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Designer Skin LLC v. S & L Vitamins, Inc., et al.
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...

The New York Society of Certified Public Accountants v. Eric Louis Associates, Inc.

79 F.Supp. 2d 331 (S.D.N.Y., Dec. 2, 1999)

The court awarded plaintiff $46,000 to compensate for the attorney's fees expended in stopping defendant's infringement of plaintiff's common law trademark, which defendant used in both its domain name and meta tags.

Plaintiff, the New York State Society of Certified Public Accountants, is a not-for-profit corporation that provides information to, and seeks to protect the interests of, Certified Public Accountants in the State of New York. Plaintiff is the owner of the common law trademark "nysscpa," which mark plaintiff has used continuously since 1984 to promote the services it offers to its over 30,000 members. Plaintiff uses its mark in connection with its publication of two monthly journals. Since in or about November 1994, plaintiff has operated a web site at the domain name "nysscpa.org."

Defendant Eric Louis Associates is a small "head hunter" firm specializing in the placement of financial, accounting, brokerage and support professionals. In January, 1999, defendant registered the domain name "nysscpa.com" at which it commenced operation of a web site promoting its "head hunting" services. The site clearly indicated that it was owned by Eric Louis Associates, and contained a disclaimer that stated that the "site is not affiliated with" the plaintiff. Defendant's site also contained a hyperlink to the web site operated by the plaintiff. Clicking on this link caused plaintiff's site to appear within a frame contained on defendant's site. Defendant also caused to be embedded in the meta tags contained on its site plaintiff's "nysscpa" mark.

Upon learning of defendant's use of its mark, the plaintiff sent a cease and desist letter. Defendant responded by offering to sell plaintiff its domain name for either $20,000 or certain other consideration. Plaintiff rejected this offer, and followed up with a second cease and desist letter. When defendant failed to respond, and continued its activities, plaintiff commenced this lawsuit, charging that defendant, by its conduct, was guilty of trademark infringement in violation of Section 43(a) of the Lanham Act, dilution in violation of both Section 43(c) of the Lanham Act and applicable New York state statutes, and copyright infringement. After plaintiff obtained a temporary restraining order, defendant consented to the entry of a permanent injunction, prohibiting it from continuing to so use the plaintiff's mark, or from framing the plaintiff's site.

Plaintiff thereafter made the instant motion, seeking both attorney's fees under section 35(a) of the Lanham Act, and discovery to aid it in establishing its entitlement to damages under the Copyright Act. The court, after determining both that plaintiff's federal trademark infringement and dilution claims were meritorious, awarded plaintiff in excess of $45,000 to compensate for the attorney's fees expended in the prosecution of the claims at issue.

The court first determined that defendant's use of plaintiff's mark in both its domain name and meta tags constituted trademark infringement. According to the court "because plaintiff's mark is unregistered, plaintiff, to establish false designation of origin, must show that (1) the mark has acquired secondary meaning and (2) there is a likelihood of confusion as to the goods and services in question."

The court held that on the evidence before it, the plaintiff had established that its mark had secondary meaning. In reaching this result, the court relied on the fact that defendant, in the court's view, had attempted to plagiarize plaintiff's mark, that plaintiff expended in excess of $1.5 million annually in advertising and promotions, much of which featured the mark, there were numerous examples of unsolicited media coverage of the plaintiff and its mark, and the fact that the plaintiff has 30,000 members.

The court also held that plaintiff had established that defendant's use of the mark in a domain name and meta tags was likely to confuse the public. The court held that such confusion can, in this case, be presumed as a matter of law, because defendant had copied plaintiff's mark in bad faith to benefit from the good will associated therewith. This determination was supported by the fact that defendant's partners were members of the plaintiff Society, and thus presumably were aware of plaintiff's use of the mark. In addition, the court supported its determination by pointing to the fact that plaintiff's mark had nothing to do with defendant's business.

The court went on to hold that, under the standard Polaroid eight factor analysis, plaintiff had established a likelihood of consumer confusion. The court supported its determination by pointing to the strength of plaintiff's mark, the near identity of the marks used by the parties, the bad faith that motivated defendant's use of plaintiff's mark, and the fact that both parties used the Internet to compete for the same audience.

The court's decision rested, in the main however, on the fact that defendant's use of plaintiff's mark in its domain caused "initial interest confusion," which "momentary confusion suffices to establish a likelihood of confusion." In reaching this determination, the court relied on the court's decisions in Planned Parenthood and Brookfield Communications. Said the court:

 

[T]his argument ... ignores the initial interest confusion caused by Defendant's use of these two devices. Person's sing them are expecting to arrive at the Society's web site. When they arrive instead at Defendant's web site, they cannon help being confused -- even if only momentarily. In recognition of this very point, Judge Wood held that a "defendant's appropriation of a plaintiff's mark as a domain name and home page address cannot adequately be remedied by a disclaimer. A defendant's domain name and home page address are external labels that, on their face, cause confusion among Internet users and may cause Internet users who seek plaintiff's web site to expend time and energy accessing defendant's web site.

Because of this "initial interest confusion" defendant's use of a disclaimer, expressly disclaiming any affiliation with the plaintiff, did not defeat plaintiff's trademark infringement claim.

The court went on to hold that defendant's conduct also diluted plaintiff's famous mark in violation of the Lanham Act. The court determined that plaintiff's mark was famous "in this particular trade and geographical location" because of its extensive use and advertising since 1984, as well as plaintiff's extensive membership.

The court also held that defendant's use of plaintiff's mark in both its domain name and meta tags blurred the mark, which occurs "where the defendant uses ... the plaintiff's trademark to identify the defendant's goods or services, raising the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's services." Applying a ten factor test, the court supported its decision by pointing to the fact that plaintiff's mark was distinctive, that defendant had used almost an identical replica of plaintiff's mark, that plaintiff and defendant both compete for the same audience via the same medium, that the mark does not bear any relationship to defendant's business, the promptness evidenced by plaintiff in pursuing its claim, and the initial interest confusion caused by defendant's conduct.

It should be noted that the court expressly declined to rule on the validity of defendant's framing activities.

Lastly, the court found that in this case, an award of attorney's fees to plaintiff as the prevailing party was appropriate. Under Section 35(a) of the Lanham Act, the court "in exceptional cases may award attorney's fees to the prevailing party." Such an award is not mandatory, but is left to the equitable discretion of the court. In the Second Circuit, such fees should be awarded only on evidence of fraud, bad faith or willful infringement.

The court found that defendant had acted in bad faith. The defendant sought to defend its conduct by arguing that it believed that its registration of the domain name gave it certain rights, by asserting that it did not consult counsel until after the lawsuit was commenced, and by pointing to the fact that it had an express disclaimer on its site. This was not enough to save defendant, said the court, particularly in light of the fact that defendant's partners were aware of plaintiff's organization and its use of the mark at issue, and had elected to use a mark that had no relationship to their business. More importantly, defendant did not seek legal counsel after receiving not one, but two cease and desist letters, and instead offered to sell the domain to plaintiff. This conduct made this an exceptional case warranting an award of attorney's fees.

For various reasons, the court declined to award plaintiff the full $91,000 it sought in fees. Instead, the court limited its award to $46,000. This reduction was caused, in part, by the burden the award was anticipated to have on defendant's relatively small company. Nonetheless, the court cautioned that it intended to place a large burden on defendant to deter future infringement. Said the court:

 

The Court is aware that even this amount may very well "impose a tremendous hardship" on Defendant. We are equally mindful, however, that failure to grant significant attorney fees in a case such as this would only encourage others to pursue the course charted by Defendant.
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