Court Opinion

ID: 35233
Source: CourtListenerOpinion
Date Created: 2010-04-25 19:25:35+00
Date Added: 2024-06-11T14:55:31.703800
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
               IN THE UNITED STATES COURT OF APPEALS           April 21, 2004
                       FOR THE FIFTH CIRCUIT
                      _______________________             Charles R. Fulbruge III
                            No. 03-20243                          Clerk
                            No. 03-20291
                      _______________________

                               TMI INC,

                         Plaintiff-Appellee

                                  v.

                         JOSEPH M. MAXWELL,

                         Defendant-Appellant

                        --------------------
           Appeals from the United States District Court
                 for the Southern District of Texas
                        --------------------

Before DAVIS, BARKSDALE and PRADO, Circuit Judges.

EDWARD C. PRADO, Circuit Judge:

     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

                                   1
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.

     During its existence, the site contained Maxwell’s story of

his dispute with TMI, along with a disclaimer at the top of the

home page indicating that it was not TMI’s site.    It also

contained what Maxwell called the Treasure Chest.      Maxwell

envisioned the Treasure Chest as a place for readers to share and

obtain information about contractors and tradespeople who had

done good work.    During the year of the site’s existence, the

Treasure Chest only contained one name, that of a man who had

performed some work for Maxwell. The site did not contain any

paid advertisements.

     The parties agree that some e-mail intended for TMI was sent

to Maxwell’s site.    They also agree that Maxwell forwarded each

of these messages to TMI.

     Shortly after Maxwell’s registration expired, TMI sent

Maxwell a letter demanding that he take down the site and

relinquish the www.trendmakerhome.com domain name.      In response,

Maxwell attempted to re-register the domain name.      His attempt

                                  2
was unsuccessful, however, because TMI had acquired the domain

name once Maxwell’s registration expired.      Instead, Maxwell

registered the domain name www.trendmakerhome.info.      This lawsuit

followed. Because of the suit, Maxwell has never posted any

content on the trendmakerhome.info site.

     Almost immediately, the parties entered into settlement

negotiations.    Maxwell retained a lawyer, but knew he would not

be able to afford to pay the legal fees that would be required to

defend the entire lawsuit.    TMI and Maxwell’s lawyer negotiated a

settlement, while Maxwell researched his case.      Following this

research, Maxwell backed out of the settlement agreement and

proceeded pro se.    He continued to represent himself through the

bench trial on January 17, 2003.

     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

                                   3
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.

     TMI made several related claims in this lawsuit.      In the

first, TMI alleged that Maxwell violated ACPA.    Additionally, TMI

alleged that Maxwell’s actions diluted its mark and thus violated

the Texas Anti-Dilution Statute, as well as the anti-dilution

provision of the Lanham Act.1

Commercial Use Requirement

     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.

                                  4
     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.

     In making this argument, TMI does not address the anti-

dilution provision’s language, which conditions liability on

commercial use:

     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.
     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

     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

                                 5
(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)(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

use.

                                    6
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.

Was Maxwell’s site commercial use?

       TMI argues that Maxwell’s site was “mixed-use” and therefore

                                    7
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

                                  8
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).

     TMI agrees that the section of the site addressing Maxwell’s

complaints about TMI was noncommercial.      TMI argues, however,

that the Treasure Chest section was commercial, and thus the site

“intermingle[d] gripes with commercial activities.”

     Admittedly, Maxwell added the Treasure Chest to draw more

people to his site so that they would see his story.      This intent

does not make his site commercial, however.      Maxwell never

accepted payment for a listing on the Treasure Chest, and he

charged no money for viewing it.4      Further, TMI presented no

evidence that Maxwell had any intent to ever charge money for

using the site.    Additionally, Maxwell’s site contained neither

advertising nor links to other sites.      And unlike the defendants

in Gallo, Maxwell was not engaged in the business of selling

domain names.     Gallo, 286 F.3d at 275; see also Panavision Int’l,

     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.

                                   9
L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998) (“Toeppen’s

commercial use was his attempt to sell the trademarks

themselves”).   Nor did TMI present evidence that Maxwell’s use

was “in the ordinary course of trade,” or that it had any

business purpose at all.   Thus, no evidence suggests that

Maxwell’s use was commercial, and the district court’s findings

to the contrary were clear error.5

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 from use of the mark.6   These factors are:

     (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

     5
       The district court’s discussion of commercial use (under
ACPA) was: “[b]ased on the undisputed evidence, the Court holds
that the defendant’s actions have been intentional, flagrant, and
in bad faith. Moreover, he has shown no remorse for his actions,
even in trial. Thus, the defendant’s use of “trendmakerhome.com”
was the kind of commercial use prohibited by the ACPA.”
     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).

                                10
     owner's online location to a site accessible under the
     domain name that could harm the goodwill represented by
     the mark, either for 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 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 . . .
     15 U.S.C. § 1125(d)(1)(B)(i).

     Much of the district court’s analysis of bad faith intent to

profit focuses on Maxwell’s behavior during the settlement

negotiations and, particularly, his backing out of the

settlement.   Although the district court listed the nine relevant

factors, in the Memorandum and Order it did not explain how those

factors apply to this case.

     Maxwell’s behavior differs from other registrations made

with bad faith intent to profit.     For example, in Gallo, and

other cases, the defendant essentially held hostage a domain name

                                11
that resembled a mark with the intention of selling it back to

the mark’s owner.   So, too, is Maxwell’s use different from that

of the defendant in Virtual Works, Inc. v. Volkswagen of America,

Inc., 238 F.3d 264 (4th Cir. 2001), where Virtual Works

registered the domain name “VW.net” for its own website, but also

hoping to sell the name to Volkswagen, whose VW mark the domain

name resembled.7

     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

     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."

                                12
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.

     As in Lucas Nursery, here “[t]he paradigmatic harm that the

ACPA was enacted to eradicate - the practice of cybersquatters

registering several hundred domain names in an effort to sell

them to the legitimate owners of the mark – is simply not

present.”    Id. at 810.   Also here, as in Lucas Nursery, the

site’s purpose as a method to inform potential customers about a

negative experience with the company is key.    As the Sixth

Circuit noted:

     Perhaps   most   important   to   our   conclusion   are,
     [defendant’s] actions, which seem to have been undertaken
     in the spirit of informing fellow consumers about the
     practices of a landscaping company that she believed had
     performed inferior work on her yard. One of the ACPA's
     main objectives is the protection of consumers from slick
     internet peddlers who trade on the names and reputations
     of established brands. The practice of informing fellow
     consumers of one's experience with a particular service
     provider is surely not inconsistent with this ideal.
     Id. at 811.

     In short, after analyzing the statutory factors and ACPA’s

purpose, we are convinced that TMI failed to establish that

Maxwell had a bad faith intent to profit from TMI’s mark and that

the district court’s conclusion to the contrary was clearly

erroneous.   Although factors I, II, III and IX seem to fall in

favor of TMI because Maxwell had no pre-existing use of the

      Lucas Nursery, 359 F.3d at 809 (quoting S.Rep. No. 106-140
at 5-6).

                                  13
TrendMaker name and Maxwell did not dispute that the mark was

distinctive and famous, importantly, factors IV, V, VI, VII, and

VIII favor Maxwell.    Under factor IV, Maxwell made bona fide

noncommercial use of the mark in his site, and for purposes of

factor V, TMI made no showing that Maxwell intended to divert

customers from its own site.    Turning to factor VI, Maxwell never

offered to sell the domain name, and certainly never had a

pattern of selling domain names to mark owners.    Maxwell did not

behave improperly when providing contact information, as

addressed in factor VII.    Factor VIII concerns the registration

of multiple domain names; Maxwell’s registration of his second

site related to TrendMaker Homes does not argue in favor of

finding bad faith intent to profit.    Maxwell registered the

second domain name for the same purposes as the first one and

only after his registration of the first name expired.    Finally,

like the Lucas Nursery court, we particularly note that Maxwell’s

conduct is not the kind of harm that ACPA was designed to

prevent.

Texas Anti-Dilution Statute

     The district court also found that Maxwell violated the

Texas Anti-Dilution Statute.

 That statute reads:

     A person may bring an action to enjoin an act likely to
     injure a business reputation or to dilute the distinctive
     quality of a mark registered under this chapter or Title
     15, U.S.C., or a mark or trade name valid at common law,
     regardless of whether there is competition between the

                                 14
     parties or confusion as to       the   source   of   goods   or
     services.
     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.

Conclusion

     For these reasons, we reverse the judgment of the district

court and render judgment in favor of Maxwell.

REVERSED AND RENDERED.

                                15