Tuesday, December 08, 2009

If you build it, they will gripe

Cleary Building Corp. v. Dame, 2009 WL 4506414 (D. Colo.)

Cleary sued Dame over a website Dame operates attacking Cleary’s performance in building a building for Dame, and some related nasty comments. Dame succeeded in getting the trademark-related claims kicked out on the pleadings—a rare but encouraging result, even though the court accepted the bare allegation that the Cleary marks are famous, a result I’m not sure survives an Iqbal challenge.

Anyway, the allegations: Dame contracted with Cleary for the construction of a 50' x 100' x 18' 8" post frame building. Construction began in December 2008, then halted for the holidays. In January 2009, the relationship soured, and Dame refused to allow Cleary access to the construction site until Cleary agreed to address his concerns. Despite various negotiations, Dame refused to allow Cleary to do a final walk-through and correct remaining problems.

By May 2009, Dame was advertising his building for sale online, with links to myclearybuilding.com. The site used Cleary’s blueprint plans, including at least one Cleary mark, as a background to the opening page. (Actually, it’s a pretty cute graphic design, in my opinion.) He also posted a link to the website on a bulletin board where others were discussing the quality of Cleary products. “Readers accessed photographs of the Dame Building and commented that, while some defects were merely cosmetic, Cleary Building’s installers appeared to have done a ‘poor job’ overall and that the roof attachment was ‘horrible.’ After viewing the pictures on the Dame Website, one reader suggested that Dame ‘get a lawyer,’ while another opined that ‘Unless you live in the desert and never get rain or snow the roof will give you fits until you finally replace it.’”

Cleary further alleged false or misleading statements about Cleary and the Dame Building appeared on the website, for example that Cleary “declared the project finished.”

Dame didn’t move to dismiss the defamation, trade disparagement, and breach of contract claims, so the court didn’t analyze them.

Cybersquatting: The court found that “myclearybuilding.com” was confusingly similar to the Cleary word mark. But ACPA requires a bad faith intent to profit. Cleary argued that the following allegations were sufficient: Dame posted false and misleading statements about Cleary; the website apparently misrepresented the number of times it had been accessed; Dame used the domain name to attempt to gain an unfair advantage in negotiations; and Dame offered to remove the site if Cleary met Dame’s demands.

Even drawing all reasonable inferences in Cleary’s favor, the court found that Dame was making a noncommercial/fair use of Cleary’s marks. The exhibits to the complaint demonstrated that the site was nothing more than a gripe site: Dame was telling his story. “This is a valid exercise of free speech rights, and not the type of harm that the ACPA was designed to protect.” Moreover, ACPA directs courts to consider the registrant’s intent to divert consumers by creating a likelihood of confusion; here confusion is not plausible. There’s no disclaimer, but it’s clear from the screen shot that the site is about Dame’s experiences with Cleary. Confusion over source, sponsorship, or affiliation would simply be unreasonable.

What about Dame’s use of the site as bargaining power? ACPA also directs courts to consider a registrant’s offer to transfer the domain name for financial gain, when the registrant hasn’t used the domain name for the bona fide offering of goods or services. But use of a domain name as a bargaining chip isn’t an offer to sell, and anyway here Dame offered to remove the site, not sell it. In the end, the ACPA factors are “given to courts as a guide, not as a substitute for careful thinking about whether the conduct at issue is motivated by a bad faith intent to profit.” The paradigmatic harm of cybersquatting on hundreds of domain names in order to sell them to mark owners wasn’t alleged. The ACPA claim was dismissed.

The trademark claims also failed, because Cleary didn’t state a plausible claim that Dame used Cleary’s mark “in connection with any goods or services.” Instead, the mark was used in connection with his opinion about Cleary’s goods and services. Even accepting that Dame advertised his building with ads that included links to the site, and that the site uses Cleary’s marks and contains false/misleading statements about Cleary, that’s insufficient. The use of the trademark was separated from any goods or services offered for sale; the site doesn’t even link to the online ads. This was “too roundabout and attenuated” a connection. Trademark rights shouldn’t be used to quash discussion about trademark owners.

The dilution claim also requires commercial use, and Cleary’s pleading was equally insufficient on that count.

The court then dismissed the §43(a)(1)(A) claim for the same failure to allege commercial use, and then §43(a)(1)(B) for the same reason, which I will pickily point out should have been a failure to allege competition/commercial advertising and promotion.

The court found that it had diversity jurisdiction because, based on Dame’s own representations, the site had been accessed a substantial number of times and damages for defamation were potentially very large. But the state common law trademark infringement and statutory unfair and deceptive trade practices had to be dismissed anyway, the latter because Colorado law requires that to be liable a defendant must act in the course of its business, which means “regular commercial activity.” Dame was selling “ONE used post frame building” (allcaps in original! A judicial first?) and thus does not fall within the scope of the law.


David Welkowitz said...

I feel somewhat compelled to comment on the court's dilution analysis here. The TDRA replaced the "commercial use in commerce" language of the original FTDA with "use in commerce," although it did keep the noncommercial use exclusion intact. However, the court cited only pre-TDRA case law and even erroneously cited the pre-TDRA noncommercial use exclusion (the TDRA renumbered it from 43(c)(4)(B) to 43(c)(3)(C)). Thus, although the use in question may qualify for the exclusion, I believe the analysis was poorly done.

RT said...

David: Thanks for the clarification. I think the bigger issue is the same for both the trademark and false advertising claims, where I noted a similar bobble in the analysis: have we gone wrong by complicating Lanham Act doctrine so much that a judge proceeding in good faith and achieving what seems clearly the right result is nonetheless too easily tripped up by doctrinal details? And what could we do instead?