Friday, November 20, 2009

Smiley Company Frowns On Court’s Decision to Deny Motion to Dismiss

An Illinois district court has denied a motion to dismiss filed by Franklin Loufrani and The Smiley Company SPRL (together “Smiley”) seeking dismissal of numerous counterclaims brought by Wal-Mart Stores, Inc. (“Wal-Mart”) in Smiley’s action under 15 U.S.C. § 1071(b)(1) seeking judicial review of the Trademark Trial and Appeal Board’s (“TTAB”) final decision dismissing Smiley’s opposition to Wal-Mart’s trademark application. See Loufrani et al v. Wal-Mart Stores, Inc., 2009 U.S. Dist. LEXIS 105575 (N.D. Ill. Nov. 12, 2009). For background on the long running dispute and the TTAB decision leading up to the lawsuit by Smiley, see my prior blog post here and John Welch’s post on The TTABlog®.

At the TTAB level, the Board dismissed Smiley’s opposition of Wal-Mart’s application to register its Mr. Smiley Mark (the “Wal-Mart Mark”) and sustained Wal-Mart’s opposition of Smiley’s intent-to-use applications (here and here) for Loufrani’s Smiley Face Design (the “Loufrani Mark”) on the basis that the Wal-Mart Mark had acquired a secondary meaning, the Loufrani Mark had not acquired distinctiveness and so could not be registered, and that Smiley’s use of the Loufrani Mark in certain classes of goods would create a likelihood of confusion with the Wal-Mart Mark.

Rather than appeal the TTAB’s decision to the Federal Circuit, Smiley filed a district court action under Section 21(b)(1) of the Lanham Act (15 U.S.C. § 1071(b)(1)) seeking judicial review of the TTAB’s decision. Smiley sought an order declaring its mark to be distinctive, reversing the TTAB’s decision finding a likelihood of confusion, directing the PTO to issue a Notice of Allowance for its applications, and reversing the TTAB’s decision finding that the Wal-Mart Mark had acquired distinctiveness. In response, Wal-Mart filed a six counterclaims: Count I sought a declaratory judgment that the TTAB’s decision was correct, Counts II-IV sought a declaratory judgment that Smiley’s use or licensing of the Loufrani Mark would constitute trademark infringement under federal and common law, and Counts V-VI sought a declaratory judgment that Smiley’s use or licensing of the Loufrani Mark would violate Illinois’ Deceptive Trade Practices Act and Consumer Fraud and Deceptive Business Practices Act.

Smiley moved to dismiss Counts II-VI on the basis that Counts II-VI presented no case or controversy. Smiley also argued that Counts II-IV should be dismissed because the limited scope of this Court’s review of the TTAB’s decision would make the court’s determination of the issue of trademark infringement an improper advisory opinion. Finally, Smiley moved to dismiss Count VI on that basis that Wal-Mart failed to plead that it suffered actual damages as required under the Illinois statute.

With respect to Smiley’s argument that Wal-Mart’s counterclaims presented no case or controversy, the Court, taking all of the facts in Wal-Mart’s counterclaims in the light most favorable to Wal-Mart, concluded that Wal-Mart had plead sufficient facts establishing the existence of a justiciable controversy. In each of Wal-Mart’s counterclaims, Wal-Mart alleges that if Smiley were to begin to use the Loufrani Mark (the application for which identifies hundreds of goods and services identical to goods and services offered by Wal-Mart in its retail stores), it would create a likelihood of confusion with Wal-Mart’s use of its Wal-Mart Mark.

The court, however, took the common sense approach in determining whether an actual controversy exists by noting that “the primary evidence of a substantial controversy here is the case itself: that is, that the parties have numerous claims against one another over similar smiley-face marks that both desired to register with the PTO.” The court also noted that the parties had already developed clear positions on the issue of infringement, thereby further demonstrating a substantial controversy and adverse legal interests of the parties.

With respect to Smiley’s argument that Wal-Mart’s Counts II-IV would constitute an advisory opinion, Smiley argued that Wal-Mart’s trademark infringement counterclaims inappropriately seek to have the court, in reviewing the TTAB’s decision regarding likelihood of confusion, decide whether hypothetical use of the Loufrani Mark constitutes trademark infringement.

The court noted, however, in a district court’s review of a decision by the TTAB, the district court may rule on the issues of likelihood of confusion and trademark infringement under the Lanham Act (citing CAE, Inc. v. Clean Air Engineering, Inc., 267 F.3d 660, 664, 678 (7th Cir. 2001)). The court added that, under the broad jurisdictional powers conferred by the Lanham Act upon district courts (citing Steele v. Bulova Watch Co., 344 U.S. 280, 283-84 (1952)), it may affirm the TTAB’s explicit finding of likelihood of confusion and apply it to render a declaratory judgment that Smiley’s actions would violate the Lanham Act or common law.

In addition, because the court’s review of the TTAB’s decision is both an appeal and an independent action, the parties are allowed to submit new evidence and request additional relief. Accordingly, Wal-Mart, in its counterclaims, may request additional relief not specifically rendered by the TTAB. Finally, the court noted that because Wal-Mart’s counterclaims arise out of the same transaction or occurrence as Smiley’s claims (i.e., the same trademark oppositions and the TTAB’s findings with respect to both parties), Wal-Mart’s counterclaims are compulsory under Fed. R. Civ. P. 13(a)(1).

Finally, with respect to Wal-Mart’s Count VI, the court noted that it is impossible for a claimant seeking a declaratory judgment that a future act would violate Illinois’ Consumer Fraud and Deceptive Business Practices Act to plead damages since no violation would have yet occurred. And based on Wal-Mart’s showing of a substantial controversy between Smiley and Wal-Mart as to the issue of likelihood of confusion underlying all of Wal-Mart’s counterclaims, including Count VI, the court held that Wal-Mart has adequately pled its allegations in Count VI so as to survive a Motion to Dismiss.

As such, the court denied Smiley’s Motion to Dismiss.

Thursday, November 19, 2009

Planet Hollywood Resort & Casino Gets TRO Against Domain Name

(Photo credit:

Another week, another Las Vegas resort and casino cybersquatting case.

This week, it is OpBiz, LLC (“OpBiz”) – the owner of the Planet Hollywood Resort & Casino in Las Vegas – going after Unister GmbH (“Unister”), an company whose domicile is unknown but believed to be in Germany. See OpBiz, LLC v. Unister GmbH, Case No. 09-cv-02192 (D. Nev.). A copy of the complaint can be downloaded here. The Las Vegas Sun reports on the lawsuit here.

But unlike last week’s cybersquatting case pitting New York New York Hotel and Casino against the owner of (blogged here), this lawsuit is a little more clear cut, as evidenced by the fact that the court has already issued a temporary restraining order in the case ordering the domain registrar to lock the domain and have it transferred to OpBiz pending the outcome of the litigation (copy of the order here).

According to the complaint, Unister registered the domain name with the domain name registrar Domain Robot on July 18, 2009, and soonafter, began linking the domain name to a “hotel reservation website offering links to services provided by Plaintiffs competitors.” OpBiz alleges that the website offers vacation and flight packages at the Planet Hollywood resort and casino, but when website visitors attempt to purchase such packages, they are informed that no rooms are available and instead offered to book rooms at other competing hotels, from which OpBiz believes Unister will obtain pay-per-click referral revenue. The website is already down but Google’s cache still has a snapshot of the website here.

This case is a much clearer illustration of the type of activity that the Anti-Cybersquatting Protection Act was designed to address. And yet, in the end, what does OpBiz get out of the lawsuit except possession of a fairly worthless domain name that was probably not getting much traffic in the first place (nor was it probably diverting a lot of customers away from Planet Hollywood, but this point is certainly up for debate). After all, how many web users will type in into a web browser with dashes between each word (OpBiz already owns the same domain name without dashes)? It’s not the type of domain name that internet users would just stumble across. Moreover, Unister’s website doesn’t appear anywhere among top search results for the terms Planet Hollywood Resort.

And while OpBiz, upon obtaining a default judgment when Unister undoubtedly fails to respond to the complaint, might be able to obtain the maximum statutory damages award of $100,000 for Unister’s infringing domain name (see 15 U.S.C. §1117(d)), is OpBiz really going to go through the steps to try and collect such a judgment? Then again, in these tough economic times with the Planet Hollywood Resort & Casino teetering on the verge of bankruptcy (news story here), maybe they will. And with federal courts possibly starting to come around towards accepting that domain names can be property subject to creditor claims (see court order in Bosh v. Zavala; see also comments by Venkat and Digital Media Lawyer Blog), perhaps there might be some property for OpBiz to attach after all.

Tuesday, November 10, 2009

Cybersquatting or Domain Name Hijacking? You be the judge.

New York-New York Hotel & Casino

On November 6, 2009, New York-New York Hotel & Casino, LLC (“NY-NY”), the company which owns the New York New York Hotel & Casino in Las Vegsa, brought a lawsuit in Nevada District Court against California resident Ronnie Katzin, the owner of the domain name See New York-New York Hotel & Casino, LLC v. Katzin et al, Case No. 09-cv-02139 (D. Nev.) The Las Vegas Sun reported on the lawsuit here and a copy of the complaint can be downloaded here.

Interestingly, NY-NY appears to acknowledge that Katzin registered the domain name around December 7, 1995, and has been in control of the domain name since it was registered in December 1995.

NY-NY appears to be basing its claim for cybersquatting on the fact that its predecessor in interest, MGM Grand, Inc, announced the hotel-casino in 1994, and then on September 13, 1995 (three months prior to the date Katzin registered the domain), NY-NY filed two trademark applications for NEW YORK NEW YORK (one for hotel services and one for casino services), which registered in September 1998. NY-NY claims that Katzin registered the domain name after learning of NY-NY’s plan to build the New York-New York Hotel & Casino. [Comment: Really? You don’t supposed it had anything to do with the fact that maybe “New York New York” is probably the most common way in which to identify New York City, New York and that the domain name might be a valuable domain name for offering marketing and promotional services for New York City businesses? ]

In February 2006, NY-NY had its attorney send a letter complaining about how the website contained links which enabled visitors to book hotel reservations for both New York-New York Hotel & Casino and other Las Vegas hotels. After receiving the letter, Katzin stopped hosting a website which offered hotel bookings at the New York-New York Hotel & Casino.

However, according to the complaint, NY-NY recently discovered a large rectangle banner that appeared in the upper right part of the website which featured a picture of the New York-New York Hotel & Casino and which, according to the complaint, when clicked on would lead the visitor to a different website (not NY-NY’s website) which allowed visitors to book a hotel room at the New York-New York Hotel & Casino (and very likely compensated Katzin for some amount per clicks). [Note: as of November 9th, the banner was still up, but as of November 10th, the banner no longer appeared and the rectangle was simply black.]

So what do you think? In order for a domain name registration to constitute cybersquatting, the person must register, traffic in, or use a domain name that is identical or confusingly similar to a mark that is distinctive at the time of registration of the domain name. Is Katzin a cybersquatter who registered this domain name in order to take advantage of NY-NY’s “distinctive” trademark rights at the time of registration or is NY-NY using this banner ad as a thin basis to now hijack this valuable domain name for its own use?

Does it make a difference knowing that both of NY-NY’s trademark registrations for NEW YORK NEW YORK were based on a claim of Section 2(f) acquired distinctiveness, which is pretty much an acknowledgement that the marks were not inherently distinctive and could not have been distinctive until such time as they were used in commerce, which NY-NY acknowledges was not until at least January 3, 1997?

11/11/09 Update:
Las Vegas Sun reporter Steve Green has a follow-up article on the lawsuit here after speaking directly with Katzin and getting his side of the story.

According to Katzin, he registered the domain name as part of a plan to create a site promoting New York City – the domain name is a reference to the song “New York New York” famously sung by Frank Sinatra (but originally performed by Liza Minnelli in the Martin Scorsese film of the same name).

Katzin also clarifies part of the allegations set forth in NY-NY’s complaint. Specifically, the complaint alleged that a company, True Magic, LLC, held onto the domain name and put up PPC advertising which were taken down after NY-NY’s counsel sent a letter. While the complaint never comes right out and states directly that Katzin and True Magic were one and the same, the insinuation is there based on subsequent allegations that Katzin controlled the website since 1995. According to Katzin, however, True Magic hijacked the name from him around 2004 and used it until 2006 when he was able to get it back.

As for the image of the New York-New York hotel-casino on his current website, Katzin explained that the image linked to a room-booking website operated by Expedia's Interactive Affiliate Network, which has a deal to sell MGM Mirage rooms (NY-NY is part of MGM Mirage). Katzin also indicates that an MGM Mirage official, who he did not identify, told him that such link would be authorized once Interactive Affiliate Network started booking rooms for MGM Mirage.

So does this change anybody’s mind about whether this is a real case of cybersquatting or an example of a “Goliath” company seizing an on opportunity to hijack a domain name from an innocent domain name owner?

Saturday, November 7, 2009

Two more high profile trademark infringement lawsuits end with confidential settlements

McDonald’s reached a confidential settlement with the Lion's Tap – an Eden Prarie, Minnesota restaurant which claimed trademark rights to the mark WHO’S YOUR PATTY in connection with restaurant services (registration application applied for on August 25, 2009) – over McDonald’s Angus burger marketing campaign which used WHO’S YOUR PATTY as a tagline (see billboard below). Original complaint here. Articles on the settlement from NYTimes and AmLawDaily. Duetsblog comments here.

Yahoo also settled on confidential terms the lawsuit filed against it by Mary Kay Cosmetics back in July (blogged here) over pop-up ads appearing from supposedly unauthorized resellers of Mary Kay cosmetics that would appear in the “Yahoo Shortcut” feature of Yahoo’s e-mail services (pictured above). Article on the settlement from Bloomberg.