Source: https://caselaw.findlaw.com/us-5th-circuit/1122729.html
Timestamp: 2019-04-18 17:37:50+00:00

Document:
TMI, INC., Plaintiff-Appellee, v. Joseph M. MAXWELL, Defendant-Appellant.
Before DAVIS, BARKSDALE and PRADO, Circuit Judges. J. Timothy Headley (argued), Gardere Wynne Sewell, Houston, TX, for Plaintiff-Appellee. Paul Alan Levy (argued), Pub. Citizen Lit. Group, Washington, DC, for Defendant-Appellant.
Following a bench trial, the district court determined that Appellant Joseph Maxwell's website that complained about Appellee TMI, Inc. violated the anti-dilution provision of the Lanham Act, 15 U.S.C. § 1125(c); the Anti-Cybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. § 1125(d); and the Texas Anti-Dilution Statute, Tex. Bus. & Com.Code § 16.29. Concluding that Maxwell's site, as a non-commercial gripe site, violates none of these statutes, we reverse and render judgment in favor of Maxwell.
Appellant Joseph Maxwell intended to buy a house from Appellee TMI, Inc., a company that builds houses under the name TrendMaker Homes. Unhappy with what he viewed as the salesperson's misrepresentations about the availability of a certain model, Maxwell decided to create a website to tell his story. To this end, Maxwell registered an internet domain name- www.trendmakerhome.com-that resembled TMI's TrendMaker Homes mark. (TMI had already been using the domain name www.trendmakerhomes.com.) Maxwell registered his domain name for a year; after the year passed, Maxwell removed the site and let the registration expire.
After the trial, the district court issued a Memorandum and Order. In it, the district court found that Maxwell violated the ACPA as well as the federal and Texas anti-dilution statutes. The district court also issued an injunction forbidding Maxwell “from using names, marks, and domain names similar to” ten of TMI's marks, including Trend Maker, and ordering Maxwell to transfer trendmakerhome.info to TMI. The district court also required TMI to submit a proposed judgment and gave Maxwell ten days to respond to that proposal. Maxwell immediately filed a notice of appeal.
Without allowing Maxwell ten days to respond, the district court signed TMI's proposed judgment. In many ways, this judgment expanded the Memorandum and Order's conclusions. For example, the Memorandum and Order contained no findings about either common law or statutory unfair competition. Yet the judgment stated that Maxwell's actions constituted unfair competition under both common law and the Lanham Act. The judgment provided a broader injunction than the one contained in the district court's original order by adding three marks to the injunction. The judgment also awarded statutory damages of $40,000 and, without elaboration, found the case to be an “exceptional case,” justifying an award of $40,000 in attorney's fees. Additionally, the judgment addressed how Maxwell was to pay the judgment: “[w]ithin twenty (20) days after entry of this Order, defendant shall hand-deliver to plaintiff's lawyer a cashier's check in the amount of $80,000, made payable to TMI, Inc.” Maxwell then filed his second notice of appeal.
We first address whether the two relevant sections of the Lanham Act-the anti-dilution provision and ACPA-require commercial use for liability.2 The district court concluded that ACPA requires commercial use, but did not address commercial use in the context of the anti-dilution provision. TMI argues that the anti-dilution provision applies even in the absence of commercial use.
15 U.S.C. § 1125(c)(1)(emphasis added).
Citing this language, courts have observed that the anti-dilution provision requires the diluter to have made commercial use of the mark.3 See, e.g., Bird v. Parsons, 289 F.3d 865, 879 (6th Cir.2002); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir.1998). One of the exceptions to the anti-dilution provision further indicates that the provision only applies to commercial use: “(4) The following shall not be actionable under this section ․ (B) Noncommercial use of a mark.” 15 U.S.C. § 1125(c)(4). We conclude that, under the statute's language, Maxwell's use must be commercial to fall under the anti-dilution provision.
On the other hand, ACPA's language does not contain such a specific commercial-use requirement. Under ACPA, the owner of a mark can recover against a person who, acting with “a bad faith intent to profit from that mark ․ registers, traffics in, or uses a domain name that ․ is identical or confusingly similar to that mark.” 15 U.S.C. § 1125(d). ACPA thus bases liability on a bad faith intent to profit. ACPA lists nine non-exclusive factors for courts to consider when determining whether a defendant had a bad faith intent to profit. One of those factors is “the person's bona fide noncommercial or fair use of the mark in a site accessible under the domain name.” 15 U.S.C. § 1125(d)(1)(B)(i)(IV).
This Court has addressed ACPA and commercial use in E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 276 n. 3 (5th Cir.2002). In Gallo, the defendant Spider Webs registered domain names that “could be associated with existing businesses, including ‘ernestandjuliogallo.com,’ ‘firestonetires.com,’ ‘bridgestonetires.com,’ ‘bluecross-blueshield.com,’ ‘oreocookies.com,’ ‘avoncosmetics.com,’ and others.” 286 F.3d at 272. Spider Webs then auctioned those domain names, refusing all bids of less than $10,000. Id. One of Spider Webs' owners testified during deposition that, after registering the domain name ernestandjuliogallo.com, Spider Webs hoped that Gallo would contact it so that Spider Webs could “assist” the company. Id. With this evidence, the Court determined that the defendant's use was commercial; the company registered domain names and then sold those names to trademark holders. Id. at 275. Because Spider Web's use was so clearly commercial, the Court noted that it did not need to decide whether ACPA also requires use in commerce. Id. at 276 n. 3. The Sixth Circuit, too, recently determined that it did not need to consider arguments about whether ACPA covers non-commercial use, “as the statute directs a reviewing court to consider only a defendant's ‘bad faith intent to profit’ from the use of a mark held by another party.” Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d 806, 809 (6th Cir.2004). Like the Lucas Nursery court, we, too, do not need to decide this question in this case.
TMI argues that Maxwell's site was “mixed-use” and therefore not protected from the Lanham Act's coverage. According to TMI, Maxwell put the site to commercial use by including the Treasure Chest and in so doing removed any protections his speech might otherwise have had.
The Lanham Act defines “use in commerce” as “the bona fide use of a mark in the ordinary course of trade.” 15 U.S.C. § 1127. When defining commercial use, courts have examined several different aspects of the defendant's use. The Ninth Circuit has emphasized that commercial use in commerce “refers to a use of a famous and distinctive mark to sell goods other than those produced or authorized by the mark's owner.” Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir.2002) and that the phrase “requires the defendant to be using the trademark as a trademark, capitalizing on its trademark status.” Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 880 (9th Cir.1999). Put another way, the Ninth Circuit in Avery Dennison also referred to “a classic ‘cybersquatter’ case” in which a court referred to the “ ‘intention to arbitrage’ the registration which included the plaintiff's trademark.” Id. (quoting Intermatic, Inc. v. Toeppen, 947 F.Supp. 1227, 1239 (N.D.Ill.1996)). This Court has provided a similar definition, determining in Gallo that the defendant's business of selling domain names containing marks satisfied the commercial use requirement. Gallo, 286 F.3d at 275. See also Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1325 (9th Cir.1998) ( “[defendant's] ‘business' is to register trademarks as domain names and then sell them to the rightful trademark owners”). Other courts have emphasized the content of the website. For example, while analyzing another section of the Lanham Act, the Sixth Circuit concluded that so long as the defendant's fan website contained no links to commercial sites, and contained no advertising or other specifically commercial content, his site was not commercial. Taubman Co. v. Webfeats, 319 F.3d 770, 775 (6th Cir.2003).
In contrast to these instances of bad faith intent to profit, the Sixth Circuit recently affirmed a trial court's finding that a disgruntled customer who posted a website similar to Maxwell's did not have a bad faith intent to profit. Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d at 811. In Lucas Nursery, a former customer of Lucas Nursery registered the domain name “lucasnursery.com” and used the site to post her complaints about the nursery's work. Id. at 808. The nursery sued her under ACPA. Id. After addressing the purposes behind ACPA,8 the Lucas Nursery court concluded that the former customer did not have the kind of intent to profit that the act was designed to prohibit. Id. at 808-11.
Tex. Bus. & Com.Code § 16.29.
This statute “is not intended to address non-trademark uses of a name to comment on, criticize, ridicule, parody, or disparage the goods or business of the name's owner.” Express One Int'l, Inc. v. Steinbeck, 53 S.W.3d 895, 899 (Tex.App.-Dallas 2001, no pet.)(citing McCarthy). Because this exception describes Maxwell's use, Maxwell's domain name is not actionable under the Texas Anti-Dilution Statute.
1. TMI also alleged unfair competition under the Lanham Act and under the common law. The district court made no findings on unfair competition, until those claims were added to the judgment, and TMI makes no arguments in support of its judgment on those claims on appeal.
2. This Court has previously determined that § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1), which addresses false and misleading descriptions, only applies to commercial speech. See Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 547 (5th Cir.2001).
3. TMI refers to United We Stand America, Inc. v. United We Stand, America New York, Inc., 128 F.3d 86, 89-90 (2d Cir.1997), for the principle that the Lanham Act does not require commercial use. United We Stand America does not involve either the anti-dilution provision or ACPA and is, thus, irrelevant to the determination of whether these two sections require commercial use.
4. In fact, the Treasure Chest only ever contained one listing, for a contractor who had done some work for Maxwell. This listing was not made at the contractor's request.
6. ACPA's safe harbor provision also provides that “[b]ad faith intent described under subparagraph (A) 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 a fair use or otherwise lawful.” 15 U.S.C. § 1125(d)(1)(B)(ii).
7. In fact, at one point, Virtual Works threatened to auction the domain name to the highest bidder unless Volkswagen paid them for it. Id. at 267.
8. The Lucas Nursery court concisely summarized the Senate Report's description of cybersquatters, namely those who:(1) “register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks;” (2) “register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder;” (3) “register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner's site to the cybersquatter's own site;” (4) “target distinctive marks to defraud consumers, including to engage in counterfeiting activities.”Lucas Nursery, 359 F.3d at 809 (quoting S.Rep. No. 106-140 at 5-6).

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