Ninth Circuit’s Ruling Favors Internet Specialties over its Domain Name Dispute with Milon-Digiorgio Enterprises

Holding:

In this dispute over an internet domain name, the U.S. Court of Appeals for the Ninth Circuit has upheld the grant of injunction against any further use of the registered domain name “ISPWest.com.” Plaintiff-appellee Internet Specialties West, Inc. (“Internet Specialties”) alleged in its trademark infringement suit in the U.S. District Court for Central District of California that its use by defendant Milon-Digiorgio Enterprises, Inc. (“MDE”) violated the Lanham Act. The district court granted Internet Specialties’ application for injunction. On appeal, the Ninth Circuit turned to whether the district court erred in determining that laches did not bar Internet Specialties’ trademark infringement claim. The Ninth Circuit agreed with the district court’s holding that that MDE did not demonstrate prejudice from Internet Specialties’ delay in bringing suit. The NInth Circuit reasoned that MDE did not spend the time in the interim developing brand recognition of its mark. The Ninth Circuit pointed to the uncontested evidence at trial showing that the vast majority of MDE’s advertising took the form of “pay-per-click” advertisements, through which potential customers are funneled to MDE’s website based on their interest in a particular type of service (i.e., internet services in Southern California). Additionally, the Ninth Circuit found the scope of the injunction appropriate. The Ninth Circuit explained that in order to avoid confusion to consumers, MDE must abandon all use of the name “ISPWest.com.”

Detailed Summary:

By way of background, Internet Specialties and MDE are both internet service providers offering substantially similar services, including internet access, e-mail, and webhosting. Internet Specialties uses the domain name “ISWest. com”, which it registered in May of 1996. MDE uses the domain name “ISPWest.com”, which it registered in July of 1998.

In 2005, after giving MDE a cease-and-desist letter, Internet Specialties brought suit alleging that MDE’s use of the name “ISPWest” constituted trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1). The trial was bifurcated. In the first phase, the jury found that MDE had infringed on Internet Specialties’ trademark, but found no damages from the infringement.

In the second phase, the district court ruled that MDE did not have a laches defense to the action. Accordingly, the court issued an injunction against the use of the name ISPWest. MDE moved for a new trial that the district court denied.

MDE filed this appeal against the district court’s grant of an injunction against any further use of its registered domain name, “ISPWest.com.” MDE asserted three challenges to the injunction: 1) that the jury’s finding of trademark infringement, which gave rise to the injunction, was the result of an improper jury instruction; 2) that the district court erred in finding that the plaintiff’s claim was not barred by laches; and 3) that the injunction is overbroad.

First, the Ninth Circuit considered MDE’s contention that jury instruction18.15 was improper and prejudiced the jury in favor of Internet Specialties on its trademark infringement claim. Jury instruction 18.15 followed the Model Civil Instructions by identifying the elements of trademark infringement, and by listing the eight Sleekcraft factors under the element of likelihood of confusion. Opinion, p. 3407, citing AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979).

The Ninth Circuit rejected MDE’s contention that the jury instruction misled the jury as to the source of these factors.  For example,  the district court’s phrase “three of these factors” which the Ninth Circuit said clearly referred to the eight Sleekcraft factors. And the district court’s phrase “as I have instructed you”, taken in context, was not an attempt to direct the jury to find for the plaintiff. Instead, it merely referred back to the district judge’s previous instructions on the likelihood of confusion. Therefore, the Ninth Circuit rejected MDE’s claim that jury instruction 18.15 was improper.

Next, the Ninth Circuit turned to whether the district court erred in determining that laches did not bar Internet Specialties’ trademark infringement claim. The Ninth Circuit agreed with the district court’s holding that that MDE did not demonstrate prejudice from Internet Specialties’ delay in bringing suit.

The NInth Circuit reasoned that MDE did not spend the time in the interim developing brand recognition of its mark. The Ninth Circuit pointed to the uncontested evidence at trial showing that the vast majority of MDE’s advertising took the form of “pay-per-click” advertisements, through which potential customers are funneled to MDE’s website based on their interest in a particular type of service (i.e., internet services in Southern California). Such advertising creates little to no brand awareness. It is a simple premise that MDE cannot create “public association” between ISPWest and the company if it does not even use the ISPWest mark in its most prevalent form of advertising, the Ninth Circuit wrote.

The Ninth Circuit found no error or abuse of discretion in the district court’s finding that MDE was not prejudiced within the meaning of a trademark infringement claim. Thus, the Ninth Circuit concluded that laches did not bar Internet Specialties lawsuit.

Finally, the Ninth Circuit determined the issue whether the district court’s injunction is overbroad. The Ninth Circuit answered this question in the negative, and affirmed the district court’s finding on this issue.

In seeking to overturn the district court’s ruling, MDE contended that even if it cannot use its mark to market DSL services, it should not be prohibited from using it to market its other services which did not prompt Internet Specialties’ lawsuit. The Ninth Circuit however found the scope of the injunction appropriate. The essence of trademark infringement is the likelihood of confusion, and an injunction should be fashioned to prevent just that. The Ninth Circuit did not find any abuse in the district court’s determination that, in order to avoid confusion to consumers, MDE must abandon all use of the name “ISPWest.com.”

On the basis of the foregoing, the Ninth Circuit affirmed the district court’s judgment.

Justice Kleinfeld dissented, arguing that the Court improperly applied the prejudice standard.  He explained that the majority opinion defied circuit precedent, citing the cases of Grupo Gigante S.A. de C.V. v. Dallo & Co., 391 F.3d 1088, 1105 (9th Cir. 2004) (citing 5 McCarthy on Trademarks and Unfair Competition § 31:12 at 31-42 & n.4 (4th ed. 2002)); Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 837-38 (9th Cir. 2002); Whittaker Corp. v. Execuair Corp., 736 F.2d 1341, 1347 (9th Cir. 1984).

Also See:

USPTO Issues TEAS 4.9 Release

Bicameral, Bipartisan IP Protection Bill That Will Not Break the Net Filed in Both Chambers

Additional Courtesy Electronic Mail Addresses Now Permitted for Trademark Correspondence

USPTO Expands Consistency Initiative

European Union Court Issues Ruling in Trademark Dispute between Google and Louis Vuitton