Tuesday, August 3, 2010

New York New York Hotel/Casino Successfully Hijacks NewYorkNewYork.com

This is the sad (but probably all too common) story of one individual’s attempt to seek justice in our courts only to be smacked in the face with the reality of how our legal system really works. In this case, Goliath not only defeated David, but also obtained possession of a valuable internet domain name in the process leaving David with nothing.

The David in this case is California resident Ronnie Katzin (“Katzin”) and the Goliath in this case is New York-New York Hotel & Casino, LLC (“NY-NY”), the company which owns the New York New York Hotel & Casino in Las Vegas.

Not the real "New York New York" (but thanks to a default judgment, now the proud owner of http://www.newyorknewyork.com/)

On November 6, 2009, NY-NY filed a cybersquatting and trademark infringement lawsuit against Katzin and his wholly-owned corporation, NewYorkNewYork.com, Inc., regarding the domain name newyorknewyork.com (the “Domain Name”). See New York-New York Hotel & Casino, LLC v. Katzin et al, Case No. 09-cv-02139 (D. Nev. November 6, 2009). Complaint here (via Las Vegas Sun).

I previously blogged about this lawsuit here. I think it’s clear from the tone of my original post that I believed this lawsuit to be a clear cut case of NY-NY overreaching and using weak claims of trademark infringement and cybersquatting in order to reverse hijack the very valuable domain name newyorknewyork.com for NY-NY’s own business purposes.

While the allegations in the complaint sounded pretty egregious and straightforward, one must always keep in mind that almost anything can be stated in allegations set forth in a legal complaint – it does not mean that such allegations are automatically true (and indeed that’s what trials are all about – a jury or judge determining what are the true facts of a case based on evidence).

On the face of the complaint, NY-NY based its cybersquatting claim 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 that NY-NY acknowledges in its complaint that 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

Of course, what the complaint never revealed was that NY-NY’s trademark applications were initially denied registration on the basis of descriptiveness (or possibly genericness -- the file wrapper is not available online so I’m not certain the basis for the refusal). NY-NY obtained these trademark registrations only after making a claim of “acquired distinctiveness” under Section 2(f). NY-NY acknowledges that it did not start actually using the mark until January 1997 when the hotel-casino opened – over a year after the Domain Name had been registered. So how could the mark “NEW YORK NEW YORK” have been distinctive at the time of the Domain Name was registered if the only basis for NY-NY’s own claim for registration on the Principal Register is NY-NY’s claim of acquire distinctiveness which it could not have achieved until it began using the mark in commerce in January 1997? And if the mark “NEW YORK NEW YORK” was not distinctive at the time Katzin registered the Domain Name, how could such registration be deemed cybersquatting under the Anticybersquatting Consumer Protection Act (“ACPA”) (setting aside the fact that a registration dating back to 1995 was pre-ACPA)? [Of course, some would argue that subsequent re-registrations of the Domain Name – even if occurring by Katzin himself – constitute new registrations and restart the date for determining distinctiveness and cybersquatting -- a position I strongly disagree with (and I believe this case demonstrates why), but which the courts seem to be embracing nonetheless despite the unfair consequences that can arise to domain name owners.]

What’s even more unbelievable is the single event that seemed to give NY-NY the “hook” for making its claims against Katzin after all this time. The website that Katzin was running at the Domain Name was a basic travel-type site that allowed visitors to make reservations to various hotels, restaurants, entertainment attractions located, where else, in New York, New York. Unfortunately, as part of that website, Katzin put up a banner ad which displayed “New York-New York Hotel & Casino” and which visitors to the Domain Name could click on and make reservations to that hotel or possibly other hotels in the Las Vegas. According to Katzin (in a statement he made to the Las Vegas Sun), this 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). This single banner ad (pictured below) that probably only ran for a short period of time gave NY-NY the hook that it had probably been looking for to file a cybersquatting complaint against Katzin and his corporation.

A screenshot of the so-called “infringing” website captured just before the lawsuit

Is this trademark infringement? Maybe, but only for minor damages and nothing that can’t be remedied through a court injunction and certainly not deserving of a court order turning over such a valuable domain name. Is this cybersquatting? Only if you believe that Katzin registered the Domain Name all those many years ago before New York-New York Hotel & Casino had even opened (and could make any claim for acquired distinctiveness), waited nearly 15 years, and then through the posting of a single banner ad in a larger website that had nothing to do with New York-New York Hotel & Casino is engaging in bad faith use of the Domain Name such that Katzin should be labeled as a cybersquatter.

Unfortunately for Katzin, the WHOIS registration information for the Domain Name reflected that the corporation was the registrant of the Domain Name, which is why the corporation was named as a co-Defendant in the case. While some of the filings show that Katzin represented himself in this case, he could not represent the corporation before the court since Katzin is not a licensed attorney. Without legal representation, NY-NY was able to obtain a default against the corporation and requested a default judgment against the corporation.

A review of some documents filed by Katzin in the case do raise some questions regarding ownership of the Domain Name (issues of fact that should’ve been decided by a factfinder). While the corporation may have been listed as the registrant on the WHOIS database, I would argue (and indeed I have argued albeit somewhat unsuccessfully) that WHOIS cannot be relied upon for determining ownership to a particular domain name. There was also some evidence that Mr. Katzin may have even had a written license agreement with the corporation for the corporation to use the domain name – which would suggest that Katzin was indeed the true owner of the Domain Name despite what was reflected in WHOIS.

But none of that mattered unfortunately because Katzin apparently could not afford to hire legal counsel to represent the corporation in this matter. And last week, U.S. District Court Judge Lloyd George awarded NYNY the Domain Name by virtue of a default judgment against the corporation – the purported owner of the domain name. A copy of the court’s order is available here. The Domain Name was apparently transferred the very day the court entered its order (an order that was drafted by NY-NY and merely signed off on by the court).

The end result is that NY-NY, by pursuing a case through the legal system against a party that it probably knew would not have the financial wherewithal to mount a defense against a big-time hotel/casino company like NY-NY, was able to lawfully take from Katzin an extremely valuable domain name for its own use. The newyorknewyork.com domain name was probably worth upwards of $100,000 – and rather than buying it from Katzin for a fair market price, NY-NY obtained it for the costs of filing a district court action and its attorneys fees. And not only did NY-NY get the Domain Name, but the court awarded NY-NY the maximum statutory damages allowed under the ACPA for cybersquatting ($100,000). So not only did NY-NY obtain a domain name worth $100,000, but also got a default judgment against Katzin’s corporation for $100,000. [ed--talk about the “house” winning.]

The cybersquatting statute was meant to stop bad faith registration of domain names and bad faith use of a domain – it was not mean to be used as a tool by large businesses to obtain possession of domain names that they feel rightfully belong to them from someone who was lucky enough to buy a valuable domain name during the infancy of the internet and who had been holding onto such domain name and making actual good faith use of the name separate and apart from its meaning as a designator of a Las Vegas hotel and casino [that’s right – New York New York does have another highly recognized meaning out there that has nothing to do with NY-NY's hotel/casino]. Instead, the ACPA has become a tool to allow trademark owners like NY-NY to hijack domain names that they would like to have as part of their asset portfolio under the guise of cybersquatting and trademark infringement claims.

Based on what I saw from court filings, there was no evidence in the case that the Domain Name had ever once relied upon the goodwill of NY-NY other than the aforementioned banner ad – an action that could’ve easily been redressed with a cease and desist letter. [There were some other interesting facts in this case involving the Domain Name also being hijacked from Katzin in 2004 (during which time it may have been improperly used, but not by Katzin) – only to be returned in 2006 after the FBI discovered the large scale theft of domain names by a company named True Magic – but that’s outside the scope of this post (and touched upon briefly in my prior blog posting).] Of course, NY-NY didn’t want Katzin to cease and desist from using the banner ad on the website – NY-NY wanted the Domain Name, plain and simple. While NY-NY may have had a real cause for complaint regarding trademark infringement because of this banner ad , this was not cybersquatting and did not merit the handing over to NY-NY of the Domain Name. This was a successful domain name hijacking, plain and simple. And all because a business entity must be represented in court by legal counsel and legal complaints that go unanswered are deemed true regardless of what kind of fatuous allegations are stated therein and despite the existence of other evidence that raises serious issues of fact regarding such factual allegations.

While the case technically moves on because NY-NY sued both the corporation and Katzin personally, and the default judgment was only against the corporation and not Katzin, now that NY-NY has what it really wanted all along (along with a $100,000 cherry on top), I would suspect that NY-NY might simply voluntarily dismiss its claims against Katzin individually so that the judgment against the corporation can be made final.

1 comment:

dce said...

David ended up with a fat $100k bill to pay too.

I am (probably) in need of a Vegas trademark attorney, you'll probably hear from me on Monday as I suspect my current attorney wants out of our engagement.