Source: http://gozips.uakron.edu/~dratler/2008cyberlaw/materials/lockheeddist.htm
Timestamp: 2017-10-23 09:42:21
Document Index: 555849935

Matched Legal Cases: ['§ 1114', '§ 1202', '§ 1125', '§ 1125', '§ 1127', '§ 1125']

Lockheed Martin Corp. v. Network Solutions, Inc. (district court)
985 F. Supp. 949,
44 U.S.P.Q.2d (BNA) 1865 (C.D. Cal. 1997),
aff'd, 194 F.3d 980, 52 U.S.P.Q.2d (BNA) 1481 (9th Cir. 1999)
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Domain names are arranged so that reading from right to left, each part of the name points to a more localized area of the Internet. For example, in the domain name "cacd.uscourts.gov," "gov" is the top-level domain, reserved for all networks associated with the federal government. The "uscourts" part specifies a second-level domain, a set of the networks used by the federal courts. The "cacd" part specifies a sub-network or computer used by the United States District Court for the Central District of California.
If a user knows or can deduce the domain name associated with a Web site, the user can directly access the Web site by typing the domain name into a Web browser, without having to conduct a time-consuming search. Because most businesses with a presence on the Internet use the ".com" top-level domain, Internet users intuitively try to find businesses by typing in the corporate or trade name as the second-level domain name, as in "acme.com." Second-level domain names, the name just to the left of ".com," must be exclusive. Therefore, although two companies can have non-exclusive trademark rights in a name, only one company can have a second-level domain name that corresponds to its trademark.(1) For example, Juno Lighting, a maker of lamps, sought to establish a [*953] Web site with the address "juno.com," a domain name already in use by Juno Online Services, which uses the domain name as part of e-mail addresses for hundreds of thousands of e-mail customers. See Juno Online Servs., L.P. v. Juno Lighting, Inc.,1997 U.S. Dist. LEXIS 15699, 1997 WL 613021 (N.D. Ill. 1997). In short, the exclusive quality of second-level domain names has set trademark owners against each other in the struggle to establish a commercial presence on the Internet, and has set businesses against domain name holders who seek to continue the traditional use of the Internet as a non-commercial medium of communication.
Under a contract with the National Science Foundation, NSI manages domain name registrations for the ".com," ".net," ".org," ".edu," and ".gov" top-level domains.(2) The contract authorizes NSI to charge $ 100 for an initial two-year registration and $ 50 annually starting the third year. NSI registers approximately 100,000 Internet domain names per month. Registration applications are made via e-mail and in more than 90% of registrations no human intervention takes place. On average, a new registration occurs approximately once every 20 seconds.
NSI does not make an independent determination of an applicant's right to use a domain name. Nor does NSI assign domain names; users may choose any available second-level domain name. In 1995, NSI responded to the problem of conflicting claims to domain names by instituting a domain name dispute policy. Under the current policy, in effect since September 9, 1996, NSI requires applicants to represent and warrant that their use of a particular domain name does not interfere with the intellectual property rights of third parties. Under the policy, if a trademark holder presents NSI with a United States Patent and Trademark Office registration of a trademark identical to a currently registered domain name, NSI will require the domain name holder to prove that it has a pre-existing right to use the name. If the domain name holder fails to do so, NSI will cancel the registration. NSI's policy has been criticized as favoring trademark owners over domain name holders, and favoring owners of federally registered marks over owners of non-registered marks, because owners of federally registered marks can invoke NSI's policy to effectively enjoin the use of identical domain name's without having to make any showing of infringement or dilution. * * *
If a trademark holder and domain name registrant take their dispute to court, NSI will deposit the domain name in the registry of the court. This process maintains the status quo; the domain name remains active while in the registry of the court.(3)
[*954] C. Factual Background
1. Lockheed owns the federally registered SKUNK WORKS service mark for "engineering, technical consulting, and advisory services with respect to designing, building, equipping, and testing commercial and military aircraft and related equipment." Certificate of Registration Nos. 968,861 & 1,161,482.
2. In August 1994, Seng-Poh Lee registered the domain name "skunkworks.com" with NSI. Lee did not associate the domain name with a Web site. In March 1996, Lockheed demanded that Lee cancel his registration. In May 1996, Lee complied. However, Lockheed did not apply to NSI for registration of the name. It became generally available and was registered by Grant Smith, a resident of the United Kingdom, in December 1996.
3. In September 1995, Kathy Huber, a resident of New York, registered "skunkwrks.com" with NSI for the use of her employer Skunkworks Marketing Lab, Inc. ("SML"). SML used the domain name for e-mail only; it did not associate a Web site with the domain name. On March 21, 1996, Lockheed sent a cease-and-desist letter to SML. SML filed a petition in the United States Patent and Trademark Office seeking to cancel registration of the SKUNK WORKS mark on the grounds that "skunk works" was generic. SML has since moved to withdraw its petition.
[The court recites similar facts, involving other individual registrants and other domain-name registrations similar to "skunk works."]
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Summary judgment is disfavored in trademark cases because of the inherently factual nature of most trademark disputes. Nonetheless, summary judgment is appropriate "where the party opposing the motion fails to demonstrate the existence of any material issues of fact for trial." Sykes Laboratory, Inc. v. Kalvin, 610 F. Supp. 849, 860 (C.D. Cal. 1985).
Section 32 of the Lanham Act prohibits any person from using another's mark without permission "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 . . . ." 15 U.S.C. § 1114(1). To be liable under section 32, a person must use the mark on competing or related goods in a way that creates a likelihood of confusion. Before considering the likelihood of confusion, however, the Court must determine whether NSI, by accepting registrations, has used the SKUNK WORKS mark in connection with the sale, distribution or advertising of goods or services.
Domain names present a special problem under the Lanham Act because they are used for both a non-trademark technical purpose, to designate a set of computers on the Internet, and for trademark purposes, to identify an Internet user who offers goods or services on the Internet. When a domain name is used only to indicate an address on the Internet, the domain name is not functioning as a trademark.(4) See Walt-West Enterprises, Inc. v. Gannett Co., 695 F.2d 1050, 1059-1060 (7th Cir. 1982) (radio station frequency used in "utilitarian sense of calling the listener's attention to a location on the FM dial" is not protectable under trademark law). Like trade names, domain names can function as trademarks, and therefore can be used to infringe trademark rights. Domain names, like trade names, do not act as trademarks when they are used merely to identify a business entity; in order to infringe they must be used to identify the source of goods or services. Cf. In re Unclaimed Salvage & Freight Co., 192 U.S.P.Q. 165, 168 (T.T.A.B. 1976) (affirming refusal of registration of trade name as trademark where specimen demonstrated use only to identify applicant as a business); U.S. Dept. of Commerce, Patent and Trademark Office, Trademark Manual of Examining Procedure § 1202.02, at 1202-4 (2d ed. May 1993) (directing examiners to refuse [*957] registration of material that functions only to identify a business).
NSI's acceptance of domain name registrations is connected only with the names' technical function on the Internet to designate a set of computers. By accepting registrations of domain names containing the words "skunk works," NSI is not using the SKUNK WORKS mark in connection with the sale, distribution or advertising of goods and services. NSI merely uses domain names to designate host computers on the Internet. This is the type of purely "nominative" function that is not prohibited by trademark law.
This is not to say that a domain name can never be used to infringe a trademark. However, something more than the registration of the name is required before the use of a domain name is infringing. In Planned Parenthood Federation of America, Inc. v. Bucci, for example, the defendant registered the domain name "plannedparenthood.com" and used it as the address of a Web site promoting his book on abortion. 1997 U.S. Dist. LEXIS 3338, 42 U.S.P.Q.2d (BNA) 1430, 1432 (S.D.N.Y. 1997). The defendant admitted that he used the domain name hoping that people looking for the Planned Parenthood's site would find his site. The defendant argued that registration without more is not a commercial use of a mark. The court, however, found that the defendant did "more than merely register a domain name; he has created a home page that uses plaintiff's mark as its address, conveying the impression to Internet users that plaintiff is the sponsor of defendant's web site." The infringing use in Planned Parenthood was not registration of the plaintiff's mark with NSI, but rather the use of the plaintiff's trademark "as a domain name to identify his web site" in a manner that confused Internet users as to the source or sponsorship of the products offered there. Cf. TeleTech Customer Care Management (California), Inc. v. Tele-Tech Co., 977 F. Supp. 1407, 42 U.S.P.Q.2d (BNA) 1913, 1919 (C.D. Cal. 1997) (finding that the plaintiff was not likely to prevail on the merits of an infringement claim because the plaintiff demonstrated only that customers were likely to be confused as to location of Web site, not as to source of goods or services).
The cases dealing with vanity telephone numbers are consistent with the conclusion that registration of a domain name, without more, does not constitute use of the name as a trademark. A toll-free telephone number with an easy-to-remember letter equivalent is a valuable business asset. As with domain names, courts have held that the promotion of a confusingly similar telephone number may be enjoined as trademark infringement and unfair competition. Dial-a-Mattress Franchise Corp. v. Page, 880 F.2d 675, 678 (2d Cir. 1989); American Airlines, Inc. v. A 1-800-A-M-E-R-I-C-A-N Corp., 622 F. Supp. 673 (N.D. Ill. 1985). The infringing act, however, is not the mere possession and use of the telephone number. If it were, trademark holders would be able to eliminate every toll-free number whose letter equivalent happens to correspond to a trademark. In Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619 (6th Cir. 1996), the district court held that the defendant's use of 1-800 H[zero]LIDAY infringed the plaintiff's trademark in the telephone number 1-800-HOLIDAY. The court of appeals reversed, holding that Holiday Inns's trademark rights in its vanity telephone number did not allow it to control use by others of confusingly similar telephone numbers. Although the defendant's toll-free number was often misdialed by customers seeking 1-800-HOLIDAY, the defendant never promoted the number in connection with the HOLIDAY trademark; but only promoted it as 1-800-405-4329. Because the defendant had used the number only as a telephone number, and not as a trademark, the court of appeals held that the defendant had not infringed the plaintiff's trademark.
[*958] Domain names and vanity telephone numbers both have dual functions. Domain names, like telephone numbers, allow one machine to connect to another machine. Domain names, like telephone numbers, are also valuable to trademark holders when they make it easier for customers to find the trademark holder. Where the holder of a vanity telephone number promotes it in a way that causes a likelihood of confusion, the holder has engaged in an infringing use. American Airlines, 622 F. Supp. 673 at 682 (mere use of telephone number is not infringing, but misleading use of trademarked term in yellow pages advertisement is infringing). But, where, as with NSI, the pure machine-linking-function is the only use at issue, there is no trademark use and there can be no infringement.
Lockheed has followed the common practice of alleging unfair competition under section 43(a) of the Lanham Act along with trademark infringement under section 32. [*959] Both causes of action depend on a demonstration of a likelihood of confusion. Federal unfair competition requires use of the mark in connection with goods or services. 15 U.S.C. § 1125(a)(1). As discussed above, NSI's acceptance of registrations for domain names resembling SKUNK WORKS is not a use of the mark in connection with goods or services.
A recent district court decision illustrates the application of federal unfair competition law to the domain name context. Juno Online Services L.P. v. Juno Lighting, Inc., 979 F. Supp. 684, 44 U.S.P.Q.2d (BNA) 1865 (N.D. Ill. 1997). During a dispute over the domain name "juno.com," Juno Lighting registered the domain name "juno-online.com" in the hopes of persuading Juno Online Services to switch its e-mail service to that domain name. Juno Online sued Juno Lighting for federal unfair competition. The district court dismissed the unfair competition claim because Juno Online alleged only that Juno Lighting registered the name with NSI, and did not allege further use of the name to create a Web site or to advertise its services. The court held that registration of a trademark as a domain name does not constitute use of the trademark on the Internet in connection with goods or services, and therefore was not prohibited by section 43(a). This reasoning applies more strongly to NSI, which has not registered domain names resembling SKUNK WORKS for its own use, but has merely accepted domain name registrations from others.
Trademark dilution laws protect "famous" marks from certain unauthorized uses regardless of a showing of competition, relatedness or likelihood of confusion. The federal dilution statute entitles the owner of a famous mark to enjoin "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 . . . ." 15 U.S.C. § 1125(c)(1). 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(1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception." 15 U.S.C. § 1127. The Federal Trademark Dilution Act specifically excludes non-commercial use of a mark from its coverage. 15 U.S.C. § 1125(c)(4)(B).
NSI's acceptance of domain name registrations is not a "commercial use" within the meaning of the Federal Trademark Dilution Act. Lockheed argues that NSI engages in commercial use because the registration of SKUNK WORKS-type domain names inhibits Lockheed's ability to use its service mark as a domain name. Lockheed contends that NSI's conduct is similar to that of the defendant in Panavision International, L.P. v. Toeppen, 945 F. Supp. 1296, 1299 (C.D. Cal. 1996). In Panavision, the defendant, Toeppen, was a "cybersquatter," an entrepreneur who made a business of registering trademarks as domain names for the purpose of selling them later to the trademarks' owners. The court held that Toeppen traded on the value of the marks as marks by attempting to sell the domain names to Panavision. The court found that "this conduct injured Panavision by preventing Panavision from exploiting its marks and it injured customers because it would have been difficult to locate Panavision's web site if Panavision had established a web site under a name other than its own." See also Intermatic Inc. v. Toeppen, 947 F. Supp. 1227, 1239 (N.D. Ill. 1995) (holding that defendant's use of the mark was diluting because it prevented plaintiff from using it). Lockheed's argument implies that any conduct that makes it more difficult for Lockheed to establish a presence on the Internet is diluting conduct. This argument is flawed. In Panavision and Intermatic, the fact that the defendant's conduct impeded plaintiff's use of its trademark as a domain name was not the determining factor in finding that the defendant's use was diluting. If impeding use of the trademark as a domain name were the [*960] only factor, the court in Panavision would not have asserted that registration of a trademark "as a domain name, without more, is not a commercial use of the trademark and therefore not within the prohibitions of the Act." Panavision, 945 F. Supp. at 1303. All prior domain name registrations corresponding to words in a trademark impede the trademark owner's use of the same words for use as a domain name. The Internet, however, is not exclusively a medium of commerce. The non-commercial use of a domain name that impedes a trademark owner's use of that domain name does not constitute dilution.(5) In Intermatic and Panavision, the defendant's use was commercial because the defendant sought to "arbitrage" the trademarks for their value as domain names.
Lockheed argues that NSI is engaged in commercial use of its service mark because NSI seeks to maximize the number of domain names registered in order to maximize its revenue and profits. Lockheed cites statements in NSI's Initial Public Offering registration statement ("IPO") to the effect that part of NSI's strategy for growth is to stimulate demand for domain names in targeted customer segments, including among trademark owners. Lockheed contends that like Toeppen, NSI trades on the value of domain names by "selling" registrations to as many people as possible. NSI, however, does not trade on the value of domain names as trademarks. NSI's use of domain names is connected to the names' technical function on the Internet to designate computer addresses, not to the names' trademark function to distinguish goods and services. The fact that NSI makes a profit from the technical function of domain names does not convert NSI's activity to trademark use. The Court does not question that a domain name which is easily deducible from a trademark is a valuable asset to the trademark owner. Such a domain name makes it easier for the trademark owner's customers to find the trademark owner's Internet resources such as Web sites. But a domain name's correspondence to a trademark does not make the domain name any more valuable to NSI, whose only interest in a domain name is as a pointer to an IP number. NSI, unlike the defendant in Intermatic and Panavision, does not make a commercial use of domain names by trading on their value as trademarks.
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[The part of this court's opinion on contributory infringement is omitted
because that was the primary issues addressed on appeal, as reported below.]
If the Internet were a technically ideal system for commercial exploitation, then every trademark owner would be able to have a domain name identical to its trademark. But the parts of the Internet that perform the critical addressing functions still operate on the 1960s and 1970s technologies that were adequate when the Internet's function was to facilitate academic and military research. [*968] Commerce has entered the Internet only recently. In response, the Internet's existing addressing systems will have to evolve to accommodate conflicts among holders of intellectual property rights, and conflicts between commercial and non-commercial users of the Internet. "In the long run, the most appropriate technology to access Web sites and e-mail will be directories that point to the desired Internet address. Directory technology of the necessary scale and complexity is not yet available, but when it is developed it will relieve much of the pressure on domain names." Domain Name System, Hearings Before the Subcommittee on Basic Research of the House Science Committee, 105th Cong., 1997 WL 14151463 (September 30, 1997) (testimony of Barbara A. Dooley, Executive Director, Commercial Internet Exchange Association). No doubt trademark owners would like to make the Internet safe for their intellectual property rights by reordering the allocation of existing domain names so that each trademark owner automatically owned the domain name corresponding to the owner's mark. Creating an exact match between Internet addresses and trademarks will require overcoming the problem of concurrent uses of the same trademark in different classes of goods and geographical areas. Various solutions to this problem are being discussed, such as a graphically-based Internet directory that would allow the presentation of trademarks in conjunction with distinguishing logos, new top-level domains for each class of goods, or a new top-level domain for trademarks only. The solution to the current difficulties faced by trademark owners on the Internet lies in this sort of technical innovation, not in attempts to assert trademark rights over legitimate non-trademark uses of this important new means of communication.
1. [court's footnote 1] One solution to this problem is for businesses to stake their claims on higher level domain names. For example, a business could use an Internet service provider's second-level domain and place its trademark in the third-level domain. Thus, if Acme Plumbing uses the Microsoft Network, its Web site could be at "acme.msn.com." Acme Electrical could house its Web site on America Online with the address "acme.aol.com." The drawback of this solution is that it requires customers to guess as to the second-level domain.
2. [Professor's note] Much has changed in the domain-name registration system since this opinion was written. NSI is no longer the exclusive registrar of domain names; although still the largest registrar, it now has competition from several other companies, both in the United States and abroad. In addition, the names mentioned in the opinion are no longer the exclusive top-level domain names. In 2001 the Internet Corporation for Assigned Names and Numbers ("ICANN") introduced several new top-level domain names, including ".info" and ".biz". See http://www.icann.org/tlds/ In addition, prices for registration have changed, and some registrars now offer "packages" of services including registration. See, e.g., http://www.netsol.com/en_US/build-it/
3. [court's footnote 2] Although NSI's policy does not refer explicitly to interpleader actions, NSI has attempted to deposit domain names in the registry of the court by bringing interpleader actions. None of the actions have been successful. In the one reported case arising from this interpleader policy, the district court dismissed NSI's interpleader action. Network Solutions, Inc. v. Clue Computing, Inc., 946 F. Supp. 858 (D. Colo. 1996). Clue Computing had sued NSI in state court to prevent cancellation of its domain name registration, "clue.com," at the behest of Hasbro, Inc., which sought to use the domain name for a Web site based on the board game "Clue." Hasbro had presented NSI with the federal registration of Hasbro's CLUE trademark, and demanded that NSI cancel Clue Computing's domain name registration. NSI attempted to extricate itself from between the two claimants by filing an interpleader action. However, the district court found that NSI was not a disinterested stakeholder because Clue Computing had accused it of breaching the domain name registration contract. 946 F. Supp. at 861.
4. [court's footnote 3] The Court takes judicial notice of a draft document prepared by the staff in the Office of the Assistant Commissioner for Trademarks of the United States Patent and Trademark Office entitled "Observations Concerning the Examination of Applications for Registration of Domain Names in the Trademark Office." This document directs trademark examiners to determine whether a domain name submitted for trademark registration functions only as a locator of a business on the Internet, in which case registration should be refused because the domain name is not serving a trademark function. While the Court's conclusion does not depend on this document or on any Patent and Trademark Office policy that it might reflect, the Court notes that trademark examiner practice is consistent with the view that the registration of a domain name with NSI for use on the Internet, without more, is not a commercial use of the name as a trademark under the Lanham Act.
5. [court's footnote 4] It is important to note that impeding access to a domain name is not the same thing as impeding access to the Internet. Even if a trademark owner cannot establish a "vanity" domain name, the owner remains free to promote the trademark on the Internet by using the trademark in the content of a Web site. A Web site's content is not connected to or restricted by the domain name under which it is accessed. In addition, the trademark owner may use the trademarked words as a third-level domain name, or as a second-level domain name in combination with letters that distinguish it from previously registered second-level domains. A domain name dispute between Acme Plumbing and Acme pizza, for example, can be resolved by adding more information to the second-level domain names, as in "acmeplumbing.com" and "acmepizza.com."