Thursday, October 29, 2009

Anticybersquatting Consumer Protection Act (ACPA): Bad Faith Intent to Profit

Southern Grouts & Mortars, Inc. v. 3M Corporation, 575 F.3d 1235, 1238 (11th Cir. Fla. 2009)

The Plaintiff-Appellant Southern Grouts owned the trademark for Diamond Brite and wanted to own the rights to the domain name However, the Defendant-Appellee 3M had re-registered its ownership of the domain name, even though it did not own the word mark and did not sell a product under that name. The Defendant-Appellee 3M refused to relinquish its registration of the domain name.

Analysis of the two unique circumstances and nine non-exclusive permissive factors for finding bad faith intent to profit weighed in favor of granting 3M’s motion for summary judgment to dismiss the ACPA claim.

The first unique circumstance was that, “through its registration of the domain name, 3M had the ability to monitor the viability and value of Internet traffic, the number of “hits,” to, and the geographic location of all or most of the “hits,” which could be used to determine strategic commercial information. This assertion was based solely on the report of Mr. Moody, an expert witness for Southern Grout. In the report, Mr. Moody stated that 3M enjoyed a commercial advantage from keeping the registration for The Appellate court found that the District court did not abuse its discretion because the report was “imprecise and unspecific” or “the factual basis is not adequately explained”. The Appellate Court found that even if the report were admissible, Southern Grouts did not identify which part supported the idea that 3M had the ability to use its control over the domain name to monitor hits, and no evidence that 3M intended to do that. Also, there was no explanation in the report how the information would be useful to 3M when there were at least six other registered users of the DIAMOND BRITE mark.

The second unique circumstance Southern Grout argued to show bad faith intent to profit by 3M was that 3M retained control of the domain name not to display content but to prevent others from registering it. The Appellate court stated that bad faith may be proved here by 3M re-registering the domain name a month after receiving the cease and desist letter from Southern Grouts. However, ACPA required intent to profit from that bad faith. The appellate court cited a US Senate report defining cybersquatters, but the Senate report stated nothing about competitors who hold onto a domain name to prevent a competitor from using it. The Appellate court found that the legislative intent of ACPA was to prevent the practice of holding a domain name ransom with intent to profit from selling it for a price. Here, 3M was refusing to sell the domain name at all, and thus was not holding the domain name for ransom. Also, there was no evidence that 3M had the intent to divert customers to its site so that they would purchase their products instead. Therefore, there was no bad faith intent to profit shown from the second unique circumstance.

The appellate court found that of the nine discretionary factors for finding bad faith, § 1125(d)(1)(A): five factors favored the 3M, two factors favored Southern Grout, and the two other factors were inapplicable. Therefore, the nine factors weighted in favor of 3M.

Also, the court of appeals held that Southern Grout’s Lanham Act claim failed because it did not demonstrate that 3M used the domain name in commerce.

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