Rearden LLC v. Rearden Commerce, Inc., --- F.3d ----, 2012
WL 2402012 (9th Cir.)
HT Eric Goldman
Rearden LLC, Rearden Productions LLC, Rearden Studios LLC,
Rearden, Inc., and Rearden Properties LLC appealed from summary judgment
granted to Rearden Commerce on Rearden LLC etc.’s Lanham Act and ACPA
claims. The court of appeals found that
genuine issues of material fact precluded summary judgment. To my mind, the most notable part of this
opinion is something that neither party really had the incentive to argue (in
part because of pending trademark applications): they claimed that “Rearden”
was suggestive, when I would think that it’s quite obviously descriptive in
that it is a surname.
Both parties took their inspiration from Ayn Rand’s Hank
Rearden. Steve Perlman founded Rearden
Steel, Inc. in May 1999, then changed its name to Rearden Studios, Inc. in
March 2002, Rearden, Inc. in October 2004, and, finally, Rearden LLC in June
2006. Perlman founded several other
Rearden companies: Rearden Studios LLC (which also went through a bunch of
Rearden name changes), Rearden Productions LLC (which began life as Look Aside
but quickly changed to a Rearden variant), and Rearden Properties LLC.
These entities have offices in San Francisco and Palo Alto, employing
approximately one hundred employees in total, and they have a number of
websites, including the main rearden.com (since April 2001), reardensteel.com
(Nov. 1999), reardenstudios.com (Mar. 2002), and reardenlabs.com (May
2005). They are technology incubators
and artistic production companies. Tech
incubators provide resources and support for start-ups, including “office
space, personnel, equipment, IT infrastructure, funding, credit guarantees,
insurance, administrative services, benefits, travel services, marketing,
creative ideas, intellectual property, and domain names.” They’ve entered into a partnership with TriNet,
a human resources company, to provide their affiliates with “online access to
payroll and benefits management services as well as the ability to purchase
such services as airline, hotel, and dining reservations, car services, and
event tickets.”
Rearden LLC is the one that really does this; Rearden
Productions LLC and Rearden Studios LLC specialize in high definition and
animated movie production services, while Rearden Properties LLC is a property
ownership and management company that rents three units in a San Francisco
building to the other Rearden entities.
Appellants have a registration for “Rearden Studios” and
logo. They also filed ITUs for “Rearden,”
“Rearden Companies,” “Rearden Commerce Email,” “Rearden Personal Email,”
“Rearden Mobile,” “Rearden Wireless,” and “Rearden Communications.” And they alleged infringement of other claimed
Rearden marks, including most of the above along with “Rearden LLC,” “Rearden
Productions,” “Rearden Properties,” “Rearden Entertainment,” “Rearden, Inc.,”
“Rearden Labs,” “and “Rearden Steel.” The district court, encouraged by appellants,
focused on “Rearden.”
Rearden Commerce, Inc., is “a Silicon Valley-based business
concierge company. Simply put, it offers a proprietary web-based platform
called the ‘Rearden Personal Assistant,’ which links its clients, specifically
businesses and professionals, to an online marketplace where they then are able
to search for, compare, purchase, and manage a variety of business and
travel-related services from more than 130,000 different vendors (including
such well-known companies as American Airlines, Hertz, Hilton, and WebEx). The
available services include air, car, hotel, and dining reservations, event
tickets, web conferencing, and package shipping.” Patrick Grady founded the company in 1999,
when it was Gazoo Corp. and then Talaris.
Talaris reserved “Rearden, Inc.” as a California corporate name in
August 2004, but lost the reservation to appellants in October, so it reserved
“Rearden Commerce” in November and changed its name to Rearden Commerce in
January 2005. ReardenCommerce.com launched in February 2005 (it had been
purchased in August 2004). In March 2005, it filed trademark applications for
“Rearden Commerce” and its associated logo.
When they were published for opposition in July/October 2006, appellants
became aware of Rearden Commerce.
Rearden Commerce also bought various domain names in March
2005, registering .com/.org etc. families for reardeninc, reardenco and
reardenc. On the same day in October
2006 that it agreed to an extension of time for appellants to oppose its
registrations, Rearden Commerce registered reardenllc.com, and soon thereafter
reardenllc.net, reardenmobile.com, and mobilerearden.com. The reardenllc domain names soon began
redirecting to Rearden Commerce’s main site.
Appellants sued in November 2006.
Rearden Commerce then ceased the redirection and “parked” the domain
names, refusing to assign them to appellants.
It refused to agree to a stipulated preliminary injunction limiting it
to reardencommerce, but offered to maintain the domain names in parked status
in return for appellants’ agreement to withdraw their applications for “Rearden
Commerce Email, Rearden Personal Email, Rearden Mobile, Rearden Wireless,
Rearden Communications, Rearden Companies, and Rearden,” which Rearden Commerce
suggested were based on its marks and
products. The district court granted a
preliminary injunction against Rearden Commerce only as to reardenllc domain
names.
The district court first asked whether the Rearden companies
had used “Rearden” in commerce; it was dubious, because the evidence suggested
that the Rearden companies had served only to incubate Perlman’s ideas, and
that no one actually paid Rearden to have their ideas incubated. Appellants suggested that people could come to Rearden. However, the district court ultimately
assumed without deciding that there was a triable issue of fact on use in
commerce.
Instead, the court found that there was no likely confusion. The suggestiveness of the Rearden mark and
the similarities between the parties’ marks weighed, albeit only somewhat, in
favor of likely confusion. The other
factors, however, weighed against likely confusion, particularly the proximity
of the services and the degree of purchaser care, with marketing channels also
weighing against confusion and no help from actual confusion or bad faith
intent. “According to the District
Court, no reasonably prudent consumer seeking to obtain start-up support would
mistake Rearden Commerce's online marketplace for Appellants' incubation
business. In turn, no prudent consumer seeking a web-based means to search,
compare, and purchase a variety of business services would mistake Appellants'
start-up incubation services for Rearden Commerce's online personal assistant
program.” In addition, the district
court rejected appellants’ evidence of confusion, which came from
vendors/industry insiders, not members of the relevant consuming public. E.g., “a Rearden Commerce customer known as
QubicaAMF expressed confusion as to which “Rearden” it conducted business with
after receiving a subpoena in this lawsuit, and Appellants received dozens of
misdirected emails originally intended for Rearden Commerce, some of which were
sent by Rearden Commerce's own customers).”
This latter at most involved confusion over proper names/addresses (what
other courts have characterized as lookup errors, from the days of yellow
pages).
The district court, after some motion practice, turned to
the cybersquatting claims. It determined
that appellants couldn’t establish a valid interest in any Rearden mark before
July 2005, thus entitling Rearden Commerce to summary judgment for domain names
acquired before that date. A reasonable
jury could, however, find use after that, such as appellants’ entry in a “Reel
Directory” and an agreement to provide editing services to Electronic
Arts. This left ReardenLLC.com, ReardenLLC.net,
ReardenMobile.com, MobileRearden.com, and ReardenC.com. The district court found that the statutory
factors generally favored Rearden Commerce on the issue of whether it acted
with a bad faith intent to profit with respect to those domain names, though
matters were complicated with respect to the reardenllc domain names. The court ultimately found good faith because
of Rearden Commerce’s belief that it was the mark owner and its unconditional
offer, at oral argument on summary judgment, to transfer the domain names to appellants.
The court of appeals reversed. Summary judgment is disfavored in trademark
cases.
First, the court found genuine issues of material fact on
use in commerce before July 2005. Use
means bona fide use, not use made merely to reserve rights in a mark. Mere advertising by itself can’t establish
priority of use. But the circuit applies
a totality of the circumstances approach.
Evidence of actual sales or lack thereof isn’t dispositive. Non-sales activity can be relevant to show
that the mark has been adequately displayed to the public and that a service
has been rendered in commerce.
Appellants argued that they offered incubation-related
services to a variety of start-up companies, including securing millions in
outside funding for Rearden Steel Technologies (2001), spinning the company off
as Moxi Digital (2002), providing incubation services to Ice Blink Studios
(2004), and other activities after 2005.
Many, and possibly all, of these incubated companies were created by
Perlman himself. If appellants had only
ever incubated Perlman’s ventures and never provided or even offered their
services to outsiders, that wouldn’t be use in commerce because it wouldn’t be
sufficiently public to identify or distinguish their services to an appropriate
segment of the public. But, the court of
appeals thought, there were genuine issues of material fact about whether
appellants provided incubation services to outsiders. Rearden did have a written contract to
provide studios to Ice Blink.
Also, there was “more than enough” evidence that appellants
provided non-incubation services to prevent summary judgment. Appellants “participated in” a 2001 Cinemax
movie project, and one of the Rearden entities was expressly identified in the
credits of “How to Make a Monster” as furnishing motion capture services. There was also a 2003 licensing agreement with
Life Aquatic Productions, a 2006 editing services agreement between Electronic
Arts and Rearden Studios, the “Reel Directory” published in July 2005
identifying Rearden Studios as providing various editing-related services and
welcoming independent filmmakers, a 2005 DVD identifying Rearden Studios as
providing DVD design and editoral studios, and two 2005 DVD independent films
listing Rearden Studios in the credits.
This created a genuine issue of material fact as to whether appellants’
services were rendered in commerce, and also used or displayed in the sale of
services. As to the latter, appellants
generated publicity about their services and the marks, including stories in
trade and other publications (19 pre-2005 news stories), appearances at trade
shows and publicity parties including Rearden Steel’s own launch party, and
distribution of Rearden merchandise.
A reasonable finder of fact would not be required to find in
favor of appellants, but the issue did have to be resolved at a trial. Facts favoring Rearden commerce include the
undisputed assertion before the district court that appellants only ever provided
services to Perlman himself and no one actually paid for idea incubation, and
appellants’ failure to file trademark applications for the “Rearden,” “Rearden
Companies,” “Rearden Commerce Email,” and “Rearden Personal Email” marks until
May 2007. Perlman claimed under oath, in
connection with the “Rearden Studios” trademark applications, that the “Rearden
Studios” mark was not used until February 23, 2005, at which point Rearden
Commerce had already changed its name from Talaris.
Turning to likely confusion, appellants’ theory was unjust
enrichment: “consumers could be more inclined to do business with Rearden
Commerce because they mistakenly believe that its services are sponsored by or
affiliated with Appellants.” (Sorry,
Mark McKenna.) If true, this would
deprive appellants of the opportunity to charge for the use of their marks and
could also risk damage to their reputation or goodwill if Rearden Commerce’s
services were bad.
Here again, a reasonable jury could go either way. Two factors, strength of the mark and
similarity of the marks, weighed in favor of appellants. “Indeed, a reasonable jury could give great
weight to these two factors, especially when viewed together.” And there were genuine issues of material
fact on proximity of goods, evidence of actual confusion, marketing channels,
and likely expansion of product lines.
The Ninth Circuit specifically stated that the district
court properly characterized Rearden as a suggestive mark because “it takes
only a small exercise of imagination to associate this name, made famous in the
business community (and elsewhere) as an image or paragon of entrepreneurial
success by Rand's highly successful and influential novel, with the incubation
of start-up enterprises.” Sigh. Also, it was correct to reject Rearden
Commerce’s argument that the mark was weak because over 840 other companies use
Rearden or some variation in their names.
Only four identify as tech or engineering firms, and each of those has
headquarters outside of California, lacks an Internet presence, and employs
fewer than five people. “A reasonable finder of fact could accord more
significant weight to this factor than did the District Court, particularly in
light of evidence that Appellants have undertaken efforts to promote the mark
in association with their services; we have observed that ‘advertising
expenditures can transform a suggestive mark into a strong mark.’”
Similarity, of course, also favored appellants, especially
given that Rearden Commerce naturally often referred to itself as
“Rearden.” True, it’s common for
multiple companies to use similar names and marks, such as Johnson &
Johnson, Johnson Publications, Howard Johnson's, Johnson Controls, Johnson
Products, and S.C. Johnson. But a
reasonable jury could determine that this factor weighs “significantly” in
appellants’ favor, especially given the possible cumulative effect of strength
and similarity.
On proximity of the services, the Ninth Circuit favors
flexibility. In the light most favorable
to appellants, there was evidence that the parties “(1) offered arguably
similar technology platforms to their respective customers (i.e., Appellants
have offered an online means, as part of their incubation business, for clients
to arrange business, travel, and other services through TriNet while, on the
other hand, Rearden Commerce has provided businesses with an online marketplace
for businesses to purchase and manage similar services from a variety of third
parties); (2) attended the same trade shows; (3) appeared in the same
publications; and (4) relied on private investment funding from the same
sources.” A reasonable jury could go the
other way too, finding that an incubator doesn’t really compare to an online
business concierge marketplace.
It was on evidence of actual confusion that the court of
appeals made the most law. While the
court rejected appellants’ theory of confusion among “non-purchasing
consumers,” it ruled that confusion among non-consumers could create an
inference of consumer confusion.
Appellants began with the proposition that incubation
services, by definition, are not directed towards the general public. They typically deal with investors, other
businesses seeking strategic partnerships, marketers, business strategists,
vendors, suppliers, and media outlets. “Various
outlets, like trade shows and trade publications, are therefore critical to a
successful incubation process as well as to a successful incubation business.” Thus, they concluded, an incubator sells the
start-up itself to investors and the like.
The court found this theory “open-ended and unsupported.” “It is difficult to see who exactly could not
be included as a ‘non-purchasing consumer’ under their interpretation of this
concept, which apparently includes those who sell to, as well as buy from, the
entity.” The relevant consumer for
purposes of incubation is the hiring start-up.
Trademark law prevents only against mistaken purchasing decisions, not
against confusion generally.
However, non-consumer confusion may be relevant to likely
confusion “where there is confusion on the part of: (1) potential consumers;
(2) non-consumers whose confusion could create an inference that consumers are
likely to be confused; and (3) non-consumers whose confusion could influence
consumers.” In those cases, non-consumer
confusion “bears a relationship” to consumer confusion. In a footnote, the court said it wasn’t
deciding whether other circumstances also justified taking non-consumer
confusion into account. Its rationale
for leaving the class open was pure dilution, despite the confusion language: “we
do not decide whether confusion on the part of such nonconsumers as vendors and
suppliers, potential employees, and investors should be considered merely
because such confusion could affect the trademark holder's business, goodwill,
or reputation.”
In the TrafficSchool.com
case, the court already recognized non-consumer confusion as a relevant
proxy—there, it was law enforcement officials and state DMV employees confused
about the official status of DMV.org.
“[I]f even these parties, who presumably have much more familiarity with
governmental DMVs, are confused about the defendants' website, then it is
probable that consumers, who have less familiarity, would also experience
confusion.” If sophisticated
non-consumers are confused, that might be evidence that less sophisticated
consumers would be confused, whereas confusion by non-sophisticated
non-consumer “may shed little or no light on whether a sophisticated consumer
would likewise be confused.” Also, the
court has recognized relevance where non-consumer confusion can contribute to
consumer confusion, such as post-sale confusion.
There were two record incidents of actual consumer
confusion: a customer of Rearden Commerce, QubicaAMF, expressed confusion as to
which “Rearden” it was conducting business with after receiving a subpoena in the
instant lawsuit. Also, appellants received dozens of misdirected e-mails
actually intended for Rearden Commerce, some sent by Rearden Commerce's own
customers.
As for non-consumer evidence, trade and other publications,
as well as trade show organizers and attendees, have confused the parties or
believed that Rearden Commerce was founded by Perlman or somehow is associated
with him and the various Rearden companies. The Ninth Circuit lumped together examples of
uncertainty, which some courts treat as the opposite of confusion, with
confusion: “For example, the author of a March 23, 2005 CNET News.com article observed
that ‘the main question in the conference hallways [at the PC Forum trade show]
was whether the company [Rearden Commerce] had any relationship to Rearden
Steel, the set-top box outfit started years ago by WebTV founder Steve Perlman’
and that, ‘[i]t doesn't, but the association made many wiggly.’” Another 2008 article, discussing $100 million
in funding for Rearden Commerce, clearly believed that this company was created
by the “legendary inventor,” Perlman, and the “technology incubator” he founded;
the article also featured an excerpt from a recent interview with Perlman and
included his picture. A Rearden Commerce employee testified that he was asked
about “a dozen times” on the first day of the April 2008 Web 2.0 show whether
the companies were somehow affiliated or related.
This type of confusion could fall into any of the three
relevant categories the court of appeals identified. “In particular, it appears that the confusion
of presumably knowledgeable and experienced trade journalists and trade show
organizers could very well influence the purchasing decisions of consumers.”
There was also evidence of confusion by other non-consumers,
“evidently either in a position in which to influence consumers or to serve as
their proxy”: (1) appellants' prospective employees; (2) a vendor; (3) an
investor (Mac-Quarie Group, which entered into an agreement with Rearden
Commerce and then negotiated with appellants over a $1 billion lease); (4) appellants'
auditors; and (5) their patent attorneys. “Tellingly, Rearden Commerce and
Grady were cautioned about using the ‘Rearden’ name before the company's name
was ultimately changed in 2005. For example, Rearden Commerce's public
relations consultant stated in a December 8, 2004 email that: ‘Also, there is a
guy who has a small thing called Rearden Steel, the one who started Web TV.
That might confuse folks in the beginning.’”
A reasonable finder of fact could still find in Rearden
Commerce’s favor, given that this evidence might have no bearing on actual
consumer confusion. “For instance, a reasonable jury could find that presumably
sophisticated start-ups looking for critical incubation services could not
really be misled by some mistakes in a trade publication.” Other reasons to discount the evidence
included that the confusion evidence related only to names/email addresses, not
to the full marks. Indeed, Rearden
Commerce suggested that appellants attempted to generate confusion evidence by
doing things like removing email filters and moving their booth at the Web 2.0
show. But these accusations of good
faith only highlighted the existence of genuine factual issues.
There were also genuine issues of material fact on marketing
channels used (the parties appeared in the same trade publications and
participated in the same trade shows) and likelihood of expansion of product
lines (Perlman testified that Rearden had been developing wireless technology
since 1999). Meanwhile, Rearden Commerce
had, among other things, developed its own “mobile wireless product,” registered
mobilerearden.com and reardenmobile.com, and had an interest in further
expansion. (Isn’t having an interest in
mobile apps a bit like having an internet presence these days?)
Similar factual issues preserved the ACPA claim. A reasonable jury could weigh more heavily
than the district court did that Rearden Commerce has never used Rearden LLC to
describe itself, given that it’s one of appellants’ legal names. Also, the timing suggests that Rearden
Commerce might have been trying to use the domain names as leverage in
negotiations, which the ACPA doesn’t let you do absent some other
interest. (Compare filing an ITU for "Rearden Commerce," which is apparently fair game for exerting leverage.) Rearden Commerce’s general
counsel testified, “So, yes, at that point in time, there was I find out that
there's a party opposing my trademark application that I feel has no right to
oppose my trademark application, and I need to protect my mark, and I need
to—and those were two marks that I hadn't obtained in the past.” A reasonable jury could find that Rearden
Commerce simply purchased domain names it initially overlooked, but it could
also find bad faith, especially given the apparent absence of any formal policy
or method for Rearden Commerce’s registrations.
There were also genuine issues of material fact on Rearden
Commerce’s good or bad faith after appellants first accused it of
cybersquatting. Though Rearden Commerce
did deactivate the LLC.com domain names when confronted and then
unconditionally offered to transfer them to appellants, that was just one fact for
the jury to evaluate. Earlier, it offered
to maintain them as non-directing only on the condition that appellants abandon
some trademark applications.
1 comment:
And nobody comments on the irony of these guys taking to federal court to assign one of them the rights to Hank Rearden's name? I suppose the irony probably would have been lost on Ayn Rand, too.
Post a Comment