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Factual Background Edit
Plaintiffs formed Freebie, Inc. in 1999 to provide customer relationship management services to Blockbuster. Under plaintiffs' agreement with Blockbuster, Blockbuster customers earned "Freebie Points" when they rented or bought movies at any Blockbuster store, which were redeemable for free products and discounts from Blockbuster and other retailers. In 2001, plaintiffs launched the "freebie.com" website, which allowed Blockbuster customers to access and manage their Freebie Points account.
Defendants owned an incontestable federal trademark registration for the word FREEBIES in a stylized script covering "magazines and newspapers with information about mail order offerings." Defendants published FREEBIES magazine until March 2000, at which time they began operating a website that provided information about mail order offerings. Defendants registered the domain name "freebies.com" in November 1997.
In April 2001, defendants brought a UDRP proceeding against plaintiffs' domain name "freebie.com," and the UDRP panelist found in favor of defendants. In particular, the UDRP panelist found that plaintiffs' use of the word "freebies" in a metatag on its own website was evidence that it was aware of defendants' trademark and had registered the "freebie.com" domain name in bad faith.
Trial Court Proceedings Edit
Plaintiffs filed this suit to stay the UDRP decision ordering transfer of the "freebie.com" domain name to defendants and for a declaration that plaintiffs' use of "freebie.com" did not violate the ACPA or the Lanham Act and for cancellation of defendants' trademark registration for the mark FREEBIES on the ground that it was generic. Defendants counterclaimed for trademark infringement, dilution, and cybersquatting, among other claims.
The court granted plaintiffs' motion for summary judgment on all counts of the complaint and counterclaims, and ordered cancellation of defendants' trademark registration. The court initially determined that the term "freebies" had become a generic term referring to free or almost free goods and services. Although defendants' federal trademark registration was prima facie evidence that the registered term was not generic, plaintiffs overcame that presumption through dictionary definitions of the term "freebie," newspaper and magazine articles using the words "freebie" or "freebies" generically to denote free products, and most significantly use of "freebies" in a generic manner on thousands of other websites and in thousands of other domain names.
The court rejected defendants' argument that "freebies" was not generic because it used the term to provide information on how to obtain things by mail order, not to provide free or almost free things. According to the court, defendants' argument was "totally unsupported by the evidence" and conflicted with their own website, which touts the "free and almost free offers" featured on the site. Accordingly, plaintiffs were entitled to summary judgment on defendants' counterclaims, all of which were based on the validity of defendants' trademark.
Turning to plaintiffs' request for a declaration that its registration and use of the domain name "freebie.com" did not violate the ACPA, the court stated that UDRP decisions are not afforded deference by district courts. It then held that the UDRP decision in this case was "unsupported by the evidence" and thus should be reversed. Even if defendants' trademark was valid, there was insufficient evidence before the UDRP panelist to sustain a finding that plaintiffs registered the domain name in bad faith. In particular, the panelist's finding that the "freebies" metatag was evidence of plaintiffs' opportunistic bad faith was "directly contradicted by the evidence that the parties are not competitors." In short, the "freebies" metatag on plaintiffs' site was not intended to divert defendants' customers.
Finally, the court denied defendants' request for attorney's fees, finding that this was not an "exceptional" case. Although plaintiffs' trademark was held to be invalid, they nonetheless had a good-faith belief, based on their federal registration and the UDRP decision, that they had a protectable trademark.
Appellate Court Proceedings Edit
On appeal, the Fourth Circuit affirmed the lower court's decision in its entirety. The court initially rejected defendants' argument that their federal trademark registration alone created an issue of fact regarding genericness sufficient to preclude summary judgment. Although the Fourth Circuit held in Americal Online, Inc. v. AT&T Corp. that a federal trademark registration was sufficient to establish a question of material fact in that case, it did not go so far as to suggest that a registration would always create an issue of material fact.
The Fourth Circuit then upheld the district court's finding of genericness based on: (1) dictionary definitions of "freebie," (2) defendants' own generic use of "freebies," (3) the 1,600-plus websites that use "freebie" or "freebies" in their domain names, (4) the numerous websites that use "freebie" or "freebies" generically in their content, and (5) news articles using "freebie site" generically to refer to websites like defendants'. This evidence was so one-sided that it rebutted the presumption of nongenericness arising from defendant's registration.
The Fourth Circuit also rejected defendants' many arguments about why "freebies" was not generic. For example, the court rejected defendants' argument that the mark acquired secondary meaning, noting that secondary meaning is irrelevant when a mark is found to be generic. Evidence of actual confusion was similarly irrelevant. Moreover, defendants' argument that it used "freebies" in a nongeneric manner was unpersuasive. According to the court, "[e]ven though defendants do not directly distribute free products of 'freebies,' their business nonetheless revolves around 'freebies' in the generic sense of the word." And defendants' reliance on the incontestable status of its registration was misplaced because incontestable registrations can always be challenged on genericness grounds.
Finally, the court of appeals rejected the argument that the stylized form of defendant's FREEBIES mark gave defendants rights in the generic word "freebies." Because the Fourth Circuit found FREEBIES to be generic, it also affirmed the district court's finding that "freebie.com" did not violate the ACPA. Finally, the court of appeals found that the district court did not abuse its discretion in declining to award attorney's fees to plaintiff.
This page uses content from Finnegan’s Internet Trademark Case Summaries. This entry is available under the Creative Commons Attribution-Share Alike License 3.0 (Unported) (CC-BY-SA).