Friday, November 14, 2008

Fractional Villas Files Trademark Infringement Lawsuit Against Competing Fractional Ownership Company

On November 12, 2008, Fractional Villas, Inc. (“FVI”) filed a trademark infringement lawsuit against LVPalmsplace, LLC and Las Vegas residents Yvonne Milko and Janet Armkenect (“Defendants”) in the U.S. District Court for the Southern District of California. See Fractional Villas, Inc. v. LVPalmsplace, LLC. et al, Case No. 08-cv-02072 (S.D. Cal. November 12, 2008). A copy of the complaint can be viewed here.

FVI, a company based in Del Mar, California, is in the business of marketing fractional ownership of luxury properties. The company markets its services on its website and has two federal service mark registrations for the mark FRACTIONAL VILLAS – a supplemental registration for the word mark alone for “Real estate consultation; Real estate equity sharing, namely, managing and arranging for co-ownership of real estate” and a principal registration for the FRACTIONAL VILLAS logo pictured above (with the words “FRACTIONAL VILLAS” disclaimed) for two classes of services (“Real estate marketing services in the field of high-value properties” and “Real estate consultation; Real estate equity sharing, namely, managing and arranging for co-ownership of real estate; Real estate time-sharing; Vacation real estate time share exchange services; Vacation real estate time-sharing; Vacation real estate timeshare services.”).

According to the complaint, FVI has been marketing its services since 2003 – although according to the Internet Archive, the website has only been up since December 2005 (which FVI pretty much admits by claiming on its website that its contents are Copyright 2005-2008). The complaint is not specific about the extent of FVI’s marketing efforts prior to the website – it does mention that FVI’s owner, Robert Vicino, was a guest on Fox News and several radio programs and has been featured in numerous print and online articles, but such appearances came after the launch of the website.

Sometime around August 2008, Defendants began marketing fractional ownership of luxury properties under the website The Defendants also own the website, which is currently focused on marketing the Palms Place Hotel & Spa at the Palms Casino Resort in Las Vegas.

Palms Place, Las Vegas, Nevada

FVI argues that as a result of its ongoing advertising and promotion, the “FRACTIONAL VILLAS” mark has acquired a secondary meaning (i.e., has come to be a unique identifier of FVI’s services) and the Defendants’ use of the similar mark Las Vegas Fractional Villas (and the domain name) is likely to cause confusion.

Vegas™Esq. Comments:
Since FVI’s trademark registration for the word mark FRACTIONAL VILLAS is only on the Supplemental Register, the registration provides no additional rights beyond what FVI has under the common law and reinforces that the mark is not inherently distinctive (and thus FVI must make a case for acquired distinctiveness). And FVI, in its registration on the Principal Register, concedes that it does not have exclusive rights to use the mark FRACTIONAL VILLAS apart from that mark as shown.

FVI will have an uphill battle in attempting to show that FRACTIONAL VILLAS has acquired a secondary meaning in the marketplace as identifying FVI’s services. The greater the degree of descriptiveness of a mark, the heavier the burden is on the mark holder to prove that the mark has acquired a secondary meaning. In this case, FRACTIONAL VILLAS is no doubt very descriptive of the services offered by FVI under the mark. As the PTO stated in rejecting registration of FRACTIONAL VILLAS on the Principal Register on the basis that it was merely descriptive:

The wording FRACTIONAL VILLAS describes luxury villa properties having a fractional, or shared, ownership. See web sites previously provided describing FRACTIONAL VILLAS. When the mark is applied to the applicant’s services, the consumer is immediately informed that the real estate consultation is specifically in the area of FRACTIONAL VILLAS, and that the equity sharing is specifically for FRACTIONAL VILLAS. See attached pages from applicant’s own website.
The complaint also attempts to make out a cause of action for trade dress infringement based on the website’s “distinctive, non-functional protectable trade dress,” but falls short on details regarding what such trade dress is.

Curiously, while the complaint notes that the contents of the website, authored by Vicino, have been registered with the U.S. Copyright Office (TX-6-613-055 and TX-6-856-810 ), the complaint does not go on to make any claims for copyright infringement. Most likely because there is not enough content on the to make out a prima facie case that the Defendants copied any part of the website (other than maybe the concept itself, which copyright does not protect).

But the inclusion of these copyright registrations may have been a carryover from another lawsuit complaint – it turns out that this particular lawsuit is one of many that FVI has filed in the last few months. It would appear that FVI has decided to mount an aggressive intellectual property enforcement campaign against other competitors involved in the “fractional” ownership business.

Filed November 12, 2008
Fractional Villas, Inc. v. et al
Fractional Villas, Inc. v. Paine et al
Fractional Villas, Inc. v. Harbor Light Villas et al
Fractional Villas, Inc. v. Windsor Capital Mortgage Corp. et al
Fractional Villas, Inc. v. Friedman et al

Filed September 23, 2008
Fractional Villas , Inc. v. MWS Fractional et al
Fractional Villas, Inc. v. Panama Fractional Real Estate et al
Fractional Villas, Inc. v. The Fractional Concierge, LLC. et al
Fractional Villas, Inc. v. Walker et al
Fractional Villas, Inc. v. Desert Quarters et al

Filed July 25, 2008
Fractional Villas, Inc. v. Rodgers et al

Filed July 22, 2008
Fractional Villas, Inc. v. Katz et al

Filed May 30, 2008
Vicino et al v. Allen et al
Vicino et al v. Starfish Coastal Properties, LLC et al
Vicino et al v. Coastal Resort Homes LLC et al

But with the exception of the above lawsuit against the Defendants, FVI’s lawsuits have all been copyright lawsuits (of course, trademark claims may have been asserted, but the lawsuits were classified primarily as copyright infringement lawsuits). FVI may be reaping the benefit of having registered its website with the U.S. Copyright Office since, with registered copyrights, FVI can assert statutory damages (rather than having to prove actual damages) against any other website that may have copied its website’s protected content. Of course, this also presumes that the infringement began after registration and not beforehand in which case statutory damages might be unavailable if the websites copied FVI’s website before registration even if such infringement continued after registration – see Derek Andrew, Inc. v. Poof Apparel. Corp., 528 F.3d 696 (9th Cir. 2008).

And one final unrelated note -- I wonder if the owners of Palms Place (Fiesta Palms, LLC -- see pending trademark applications here, here and here) will try to stop the Defendants from operating under the company name LVPalmsPlace, LLC.


Anonymous said...

As a defendant in one of the many lawsuits filed by Fractional Villas, I find their tactics despicable. If they were truly interested in protecting their intellectual property, then a simple letter to the company asking that the "offensive" language be removed from the web site would all that would be necessary. But Fractional Villas and their attorneys have decided to make a business out of this and “extort” money from anyone and everyone they can. This is a terrible legal precedent and Fractional Villas and their attorneys should be admonished for abusing the legal process. We don’t need people like this in the fractional business. My suggestion to Fractional Villas is to close their website and go church and pray what they have done does not condemn them to hell.

Anonymous said...

It is clear Fractional Villas incurred the effort and expense to develop its IP, has taken the steps to protect it within the bounds of the law, and will continue to protect and enforce its rights within the bounds of the law. It’s easy for those who rip off the material to expound on what the remedy should be for their own poor judgment. Unfortunately, the real estate industry is plagued with uneducated, unscrupulous individuals that disregard the law to better their own business. Those same individuals contributed to the situation our economy is in today. We are a nation of laws. Unfortunately, with the internet anyone can easily copy and paste another’s intellectual property with a few clicks. That doesn't make it legal, nor give them any excuse for doing so. These defendants would like everyone to believe that they are not the "victims", but the “culprits”. Perhaps some church time would help those who desire to get ahead by stealing from others. Why is it so easy for those who do improper things, like steal Intellectual Property, to justify both their impropriety and condemn the owner as unjustified? This is not "extortion". It is defense of private intellectual property that if not pursued would cause Fractional Villas to lose any rights it may have to its novelty. Thieves should be aware that Fractional Villas is serious about protecting their original intellectual property, which is obviously that of the leader in the industry, just like Coke, Sony, Apple or any respectable company would.

Anonymous said...

Yes, I agree, the copyright laws are in place to protect companies from being harmed by others that would ripe off their intellectual property. But that is not the situation with Fractional Villas lawsuits. These lawsuits have been brought against companies that may, at worst, have taken a paragraph or two from the Fractional Villa website. While not right, let’s face reality that in today’s Internet world we are all going to lose a paragraph or two over time.

Yes, I agree, we are a Nation of Laws but with that principle comes reasonability and fairness. Should we send people to prison for jaywalking? The real issue is what harm is being done here and what course of action should be taken to remedy the situation. In all these cases, Fractional Villas has lost no business or customers. Nor has their “unique position and reputation” been impacted. As far as I am aware, none of the companies sued by Fractional Villas even list or sell the same properties.

In many of the cases, Fractional Villas has objected to the use of single words. These are not protected intellectual property. Yet Fractional Villas did not do the gentlemanly thing and write a letter or send an email asking the “offending” websites to remove the language they felt impacted their intellectual property rights. They just filed suit. This, in my opinion, is an abuse of the legal system. Now these defendants have to hire counsel to defend themselves which, at a minimum, costs $10,000. How is that fair or right? Fractional Villas has taken an innocent, none damaging event and made a business out of it. Rather than potentially spend double or triple that amount defending a baseless suit, these innocent companies have made a business decision to pay $25,000 to Fractional Villas. While this strategy is not illegal, it just leaves a very unsavory taste in my mouth.

This is not a personal attack on Fractional Villas. They are a nice company that is trying, like all of us, to make a living. My point is that the strategy followed here is uncivilized and unnecessary. Sure, we can fight about issues of intellectual property but let’s fight fair.

Anonymous said...

It appears to meas an outsider that Fractional Villas have rights however their cause of actions appear to be one of profit from these companies rather than the law of giving notice first as prescribed in common law. To my mind that would be a fair way for sure and a better offense with respect to the law.

Anonymous said...

Everyone seems to be accusing Fractional Villas of not being "gentlemen" in their protecting their intellectual property from these copycat thieves.

Anonymous #1 mentioned going to church. When he does, be sure to read the The EIGHTH Commandment - THOU SHALT NOT STEAL.

Bravo Fractional Villas! Keep leading the way in this new industry!

Anonymous said...

I am truly amazed at some of the self-serving rationales being posted here.

One poster claims: “These lawsuits have been brought against companies that may, at worst, have taken a paragraph or two from the Fractional Villa website. While not right, let’s face reality that in today’s Internet world we are all going to lose a paragraph or two over time.”

Read the cases Mr. Gile has linked. In many cases the defendant stole entire sections of the Fractional Villas website – not “a paragraph or two”. Second, I’ve developed websites before and it is NOT the case that “we are all going to lose a paragraph or two over time.” When you build a website, you have a choice on content. You can write your own, or you can steal someone else’s. The decision is yours, and you are fully aware that when you hit Ctrl-C, Ctrl-V, you are stealing words that someone else created through, in some cases, considerable time, energy, and/or expense. Anyone in the web development industry knows that copyright laws protect the honest web developers, who take the time to create original content, from the uncreative ones that find it easier to steal than – gasp – actually try to have an original thought. Ignore these laws at your own peril. Web developers live and die by the creativeness and originality of their websites; why should the unethical ones who steal from others go unpunished? What incentive would a simple “Excuse me, but you have stolen 5 pages of my website, please stop” give to lazy website developers who prefer to steal from others rather than tax their little brains thinking up original content? Following some of the reasoning found in these comments, what would happen if we just let bank robbers off the hook once they are caught if they promised to give back the money? There would be a sudden increase in the number of bank robbers because there would be no incentive not to try it – at worst you just give back the money, but if you don’t get caught you get to keep the money you stole.

Regarding the comments accusing Fractional Villas of not playing fair, some of you people are seriously out of whack. Who stole the website content here? The defendants! (That is why they got sued). Look at the number of lawsuits; is it Fractional Villas’ duty to spend their time running around trying to notify everyone who is stealing their website content? That is not what the copyright laws say. Just be thankful it is not Microsoft or Intel’s content you stole. They would bury you in litigation for years.

Anonymous said...

The issue here is not theft. We all acknowledge the need to protect our intellectual property. What we are discussing here is the abuse of the court system to hurt companies that have not caused any real damage. Fractional Villas has not lost a dime, a customer, their reputation or their position in the industry. But they have destabilized other fractional companies and even put some out of business for no good reason. Is this the way we want to run our marketplace? Is this what it means to be a good business neighbor? If someone has harmed you, yes I agree, sue them and get back the amount of money you have been damaged. But to sue a company over a non-damaging event just because you have a copyright license seems unfair and unnecessary. Does this make Fractional Villas feel powerful? I think it's a cowardly way to do business.