Court Opinion

ID: 3050185
Source: CourtListenerOpinion
Date Created: 2015-10-13 23:30:11.207493+00
Date Added: 2024-06-11T15:46:39.585600
License: Public Domain

FOR PUBLICATION
 UNITED STATES COURT OF APPEALS
      FOR THE NINTH CIRCUIT

THE FREECYCLE NETWORK, INC.,               No. 06-16219
                Plaintiff-Appellee,
               v.                            D.C. No.
                                          CV-06-00173-RCC
TIM OEY; JANE DOE OEY,
                                             OPINION
           Defendants-Appellants.
                                      
       Appeal from the United States District Court
                for the District of Arizona
        Raner C. Collins, District Judge, Presiding

                  Argued and Submitted
        August 15, 2007—San Francisco, California

                 Filed September 26, 2007

 Before: Diarmuid F. O’Scannlain, Michael Daly Hawkins,
        and Kim McLane Wardlaw, Circuit Judges.

                Opinion by Judge Hawkins

                           13235
               FREECYCLE NETWORK, INC. v. OEY         13237

                        COUNSEL

Donald M. Falk, Mayer, Brown, Rowe & Maw LLP, Palo
Alto, California, for the appellants.

Paul J. Andre, Perkins Coie LLP, Menlo Park, California, for
the appellee.

Bruce Adelstein, The Law Offices of Bruce Adelstein, Los
Angeles, California, David Post, I. Herman Stern Professor,
James E. Beasley School of Law, Philadelphia, Pennsylvania,
for Amici James Boyle, Lauren Gelman, Lawrence Lessig,
Declan McCullagh, David Post, Glenn Harlan Reynolds, Mar-
tin Schwimmer, Jimmy Wales, and Jonathan Zittrain, in sup-
port of the appellants.
13238             FREECYCLE NETWORK, INC. v. OEY
Mark A. Lemley, William H. Neukom Professor, Stanford
Law School, Palo Alto, California, for Amici 38 Intellectual
Property Law Professors and the Electronic Frontier Founda-
tion, in support of the appellants.

                              OPINION

HAWKINS, Circuit Judge:

   Tim Oey (“Oey”) appeals a preliminary injunction prevent-
ing him “from making any comments that could be construed
as to disparage upon [The Freecycle Network]’s possible
trademark and logo” and requiring that he “remove all post-
ings from the [I]nternet and any other public forums that he
has previously made that disparage [The Freecycle Net-
work]’s possible trademark and logo.”1 The Freecycle Net-
work, Inc. v. Oey, No. CV 06-173, Order at 5 (May 11, 2006)
(emphasis added). We have jurisdiction under 28 U.S.C.
§ 1291 and, for the following reasons, vacate the injunction
and remand.

                                   I.

   The Freecycle Network (“TFN”) is a nonprofit Arizona
corporation “dedicated to encouraging and coordinating the
reusing, recycling, and gifting of goods.” Through its website,
http://www.freecycle.org, TFN coordinates the efforts of over
3,700 Freecycle groups worldwide. Via the local groups’
webpages, individuals can post goods they no longer want. If
another member wants the item offered, an exchange is
arranged between the parties and the item thus avoids the
landfill.
  1
   Although Oey’s wife remains a party to this case, the facts and legal
questions revolve solely around Oey and, accordingly, this opinion refers
only to him.
                  FREECYCLE NETWORK, INC. v. OEY                   13239
   Although TFN claims to have consistently used the marks
FREECYCLE and THE FREECYCLE NETWORK, and
“The Freecycle Network” logo since May 2003 to refer to
TFN, it also admits that it initially used the term “freecycle”
and its various derivations (e.g., freecycling, freecycler) to
refer more generally to the act of recycling goods for free via
the Internet. In 2004, based on the advice of then-member
Oey, TFN decided to more actively police its use of the term
“freecycle” and to formally pursue trademark protection for it,
filing a trademark registration application on August 27,
2004. Shortly thereafter, TFN instituted a strict usage policy,
drafted by Oey, preventing use of the term “freecycle” in any
sense other than to refer to TFN or TFN’s services. On Janu-
ary 17, 2006, TFN’s proposed mark was published for opposi-
tion in the Official Gazette. An opposition was filed the next
day and the mark currently remains unregistered.2

   A member of TFN since February 2004 and active in the
corporation’s early development, Oey initially supported
TFN’s claim to the FREECYCLE mark. Experiencing a
change of heart and convinced that the term should remain in
the public domain, Oey later urged TFN to abandon its efforts
to secure the mark, conveying his feelings in an August 8,
2005, email to fellow TFN group moderators.3 In the follow-
ing weeks, Oey made various statements on the Internet that
  2
     Opposition proceedings before the Trademark Trial and Appeal Board
have been stayed pending resolution of a challenge to TFN’s trademarks
currently pending in the Northern District of California. In FreecycleSun-
nyvale v. The Freecycle Network, No. 06-00324CW (N.D. Cal.), Freecy-
cleSunnyvale (an independent “free recycling” group started by Oey)
seeks a declaration that its use of the term “freecycle” does not infringe
on TFN’s mark, or, in the alternative, that “freecycle” is a generic term.
   3
     In this email, Oey urged abandonment of TFN’s trademark pursuit,
contending that forcing the term “freecycle” into the public domain “fits
well with a ‘viral’ marketing approach to freecycle . . . which will lead
back to [TFN] . . . [and] generate lots of goodwill.” He also recommended
that TFN “maintain the trademark on the full name ‘The Freecycle Net-
work’ . . . [and] take credit for birthing [the] freecycle [concept].”
13240           FREECYCLE NETWORK, INC. v. OEY
TFN lacked trademark rights in “freecycle” because it was a
generic term, and he encouraged others to use the term in its
generic sense and to write letters to the United States Patent
and Trademark Office (“PTO”) opposing TFN’s pending reg-
istration.

   Not surprisingly, TFN took issue with Oey’s views and, on
September 16, 2005, asked him to sever ties with the com-
pany. In the ensuing months, Oey continued to make state-
ments on the Internet challenging the validity of TFN’s
claimed trademark in the term “freecycle” and encouraging
others to use the term in its generic sense.

   In April 2006, TFN sued Oey, seeking an injunction and
damages, alleging that Oey’s statements constituted contribu-
tory trademark infringement and trademark disparagement
under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
as well as injurious falsehood, defamation, and intentional
interference with a business relationship under Arizona law.
The district court granted a preliminary injunction based
solely on TFN’s § 1125(a) claims, apparently conflating
TFN’s allegations of contributory trademark infringement and
trademark disparagement. Oey timely appealed, and, on July
20, 2006, we stayed the district court’s injunction pending the
outcome of this appeal.

                               II.

   We review a district court’s grant of a preliminary injunc-
tion for an abuse of discretion. Perfect 10, Inc. v. Ama-
zon.com, Inc., 487 F.3d 701, 713 (9th Cir. 2007). A district
court abuses its discretion in granting an injunction if its deci-
sion is based on “either an erroneous legal standard or clearly
erroneous factual findings.” Clear Channel Outdoor, Inc. v.
City of Los Angeles, 340 F.3d 810, 813 (9th Cir. 2003) (inter-
nal quotations and citations omitted). “A district court’s deci-
sion is based on an erroneous legal standard if: (1) the court
did not employ the appropriate legal standards that govern the
                FREECYCLE NETWORK, INC. v. OEY              13241
issuance of a preliminary injunction; or (2) in applying the
appropriate standards, the court misapprehended the law with
respect to the underlying issues in the litigation.” Id.

  We have established two sets of criteria for evaluating a
request for a preliminary injunction. Earth Island Inst. v.
United States Forest Serv., 351 F.3d 1291, 1297 (9th Cir.
2003).

    Under the “traditional” criteria, a plaintiff must show
    (1) a strong likelihood of success on the merits, (2)
    the possibility of irreparable injury to plaintiff if pre-
    liminary relief is not granted, (3) a balance of hard-
    ships favoring the plaintiff, and (4) advancement of
    the public interest (in certain cases). Alternatively, a
    court may grant the injunction if the plaintiff demon-
    strates either a combination of probable success on
    the merits and the possibility of irreparable injury or
    that serious questions are raised and the balance of
    hardships tips sharply in his favor.

Id. at 1297-98 (internal quotations and citations omitted).
Thus, under either criteria, where a plaintiff fails to even raise
serious questions about its likelihood of success, an injunction
may not issue.

                               III.

   Although the district court correctly identified the “tradi-
tional” criteria for granting a preliminary injunction, it issued
the injunction based solely on TFN’s Lanham Act claims of
trademark infringement and trademark disparagement. As we
detail below, the district court’s “likelihood of success” analy-
sis did not adequately analyze the necessary elements for
trademark infringement, see Clear Channel Outdoor, Inc.,
340 F.3d at 813, and the district court “misapprehended the
law” insofar as the Lanham Act contains no cause of action
for trademark disparagement.
13242              FREECYCLE NETWORK, INC. v. OEY
A)    Trademark Infringement

   [1] The district court’s order characterized TFN’s § 1125(a)
claims as allegations of “trademark infringement.”4 To be lia-
ble for trademark infringement under § 1125(a), a person
must (1) use in commerce (2) any word, false designation of
origin, false or misleading description, or representation of
fact, which (3) is likely to cause confusion or misrepresents
the characteristics of his or another person’s goods or ser-
vices. 15 U.S.C. § 1125(a). “The core element of trademark
infringement is the likelihood of confusion, i.e., whether the
similarity of the marks is likely to confuse customers about
the source of the products.” Abercrombie & Fitch Co. v.
Moose Creek, Inc., 486 F.3d 629, 633 (9th Cir. 2007) (internal
quotations omitted). We have identified eight nonexclusive
factors relevant to evaluating likelihood of confusion. AMF
Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979).5
In its order, the district court did not mention, let alone ana-
lyze, these critical factors in evaluating TFN’s likelihood of
success on its trademark infringement claim. Rather, the dis-
trict court simply concluded that: (1) TFN appears to have a
legitimate mark; (2) Oey at one time acknowledged TFN’s
  4
     The district court makes no reference to TFN’s contributory trademark
infringement claim. Likewise, TFN’s brief on appeal references only
direct infringement, unfair competition, and disparagement. Regardless, as
discussed below, neither Oey’s actions, nor those he encouraged others to
take are actionable under the Lanham Act, making it unlikely TFN would
succeed on a contributory infringement claim either. There is nothing in
the record suggesting that Oey intentionally induced others to infringe
upon TFN’s claimed mark or that third parties actually used the mark in
an infringing manner. See Inwood Laboratories, Inc. v. Ives Laboratories,
Inc., 456 U.S. 844, 854 (1982). Rather, based on this record, Oey simply
encouraged the use of the claimed mark in its generic sense.
   5
     The so-called Sleekcraft factors are: (1) strength of the mark; (2) prox-
imity of the goods; (3) similarity of the marks; (4) evidence of actual con-
fusion; (5) marketing channels used; (6) type of goods and the degree of
care likely to be exercised by the purchaser; (7) defendant’s intent in
selecting the mark; and (8) likelihood of expansion of the product lines.
Id.
                  FREECYCLE NETWORK, INC. v. OEY                 13243
mark and sought to protect it; and (3) “after his separation
from the organization, [Oey] began to publicly encourage the
disparagement of the Freecycle trademark.” Contrary to the
district court’s conclusion, these facts—even if true6—simply
do not demonstrate that TFN has a likelihood of success on
its § 1125(a) infringement claim.

   As a threshold matter, Oey’s actions likely did not consti-
tute a “use in commerce,” 15 U.S.C. § 1125(a)(1), as the
record in this case does not indicate they were made to pro-
mote any competing service or reap any commercial benefit
whatsoever. See 15 U.S.C. § 1127 (defining “use in com-
merce”); Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894,
903 (9th Cir. 2002) (“[Trademark law’s ‘use in commerce’]
refers to a use of a famous and distinctive mark to sell goods
[or services] other than those produced or authorized by the
mark’s owner.”). Rather, based on his view that the term was
generic, Oey simply expressed an opinion that TFN lacked
trademark rights in the term “freecycle” and encouraged like-
minded individuals to continue to use the term in its generic
sense and to inform the PTO of their opinions.7

   Furthermore, even if Oey’s statements could somehow be
construed to be a “use in commerce,” such use was not likely
to cause confusion, mistake, or deceive anyone as to the con-
nection of Oey’s services (or any other) with TFN. Id.
§ 1125(a)(1)(A). Although the district court did not examine
the relevant Sleekcraft factors, our review of the record identi-
fies no potential likelihood of confusion resulting from Oey’s
activities. Oey simply did not use TFN’s claimed mark or a
similar mark in any manner likely to confuse the relevant pub-
lic: his statements neither mention any competing service or
product, nor claim any affiliation with TFN.
  6
   We express no opinion regarding the validity of TFN’s claimed mark.
  7
   Likewise, nothing in the record suggests Oey encouraged others to use
the mark in commerce.
13244             FREECYCLE NETWORK, INC. v. OEY
   Finally, Oey’s statements also do not satisfy the require-
ments for false advertising, misrepresentation, or unfair com-
petition under § 1125(a)(1)(B). There is no evidence that
Oey’s statements were made in “commercial advertising or
promotion.” Id. § 1125(a)(1)(B). And, even if such evidence
existed, § 1125(a)(1)(B) creates liability only for product
disparagement—i.e., misrepresentation of “the nature, charac-
teristics, qualities, or geographic origin” of “another person’s
goods, services, or commercial activities.” Id. (emphasis
added). TFN does not allege or show that Oey made any state-
ments disparaging its goods or services.8 To the contrary,
many of Oey’s remarks appear aimed at ensuring the ongoing
success of TFN and its services.9

   [2] Because the district court did not adequately analyze the
relevant law in evaluating TFN’s likelihood of success on its
trademark infringement claim, and the facts alleged do not
demonstrate such a likelihood, the district court abused its dis-
cretion in granting a preliminary injunction based on this
claim.

B)    Trademark Disparagement

  [3] TFN’s complaint also alleged “trademark disparage-
ment” under § 1125(a).10 However, no such claim exists under
  8
     While perhaps relevant to an analysis of the mark’s validity, TFN’s
novel argument that disparaging its mark constitutes disparagement of its
service because its mark is largely synonymous with its service is irrele-
vant here. Oey simply did not misrepresent “the nature, characteristics,
qualities, or geographic origin” of TFN’s services. See id.
   9
     Oey’s statements included: (1) “Let everyone know that TFN does not
need to control freecycling for TFN to be successful.”; (2)“[Keeping the
term ‘freecycle’ in the public domain] fits well with a ‘viral’ marketing
approach to freecycle. People hear about it and want to know where it
came from — which will lead back to [TFN] without strong trademark
enforcement. It will also generate lots of goodwill.”; and (3) “My alterna-
tive also has consequences but I firmly believe it is a much better choice
for [TFN] in the long run.”
   10
      The district court did not address this claim individually, but did
seemingly conflate it with TFN’s trademark infringement claim, conclud-
ing that Oey’s alleged disparagement of TFN’s mark somehow enhanced
TFN’s likelihood of success on its infringement claim.
                  FREECYCLE NETWORK, INC. v. OEY                    13245
the Lanham Act.11 The “elements” of TFN’s “trademark dis-
paragement” claim, as set forth in its complaint—i.e., false
statement, with malice, about TFN’s operations and the valid-
ity of its mark—simply cannot be gleaned from § 1125(a)’s
text or its prohibition against unfair competition, but instead
seem to have been derived largely from a common law “slan-
der of title” claim. See Big O Tire Dealers, Inc. v. Goodyear
Tire & Rubber Co., 561 F.2d 1365, 1373-74 (10th Cir. 1977)
(comparing “trademark disparagement” claim to Colorado’s
“slander of title,” which requires a false statement, malice,
and special damages). That the Lanham Act’s text does not
contemplate a trademark disparagement claim is borne out by
the absolute dearth of precedent analyzing such a claim under
the Act.12

   Even assuming TFN’s trademark disparagement claim were
somehow cognizable under the Lanham Act, the district court
made no attempt to determine whether TFN would likely suc-
ceed on the merits and, in any event, Oey’s conduct does not
satisfy TFN’s asserted elements. Oey’s statements were not
“false.” At worst, Oey offered an erroneous legal opinion (by
a layperson) that TFN lacked trademark rights in the term
“freecycle.” “Statements of opinion are not generally action-
able under the Lanham Act.” Coastal Abstract Serv., Inc. v.
First Am. Title Ins. Co., 173 F.3d 725, 731 (9th Cir. 1999).
  11
      As discussed above, § 1125(a)(1)(B) does prohibit product disparage-
ment, but Oey’s actions did not satisfy the requisite elements. TFN did not
raise a dilution by blurring or tarnishment claim under § 1125(c).
   12
      TFN’s reliance on Perfect 10, Inc. v. Cybernet Ventures, Inc., 167 F.
Supp. 2d 1114 (C.D. Cal. 2001) (declining to dismiss a complaint alleging,
inter alia, trademark disparagement under § 1125(a)), is misplaced. There,
the district court simply concluded that Perfect 10’s infringement claims
were sufficiently specific to withstand a vagueness challenge at the plead-
ing stage. See id. at 1122. Furthermore, contrary to TFN’s claims, Echo
Drain v. Newsted also offers no assistance because there the district court
simply recited the plaintiffs’ various allegations, including a claim of
“trademark disparagement,” but offered no further analysis as to whether
the claims were in fact cognizable under the Lanham Act. See 307 F.
Supp. 2d 1116, 1118 (C.D. Cal. 2003).
13246             FREECYCLE NETWORK, INC. v. OEY
    To this day, there has been no formal determination that
TFN has trademark rights in the term “freecycle.” The mark
is not yet registered and both an opposition to registration and
action seeking a declaration that TFN lacks trademark rights
in the term are currently pending. Oey’s statement that TFN
lacked trademark rights in the term therefore cannot be con-
sidered a false statement of fact. Cf. id. (“Absent a clear and
unambiguous ruling from a court or agency of competent
jurisdiction, statements by laypersons that purport to interpret
the meaning of a statute or regulation are opinion statements,
and not statements of fact.”). TFN and the district court
emphasize Oey’s prior support of TFN’s efforts to trademark
the term, but these prior efforts do not render his subsequent
statements “false.” Oey is entitled to change his mind. Until
it is definitively established that TFN holds a trademark in the
term “freecycle,” it cannot be false to contend that it does not.13

   [4] Trademark disparagement is not a valid cause of action
under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a),
and, even if it were, Oey’s actions do not satisfy the elements
alleged by TFN because he made no false statements. Accord-
ingly, to the extent the district court relied on this alternative
claim in granting TFN an injunction, it abused the discretion.

C)     Genericide

   [5] Although we do not reach the question of the validity
of TFN’s claimed mark, the crux of TFN’s complaint is that
Oey should be prevented from using (or encouraging the use
of) TFN’s claimed mark FREECYCLE in its generic sense.
However, TFN’s asserted mark—like all marks—is always at
risk of becoming generic and thereby losing its ability to iden-
tify the trademark holder’s goods or services. See, e.g., Mat-
  13
     Even if TFN unambiguously obtains trademark rights (e.g., by regis-
tration or judicial decree), Oey would remain free to argue that TFN
should not have been granted the trademark or that the public would be
better served with the mark in the public domain.
               FREECYCLE NETWORK, INC. v. OEY            13247
tel, Inc., 296 F.3d at 900 (“Some trademarks enter our public
discourse and become an integral part of our vocabulary.”); 2
J. THOMAS MCCARTHY, MCCARTHY ON TRADEMARKS AND
UNFAIR COMPETITION § 12:1 (2007) (hereinafter “MCCARTHY”).
Where the majority of the relevant public appropriates a
trademark term as the name of a product (or service), the
mark is a victim of “genericide” and trademark rights gener-
ally cease. MCCARTHY § 12:1.

   [6] Such genericide can occur “as a result of a trademark
owner’s failure to police the mark, resulting in widespread
usage by competitors leading to a perception of genericness
among the public, who sees many sellers using the same
term.” Id. (footnotes omitted). Alternatively, “a term intended
by the seller to be a trademark for a new product [can be]
taken by the public as a generic name because customers have
no other word to use to name this new thing.” Id. Genericide
has spelled the end for countless formerly trademarked terms,
including “aspirin,” “escalator,” “brassiere,” and “cello-
phane.” See id. § 12:18 (list of terms held to be generic).

   “Although there is a social cost when a mark becomes
generic—the trademark owner has to invest in a new trade-
mark to identify his brand—there is also a social benefit,
namely the addition to ordinary language.” Ty Inc. v. Perry-
man, 306 F.3d 509, 514 (7th Cir. 2002). Furthermore, when
a trademark becomes generic, “it reduces the cost of commu-
nication by making it cheaper for competitors to inform con-
sumers that they are selling the same kind of product” or
providing the same kind of service. MCCARTHY § 12:2; see
also Mattel, Inc., 296 F.3d at 900 (“Trademarks often fill in
gaps in our vocabulary and add a contemporary flavor to our
expressions. Once imbued with such expressive value, the
trademark becomes a word in our language and assumes a
role outside the bounds of trademark law.”).

  [7] Of course, trademark owners are free (and perhaps
wise) to take action to prevent their marks from becoming
13248             FREECYCLE NETWORK, INC. v. OEY
generic and entering the public domain—e.g., through a pub-
lic relations campaign or active policing of the mark’s use.
The Lanham Act itself, however, contains no provision pre-
venting the use of a trademarked term in its generic sense.14
Cf. Ty Inc., 306 F.3d at 513-14 (rejecting an attempt to extend
the Lanham Act’s antidilution provisions “to enjoin uses of
their mark that, while not confusing, threaten to render the
mark generic”).

   [8] Nor does the Act prevent an individual from expressing
an opinion that a mark should be considered generic or from
encouraging others to use the mark in its generic sense.
Rather, the use of a mark in its generic sense is actionable
under the Lanham Act only when such use also satisfies the
elements of a specified cause of action—e.g., infringement,
false designation of origin, false advertising, or dilution.
TFN’s mere disagreement with Oey’s opinion and frustration
with his activities cannot render Oey liable under the Lanham
Act.

                                   IV.

   Based on the record before us, our analysis of the necessary
elements and relevant considerations under § 1125(a) indi-
cates that Oey’s actions likely did not constitute infringement
because they were not a “use in commerce,” created no likeli-
hood of confusion, and did not disparage TFN’s products or
services.

  To the extent the injunction was based on TFN’s “trade-
mark disparagement” claim under section 43(a) of the Lan-
  14
     Although generic use (or encouraging generic use) alone does not vio-
late the Lanham Act, we express no opinion as to whether such actions
may be cognizable pursuant to alternative theories of relief under state or
federal law. The district court’s preliminary injunction was based solely
on TFN’s claims under section 43(a) of the Lanham Act, and we therefore
need not—and do not—address TFN’s other potential causes of action.
                  FREECYCLE NETWORK, INC. v. OEY                   13249
ham Act, the district court abused its discretion because no
such cause of action exists under the Act. Furthermore, even
if the claim were somehow cognizable under § 1125(a), TFN
has not demonstrated any likelihood of success because the
record does not demonstrate that Oey made any false state-
ment.15

   [9] Because TFN’s Lanham Act claims provided the sole
basis for the district court’s order granting a preliminary
injunction, we VACATE the injunction and REMAND for
further proceedings consistent with this opinion.16

  15
      Because we conclude TFN failed to demonstrate any likelihood of
success or raise any serious questions, we need not address whether TFN
can meet the additional prerequisites for obtaining a preliminary injunc-
tion.
   16
      Because we vacate the injunction on other grounds, we express no
opinion on the First Amendment challenges raised by Oey and amici. Nor
do we express any opinion on whether an injunction is appropriate pursu-
ant to any of TFN’s state law claims. We leave it to the district court to
determine its jurisdiction over—and, if necessary, the relative merits of—
those claims.