions Golf Club, Inc. v. The Champions Golf Club, Inc., 78 F.3d 1111, 1121 (6th Cir. 1996) (explaining court must inquire into both whether buyers would accidentally purchase other company’s product and whether sophisticated purchaser might be confused as to affiliation). Since the analysis of this issue was incomplete and may not favor Data as strongly as the magistrate judge indicated, we cannot accept his analysis of this factor.

6. Data’s Intent in Selecting the Mark

We also find merit in Data’s argument that the magistrate judge erred by inferring that Data intentionally selected DCI’s mark. Data contends that it was the senior user based on its prior use of its stylized mark incorporating the letters d, c, and i. It also claims that, even if it was not the senior user, it was unaware of Digital and its registration of the DCI mark. Digital asserts that Data’s failure to investigate whether there were any registered marks using DCI is circumstantial evidence of Data’s intent to appropriate Digital’s mark for its own advantage.

There is no direct evidence in the record that Data intentionally selected the DCI mark as part of its Internet address in an effort to appropriate the goodwill of Digital’s mark. Intent can, however, be established by circumstantial evidence. Champions, 78 F.3d at 1121. For example, in Champions, evidence indicating that the junior user of a mark was aware of the senior user’s prior use of the mark supported “an inference of intentional infringement.” Ibid. There is no such evidence in this case. The record indicates that Data really was unaware of Digital at the time it decided to use DCI as part of its Internet address. Such evidence usually militates in favor of finding no intent, which weighs against a finding of a likelihood of confusion. See Little Caesar, 834 F.2d at 572 (“[T]here is no evidence that [defendant] even had actual knowledge of the existence of Little Caesar Enterprises, much less that he had any larcenous intent.”). Accordingly, we cannot accept the magistrate judge’s analysis of this factor either.

7. Other Factors

Neither the parties’ arguments or our own review indicates any problems with the magistrate judge’s analysis of marketing channels. The magistrate judge’s analysis of the likelihood of expansion factor was quite cursory. It appears to us that this was because, at this juncture in the litigation, it is not clear that this factor is of any great relevance. If the parties produce evidence indicating that this factor is more significant than it now appears to be, they should be permitted to present this evidence to the trier of fact.

III

In summary, the magistrate judge’s analysis of several of the likelihood of confusion factors was clearly inadequate. Because of these errors and shortcomings in the magistrate judge’s analysis (upon which the district court apparently relied), it cannot be said that a likelihood of confusion existed as a matter of law and that Digital was entitled to summary judgment on its infringement claim. See Homeowners Group, Inc. v. Home Marketing Specialists, Inc., 931 F.2d 1100, 1112 (6th Cir. 1991). When the likelihood of confusion factors are properly analyzed, and the record is viewed in a light most favorable to Data, this case appears to present too close a question to decide as a matter of law.

IV

For the forgoing reasons we AFFIRM in part, and REVERSE in part the judgment of the district court. We affirm the denial of Data’s motion for summary judgment and the rejection of Data’s claim that it was the senior user of the “DCI” mark. We reverse the district court’s grant of Digital’s motion for summary judgment on its counterclaim for infringement based on the holding that a likelihood of confusion exists as a matter of law. We conclude that a triable issue of fact exists on the issue of likelihood of confusion and remand the case for proceedings consistent with this opinion.

CONCURRENCE

MERRITT, Circuit Judge, concurring. I concur in Judge Boggs’s well reasoned opinion, but I believe that there is a serious question regarding whether Data Concepts’ use of the dci.com domain name constituted use of a trademark in the first place. As a leading commentator recently observed, “The question is sometimes asked: ‘Is a domain name a trademark?’ The correct answer is: ‘A domain name can become a trademark if it is used as a trademark.’” 1 J. McCarthy, Trademarks and Unfair Competition  7:17.1 (4th ed. 1998). Courts and other commentators have generally recognized that an Internet domain name can be used for both trademark and non-trademark purposes. See, e.g., 2 Jerome Gilson & Jeffrey M. Samuels, Trademark Protection and Practice,  5.11[3] & 5.11[5] (1997) (distinguishing the technical use of domain names from the trademark use of domain names to identify goods and services); Lockheed Martin Corp. v. Network Solutions, Inc., 985 F. Supp. 949, 956 (C.D. Cal. 1997). When a domain name is used only to indicate an address on the Internet and not to identify the source of specific goods and services, the name is not functioning as a trademark. See Lockheed, 985 F. Supp. at 956; 1 McCarthy  7:176.1, at 7-24.

Although Data Concepts appears to concede that its use of letters in the domain name constituted trade use of the mark in connection with the sale of its goods, it is not clear that this is the case. The record is not well developed on how exactly it used the dci.com Internet address. It is undisputed that Data Concepts did not use the dci.com domain name to establish a “web site” to advertise and sell its services. At the very least, Data Concepts used the domain name as a means for sending and receiving e-mail. The only evidence in the record regarding the extent of Data Concepts’ use of the dci.com domain name is the affidavit the company’s CEO, Terry Woodson, which asserts generally that “DCI now conducts a significant portion of its business through the Internet using the Internet address ‘DCI.COM’. Last year, business generated through use of our Internet address resulted in revenues in excess of $80,000 for the company.” J.A. at 98-99. The affidavit also states that Data Concepts communicates with some of its clients solely through the Internet. Id.

Data Concepts’ vague assertion that it received customer inquiries through the address that resulted in revenue is not enough to establish that its use of dci.com domain name constituted “use” of the DCI trademark. For instance, there is no evidence in the record indicating whether Data Concepts disseminated advertisements of its services displaying the dci.com address or whether the company’s customers or employees simply passed the dci.com address along to potential customers in the same way someone might give out a telephone number. See 1 McCarthy  7:17.1 (domain names, like telephone numbers, street addresses, and radio station call letters, which permit one to locate and communicate with a place or a person, do not, without more, function as trademarks). Thus, it is unclear whether Data Concepts used the dci.com domain name merely as a means of communication or whether the company used the name to identify its goods and services. Since resolution of this question could dispose of the case, I would instruct the District Court to consider this matter on remand.

FOOTNOTES

1. (1) Digital Consulting’s registered trademark is uncontestable as it has been registered and uncontested for over five years; (2) Data Concepts and Digital Consulting are both involved in database systems and the development of software; (3) the practice of “surfing the Net” gives rise to the prospect that Data Concepts’ use of Digital Consulting’s registered trademark as its Internet domain name would cause confusion; (4) both businesses use the Internet to market their products; and (5) Digital Consulting’s trademark was already registered at the time Data Concepts chose its Internet address.
(JA 94).

2. Although the affidavit does not list any examples, our own research discloses many Internet addresses incorporating “DCI.” Examples include: “DCI.DE,” a German-language site for commerce and industry; “DCISONGS,” a site for drum corps international, which contains excellent information about drum corps history and music; “DCI-US,” the site of a company that specializes in performance PC board design; “DCICLRC,” the constrained and unconstrained testing environment site; and “DCIMARKETING,” the site for a Milwaukee-based marketing firm.

an Internet Domain Name,
Defendant.
MEMORANDUM AND ORDER
00 CV 2884 (RO)
APPEARANCES
Attorney for Plaintiff:
Ira Jay Levy
DARBY & DARBY P.C.
Attorney for Defendant:
Dale M. Cendali
O’MELVENY & MYERS LLP
OWEN. District Judge

Before me in this in rem proceeding under the recently enacted Anticybersquatting Consumer Protection Act (ACPA) are plaintiff BroadBridge Media’s order to show cause for a preliminary injunction continuing the transfer of the domain name from Barry Henderson to plaintiff, earlier ordered on a TRO, and Henderson’s cross motion to dismiss for lack of jurisdiction or failure to state a claim. I find jurisdiction, deny Henderson’s motion to dismiss, and grant plaintiff’s motion, and direct Register.com to maintain the registration of in the plaintiff’s name.

Since 1996, BroadBridge and its predecessors, in connection with its business, have distributed over 4,500,000 compact discs bearing the mark ,HyperCD and the domain name . (Park Decl. 5). BroadBridge’s predecessor in interest registered HyperCD as a trademark with the United States Patent and Trademark Office on September 17, 1997, and received Federal Registration No. 2,098.352. (Id. 4, Exs. A, B). Plaintiff under this trademark promotes technology which converts and “compresses” analog audio information into digital information and “burns” this information onto a compact disc (“CD”). (Id. 3). Under this trademark, plaintiff also promotes its technology which allows its clients’ customers to access additional features embedded in the CD, but unavailable until that customer visits BroadBridge’s clients’ website and downloads certain information. In this way, BroadBridge offers to its clients, the content owner, an Internet based system whereby the client can control its customer’s use of the content on that CD. (Id. These conversion services are marketed to major record labels and content providers, who then distribute the HyperCD branded CDs to their customers. (Id.)

BroadBridge contracted to provide technical support to its clients’ customers. (Id. 8). BroadBridge centered its technical support system on its trademark by registering HyperCD as a domain name, , and by advertising its e-mail address, , on millions of CDs and on the Internet as the way for its clients’ customers to obtain technical support. (Id. 7). Through inattentiveness and inadvertence, plaintiff failed to renew its registration, and the registration along with its e-mail address terminated on March 1, 2000. (Id. 9). As such, BroadBridge was unable to provide the contractually required technical support.

Prior to March 22, 2000, one Barry Henderson, living in Pitt Meadows, British Columbia, Canada, worked for Creation Technologies, Inc., located in Vancouver, British Columbia, Canada, and was in charge of their RADAR division. (Henderson Decl. 5). As part of his duties, he was responsible for conceiving product names and corresponding Internet domain names. That division was developing a new technology which “compresses” digital audio information as recorded on its own recording equipment and “burns” this information onto a regular compact disc, (Id. 5, 6). Apparently on the morning of March 22, Henderson was brainstorming and came up with “HyperCD” as accurately describing this new technology. (Id. 7). Upon ascertaining that was available as a domain name, Henderson paid $70.00 and registered it with Register.com. (Id. 8, 9).1

The day after Henderson registered hypercd.com, Ken Parks, president of BroadBridge Media, e-mailed Henderson, explained what had happened, and asked Henderson to transfer back to BroadBridge Media. (Park Decl. 11, Ex. F). Even though Henderson had only come across the name the day before, Henderson responded to Parks by describing “HyperCD” as a “feature” of Creation’s recording devices which they have been developing for sometime at considerable expense and which was “critical” to its business strategy.

Id. Ex. F). Subsequently, Parks telephoned Henderson, informed him of BroadBridge’s trademark, “HyperCD”, and learned from him that Creation Technologies had never used “HyperCD” nor in connection with the promotion or sale of any products or services nor had they spent any money developing a brand identity. (Id. 12). Park offered to reimburse Henderson the $70 it cost him to register . (Id. Ex. F). Rejecting this offer, Henderson remained open to another offer. Park then offered $1000. Rejecting the $1000, Henderson replied, “I said that I would be open to a financial compensation in return for transferring the hypercd.com domain name. . . I would only be open to this alternative if any compensation that you offer is in keeping with I consider to be the significant intrinsic value of the name.” (Henderson Decl. Ex. G). Unable to determine what Henderson thought was “significant intrinsic value of the name” and not being offered any figure by Henderson. Park turned to his attorneys to continue the negotiations.

While the attorneys continued their negotiations, Park, on April 4, offered to rent from Henderson for a few months while the domain name issue remained unresolved between them. Rejecting this offer also, Henderson proposed a three year rental arrangement with a monthly fee to be determined but with the requirement that BroadBridge agree “to co-exist with the use by me [Henderson] (or my designated company) in the U.S. and elsewhere, of the hypercd name [plaintiffs trademark] in association with our products and services only in the professional audio recording industry[,]” and “agree not to commence any legal proceedings as a result of that use, or regarding ownership and use of the domain name by us in connection with our products.” (Id. Ex. K).

Two days later, on April 7, BroadBridge offered $5,000. (Green Decl. 4). Rejecting that offer, Henderson responded by offering a three year rental term with a monthly fee of $4,250 (equal to $153,000 over three years) or $85,000 to transfer the domain name. (Id. 6, 7). BroadBridge rejected these offers and offered $7,000. (Id. 8). Henderson counter-proposed $46,000. (Id. 9). BroadBridge rejected this offer as outrageous and the following week filed a domain name dispute complaint form under the ICANN procedures and rules. (Cendali Decl. 11). Two days later, on April 13, BroadBridge initiated this in rem proceeding in this Court under the ACPA, not being able to serve Henderson, a Canadian resident.

Ten days later, BroadBridge filed an order to show cause for a temporary restraining order and for a preliminary injunction. After considering the papers submitted, I directed Register.com to transfer the domain name to BroadBridge and set a hearing for May 3, 2000. Before that hearing took place, Henderson, on April 25, sought by order to show cause dismissal of BroadBridge’s in rem action and reimbursement of attorney’s fees and other costs associated with defending the action. Judge Sweet, sitting as the Part I Judge, declined to dismiss the action and set a hearing on that issue for May 3 before me so that the entire controversy could be heard at one time. On May 3, the hearing was so held. Henderson did not appear, but submitted papers, and Dale Cendali, Esq. spoke for him.

I deal with Henderson’s order to show cause to dismiss under Fed. R. Civ. P. 12(b)(1) and (6) first. Henderson argues that when plaintiff filed its domain name dispute complaint, it waived its right to also proceed in federal court. Henderson contends that paragraph 4(k) of the Uniform. Domain Name Dispute Resolution Policy supports his argument2 because that paragraph affirmatively states that the complainant may submit the dispute to a court before or after the ICANN administrative proceeding, and therefore, as a necessary corollary, the paragraph prohibits a complainant from initiating court proceedings during the pendency of the administrative proceeding. Thus, Henderson contends this Court has no jurisdiction. I reject this interpretation of the ICANN dispute policy. First, ICANN’s policy, rules and complaint form do not state that a complainant gives up the right to proceed in court by filing a domain name dispute complaint. Second, the policy clearly states that the dispute proceedings are to be conducted under the rules, and rule 18 contemplates a complainant going to court3 by giving the “Panel” discretion to terminate, suspend, or proceed with an administrative proceeding once court proceedings on the same matter have begun. Third, I note that experts in this field likewise interpret paragraph 4(k) as not prohibiting a complainant from going to court. See Jerome Gilson & Anne Gilson LaLonde, The Anticybersguatting Consumer Protection Act and the ICANN Uniform Domain Name Dispute Resolution Policy 36 (2000) (citing paragraph 4(k) for the proposition that either party involved in a UDRP administrative proceeding may file a lawsuit before, during, or after the administrative proceeding). Accordingly, I conclude this Court has jurisdiction, and for the reasons stated below, plaintiff has stated a claim.4 Accordingly, I deny Henderson’s motion to dismiss.

The essence of the ACPA under the subsection at issue here, see infra note 5, is that it allows a trademark owner, here the plaintiff, to proceed in rem to have a domain name transferred to itself if the domain name violates its trademark and if the trademark owner can not obtain in personam jurisdiction over the registrant of the offending domain name in the proper course. Since the purpose of a preliminary injunction is to maintain some status quo, Warner Vision Entertainment v. Empire of Carolina, Inc. 101 F.3d 259, 261-62 (2d Cir. 1992), a plaintiff must demonstrate both (1) that it will suffer irreparable harm if the motion is not granted and (2) either (a) a likelihood that it will succeed on the merits of the action, or (b) a sufficiently serious question going to the merits of the litigation and the balance of hardships tipping decidedly in plaintiff’s favor. L. & J. G. Sickly. Inc. v. Canal Dover Furniture Co., 79 F.3d 258, 261-62 (2d Cir. 1996). However, the standard is heightened when injunction “alter[s] the status quo by commanding some positive act.” Tom Doherty Assocs., Inc. v. Saban Entertainment. Inc., 60 F.3d 27, 34 (2d Cir. 1995). Because plaintiff alters the status quo by requesting this Court to “order the transfer of the domain name to it,” the heightened standard of “substantial” or “clear” likelihood of success applies.

I find that plaintiff has made the requisite showing of irreparable harm. Plaintiff has advertised on millions of CDs and invested a significant amount of money developing its trademark and its email address, , which it promoted as the method to obtain technical support for its clients’ customers. Loss of the domain name resulted in a loss of the email address, and plaintiff is unable to provide the contractually required technical support. In addition to being in possible breach of contract with its own clients, plaintiff’s clients’ customers whose email is returned may assume that plaintiff is out of business or failing to provide the technical support. Either assumption seriously, and if prolonged, may factually damage plaintiff’s reputation and goodwill.

I also find that plaintiff has shown a “substantial” likelihood of success on the merits. Plaintiff brought this in rem action under the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. §11 25(d)(2).5 To repeat, under that section, the owner of a mark may file an in rem civil action against a domain name if that domain name violates any right of the owner of a mark registered in the Patent and Trademark Office, 15 U.S.C. §1125(d)(2)(A)(i), and the court finds that the owner is unable to “obtain in personam jurisdiction over a person who would have been a defendant in a civil action under paragraph (1),” 15 U.S.C. §(d)(2)(A)(ii)(I). Accordingly, a plaintiff must show (1) he owns a mark registered with the Patent and Trademark Office, (2) a right of his has been violated, and (3) he is unable to obtain in personam jurisdiction over a person who would have been a defendant under 15 U.S.C. §1125(d)(1). Because plaintiff here alleges that the violated right was under another subdivision of the ACPA, 15 U.S.C. §1125(d)(1),6 he incorporated the elements of that subsection, §1125(d)(1), into this in rem proceedings, and therefore, to show a violated right, he must also show, without regard to goods or services of the parties, (1) he had a distinctive mark at the time of the registration of the domain name, (2) that person uses a domain name that is identical or confusingly similar to plaintiff’s mark, and (3) that person has a bad faith intent to profit from that mark. 15 U.S.C. §1125(d)(1).

Many of these elements are undisputed. Plaintiff owns the “HyperCD” mark and it is registered with the Patent and Trademark Office. Both parties agree that plaintiff cannot obtain in personam jurisdiction over Henderson. Since the “.com” portion of the name is inconsequential to the analysis here, Sporty’s Farm. L.L.C. v. Sportsman’s Market. Inc., 202 F.3d 489, 497-98 (2d Cir. 2000), I find that and HyperCD are at least confusingly similar, if not identical, for protection under the ACPA.

Other elements are disputed. Henderson contends that plaintiff’s “HyperCD” mark is not distinctive and that plaintiff has failed to establish his bad faith. Though raising this more at oral argument than in its papers, plaintiff questions whether it need establish Henderson’s bad faith in an in rem proceeding under ACPA.

Addressing Henderson’s claim that plaintiff’s mark is not distinctive, I find that plaintiff’s HyperCD mark is distinctive because it is suggestive. A suggestive mark is one that requires imagination, thought and perception to reach a conclusion as to the nature of the goods. Abercombie & Fitch v. Hunting World. Inc., 537 F.2d 4, 11 (2d Cir. 1976). Along the Abercombie & Fitch “spectrum of distinctiveness,” suggestive marks are inherently distinctive. Id. The HyperCD mark is suggestive when used in relation to plaintiff’s digital analog conversion services software and its Internet-based content management system. Additionally, plaintiff has presented strong evidence of secondary meaning in that it has exclusively and continuously used of the mark for four years and has placed it on millions of CDs.

Before addressing Henderson’s contention that plaintiff has failed to establish Henderson’s bad faith, I first address plaintiff’s concern regarding the necessity of showing bad faith at all in an in rem proceeding, but conclude that bad faith intent to profit is a necessary element to plaintiff’s case for two reasons. First, Congress clearly intended to use the bad faith element of the statute as a way to narrow the breath of the statute. “The bill is carefully and narrowly tailored, however, to extend only to cases where the plaintiff can demonstrate the defendant. . . used the offending domain name with bad-faith intent to profit from the goodwill of a mark belonging to someone else. Thus, the bill does not extend to innocent domain name registrations by. . . someone who is aware of the trademark status of the name but registers a domain name containing the mark for any reason other than with bad faith intent to profit from the goodwill associated with that mark.” H.R. Conf. Rep. 106-412 (emphasis added); see Northern Light Technology, Inc. v. Northern Lights Club, Civil Action No. 99-11664-DPW, 2000 U.S. Dist. Lexis 4732, at *67 (D. Mass. Mar. 31, 2000). Reflecting this intent, Congress limited the in rem action against a domain name to those situations where the court finds the owner is unable “to obtain in personam jurisdiction over a the person who would have been a defendant under paragraph (1).” 15 U.S.C. 1125 §(d)(2)(A)(i)(I) (emphasis added). To be brought in as a defendant under paragraph (1) requires, in addition to other elements, a bad faith intent to profit. Second, plaintiff incorporated into this in rem action the bad faith intent to profit element of §1125(d)(1) by pleading that subsection, which created a right, was his right as a mark owner that was violated. As such, I conclude plaintiff must show bad faith intent to profit.

When making a determination of bad faith intent to profit, I should consider a nonexelusive list of nine factors provided by Congress as guidance. 15 U.S.C. §1125(d)(1)(B).7 Of these factors, the following support my conclusion of bad faith intent to profit. Henderson has no trademark or intellectual property rights in . Henderson has not used in connection with any promotion or sale of any goods or services nor spent any money developing a brand identity. Henderson’s “legal name” is not the domain name. Henderson does not claim that the use of the domain name was “noncommercial” or “fair use.” Henderson repeatedly offered to sell the domain name to plaintiff for unusually large but diminishing financial gain without ever having used the domain name in connection with any offering of any goods or services. As mentioned before, the HyperCD mark is distinctive and entitled to protection.

The “bad faith” statutory list not being exclusive, I may take into account other factors bearing on bad faith intent to profit. I find the following particularly relevant: Henderson’s attempt to hold the domain name hostage until BroadBridge either pay him an exorbitant amount of money (discussed above) for the transfer or rental of the domain name, or share with him the use of plaintiff’s mark for his own apparently competing goods, which would give him the immediate benefit of plaintiff’s good will flowing from the mark, but promise not to sue him regardless of how he uses plaintiffs mark. Accordingly, I find that Henderson’s use of that domain name was unquestionably the type of bad faith use Congress intended to prohibit.

While not a factor relevant to Henderson’s bad faith, I note that inevitably future trademark litigation would arise should Henderson use in the way he proposes. To the extent Congress enacted the ACPA intending to give trademark owners inexpensive and effective legal remedies that were uncertain and expensive under then-existing trademark law, plaintiff’s initiation of this in rem proceeding is consistent with that Congressional intent since Henderson’s proposed use of the domain name which is nearly identical to plaintiff’s trademark is certain to engender a presumptively meritorious yet expensive trademark action against him.

All the elements of success on the merits being adequately shown, Register.com is directed to maintain the already-effected transfer of the registration of in the name of BroadBridge in accordance with its normal subscription and registration policies and procedures.

The foregoing is so ordered.

Dated: New York, New York
July 7, 2000
United States District Judge

Footnotes

1Register.com incorporates into its registration agreements with registrants the Internet Corporation for Assigned Names and Numbers’s (ICANN) Uniform Domain Name Dispute Resolution Policy and ICANN’s Rules of the Uniform Domain Name Dispute Resolution Policy. By registering with Register.com, Henderson agreed to ICANN’s dispute policy and rules which require him to submit to an administrative proceeding when a complainant alleges his domain name is identical or confusingly similar to that complainant’s trademark.

2Paragraph 4(k) reads:
Availability of Court Proceedings. The mandatory administrative proceeding requirements set forth in Paragraph 4 shall not prevent either you or the complainant from submitting the dispute to a court of competent jurisdiction for independent resolution before such mandatory administrative proceeding is commenced or after such proceeding is concluded.
Uniform Domain Name Dispute Resolution Policy 4(k) (Internet Corporation for Assigned Names and Numbers 1999) (emphasis added).

3Rule 18 states:
Effect of Court Proceedings. (a) In the event of any legal proceedings initiated prior to or during an administrative proceeding in respect of a domain name dispute that is the subject of the complaint, the Panel shall have the discretion to decide whether to suspend or terminate the administrative proceedings, or to proceed to a decision.”
Rules of the Uniform Domain Name Dispute Resolution Policy 18 (Internet Corporation for Assigned Names and Numbers 1999) (emphasis added).

4Since these proceedings began, the Panel has elected to suspend the administrative proceeding pending the outcome of this case. (Letter from Levy to the Court of 5/17/00). Accordingly, Henderson’s request for a stay pending the outcome of the administrative proceedings is either moot or is denied.

5The statute reads, in relevant part:
(d)(2)(A) The owner of a mark may file an in rem civil action against a domain name in the judicial district in which the domain name registrar, domain name registry, or other domain name authority that registered or assigned the domain name is located if
(i) the domain name violates any right of the owner of a mark registered in the Patent and Trademark Office, or protected under subsection (a) or (c); and
(ii) the court finds that the owner-
(I) is not able to obtain in personam jurisdiction over a person who would have been a defendant in a civil action under paragraph (1); or
* * *
(D)(i) The remedies in an in rem action under this paragraph shall be limited to a court order for the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark.
15 U.S.C. §1125(d)(2).

6The statute reads, in relevant part:
(d) Cyberpiracy prevention
(1)(A) A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person
(i) has a bad faith intent to profit from that mark, . . . and
(ii). . . uses a domain name that-
(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark[.]
15 U.S.C. §1125(d)(1).

7The statutory list includes:
(B)(i) In determining whether a person has a bad faith intent described under subparagraph (a), a court may consider such factors as, but not limited to
(I) the trademark or other intellectual property right of the person, if any, in the domain name;
(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
(IV) the person’s bona fide noncommercial or fair use of the mark in a site accessible under the domain name;
(V) the person’s intent to divert customers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either commercial gain or with the intent to tarnish or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell, or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in the bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct;
(VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the person’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct;
(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to the marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
(IX) the extent to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of subsection (c)(1) of this section.
(ii) Bad faith intent described under subparagraph (A) shall not be found in any case in which the court determines that the person believed or had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.
15 U.S.C. §1125 (d)(1)(B).

- against -

NEXT BIG STAR, INC., NEXT BIG STAR
L.L.C., VICTORY ENTERTAINMENT
CORPORATION and MICHAEL H. GERBER,
Defendants.

DECISION AND ORDER

00 Civ: 0911 (VM)

VICTOR MARRERO, District Judge:

BigStar Entertainment, Inc. (“BigStar”), plaintiff in this action for a preliminary injunction, seeks to restrain Next Big Star, Inc. and related defendants (collectively, “Next Big Star”) from using a name that plaintiff contends infringes on BigStar’s prior trademark rights. BigStar’s business for over two years has been principally the sale of videos, offered along with free information about the film industry, chat rooms and interviews with movie celebrities, all conducted online through the World Wide Web at “www.bigstar.com”. Next Big Star was launched recently to conduct an entertainment talent search. For this purpose, defendants established a website at “www.nextbigstar.com” through which they plan to conduct their talent contest and offer related information, chat rooms and interviews with celebrities.

The case, typical of many trademark disputes, reaches to the fringes of the subtleties that very often enter into what is in a name and manifests the weighty consequences associated with the choice. The parties’ legal quarrels here, and the issues they raise, are familiar. But the controversy adds the dimension of cyberspace. It joins the ranks of the exponential number of legal struggles arising out of the use of the Internet — as a mass medium of communication and commerce, and, more and more prolific as consumers and markets expand and competing users clash, as an incubator of lawsuits. Many among this rapidly growing variety of cases raise knotty issues, some of them novel. Do these online collisions pose new, unique difficulties to the law? To what extent do the distinct dimensions or the World Wide Web challenge the established concepts and methods developed to resolve legal conflicts arising from other media? Do the familiar approaches suffice to accommodate analysis of unaccustomed aspects of the new disputes? The case before the Court prompts some of these questions, aspects of which have not been fully addressed in this Circuit.

The Court, having reviewed the parties’ papers raising some of these issues, and having heard oral argument, sets forth its findings of fact and conclusions of law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure. For the reasons described below, this Court has concluded that BigStar, though first in time as between these parties to stake out its name, trademark and web domain, has not met the legal burden to establish it is entitled to enjoin Next Big Star at this stage of these proceedings.

I. FINDINGS OF FACT¹

The facts before this Court are undisputed. The parties’ disagreement is limited to the application of relevant legal standards to these facts.

BigStar, a Delaware corporation with an office in New York, has its principal address in cyberspace at “www.bigstar.com”. There it operates as an online retailer dedicated exclusively to filmed entertainment products such as videocassettes, digital video discs (“DVDs”) and related movie merchandise. Plaintiffs website also provides its visitors with movie industry news, interviews with celebrities, movie previews and periodic online chats in real time with film celebrities.

Plaintiff has used variations of its name as trademarks and in a logo to identify its “Movie Superstore” on the Internet since its incorporation in March 1998 and has used and advertised its name and domain address since the launching of its website in May of 1998. Its website logo contains the words “bigstar.com” and appears in black (“bigstar”) and red (“.com”). A five-pointed red star is used to dot the “i”, and a light bluish-grey trail evinces that the star has streaked across the top of the logo to the left from the right.

Plaintiff filed applications for trademark registration protection with the Patent and Trademark Office (“PTO”) in October 1998 for “BIGSTAR” and in May 1999 for “BIGSTAR.COM”. These applications remain pending. While no opposition to them has been filed to date, at least two parties, including defendants herein, have requested additional time from the PTO within which to consider whether to file a Notice of Opposition to plaintiffs marks. Plaintiff states it has spent over S12 million to date on marketing BigStar’s name and products, by virtue of which it contends its trademarks have become well known and established in the market in which they operate. According to plaintiff, it received over 3 million unique visits to its website in January 2000.

In December 1999, BigStar formed an alliance with Value Vision International Inc. (“Value Vision”) and announced a venture into the off-line world, where it hopes to produce a weekly television program for Value Vision’s cable network. BigStar’s show, to be called “THE BIGSTAR SHOW” will consist of human interest stories about film celebrities and their movies and will offer plaintiffs merchandise for sale. Plaintiff has also filed with the PTO an application to register “THE BIGSTAR SHOW” in connection with its television production.

Defendants Next Big Star, Inc. and Next Big Star L.L.C. are corporations organized in December 1999 and January 2000, respectively, under the laws of the state of Delaware. Both entities are involved with defendant Victory Entertainment Corporation, a multimedia company incorporated in Florida, in the development, sponsorship and production of an online talent competition to be conducted and judged on the Internet and of a related network television program to be produced quarterly in order to introduce the competition winners. Defendant Michael H.

Gerber is a New York resident who serves as president and chief executive officer of Victory Entertainment Corporation, and as senior executive of the other corporate defendants. Mr. Gerber assisted with the creation of the “Next Big Star” mark² and the implementation of the talent search venture.

The defendants, in or about October 1999, approached Ed McMahon, a television personality who was previously associated with The Tonight Show and who had hosted a talent competition on national television called Star Search, in an attempt to enlist him in their enterprise. Mr. McMahon joined forces with the defendants and, from November 1999 through January 2000, helped them design the contest, television show and website.

On January 25, 2000, defendants issued a press release promoting their new online talent competition and related television program and the launching of “www.nextbigstar.com” as the site for the competition. Defendants claim that their website received 4.75 million “hits” in the weeks immediately following the announcement of their venture.

Defendants’ logo, which was revised shortly after this litigation commenced as a direct result of plaintiffs instant application, now contains the words “ED McMAHON’S nextbigstar.com”, the first half of which appears in white or red (“ED McMAHON’S”), with the other words in yellow (“nextbigstar” and “coin”). It, too, has a five point red star, but here the star replaces the period in “.com”, above which there is a long triangular red mark designed to resemble the upward beam of a searchlight.

Defendants’ website celebrity interviews, along with the information there provided, are intended primarily to promote the talent search and encourage participation. Defendants are also sponsoring a national bus tour to search for talent and, to this end, were scheduled to start visiting some 40 cities in March 2000. Persons interested in entering the competition, whether enlisted by promotion online or through the bus tour, may select the category that best fits their skills from the many choices offered by defendants, such as music, comedy, dance and modeling. The aspiring performer is invited to complete and sign an entry form which may be copied from the website and submitted to defendants, along with a registration fee of S 19.95 and a self-produced videotaped performance.

Performances are to be displayed on the Internet for judging by individuals at home who may download, view and vote on them. Under defendants’ plan, the online contest winners are to appear on a nationally televised competition to be broadcast four times a year on a major network. The television contest, which is to be called “The Next Big Star Show”, is to be hosted by Mr. McMahon and will be simulcast on the World Wide Web. Performers who reach the television competition are eligible to win cash awards up to S 10,000.00 and other prizes.

Plaintiff, upon learning of defendants’ plans as announced on January 25, 2000, moved on February 7, 2000 for a preliminary injunction under Rule 65 of the Federal Rules of Civil Procedure to restrain defendants from (a) using “Next Big Star” or “nextbigstar.com” as a trademark, trade name, Internet domain name or as part of a logo in connection with their new online talent competition or related television program and (b) taking any other actions designed or intended to infringe and dilute the value of plaintiffs trademarks, logo and domain name. This Court heard oral argument on February 22, 2000.

II. CONCLUSIONS OF LAW

A preliminary injunction is an extraordinary equitable remedy which places on the movant the burden of proving each element requisite for such relief. The decision to grant a preliminary injunction rests within the sound discretion of the Court. To obtain a preliminary injunction in this Circuit, the moving party must show (1) irreparable harm and (2) either (a) a likelihood of success on the merits, or (b) sufficiently serious questions going to the merits to make them a fair ground for litigation, and a balance of hardships tipping decidedly toward the party requesting the preliminary relief See Jackson Dairy, Inc. v. H.P. Hood & Sons. Inc., 596 F.2d 70, 72 (2d Cir. 1979). We now consider whether plaintiff has met its burden, addressing the second requirement first for reasons later explained.

A. Likelihood Of Plaintiff’s Success On The Merits

A preliminary injunction may issue only if the Court finds that the movant is likely to prevail on the merits of the underlying controversy. The movant need not show that success is certain, only that the probability of prevailing is “better than fifty percent.” Wali v. Coughlin, 754 F.2d 1015, 1025 (2d Cir. 1985). Plaintiffs complaint sets forth five claims, each of which we address in turn.

(1) Trademark Infringement Claim Under 43(a) of the Lanham Act

Neither plaintiffs “BIGSTAR” nor “BIGSTAR.COM” is a registered trademark. Although plaintiff has filed for registration, its applications are still pending. Nonetheless, unregistered marks may qualify for protection under section 43(a) of the Lanham Act, which provides in pertinent part:

Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof. . . which. . . is likely to cause confusion, or to cause mistake, or to deceive.,, as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person . . . shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C.    1125(a)(1).

The Second Circuit has noted that “eligibility for and scope of protection under section 43 a . . . is dependent on the nature of the mark allegedly infringed. . . .” Western PubI‘ Co., Inc. v. Rose Art Indus., Inc., 910 F.2d 57, 60 (2d Cir. 1990). As in any case under section 43(a), once the strength of plaintiffs marks is identified, the focus turns to whether defendants’ commercial name or symbol is likely to cause confusion among consumers as to the source, origin or sponsorship of plaintiffs goods due to any similarity between the respective marks.

The likelihood of confusion as to a product’s source is evaluated by balancing the eight factors set forth in Judge Friendly‘s seminal opinion in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492 (2d Cir. 1961), cert. denied, 368 U.S. 820(1961). In considering plaintiffs claim here, this Court thus must examine the function of many variables: the strength of [its] mark, the degree of similarity between the two marks, the proximity of the products, the likelihood that the prior owner will bridge the gap, actual confusion, and the reciprocal of defendant[s'] good faith in adopting its own mark, the quality of defendant[s'] product, and the sophistication of the buyers.

Id. at 495. No single one of these factors is determinative, and this Court may consider additional -factors if appropriate. Id.

Strength of Plaintiff’s Marks

Plaintiff must establish that its trademarks fall within one of the classes of marks recognized as eligible for protection under section 43(a) of the Lanham Act. In order to determine whether plaintiffs marks are entitled to protection, the Court must initially classify the marks by looking to their strength, bearing in mind that the purpose of trademark law is to establish the rights of the creators and users of commercial names, while also protecting the general public from confusion, mistake or deception that may flow from the copying of a mark which, through distinctiveness, identifies the origin of the products so branded. See W.E. Bassett Co. v. Revlon. Inc. 354 F.2d 868, 871 (2d Cir. 1966).

A mark’s strength is measured by two factors: “(1) the degree to which it is inherently distinctive; and (2) the degree to which it is distinctive in the marketplace.” W.W.W. Pharm. Co., Inc. v. Gillette Co., 984 F.2d 567, 572 (2d Cir. 1993) (citing McGregor-Doniger, Inc. v. Drizzle Inc., 599 F.2d 1126,1131-33 (2d Cir. 1979)). And this is where the word battles here begin. The parties sharply disagree on the strength of plaintiffs trademarks. BigStar contends that its marks are inherently distinctive and should be classified as arbitrary or fanciful, or at least as suggestive. Memorandum in Support of Plaintiffs Motion for a Preliminary Injunction (“Plaintiffs Memorandum”) at 11. Next Big Star argues that BigStar’s marks are generic or descriptive, or perhaps “at most” suggestive. Defendants’ Memorandum at 6-8. Each of these designations carries distinct-rank with legal implications on which the case may turn. What label the law pins on the marks can make all the difference.

What goes into a product name or symbol is often charged with nuances. Precisely for this reason, trademark law abounds with elaborate semantics and fine distinctions that test the limits of parsing the language, rendering judgments among competing claimants in disputes about commercial marks always an exacting and perplexing challenge. “Razor-thin judgment calls are indigenous to the law of trademark protection.” Thompson Med. Co., Inc. v. Pfizer Inc., 753 F.2d 208, 212 (2d Cir. 1985). Through the rambles and tangles of words, and through the niceties and bewilderment peculiar to this area of the law, however, certain order and logic and purposes do emerge, even if at times only impressionistically. These points of light help illuminate the ends that the law strives to achieve, as well as the priorities it recognizes and protects. The challenge entailed in resolving the conflicting claims at issue in this case may be eased somewhat if the analysis of the decision to be made is formulated against a backdrop of the theory and intent of the law in this area, on the conceptual framework and accompanying legal principles upon which trademark and unfair competition rules are founded.

A close reading of pertinent cases, statutes and commentary suggests some of the basic ends trademark law seeks to achieve and the values it strives to promote and protect. Most prominent among these are to encourage honest business competition and to recognize and reward commercial creativity, investment, diligence, initiative and good faith, weighed against certain interests of the public, when making purchasing choices, to be protected from confusion, mistake and deception. As the discussion below indicates, the rank the law assigns to a name or mark chosen for use in trade, along with the accompanying level of protection, varies in direct proportion to the presence of these equities. Implicitly, if not expressly articulated, the probability of inherent distinctiveness injected into a choice of a commercial name and the foreseeability of its exclusivity also bear significantly in establishing the scope of recognition and protection to which a trademark is eligible.

Language is rich, and English more bountiful than most in this regard. The wealth of our tongue consists of an almost limitless number of words, alone or in combination, placed at our disposal to name persons, places and things. And when the known nomenclature falls short, when the existing or familiar vocabulary just will not do to serve a purpose calling for a special term, only the frontiers of human ingenuity contain the possibilities to adapt a common word to an uncommon use, to borrow one from a foreign language or to invent one altogether for the given need perceived. Moreover, together with the name, the graphic logos designed to identify products and link them to their source further enlarge the range of signature possibilities to still more expansive dimensions.

And yet, the law abounds with conflicts about names given to things. For, from among the abundance of opportunities available, the selection of a term or symbol used to describe an article in trade is fraught with legal meaning, often also with potentially fateful consequences. To This end, the options that language aided by imagination offers are vast, ranging from the mundane to the sublime, from the known, clear and familiar to the abstract, the allusive, the symbolic, the figurative, the fancied or entirely improvised. Within that broad compass, trademark choices generally follow patterns that fall within a spectrum of two extremes.

At a far end, one approach strives deliberately for uniqueness and inherent distinction. It does so by purposefully employing rare or coined terms or using ordinary words in unusual ways. This choice maybe grounded On several objectives. It recognizes that the more effort, creativity and resources invested to produce and establish the name or mark, the greater the probabilities are that another person, honestly and truly, genuinely by happenstance, will not chance upon identical or similar words to brand a comparable product in the same or near market. That farther reach extended to tap imagination works to extract what is farther out of range and to protect against the odds of duplication. It thus may not only serve the purpose of diminishing the likelihood of infringement, but may also guard against the prospect that the public may confuse the item or its source with another one. And, should the name sufficiently stir the fancy of customers for which the product is intended, the considered choice of the unconventional way, like the propitious tide in human affairs, may lead on to fortune. It could reap rewards for the rightful holder of the mark. If the trademark catches on, if by its ingenuity or singularity it captures the imagination and embeds in the mind of the public, it could firmly establish the distinctiveness of the article and others similarly named by the same producer, thereby advancing the identity and markets of the source. In this manner, the originality summoned to give the product its name may generate its own recompense.

Uniqueness and distinctive identity, however, have their limitations. Inventiveness does not spontaneously spawn recognition. Nor does it necessarily create a following for any given goods. Public acceptance and allegiance must be purchased, at a price generally proportionate to the degree of novelty of the trademark and product and the unfamiliarity of their origin. Accordingly, however inspired and felicitous the mark may be, it takes a greater investment of capital, energy and time, as well as higher-stake risk, to establish a market in a product sold under a brand that identifies neither the article, the market nor the source. And, once achieved, success inevitably invites parasitic imitation or outright copying. Good fortune attracts piracy to the fruits of creativity.

The course at the other end of the spectrum lessens some of these obstacles and risks. It offers the somewhat easier and quicker way to product recognition and source identity. This shortcut entails a choice of the road most taken by entrepreneurs searching for trademarks and names. It is that of using names that rely on common terms, on marks that display little linguistic flair or frills, nothing fancy that demands stirring an associational flight into imagination either on the part of the creator or the purchaser of the goods so named. By sticking with the familiar and employing self-advertising, ordinary description, these marks readily identify the item sold or its market and maker. A product whose name hawks what it is sells itself. Because the trademark rides on the coattails of the product itself, or easily identifies the seller and what is being sold, relatively less time and investment generally may be necessary to create a, loyal market for the goods.

But the commonplace, too, has its inherent deficiencies. And here the laws of probability and foreseeability come into play to yield reverse results. Where the distinctive trademark route might lead to fortune, remarkably the beaten path more often taken may end at the intersection with the law’s equivalent of the road to the poorhouse — potential litigation. Reliance on conventional, pervasive terms to label a product reduces the likelihood that consumers would be confused by products similarly named in a competing market. This result obtains in part because the undistinguished name raises the probability of chance duplication, rendering it both more likely and foreseeable that another person, acting entirely independently and in good faith, may strike upon the same word or notion to brand a potentially competing product in a potentially competing market. As the chances of foreseeable, honest trademark duplication rises, the element of surprise to consumers and to merchants, as well as their realistic expectation about the singularity and distinctiveness of the trademark in question, should lessen. In this manner, therefore, the business judgment to settle on the familiar term entails its own risk-benefit calculus. The easy mark may offer the less costly, more rapid course to name recognition and identification of source. At the same time, the name selection entails an assumption of risk in two ways. First, in settling upon ordinary words the likelihood of duplication is greater. Second, the law places a heavier burden on trade reliance on the common term by extending less recognition and protection to inherently indistinctive marks precisely because of the probability that the public is less likely to be confused by them.

Trademark law, as it has evolved in the cases and as codified in statutes, recognizes the whole spectrum of these distinctions, not only at the lines demarcating the two extremes, but in the very subtle shades of differences that blend faintly in between. The law distinguishes among these bands and their ends, applies corresponding legal concepts and assigns varying consequences. Thus, it confers degrees of recognition, and it bestows differing levels of protection — thereby fostering competition, initiative, investment and diligence — in a hierarchical scale that weighs these considerations in the mix. And, for the reasons indicated, it rates the trademark, and ranks the order of protection to which it is entitled, in proportion to the inherent qualities the mark reflects in minimizing the likelihood of confusion, mistake and deception in the marketplace. In this respect, the law tilts decidedly in favor of the distinctive term over the unremarkable, the rare over the commonplace.

These concepts were concisely articulated by the Second Circuit in Abercrombie & Fitch Co. v. Hunting World. Inc., 537 F.2d 4 (2d Cir. 1976). There the Court identified and examined four classes of marks generally recognized in commercial use, “[a]rrayed in an ascending order which roughly reflects their eligibility to trademark status and the degree of protection accorded. . . .” Id. at 9. The categories are (1) generic; (2) descriptive; (3) suggestive; and (4) arbitrary or fanciful. Id. But, as Abercrombie & Fitch Co. recognized, much ambiguity and complexity inhere in these classifications “because a term that is in one category for a particular product may be in quite a different one for another, because a term may shift from one category to another in light of differences in usage through time, because a term may have one meaning to one group of users and a different one to others, and because the same term may be put to different uses with respect to a single product.” Id. The word puzzles and legal quandaries these amorphous intricacies pose are concretely illustrated by the example cited by a leading trademark commentator who, declaring that the proper designation of a mark will vary with the relationship between the term and the product or service, opined that “the word ‘apple’ would be arbitrary when used on personal computers, suggestive when used in ‘Apple-A-Day’ on vitamin tablets, descriptive when used in ‘Tomapple’ for combination tomato-apple juice and generic when used on apples.” 2 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition 11:71, at 11-120 (4th ed. 1999).

The generic label attaches to words that comprise the ordinary language. It embraces terms which derive from nomenclature that has become the public domain and which are employed to identify a particular thing by its given name. Such terms cannot be appropriated or monopolized. Generic words and their usage belong to all who wish to speak the language. No single user may corner the market on application of particular terms of everyday speech to serve private purposes, to the exclusion of other persons who may seek, at the risk of potential liability to one who laid claim to words of common currency, to avail themselves of ordinary language to refer to an article by its publicly accepted name. See American Cyanamid Corp. v. Connaught Lab., Inc., 800 F.2d 306 (2d Cir. 1986). For these reasons, the common law did not extend validity or protection to trademarks based on generic terms. Regardless of how far the use of the name may have prospered in marketing a particular product and publicly associating it with its maker. Indeed, if an invented word becomes too successful Over time, it may very well be deemed generic and lose its protection See e.g., King Seeley Thermos Co. v. Aladdin Indus., Inc., 321 F.2d 577 (2d Cir. 1963) (“THERMOS”); DuPont Cellophane Co., Inc. v. Waxed Products Co., Inc., 85 F.2d 75 (2d Cir.), cert. denied, 299 U.S. 601 (1936) (“CELLOPHANE”); Bayer Co., Inc. v. United Drug Co., 272 F. 505 (S.D.N.Y. 1921) (“ASPIRIN”); Haughton Elevator Co. v. Seeberger, 85 U.S.P.Q. 80 (1950) (“ESCALATOR”). Thus, Kentucky Fried Chicken could not usurp the words marking its product and thereby deprive “Kansas Fried Chicken” of the use of common language to describe its own brand of the same thing, compelling the later entrant into strained construction of language for generic reference to the identical product, such as “Kansas Fowl Cooked in Deep Fat”.

Could BigDeal Investments, having commenced trade under that mark, foreclose Next Big Deal Prospectors from using the words their names have in common? The answer, approaching closer to the merits of the dispute at hand, turns on the status accorded to marks filling the next ring in the order: those labeled as descriptive. Names in this grouping also rely on generic words that contain literal descriptions. These terms, with minor shades and twists, readily identify the qualities or content of the item and signal the market in which the product may be found. See, e.g., Papercutter. Inc. v. Fav’s Drug Co., Inc., 900 F.2d 558 (2d Cir. 1990) (“PAPER CUTTER” paper ornaments); W.E. Bassett Co., 354 F.2d 868 (“TRIM” cuticle trimmer); Ideal World Mktg. Inc. v. Duracell. Inc., 15 F. Supp.2d 239, 244 (E.D.N.Y. 1998), aff’d, 182 F.3d 900 (2d Cir. 1999) (“POWERCHECK” battery). Because the mark, by incorporating familiar words that manifestly refer to the goods or market, piggybacks on the product itself, a merely descriptive term is considered a weak mark.

The protection threshold of the descriptive name is placed above that of the generic, to which neither the common law nor the Lanham Act affords trademark protection, but the range is restricted. First, the scope of protection may be narrowly limited to similar goods and markets in close competitive proximity. See 3A Rudolf Callmann, The Law of Unfair Competition, Trademarks and Monopolies 20.43, at 472 (4th ed. 1999); AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 350 (9th Cir. 1979). Second, to be eligible for legal recognition and enforcement, the descriptive name must satisfy a standard particular to this classification. While section 2(f) of the Lanham Act (see 15 U.S.C.    1052(f)) permits registration of merely descriptive terms, the corresponding protection it accords demands, as a precondition, proof that the mark has acquired secondary meaning in its market. This test refers to demonstrable evidence that the mark, by means of sufficient marketing, sales, usage and passage of time, has established distinctiveness in commerce, measured by the extent to which it has become identified in the public mind with the particular source of the goods.

Suggestive marks occupy the next gradation on the scale of trademark status and protection. This variety is perhaps the most elusive, the hardest to conceptualize and define. Like generic and descriptive names. This category relies on terms derived from ordinary language. But the words chosen for a suggestive name are not just any words, but specially select words, the mor juste appointed for the particular trade purpose. Such terms generally do not, unlike the merely descriptive phrase, direct the consumer immediately to the producer by way of road signs that prominently advertise the goods. Instead, the journey to the market source leads there through an intermediate loop at a cloverleaf in thought. Where the descriptive common word leads the buyer by the hand, the rarer suggestive mark ushers through the mind. From the commercial name to the product or its market to its source, the suggestive term transports both through purposefully evocative words laden with intimation and through the contemplated imagery and associations the name conjures. That passage is neither linear nor strait. It demands a mental exercise, multiple bounds in a dual act of perception and imagination. A first stage is associated with the creative energy exerted by the maker of the mark. When choosing what to call the article, the creator of the suggestive name meaningfully fixes upon associational terms that will identify the product figuratively and will appeal to the consumer by allusion and metaphor. The second mental act closes that loop. It is that which occurs in the mind of the consumer allured to the product, and who may accept it in part on the strength of the purposeful imagery summoned by its name.

Among the prominent qualities the courts have found most compelling for a mark to qualify as suggestive are the extent to which the mark demands or reflects creativity; abstract thought and intuition; allegorical reference; metaphorical resemblance; figurative imagery; associational reasoning; and sheer incongruity — in short, the ingenuity that inspired the following graphically apt word-product associations declared suggestive: “ROACH MOTEL” (insect trap);³ “GLING-HO” (military toy figure);⁴ “COPPERTONE (suntan lotion);⁵ “PLAYBOY” (magazine);⁶ “POPCORN” (small silver anodes used in electroplating);⁷ and “SHEER ELEGANCE” (pantyhose).⁸ By these standards, suggestiveness is an artful quality of inherent imagery and obliqueness infused into a fine turn of a word or phrase which, at the moment of perception when it all clicks and the association intended becomes apparent, stirs the response, often with admiration: “That’s it.” It is, for example, the roundabout recognition evoked by calling a computer clicker a “mouse”, or conceiving of the name “Big Star” to mark a small inn in Bethlehem.

One court in this District defined the difference: “A term is suggestive if it requires imagination, thought and perception to reach a conclusion as to the nature of the goods. A term is descriptive if it forthwith conveys an immediate idea of the ingredients, qualities or characteristics of the goods.” Stix Products, Inc. v. United Merchants & Manufacturers, Inc., 295 F.Supp. 479, 488 (S.D.N.Y. 1968). Qualitatively, the distinction may be illustrated by the difference in the creativity which must be summoned to devise, as well as the sequential thought necessary to catch the linkage meant by, a name such as “PASSION” for a fragrance on the one hand (see Elizabeth Taylor Cosmetics Co., Inc. v. Annick Goutal, S.A.R.L., 673 F.Supp. 1238 (S.D.N.Y. 1987)) and, on the other, “LITTLE TAVERN” for a restaurant. See Little Tavern Shops, Inc. v. Davis 116 F.2d 903 (4th Cir. 1941). Correspondingly, it is likely to demand greater effort and larger financial investment in order to create the public recognition associating the suggestive mark with its product and establishing a market linking the item to its source. Recognizing the larger commitment of both resourcefulness and resources that must be spent to procure market success with a given suggestive term, the law rewards the extra demands by conferring broader trademark protection upon this class than that granted to the merely descriptive term. The suggestive name does not depend upon a showing of secondary meaning to entitle it to trademark registration. See Abercrombie & Fitch Co., 537 F. 2d at 8.

At the apex of the trademark hierarchy are the terms denominated arbitrary or fanciful. In this realm, inventiveness and ingenuity leap beyond mere suggestiveness, dispensing with any effort to identify the product through its name. That continuity, even through circuitous routes, is entirely broken. Arbitrary marks employ common words in uncommon ways. New fanciful words and terms are not real words at all, but are coined and applied in a unique, unfamiliar usage for the express purpose of serving as a trademark to be attached to a particular product, but bearing no identifying trace to the product or source. Of course, that gap is not forever. In time, with sufficient advertising, the unfamiliarity of the fanciful or arbitrary use may be overcome, at some threshold of marketing success creating a risk that the term may take on generic usage in some markets, there applied to refer to the particular product. See Abercrombie & Fitch Co., 537 F. 2d at 9. By way of contrast, for example, while some stretch of imagination may be needed to link “PASSION” to a perfume, it demands much more, especially at the initiation of the mark, to establish an association between “APPLE” as a brand name for a computer or “XEROX” for a copier.

Given its uppermost tier, the fanciful or arbitrary name is the easiest to register and, like the suggestive, does not demand proof of secondary meaning. In according to this class the highest rank of trademark recognition and protection, the law recognizes that the more unique and inherently distinctive the mark, the stronger it is, and the greater will be the likelihood that the public may confuse a similar mark in the same or closely related market as originating from the same source. See 3A Callmann, supra,    20.43, at 47. See also Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F. 2d 254 (2d Cir. 1987). The law also acknowledges and rewards the yet greater level of creativeness, investment and risk required to establish and sustain a market in a product so denominated, recognizing, among other things, that the act of inherently distinct creation also builds in a form of self-protection. The unfamiliar or coined term significantly enhances the likelihood of exclusivity. It guards against infringement, presumptively easing enforcement by minimizing the odds that a competitor would independently, and in good faith, arrive at the same or a substantially similar arbitrary or fanciful mark.

These legal distinctions have all been put into play in the case before the Court. Application of the principles described to the proper classification of the names here in dispute should facilitate resolution.

Inherent and Marketplace Distinction
Classification of the Marks

As an initial matter, the Court notes that PTO registration is pertinent to a mark’s strength. Plaintiffs marks herein are not registered (Affidavit of David S. Friedensohn sworn to February 4, 2000 (“Friedensohn Aff.”), ¶ 9), and third parties have sought additional time from the PTO within which to consider whether to oppose plaintiffs pending applications for registration. Affidavit of Lance H. Koonce, III, sworn to February 17, 2000 (“Koonce Aff.”), Ex. A. Accordingly, the Court is unable to draw upon the legal presumptions about the validity and classification of a mark that follow from an incontestable registration. This analysis therefore must commence on a clean slate.

We begin with plaintiffs choice .of words for its trademarks, assessed in the context of the markets in which the products exist and how the terms used may reasonably be perceived by the ordinary consumer to whom the claimant appeals. The Court disagrees with BigStar’s claims that its marks are inherently distinctive and finds instead that plaintiffs marks fit more properly in the trademark grouping designated as descriptive.

In reaching this judgment, the Court grants, at the outset, that the call is a narrow one, by no means devoid of doubt. Hence, the Court has taken pains here, at lengths perhaps excessive, to explain the grounds upon which its conclusion rests and the paths that lead the Court there. The choice is difficult for the same reasons which, over the ages, have bedeviled many other judges in marking the vague boundary that divides suggestive and descriptive terms. Courts and commentators alike concede that the border is often “chimerical” (Thompson Med. Co., Inc., 753 F.2d at 215, n.8) and “illusory.” Id. at 215. The gradations between the two classes often blend imperceptibly into one another, resulting in often confusing, at times subjective and even contradictory decisions. See Abercrombie & Fitch Co., 537 F.2d 4; Franklin Knitting Mills. Inc. v. Fashionknit Sweater Mills. Inc., 297 F. 247 (S.D.N.Y. 1923), aff’d, 4 F.2d 1018 (2d Cir. 1925). See also 2 McCarthy, supra, at   11:71, at 11-118. In a sense, most marks may possess qualities that properly may be called both suggestive and descriptive. Description may be suggestive, and suggestion may be descriptive, and one may evolve into the other. A compound word or a composite phrase may combine components of both. Whatever the difficulties encountered in finding them, the demarcations are real As Justice Holmes said, “the theory of the law is that such lines exist.” Oliver Wendell Holmes, Law in Science and Science in Law, 12 Harvard L.J. 443, 457 (1899).

In rejecting BigStar’s contention that its marks are arbitrary or suggestive, the Court considered a number of questions culled from case law and commentary. How are BigStar’s marks perceived? How are the words composing the name understood by the ordinary potential customer in the market in which plaintiff offers its products? To what degree do the marks challenge the imagination of the general public or the targeted ordinary consumer? How rapid, demanding and direct is the thought process by which the prospective buyer of plaintiffs products will associate them with their source? Does that connection require mature, multi-step reasoning? Or does “BIGSTAR” or “BIGSTAR.COM” as used in the commercial context here promptly convey an immediate idea of the qualities or characteristics of the goods? How likely is it that consumers would be confused by the appearance of a “BIG STAR” or “Big Star” in the same industry? Does the name rely on plain words that are in the public domain? Would exclusive trade use of those words by one person reduce the stock of common terms, infringing on the rest of the public’s use of the language? Would the first user’s claim to protected use of the common words unduly restrict the competitive opportunity of other entrants into the same or similar market to the equal use of ordinary language to describe another product, potentially competing or not, or to refer to it by its commonly understood name? What were the probabilities of duplication of the name at the time conceived and chosen by plaintiff, and how foreseeable was the likelihood of a competing name occurring in the same market?

OPINION AND ORDER

SIDNEY H. STEIN, District Judge:

Plaintiff Bensusan Restaurant Corp. (“Bensusan”) brought this action against defendant Richard King, individually and doing business as The Blue Note, alleging that King is infringing on Bensusan’s rights in its trademark “The Blue Note.” King has moved to dismiss the complaint for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2). The issue raised by that motion is whether the existence of a “site” on the World Wide Web of the Internet, without anything more, is sufficient to vest this Court with personal jurisdiction over defendant pursuant to New York’s long-arm statute and the Due Process Clause of the United States Constitution. For the reasons that follow, the motion to dismiss the complaint is granted.

I. BACKGROUND

Bensusan, a New York corporation, is the creator of a jazz club in New York City known as “The Blue Note.” It also operates other jazz clubs around the world. Bensusan owns all rights, title and interest in and to the federally registered mark “The Blue Note.” (Complaint, paragraphs 1, 5.) King is an individual who lives in Columbia, Missouri and he owns and operates a “small club” in that city which is also called “The Blue Note.” (Complaint, paragraphs 2,6.)

In April of 1996, King posted a “site” on the World Wide Web of the Internet to promote his club.[1] This Web site, which is located on a computer server in Missouri, allegedly contains “a fanciful logo which is substantially similar to the logo utilized by [Bensusan].” (Complaint paragraph 11.) The Web site is a general access site, which means that it requires no authentication or access code for entry, and is accessible to anyone around the world who has access to the Internet. (Meltzer Aff. paragraph 2.) It contains general information about the club in Missouri as well as a calendar of events and ticketing information. (Id., paragraphs 2 – 3; Exhs. A & B.) The ticketing information includes the names and addresses of ticket outlets in Columbia and a telephone number for charge-by-phone ticket orders, which are available for pick-up on the night of the show at the Blue Note box office in Columbia. (Id., Exh. B.)

At the time this action was brought, the first page of the Web site contained the following disclaimer: “The Blue Note’s Cyberspot should not be confused with one of the world’s finest jazz club[s] [the] Blue Note, located in the heart of New York’s Greenwich Village. If you should find yourself in the big apple give them a visit. (Complaint, paragraph 9.) Furthermore, the reference to Bensusan’s club in the disclaimer contained a “hyperlink”[2] which permits Internet users to connect directly to Bensusan’s Web site by “clicking” on the link. (Id. at paragraph 10.) After Bensusan objected to the Web site, King dropped the sentence “If you should find yourself in the big apple give them a visit” from the disclaimer and removed the hyperlink. King Aff., paragraph 14.)

Bensusan brought this action asserting claims for trademark infringement, trademark dilution and unfair competition. King has now moved to dismiss the action for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2).

II. DISCUSSION

At this stage of the litigation– prior to an evidentiary hearing or discovery– Bensusan may defeat a motion to dismiss the complaint for lack of personal jurisdiction by making merely a prima facie showing of jurisdiction. See A.I. Trade Finance, Inc. v. Petra Bank, 989 F.2d 76, 79-80 (2d Cir. 1993); Hoffritz for Cutlery, Inc. v. Amaiac, Ltd., 763 F.2d 55, 57 (2d Cir. 1985); Rothschild v. Paramount Distiller, Inc., 923 F.Supp. 433, 435 (S.D.N.Y. 1996); PI, Inc. v. Quality Prods. Inc., 907 F.Supp. 752, 758 (S.D.N.Y. 1995); Dave Guardala Mouthpieces, Inc. v. Sugal Mouthpieces, Inc., 779 F.Supp. 335, 336 – 37 (S.D.N.Y. 1991).

In that regard, Bensusan is entitled to have its complaint and affidavits interpreted, and any doubts resolved, in the light most favorable to it. See Landoil Resources Corp. v. Alexander & Alexander Servs., Inc., 918 F.2d 1039, 1043 (2d Cir. 1991); Hoffritz for Cutlery, 763 F.2d at 57; Linzer v. EMI Black wood Music, Inc., 904 F.Supp. 207, 211 (S.D.N.Y. 1995); Editorial Musical Latino Americana, S.A. v. Mar Int’l Records, Inc., 829 F.Supp. 62, 64 (S.D.N.Y. 1993). This burden is satisfied even when the moving party makes contrary allegations that place in dispute the factual basis of plaintiff’s prima facie case. See A.I. Trade Finance, 989 F.2d at 79 – 80; Marine Midland Bank, N.A. v. Miller, 664 F.2d 899, 904 (2d Cir. 1981); Lancaster v. Zufle, 165 F.R.D. 38, 40 (S.D.N.Y. 1996); National Cathode Corp. v. Mexus Co., 855 F.Supp. 644, 646 (S.D.N.Y. 1994).

Furthermore, where, as in this case, discovery has not commenced on this issue or any other, plaintiff is entitled to rely on mere factual allegations to make its prima facie showing of jurisdiction. See Ball v. Metallurgie Hoboken-Overpelt, S.A., 902 F.2d 194, 197 (2d Cir.), cert. denied, 498 U.S. 854, 111 S.Ct. 150, 112 L.Ed.2d 116 (1990); Rothschild, 923 F.Supp. at 436; Executive Telecard, Ltd. v. Engelman, No. 95 Civ. 9505, 1996 WL 191967, at *2 (S.D.N.Y. Apr. 19, 1996); Pilates, Inc. v. Pilates Inst., Inc., 891 F.Supp. 175, 177 (S.D.N.Y. 1995); Palmieri v. Estefan, 793 F.Supp. 1182, 1186 (S.D.N.Y. 1992); Kinetic Instruments, Inc. v. Lares, 802 F.Supp. 976, 981 (S.D.N.Y. 1992). Matters outside the pleadings, however, may also be considered in resolving a motion to dismiss for lack of personal jurisdiction pursuant to Fed.R.Civ.P. 12(b)(2) without converting it into one for summary judgment. See Visual Sciences, Inc. v. Integrated Communications, Inc., 660 F.2d 56, 58 (2d Cir 1981); Rothschild, 923 F.Supp. at 436; John Hancock Property and Casualty Ins. Co. v. Universale Reinsurance Co., Ltd., No. 91 Civ. 3644, 1992 WL 26765, at *6 (S.D.N.Y. Feb. 5, 1992).

Knowing that personal jurisdiction over a defendant is measured by the law of the jurisdiction in which the federal court sits, see Rothschild, 923 F.Supp. at 436 (citing Pilates, 891 F.Supp. at 179), Editorial Musical Latino Americana, 829 F.Supp. at 64, Bensusan relies on subdivisions (a)(2) and (a)(3)(ii) of N.Y.C.P.L.R. Section 302, New York’s long-arm statute, to support its position that personal jurisdiction exists over King in this action. Each provision will be addressed in turn.

A. C.P.L.R. Section 302(a)(2)

C.P.L.R. Section 302(a)(2) permits a court to exercise personal jurisdiction over any non-domiciliary who “commits a tortious act within the state” as long as the cause of action asserted arises from the tortious act. See Pilates, 891 F.Supp. at 180; Exovir, Inc. v. Mandel, No. 94 Civ. 3546, 1995 WL 413256, at *6 (S.D.N.Y. July 12, 1995); Dave Guradala Mouthpieces, 779 F.Supp. at 337; Business Trends Analysis v. Freedonia Group, Inc., 650 F.Supp. 1452, 1456 (S.D.N.Y. 1987). In Vanity Fair Mills, Inc. v. T. Eaton Co., 234 F.2d 633, 639 (2d Cir.), cert denied, 352 U.S. 871, 77 S.Ct. 96, 1 L.Ed.2d 76 (1956), the United States Court of Appeals for the Second Circuit held that trademark infringement occurs “where the passing off occurs, i.e., where the deceived customer buys the defendant’ product in the belief that he is buying the plaintiff’s.” Under this standard, courts have found that an offering for sale of even one copy of an infringing product in New York, even if no sale results, is sufficient to vest a court with jurisdiction over the alleged infringer. See Editorial Musical Latino Americana, 829 F.Supp. at 645; German Educational Television Network, Ltd. v. Oregon Public Broadcasting Co., 569 F.Supp. 1529 (S.D.N.Y. 1983); Hertz Sys., Inc. v. Hervis Corp., 549 F.Supp. 796, 797-98 (S.D.N.Y. 1982); Honda Assocs., Inc. v. Nozawa Trading Inc., 374 F.Supp. 886 (S.D.N.Y. 1974). Accordingly, the issue that arises in this action is whether the creation of a Web site, which exists either in Missouri or in cyberspace– i.e., anywhere the Internet exists– with a telephone number to order the allegedly infringing product, is an offer to sell the product in New York.

Even after construing all allegations in the light most favorable to Bensusan, its allegations are insufficient to support a finding of long-arm jurisdiction over plaintiff. A New York resident with Internet access and either knowledge of King’s Web site location or a “search engine” capable of finding it could gain access to the Web site and view information concerning the Blue Note in Missouri.

It takes several affirmative steps by the, New York resident, however, to obtain access to the Web site and utilize the information there. First, the New York resident has to access the Web site using his or her computer hardware and software. See Shea, 930 F.Supp. at 930. Then, if the user wished to attend a show in defendant’s club, he or she would have to telephone the box office in Missouri and reserve tickets. Finally, that user would need to pick up the tickets in Missouri because King does not mail or otherwise transmit tickets to the user. Even assuming that the user was confused about the relationship of the Missouri club to the one in New York, such an act of infringement would have occurred in Missouri, not New York. The mere fact that a person can gain information on the allegedly infringing product is not the equivalent of a person advertising, promoting, selling or otherwise making an effort to target its product in New York. See Hertz, 549 F.Supp. at 797. Here, there is simply no allegation or proof that any infringing goods were shipped into New York or that any other infringing activity was directed at New York or caused by King occur here. Cf. People v. Concert Connection Ltd. 211 A.D.2d 310, 314, 629 N.Y.S.2d 254, 257 (2d Dep’t 1995), appeal dismissed 86 N.Y.2d 837, 634 N.Y.S.2d 445, 658 N.E.2d 445, 658 N.E.2d 223 (1995).

Accordingly, C.P.L.R. Section 302(a)(2) does not authorize this Court to exercise jurisdiction over King.

B. C.P.L.R. Section 302(a)(3)(ii)

Bensusan also contends that personal jurisdiction is established pursuant to C.P.L.R. Section 302(a)(3)(ii), which permits a court to exercise personal jurisdiction over any non-domiciliary for tortious acts committed outside the state that cause injury in the state if the non-domiciliary “expects or should reasonably expect the act to have consequences in the state and derives substantial revenue from interstate or international commerce.” See American Eutectic Welding Alloys Sales Co. v. Dytron Alloys Corp., 439 F.2d 428, 432-35 (2d Cir. 1971); In re Houbigart Inc., 914 F.Supp. 964, 979 (S.D.N.Y. 1995): Time Prods. Plc. v. J. Tires Classic Handbags, Inc., 93 Civ. 7856, 1994 WL 363930, at *7 (S.D.N.Y. July 13, 1994); Car-Fresher Corp. v. Broadway Mfg, Co., 337 F.Supp. 618, 619 (S.D.N.Y. 1971); see also Sybron Corp. v. Wetzel, 46 N.Y.2d 197, 204-05, 413 N.Y.S. 127, 130 – 31, 385 N.E.2d 331 (1978).

As an initial matter, Bensusan does not allege that King derives substantial revenue from interstate or international commerce. Instead, it relies on arguments that King participates in interstate commerce by hiring and showcasing bands of national stature. Section 302(a)(3)(ii), however, explicitly states that substantial “revenue” is required from interstate commerce, not mere participation in it. King has submitted an affidavit stating that 99% of his patronage and revenue is derived from local residents of Columbia, Missouri (primarily students from the University of Missouri) and that most of the few out-of-state customers have either an existing or a prior connection to the area, such as graduates of the University of Missouri. (King Decl. paragraphs 4, 8.)

Moreover, Bensusan’s allegations of foreseeability which are based solely on the fact that King knew that Bensusan’s club is located in New York, is insufficient to satisfy the requirement that a defendant “expects or should reasonably expect the act to have consequences in the state.” That prong of the statute requires that a defendant make “a discernable effort … to serve, directly or indirectly, a market in the forum state.” Darienzo v. Wise Shoe Stores, Inc., 74 A.D.2d 342, 346, 427 N.Y.S.2d 831, 834 (2d Dep’t 1980).

Finally, Bensusan’s conclusory allegation of a loss in New York is nothing more that an allegation of an “indirect financial loss resulting from the fact that the injured person resides or is domiciled in New York,” which is not the allegation of a “significant economic injury” required by section 302(a)(3). See ICC Primex Plastics Corp. v. LA/ES Laminati Estrusi Termoplastici S.P.A., 775 F.Supp. 650, 656 (S.D.N.Y. 1991); Arbitron Co. v. E.W. Scripps, Inc., 559 F.Supp. 400, 404 (S.D.N.Y. 1983); Fantis Foods, Inc. v. Standard Importing Co., 49 N.Y.2d 317, 326 – 27, 425 N.Y.2d 783, 787, 402 N.E.2d 122 (1980); Sybron, 46 N.Y.2d at 205, 413 N.Y.S.2d at 131.

Accordingly, C.P.L.R. Section 302(a)(3) does not authorize this Court to exercise jurisdiction over King.

Bensusan’s primary argument in support of both statutory bases for personal jurisdiction is that, because defendant’s Web site is accessible in New York, defendant could have foreseen that the site was able to be viewed in New York and taken steps to restrict access to his site only to users in a certain geographic region, presumably Missouri. Regardless of the technical feasibility of such a procedure, see Shea, 930 F.Supp. at 929-30, 933-34, mere foreseeability of an in-site consequence and a failure to avert that consequence is not sufficient to establish personal jurisdiction. See Fox v. Boucher, 794 F.2d 34. 37 (2d Cir. 1986); Taurus Int’l Inc. v. Titan Wheel Int’l Inc., 892 F.Supp. 79, 82 (S.D.N.Y. 1995).

C. Due Process

Furthermore, even if jurisdiction were proper under New York’s arm statute, asserting personal jurisdiction over King in this forum would violate the Due Process Clause of the United States Constitution. See e.g., Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475-76, 105 S.Ct. 2174, 2183 – 84, 85 L.Ed.2d 528 (1985); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 292, 100 S.Ct. 559, 564, 62 L.Ed.2d 490 (1980); see also Richard S. Zembek, Comment, Jurisdiction and the Internet: Fundamental Fairness in the Networked World of Cyperspace, 6 Alb. L.J. Sci & Tech 339, 367-80 (1996). Due process requires “that the non-resident defendant has purposefully established minimum contacts with the forum state such that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.’”‘ Darby v. Compagnie Nationale Air France, 769 F.Supp. 1255, 1262 (S.D.N.Y. 1991) (quoting International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945)).

The following factors are relevant to this determination: “(1) whether the defendant purposefully availed himself of the benefits of the forum state; (2) whether the defendant’s conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there; and (3) whether the defendant carries on a continuous and systematic part of its general business within for forum state.” Independent Nat’l Distributors, Inc. v. Black Rain Communications, Inc., No. 94 Civ. 8464, 1995 WL 571449, at *5-6 (S.D.N.Y. Sept. 28, 1995).

As set forth above, King has done nothing to purposefully avail himself of the benefits of New York. King, like numerous others, simply created a Web site and permitted anyone who could find it to access it. Creating a site, like placing a product into the stream of commerce, may be felt nationwide– or even worldwide– but, without more, it is not an act purposefully directed towards the forum state. See Asahi Metal Indus. Co. v. Superior Court, 480 U.S. 102, 112, 107 S.Ct. 1026, 1032, 94 L.Ed.2d 92 (1992) (plurality opinion). There are no allegations that King actively sought to encourage New Yorkers to access his site, or that he conducted any business– let alone a continuous and systematic part of its business– in New York. There is in fact no suggestion that King has any presence of any kind in New York other than the Web site that can be accessed worldwide. Bensusan’s argument that King should have foreseen that users could access the site in New York and be confused as to the relationship of the two Blue Note clubs is insufficient to satisfy due process. See Fox, 794 F.2d at 37; Beckett v. Prudential Ins. Co. of Am., 893 F.Supp. 234, 239 (S.D.N.Y. 1995).

Although CompuServe v. Patterson, 89 F.3d 1257 (6th Cir. 1996), a recent decision of the United States Court of Appeals for the Sixth Circuit, reached a different result, it was based on vastly different facts. In that case, the Sixth Circuit found personal jurisdiction proper in Ohio over an Internet user from Texas who subscribed to a network service based in Ohio. The user, however, specifically targeted Ohio by subscribing to the service and entering into a separate agreement with the service to sell his software over the Internet. Furthermore, he advertised his software through the service and repeatedly sent his software to the service in Ohio. Id. at 1264-65. This led that court to conclude that the Internet user “reached out” from Texas to Ohio and “originated and maintained” contacts with Ohio. Id. at 1266.[3] This action, on the other hand, contains no allegations that King in any way directed any contact to, or had any contact with, New York or intended to avail itself of any New York’s benefits.

Accordingly, the exercise of personal jurisdiction over King in this case would violate the protections of the Due Process Clause.

III. CONCLUSION

For the reasons set forth above, defendant’s motion to dismiss the complaint pursuant to Fed.R.Civ.P. 12(b)(2) for lack of personal jurisdiction is granted and the complaint is dismissed.

FOOTNOTES:

FN1. In MTV Networks v. Curry, 867 F.Supp. 202 (S.D.N.Y. 1994), Judge McKenna of this court described the Internet as follows: The Internet is the world’s largest computer network (a network consisting of two or more computers linked together to share electronic mail and files). The Internet is actually a network of thousands of independent networks, containing several million “host” computers that provide information services. An estimated 25 million individuals have some form of Internet access, and this audience is doubling each year. The Internet is a cooperative venture, owned by no one, but regulated by several volunteer agencies. Id. at 203 n.1 (citations omitted). A “site” is an Internet address which permits users to exchange digital information with a particular host, see id. at 203 n.2., and the World Wide Web refers to the collection of sites available on the Internet, see Shea v. Reno, 930 F.Supp. 916, 929 (1996). See also Malarkey-Taylor Assocs., Inc. v. Cellular Telecommunications Indus. Ass’n, 929 F.Supp. 473, 476 n.1 (D.D.C. 1996) (citing American Civil Liberties Union v. Reno, 929 F.Supp. 824 (E.D. Pa. 1996)); Religious Technology Ctr. v. Netcom On-Line Communications Servs., Inc., 923 F.Supp. 1231, 1238 n.1 (1995).

FN2. A “hyperlink” is “highlight text or images that, when selected by the user, permit him to view another, related Web document.” Shea, 930 F.Supp. at 929. With these links “a user can move seamlessly between documents, regardless of their location; when a user viewing the document located on one server selects a link to a document located elsewhere, the browser will automatically contact the second server and display the document.” Id.

FN3. In CompuServe, the Sixth Circuit explicitly wrote that it was not addressing the issue of whether the Internet user “would be subject to suit in any state where his software was purchased or used …” CompuServe, 89 F.3d at 1268.

Opinion: Judge Zagel:

This matter having come before the Court upon the Complaint For Damages And Injunctive Relief filed by ActMedia, Inc. (“Plaintiff”) against Active Media International, Inc. (“Defendant”), the Court having reviewed the Complaint and all other matters of record, and being otherwise knowledgeable of the premises, it is hereby;

FINALLY ORDERED, ADJUDGED, AND DECREED as follows:

Pursuant to 15 U.S.C. Section 1121(a), this Court has original subject matter jurisdiction over this action as it arises under U.S.C., Title 15, Chapter 22 (the “Act”), and involved Defendant’s unauthorized use and false designation of origin in commerce of a federally registered trademark owned by Plaintiff. This Court has personal jurisdiction over Defendant because it is a Illinois corporation doing business in the State of Illinois. Pursuant to 28 U.S.C. Section 1391(b)(1), venue is proper before this Court.

Since June of 1972, Plaintiff has provided advertising and promotional services, domestically and internationally, through use and ownership of trademark “ActMedia” (“Mark”), relating to the promotion of goods and services of others through planning, arranging, and designing in-store signage, print displays, video and audio displays, sampling and couponing events, conducting demonstrations, and providing post-event analysis and demonstrations (the “Services”). Plaintiff has become widely known in the marketplace as a preeminent source for such Services. The Services are strongly associated with and identified by Plaintiff’s registered Mark, which has been continuously owned and used by Plaintiff in commerce since June of 1972. On April 8, 1986, Plaintiff registered the Mark with the United States Patent and Trademark Office, Registration No. 1389.370. Pursuant to 15 U.S.C. Section 1065, Plaintiff has the incontestable right to use the Mark in commerce in connection with the Services.

The Mark has also been affixed to and used in commerce in connection with a wide variety of promotional and sales items, such as posters, signs, display units, uniforms, and promotional materials. Through great expense and effort incurred by Plaintiff, the Mark has become known in commerce as a strong identifier of the source of the Services and these related consumer items: that source being Plaintiff. As a direct result of Plaintiff’s extensive efforts, the Mark has acquired substantial and valuable secondary meaning.
In or about 1995, Plaintiff began implementation of its plan to go “on line” through the Internet. In or about February, 1996, Plaintiff attempted to reserve the Internet domain name, “actmedia.com” (“Domain Name”), as its Internet address. When it attempted to reserve the Domain Name, Plaintiff discovered for the first time that Defendant, without authorization from Plaintiff, had already reserved the Domain Name. Defendant’s reservation of the Domain Name has precluded Plaintiff from reserving an Internet domain name incorporating its registered Mark.

Defendant’s reservation of the Domain Name violates 15 U.S.C. Section 1125 and Illinois common law because it: (a) constitutes unauthorized use and misappropriation of Plaintiff’s Mark; (b) constitutes false designation of origin; (c) is likely to cause confusion in the marketplace that Plaintiff and Defendant are affiliated; and (d) is likely to cause confusion that Plaintiff sponsors or approves Defendant’s commercial activities. Further, Defendant’s reservation of the Domain Name also violates the Illinois Anti- Dilution Act, III.Rev.Stat ch 140, Section 22, because it creates a likelihood of dilution of the distinctive quality of the Mark. Plaintiff has no adequate remedy at law, and has and will continue to suffer irreparable harm if Defendant continues its unauthorized use and misappropriation of the Mark by precluding Plaintiff from using its Mark as an Internet domain name. The public interest will be served by issuing the injunctive relief requested by Plaintiff.

Relief Granted
Plaintiff is hereby granted the following permanent injunctive relief:

1. 1. Pursuant to 15 U.S.C. Section 1116, the Illinois Anti-Dilution Act, and Illinois common law, Defendant, and officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice of this Final Judgment And Permanent Injunction are hereby mandatorily and permanently enjoined from using or infringing in any manner Plaintiff’s registered trademark, “ActMedia;”

2. 2. Pursuant to 15 U.S.C. Section 1116, the Illinois Anti-Dilution Act, and Illinois common law, Defendant, and its officers, agents, servants, employees, and attorneys, and those persons in active concert or participation with them who receive actual notice of this Final Judgment And Permanent Injunction are hereby directed to immediately release to Plaintiff their interest(s) in the Internet Domain Name, “actmedia.com”, and immediately transfer all interests in said Domain Name to Plaintiff, and execute all documents necessary to immediately effect such transfer of the Domain Name to Plaintiff;

3. 3. The Court reserves jurisdiction to enforce the requirements of this Final Judgment And Permanent Injunction.
So Ordered, in Chambers on this 12th day of July 1996.
(signed) James B. Zagel, United States District Court Judge For The Northern District Of Illinois

Defendants.
CIVIL ACTION 1:96-cv-2475-MHS

ORDER

This action is before the Court on plaintiffs’ motion for preliminary injunction and defendants’ motion to dismiss. For the reasons stated below, the Court grants plaintiffs’ motion and denies defendants’ motion.
Factual Background

Plaintiffs bring this action for declaratory and injunctive relief challenging the constitutionality of Act No. 1029, Ga. Laws 1996, p. 1505, codified at O.C.G.A. § 16-9-93.1 (“act” or “statute”). The act makes it a crime for any person . . . knowingly to transmit any data through a computer network . . . for the purpose of setting up, maintaining, operating, or exchanging data with an electronic mailbox, home page, or any other electronic information storage bank or point of access to electronic information if such data uses any individual name . . . to falsely identify the person . . . and for any person . . . knowingly to transmit any data through a computer network . . . if such data uses any . . . trade name, registered trademark, logo, legal or official seal, or copyrighted symbol . . . which would falsely state or imply that such person . . . has permission or is legally authorized to use [it] for such purpose when such permission or authorization has not been obtained.

The parties vigorously dispute the scope of the act. Plaintiffs, a group of individuals and organization members who communicate over the Internet, interpret it as imposing unconstitutional content-based restrictions on their right to communicate anonymously and pseudonymously over the internet, as well as on their right to use trade names, logos, and other graphics in a manner held to be constitutional in other contexts.

Plaintiffs argue that the act has tremendous implications for internet users, many of whom “falsely identify” themselves on a regular basis for the purpose of communicating about sensitive topics without subjecting themselves to ostracism or embarrassment. Plaintiffs further contend that the trade name and logo restriction frustrates one of the Internet’s unique features–the “links”[1] that connect web pages on the World Wide Web and enable users to browse easily from topic to topic through the computer network system. Plaintiffs claim that the act’s broad language is further damaging in that it allows for selective prosecution of persons communicating about controversial topics.

Defendants contend that the act prohibits a much narrower class of communications. They interpret it as forbidding only fraudulent transmissions or the appropriation of the identity of another person or entity for some improper purpose. Defendants ask the Court to abstain from exercising jurisdiction in this case in order to give the Georgia Supreme Court an opportunity to definitively interpret the act.

Motion for Preliminary Injunction

In order to prevail on a preliminary injunction motion, plaintiffs must establish 1) a substantial likelihood of success on the merits; 2) a substantial threat of irreparable injury if the injunction is not granted; 3) that the threatened injury to the plaintiffs outweighs the harm an injunction may cause defendants; and 4) that granting the injunction would not disserve the public interest. Teper v. Miller, 82 F.3d 989, 992-93 n.3 (11th Cir. 1996). The Court concludes that plaintiffs have satisfied each of these requirements and are thus entitled to injunctive relief.

1. Likelihood of Success on the Merits[2]

In their motion to dismiss, defendants assert two affirmative defenses which, if persuasive, would make plaintiffs’ success on the merits unlikely. First, defendants argue that because plaintiffs have not been prosecuted or threatened with prosecution under the act, no live controversy exists and plaintiffs therefore lack standing to bring this action. The Court concludes, however, that plaintiffs do have standing because “a credible threat of prosecution” exists. Graham v. Butterworth, 5 F.3d 496, 499 (11th Cir. 1993). When plaintiffs filed this action “they intended to engage in arguably protected conduct, which the statute seemed to proscribe.” Id. at 499. Furthermore, the rules of standing are relaxed in the first amendment context where “the statute’s alleged danger is, in large measure, one of self-censorship; a harm that can be realized even without an actual prosecution.” Virginia v. American Booksellers Ass’n, 484 U.S. 383, 384 (1988).

Defendants also ask the Court to abstain from exercising jurisdiction over this case on the grounds that the law is ambiguous and in need of state court interpretation.[3] However, abstention should rarely be invoked in cases involving facial challenges to statutes allegedly violative of the first amendment. Dombrowski v. Pfister, 380 U.S. 479, 489-90 (1965) (holding abstention “inappropriate for cases [where] . . . statutes are justifiably attacked on their face as abridging free expression”). The reluctance to abstain in first amendment cases recognizes that the delay abstention imposes has a further chilling effect on speech. Zwickler v. Koota, 389 U.S. 241, 252 (1967).

The correct inquiry, when asked to abstain in a case involving a facial statutory challenge, is whether the statute is “fairly subject to an interpretation which will render unnecessary or substantially modify the federal constitutional question.” City of Houston v. Hill, 482 U.S. 451, 468 (1987). “If the statute is not obviously susceptible of a limiting construction, then even if the statute has never [been] interpreted by a state court tribunal . . . it is the duty of the federal court to exercise its properly invoked jurisdiction.” Id. The Court finds, as set forth below, that O.C.G.A. § 16-9-93.1 is not fairly subject to a limiting construction which would obviate its constitutional problems. Moreover, abstention would impose great costs on plaintiffs by further chilling their expression while they wait for an interpretation of the act by the Georgia Supreme Court or by forcing them to risk prosecution if they choose not to wait. Therefore, the Court finds that abstention is inappropriate in this case.

Having addressed defendants’ affirmative defenses, the Court concludes that plaintiffs are likely to prevail on the merits of their claim. It appears from the record that plaintiffs are likely to prove that the statute imposes content-based restrictions which are not narrowly tailored to achieve the state’s purported compelling interest. Furthermore, plaintiffs are likely to show that the statute is overbroad and void for vagueness.

First, because “the identity of the speaker is no different from other components of [a] document’s contents that the author is free to include or exclude,” McIntyre v. Ohio Elections Comm’n, 115 S. Ct. 1511, 1516 (1995), the statute’s prohibition of Internet transmissions which “falsely identify” the sender constitutes a presumptively invalid content-based restriction. See R.A.V. v. St. Paul, 505 U.S. 377, 382 (1992). The state may impose content-based restrictions only to promote a “compelling state interest” and only through use of “the least restrictive means to further the articulated interest.” Sable Communications of California, Inc. v. FCC, 492 U.S. 115, 126 (1989). Thus, in order to overcome the presumption of invalidity, defendants must demonstrate that the statute furthers a compelling state interest and is narrowly tailored to achieve it.

Defendants allege that the statute’s purpose is fraud prevention, which the Court agrees is a compelling state interest. However, the statute is not narrowly tailored to achieve that end and instead sweeps innocent, protected speech within its scope. Specifically, by its plain language the criminal prohibition applies regardless of whether a speaker has any intent to deceive or whether deception actually occurs. Therefore, it could apply to a wide range of transmissions which “falsely identify” the sender, but are not “fraudulent” within the specific meaning of the criminal code.

Defendants respond that the Act does not mean what it says and that, instead, a variety of limiting concepts should be engrafted onto it. First, defendants propose to add an element of fraud, or a specific intent requirement of “intent to defraud” or “intent to deceive” to the act.[4] None of these terms or phrases appears in the statute, however, although they are expressly included in other Georgia criminal statutes which require proof of specific intent. See, e.g., O.C.G.A. §§ 10-1-453, 16-9-1(a), 16-9-2, and 16-8-3.
Second, defendants contend that the Act applies only to persons who misappropriate the identity of another specific entity or person. Again, there is nothing in the language of the act from which a reasonable person would infer such a requirement, and the General Assembly has specifically included analogous elements when it meant to do so. See O.C.G.A. § 10-1-453.

Third, defendants seek to limit the restriction on use of trade names, marks, and seals by collapsing the Act’s two clauses–suggesting that “use” of a mark is prohibited only when it would “falsely identify” the user. Without explanation, this construction borrows the “false identification” portion of the first clause and applies it to the second. In addition to not making sense grammatically, the interpretation also imports into the second clause all of the previously discussed interpretive problems with the phrase “falsely identify.”[5]

In construing a statute, the Court must “follow the literal language of the statute ‘unless it produces contradiction, absurdity or such an inconvenience as to insure that the legislature meant something else.’” Telecom*USA, Inc. v. Collins, 260 Ga. 362, 363 (1990) (citing Department of Trans. v. City of Atlanta, 255 Ga. 124, 137 (1985)). Only if a statute is “readily susceptible to a narrowing construction” may such an interpretation be applied to save a questionable law. American Booksellers Ass’n, 484 U.S. at 397. The words and phrases defendants seek to add to the Act appear nowhere in it. Moreover, defendants’ attempt to interpret the act is so confusing and contradictory that it could not possibly constitute grounds for rejecting the Act’s plain language. Even if the Court could impose a limiting construction on the Act, defendants’ brief provides no real guidance on what that construction should be, but instead offers a variety of very different possible interpretations in hopes that the Court will select one. The Court concludes, therefore, that the Act is not readily susceptible to a limiting construction and that its plain language is not narrowly tailored to promote a compelling state interest.

For similar reasons, plaintiffs are likely to succeed on their overbreadth claim because the statute “sweeps protected activity within its proscription.” M.S. News Co. v. Casado, 721 F.2d 1281, 1287 (10th Cir. 1983) (citing Erznoznik v. City of Jacksonville, 422 U.S. 205, 212-13 (1975)). In the first amendment context, the overbreadth doctrine, which invalidates overbroad statutes even when some of their applications are valid, United States v. Salerno, 481 U.S. 739, 745 (1987), is based on the recognition that “the very existence of some broadly written laws has the potential to chill the expressive activity of others not before the Court.” Forsyth County v. Nationalist Movement, 505 U.S. 123, 129 (1992).

The Court concludes that the statute was not drafted with the precision necessary for laws regulating speech. On its face, the Act prohibits such protected speech as the use of false identification to avoid social ostracism, to prevent discrimination and harassment, and to protect privacy, as well as the use of trade names or logos in non-commercial educational speech, news, and commentary–a prohibition with well-recognized first amendment problems.[6] Therefore, even if the statute could constitutionally be used to prosecute persons who intentionally “falsely identify” themselves in order to deceive or defraud the public, or to persons whose commercial use of trade names and logos creates a substantial likelihood of confusion or the dilution of a famous mark, the statute is nevertheless overbroad because it operates unconstitutionally for a substantial category of the speakers it covers. Village of Schaumburg v. Citizens for a Better Environment, 444 U.S. 620, 634 (1980).

Finally, plaintiffs are likely to succeed on their claim that the statute is unconstitutionally vague. The void-for-vagueness doctrine requires a criminal statute to “define the criminal offense with sufficient definiteness that ordinary people can understand what conduct is prohibited and in a manner that does not encourage arbitrary and discriminatory enforcement.” Kolender v. Lawson, 461 U.S. 352, 357 (1983). Like the overbreadth doctrine, the policies underlying the vagueness rule apply with special force where the statute at issue restricts speech. ACLU v. Reno, 929 F. Supp. 824, 860 (E.D. Pa. 1996). The Court concludes that plaintiffs are likely to prove that the statute is void for vagueness because it 1) does not give fair notice of the scope of conduct it proscribes; 2) is conducive to arbitrary enforcement; and 3) infringes upon plaintiffs’ free expression. See Grayned v. City of Rockford, 408 U.S. 104, 108-09 (1972).

First, the Act fails to give fair notice of proscribed conduct to computer network users by failing to define the following terms and phrases: “falsely identify,” “use,” “falsely imply,” and “point of access to electronic information.” These undefined terms provide inadequate notice of the scope of proscribed conduct to persons of ordinary intelligence and thus void the act for vagueness.

The statute criminalizes computer transmissions which “falsely identify” the sender, yet fails to state whether or not proof of specific intent to deceive, or proof of actual deception, is required. Plaintiffs’ affidavits demonstrate that, although they have no intent to deceive when sending transmissions which may “falsely identify” them and, indeed, have many legitimate and important reasons for concealing their identity, they cannot determine whether or not their conduct violates the act.

Similarly, the portion of the Act relating to trade names and logos fails to define or adequately limit the word “use.” Other statutes protecting intellectual property expressly limit the definition of “use” to use in a commercial context. See, e.g., 15 U.S.C. § 1125 (federal trademark infringement law); O.C.G.A. § 10-1-440 (b) (1994) (defining “use” within the meaning of Georgia trademark infringement laws); O.C.G.A. § 10-1-450 (1994) (Georgia trademark infringement law). In contrast, the only limiting concept of “use” in the Act is that such use must “falsely imply” that permission to use the mark has been obtained. This restriction, which is also undefined and suffers from the same vagueness problems as the term “falsely identify,” fails to provide sufficiently specific notice of proscribed conduct.

Finally, the Act fails to explain the phrase “any data . . . over the transmission facilities or through the network facilities of a local telephone network for the purpose of . . . exchanging data with . . . a point of access to electronic information.” Plaintiffs contend that this phrase could mean that the act applies not only to computer transmissions per se, but also to transmissions by telephone, fax machine, answering machine, voice mail system, pager, or any other electronic device which might be connected to computer network facilities. The act provides no guidance about these potential applications.

Second, the Act’s vague provisions create a risk of arbitrary and discriminatory enforcement. As plaintiffs point out, not only does the Act fail to notify potential defendants of proscribed conduct, but it also fails to notify law enforcement officials of what exactly is prohibited. The Act’s failure to specifically articulate proscribed conduct affords prosecutors and police officers substantial room for selective prosecution of persons who express minority viewpoints.

Third, the Act’s vagueness is particularly harmful because it chills protected expression. Plaintiffs’ affidavits indicate that they have already altered what they believe to be innocent and legitimate behavior because of their inability to discern what exactly the Act proscribes. Without court intervention, this self-censorship will continue until the act is amended, revoked, or definitively interpreted by the state supreme court.

For all of these reasons, the Court concludes that plaintiffs are likely to succeed on their claim that the Act is void for vagueness, overbroad, and not narrowly tailored to promote a compelling state interest.

2. Substantial threat of irreparable injury

Plaintiffs have also demonstrated a substantial threat of irreparable injury in the absence of a preliminary injunction. The Supreme Court has held that “[t]he loss of First Amendment freedoms, for even minimal periods of time, unquestionably constitutes irreparable injury.” Elrod v. Burns, 427 U.S. 347, 373 (1976). As described above, the act has already induced self-censorship. The Court concludes, therefore, that failure to enjoin enforcement of the act will force plaintiffs either to continue self-censorship or to risk criminal prosecution. Thus, plaintiffs have demonstrated a substantial threat of irreparable injury unless a preliminary injunction is issued.

3. Balance of hardships

The balance of hardships weighs heavily in plaintiffs’ favor. As stated above, plaintiffs will suffer irreparable injury if prosecution under the statute is not enjoined. In contrast, Georgia already has in place many less restrictive means to address fraud and misrepresentation–the interests defendants claim the act at issue promotes. See, e.g., O.C.G.A. § 16-8-3 (1996) (theft by deception); O.C.G.A. § 16-9-93(a)(2) (1996) (computer theft by deception); O.C.G.A. § 10-1-453 (1994) (unauthorized and deceitful use of name or seal of another); O.C.G.A. § 10-1-393 (Supp. 1996) (unfair and deceptive consumer trade practices).

Defendants contend that these statutes do not fully reach problematic behavior over the internet, but they fail adequately to explain why. If the Act prevents some ill-defined category of fraud or deception not covered by existing laws, defendants do not articulate why they have a compelling interest in preventing that conduct on the Internet but have done nothing to prevent the same practices in the print media. Therefore, the Court concludes that plaintiffs face substantially greater harms if the Act is allowed to stand than defendants face if its enforcement is enjoined.

4. Promotion of the Public Interest

Finally, for all the reasons set forth above, a preliminary injunction will advance the public interest. “No long string of citations is necessary to find that the public interest weighs in favor of having access to a free flow of constitutionally protected speech.” Reno, 929 F. Supp. at 851.

5. Conclusion

For the foregoing reasons, the Court DENIES defendants’ motion to dismiss [#11-1], GRANTS plaintiffs’ motion for preliminary injunction [#3-1], and enjoins defendants from enforcing O.C.G.A. § 16-9-93.1 pending a final determination on the merits of plaintiffs’ complaint.

IT IS SO ORDERED, this ____ day of 630m, 1997.
____________________________
Marvin H. Shoob, Senior Judge, United States District Court
Northern District of Georgia

FOOTNOTES:

FN1. Links are often graphics or logos which, if “clicked on” by the user with a computer mouse, will transport the user to a different web page covering a new topic of information.

FN2. In this section of the order, the Court will also address arguments advanced in defendants’ motion to dismiss.

FN3. Significantly, this argument contradicts defendants’ contention that the statute is sufficiently clear to avoid vagueness and overbreadth challenges.

FN4. The terms “fraud,” “intent to defraud,” and “intent to deceive,” although used interchangeably by defendants, are not synonymous in the criminal code. See, e.g., United States v. Godwin, 566 F.2d 975, 976 (5th Cir. 1978). Each term requires proof of different elements, and by using the terms interchangeably, defendants fail to explain which of the distinct elements should be applied to the statute.

Also, the word “falsely”–the only term which actually does appear in the statute–is synonymous with none of the above terms defendants seek to add. “Falsely” means merely “wrongly,” “incorrectly,” or “not truthfully.” Webster’s Third New Int’l Dictionary 819 (1976).

FN5. To further confuse the matter, defendants suggest elsewhere in their brief that the second clause actually does mean what it says and prohibits all uses of marks which would imply permission for that use which has not been obtained. A fair reading of the clause, as written, is that it prohibits the current use of web page links. The linking function requires publishers of web pages to include symbols designating other web pages which may be of interest to a user. This means that an entity or person’s seal may appear on hundreds or thousands of other web pages, just for the purpose of enabling the linking system. The appearance of the seal, although completely innocuous, would definitely “imply” to many users that permission for use had been obtained. Defendants have articulated no compelling state interest that would be furthered by restricting the linking function in this way.

FN6. Congress acknowledged the first amendment problems with banning non-commercial use of trademarks by limiting the scope of the new Federal Trademark Dilution Act to apply to commercial use only. See 15 U.S.C. § 1125(c)(4); H.R. No. 104-374 (1995).