Court allows false advertising suit over calling take-out pizza restaurant “fast-casual”

Marketing firms take note: what you say about one client on your website will get noticed by other clients, and they may sue.

Plaintiff San Francisco Oven hired defendant Fransmart to market San Francisco Oven’s “fast-casual brick-oven” pizza restaurant to potential franchisees. After San Francisco Oven and Fransmart entered into an agreement, Fransmart changed its website to describe another pizza restaurant, Z-Pizza, as also employing the “fast-casual brick oven” concept.

San Francisco Oven believed that this information about Z-Pizza was false, and that Fransmart had changed the description to steer potential franchisees away from San Francisco Oven and to Z-Pizza. Before San Francisco Oven hired Fransmart, the Fransmart website had listed Z-Pizza as having merely “take-out and delivery and limited in-restaurant dining.”

After learning of the changed information on the website, San Francisco Oven sued Fransmart for false advertising under Section 43(a) of the Lanham Act, 15 U.S.C. §1125(a). Fransmart moved to dismiss, arguing that San Francisco Oven’s complaint did not allege sufficient facts upon which subject matter jurisdiction could be based. The court disagreed, and denied Fransmart’s motion.

In its analysis, the court looked to the case of Scotts Co. v. United Indus. Corp., 315 F.3d 264 (4th Cir. 2002) to recast the elements of a 43(a) claim as follows: (1) the defendant made a false or misleading description of fact or representation of fact in a commercial advertisement about his own or another’s [goods or services]; (2) the misrepresentation is material, in that it is likely to influence the purchasing decision; (3) the misrepresentation actually deceives or has the tendency to deceive a substantial segment of its audience; (4) the defendant placed the false or misleading statement in interstate commerce; and (5) the plaintiff has been or is likely to be injured as a result of the misrepresentation, either by direct diversion of sales or by a lessening of goodwill associated with its [goods or services].

The court held that San Francisco Oven’s allegations of Fransmart’s statements about Z-Pizza satisfied these elements. The statements on the website described goods and services of another company. The representations were material in that they dealt with the actual subject about which Fransmart was hired (i.e., the franchise concept). The representations had the tendency to deceive, due to the alleged mischaracterization of Z-Pizza’s concept. By posting the statements online, Fransmart placed them into interstate commerce. Finally, San Francisco Oven had properly alleged that diverted franchisees to Z-Pizza would cause damage.

San Francisco Oven, LLC v. Fransmart, LLC, 2005 WL 1838125 (E.D.Va., July 27, 2005).

Google and the reasonable person

You may recall a posting on this site from a few weeks ago about an Indiana court that concluded a plaintiff who hadn’t consulted the Internet failed to exercise due diligence in locating a defendant for service of process. A court in West Virginia has taken the centrality of Google in everyday life one step further. The judge in the case of Plemons v. Gale, 2005 WL 1798335, (S.D.W.Va., Jul 27, 2005) equates doing a Google search with the “reasonable person standard.” Here’s an extensive quote from the case:

“In the ‘time, place, and circumstances’ of this case, one who actually wanted to inform Ms. Plemons that her house was to be conveyed because of a failure to pay roughly $3,000 in taxes and fees would not have looked for her in the dusty corners of the Kanawha County record room. In the age of telephones, internet search engines, online newspapers, online people-finders, and readily available credit reports, most people can easily find someone. Thus, if a reasonable person were charged with the duty of locating Ms. Plemons in the relatively small city of Charleston, West Virginia, it is my belief that he would be likely to employ ‘Google’ to find her name, call information to learn her telephone number, contact her lending bank, or call her ex-husband. Instead, Advantage searched the public records for Ms. Plemons’ address and mailed written notices to two of the addresses contained therein. When the notices were found to be undeliverable, Advantage did nothing further. I continue to believe that those efforts failed to meet the constitutional standards of due process.” [Emphasis added.]

When the defendant is a domain name: the power of in rem proceedings under the ACPA

A recent decision by a federal court in Virginia illustrates some interesting legal issues that arise from the global nature of the domain name system. It also highlights a powerful mechanism under the Anticybersquatting Consumer Protection Act (“ACPA”) by which a plaintiff can proceed with a legal action to recover a domain name without regard to the court’s personal jurisdiction over the registrant.

In June of 2003, Junak Kwon registered the domain name nbcuniversal.com through a registrar in Korea. NBC Universal, Inc. filed suit in the U.S. District Court for the Eastern District of Virginia – the district in which the registry for the .COM TLD is located – to recover the domain name. NBC Universal alleged violation of the ACPA (15 U.S.C. §1125(d)), and alleged other claims under federal trademark law, namely, that Kwon’s registration of the domain name diluted NBC Universal’s mark.

NBC Universal’s lawsuit was an in rem action, a type of action provided for under 15 U.S.C. §1125(d)(2) which allows, under certain circumstances, a plaintiff to proceed directly against a domain name to enforce ownership rights in it. The court had allowed NBC Universal to proceed in this manner because it would not have been possible for the court to obtain personal jurisdiction over the registrant.

Kwon filed a motion to dismiss which presented three arguments, each of which the court rejected. First, Kwon argued that the court was without subject matter jurisdiction over the case. He contended that by filing a prior proceeding with the World Intellectual Property Organization (“WIPO”) pursuant to the Uniform Domain Name Dispute Resolution Policy (“UDRP”), NBC Universal had submitted to the jurisdiction of the legal system in Korea, where the domain name was registered.

In rejecting Kwon’s argument based on lack of subject matter jurisdiction, the court cited the case of Barcelona.com, Inc. v. Excelenstisimo Avuntamiento de Barcelona, 330 F.3d 617 (4th Cir. 2003), which held that arbitrating a dispute pursuant to the UDRP does not preclude a plaintiff form filing a civil suit, either before or after the arbitral proceeding. The court further noted that a plaintiff is not limited to bringing such an action in the jurisdiction to which it submits for purposes of the WIPO proceeding. Accordingly, the previous WIPO proceeding did not deprive the court of subject matter jurisdiction.

Kwon’s second argument was that the U.S. court should abstain from exercising jurisdiction over the matter, because Kwon had already filed an action in Korea challenging the WIPO panel’s ruling that was adverse to him. The court observed that abstention is only warranted in “extremely rare circumstances,” and concluded that such circumstances were not present in this situation. The court found that principles of international comity would not require the court to abstain, because the Korean court action had “not been initiated in any meaningful sense.” The defendant had not yet been served with process, and the Korean action was an in personam action against NBC Universal (as opposed to an in rem action against the domain name itself, as this case was).

Kwon’s third argument was that the in rem provisions found at 15 U.S.C. §1125(c)(2) provided for such an action only over cybersquatting claims. Therefore, Kwon argued, adjudication of NBC Universal’s dilution claim would require the court to acquire personal jurisdiction over him, and both sides had agreed that the court could not acquire personal jurisdiction. The court quickly dispensed with this argument, however, citing to the case of Harrods Ltd. v. Sixty Internet Domain Names, 302 F.3d 214 (4th Cir. 2002), which held that “the in rem provision [of the Lanham Act] not only covers bad faith claims under §1125(d)(2), but also covers . . . dilution claims under §1125(c).”

NBC Universal, Inc. v. NBCUNIVERSAL.COM, — F.Supp.2d —, 2005 WL 1712887 (July 14, 2005).

Evidence of intentional copying of domain name gives rise to presumption of trademark distinctiveness

Plaintiff Fryer sued his former employee, Bernie Brown (no relation to the author of this weblog), after Brown set up a website for his new competing auto upholstery business. Since 2000, Fryer had maintained the website located at autoupholsterykits.com. In 2002, Brown set up his website at autoupholsterykit.com.

Fryer’s suit alleged, among other things, violation of the Anticybersquatting Consumer Protection Act (“ACPA”), 15 U.S.C. §1125(d). In a motion for summary judgment, Brown argued that the domain name autoupholsterykits.com was a generic term, and thus not subject to trademark protection. He argued in the alternative that if it was not a generic term, it was at least a descriptive term without secondary meaning.

The court denied the motion for summary judgment as to the ACPA claim, holding that the domain name was a distinctive trademark and subject to protection against infringement. The court did some interesting maneuvering, however, to reach this conclusion. In essence, it avoided the real question of whether the domain name may actually be a generic term or merely describe the goods provided. Instead, the court looked to evidence of intentional copying of the plaintiff’s domain name by the defendant.

In so many words, the court conceded that an analysis of the domain name vis-à-vis the goods provided in connection therewith would be like stepping into a quagmire: “The distinctions between generic and descriptive and descriptive and suggestive are often illusory. Accordingly, the Court relies upon the link between the mark’s secondary meaning and the likelihood of confusion as critical.”

So the court analyzed the relationship of intentional copying of plaintiff’s domain name to both the likelihood of confusion and secondary meaning. It noted that “[w]hen intentional copying is at issue, the court may presume the likelihood of confusion.” Further, the court noted that “evidence of deliberate copying establishes a prima facie case of secondary meaning.”

Accordingly, the court denied summary judgment where there were factual issues relating to whether the defendant had intentionally copied the domain name.

Fryer v. Brown, 2005 WL 1677940 (W.D.Wash., Jul 15, 2005).

Spam filters and storage limits okay under First Amendment

Plaintiff de Mino, a part-time faculty member at the University of Houston Downtown, filed suit against the University, claiming that various restrictions placed on the use of school e-mail accounts violated the First Amendment right to free speech.

Specifically, de Mino complained of the University’s practice of shutting down e-mail accounts for adjunct professors during the summer, when they were not under contract to teach. He further complained of the inability to transmit e-mail after his account had reached its data storage limit. De Mino had other problems with the e-mail system when he failed to designate his personal e-mail address as legitimate, thus certain messages he had sent to other faculty had been caught in the system’s spam filter. De Mino contended that he was denied access when he tried to communicate with other faculty regarding University policies.

The court granted summary judgment in favor of the University, and dismissed the lawsuit. In deciding on de Mino’s First Amendment claim, the court looked primarily to two tests used to analyze such claims in the education context.

Under the Perry test (Perry Educ. Assn v. Perry Local Educators’ Assn., 460 U.S. 37 (1983)), educational authorities may reserve an internal mail system for its intended purposes, so long as there is no discrimination on the basis of viewpoint and the limitations imposed are reasonable in light of the purpose of the forum. Under the Tinker test, (Tinker v. Des Moines Indep. Community School Dist., 393 U.S. 503 (1969)), teacher communications may be suppressed only when the expression or its method of exercise materially and substantially interferes with the activities or discipline of the school.

In this case, the court held that the restrictions on de Mino’s e-mail account satisfied these tests. The limited duration of adjunct accounts, as well as the spam filters and storage limits were not content- or viewpoint-based restrictions, and were reasonable in light of the need to preserve the integrity of the IT system. Doing away with such restrictions (and allowing open access to spam and unlimited data storage) would have been a substantial interference with the activities of the school.

Faculty Rights Coalition v. Shahrokhi, 2005 WL 1657116 (S.D.Tex., July 13, 2005).

Has Microsoft forgotten to file a trademark application for the name of its new operating system?

Microsoft has announced that the name of its new operating system coming out next year will be called “Vista.” As of the date of this posting, a search of the records of the United States Patent and Trademark Office reveals no applications on file for the mark VISTA owned by Microsoft. Is this an oversight or merely a consequence of the several day backlog for getting information about new applications online? Perhaps it’s just a load date issue.

Further: More observations on this subject over at Infamy or Praise.

And further: Dennis Crouch over at Patently-O has a this post on the delay one finds in the world of patent applications.

Section 230 of Communications Decency Act shields websites from defamation liability

Plaintiff Whitney Information Network sued various defendants that publish websites which purport to provide consumers with an outlet to report dishonest companies. Whitney claimed it had been harmed from the defendants’ reckless publication of false stories about its business. It alleged various causes of action against the defendants, including defamation per se of business reputation.

The defendants moved to dismiss the defamation claim, arguing that Section 230(c)(1) of the Communications Decency Act shielded them from liability for defamation. That portion of the act provides that, “No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider.”

The court found that the defendants did not write the messages that appeared on their websites. Instead, visitors to the website submitted the information. Accordingly, the court dismissed the defamation claim, holding that the “Defendants are a service provider as they publish information by consumers on their website.”

Whitney Information Network, Inc. v. Xcentric Ventures, LLC, 2005 WL 1677256 (M.D.Fla., Jul 14, 2005).

Supreme Court nominee John Roberts and the law of the Internet

John Roberts, President Bush’s nominee for the Supreme Court has only been on the bench since 2003, when he was appointed to the U.S. Court of Appeals for the District of Columbia Circuit. In that time, it does not appear that Judge Roberts authored any opinions dealing squarely with what most would consider “Internet law.”

Roberts was on the panel of judges (but not the author of the opinion) in the case of Recording Indus. Assn. of America, Inc. v. Verizon, 351 F.3d 1229 (D.C.Cir., 2003), which garnered a significant amount of attention upon its pronouncement. In that case, the Court of Appeals reversed the decision of the district court which had denied Verizon’s motion to quash subpoenas issued by the RIAA. The RIAA had issued such subpoenas pursuant to the Digital Millenium Copyright Act (“DMCA”), seeking to learn the identity of accused file sharers.

The court held that under the DMCA, a subpoena could issue only to Internet service providers that actually stored infringing material on their servers. Because Verizon was acting as a mere “conduit” for data transferred between Internet users, the subpoenas should not have issued.

Of course, the Grokster opinion has changed the overall landscape of potential liability for copyright infringement over peer-to-peer networks. The author of this weblog will defer to more knowledgeable sources rather than speculate on how a Supreme Court Justice Roberts would rule on such a matter.

If the CIA cares about the environment, it apparently doesn’t want you to know about it

Court holds that CIA violated provision of Energy Policy Act, ordering publication of information regarding acquisition of alternative fuel vehicles.

The Energy Policy Act of 1992, 42 U.S.C. §13211 et seq., requires federal agencies to purchase a minimum number of alternative fuel vehicles (“AFVs”) when adding to their fleets of automobiles. To ensure compliance with this environmentally-friendly requirement, 42 U.S.C. §13218 calls for federal agencies to prepare annual reports to Congress summarizing their compliance with the AFV purchasing requirements. These annual reports must be posted “on a publicly available website on the Internet.” 42 U.S.C. 13218(b)(3).

For the past six years, the CIA has apparently been too busy with the war on terror and other pressing matters to concern itself with the reporting requirements of the Energy Policy Act. Certain environmental groups noticed this, and filed suit in federal court in California, claiming that the agency (and 12 other agencies as well) had failed to properly make the AFV compliance information available online.

The plaintiffs filed a motion for summary judgment, claiming that there was no genuine issue of material fact regarding the failure of the various agencies to meet the reporting requirements. Although the court denied the motion as to the other 12 agencies (their reporting was at least somewhat sufficient), the court found that the CIA “essentially conceded that it failed to prepare or publish any compliance reports required under the [Energy Policy] Act.”

Accordingly, the court held that the CIA had not met its reporting obligations under the Act, and ordered it to publish on the Internet no later than January 31, 2006 information regarding its acquisition of AFVs during the past six years.

Center for Biological Diversity v. U.S. Dept. of Energy et al., 2005 WL 1656881 (N.D. Cal., July 14, 2005).