Welcome to Sunnyvale: Dueling Freecycles fight it out in California

FreecycleSunnyvale v. The Freecycle Network, Inc., 2006 WL 2060431 (N.D. Cal.)

For those of you following the dispute over the Arizona injunction forbidding criticism of the validity of the Freecycle Network’s trademark in FREECYCLE, this case may be of interest.

Plaintiff sought a declaratory judgment of non-infringement of trademark and tortious interference with business relations. Defendant is a nonprofit organizations that promote local recycling. Defendant alleges it owns distinctive and famous trademarks in FREECYCLE, THE FREECYCLE NETWORK, and its logo, which it’s been using since May 2003. The PTO has published defendant’s application to register the marks for opposition, and plaintiff has filed an opposition.

Defendant alleges that plaintiff has used the marks without permission, including founding a Yahoo! group with the name SunnyvaleFree that encourages others to use the marks without permission. Defendant maintains that plaintiff’s unauthorized use is likely to cause confusion about origin or sponsorship. Defendant thus counterclaims for direct and contributory trademark infringement under §§ 32(1) and 43(a) of the Lanham Act, unfair competition under the Lanham Act, and unfair competition under California law. The court took judicial notice of defendant’s Arizona lawsuit against Tim Oey, who’s associated with plaintiff.

Plaintiff correctly pointed out that defendant lacked standing under §32, since it had no registered marks. (Consistent with defendant’s rather aggressive view of its rights, defendant actually tried to fight this one.)

The counterclaims never state that plaintiff intentionally induced infringement, just inducement to “use” the marks. To amend the counterclaim to state a claim, therefore, defendant must – if it can do so truthfully – allege either intentional inducement to infringe or that plaintiff directly controls and monitors the instrumentality used by others to infringe.

Defendant didn’t specify whether its §43(a) unfair competition claims covered false association or false advertising. There’s ambiguity in the complaint over whether the parties are competitors. Because that’s an element of false advertising but not false association, the counterclaim needed to specify which theory defendant was using, and it didn’t, so it was dismissed with leave to amend. Interestingly, the court also ruled that, in order to provide plaintiff with fair notice, the counterclaim had to specify whether defendant’s claim relied on inherent or acquired distinctiveness.

Plaintiff also moved to strike the state law counterclaim as a strategic lawsuit against public participation (SLAPP). Anti-SLAPP protection applies to acts in furtherance of a person’s right of petition or free speech under the state or federal constitutions in connection with a public issue. Defendant submitted an email addressed to the Yahoo! group “freecyclenext,” which states:

The best way to keep freecycle in the public domain is for as many people and groups as possible to continue to use the term generically.

If you feel that the term freecycle is generic, you can let the USPTO know by sending a letter to:

Commissioner Of Trademarks

P.O. Box 1451

... Yahoo listens to its customers, so if folks complain about groups being deleted for use of the term 'freecycling' than [sic] members/moderators of those groups should complain to Yahoo at: http:// add.yahoo.com/fast/help/us/groups/cgi_abuse....

Another email message to the “freecyclesunnyvale” Yahoo! group and to one of defendant’s officials stated:

I have encouraged people to use the term freecycle as a generic term which would block [Defendant], and all others, from holding a trademark on the term in the area of freecycling services offered on the web.

On their face, the postings don’t appear to cover “a private commercial dispute,” but an expression of opinion about the marks’ protectability. Defendant’s own exhibits indicate the existence of magazine articles and discussion groups critical of defendant, and extensive Google results for “freecycle,” further persuading the court that defendant’s counterclaim arises out of speech acts in connection with an issue of public interest.

The defendant therefore had the burden to show a probability of success, here by demonstrating that plaintiff’s business practice was unlawful, unfair, or fraudulent. Defendant didn’t specify facts behind its allegation of “unauthorized and improper activities,” nor facts supporting its assertion that it has been harmed by loss of distinctiveness or fraud. Without specific allegations, and in view of the Arizona preliminary injunction against plaintiff’s principal Tim Oey, the court was reluctant to grant plaintiff’s motion to strike. Thus defendant was ordered to file amended pleadings specifying a legal basis for the state law claim and alleging facts sufficient to substantiate the underlying legal claim, at which point plaintiff can file a renewed motion to strike. Comment: given the point of the anti-SLAPP statute, which is to protect speakers against litigation unless and until the opposing party has specific facts showing likely success, this presumably puts defendant in jeopardy of paying fees and costs if it decides not to file an amended counterclaim. Also, the 9^th Circuit stayed the highly suspect Arizona injunction, which might bear on the issue.