Charbucks prevails over Starbucks on remand

Starbucks Corp. v. Wolfe's Borough Coffee, Inc., 2011 WL 6747431 (S.D.N.Y.)

Starbucks sued Wolfe’s over its Mr. Charbucks coffee.  After the district court rejected all the Lanham Act and coordinate state claims, the court of appeals reversed only on the federal dilution claim, holding that the district court had wrongly applied a substantial similarity requirement to the marks and that the absence of bad faith doesn’t matter to intent to associate under the TDRA.

On remand, the court reached the same conclusion: Mr. Charbucks did not diminish the selling power of the Starbucks mark by harming its ability to clearly identify one source. 

The TDRA offers six factors for courts to consider in a blurring analysis: “(i) [t]he degree of similarity between the mark or trade name and the famous mark; (ii)[t]he degree of inherent or acquired distinctiveness of the famous mark; (iii)[t]he extent to which the owner of the famous mark is engaging in substantially exclusive use of the mark; (iv)[t]he degree of recognition of the famous mark; (v)[w]hether the user of the mark or trade name intended to create an association with the famous mark; [and] (vi) [a]ny actual association between the mark or trade name and the famous mark.” But in the end, a court “must ultimately focus on whether an association, arising from the similarity between the subject marks, ‘impairs the distinctiveness of the famous mark’” (quoting the court of appeals).

There was no dispute that four of the six factors weighed in Starbucks’s favor: the distinctiveness of its mark, the exclusivity of its use, the high degree of recognition of its marks, and Wolfe’s intent to associate its mark with the Starbucks mark.  The court thus turned to the degree of similarity of the marks and the evidence of actual association.

Similarity: the court gave the most weight to the way the marks were presented in commerce. There was no evidence that Charbucks was ever used as a standalone term, and it was unlikely that Charbucks would appear to consumers “outside the context of its normal use” (again quoting the court of appeals).  Instead, Charbucks always preceded or followed by the terms “Mister,” “Mr.” or “Blend,” and was used in connection with Wolfe’s Black Bear mark, a large black bear, or the figure of a walking man above the words “Black Bear Micro Roastery.”  These weren’t similar to the highly recognizable Starbucks siren mark.  The packaging used an entirely different color scheme from that of Starbucks, and identified Black Bear as a New Hampshire “Micro Roastery.”  On the webiste, they were accompanied by the domain name blackbearcoffee.com.  “Thus, although the term ‘Ch’arbucks is similar to ‘St’arbucks ‘in sound and spelling’ when compared out of context, the marks are only minimally similar as they are presented in commerce.”  The cases cited by Starbucks involved junior marks used on their own, without contextual features distinguishing them from the senior mark.  The “minimal degree” of similarity weighed in Wolfe’s favor.

Actual association: the court was unimpressed with Starbucks’s telephone survey asking consumers about the terms “Charbucks” and “Starbucks.”  Of 600 respondents, 30.5% said that they associated the term “Charbucks” with “Starbucks,” and 9% said they associated “Charbucks” with coffee. Asked to name a company or store that they thought might “offer a product called ‘Charbucks,’” 3.1% of respondents said Starbucks.

This survey showed “some association” between the two terms, but didn’t measure how consumers would react to the Charbucks marks as actually used in commerce.  Moreover, this percentage was relatively small for a dilution survey.  The court noted that other percentages have been much higher for successful plaintiffs: VISA/EVISA (73%), NIKE/NIKEPAL (87%), STARBUCKS/SAMBUCK’s COFFEEHOUSE (85%).  “Here, even stand-alone use of the core term “Charbucks” drew only a 30.5% association response.”  In the 9^th Circuit’s HOT WHEELS/HOT RIGZ case, the court found 28% to be “significant evidence of actual association.”  But that number was the percentage who thought that HOT RIGZ was made by Mattel/Hot Wheels or with that company’s permission.  When asked a similar question, however, only 3.1% of the respondents in this case gave a similar answer.  Thus, the case “does little to bolster Starbucks' argument that a single-digit source confusion indicator produced by a survey that did not present the relevant terms in context is probative of a likelihood of dilution by blurring.”  Thus, actual association weighed no more than minimally in Starbucks’s favor.

The court then turned to an overall assessment.  The ultimate question was not simply whether there was an association between the marks, but whether the association arising from the similarity of the marks is likely to impair the distinctiveness of the famous mark.  The court noted that trademarks aren’t supposed to create an unlimited right at large, and that dilution law shouldn’t prohibit all uses of a distinctive mark the owner prefers not be made. 

Starbucks’s evidence on distinctiveness, recognition, and exclusivity of use was strong. As the court pointed out, however, these are really indicators of fame, not indicators of likely dilution from any particular defendant’s use: “None of the three, however, is dependent on any consideration of the nature of the challenged marks or any defendant's use of any challenged mark. Thus, although these factors are significant insofar as they establish clearly Plaintiff's right to protection of its marks against dilution, they are not informative as to whether any association arising from similarity of the marks used by Defendant to Plaintiff's marks is likely to impair the distinctiveness of Plaintiff's marks.”

Intent to associate also weighed in Starbucks’s favor, since Wolfe’s principal testified that he meant to evoke an image of dark-roasted coffee of the type offered by Starbucks.  However, similarity of the marks and association between them are important factors, as emphasized by the statutory language defining dilution as “association arising from the similarity between a mark or trade name and a famous mark that impairs the distinctiveness of the famous mark.”  Thus, the court looked carefully at the relationship between similarity and association as the marks were presented in commerce.

Given the contextual dissimilarity, the survey’s weakness, and the use of other house marks with Charbucks, the court concluded that “the Charbucks marks are only weakly associated with the minimally similar Starbucks marks and, thus, are not likely to impair the distinctiveness of the famous Starbucks marks.”

iPad "just like a book" claim is puffery

Baltazar v. Apple Inc., 2011 WL 6747884 (N.D. Cal.)

Plaintiffs alleged breach of contract and violation of the UCL based on claims that Apple promised that the iPad could be used outdoors as an e-reader and mobile internet device, when in fact the iPad overheated when it was used outdoors even within the acceptable ambient temperature range, causing it to shut down until it cooled. The court granted Apple’s motion to dismiss the third amended complaint with prejudice. 

Apple ran a TV ad showing images of the iPad being used outdoors, at least some of the time on sunny days, and posted on its website a video showing scenes of the iPad being used outdoors and in the sun.  Plaintiffs also noted Apple’s website statement that “[r]eading the iPad is just like reading a book.” 

The court rejected the breach of contract claim, which was similar to a warranty-based claim.  The ads and specifications were insufficient to show that Apple ever claimed that the iPad would operate without interruption under the conditions identified by the plaintiffs.  The ad on which plaintiffs relied had seven brief scenes showing the iPad in outdoor locations, some on a “sunny day.”  But these were only a small fraction of the approximately 30 different scenes in the 30-second ad; they were fleeting depictions and none showed the iPad being used in direct sunlight or for an extended period outdoors.  “The overall impression of the commercial is not that the iPad was an outdoor product, but a mobile product. In fact, the iPad was not even turned on in some of the scenes, but was merely being moved about handily.” The scenes couldn’t be construed as a promise that the device will operate relentlessly outdoors in sunlight.

Neither did Apple’s web video help.  The video, clearly marked on Apple’s website as having been created by an iPad owner, included brief scenes of the iPad being used outdoors, including being affixed to the dashboard of a car and the gas tank of a motorcycle. (Eric Goldman is going to wonder where the §230 analysis is here.)  The Apple web page quoted the creator’s statement that, “This is an exploration of what is possible, not necessarily what is practical.” Apple also added a footnote, warning “Do not attempt.” Thus, plaintiffs failed to allege that any ad promised the particular performance to which plaintiffs claimed to be entitled.

Plaintiffs alleged that the iPad came with an express warranty against defects in materials or workmanship under normal use, which Apple itself defined to include operation in a place where the ambient temperature was between 32-95 °F. The court disagreed with plaintiffs' interpretation: there was no promise that the iPad would operate without interruption under all conditions within a specified ambient temperature range. “To use an obvious example, one could not conclude from the specifications that the iPad would be expected to operate in a rain or snow storm simply because it is designed to operate at certain ambient temperatures.”

The UCL claim also failed.  If an alleged misrepresentation wouldn’t deceive a reasonable consumer, a claim may be dismissed on the pleadings.  As with the contract claim, the court found, a reasonable consumer wouldn’t receive the message that the iPad would operate without interruption in the specific environmental conditions under which it allegedly tended to shut down.  The plaintiffs alleged that they relied on the Apple ad to conclude that the iPad would work “outdoors,” or “under the conditions in the advertisement,” but they alleged only that it failed to operate without interruption in a limited subset of outdoor conditions.  Also, the statement that the iPad could be used “just like a book” was mere puffery.  

Release trumps right of publicity claim even when endorsement was altered

Hauf v. Life Extension Foundation, 2011 WL 6757001 (6th Cir.)

Prior coverage. 

Virginia Hauf, the mother of a child diagnosed with brain cancer, purchased shark cartilage supplements from the Life Extension Foundation. Several years later, Hauf contacted the Foundation and offered to endorse its products. The Foundation sent her a proposed “Testimonial” and a “Standard Release of Testimonials & Photos.” Hauf revised the proposed testimonial and returned it to the Foundation. She also signed and returned the release, which provides that Hauf grants the Foundation the “irrevocable right” to use her “name (or any fictional name)” and her image “in all manners, including composite or distorted representations, for advertising, trade, or any other legal purposes.” It further provides that Hauf releases “any right to inspect or approve the finished product, including written copy.”

The Foundation took the release and ran with it, ascribing a variety of testimonials to Hauf. She sued for false endorsement, false advertising, and misappropriation of name and likeness under the Lanham Act, the Michigan Consumer Protection Act, and Michigan common law. Based on the unambiguous language of the release, the district court summarily dismissed all of her claims, and the court of appeals affirmed.

In 1993, Hauf contacted the Foundation to buy shark cartilage supplements. A founder, William Faloon, spoke with her about why she was ordering. After learning her reasons, Faloon asked Hauf whether she would be willing to publish a letter to the editor in the Foundation’s Life Extension Magazine recounting her son's story. She agreed. Her letter was published in 1994, the year in which she stopped purchasing shark cartilage from the Foundation. Sometime later, she was asked and agreed to publish an updated letter to the editor. The updated letter was published in 1995.

In 2001, Hauf contacted the Foundation again and offered to endorse its products. She wrote: “i would like to get with you on the life extension foundation. i feel your products are wonderful .... i would like to work out something with you in regards to recommending your products.” A Foundation employee faxed her a proposed “Testimonial” and a “Standard Release of Testimonials & Photos.”  Hauf believed that the proposed testimonial contained several errors, so crossed out inaccuracies, interlineated additions, and faxed the result back to the Foundation.  Her statement said that her 13-year-old son was diagnosed with brain cancer and that surgeons were unable to remove all of it, giving him a 6-month prognosis at best.  It continued that Hauf had used “high doses of vitamin C, E, beta carotene, shark cartilage, garlic, selenium, and other nutrients and minerals” as well as an “immuno augmentative” therapy she obtained for him in Mexico, and that her son was now tumor free with no limitations.

The surgeon who operated on Hauf’s son disagreed: he testified that the surgery completely eradicated the tumor and that he never told them that the son had only 6 months to live.  Indeed, when the Make-a-Wish Foundation asked about Hauf’s son, he told that organization that the son’s condition was not life-threatening.  Another of Hauf’s son’s doctors also disagreed with Hauf’s version of events.

As to the release, Hauf alleged that in a phone conversation with the Foundation employee who sent her the release, she explained that she was supplying the testimonial for publication in a single issue of the Foundation’s magazine and that it wasn’t to be used for monetary gain.  She claimed that the employee assured her that her requests would be respected and that she’d be able to view and approve the testimonial before it was published.  She then signed the release.

The release gave the Foundation and all its business affiliates, assingns, licensees, and legal representatives the “irrevocable” right “to use my name (or any fictional name), picture, portrait, digital image, or photograph in all forms and media and in all manners, including composite or distorted representations, for advertising, trade or any other legal purposes, and I waive any right to inspect or approve the finished product, including written copy, that may be created in connection therewith.”

The Foundation published the testimonial more than forty times between 2001 and 2005.  Its language was altered to claim that Hauf found out about “immuno augmentative therapy” through the Foundation, and even though Hauf specifically struck out the phrases “In my search for a way to save my son's life, someone referred me to Life ExtensionTM” and “The People at your organization supported my search for different treatment regimens we could try,” they reappeared in several versions of the testimonial. At Hauf's request, in 2005, the Foundation ceased publishing testimonials bearing Hauf's name.  (Note that the defense’s victory here provides no solace against violations of the FTC Endorsement Guidelines were they to try to restart use based on the release.)

Hauf’s argument that her release wasn’t a release failed, based on its plain language. Its scope was unambiguous.  (As researchers who do consent forms know, many people don’t read or understand these things no matter how clearly and prominently you try to convey the information, because they simply don’t think that it matters to them—and, though I take no position on the actual facts of this case, if there is an oral conflicting promise then our default is to believe the human being over the text, contrary to the parol evidence rule.  See Jessica M. Choplin et al., A Psychological Investigation of Consumer Vulnerability to Fraud: Legal and Policy Implications, 35 Law & Psych. Rev. 61 (2011).   What should or can be done about this for consumer protection purposes is a difficult question, but empirically there can be little dispute that, if you’re not a lawyer or a superstar for whom an endorsement agreement is how you make your money, you’re not particularly likely to understand what you’re signing even if given all the opportunity in the world to peruse it.)

Here, the release was unambiguous; its plain language provided that the Foundation could use Hauf's name for advertising, including in composite or distorted representations, without Hauf's inspection or approval.  There was no need to reference testimonials specifically. “Simply put, Hauf is relinquishing the advertising rights in her name to the Foundation.”  Hauf argued that waiving “any right to inspect or approve the finished product, including written copy” didn’t authorize modification since “copy” means “duplicate,” but the context showed that the meaning was instead “advertising copy.”

Hauf also argued that the Lanham Act prohibited modifications of a testimonial, citing the unfortunate Facenda v. NFL Films, Inc., 542 F.3d 1007 (3d Cir. 2008).  Facenda “signed a release shortly before his death in 2004 giving NFL Films “the unequivocal rights to use the audio and visual film sequences recorded of me ... provided, however, such use does not constitute an endorsement of any product or service.” The Third Circuit construed this not as a statement that Facenda wasn’t endorsing products/services, but rather as a waiver only with respect to non-endorsement uses, such that if the estate proved that the NFL’s use counted as an endorsement then the waiver wouldn’t apply.  Anything that fell outside the Lanham Act prohibition on false endorsement would also fall within the contract waiver; this was based on the contract language, and by contrast here the release's express terms authorized the Foundation to modify the language of the testimonial without Hauf's knowledge.

Finally, the court agreed that the release wasn’t void as against public policy.  The language of the release didn’t violate any statutes, and the manner of the testimonial’s use didn’t constitute fraud because the changes were principally changes in wording.  (The irrevocable part, though, may well violate public policy, at least if the FTC’s Endorsement Guides count, since the Guides say it’s deceptive to continue using a testimonial when an endorser’s opinion has changed.)  The general principle is freedom of contract, unless there’s some well-defined explicit public policy to the contrary that is ascertainable with reference to laws and legal precedents rather than general principles. The release’s scope was limited to use “for advertising, trade or any other legal purposes.”  So that was ok.

Nor did de minimis alterations to the testimonial offend public policy. The modifications to which Hauf objected exaggerated the Foundation’s role in her son’s treatment, but didn’t tout the quality or efficacy of the Foundation’s products.  “They do not misrepresent the effectiveness of immuno-augmentative therapy, for example, or create a false impression regarding how the Foundation's products helped Hauf's son.  Indeed, they do not reference any of the Foundation's products.”  Any substantive misstatements about her son’s story were apparently from Hauf.

Holdover franchisee engaged in counterfeiting

Century 21 Real Estate, LLC v. Destiny Real Estate Properties, Slip Copy, 2011 WL 6736060 (N.D. Ind.)

Century 21 entered into a franchise agreement with Destiny Real Estate Properties in Lowell, Indiana allowing Destiny to use Century 21’s marks.  Failure to pay royalties and advertising fees would allow Century 21 to terminate the agreement, prohibiting any future use of Century 21’s trademarks and triggering a liquidated damages provision. In 2011, Century 21 terminated Destiny for nonpayment, but Destiny continued to operate using Century 21’s marks.

Century 21 sued; Destiny defaulted.  The court awarded damages, including liquidated damages, under the franchise agreement, along with attorney’s fees.  Century 21 also sued for infringement and counterfeiting under § 1116(d)(1)(B), seeking mandatory treble damages under 15 U.S.C. § 1117(b) because the counterfeiting was knowing and willful.  (It sought trebling of at least the minimum it would have received under the franchise agreement between the time of termination and the filing of the complaint.)

While infringement was easily established, the court spend more time on the counterfeiting issue.  The case law on whether continued use of a mark after the termination of a franchise constitutes counterfeiting, allowing an award of enhanced damages and fees.  Counterfeiting requires the unauthorized use, for the same goods or services as to which the plaintiff has a registration, of “a spurious mark which is identical with, or substantially indistinguishable from, a registered mark.”  It also requires knowledge and intent.  The only issue not clearly established was whether the continued use of a formerly authorized mark by a hold-over franchisee constitutes the use of a “counterfeit” mark.

In light of the reasonable meaning of the statute and Seventh Circuit precedent, the court held that it did, a Sixth Circuit holding to the contrary nothwithstanding, see U.S. Structures, Inc. v. J.P. Structures, Inc., 130 F.3d 1185 (6th Cir.1997).  (The court commented that relatively few franchise cases had addressed the issue, which to me is evidence that Century 21 might be claiming too aggressively—this is a pretty big stick to hand franchisor-plaintiffs over above contract and ordinary trademark law, and it comes with a label that invites obloquoy and even criminal prosecution; cf. the CFAA.  Note also that we might want to be pretty careful about the requisite “knowledge and intent” under these circumstances—a franchisee who has even an unreasonable belief that the franchisor isn’t allowed to terminate, much less a reasonable but wrong one, knows she’s continuing to use the mark and intends to continue to share in the mark’s goodwill, but is that really enough to make her a counterfeiter?)

The Ninth Circuit has held that for certification marks, the continued use of a mark by a former licensee constitutes counterfeiting. State of Idaho Potato Comm'n v. G & T Terminal Packaging, Inc., 425 F.3d 708 (9th Cir. 2005).  Neither the Sixth or the Ninth, the court thought, offered much in the way of reasoning.  Pennzoil-Quaker State Co. v. Smith, No. 2:05cv1505, 2008 WL 4107159 (W.D. Pa. Sept.2, 2008), involved a variant, where a successor business to a formerly licensed distributor continued to use the former business’s signs. The court found infringement but not counterfeiting because the signs were genuine.  The Seventh Circuit, while lacking cases directly on point, has held that counterfeiting isn’t limited to reproduced marks and can include the use of a genuine mark on an unauthorized product, such as packaging unauthorized goods in boxes bearing the mark.  General Elec. Co. v. Speicher, 877 F.2d 531 (7th Cir.1989).  “The happenstance of having trademarks made by the owner in one's possession, so that one doesn't have to copy them, has no relevance to the purposes of the statute. Indeed, the danger of confusion is even greater because the ‘imitation’ is not merely colorable, but perfect.”

The court found this to create an instructive analogy: “the ex-franchisee sells a non-genuine service wrapped in the ‘package’ stamped with the former franchisor's trademarks. The consumer associates the service with the franchisor's brand and may never know that the service provided was unauthorized. Profits are diverted that may have gone to sales of authorized services, and the franchisor loses control over its trademarks.”  The court thought that an unrelated entity would obviously be counterfeiting; it could “conceive of no reason why an ex-franchisee should escape liability for counterfeiting simply because that person had access to a franchisor's original marks because of the former relationship and therefore did not need to reproduce an identical or substantially similar mark.”

The court then turned to damages, specified by statute as three times profits or damages, whichever is greater, along with a reasonable attorney’s fee.  Century 21 sought actual damages equal to the minimum royalties and advertising fund contributions between the termination of the agreement and the filing of the complaint; a separate award of treble that amount; and treble the amount of damages and profits uncovered in an accounting of Destiny's profits.  The court disagreed.  First, the way Century 21 put it, it was seeking four times its actual damages.  Second, Century 21 was seeking double recovery.  The court did order an accounting, but if it revealed profits or damages from the infringement greater than the actual damages based on the franchise agreement, that higher amount would be trebled as the total award. 

Plus, the liquidated damages awarded under the franchise agreement already accounted for at least a portion of Century 21’s lost profits.  Some authority permits such a double recovery, “apparently under the theory that the liquidated damages and trademark damages compensate for different injuries and that limiting damages to liquidated damages gives incentives for franchisees to hold-out and continue using licensed marks despite the termination of the franchise agreements.”  While breach of contract and infringement are separate wrongs, and while a franchisor’s recovery for infringement should not be limited to agreed-on liquidated damages, there was still a question of the proper amount of damages, which weren’t automatically created by the existence of two separate wrongs.  “[A] trebling of the lost royalty stream, on top of the liquidated damages award … , would result in a recovery of quadruple damages. While Century 21's harm from Defendant's infringement may go well beyond lost royalties to include damages resulting from the trademark holder's loss of control over the mark, the dilution of the value of the mark, public confusion, and other harms, the trebling provision of § 1117 accounts for the difficulty of ascertaining the extent of the actual harm.”

As a result, the court reduced the award of treble damages for infringement by a third to take into account Century 21’s separate recovery of its lost royalty and ad fees through liquidated damages.  If Century 21 chose an accounting, it could file a supplemental claim for damages based on additional evidence.

The court also refused to hold Destiny’s president individually liable because the complaint didn’t provide enough detail beyond the legal conclusion that he was the active force behind the infringement.

Century 21 was also entitled to a permanent injunction because of the loss of control over and harm to its marks.  Destiny was enjoined from new infringing acts and to cease all physical and online use of Century 21’s marks (including a domain name incorporating the mark, a Facebook page, and a Yelp page), as well as to contact any third party website that identifies Destiny as associated with Century 21 and request that any such references be removed and to assign its telephone numbers to Century 21 or its designee. The court declined to order corrective advertising “because any lingering associations in the public's mind between Destiny and Century 21 are more the result of the decade-plus affiliation than the post-termination infringement. In any event, the injunctive remedies above should sufficiently demonstrate to the public that the relationship has been severed.”

Substantial similarity?

Interesting examples of copying existing works, mostly paintings, through photography--some interpretations are looser than others, and many would make for good class discussion.  The contest rules specify classic works of art, but many are still in copyright.

No class treatment for "cure" claims

Doe v. Passages Malibu, 2011 WL 6739610 (Cal.App. 2 Dist.)

Doe was a former client of defendant Grasshopper House d/b/a Passages Malibu, an alcohol and drug treatment center.  He sued after his admission was terminated early as a result of his allegedly violent threats against the owner of the facility. He paid $200,000, and argued that he was wrongfully denied a refund of over $100,000 for the unused period of his stay. He also contended that defendants' use of the word “cure” in advertising was unlawful and misleading.

He wanted to sue on behalf of a class consisting of all clients who had paid for “the addiction cure services” during the class period, and a subclass who’d been involuntarily terminated without a refund.  Doe argued that the CLRA and UCL claims could be dealt with classwide because they relied on the same misrepresentations of addiction cure services, and that the core of the case was that Passages wasn’t licensed to provide medical treatment and falsely represented that it could offer a medical cure.  Given the undeniable materiality of a promised cure to a class of people suffering from addiction, he contended, the claims were amenable to class treatment.  He cited case law that causation on a classwide basis could be shown by materiality, and that a material misrepresentation would give rise to an inference of reliance for the class.

Defendants argued that class treatment was inappropriate.  Each client signed a contract on admission acknowledging that no guarantee of recovery had been made, thus making issues of materiality or reliance vary from consumer to consumer.  Further, defendants argued, each class member’s right to medical privacy would render management difficult or even impossible.  Plus, the large admission fee would give each member sufficient incentive to litigate on her own.

The trial court denied certification, and the court of appeals affirmed.  Substantial evidence supported the trial court’s determination that common questions of law or fact didn’t predominate.  In order to establish commonality in false advertising, a plaintiff must show at a minimum that each class member was exposed to the ads.  But the class definition included people who never saw any of Passages’s ads, as well as people who were cured.  Tobacco II was not to the contrary; it involved standing, not commonality.  Even assuming that the class comprised only those exposed to the ads at issue, Doe would have to show reliance, and the trial court found that reliance and causation couldn’t be established classwide, a finding that was supported by the evidence.

If materiality or reliance would vary from consumer to consumer, the issue is not subject to common proof, and the action is properly not certified as a class action. That was the situation here because, “among other reasons, there was no evidence of a common misrepresentation that had caused injury to the entire class, and there was a potential conflict between those class members who had read and attempted to negotiate the allegedly unconscionable contract and those, like plaintiff, who had not read or negotiated the contract.”  But isn’t a promised cure inherently material to these vulnerable consumers, and thus presumed to cause classwide reliance?  Passages argued that the contract dispersed any such inference, and Doe didn’t address the contract until his reply brief.  The court of appeals held that the enforceability of the contract provision might vary from client to client; Doe’s declaration said that he didn’t read or understand the contract and was mentally and physically impaired when he signed it.  That supported a finding that his claim was not typical and that potential class members differed.

Moreover, the court of appeals affirmed denial of certification of the UCL claim on superiority grounds, even though the UCL claim didn’t require reliance or proof of exposure to deceptive advertising.  The proposed class included those who were actually cured, which mattered to the question of restitution, which is measured by the difference between what the plaintiff paid and the value of what she received.  For cured class members, that difference was zero.  For those who relapsed, calculating restitution wouldn’t be a simple matter of calculating the cost per day to attend Passages.  Thus, the trial court reasonably denied certification of the proposed class on the ground that, in order to fashion a restitution award, “it would be necessary to litigate the degree of each class member's recovery (or lack thereof) from addiction.”

First sale slightly protects unauthorized reseller

Bel Canto Design, Ltd. v. MSS HiFi, Inc., 2011 WL 6355215 (S.D.N.Y.)

HT Eric Goldman. Bel Canto sells high-quality audio components and owns registered trademarks for its marks with significant goodwill.  Bel Canto’s products have serial numbers, which Bel Canto tracks for invoicing and warranty purposes, and in order to sell legally in Canada.  Bel Canto products are supposed to be sold only through a network of authorized dealers, who are prohibited from selling them to unauthorized dealers.  Bel Canto refuses to honor the manufacturer’s warranty or provide product and service assistance, product use information, software upgrades, rebates, and recall notices to consumers who buy from unauthorized dealers.

Defendant MSS was an authorized dealer in 2009 but was terminated in 2010.  It still offered Bel Canto products in its stores and on its own and other websites.  MSS got Bel Canto products from authorized dealers who were violating their dealer agreements.  MSS advertises on its website that it will buy authorized dealers’ inventory in violation of their OEM agreements:

Need to place a $50k or $100k order with a manufacturer in order to get the  proper discount? JB Audio can be your secret investor. We are very discreet, and we already have arrangements with a number of dealers to keep the big brothers guessing. We will do everything in our power to protect your interest.

Defendant John Boey owns MSS; Bel Canto terminated MSS when it learned that Boey was involved.

MSS altered Bel Canto serial numbers. Bel Canto found out about this when a French customer contacted it to complain that he hadn’t received the product he’d ordered from MSS, which MSS had told him would be altered by the Bel Canto factory to change the voltage from standard US current to European current.  Shortly after that, MSS shipped the customer a different product than the one he’d originally ordered.  MSS obtained the product from an authorized Bel Canto dealer.  Bel Canto investigated and found the serial number on the unit to be counterfeit: the exterior serial number didn’t match the interior serial numbers.  Bel Canto determined that this had been done to hide the identity of MSS’s supplier (who it then terminated).

Bel Canto then looked into MSS’s eBay listings and concluded that it was listing products with counterfeit serial numbers.  Also, MSS explicitly or implicitly misrepresented to consumers that Bel Canto would alter the voltage from US to European, but Bel Canto won’t do that for products sold by unauthorized dealers.  MSS also claimed that it would modify the products, but such alterations by unauthorized technicians may pose a risk to consumers since improperly performed alterations may cause injury or damage to property.  Such voltage conversions require removal of the product’s casing.

Bel Canto does not honor warranties for products sold by unauthorized dealers, while new Bel Canto products sold through authorized Bel Canto dealers have at least a two-year parts and labor limited warranty. Bel Canto also refuses to honor the warranty of a product bearing an altered serial number, regardless of whether the product was sold by an authorized or unauthorized dealer. Finally, Bel Canto will also refuse to honor the warranty of a product that has had its casing opened by anyone other than an authorized service provider. It discloses these things on its website.  Many manufacturers in the industry have similar policies.

Bel Canto wants to control the presentation of its products in display rooms; absent an incentive to have knowledgeable dealer employees and good demonstrations available, dealers might not think it’s worth the trouble to do so.  Thus, if customers can easily find the same products at lower prices online from unauthorized dealers, who don’t have the burden of brick-and-mortar overhead, dealers might not want to carry Bel Canto products, which are generally sold only after an audition. MSS doesn’t have a retail store with display rooms that would meet Bel Canto’s standard for providing an appropriate atmosphere.

Bel Canto also only wants authorized dealers who give consumers good experiences, since consumers may not differentiate between the manufacturer and the dealer if they have bad experiences.  Boey has a felony record; Bel Canto doesn’t want to associate with such people.  Moreover, MSS competes unfairly with authorized dealers in other countries: if asked by a customer, MSS won’t declare the proper value of the goods it’s shipping, allowing customers to evade customs taxes.  Bel Canto authorized dealers aren’t allowed to make false customs declarations.

MSS also said things on its website to which Bel Canto objected, including claims that MSS was the "exclusive online headquarter [ ]" for all Bel Canto Design products; that Bel Canto's national sales manager would attend an event at a MSS store; that Bel Canto endorsed MSS as a dealer; that Bel Canto and its national sales manager endorsed the disclosure of inaccurate wholesale pricing information; that Bel Canto's lawyers believed that MSS was "best suited" to present Bel Canto products to the world; and that voltage conversions performed by MSS are as good as those performed by Bel Canto licensed technicians.

Bel Canto received a TRO in August 2011 forbidding defendants from selling Bel Canto products with altered serial numbers or making any claim of affiliation with Bel Canto or otherwise "defaming, diluting, or causing confusion with respect to Bel Canto or its trademarks ...." In September the TRO was expanded to require an affirmative disclaimer of affiliation on MSS’s site stating that MSS “IS NOT AN AUTHORIZED BEL CANTO DESIGN DEALER. ANY BEL CANTO DESIGN  PRODUCTS PURCHASED FROM MSS HiFi DO NOT HAVE A MANUFACTURER'S WARRANTY, and WILL  NOT BE ELIGIBLE FOR (i) SERVICE FROM BEL CANTO DESIGN, (ii) SOFTWARE OR HARDWARE  UPGRADES, (iii) REBATES, or (iv) ANY RECALL OR OTHER NOTICES.”  You know, allcaps doesn’t work very well for long statements, but people apparently like it anyway.  It’s so shouty.

Now the court was looking at a preliminary injunction.  It divided MSS’s conduct into persistent and one-off activities.  The persistent conduct was the repeated claim on MSS’s website that it was Bel Canto's "exclusive online headquarter." Surprisingly, the court found these statements not actionable.  First, this was not false because there was no evidence that other online retailers offered Bel Canto proucts, because of Bel Canto’s business model.  It was therefore not misleading to call defendants the “exclusive” source, or even the “headquarter” (argh!) for online Bel Canto products.  This didn’t suggest a legal or business relationship between the parties and wouldn’t confuse consumers. 

Second, defendants carefully avoided any reference to being an “authorized” Bel Canto dealer.  The difference between exclusivity, which can and does result from factors other than a relationship between two parties, and authorization, was significant. No injunction against the "exclusive online headquarter[s]" statement so long as it remained true.

However, Bel Canto also identified false statements that likely did violate the Lanham Act.  The false statement that Bel Canto’s national sale manager planned to attend a MSS promotion featuring Bel Canto’s full line of products did suggest a business relationship.  Boey also directed a friend to post a comment on MSS’s website under the name “Larson and Ricko,” purporting to be authorized by Bel Canto attorneys Larsen and Rico, “confirming” that the manager would be there to “officially endorse” MSS as the “Online Headquarter for all [Bel Canto] products,” with a laudatory statement about Boey.

These false statements were likely to cause confusion.  The court applied the rule (at best, deeply uncertain after eBay and Salinger) that likely confusion creates a presumption of irreparable injury; therefore, Bel Canto showed irreparable injury.  Voluntary cessation may negate the need for injunctive relief if there’s no danger of recurrent violation.  However, the evidence demonstrated that Boey posed a risk of recurring violations.  Even after the first TRO, Boey persisted in bad behavior.  For example, after the first TRO, defendants disparaged Bel Canto by claiming that Bel Canto's ratings of its own products were "deceiving."  (Is that defamation?  Without more detail, it’s hard to know, and a TRO that covers simply saying nasty, nonfalsifiable stuff about Bel Canto sounds like a First Amendment problem.)  More persuasively, the court noted evidence of Boey’s past falsehoods about affiliation with Stereo Exchange, an MSS competitor and authorized Bel Canto dealer. In combination with “the unquantifiable nature of the injury” his false claims inflicted, the risk of recurrence justified injunctive relief. 

This injunction would be limited to prohibiting other false claims of endorsement, not a mandatory injunction altering the status quo.  The “extreme remedy” of an affirmative disclaimer was unnecessary. 

Bel Canto also sought an injunction barring defendants from selling Bel Canto products with altered serial numbers.  Defendants argued that they were protected by first sale; the court disagreed.  Trademark law doesn’t confer on trademark owners the right to control subsequent unauthorized resales of genuine products.  Material differences mean a product isn’t genuine.  Not every difference between a product in its first sale state and its resale is material.  The guiding principle is whether the difference confuses consumers.  However, because many factors influence consumers, the threshold must be kept low to include even subtle differences.

The material difference exception to first sale is a proxy for the ultimate inquiry into confusion. “[W]hen a defendant sells a product that is materially different, but has the exact same appearance as a plaintiff's product, it is presumed likely that the undisclosed difference between the products will confuse consumers and damage the plaintiff's good will.”  The implicit corollary is that sufficient disclosure of the difference dispels any confusion (e.g., “used” for a car).  

Defendants argued that MSS customers were getting genuine Bel Canto products.  They didn’t replace the original parts with inferior ones, or even offer different accessories.  Bel Canto argued that there were material differences because the external serial numbers had been altered.  The Tenth Circuit has held that a physically identical product is nevertheless "materially different" from the genuine article if "the bundle of services" that attach to the genuine article ia not available to the consumer, which can occur if the serial number is altered and the manufacturer therefore won’t honor the warranty.  Likewise, the Second Circuit has held that physically identical Cabbage Patch Kids dolls were materially different because the unauthorized imported dolls came with Spanish “birth certificates” and “adoption papers” instead of English.

Thus, if defendants were selling Bel Canto products that lack warranty and other services such as upgrades and recall notices without alerting their customers, there’d be material differences and first sale wouldn’t protect defendants.  However, the court found a complication.  Because MSS is a New York dealer, Bel Canto’s policy of refusing to honor warranties solely because a product was purchased through an unauthorized dealer was trumped by section 369-b of the New York General Business Law:

A warranty or guarantee of merchandise may not be limited by a manufacturer  doing business in this state solely for the reason that such merchandise is sold by a particular dealer or dealers, or that the dealer who sold the merchandise at retail has, since the date of sale, either gone out of business or no longer sells such merchandise. Any attempt to limit the manufacturer's warranty or guarantee for the aforesaid reason is void.

A previous case suggested that a blanket disclaimer of warranties for “unauthorized Internet sellers” might be too general to fit into the statutory language.  But the court here thought that “particular dealer or dealers” was not so limited.  The practice commentary noted that the purpose of the section was to prevent enforcement of precisely the kind of policy at issue here: denying service to customers because goods were sold by unauthorized dealers.

Bel Canto argued that the law might not apply, at least not to non-NY customers.  This was an issue of first impression.  Applying the general principles of NY consumer protection laws, the court concluded that all MSS customers were entitled to the law’s protection because the transactions in which they purchased their goods were “New York transactions.”  All the evidence was that MSS sold/accepted and filled internet orders in New York.

As a result, Bel Canto couldn’t rely on MSS’s non-authorized status to establish a material difference in the absence of warranties or other services (which were themselves contingent on valid warranties; the court didn’t address what would happen if Bel Canto tweaked its policies to honor warranties but deny upgrades etc., though that might be easier to disclose/less material to consumers). 

Bel Canto wasn’t entirely out of luck—in some instances, it refused to honor warranties on other, valid bases. “For example, if a dealer is known to the manufacturer to handle the product in a negligent manner, risking damage before the product reaches the consumer, the manufacturer remains free to refuse to honor all warranties from that particular dealer.”  Bel Canto refused to honor warranties for products that had their serial numbers altered, even though it didn’t say so on its website.  The court found that the reasons for doing this made sense, because accurate external serial numbers were important to quality control and recalls.  Unauthorized resales that interfere with a mark holder’s ability to exercise quality control are outside the protection of first sale.  (Here the court quoted cases that apparently omit a confusion requirement, equating sale of goods that don’t meet the TM owner’s quality control standards with infringement, though it described these as cases in which the defense that the defendant was doing nothing more than selling genuine articles was countered with evidence that the defendant’s conduct interfered with quality control.  I still don’t get what’s likely confusing about such conduct, as opposed to theoretically confusing, but here’s another court explaining that “the interference with the trademark holder's legitimate steps to control quality  unreasonably subjects the trademark holder to the risk of injury to the  reputation of its mark.”)

Here, Bel Canto’s use of serial numbers to track components and institute targeted recalls, if necessary, meant that even if altered serial numbers didn’t qualify as material differences, the interference with quality control constituted a basis for relief.  Thus, selling products with altered serial numbers risked consumer confusion.  (What if the serial numbers are simply removed, and there’s disclosure?) 

Defendants argued that there was no evidence of actual confusion, but that’s not required.  “Bel Canto does not need to adduce evidence from customers who unknowingly bought a product with a fake serial number, sought and were denied warranty service, and developed a negative impression of Bel Canto as a result. It is enough that such an outcome is likely given Bel Canto's legitimate policies and Defendants' practices.”  Moreover, the experience of the French customer demonstrated likely confusion; US customers were similarly situated in all relevant respects.

Defendants argued that the interior serial number remained on the product, but that was irrelevant.  It was enough that Bel Canto had a legitimate policy that gave rise to a material difference.  Moreover, the interior numbers wouldn’t help owners figure out if they were targeted by recalls unless they knew about the exterior alterations, and they couldn’t look for interior serial numbers without cracking the case and voiding the warranty (a Bel Canto policy that was obviously permissible).  Defendants had no right to put customers in that Catch-22.

In addition, products sold overseas were therefore materially different, because MSS had cracked the case to perform the voltage conversion, voiding the warranty. “[T]his practice too makes the products that Defendants sell not genuine, risks consumer confusion and damage to Bel Canto's goodwill, and therefore constitutes infringement under the Lanham Act.”  (Again, the court didn’t address whether a disclaimer could solve the problem.)

So, the court granted an injunction barring defendants from making false claims of affiliation with or endorsement by Bel Canto; from advertising or selling any Bel Canto product with an altered serial number (I wonder whether this covers removal); and from advertising or selling any Bel Canto product as to which defendants had taken steps that voided the warranty, including cracking the case. 

particularity, but not public interest, in false advertising claim

Select Comfort Corp. v. The Sleep Better Store, LLC, 796 F. Supp. 2d 981 (D. Minn. 2011)

The parties compete in the market for air beds. Select Comfort sued for trademark infringement and false advertising under Minnesota and federal law. 

The court began with the proposition that Rule 9(b) applies to all false advertising claims.  Claims “on information and belief” have generally not been pleaded with particularity unless facts constituting the fraud are peculiarly within the opposing party’s knowledge, and “information and belief” is ok if accompanied by a statement of the facts on which the belief is based.

Select Comfort alleged that Sleep Better, or an agent or affiliate of Sleep Better, anonymously maintained a website that purports to neutrally “review” mattresses but which, in fact, favors its own products in misleading comparisons to products made and sold by Select Comfort.  The complaint described how the website was misleading and biased, alleged that it was anonymously registered, and described how the reviews focused on comparisons favoring Sleep Better over Select Comfort.

Select Comfort also alleged that Sleep Better falsely claims that its products are made in the US.  Based on Select Comfort’s extensive corporate knowledge of the supply and manufacture of air beds, the complaint alleges that the air chambers aren’t made in the US.

Finally, Select Comfort alleged that Sleep Better phone representatives instructed potential customers to test beds at Select Comfort retail stores but then, after trying the beds and selecting one, to order the same bed online from Sleep Better for a lower price. This allegation is based on “frequent customer statements” to Select Comfort retail personnel.

The court found that these allegations made on “information and belief” were based on facts either uniquely within Sleep Better's knowledge or based on communications to which Select Comfort was not a party. The complaint included facts supporting the allegations and alerting Sleep Better to the nature of the alleged fraud and the basis of the claims. Thus, Rule 9(b) was satisfied.

Sleep Better also argued that Select Comfort failed to adequately plead that Sleep Better used false and unsubstantiated “health-related testimonials” on its website. Sleep Better wanted an exhaustive list of any allegedly fraudulent statements, but where a plaintiff alleges a systematic practice of the submission of fraudulent claims over an extended period of time, the plaintiff need not allege the specific details of every fraudulent claim. Rather, the plaintiff must plead some representative examples with particularity. This the complaint here did.

Sleep Better was more successful challenging Select Comfort’s ability to bring Minnesota law claims, since the state requires a showing that a private cause of action “benefits the public.”  Minnesota courts consider both the form of the alleged misrepresentation and the relief sought by the plaintiff.  When a plaintiff seeks only damages, courts generally find no public benefit even when plaintiffs are suing over mass produced and mass marketed products.

Select Comfort argued that it sought a public benefit because the allegedly false statements were made to the public and because it sought to enjoin deceptive advertising. The parties were direct competitors, and Select Comfort’s claims for relief were almost entirely for “damages caused by dilution of its trademark and lost profits.”  (Not clear from this discussion whether the court means dilution as a trademark lawyer would mean it; the court doesn’t spend a lot of time explaining the alleged trademark infringement to the extent it differs from the “try it in their store, then buy it from us online” conduct already described.)  As a direct competitor, Select Comfort might not litigate its claims and take positions with the public good in mind.  The complaint focused on harm to Select Comfort, not to the deceived public.  Select Comfort had other causes of action and didn’t need the protection of Minnesota’s private attorney general statute.

Somebody save me!

Waller v. Hewlett–Packard Co., 2011 WL 6325972 (S.D. Cal.)

“Robert Waller bought a Hewlett Packard ‘SimpleSave’ from Costco that, he alleges, didn't work as described on the packaging.”  The SimpleSave is a portable hard drive that plugs into a computer’s USB port and backs up files automatically. He expected it to back up all his files without any configuration on his part.  But it only backs up some files that way, “which Waller learned the hard way when his computer crashed several months after he purchased the SimpleSave and his WordPerfect files were not on it.”  (This is why I now prefer Dropbox for backing up my active files!  The only configuration required is making sure all your stuff is in your Dropbox folder, which admittedly takes a bit of planning.)

Waller sued HP and the retailers Costco and Staples for the usual California law claims.  Defendants moved to dismiss because the packaging didn’t promise what Waller claimed, arguing that the packaging made clear that the SimpleSave must be manually configured to back up certain file extensions, including WordPerfect files.

On the back, the package said, “Just plug it in.”  Further representations appear “in very small font white letters on a dark background just above five paragraphs written in French, Chinese, Japanese and Spanish”:  “Yes, it's that easy! Automatic, hands-free backup. No software to install, no files to select. Frequent backup update of changed files. Back up and restore multiple computers. Automatically supports most file types.”  Waller argued that the prominent messages promoting the product were that all the consumer user has to do is “just plug it in”; the device has “Automatic Backup Software,” “Hands Free Backup,” “Plug & Play Storage,” “No complicated setting” and it “finds and backs up all” the consumer's “important files” without doing anything more and “Yes, it's that easy.”  The packaging also said there is “no software to install,” “no files to select,” and that the drive “automatically supports most file types,” and “finds and backs up all your important files the minute you plug it in.”

The court found the copies of the SimpleSave packaging attached to the complaint supported the allegations of likely deception.  The back and sides of the packaging did promote “no files to select” etc., though one of the statements was “Automatically supports most file types--Easily add additional file types.”  One side simply said, “Just plug it in .... Yes, it's that easy.” 

The court boiled it down:

So, the facts of this case are rather straightforward. Going by the representations on the SimpleSave packaging, Waller expected that he could connect the SimpleSave to his computer and it would automatically back up all of his files, without him doing anything. That's not how the hard drive works, however, and the question is whether the statements on the packaging are sufficiently false and misleading to support the claims he asserts.

The claims here were subject to Rule 9(b), and the court found the UCL claim properly pled.

The court cautioned that properly pled and winning aren’t the same thing.  “The reasonable interpretation of ‘no files to select’ may be ‘no actual document files to select.’ It may be consistent with ‘no files to select’ that users still need to specify certain file extensions, especially given the representation that the SimpleSave ‘[a]utomatically supports most file types—Easily add additional file types.’ Similarly, the promise of ‘[a]utomatic, hands-free backup’ of ‘all your important files the minute you plug in’ may be consistent with a requirement that users tell the SimpleSave, in the very beginning, to backup certain file types automatically.”  (If I apply the ‘would this fool my parents?’ test, it looks bad for HP.  Especially since my mother uses WordPerfect.)  Still, the claim was properly pled, especially since truthful but misleading statements can be the basis of liability.

Defendants also challenged Waller’s standing because he didn’t lose money or property—they argued that his damages were caused by his hard drive crashing, not by the alleged misrepresentations at issue.  The court disagreed. First, standing doesn’t require that misrepresentations be the sole or even the decisive cause of the injury.  “It's true that it's really Waller's hard drive that failed him, but those files would have been saved if the SimpleSave representations, as Waller construed them, were true. They would have also been saved if the representations were more clear and Waller had understood that he had to configure his SimpleSave to back up WordPerfect files.”  Causation of this nature, which the court characterized as detrimental reliance, was sufficient.

Further, Waller’s alleged damages weren’t limited to the cost of retrieving his lost files.  He alleged that the SimpleSave was worth less than its purchase price given its true functionality.  The claim that he wouldn’t have bought the SimpleSave, or would have paid less for it, had he known the truth can be an injury that provides standing for a UCL claim.

However, the representations allegedly made on Costco’s and Staples’s in-store displays couldn’t support a fraud-based UCL claim (the court didn’t explain this further).  The court reserved judgment on whether the retailer defendants could be held liable simply for selling the SimpleSave in HP’s packaging.

FAL: Ordinarily, a violation of the UCL’s fraud claim is also a violation of the FAL, and so here.  CLRA: Plaintiffs have to give defendants at least 30 days in advance to give them a chance to correct the alleged wrongs before a cause of action for damages under the CLRA will lie.  Waller sent a notice letter in sufficient time before he filed the operative complaint (the second amended complaint), though not before filing the original complaint.  Because he sought damages in the original complaint, the letter was untimely and the damages claims were dismissed with prejudice.

The court commented that it understood defendants’ frustration.  “The shifty evolution of Waller's complaint, along with the fact that Waller's original lawyer was his office-mate and ostensible law partner, raise a reasonable suspicion that Waller is more interested in sharing attorney's fees in this case than actually vindicating consumers' rights.”  The court continued that many purchasers would have returned the hard drive (really? has the judge tried this lately?) or written it off as a regrettable purchase (which is, not for nothing, the theory behind allowing class actions where otherwise lots of people can all be cheated a little bit) rather than suing—but Waller’s motives weren’t for the court to judge.  However, the court did note a separate concern over Waller’s standing, since Waller had said various things about who bought the SimpleSave.  In his brief, Waller said that he and his wife were shopping together at Costco and that he made the decision to buy the SimpleSave while she actually executed the purchase with their money. On those facts, the court found that Waller had standing. 

Number one fan, number two infringement?

Fancaster, Inc. v. Comcast Corp., --- F. Supp. 2d ----, 2011 WL 6426292 (D.N.J.) [subsequently vacated at the request of the parties.]

Via Eric Goldman.  Sit back, this is going to take a while.

The parties both offer online video content.  In 1989, Fancaster’s president and director, Craig Krueger, received a registration for Fancaster (design mark) for "broadcasting services."

In 1994, Krueger filed a Combined Affidavit of Use and Incontestability.  As evidence of use, he submitted blank letterhead and envelopes bearing the FANCASTER mark.  He used the mark in connection with a number of activities, including selling Fancaster branded radios, charging customers to watch closed-circuit boxing matches, producing karaoke shows, transmitting sponsored news messages to wireless pagers and cell phones, and conducting live demonstrations of FANCASTER broadcast services. In July 2006, Fancaster launched fancaster.com, which uses the current logo, which uses lowercase lettering instead of the uppercase in the registration, and includes the tagline “welcome to planet fancaster!”:

“Fancaster.com offers a wide variety of short video clips, most of which feature sports-related content and a sports fan or athlete speaking into a microphone displaying the fancaster mark to discuss a particular sporting event, sports team, or sports fans in general.”  Krueger testified that a unifying theme is broadcasting: "[e]veryone is speaking into a microphone and being recorded."  Fancaster’s 2009 business plan says that the company “intends to develop a 21st century communications portal where user-generated video content is created by the fans and for the fans who want to emulate broadcasters or submit commentary on management, coaches, players, or teams” and "intends to produce content that traditional media ignore, such as videos of fans at unique events such as La Tomatina in Spain, Ostrich racing in Arizona, the Westminster Kennel Club Dog Show and the annual Nathan's Hot Dog Eating Contest."  The business plan anticipated targeting sports fans initially, but eventually including music and movie fans.  It identified both fan sites and large UGC/social networking sites such as YouTube and Facebook as competitors.

Krueger marketed fancaster.com online on a few sports-oriented websites and those of several local pubs but testified that most of Fancaster's marketing efforts had not been geared toward the Internet, but rather had taken place at sporting events, bars, on local television channels in Sioux Falls, South Dakota and Sioux City, Iowa, on radio stations in Charleston, South Carolina, and via flyers and handbills.

In 2003, Comcast launched a multimedia player on its website to allow users to watch cable TV online.  The player was called “The Fan” because it displayed video in a circular pattern resembling a fan.  It applied to register TheFan as a mark, but the application was rejected for likely confusion with a registered mark THE FAN for radio broadcasting services.  In 2004, Comcast requested reconsideration, listing a number of marks registered for related services that used (THE) FAN; on the list was FANCASTER.  (The application was ultimately abandoned.)

Comcast later sought to develop a standalone version of the player and hired a branding agency to research and test possible names.  The marching orders were that (1) "[t]he name should help communicate that Website X is the ultimate interactive destination for TV and Movie fans," and (2) "the name should somehow tie back to Comcast, [but] the name Comcast should not be used."  The agency generated 23 names.  Comcast also hired another agency to find names and indicated that its primary target was consumers who use “portal-centric authority sites” such as MSN, Amazon, and Netflix, and its secondary target was consumers who use sites such as YouTube, myspace, Jib Jab, and del.icio.us. This agency proposed FanCast.com and five other names.  Fancast.com performed best in consumer research.  Plus, the Comcast team thought that Fancast was a logical merger of The Fan and Comcast.  So Comcast went with Fancast.

Comcast bought the domain name and applied to register FANCAST in August 2006.  A month later, Fancaster began registering large numbers of “fancast” domain names.  Fancaster also opposed the application, which was still pending.  Three prior applications by other people to register Fancast had been rejected, including one in 2003 for likely confusion with Fancaster.

In July 2006, Krueger met with Comcast employees to pitch his program Mobile Voter, and he also pitched Fancaster’s services and website, which he advised was about to be launched. Five days later, Krueger discovered that Fox SportsNet New England, a Comcast channel, had an amateur broadcasting segment called Fancaster.  Designed to encourage young people to pursue TV broadcasting careers, this Fancaster had young sports fans audition to appear on live television during professional sporting events; video was posted on the channel’s website.  Krueger first sent a cease and desist demand, but then decided not to sue but reserved the right to do so if the program changed.  Comcast then told Krueger that discussions of a potential business relationship were suspended "due to infringement issues surrounding Fancaster.com."

In January 2008, Comcast launched a fully operational fancast.com allowing users to watch full-length premium video, including broadcast TV and premium cable shows and movies.  The website offered some sports-related and movie content, but no user-generated content.  The visual mark was, according to Comcast, designed as an “expanding universe” “[t]o emphasize that FANCAST aggregated all forms of popular premium television and movie content.”

Comcast marked Fancast nationally in print, on TV, and on the internet, targeting mainstream media consumers.  By late 2009, “Comcast had lost roughly $80 million on the FANCAST website, which relied entirely on advertising revenue.”  So it began to phase out Fancast, moving it to a website branded “FANCAST Xfinity TV” for Comcast cable subscribers.  In March 2011, fancast.com went down and Xfinity TV was offered exclusively to subscribers.  Fancast.com was redirected to Xfinitytv.com.

In June 2008, Fancaster sued Comcast for the things you’d expect, including cybersquatting, here for some reason denominated “cyberpiracy,” and Comcast counterclaimed for, among other things, cybersquatting and a finding of fraud on the PTO.

Fancaster submitted search engine results for "fancaster," "fancast," and other similar letter chunks, showing that the results included paid sponsored links to fancast.com and xfinitytv.fancast.com; organic links to Fox SportsNet’s Fancaster and www.fancast.com; and/or suggested search terms for "fancast," "fancaster comcast," "FanCaster Comcast," "fancast review," and "fancast xfinity tv," among others.

It also submitted screenshots to show that both fancast.com and fancaster.com featured sports-related content.  The fancast.com homepage featured a tab for sports videos, and the sports section stated “XFINITY-Home of the Most Live Sports.”  Fancast hosted short sports clips as well as full shows.  Search engine results for “fancast sports” etc. produced links to fancast.com.  Fancaster additionally submitted screenshots to show other content overlaps.

Other evidence: videos on YouTube featured the Fancast mark “either in the corner of the video, the title of the video, on the background wall of the set where the video was shot, and/or on the microphone being held by the interviewer.” But the videos were posted under a number of different YouTube usernames, so the court was uncertain whether these videos were posted on YouTube by Comcast or by individuals who culled them independently from fancast.com or another source without Comcast's permission.  (Cf. arguments in Viacom v. YouTube!)  Other YouTube videos featured the Fancaster mark and were posted by Fancaster's YouTube channel.

Fancaster has a Facebook page; Comcast’s Fancast Facebook page advertises Xfinity and directs visitors to xfinityTV.com.  Fancaster has a Twitter feed; Comcast’s Twitter feed “is a trivia site,” whatever that means.

Comcast submitted mall intercept survey evidence purporting to show little risk of (reverse) confusion.  The respondents were people who use or were likely to use the internet to view, post, or discuss sports-related content.

Comcast’s first survey first exposed respondents to Comcast’s mark before showing them Fancaster’s mark as well as others.  Each respondent in the test group saw a three-page printout of fancast.com.  The printout was removed.  Respondents were then shown and questioned about fancaster.com, veoh.com, musicvideocast.com, and tvfanonline.com.  These were shown as static screenshots on a computer.  The last two were specifically included because they were “examples of the many websites that contain superficial name elements in common with [f]ancaster ('fan' and 'cast' respectively) but do not come close to being confusingly similar.”

Test group respondents were asked whether they believed the given website and the printout were from the same company, different companies, or whether they had no opinion.  If they responded “same,” they were asked what made them think so.  If they didn’t answer “same,” they were then asked whether the company the current website is from is affiliated with or received authorization from the company the printed-out website is from, and if they said yes were asked what made them think so.  The same thing happened with the control group, except they saw a website called Fanwatch with the same content, format, and overall image.

In the test group, 31.1% of respondents connected Fancast and Fancaster (responding either that they were from the same company or that Fancaster was affiliated with/authorized by Fancast), 10% of whom said it was because of the similarity of the names.  In the control group, 29% connected Fancaster and Fanwatch, 8.6% of whom said it was because of the similarity of the names.  Net confusion: 2.1%.  The survey expert, Hal Poret, also concluded that the rate at which test group members connected Fancast and Fancaster was “statistically equivalent to the rate at which they connected Fancast to Musicvideocast (27.3%), Tvfanonline.com (33.0%), and Veoh (22.0%).”  He concluded that the confusion results didn’t rise above the level of typical survey noise.

Comcast’s second study, in 2011, exposed respondents to the Fancaster mark to determine whether it would mistakenly be connected to Fancast, on the theory that Fancast had been around long enough to give consumers ample opportunity to become aware of it.  Respondents were shown the current Fancaster website and allowed time to explore it.  The surveyors then asked them whether they had an opinion about what company the website they just saw was from; if they had an opinion, they were asked what company and why.  The survey then asked whether they thought the website company provided any other services or operated any other websites, and if so which and why.  Finally, they were asked whether they thought the website company was affiliated with or received authorization from any other company, and (if yes) what made them think so.  Of 209 respondents, 2 gave an answer indicating possible confusion.  By contrast, 25% said the website was from Fancaster.  Other responses: Youtube (22 respondents), Twitter (9), ESPN (8), NFL (7), Yahoo (5), Facebook (5), Google (3) and TMZ (2).

Fancaster’s damages expert submitted testimony that Comcast spent $83 million marketing Fancast, and $200 million more to promote Xfinity featuring the Fancast brand.  He opined that it would take one year of Comcast’s average annual ad expenditures to correct inaccurate marketplace beliefs, or over $73 million.  However, he based this on Comcast’s expenses, not on the existing goodwill of Fancaster.

The court initially evaluated Fancaster’s challenge to the surveys.  Fancaster challenged the survey universe because (1) only focused on sports fans, as opposed to sports, movie, and music fans, (2) ignored Fancaster's initial target of 18-35 year old males, and (3) improperly surveyed participants nationwide because Comcast offers its services only in certain markets.

Given that the claim here was one of reverse confusion, the proper universe was the junior user’s market.  The court found that it was appropriate to focus on sports fans for the first survey because at the time Fancaster was focused on sports-related content; Fancaster’s hopes to expand didn’t matter because the proper universe was Fancaster’s actual customer base at the time.  Likewise, even in spring 2011 when the second survey was conducted Fancaster maintained a sports focus; the vast majority of clips and categories were sports-related.  It was also fine to sample men and women; Krueger testified that Fancaster was "targeting [a] younger ... probably a little male-driven" audience "anywhere from 12 years old to 40 years old ... although we have a lot of women who love Fancaster."  A nationwide sample was also appropriate because Krueger claimed a nationwide customer base.

Fancaster also challenged the extrapolation of a non-probability mall intercept survey to the general population.  However, mall intercept studies have often been accepted as evidence; problems extrapolating them go to weight rather than admissibility.

More problematic was Fancaster’s argument that the first survey bore no resemblance to marketplace conditions.  A survey gains weight according to how closely it simulates how a consumer would encounter a trademark in the real world.  Here, Poret used a printout and static screenshots of the parties’ homepages instead of live vesions.  This distortion provided “ample grounds” to exclude the survey.  Video websites are meant to be viewed on a computer and to allow consumers to browse and interact with them; the survey was nothing like the actual market presentation.  Moreover, “the use of two different media to present the FANCAST and fancaster websites could improperly enhance the distinction between them.”

Comcast argued that the printout and screenshots provided a representative snapshot of the available content.  The court was unimpressed.  “While an image of a website's homepage may accurately summarize the nature of its content and services, it cannot meaningfully test for confusion if it is not presented in the way that an Internet user would actually encounter it.”

As for the second survey, Fancaster argued that the format was inappropriate because there was no evidence that respondents had been exposed to the Fancast mark.  Comcast responded that there was ample evidence that FANCAST mark had saturated the marketplace, and that any lack of awareness of the mark merely cut the reverse confusion claim.  McCarthy takes the position that a survey can’t work in a reverse confusion case until the junior user saturates the market with its mark because, until then, consumers haven’t been exposed to the relatively large promotional efforts of the junior user.  The record reflected a substantial nationwide ad campaign for Fancast across multiple media.  Krueger stated that he believed Fancast.com to be "one of the top websites in the world" based on several "measurement sites that are publicly available on the internet and track the top web sites in the world," and that Comcast had "done a pretty good job of saturating the market."  (Sometimes, both parties have incentives to maintain that the world is a particular way.)

Fancaster argued that many survey respondents still had no exposure to Fancast because they were outside Comcast’s territory.  But Fancast.com was available to anyone with an internet connection, and Comcast was marketing it to consumers in and outside of its footprint.  Even when it offered content to Comcast cable subscribers, there was no evidence that it altered its marketing strategy before the website was dismantled.  The second survey was admitted.

The court also excluded some portions of Comcast’s expert testimony about trademark registration and cybersquatting (Greg Lastowka was the expert there—hi Greg!) for reaching legal conclusions.  While some technical background about the registration process etc. could aid the jury, whether Fancaster’s uses counted as “use in commerce” of the Fancaster mark for the applied-for services (broadcasting) was for the court/the factfinder, as was whether Fancaster’s specimens were acceptable.  Likewise, technical issues of internet functions and cybersquatting were appropriate subjects of expert testimony, but Lastowka’s opinion that Fancaster “registered multiple domain names with a bad faith intent to profit in violation of the ACPA” was not appropriate expert testimony.  “A jury should not be receiving instructions on the law from two sources, and however erudite and accurate they may be, Mr. Lastowka's instructions will not be allowed to compete with the Court's instructions.”

The court then turned to the core trademark infringement claim.  In a reverse confusion case, intent, actual confusion, and the strength of the marks are analyzed differently than they are for forward confusion, but the factors are otherwise the same.  The court found that each factor weighed in Comcast’s favor and granted summary judgment for want of likely confusion.

Degree of similarity: The court found the appearance, sound, and meaning of the marks to be sufficiently distinct to present minimal risk of confusion.  On its website, Fancast appeared in all black capital letters next to a pastel "expanding universe design."  On its website, Fancast appeared in lowercase light-blue lettering and incorporated a pair of headphones turned on their side.  This use of a design as part of the mark minimized the likelihood of confusion, as did “welcome to planet fancaster!” and the different fonts.  There was no evidence that consumers put more emphasis on the verbal components of the marks than their design or meaning and the court therefore saw no reason to weigh them more heavily.  (Could no reasonable jury have decided otherwise?)

The sound of the marks weighed “less heavily” in Comcast’s favor, though the sounds were “somewhat distinct.”  And confusion was minimized by use of the Comcast housemark on fancast.com.  (Why would that help avoid reverse confusion? The Third Circuit has explicitly disapproved the effectiveness of a house mark in a reverse confusion case.  I can see the argument for why we should still count the house mark, and I actually am sympathetic to it, but it relies on a conclusion that Fancast isn’t really serving as a mark on its own, and I can’t imagine most TM owners like that logic.)

Plus, the marks evoked distinct meanings.  A “fancaster” is a fan acting as a broadcaster, as emphasized by the headphones.  Fancast doesn’t evoke the same meaning.

The court also dealt with Fancaster’s initial interest confusion argument here.  Based on the domain name, Fancaster argued, internet users who saw the domains on search engines, in sponsored ads, etc. would be confused.  In an IIC case, the relatedness of the parties’ products and consumers’ level of care are of particular importance.  Previewing what it would say about the other factors, the court found minimal content overlap, weighing against IIC.  Also, in the absence of record evidence about consumers’ level of care in searching for video content, the court went with Network Automation’s conclusion that the default level of care online is increasing.

The search engine results weren’t probative of IIC, because any internet user knows that a welter of search results creates uncertainty about where to go next, not necessarily trademark confusion. Thus, similarity weighed in favor of Comcast overall.

Strength divides into conceptual and marketplace strength.  Comcast was in as good a position as a TM owner can be in this kind of case: having abandoned Fancast as a branding strategy, it was free to dump on the strength of its own mark at will.  So it argued that Fancaster was merely descriptive of services that allow fans to become broadcasters.  Fancaster argued that 15 years of incontestability should create a presumption of strength, and that the mark was coined anyway and was therefore fanciful.

The court found Fancaster “even more descriptive” than Miraclesuit (a term the Third Circuit has held suggestive).  It’s a portmanteau of fan and broadcaster, and Fancaster’s business plan said that its content related to "fans who want to emulate broadcasters." Krueger testified that the terms "fan" and "broadcasting" relate to all the videos on the site because they "have some interest to the viewer of the clips" and "everyone is speaking into a microphone and being recorded and transmitted throughout the world," and that "Fancaster.com [is] a place that transforms fans into the role of a broadcaster...." Another witness testified that the term "fancaster" is used in "common parlance" to mean someone that "gives you a play by play of the whole game." (Never heard that, but I’m not exactly the demo, though give me a good liveblog ….)

Anyway, using a truncated version of a word doesn’t render the term arbitrary or fanciful.  (Comcast even offered a variety of other websites that used “caster” as a short form of “broadcaster.”)  The court found no stretch of the imagination required to see that fancaster.com “is a website that offers content related to sports and other fans as broadcasters.”  While “fancaster” “may not perfectly describe the nature of each and every video on fancaster.com,” that’s not the standard for descriptiveness; “it fairly describes certain distinct characteristics of the overwhelming majority of them--namely, a sports or other type of fan broadcasting via a microphone.”

Incontestability also had no bearing on likely confusion, only on validity.

Even if the court found “fancaster” suggestive or fanciful, it held, it would still find the mark weakened by evidence of its use in connection with various different products in the same market.  Comcast showed that there were many websites beginning with “fan” that offered video and other content relating to sports and fans.  The court named eight, including fanster.com (potential inducement if there’s infringing content thereon, as per one of the bad facts of Grokster?), fanpop.com (not primarily sports-related in my experience, which is born out by the homepage), and fanadu.com (cutest name in the bunch), as well as one mentioned by Fancaster in its business plan, fannation.com.

In a reverse confusion case, the commercial weakness of the junior user is less important and the strength of the senior user’s mark is more relevant.  Comcast’s substantial marketing campaign wasn’t sufficient to overcome Fancaster’s conceptual weakness, especially given the other “fan” websites, which made it “unlikely that consumers would associate websites featuring video content related to sports and other fans with a particular source, regardless of Comcast's commercial strength.”

Intent: Knowledge of the existence of a mark is insufficient to prove bad faith; the question is whether the junior user deliberately intended to push the senior user out of the market.  Comcast knew of Fancaster’s mark, but there was no evidence from which a jury could infer the intent to push Fancaster out of the market.  Comcast’s branding agency conducted consumer research and found that was the best name, and the Comcast team liked it as a merger of “The Fan” and the Comcast name.  Comcast’s notice of Fancaster’s C&D as to the Fox SportsNews Fancaster segment was irrelevant because that segment was an entirely different product and mark.  Moreover, Fancaster withdrew its C&D letters and didn’t sue. Comcast’s good faith explanation for its use of the name weighed heavily in its favor. 

Relationship of the services in consumers’ minds: The court found little relationship between the videos on the Fancast and Fancaster websites that would reasonably lead a consumer to believe that they were related.  Fancaster “focuses on short video clips emphasizing sports-related content, most of which feature a sports fan or athlete speaking into a microphone displaying the fancaster mark to discuss a particular sporting event, sports team, or sports fans in general.”  Krueger testified that a unifying theme of the clips was broadcasting: "[e]veryone is speaking into a microphone and being recorded." Fancast focused on full-length premium mainstream media content, including major television network programming, as well as full-length feature films offered by premium cable channels.  The overlap in sports-related video content wasn’t enough to make a reasonable consumer see the content as related.  Fancaster showed that there were short clips on both sites related to basketball, including player interviews and press conferences, as well as short clips on both sites related to the Westminster Kennel Club Dog Show.  (The court dismissed evidence that some video clips on Fancaster had the same topics as some search engine results for Fancast, because those might just indicate that Fancast carried a written story on that topic, not a video.)  “In light of the enormous number of videos offered on both sites, and the fact that they maintain very different emphases, this level of overlap is not significant enough to suggest a likelihood of confusion.”

Sales efforts/marketing channels: The court found “virtually no overlap” in the parties' marketing efforts.  Comcast marketed Fancast towards a national audience consuming mainstream media.  Fancaster's initial target audience was male sports fans ages 18-35.  What, those guys don’t consume mainstream media?  As far as I can tell, that’s who mainstream media is for, and that group is at least a subset of the “mainstream media” set.  But Fancaster argued that it was targeting male and female fans of sports, music, movies, social issues, politics and entertainment generally, without record support for that.  The court also found that the parties also used vastly different marketing channels: Comcast bought ads in mainstream print publications and on TV channels distributed on Comcast, while Fancaster used local TV channels in Sioux Falls, SD, and Sioux City, IA; radio stations in Charleston, SC; and flyers and handbills.  Comcast’s TV ads didn’t air in those cities.  They both used the internet, but that’s not enough to constitute overlapping marketing channels.  Moreover, while Comcast made substantial use of the internet in marketing, most of Fancaster’s marketing was not geared in that direction.  Krueger marketed Fancaster on sports-oriented websites and websites of certain local pubs, while Comcast bought banner ads on Comcast.net and other sites foucsed on popular TV and movies, such as TVGuide.com, as well as keyword ads for specific TV shows and terms such as "watch TV shows online."

Actual confusion/length of time without actual confusion.  Three years and two months of Fancast.com produced no evidence of actual confusion.  A former business partner of Krueger believed Fancaster was related to Comcast, but he’d never visited fancaster.com and apparently was unfamiliar with Fancast, so the court dismissed this as an anomaly. 

Fancaster offered several videos in which people prompted to say “You’re watching fancaster dot com” say things such as “You're watching fancast dot com," "It's Comcastic tonight," "Thanks for watching Fancast?", and "I'm here with fancast dot com."  But the record didn’t identify who these people were or the circumstances of taping, or whether they’d ever visited the parties’ sites.  (Is the latter important?  Do they only have to be likely consumers?  Does it matter if they go home and look in vain for their videos to show up on fancast.com and thus never become the proud participatory fans of fancaster.com’s desires who send links to all their friends?)  Confusion resulting from carelessness, indifference, or ennui is insufficient.  Plus, the second Poret survey weighed against finding confusion.  This weighed heavily in Comcast’s favor.

No likely confusion.

The court also thought Fancaster didn’t prove any entitlement to corrective advertising damages.  There wasn’t any evidence of damage to the Fancaster mark. 

Cybersquatting: Comcast didn’t address the ACPA claim in its opening brief, and addressing it in the reply brief was insufficient (and improper).  Hard to see how a renewed motion for summary judgment would fail, though, since the motion was denied without prejudice.

The court then turned to the counterclaims.  Fraud on the PTO: Comcast alleged that it suffered harms from two intentionally false statements to the PTO: First, Krueger’s 1988 declaration that he’d adopted and was using the Fancaster mark for communications and/or broadcasting services. Second, Krueger’s 1994 affidavit that he was using the mark in commerce in connection with the broadcasting services that were stated in the registration, and had been doing so for five consecutive years.  Comcast argued that the uses were "mere preparation," "demonstrations," "testing," or "marketing presentations" rather than bona fide use.

The court found this argument “tenuous.”   In 1988, a single “token use” would suffice (though this was soon thereafter changed by statute).  Moreover, Krueger introduced evidence of significant commercial and promotional actions in connection with Fancaster, both before and after registration.  Comcast needed clear and convincing evidence both that none of the preregistration uses constituted even token use and that Krueger knew or should have known that his uses wouldn’t qualify.

Krueger proffered evidence of: a February 1987 play-by-play broadcast using the Fancaster mark to observers of a motorcycle race; broadcasts in 1987 to observers equipped with Fancaster branded receivers at football games in Sioux City, IA, Worthington, MN, and the University of Kansas; a weather broadcast from a hot air balloon in the spring of 1988; the sale of Fancaster branded radios in July of 1988; and the transmission of a prerecorded program to individuals using Fancaster branded radios at Lake Okoboji, IA. After the application, Krueger continued similar activities, and even produced karaoke shows under the mark. 

Comcast raised legal and factual questions about each of these uses, but the court wasn’t going to get mired in the details.  It was undisputed that Krueger “engaged in significant commercial and promotional activity involving the Fancaster mark over the course of many years.”  Even if Comcast managed to kick each one out on a technicality, “either because they were mere demonstrations, or involved sales of products other than broadcast services or communication,” it offered no evidence from which a jury could conclude that Kreuger had the requisite mental state.  “A lay businessman who spends years of his life selling branded radios, performing branded broadcasts, and vigorously promoting additional businesses under a given mark would have no obvious reason to suspect that his significant efforts do not constitute ‘use in commerce.’”

Comcast argued that Krueger’s intent was shown because he submitted blank letterhead and envelopes in connection with his combined  affidavit of use and incontestability because he’d been told that letterhead was insufficient in previous communications with the PTO.  The court found this fact to prove nothing.  Even if he knew this was insufficient evidence of use, that doesn’t show knowledge that the underlying statements concerning use were false.  (I imagine that this conclusion would be different without all that use-like activity; if he had letterhead and nothing else, it would be easier to infer intent.)  Moreover, the PTO actually accepted the letterhead and envelopes.  “Comcast's real complaint is not with Mr. Krueger's submission to the PTO, but with the PTO's decision to accept the-undeniably flimsy-evidence in approving the incontestability application.”  Maybe Krueger only had limited success marketing his service, but the record showed that he kept trying to build the brand.

Summary judgment for Fancaster on this claim. Comcast also sought a declaratory judgment of cancellation, which was also dismissed on the same rationale.

Cybersquatting: The court found jury questions sufficient to preclude summary judgment on several aspects of Comcast’s ACPA counterclaim, including—appallingly—whether Fancast was famous.  While the court concluded that “[t]here is ample evidence of ‘distinctiveness’ and ‘fame’ to send the issue to a jury,” the latter can’t seriously be in play once attention is given to the question.

What was clear was that Krueger registered dozens of websites containing the word “fancast,” differing from the official Fancast.com only in their extensions.  These were identical or confusingly similar to Comcast’s domain name.

Several of the factors listed in the statute weighed in favor of bad faith: the domain names were identical to Comcast’s heavily promoted website; plaintiffs had no prior registration for Fancast and had never offered products or services bearing that mark.  They used the domains to redirect traffic to fancaster.com or used “parked” ad pages, rather than conducting business using them.  Plaintiffs argued that they were entitled to the safe harbor for people who believe and have reasonable grounds to believe that their uses were fair or otherwise lawful. Given their valid registration for Fancaster, they argued that they had an objectively reasonable belief that they could fairly/lawfully register the domain names at issue.  Moreover, they argued that their registration of various “fancast” websites before Fancast.com was active precluded any finding that subsequent registration violated ACPA.

The court found these arguments disingenous.  Comcast bought fancast.com and filed an application with the PTO for Fancast in August 2006, and Krueger began registering large numbers of “fancast” domains almost immediately thereafter. While the site wasn’t officially launched for public use until later, “Mr. Krueger does not actually claim that he was unaware of Comcast's purchase, registration, or plans to use the fancast.com domain name to heavily promote services sold under the FANCAST mark. Indeed, he explicitly withdrew prior statements to that effect.”  His timing and unwillingness to deny knowledge “is itself highly suggestive of intent.”  That was enough to get to a jury.

The court also dealt with Comcast’s laches and acquiescence defenses as applied to Fancaster’s remaining ACPA claim.  Both would require a showing that Comcast acted in reliance on its belief that Fancaster wouldn’t enforce its rights and would be prejudiced if Fancaster were allowed to sue now.  Comcast argued that Fancaster waited 14 months before filing suit, that a jury could infer acquiescence from its November 2006 letter approving the Fox SportsNews Fancaster segment, and that Comcast suffered business uncertainty arising from the lawsuit. 

The court found that there was no evidence that Comcast relied either on the November 2006 letter or on Fancaster’s delay in bringing suit.  Without reliance, there was no prejudice and the laches and acquiescence defenses were thus stricken.