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Archive for the ‘ACPA’ Category

AirFX, LLC is Free-Falling Without a Parachute

Monday, September 19th, 2011

Although we at DefendMyDomain often blog about UDRP domain name decisions. Sometimes, those decisions go another level higher, into the U.S. federal courts. Under action 15 U.S.C. § 1114(D)(v) a domain name registrant can file a civil action asking the Federal Courts to resolve the dispute. This is sometimes referred to as a reverse domain name hijacking case, depending on the specifics of the case. The prior domain name dispute decision AirFX, LLC v. ATTN AIRFX.COM ( Nat. Arb. Forum FA1384655, May 16, 2011)(available here), was decided by a single member Panel. The Complainant convinced the single member Panel that the elements of the UDRP policy had been met. We are not going to spend time rehashing the elements of that decision, because once the dispute is brought in Federal Court, the UDRP decision is essentially irrelevant. This is an important lesson for those who seek to use the UDRP system. 15 U.S.C. § 1114(D)(v) allows an aggrieved party to seek binding federal court intervention.

Marc J. Randazza, of The Randazza Legal Group, filed the complaint on behalf of the Respondent, which follows well established pleading standards and requirements for these types of actions. (available here) However, the Complainant/Defendant AirFX, LLC, has filed a motion to dismiss, alleging among other things a 12(b)(6) allegation, and other unbelievable theories and accusations. (available here). Among the odd and interesting accusations by AirFX, LLC, they complain that the respondent/plaintiff for the first time is alleging reverse domain name hijacking. This is a misunderstanding of cause of action permitted under 15 U.S.C. § 1114(D)(v). Additionally since the decision at the UDRP level has absolutely no precedential or binding effect, this concept is misplaced. A reverse domain name highjacking claim is one which is permissible in order to prove that the domain name registrants registration was not unlawful.

AirFXS also complains about the location, namely Arizona District Court, in which the case was filed. One of the things that is clear, is when you file a UDRP, you affirmatively select and agree to one of two jurisdictions for a Federal Court challenge. (1) the location of the principal office of the concerned registrar or or (2) where the Respondent is located, as shown by the address(es) given for the domain name holder in the Whois Database at the time of the submission of the Complaint. See UDRP Rule 3(b)(xiii). AirFX asks the Court to transfer the case to another district, namely the Southern District of Indiana. This concept is dead on arrival though, since AirFX was the one demanded the jurisdiction for the resolution of all disputes thus waived any challenge to the jurisdiction.

Essentially, the Motion to Dismiss provides no controlling authority of any kind in the dismissal section. When parties seek to take domains to which they are not entitled, the arguments are often weak. We have seen the Randazza Legal Group in action before and know that AirFX will have their work cut out for them.

We will continue to monitor this case and provide updates. We thought it was an important lesson to provide our readers with an understanding of which arguments should not be raised when defending a reverse domain name highjacking case under 15 U.S.C. § 1114(D)(v).

First Ever Criminal Arrest For Domain Theft

Tuesday, August 4th, 2009

Anyone who follows the domain dispute world long enough knows that the UDRP process can be a quick and inexpensive route to resolving the dispute. Of course there are many civil cases filed throughout the U.S. under the ACPA, but never before has a domain dispute resulted in criminal prosecution, until now. State prosecutors in New Jersey have now arrested a domain name owner for doamin theft.  Domain Name News has a great article which provides all the details. (see here)

The domain at issue was www.P2P.com. It was co-owned Marc Ostrofsky (a well known domain owner), Albert Angel (well known attorney and former Justice Department prosecutor) and his wife Lesli Angel. The domain was stolen in 2006 and sold it on Ebay four months later for $111,000, even though it was purchased by the Ostofsky and the Angels for $160,000 in 2005. The alleged thief ultimately sold the domain to NBA basketball player Mark Madsen, who has acquired his own large domain portfolio, but who appears to be a good faith purchaser of the domain.

The interesting thing about this case, is that the registrar GoDaddy was also sued by Ostofsky and the Angels for negligence and contributory trademark infringement under Anti-Cyber Piracy statute. Although many assume that registrars have immunty and believe that GoDaddy is off the hook, our readers should be aware of recent developments in ACPA case law. In another civil domain theft case, a Court recently ruled against regsitrar NameCheap in denying its motion to dismiss from the case of Solid Host NL, v. NameCheap, Inc., CV085414-C.D.Cal 2009. The Court found that NameCheap was acting as a privacy service and not as a resgistrar and thus the immunity that most registrars are afforded did not apply. Our good friend Marco Randazza, from The Legal Satyricon, was heavily involved in that and a full copy of that opinion is available here.

So, the ever changing world of domain disputes took a few positive steps forward in the fight against domain theft and criminal prosecution. We will keep you posted on the developments of these two cases as we learn more.

11th Circuit Rules 3M Keeps DiamondBrite.com and Finds No ACPA Bad Faith

Friday, July 24th, 2009

Any time the 11th Circuit makes a ruling regarding the ACPA, we tend to listen. In the case of Southern Grouts & Mortars, Inc. V. 3M Company, No 08-15850 (11th Cir. July 23, 2009) (available here) the Court reviewed the ACPA and the extremities for which it may be applied. A short summary of the facts are as follows. Southern sells swimming pools finishes under the mark DIAMOND BRITE and maintains web sites which include www.sgm.cc and www.diamondbrite.cc. 3M owns the domain www.diamonbrite.com since at least 2000 and owned (now cancelled or expired) several federal trademark registrations for the mark DIAMOND BRITE related to “electronically controlled display panels and signs. 3M also maintains a web site at www.3m.com. One of 3M’s many products happens to include those for the swimming pool finishing industry. Southern sued 3M for violations of the ACPA 15 U.S.C. 1125(d) and for unfair competition under 15 U.S.C. 1125(a). The district court in the Southern District of Florida ruled in favor of 3M on a motion for summary judgment dismissing the case.  Southern appealed the district court decision stating that its request to amend the complaint should not have been denied and that unfair competition and cybersquatting claims were improperly dismissed under summary judgment.

The 11th Circuit first dealt with the decision to deny Southern’s motion for leave to amend its second amended complaint. The Court found that Southern simply lacked the proper diligence in pursuing its claim and failed to present a good cause to allow the amendment. Basically, Southern tried to seek leave to amend with nearly six months passing from the deadline time to amend and after more then a month had passed since the parties both filed separate motions for summary judgment. The Court upheld the district courts ruling on this matter.

The Court next addressed the ACPA dismissal, which is where their discussion will be the source of much future debate among attorneys in the 11th Circuit. The Court noted that the ACPA provides a cause of action for a trademark owner against a person who “‘has a bad faith intent to profit from [the owner’s] mark’ and who ‘registers, traffics in, or uses a domain name’ that is identical or confusingly similar to the owner’s distinctive mark or that is identical, confusingly similar to or dilutive of the owner’s famous mark.”15 U.S.C. § 1125(d)(1)(A)(i)–(ii). The Court identified the list of nine non-exclusive factors to consider when determining whether a defendant had bad faith intent to profit. 15 U.S.C. § 1125(d)(1)(B)(i).  The 11th Circuit Court however noted that Southern sought review of the bad faith intent to profit issue based primarily on two additional “unique circumstances” that were outside of the nine factors. This is where the case gets interesting.

First Southern argued that 3M’s registration of the domain gave them a special and unique ability to monitor the viability and value of internet traffic on the disputed domain, which in turn provided 3M with strategic commercial information (collecting traffic data). Southern provided an expert report from Robert Moody to support this concept, but the district court determined it was “so pervaded by conclusory statements as to be almost with value.” The 11th Circuit agreed with the district court’s assessment of the expert witness report, finding that Southern failed to show 3M had a bad faith intent to profit from the domain based upon data collection.

The second “unique circumstance” presented by Southern was that 3M kept control of the domain to prevent others from registering it. Southern argued that 3M continually re-registered the domain despite not making active use of it for a bona fide purpose and despite multiple cease and desist letters from Southern to 3M. Some attorneys would characterize 3M’s business plans of retaining domains as being similar to warehousing domains. The Court however, did not agree with Southern’s argument and explained:

Proving “bad faith” is not enough. A defendant is liable only where a plaintiff can establish that the defendant had a “bad faith intent to profit.” 15 U.S.C. § 1125(d) We cannot read the words “intent to profit” out of the statute….The Senate Report accompanying the Anticybersquatting Consumer Protection Act bolsters our understanding that a “bad faith intent to profit” is the essence of the wrong that the Act seeks to combat….The report says nothing about those who hold onto a domain name to prevent a competitor from using it.

The Court approved the District Court’s ruling on Summary Judgment that Southern failed to establish 3M had “bad faith intent to profit” under this unique circumstance as well. The Court proceeded to review the nine statutory factors which the district court considered. The district court found that five favored 3M, two favored Southern and two were inapplicable. The 11th Circuit agreed with the assessment of the factors and found that they should not be disturbed and would not change the outcome of the 11th Circuit opinion.

The last concept reviewed the the 11th Circuit Court involved  “use in commerce” and whether the district court erred in granting summary judgment on the unfair competition claim. The Court noted the under the statute Southern needed to show that 3M used the term “diamond brite” in connection with goods and services “in commerce.” Southern argued three points in support of reversal: (1) 3M used the mark in commerce by using the domain to redirect traffic to its own web site; (2) 3M could have used the domain to obtain strategic commercial information (traffic data) which constitutes “use”; and (3) 3M bought Google AdWords (keyword advertising) for “diamond brite” which was use in commerce. The Court rejected all three arguments stating (1) the district court found that the only evidence supporting this argument was deposition testimony which the district court refused to consider and which the 11th Circuit found was not an abuse of discretion; (2) the Court already found that there was no abuse of discretion in excluding the expert report regarding this issue; and (3) this issue was not properly pleaded in the second amended complaint, despite Southern’s motion to amend, and the Court would not consider it. Ultimately, the Court found that Southern failed to establish the requisite “use in commerce” and affirmed the district court decision.

DefendMyDomain Commentary: Interestingly, regarding the third argument about keyword advertising with Google AdWords, the Court noted “This Court has not yet determined whether the purchase of Google AdWords can be considered a use in commerce for purposes of 15 U.S.C. § 1125(a).” Therefore, for those who practice in the 11th Circuit (Florida, Alabama and Georgia), the opinions from other Circuits are helpful. Despite some dicta in other cases, it appears as though the 11th Circuit is still not ready to rule on that issue.

Also, it is important to think about the Court’s statement on warehousing domains that “The [ACPA Senate] report says nothing about those who hold onto a domain name to prevent a competitor from using it.” One might ask whether or not this will have some effect on future domain registrations. Does this mean that a company who owns a domain, prior to any trademark use by any other third party, would be able to hold and not “use” that domain forever, despite no actual trademark use on its own?

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