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Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

Sporty's Farm LLC v. Sportsman's Market, Inc.

Docket Nos. 98-7452 (L), 98-7538 (XAP), 202 F.3d 489(2d Cir. Feb. 2, 2000)

The Second Circuit affirmed the holding of the District Court, which enjoined plaintiff Sporty's Farm LLC ("Farm") from continuing to use a domain name containing defendant's federally registered trademark "Sporty's" and directed plaintiff to take such steps as were necessary to transfer the domain name at issue to defendant. The Second Circuit's decision was based on the newly enacted Anticybersquatting Consumer Protection Act, and not on the Federal Trademark Dilution Act, which had been relied upon by the District Court below.

Defendant Sportsman's Market Inc. ("Sportsman's") is the owner of the federally registered trademark "Sporty's", which mark it has used since at least 1985 in the operation of its mail order catalog business. In its catalogs, Sportsman's offers for sale products of interest to pilots and other aviation enthusiasts, as well as tools and home accessories.

Third Party Defendant Omega Engineering Inc. ("Omega") is a mail order catalog company that sells scientific process measurement instruments. In late 1994 or early 1995, Omega decided to enter into competition with Sportsman's, and registered the domain name at issue, sportys.com, with NSI. At the time Omega registered this domain name one of its owners was aware of defendant's trademark, because he received defendant's catalog.

In January 1996, Omega formed a wholly-owned subsidiary, the plaintiff Farm, to engage in the business of growing and selling Christmas trees. At that time, Omega sold it's rights to the sportys.com domain name to Farm. It did not, however, actually transfer the name at that time.

In March 1996, Sportsman's discovered that Omega had registered the sportys.com domain. Shortly thereafter, Farm commenced this suit, seeking a declaratory judgment that it had the right to use the sportys.com domain name. Sportsman's counterclaimed, and asserted that Farm and Omega, by the aforesaid conduct, were guilty of trademark infringement, trademark dilution under the Federal Trademark Dilution Act, and unfair competition under Connecticut law. After this lawsuit was filed, the sportys.com domain name was transferred to Farm, and Farm commenced business operations, which included the operation of a website at the sportys.com domain at which Farm sold Christmas trees.

The Second Circuit determined that plaintiff had violated the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. Section 1125(d)(1)(A), which had been enacted after both the acts at issue had occurred, and the trial court rendered the challenged decision. A person violates the ACPA if with "a bad faith intent to profit from the mark" he registers (or uses) a domain name that is identical or confusingly similar to a mark that was distinctive at the time of registration by the defendant of the domain name in question.

The Second Circuit determined that each of the requisite elements was present here. The Second Circuit determined that defendant's "Sporty's" mark, "as used in connection with Sportsman's catalogue of merchandise and advertising, is inherently distinctive. Furthermore, Sportsman's filed an affidavit under 15 USC Section 1065 that rendered its registration of the sporty's mark incontestable, which entitles Sportsman's 'to a presumption that its registered trademark is inherently distinctive.'" The Second Circuit further determined that plaintiff's domain name sportys.com was confusingly similar to defendant's "sporty's" mark, particularly in light of the fact that apostrophes cannot be used in domain names.

The Second Circuit also determined that plaintiff had used defendant's mark in the domain name it registered with a "bad faith intent to profit" thereby within the meaning of the ACPA. In reaching this result, the court considered the nine factors set forth in the statute for determining if the party in question acted in bad faith. But the court cautioned that "we are not limited to considering just the listed factors when making our determination of whether the statutory criterion has been met. The factors are, instead, expressly described as indicia that 'may' be considered along with other facts.'"

The court relied on the following facts to support its decision: that Omega had decided to enter into competition with the defendant, that it thereafter registered a domain name that contained what it knew to be defendant's mark, which mark had no relation to Omega's business, and that Omega thereafter transferred the domain to Farm, after the lawsuit had been commenced, which then commenced utilizing the mark in a business that did not compete with that of the mark's owner. From these facts the court concluded that "it cannot be doubted ... that Omega registered sportys.com for the primary purpose of keeping Sportsman's from using that domain name."

Finding that plaintiff had violated the statute, the court affirmed the injunction issued by the District Court, which directed plaintiff to stop using the domain name, and transfer it to the defendant.

The Second Circuit determined that defendant was not, however, entitled to recover damages from the plaintiff. Defendant could not recover damages under the ACPA because "sportys.com was registered and used by Sporty's Farm prior to the passage of the new law." The court further affirmed the determination to the district court that defendant was not entitled to damages under either the Federal Trademark Dilution Act or the Connecticut Unfair Trade Practices Act.

Lastly, the Second Circuit rejected plaintiff's claim that it was retroactively applying the ACPA to the case at bar by utilizing its provisions to direct plaintiff to transfer the domain name to defendant. Said the court:

The injunction that was issued in this case provided only prospective relief to Sportsman's. Since it did no more than avoid the continuing harm that would result from Sporty's Farm's use of the domain name, there is no retroactivity problem.
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