Stephens Media Wins $200,000 Default Judgment Over Alleged Trademark Infringement of “Best of Las Vegas”

[After all these years, they still have do not have a category for “Best Las Vegas Trademark Attorney Blog” – or perhaps my dearth of blog posting in 2012 took me out of the running this year]

Back in 2009 (when I had much more time to blog on a more regular basis), I wrote about the three separate trademark infringement lawsuits filed by Stephens Media LLC (“Stephens Media”), the owner of the Las Vegas newspaper The Las Vegas Review Journal, against three separate companies over their alleged use of the term “BEST OF LAS VEGAS.”   See previous blog entry here.

In the case against one of the companies, CitiHealth LLC (“CitiHealth”), on August 6, 2012, U.S. District Court Judge Miranda Du issued a decision on a motion for default judgment filed by Stephens Media.  See Stephens Media LLC v. CitiHealth LLC, 2012 U.S. Dist. LEXIS 109431 (D. Nev. August 6, 2012).  What is interesting is how long it took for the case to get to this point.

The complaint against CitiHealth was originally filed on December 2, 2009, and related to the company’s publication of a magazine in December 2008 called “Healthy Living Las Vegas” that included the phrase on the cover “Best of Las Vegas.”  When CitiHealth failed to answer the complaint, a default was entered by the Clerk on March 24, 2010.  So why didn’t Stephens Media seek a default judgment at that time?  Well, the complaint was originally filed by Steve Gibson and his former firm Gibson Lowry and Burris.  Steve Gibson is also better known as the CEO of Righthaven LLC, the copyright enforcement company established by Gibson and Stephens Media to file lawsuits against websites that infringed on copyrights associated with Las Vegas Review Journal articles.  [I certainly don’t have the time or energy to go into all of the details of the Righthaven-saga in this post and will instead defer to those websites (here and here) that have tracked all things Righthaven and which will give any interested party the necessary background to understand what may have caused Mr. Gibson to be a little distracted during 2010 and 2011 as well as what may have caused  a rift between Mr. Gibson and Stephens Media].

Over a year went by without any follow-up after the entry of default against CitiHealth.  Finally, on May 24, 2012, the Court issued a Order to Show Cause, as to why the case should not be dismissed for failure to prosecute.  Six days later, Stephens Media filed a Motion to Substitute Attorney and subsequently informed the Court that that it had retained new counsel and intended to seek a preliminary injunction and default judgment.  On July 2, 2012, through new counsel Gordon Silver, Stephens Media filed the Motion for Default Judgment.  On July 13, 2012, Kenneth Shepherd, the co-owner of CitiHealth, notified both the Court and Stephens Media’s counsel that Healthy Living no longer exists and has not existed for the past 3 years and that CitiHealth had dissolved on May 9, 2012 and that the co-owners of the company had had filed for personal bankruptcy.

The Court nevertheless proceeded to analyze Stephens Media’s motion for default judgment under the Eitel factors established by the Ninth Circuit:

"The Ninth Circuit has identified the following factors as relevant to the exercise of the court's discretion in determining whether to grant default judgment: (1) the possibility of prejudice to the plaintiff; (2) the merits of the plaintiff's substantive claims; (3) the sufficiency of the complaint; (4) the sum of money at stake in the action; (5) the possibility of a dispute concerning material facts; (6) whether the default was due to the excusable neglect; and (7) the strong policy underlying the Federal Rules of Civil Procedure favoring decisions on the merits. Eitel v. McCool, 782 F.2d 1470, 1471--72 (9th Cir. 1986); see also Trustees of Elec. Workers Health and Welfare Trust v. Campbell, No. 07-724, 2009 WL 3255169 (D. Nev. Oct. 7, 2009)."

Despite CitiHealth's dissolution, the Court found that CitiHealth's failure to appear in this action and the likelihood that it will never respond to this action creates a high possibility of prejudice to Plaintiff in the absence of a default judgment.  The Court found that the Complaint did sufficiently state claims for relief (under the Rule 8 liberal pleading standards).

With respect to the amount of money at stake, Stephens Media sought $200,000 pursuant to 15 U.S.C. § 1117(c)(1) for non-willful trademark infringement of one mark (i.e., the Trademark Act’s statutory damages provision for use of “counterfeit” marks).  Without much discussion, the Court stated that “[b]ecause Stephens demonstrates a basis for its requested monetary relief, the fourth Eitel factor favors Stephens.”   [Comment:  counterfeit use, really?  And even so, court has discretion to award statutory damages ranging  from $1000 to $200,000—did the circumstances really merit the “maximum”?]

The Court found that the sufficiency of the Complaint was such that no genuine dispute of material facts would prejudice granting the motion.  The Court also found that CitiHealth had sufficient notice of the complaint and therefore it is unlikely that CitiHealth's failure to respond and subsequent default resulted from excusable neglect.  Finally, the Court, while recognizing the preference to have cases decided on the merits, found that CitiHealth's failure to answer Stephens Media's Complaint makes a decision on the merits impractical, if not impossible.

In the end, the Court entered a default judgment  awarding $200,000 against CitiHealth as well as a permanent injunction against CitiHealth and its officers against any further use of the “Best of Las Vegas” mark.  The Court also gave Stephens Media 30 days to file a motion for attorneys fees.

While its highly unlikely that Stephens Media will be able to collect on its $200,000 default judgment, one wonders if Stephens Media, should it be able to collect such funds, would be willing to pump that money into back into Righthaven LLC so that Righthaven can pay the money that it owes to its creditors (including multiple defendants that the Nevada District Court found were wrongly sued by Righthaven for copyright infringement).   That’s probably even more highly unlikely.     

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.