Cyberlaw Central

Angé v. Templer
Decided February 21, 2006
No. C 05-05169 WHA, 2006 WL 436139 (N.D.Cal.)

Plaintiffs, an individual and a California corporation named Gap International, Inc., sued in state court for the conversion of the domain name Gapinternational.com. Defendants include the hosting company who took the Plaintiff’s domain name and the Pennsylvania company named Gap International, Inc. the domain was ultimately transferred to. The defendants convinced a state court judge that the action needed to be removed to Federal court by arguing that Plaintiffs claims, although couched in state law claims, really were claims for cybersquatting under the Lanham Act. Before the court was Plaintiff’s motion to remand the case back to state court.

Upon reviewing the briefs, the court agreed with plaintiffs and remanded the case back to state court. While the property at issue is a domain name, not all disputes over them constitute cybersquatting. For instance, there were no claims based on confusion between two domain names. Rather, defendants had taken an asset of the plaintiffs and interfered with a contractual relationship. Specifically, a fifty million dollar business deal had gone sour as a result of the theft and conversion of the domain name.

The court has a particularly good quote regarding the intersection of federal and state claims over domain names:

At bottom, defendant’s arguments suffer from an attempt to translate every issue relating to the Internet into a federal question. The Internet is not a talisman bestowing federal jurisdiction. There remains a place for state courts to determine the rights and responsibilities in the constantly evolving world of Internet law. Congress has not indicated an intent to strip state courts of this role. While the Lanham Act bestows federal jurisdiction, it does so only over claims that explicitly fall under its scope.

Defendants were required to pay plaintiff’s costs in bringing the remand motion, which were $2,600.00.

Analysis: This case is a reminder that state law claims can exist in the context of domain name disputes. While Federal jurisdiction may be appropriate for some claims, here it was not what the plaintiffs wanted. It seems clear that they wanted a state court to hear its claim and award it monetary damages for the domain name theft since it caused fifty million dollars in funding to fall through. Defendants clearly wanted the court to view it through the lens of cybersquatting, which particular crime they may be innocent of. Conversion, though, is a state law claim which properly should be before a state court if there is no other reason for Federal jurisdiction.

Here’s a funny development I’ll be watching closely.

This week, a hacker who claimed to operate a remote ‘bot network of thousands of computers was interviewed in the Washington Post. That in itself wasn’t newsworthy enough for me to blog about it, as sadly there are many users who allow this to happen to their home computers without their knowledge by following poor computing practices. This fellow was unique only in that he chose to be interviewed about his alleged violation of federal law. I say alleged only because we don’t know for sure he wasn’t bluffing about what he’d done in order to be interviewed.

Well, the hacker went so far as to have a picture appear with the article in which his face was partially obscured. Here’s a link to an eWeek article about this case. Hidden metadata in that image file was capable of identifying the small town in Oklahoma where he lives. Hopefully, federal authorities in the vicinity of Roland, Oklahoma will now be able to zero in on his location. With further clues in the article about his identity, such as his long hair down to his eyebrows, he’s described as tall and lanky, he lives with his religious parents, and he conveniently triangulates his house near readily identifiable businesses such as a “used-car lot, a gas station and convenience store and a strip club.” It shouldn’t be too hard to find him in a town of only 2,842.

Let’s see how long it takes to bring this arrogant alleged violator of the Computer Fraud and Abuse Act to justice! Anybody care to place a friendly non-monetary wager on the timeframe?

Here are some quick news and notes:

Digital Telemedia, Inc., d/b/a Logicworks vs. C. I. Host, Inc. and Logicworks Corporation, No. 04 Civ. 1734(CSH) – Southern District of New York
2006 WL 300465 (S.D.N.Y.)

Decided February 8, 2006

The plaintiff, Digital Telemedia, Inc., does business as “Logicworks.” It alleges trademark infringement, cyberpiracy, unfair competition, and deceptive trade practices against two defendants. The defendants, C.I. Host, Inc. and Logicworks Corporation, are related companies that share the same address. Before the court is Logicwork’s motion for partial summary judgment seeking transfer of the domain name “logicworks.com” from defendants to plaintiff.

Held: Summary judgment is denied.

Important Facts
The plaintiff is a web hosting company formed in 1993. It renamed itself as “Logicworks” in 2001. At the time, it did a trademark search and discovered the name was available for its services. However, the domain name “logicworks.com” was already registered to a Logicworks Corporation, but could not make contact with anyone at the phone number or email address listed in the domain name registry. It was able to determine that defendant C.I. Host was at the same address, but it did not send any written communications there. An investigator also called two C.I. Host employees, who had never heard of Logicworks Corporation. Accordingly, it registered the domain name “logicworks.net” instead. Plaintiff then registered several trademarks in the LOGICWORKS name. An investigator once emailed Logicworks Corporation to determine whether the .com name was available for purchase, but was told that no “bid less than $100,000 cash” would be considered.

The domain name “logicworks.com” was originally registered in 1999 and did some limited business in 2001 and 2002 before ceasing operations. At some time, the domain name was redirected to point to the C.I. Host website. At the start of this litigation, it was redirected once again to point to a blank page. Defendants never intended to sell the domain name, but instead responded with the $100,000 offer to make the plaintiff go away. Apparently there is some current commercial activity by Logicworks Corporation in the area of software development and sales in California and Texas.

Plaintiff claims that there have been cases of actual confusion, such as customers emailing the plaintiff at the .COM extension rather than the correct .NET address. C.I. Host and Logicworks offer similar web hosting services, so there are also allegations of customers purchasing services from the defendants rather than the plaintiff.

Trademark Infringement Claims
Summary judgment is appropriate only when there is no genuine issue of a material fact once all of the evidence and pleadings are considered. If an issue of fact remains, then a trial must be held. Defendants do not dispute that Logicworks has valid trademark registrations, but instead argues that there is no likelihood of confusion. Plaintiff offers web hosting services, while defendant Logicworks Corporation only provides software development and sales. In support of the argument, it points out that the plaintiff had previously argued in a Response to Office Action before the trademark office that there was no likelihood of confusion between its LOGICWORKS mark and another LOGICWORKS for “computer programs for use as a computer software and database design tool.” That argument was successful, resulting in the Plaintiff’s registration of its mark.

The court notes that most of the confusion between the parties seems to be a result of the plaintiff’s choice to use the .NET address when it knew the .COM address was already registered.

The question as to whether pointing the domain name to the C.I. Host website constitutes infringement is more difficult. A number of theories were advanced, including “initial interest confusion.” These theories depend, however, on the defendant not having valid rights in the name at issue. Here, the defendants have perfectly reasonable explanations for their actions. All of the unused domains registered by the company’s owner pointed to Logicworks.com. Further, the domain name had been used by the defendant prior to the plaintiff’s rebranding of itself as Logicworks. The issue of who properly has the right to the name LOGICWORKS remains a material fact in dispute, resulting in denial of the summary judgment motion.

Cyberpiracy Claims
In order to prevail on a claim under the Anticybersquatting Consumer Protection Act (“ACPA”), the plaintiff must prove:
1) the mark is distinctive or famous;
2) that the domain name is identical or confusingly similar to that mark; and
3) that the domain name was registered, trafficked in, or used with a bad faith intent to profit from that mark.

Even if the first two prongs are met here, the court was not convinced that the plaintiff had established use in bad faith by the defendants. The domain was registered before the plaintiff’s rebranding. Further, the court believed that defendant’s explanation of its later use of the mark was reasonable. Since there is a material issue of fact regarding the bad faith of the defendant, summary judgment was not appropriate.

Analysis
The defendant here is in the unenviable position of owning a domain name it can’t easily use in commerce. Since the domain was registered before the plaintiff started using its mark, only later use in bad faith could result in the registrant losing the domain. Whether pointing to its other company’s website constitutes bad faith is an open question, especially when the company is a competitor of the plaintiff. I’m not convinced that the defendant’s normal practice of pointing its unused domains to the C.I. Host website will be enough to prove that it isn’t now profiting from a domain it once had the right to use in commerce but now may not. If the plaintiff can prove the services are similar enough, then there likely will be infringement based upon this kind of use.

At trial, I would expect the plaintiff to have a much better chance of making its case. Still, its choice of going forward with the .NET domain name when the .COM was already registered was a calculated risk, one that in hindsight was probably not the best one to make. I’m not too sympathetic about its confusion claims since, as the court points out, the confusion was self inflicted. What the plaintff didn’t expect, though, was the domain name being used to point to a competitor’s website. That use is likely what will be at issue at trial.

Research has shown that you really only have a 50-50 chance of correctly identifying the tone of email messages. Stephen Leahy of Wired News takes a look at a research study published in the December, 2005 issue of the Journal of Personality and Psychology. If interested, copies of the Journal article can be purchased from this link.

This research study confirms that a lot of users can’t accurately determine whether the person writing the email intended to tell a joke, be serious, or was being sarcastic. The person reads into the message what they want to hear. As Leahy’s article notes, many companies deal with workplace lawsuits over what is written in company emails.

Word to the wise — if you’re dealing with a sensitive issue, think twice before sending it over email. It’ll avoid misunderstandings and misapprehensions.

Christopher Lydon’s outstanding public radio show called Open Source is available as a podcast. This morning on my commute I listened to the February 7th show about Craigslist and its implications for generating community on the Internet. Here is a link to the show which you can download and listen on any MP3 player or personal computer.

What struck me was the community generated around sites like Craigslist, there is some discussion on the show of its societal impact. One of the guests, Tom Sander, had this to say:

There are two potential benefits of a site like Craigslist. One is that it actually enables new connections to form, whether it’s a backgammon partner, or a friend with benefits, or a missed connection that becomes a connection. But I think the other value is that … if people have 20 different micro transactions, one who returns their ipod, and a nanny that they hire that seems trustworthy, and a person to meet for sushi on Tuesday night, that all those things together start to change their nature about other people in their community…

Many other Internet technologies are isolating, allowing people to get more done without having to socialize with real people. Craigslist is different – it builds a sense of community and lets people interact. At the end of the show, David Cleaves, a Mandolin player in Lowell, MA played beautifully. The show had placed an ad in the local Craigslist looking for a musician, and found one willing to come in to the studio. Now *that’s* community.

Ryan Singel at Wired News has a great article on the battle (has it really been ten years? My, how time flies) ten years ago over the Communications Decency Act. The article is entitled “They Saved the Internet’s Soul.” I highly recommend it, it’s only two pages long.

This case went all the way to the Supreme Court while I was in law school, and wow, it was an exciting time to be interested in technology and the law. Reading through the Court’s opinion, it was clear that the Court actually understood the technology and its implications and was very careful in this case of first impression to get it right. Even ten years later, the decision is a good primer on how the Internet works.

On Monday, a Verizon executive named John Thorne spoke before a conference celebrating the 10th anniversary of the Telecommunications Act of 1996. His message? That Google is freeloading on the companies that built the Internet backbone, companies like Verizon that own the fiber, without paying their fair share. For a deeper summary of what he said, here is a link to an article at the Washington Post.

I’ve heard similar grumblings like this for some time coming from those who build and maintain the Internet’s infrastructure, basically amounting to little more than “They’re making money hand over fist using our pipes, and we want some of that money too.” It’s childish.

Nevermind that users pay for access, and that Google is also paying for its bandwidth. Nevermind that the Internet was founded on the principle that the pipes are shared, with users on both ends paying for their access. Nevermind that many of these pipes were subsidized with government money. Nevermind that Verizon is trying to frame the argument in such a way that it actually seems harmed by its inability to suck money directly from Google’s pockets. All this with a straight face.

I haven’t seen anything yet in any of these arguments from the backbone providers that I find compelling. It always seems to boil down to base emotions like greed and avarice.

Diane Levin is hosting Blawg Review #43 this week at her blog, the Online Guide to Mediation. Great job! The theme for this week is Shakespeare.

My post on the Hub v. Clancy trade secrets case was included, which was nice. I also liked that she included Jim Calloway’s Law Practice Tips post on metadata, linked here. It’s a nice look at the ethical concerns of metadata in attorney work product.

Enjoy!

The recent case of Hub Group, Inc. v. Clancy, decided by Judge Stengel of the Eastern District of Pennsylvania on January 25, 2006, provides an interesting look at a trade secrets case (they’re relatively rare when compared to other forms of intellectual property) and it also provides a review of the standards needed in order to obtain a preliminary injunction.

Plaintiff Hub Group, Inc. (“Hub”) is an Illinois-based transportation management service company. Defendant Clancy is a former employee who, prior to the end of his employment, sent information from Hub’s confidential pricing database to his wife’s Hotmail account. Clancy then began working for a direct competitor of Hub’s. A temporary restraining order (“TRO”) was entered in May of 2005, then a preliminary injunction hearing was held in August, 2005. The hearing was to decide whether the facts of the case were sufficient to justify extending that TRO into a preliminary injunction that would last until trial. No explanation is given in the opinion for the delay between the preliminary injunction hearing in August and this decision in January of 2006.

Trade secrets cover any information so long as it is kept reasonably secret and it provides economic advantage to the one possessing it. The pricing database is a trade secret because it contains confidential information that is kept secret. Clancy had signed a confidentiality agreement that covered access to the database, which is password protected.

Federal jurisdiction is based on violation of the Computer Fraud & Abuse Act. Clancy tried to argue that Hub wasn’t sufficiently damaged for the Act to apply, but that argument was unsuccessful. Clancy did exceed the scope of his authorization to use the information in that database, and Hub did allege sufficient damage.

In order for Hub to succeed and obtain the preliminary injunction, it needed to prove the following elements:
1)HUB needed to establish that it suffered irreparable harm by Clancy’s actions;
2)HUB needed to prove a reasonable probability of success on the merits;
3)that the harm to HUB outweighed the possible harm to other interested parties, and
4)that the injunction would be in the public interest.

In this case, however, Hub was unable to meet these required elements. Hub could not prove that it would suffer harm that could not be remedied by other means, such as payment of monetary damages. Clancy had no continuing access to Hub’s information, plus the pricing information obtained by Clancy was already severely out of date. The court reasoned that the monetary remedies were sufficient if Clancy chose to use the old data, so accordingly the preliminary injunction was denied and the temporary restraining order was dissolved.

Analysis
The information obtained by Clancy had a very short useful life, so the fact that Hub had succeeded in preventing Clancy from using it for over seven months (by bringing suit and obtaining the TRO) was already a sufficient remedy. There was no sufficiently compelling reason to prevent Clancy from accessing the information until a trial since there were other remedies available if Clancy were to actually use this obsolete information. If there were ongoing serious harm, it is likely that the injunction could have been granted.

Hub Group, Inc. v. Clancy, 2006 WL 208684 (E.D.Pa.), January 25, 2006.