TCPIP Holding Co. v. Haar Comm’ns Inc., 244 F.3d 88, 57 U.S.P.Q.2d (BNA) 1969 (2d Cir. 2001) (full-text) (motion for preliminary injunction); 2004 U.S. Dist. LEXIS 113543 (S.D.N.Y July 19, 2004) (full-text) (motion for summary judgment).
Factual Background Edit
For approximately 30 years, plaintiff operated a chain of retail stores selling children's clothing and accessories under the federally registered trademark THE CHILDREN'S PLACE. Plaintiff's chain of more than 200 stores enjoyed annual revenues of almost $300 million. Plaintiff operated a website at "childrensplace.com" where consumers could buy its products.
In the Fall of 1998, defendant developed the idea of creating an Internet portal for children that would provide information and links about a broad array of child-related products and services. Shortly thereafter, defendant registered the domain name "thechildrensplace.com." In early 1999, plaintiff sent defendant a cease-and-desist letter demanding that defendant transfer this domain name to plaintiff. Defendant subsequently registered 65 more domain names containing variations of the words "children" and "place." Defendants requested plaintiff to enter into a joint venture with them. Plaintiff responded by offering to purchase the domain name "thechildrensplace.com". Defendants refused to sell just that name but did offer it as part of various packages of combinations of the other domain names priced between $480,000 and $697,000.
Trial Court Proceedings Edit
After negotiations to purchase the domain name failed, plaintiff brought suit alleging claims of trademark infringement, dilution, and unfair competition, and filed a motion for preliminary injunction. The district court preliminarily enjoined defendant from using 81 different domain names because they were likely to infringe and dilute plaintiff's trademark.
Appellate Court Proceedings Edit
On appeal, the Second Circuit vacated the injunction based on dilution under the FTDA, and affirmed the injunction to the extent it was based on trademark infringement as to some but not all of the domain names. Regarding plaintiff's dilution claim, the appeals court held that descriptive marks like plaintiff's mark THE CHILDREN'S PLACE, "which possessed no distinctive quality, or at best a minimal degree, do not qualify for the Act's protection."
The court further noted that even assuming that plaintiff's mark had acquired secondary meaning, it would still not qualify for dilution protection. The court viewed the lack of inherent distinctiveness of plaintiff's mark as fatal to plaintiff's dilution claim. "The mark's deficiency in inherent distinctiveness is not compensated by the fact that [plaintiff's] mark has achieved a significant degree of consumer recognition."
As to whether plaintiff's mark was "famous" under the FTDA, the Second Circuit interpreted the Act to confer protection on marks "only if they carried a substantial degree of fame." Here, even assuming that descriptive marks could be protected under the FTDA, the court found that plaintiff's "sketchy" submissions to the district court and its conclusory allegations of fame did not demonstrate the requisite degree of fame. The court also noted plaintiff's failure to provide statistics for any years earlier than 1994, and its failure to submit consumer surveys, press accounts, or other evidence of fame. Accordingly, the court vacated the preliminary injunction to the extent it was based on dilution.
The court concluded, however, that the injunction was properly granted on plaintiff's trademark-infringement claim as to nine domain names that were virtually identical to plaintiff's mark. Because of the weak, descriptive nature of plaintiff's mark, however, the court held that the injunction was inappropriate as to any domain names that differed somewhat from plaintiff's mark (e.g., achildplacecom, yourchildsplace.com, mychildsplace.com, ourchildrensplace.com). Because the district court "failed to consider the narrower scope of protection afforded by the Lanham Act to descriptive marks or the lesser likelihood of confusion that arises in the case of descriptive marks," the appeals court instructed the district court on remand to review all of the domain names at issue other than the nine on which the court affirmed the injunction, to determine whether to issue a preliminary injunction based on the principles articulated in the Second Circuit's decision.
Finally, the Second Circuit rejected defendant's claim that its actions constituted fair use, i.e., it was using the domain names at issue only in their ordinary descriptive sense to describe defendant's goods or services as permitted in 15 U.S.C. §1115(b)(4). The court explained that the fair-use provision applies only where the name is used descriptively "otherwise than as a mark." Defendant's use of the domain name "thechildrensplace.com" as the "address, or name, of its website" was used "otherwise than as a mark," and was thus not a descriptive use.
Trial Court Proceedings on Remand Edit
On remand, the court granted plaintiff's motion for summary judgment on its infringement and dilution claims, as well as an ACPA claim not considered by the Second Circuit because it was not part of the preliminary-injunction proceeding.
Regarding cybersquatting, the court found that plaintiff's mark was distinctive and famous, defendant's domain names were identical or confusingly similar to plaintiff's mark, and defendant had a bad-faith intent to profit from plaintiff's mark.
Plaintiff's trademark registrations created a presumption that the mark THE CHILDREN'S PLACE was inherently distinctive and not merely descriptive, and defendants failed to rebut that presumption. Unlike at the preliminary-injunction stage, plaintiff established fame at trial by submitting extensive evidence of use of the mark and sales revenues and advertising expenditures under the mark.
And defendants' domain names were confusingly similar because they were identical to plaintiff's mark or were slight variations adding or omitting a letter or two, adding an article, or adding a possessive. Indeed, defendants' offer to sell the domain names only as packages "belie[d] [defendants'] claims that the names are not confusingly similar." The court based its finding of bad faith on defendants' use of their ownership of the domain name "thechildrensplace.com" to pitch their joint-venture proposal, offering only packages of domain names for sale, and offering those packages for "exorbitant" sums.
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