Cable News Network, L.P. v. cnnews.com, 162 F.Supp.2d 484 (E.D. Va. 2001) (full-text) (respondent's motion to dismiss), 177 F. Supp. 2d 506 (E.D. Va. 2001) (full-text) (cross-motions for summary judgment), aff'd, 56 Fed. Appx. 599 (4th Cir. 2003) (full-text).
Factual Background Edit
Plaintiff, owner of the federally registered CNN mark for news services, filed an in rem action under the ACPA against the domain name "cnnews.com." The domain name was initially registered by a Chinese individual and later transferred to a Chinese company, Maya Online Broadband Network Co. Maya operated the "cnnews.com" website, which provided news and information to Chinese-speaking people. Maya asserted that its target audience was located entirely in China and that "cn" is a popular abbreviation for China.
Trial Court Proceedings Edit
Maya moved to dismiss, arguing that: (1) the ACPA's in rem provisions do not provide a constitutionally permissible basis for jurisdiction, (2) bad faith is a jurisdictional element of an ACPA in rem action that plaintiff failed to plead or prove, (3) plaintiff failed to join Maya as an indispensable part as required by Fed. R. Civ. P. Rule 19(b), and (4) plaintiff's service of process was fatally defective.
The court denied Maya's motion to dismiss in its entirety. First, the court found that in rem jurisdiction over the "cnnews.com" domain name was proper because the domain-name registry was within its jurisdiction and in personam jurisdiction over Maya or the former registrant did not exist. According to the court, owners of the res need not have minimum contacts with the forum because ACPA in rem actions "are of the true in rem genre because they involve the rights of a disputed mark for every potential rights holder."
The constitutionality of plaintiff's in rem action was further strengthened by the Chinese registrar's decision to transfer the domain name certificate for "cnnews.com" to the court. The absence of a contract between Maya and the registry was not critical; it was the nexus that existed between the registry and the domain name that was important.
Second, the court rejected Maya's argument that the plaintiff in an in rem action must plead and prove the registrant's bad faith to withstand a threshold jurisdictional challenge. Maya confused a jurisdictional requirement with a substantive element for an ACPA cause of action.
Third, the court found no authority to support Maya's assertion that Rule 19 applies to in rem actions. Indeed, any requirement that the domain-name registrant must be joined in an in rem action would defeat the purpose of the ACPA's in rem provision. In short, if in personam jurisdiction over the registrant did not exist — a prerequisite for an in rem action — the registrant could not be constitutionally joined as a necessary party.
Finally, the court held that plaintiff provided proper notice in accordance with the ACPA's requirements by publishing notice in several Hong Kong newspapers. The court had earlier denied plaintiff's motion to waive publication because Maya already had received actual notice of the action.
In December 2001, on the parties' cross-motions for summary judgment, the court granted summary judgment on plaintiff's ACPA claim as to trademark infringement, but not dilution. Regarding trademark infringement, Maya argued that the "use in commerce" requirement was not met because the "cnnews.com" domain name was not substantially "used in commerce" because "commerce" for purposes of the Lanham Act is U.S. commerce. According to Maya, its use of the "cnnews.com" domain name did not have any effect on U.S. commerce because the domain-name registration contract was with a Chinese registrar, it received royalties from a Chinese entity, and that only persons residing in China can purchase goods at the "cnnews.com" website using only Chinese currency.
The court, however, held that providing news and information services on the Internet constituted "commerce" because Congress did not limit the Act's application to profit-making activity. The question then became whether a website ostensibly directed solely at Internet users outside the U.S. can constitute "use" in U.S. commerce. Although the court noted that the effect on U.S. commerce here was "not obvious," it was nonetheless established by the global nature of the Internet, the existence of a substantial number of Chinese-speaking persons in this country, the fact that ".com" is "essentially an American top-level domain," and the fame of the CNN mark in the United States.
The court granted summary judgment in plaintiff's favor that use of the "cnnews.com" domain name established a likelihood of confusion and thus trademark infringement under the ACPA. Among other factors, plaintiff's CNN mark is famous and strong, the "cnnews.com" domain name incorporated the CNN mark in its entirety, Maya publicly admitted that it intended the domain name to be viewed as including the acronym CNN, both "cnn.com" and "cnnews.com" were used to offer news and information services over the Internet, and both Maya and the registrant had actual knowledge of plaintiff's rights throughout Asia.
According to the court, both Chinese and English speakers alike would mistakenly believe that "cnnews.com" was in some manner affiliated with the CNN mark. Chinese speakers would note that the content on "cnnews.com" is similar to what plaintiff is known for and could wonder about a possible connection to plaintiff. English speakers could mistakenly believe that "cnnews.com" is one of the many regional-language websites plaintiff operated under the mark CNN.
Turning to plaintiff's dilution claim, plaintiff was unable to establish dilution for purposes of the ACPA because it failed to show actual economic harm as required by the Fourth Circuit. The court next addressed the unsettled question of whether the ACPA's in rem provision requires a showing that the registrant or user of the disputed domain name acted in bad faith. The court held that in rem ACPA actions, like in personam ACPA actions, require a showing of bad faith. Because the ACPA was ambiguous on this issue, the court looked to the purpose of the statute to resolve the ambiguity, noting that the ACPA's purpose is "to deter, prohibit and remedy 'cyberpiracy,' which is defined in the legislative history as the bad faith registration or use of a domain name."
According to the court, "[t]his purpose is given proper effect by resolving the ambiguity in favor of requiring bad faith in ACPA in rem actions." In this case, the court held that the original registrant or Maya acted with the requisite bad faith based on various factors including the following. First, Maya did not have any legitimate rights in the CNN mark. Maya did not claim any rights in the CNN mark, and its selection of "cnnews.com" as a domain name was unrelated to any of its trademarks.
Second, "cnnews.com," or anything similar, was neither the legal name nor the nickname for Maya. Third, Maya admitted that it made no prior use of the domain name in connection with the offering of bona fide services before plaintiff's use of the CNN mark. Fourth, Maya's news services did not constitute a noncommercial or "fair use" of the CNN mark. Fifth, Maya intended to divert consumers from plaintiff's website. Maya's contention that it targeted customers only in China had no merit because Maya chose the "American" .com top-level domain instead of the .cn top-level domain for China. And the use of the English word "news" in the domain name, as well as the website's significant amount of English-language content, suggested that the target audience was not restricted to China.
Sixth, Maya knew that the CNN mark was distinctive and famous and still chose to use the mark in its domain name. The court found no reasonable grounds for Maya to gain benefit of the ACPA's safe-harbor provision. The court also rejected Maya's contention that transfer of the "cnnews.com" domain name to plaintiff would violate due process by unconstitutionally disrupting a contract between two foreign entities, and that transfer of the domain name constituted an issuance of an unconstitutional extraterritorial injunction. Due process was not violated, however, because the domain-name certificate was located within the district. Moreover, although an order transferring the ownership of a domain-name certificate within its jurisdiction may affect foreign contracts, it was accomplished by conduct completely within the jurisdiction. Finally, the court rejected Maya's argument that the case should be dismissed on forum non conveniens grounds. Not only was this argument untimely, but it had no merit because this forum is the situs of both the disputed domain name and the pertinent domain-name registry.
Appellate Court Proceedings Edit
In an opinion designated as not for publication, the Fourth Circuit held that the district court properly exercised in rem jurisdiction over the domain name. It also affirmed the finding of trademark infringement based on the reasoning of the lower court. Because the district court decided the issue of Maya's bad faith before the Fourth Circuit's decision in Harrods Ltd. v. Sixty Internet Domain Names that a plaintiff may prevail in an in rem trademark infringement and dilution action without alleging and proving bad faith, the appeals court vacated the portions of the district court's opinion regarding the issue of bad faith.
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