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Nordic Inn Condominium Owners’ Ass’n v. Ventullo, 151 N.H. 571, 864 A.2d 1079 (2004) (full-text).
Factual Background Edit
Plaintiff was the condominium owners’ association of the NORDIC INN condominium complex established in the late 1980s. Defendant Ventullo owned two units since 1998. Most unit owners, including Ventullo, rented their units to the public. Ventullo served as a board member of plaintiff for two years in the early 1990s, during which time she helped formed plaintiff’s first authorized rental agency, for which she worked. Plaintiff did not require members of the community to use the authorized rental agency when renting their condos.
In 1992, when Ventullo was a board member of plaintiff, she solicited legal advice that: (1) warned the board that failure to pursue unit owners for wrongful use of the NORDIC INN mark when advertising their condos could result in the loss of exclusive use of the mark, (2) and recommended notifying the offending owners of such misuse. Plaintiff, however, took no such actions. In 1996, while Ventullo was no longer associated with plaintiff’s authorized rental agency, she formed the defendant corporation “Nordic Inn Too, Ltd.” to rent her units as well as other owners’ units. Ventullo informed at least one member of plaintiff’s board of her proposed business name but plaintiff did not object.
In January 1998, Ventullo registered the domain name “nordicinn.com” and began using it to advertise her rental agency. In September 1999, plaintiff solicited defendants and others to bid on becoming plaintiff’s authorized rental agent but plaintiff did not select defendants. The rental agency that plaintiff ultimately selected registered the domain name “nordicinnresort.com” in October 1999. The percentage of bookings generated by the authorized rental agency’s website increased from 24% in 2000 to nearly 50% in 2003. The authorized rental agency had onsite facilities to assist guests, whereas defendants’ customers had to pick up their keys at a nearby gas station and had to call defendants with any guest requests or complaints. As Internet bookings increased, plaintiff noticed that many of defendants’ customers visited plaintiff’s authorized agency looking for their keys and to make guest requests and complaints.
In August 2002, plaintiff sent a cease-and-desist letter to defendants requesting that they cease use of the trade name NORDIC INN and terminate the “nordicinn.com” domain name registration. Defendants responded in September 2002, and refused to comply with plaintiff’s demands. A month later, defendants registered the domain names “nordicinn.net,” “nordicinn.org,” “nordicinn.biz,” “nordicinn.info,” and “nordicinn.us.”
Plaintiff sued defendants in state court for cybersquatting and assorted state-law claims.
Trial Court Proceedings Edit
The trial court permanently enjoined defendants from using NORDIC INN as part of any corporate name in New Hampshire and as part of a domain name for their business. But the court denied plaintiff’s requests for damages and attorney’s fees and for defendants to transfer, forfeit, or cancel their domain names.
Appellate Court Proceedings Edit
The parties cross-appealed, and the appeals court affirmed the lower court’s decision. Defendants argued that estoppel by laches should have barred plaintiff’s request for injunctive relief. The trial court did not apply laches because of changed circumstances, finding that plaintiff could not have foreseen in 1998 that websites would provide 50% of their rental bookings in 2003. The appeals court upheld this decision but disagreed with the trial court’s reasoning, finding that defendants “squarely competed” against plaintiff from defendants’ inception and plaintiff knew this. Moreover, plaintiff received legal advice as early as 1992, four years prior to defendants’ use of the NORDIC INN mark, that plaintiff might lose its proprietary rights to the mark if it allowed others to use the mark. Instead of taking prompt action to discourage defendants’ use of NORDIC INN, plaintiff’s actions could “reasonably be viewed as encouraging the defendants’ use.”
The court also found that defendants relied on plaintiff’s delay to their detriment, as shown by defendants’ advertising expenditures and promotional efforts to generate good will in their business name and domain name. Nonetheless, the court affirmed the lower court’s issuance of a permanent injunction because of the strong interest in preventing public confusion. Although defendants built up equity in their domain name and corporate name, they did so at the “risk of a later finding of public confusion.” Because plaintiff presented evidence of “substantial recent public confusion,” the court concluded that any prejudice suffered by defendants was “outweighed by the interest in protecting the public from future confusion.”
The court also held that the record supported the trial court’s finding that the posting of disclaimers would not have cured the confusion caused by defendants’ continued use of the NORDIC INN mark. The court also affirmed the lower court’s denial of plaintiff’s requests for damages and attorney’s fees due to laches, finding that the equities favored defendants because they were prejudiced by plaintiff’s unreasonable delay and the public interest in trademark owners seeking prompt relief would not be served by awarding damages to plaintiff.
The appeals court also affirmed the lower court’s decision that defendants did not violate the ACPA, because defendants’ use fell within ACPA’s safe-harbor provision that applies if the alleged cybersquatter “believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.” The lower court held that defendants could reasonably believe that their use of the domain name “nordicinn.com” was lawful because: (1) defendants registered “nordicinn.com” after plaintiff registered “nordicinnresort.com,” (2) defendants used their corporate name and domain name uncontested for six and four years, respectively; (3) the domain name was an extension of defendants’ corporate name; and (4) the domain name described the building where defendants held property. Although plaintiff correctly noted that defendants registered “nordicinn.com” before plaintiff registered “nordicinnresort.com,” this error was harmless because factors (2) and (4) above supported the trial court’s finding.
Plaintiff also argued that the safe-harbor exemption should not apply because defendant registered other “nordicinn” domain names after receiving plaintiff’s demand letter. According to the court, however, the safe-harbor provision still applied because defendants were simply protecting their “nordicinn.com” domain name that they reasonably believed they could legitimately use by registering variants of the name. Nor was there any evidence that defendants were warehousing domain names to hold the trademark owner hostage in an effort “to sell those names at monopoly level prices.”
Plaintiff next argued that applying the safe-harbor defense conflicted with the trial court’s decision to grant an injunction. But the court disagreed because the issue was whether defendants reasonably believed the use of the domain name was lawful, not whether their actions were actually lawful.
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