Harrods Ltd. v. Sixty Internet Domain Names, 110 F.Supp.2d 420, 56 U.S.P.Q.2d (BNA) 1048 (E.D. Va. 2000) (full-text) (defendant's motion to dismiss); 157 F.Supp.2d 658 (E.D. Va. 2001) (full-text) (decision after trial), rev'd in part and aff'd in part, 302 F.3d 214, 64 U.S.P.Q.2d (BNA) 1225 (4th Cir. 2002) (full-text).
Factual Background Edit
Plaintiff, owner of the Harrods Department Store in London, created a wholly owned subsidiary, Harrods (Buenos Aires) Limited ("HBAL"), to open a store in Buenos Aires. Plaintiff later sold its interest in HBAL and had no further legal connection to the Buenos Aires business. Over the years, HBAL's business declined, and it eventually maintained only a parking-garage business. In 1999, plaintiff launched its website "harrods.com" and announced in the media that it would debut an online shopping service. On the same day, HBAL began registering nearly 300 HARRODS-formative domain names.
Trial Court Proceedings Edit
Plaintiff brought this in rem action under the ACPA against sixty Harrods-formative domain names owned by HBAL. It also asserted claims for trademark infringement, dilution, and unfair competition. Defendants filed a motion to dismiss, or in the alternative, for summary judgment. Initially, the court dismissed plaintiff's infringement, dilution, and unfair competition claims. Because defendants were not before the court in personam, plaintiff "cannot not pursue any cause of action with the potential to impose personal liability."
The court also dismissed plaintiff's in rem claim for failure to plead the element of bad-faith intent to profit, agreeing with the Southern District of New York's decision in Broadbridge, which held that bad-faith intent to profit was a necessary element of an in rem action under the ACPA. According to the court, "[e]very provision of the ACPA reflects Congress's intent to address the cybersquatting problem, not the innocent or good-faith registration of domain names that may infringe existing trademarks." The court, however, dismissed plaintiff's in rem claim without prejudice and gave plaintiff additional time to file an amended complaint.
Alternatively, defendants argued that their motion to dismiss the in rem action should be converted to a motion for summary judgment and that they should prevail on the merits because the evidence revealed a lack of bad faith. Because discovery had not even begun, however, the court held that it would be premature to consider defendants' motion for summary judgment and thus denied it. Finally, although "notice" was not at issue in this decision, the court appeared to indicate that plaintiff gave defendants proper notice of the in rem action by sending them copies of the complaint and related documents by Federal Express and by e-mail. In an earlier order, the court ruled that it was unnecessary for plaintiff also to provide notice by publication because defendants had received actual notice of the action.
On October 6, 2000, the court granted defendants' motion for partial summary judgment as to six domain names: "harrodsargentina.com," "harrodsargentina.net," "harrodsargentina.org," "harrodsbuenosaires.com," "harrodsbuenosaires.net," and "harrodbuenosaires.org." In 1998, the English High Court of Justice had held that there was an irrevocable implied contract allowing HBAL to "carry on business under the name HARRODS anywhere in South America." The court concluded that it would be consistent with the English court's ruling to grant summary judgment for the six domain names that clearly use the "Harrod's (Buenos Aires) Ltd." name or the descriptor "Argentina." The court found that banning defendants from registering any HARRODS-formative domain names in their own name would be inherently unfair. The remaining fifty-four domain names were the in rem defendants at trial.
After a bench trial, the court held that plaintiff prevailed on its ACPA claim against all sixty domain names, including the six on which it previously granted summary judgment in HBAL's favor. In a case of first impression, the court held that preponderance of the evidence was the proper standard of proof for ACPA actions, not the clear and convincing standard advanced by HBAL. Turning to the merits of the case, the court held that plaintiff's mark HARRODS was inherently distinctive and had acquired distinctiveness through use of the mark for over 150 years.
Although HBAL owned trademark registrations for the mark HARRODS in various South American countries and HBAL's legal name contained the name HARRODS, the court held that the defendant domain names were registered with the intent to divert potential customers from plaintiff's Internet sites. First, many of the domain names at issue incorporated the names of goods or services that HBAL had either never offered or ceased to offer, but which were all offered by plaintiff. Second, the inclusion of English descriptors in most of the domain names was "highly suspect" because the registrants did not speak English and were authorized to use the HARRODS mark only within South America. Third, defendants' business proposal for the development of its websites used a logo closely resembling plaintiff's logo and expressly recognized the potential for consumer confusion with plaintiff's London store. Fourth, HBAL's registration of its domain names was intended to drive up the price for HBAL's South American rights to the HARRODS name. Fifth, the court found that HBAL's registration of almost 300 HARRODS-formative domain names that were confusingly similar to plaintiff's distinctive mark constituted a pattern of registering domain names containing others' marks.
Although HBAL held rights to use the HARRODS mark in South America, its actions convinced the court that HBAL registered the domain names intending to use them outside of South America. Because HBAL did not hold rights to the name outside of South America, the court held that HBAL's domain names were registration of "others' marks." For the same reasons, HBAL's conduct was not protected by the ACPA's safe-harbor provision. Because the evidence of HBAL's' bad faith was so overwhelming, the court concluded that it would reverse its previous grant of partial summary judgment to defendants in connection with the other six domain names if its earlier decision was remanded by the Fourth Circuit.
Appellate Court Proceedings Edit
On appeal, the Fourth Circuit reversed the district court's dismissal of the plaintiff's infringement and dilution claims, finding that the ACPA's in rem provision "not only covers bad faith claims under §1125(d)(1), but also covers infringement claims under §1114 and §1125(a) and dilution claims under §1125(c)." The appeals court did affirm the lower court's ruling that the 54 domain names were registered in bad faith in violation of the ACPA. In doing so, the Fourth Circuit agreed with the district court that the standard for finding bad faith is a preponderance of the evidence rather than clear and convincing evidence. Before turning to an analysis of ACPA's bad faith factors, the court noted that this case presented the unusual situation of two companies both having legitimate rights in the same mark but in different geographical areas.
The court further noted that the legislative history of the ACPA indicates that Congress "did not intend to disrupt the rights of legitimate users of a mark" when it enacted the ACPA. However, because the registration of a domain name by a concurrent user will always trigger a number of ACPA's bad faith-factors, the court cautioned that courts should not apply the bad faith factors in a way that will always lead to a finding of bad faith. On the other hand, "if a concurrent user registers a domain name with the intent of expanding its use of the shared mark beyond its geographically restricted area, then the domain name is registered in bad faith as outlined in the ACPA."
The district court's finding of bad faith was supported by HBAL's use of English words in the domain names instead of Spanish words even though its primary market was in South America, a number of the domain names described goods and services offered by Harrods UK and not by HBAL, and the references to Harrods UK in HBAL's business proposal. According to the court, HBAL registered the 54 domain names and intended to use them "with the intent to divert and confuse non-South American consumers seeking to do business with Harrods UK" and "to extract a higher price for the sale of the domain names from Harrods UK as a result."
Finally, the court reversed the grant of summary judgment for the remaining six names. Although plaintiff's evidence was not sufficient to create a genuine issue of material fact sufficient to defeat summary judgment, the Fourth Circuit held that the district court granted summary judgment prematurely before plaintiff had adequate time to conduct discovery. In remanding the six names for further proceedings, including any necessary discovery, the appeals court cautioned the district court to take a "fresh look" at the six names. Despite the district court's earlier statement that it would enter judgment against the six names upon remand, the Fourth Circuit believed that "it is still an open question whether the six [names] warrant the same treatment as the 54 [names]."
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