Now leaving Sunnyvale: Second try's the charm

FreecycleSunnyvale v. The Freecycle Network, Inc., 2006 WL 2827916 (N.D. Cal.)

Plaintiff sought to dismiss defendant-counterclaimants’ counterclaims. Plaintiff originally sought a declaratory judgment of noninfringement and non-tortious interference with business relations. Defendant claims to own the inherently distinctive and famous trademarks FREECYCLE, THE FREECYCLE NETWORK, and the Freecycle Network logo.

Defendant’s § 32 infringement counterclaims were dismissed earlier because defendant has pending federal trademark applications, not registrations. (Discussion here.) Defendant filed amended counterclaims attempting to address other deficiencies the court found in its first try.

This time, defendant’s infringement counterclaim adequately specified its allegation that its marks were inherently distinctive; it need not go further and specify whether it claims the marks to be suggestive, arbitrary, or fanciful. And it adequately alleged contributory infringement by stating that plaintiff “has willfully and intentionally induced third parties to infringe the Marks by encouraging others to misuse the Marks in the form of verbs, adjectives, gerunds, and participles ... so that this misuse will result in the Marks being rendered generic ... [and] for the specific purpose of rendering them unregistrable.” I’m still not sure there’s a cause of action for this – that’s not contributory infringement, which requires an underlying infringer to be using the mark as an identifier for its own goods and services. If plaintiff is assisting other parties to use “freecycle” as a term for their own free exchange services, that could do the trick, but that’s only a subset of encouraging general “others” to use the term generically. However, the court rejected the idea that plaintiff’s status as a moderator for a website that encourages others to use the “Freecycle” marks without permission is sufficient to satisfy contributory infringement’s “supplies a product” test; defendant can’t proceed on that theory.

Further, defendant adequately alleged direct infringement by plaintiff’s own use of the term and logo.

Defendant has now specifically alleged that the parties compete, allowing it to proceed on its false advertising counterclaim. I’m not sure what the false advertising here is other than trademark infringement, because the court doesn’t set forth the alleged falsehoods. If the falsehood is that “my competitor’s trademark is invalid,” that’s an interesting variant on “my competitor is infringing IP rights,” a claim that usually but not always survives motions to dismiss. Materiality seems questionable here, even more questionable than “my competitor is infringing,” which at least suggests some risk that the competitor won’t be able to continue supplying the relevant product.

Plaintiff renewed its SLAPP objections to defendant’s state-law unfair competition counterclaims. Defendant argues that plaintiff’s conduct with respect to the “Freecycle” marks is illegal, unfair, and fraudulent. The court found that the facts alleged, if true, would substantiate the claims.