Friday, May 15, 2009

Federal Texas Court Finds Domainer Texas International Property Associates Liable for Cybersquatting

Federal District Court Judge Ed Kinkeade of the Northern District of Texas dealt a defeat to domain name company Texas International Property Associates while giving a cybersquatting victory to Hoerbiger Holding AG (“Hoerbiger”). The court dismissed with prejudice all of TIPA’s causes of action against Hoerbiger and granted summary judgment in Hoerbiger’s favor on its counterclaim of cybersquatting. See Texas International Property Associates v. Hoerbiger Holding AG, 2009 U.S. Dist. LEXIS 40409 (N.D. Tex. May 12, 2009).

Hoerbiger conducts business in the fields of compression technology, automation technology, drive technology, and actuator technology. Hoerbiger has a trademark registration for the mark HOERBIGER (obtained October 8, 2002) and owns the website

TIPA, a well-known domainer company that owns a portfolio of approximately 500,000 internet domain names that it uses to generate advertising revenues via click-through revenue, owned the domain name. When Hoerbiger first became aware of the domain name in June 2007, the site provided access to various hyperlinks labeled Automation, Compressor, Business, Valve, Web Site, Motion Control, Actuators, Storage, Cylinder, Linear Actuators and Control Valves – and a visitor, by clicking on those hyperlink labels was taken to a series of sponsored results or advertising links related to the user’s selection.

Hoerbiger asked TIPA to transfer the domain name, but TIPA refused, so Hoerbiger filed a UDRP action with the World Intellectual Property Organization (“WIPO”) against TIPA with respect to the domain name. The WIPO panel hearing the UDRP action found that Hoerbiger had shown that the domain name was confusingly similar to its HOERBIGER trademarks, that TIPA had no rights or legitimate interests in respect to the domain name, and that TIPA had registered and was using the domain name in bad faith. Accordingly, the panel, on October 19, 2007, ordered the domain name transferred to Hoerbiger.

TIPA subsequently filed suit against Hoerbiger in Texas state court on November 15, 2007, claiming that Hoerbiger has no rights in the domain name, and asking the court to prevent the transfer of the domain name to Hoerbiger. The case was removed to federal court by Hoerbiger, who added counterclaims federal trademark infringement, federal unfair competition, cybersquatting, and federal trademark dilution along with various state and common law claims. TIPA later amended its complaint to allege reverse domain name hijacking and fraudulent trademark registration and sought to prohibit the transfer of the domain name and cancellation of Hoerbiger’s registered mark HOERBIGER. Hoerbiger moved for summary judgment on all of TIPA’s claims and sought partial summary judgment on its cybersquatting counterclaim.

Hoerbiger’s cybersquatting claim alleged that registration of the domain name was done in bad faith for the purpose of “typosquatting” (i.e., using a domain name that is a typo or intentional misspelling of distinctive or famous mark).

In order to establish a cybersquatting claim under the Anti-Cybersquatting Protection Act (“ACPA”), a plaintiff must show that its mark was distinctive or famous at the time of registration of the domain name, (2) that the domain name registered is identical or confusingly similar to the distinctive or famous trademark, and (3) that the domain name registrant registered, trafficked, or used the domain name with a bad faith intent to profit plaintiff’s mark. See 15 U.S.C. § 1125(d)(1)(A)).

Hoerbiger argued that its federal registration of HOERBIGER made the mark presumptively distinctive and further argued that the HOERBIGER mark had acquired a secondary meaning as evidenced by TIPA’s own intentional copying of the HOERBIGER mark (evidenced by TIPA’s own advertising links to automation and compression products on its domain name). TIPA attempted to argue that HOERBIGER was not distinctive because the name is a surname; however, the court found the argument “disingenuous, given that TIPA itself has used ‘Horbiger,’ a very similar misspelling of ‘Hoerbiger,’ in association with advertising links for automation and compression, a deliberate copying.” The court found, with little discussion, that Hoerbiger had registered the mark, used it in connection with automation and compression, and that it had acquired secondary meaning, and thus was distinctive for purposes of the cybersquatting cause of action.

The court then found that the domain name was “identical or confusingly similar” to the HOERBIGER mark (noting that the domain name was deliberately used as a misspelling of Hoerbiger given that the website provided advertising links for automation and compression, the same products offered by Hoerbiger).

Finally, with respect to the factor of TIPA’s bad faith intent to profit from the Hoerbiger’s mark, the Court, analyzing the nine non-exclusive factors used to determine if a domain name owner had a bad faith intent to profit under the ACPA, found that most of the factors favored TIPA: 1) TIPA had no intellectual property rights in the domain name; 2) the domain name is not a legal name used to identify TIPA; 3) TIPA had not previously used the domain name in connection with the bona fide offering of goods or services; and 4) TIPA was using the site to generate revenue and not for a bona fide noncommercial or fair use. The court also noted that TIPA “must have known that the misspelling of HOERBIGER was confusingly similar, given that TIPA was using that misspelling to provide advertising links for automation and compression products.”

The only factor that slightly favored TIPA was that TIPA had never offered to sell the name to Hoerbiger; but the court quickly set that aside noting that TIPA was using the name for monetary gain - generating click-through advertising revenues for links to automation and compression.

The court rejected TIPA’s arguments that it was holding the domain name “in the surname sense” – based on the evidence showing that TIPA had used the website to provide links related to automation and compression -- products associated with the HOERBIGER mark. And in response to TIPA’s arguments that it bought the domain name because it was a “valuable internet property” (not because it was a trademarked term), the court again focused on the fact that TIPA had been using the domain name to provide advertising links to automation and compression, products that are expressly associated with the registered trademark at issue, as opposed to using the domain name to provide links unrelated to automation and compression -- activities that would more easily comport with good faith.

And when TIPA argued that it was not a cybersquatter because its domain name portfolio policy was to maintain domains with surnames and generic terms, the court found the argument puzzling given that the evidence showed TIPA using the domain name in its trademarked sense, namely to generate revenue in connection with automation and compression. The court also rejected TIPA’s invocation of the “fair use” defense set forth in 15 U.S.C. § 1115(b)(4) (which includes defense to infringement for use by a person of their own name in connection with their business and not as a mark) finding that finding that TIPA was not using the as a surname (much less using it as the name of someone in TIPA’s business).

The court stated:

Most significantly, since TIPA was using the domain to provide links related to automation and compression, it clearly knew that “horbiger” was a slight misspelling of Hoerbiger, a company dedicated to automation and compression. By using the name as it did, TIPA was generating advertising revenues based upon the deliberate use of a confusingly similar name. Further, when WIPO ruled that TIPA should transfer the domain name to Hoerbiger, TIPA refused to comply, instead protracting the issue by bringing this dispute.

[Comment: Since when is a domain name owner's use of the legal process to fight a UDRP action an indication of bad faith under the ACPA?]

In short, the court found that there were no genuine issues of material fact regarding Hoerbiger’s cybersquatting claim and entered judgment in favor of Hoerbiger on such claim.

The court then blasted through each of TIPA’s claims against Hoerbiger (without much discussion or explanation) – dismissing TIPA’s claims for fraudulent trademark registration, conversion, trespass to chattels, and tortious interference with a contract and/or peaceful use or enjoyment of property.

Regarding fraudulent trademark registration, TIPA argued that Hoerbiger’s failure to disclose to the U.S. Patent and Trademark Office (“PTO”) that the English translation of HOERBIGER is Horbiger, which is primarily a surname was an alleged false statement of fact. The court disagreed stating that TIPA offered no authority to support its argument that such an omission amounted to a fraudulent misrepresentation that would justify cancellation of the mark. With respect to conversion, TIPA argued that Hoerbiger, by filing the UDRP action, had “locked” the domain name, thereby committing conversion. The court disagreed noting that TIPA had not shown that Hoerbiger improperly initiated the UDRP action with respect to the domain name. With respect to trespass to chattels, the court rejected this claim on the same basis as it rejected the conversion claim noting the lack of any evidence of damage to the domain name or that TIPA is even currently the owner of the name. Finally, with respect to TIPA’s claim for tortious interference with a contract and/or peaceful use and enjoyment of property, the court agreed with Hoerbiger that TIPA did not show that it suffered any damage as a result of Hoerbiger’s efforts to gain ownership of the domain name

With that, the court entered summary judgment in favor of Hoerbiger on its cybersquatting counterclaim, dismissed with prejudice all of TIPA’s claims against Hoerbiger, and held over for trial Hoerbiger’s remaining counterclaims for federal trademark infringement, unfair competition, and trademark dilution as well as its state law claims.

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