by Robert C. Scheinfeld and Parker H. Bagley

Federal court litigation and alternate dispute resolution procedures involving Internet domain names continue to be evolving areas of the law.  The federal courts continue to interpret the new Anticybersquatting Consumer Protection Act (15 U.S.C. §1125(d)) and to apply traditional trademark infringement and dilution principles to domain name disputes.    

Various arbitral panels, particularly those sanctioned by the World Intellectual Property Organization (WIPO), continue to decide domain name disputes pursuant to the Uniform Policy for Domain Name Dispute Resolution (UDRP) overseen by the Internet Corp. for Assigned Names and Numbers (ICANN). 

WIPO panels have issued decisions in over 1,300 disputes since the UDRP procedures were implemented in late 1999. 
 
This article discusses a recent Second Circuit decision applying the Federal Trademark Dilution Act in a domain name dispute as well as a recent WIPO decision which found in favor of a trademark owner despite differences between the trademark asserted and the domain name sought to be transferred.
 
The Dilution Bar Is Raised

In TCPIP Holding Company, Inc., v. Haar Communications Inc.,1 the U.S. Court of Appeals for the Second Circuit affirmed the district court's decision holding that TCPIP Holding Company, Inc. (TCPIP), the holder of the mark "The Children's Place," was entitled to a preliminary injunction enjoining the use of confusingly similar internet domain names based on infringement under the

Lanham Act.  In addition, the Second Circuit held that TCPIP was not entitled to preliminarily enjoin the use of dozens of Internet domain names not sufficiently similar to TCPIP's mark.  Most significantly, however, the Second Circuit reversed the district court and held that TCPIP was not entitled to a preliminary injunction based on the Federal Trademark Dilution Act (FTDA), as the FTDA accords protection only to marks having both a significant degree of inherent distinctiveness as well as sufficient fame through long and extensive use.2  Thus, TCIP v. Haar establishes a higher burden of proof for establishing a federal dilution claim within the Second Circuit in all trademark cases, not just in domain name disputes.
 
Plaintiff TCPIP operates a chain of stores selling children's clothing and accessories that operate under the registered mark, "The Children's Place."  The clothing and accessories are also labeled "The Children's Place."  TCPIP has conducted this activity under its mark for about 30 years and had sales of $280 million in 1998.  In 1996, TCPIP registered two internet domain names "tcpkids.com" and "childrensplace.com."
 
Defendants Haar Communications Inc., and Richard Haar, its president and sole employee, (collectively, "Haar"), provide consulting and networking services in the area of network telecommunications.  In the fall of 1998, Richard Haar conceived of a "portal" on the Internet to assist Internet users in locating materials concerning children.  In November of 1998, Haar registered the domain name "thechildrensplace.com."4
 
In January 1999, TCPIP discovered that Haar had registered the domain name "thechildrensplace.com."  Discussions, negotiations, and offers for sale then occurred between TCPIP and Haar.  Haar then purchased and registered 66 additional domain names containing variations of the words "children" and "place" in combination.  These domain names were offered in packages ranging from 16 to 67 domain names that Haar offered to sell to TCPIP for sums in the range of $480,000 to $690,000.  TCPIP rejected all of the offers and proposed to purchase only the domain name "thechildrensplace.com" for $30,000, to which Haar responded by offering yet another package of names.  TCPIP rejected the last proposal and filed suit.5  

While the district court and the Second Circuit reviewed the claim of trademark infringement according to well-settled standards, the Second Circuit's approach to the dilution claim redefines the notion of distinctiveness as set forth in the FTDA and therefore appears to break new legal ground in that regard.  The Second Circuit held that the mark "The Children's Place" was insufficiently distinctive to be protected by the FTDA based on its view that the mark was highly descriptive and that there was insufficient evidence that the mark was famous.  The Second Circuit discussed three main issues in adopting its decision: a) the requirement of distinctiveness, b) the relevance of acquired distinctiveness, and c) the requirement that the mark be famous.

Distinctiveness

 (a) The requirement of distinctiveness.  The FTDA provides that "[t]he owner of a famous mark shall be entitled ... to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark" and sets forth factors that are useful in determining "whether a mark is distinctive and famous."6  
 
The Second Circuit focused on the requirement of "distinctive quality" in its analysis and held that a trademark owner seeking protection under the FTDA must first demonstrate the distinctiveness of the mark.  Through a review of the statute, legislative history and relevant case law, the court concluded that trademark law has always disfavored marks lacking distinctiveness and only has allowed protection for nondistinctive marks in circumstances where the mark has acquired "secondary meaning."  The court cited Judge Friendly's observations that the Lanham Act "'strikes a balance ... between the hardships to a competitor in hampering the use of an appropriate word and those to the owner who, having invested money and energy to endow a word with the good will adhering to his enterprise, would be deprived of the fruits of his efforts.'"7  Judge Friendly's statement was referred to by the Second Circuit as the compromise of the Lanham Act - permitting merely descriptive marks to be registered when a mark has acquired secondary meaning or acquired distinctiveness - however, it noted that the amount of protection is fairly limited in this situation.  Therefore, the court concluded that although descriptive marks are judicially disfavored and have been given a limited amount of protection when acquired distinctiveness has been established, the law (1) does not deprive trademark owners that have developed their marks and associated goodwill, and (2) does not deprive the public of the ability to rely on a mark it has come to recognize as being associated with the particular goods or services.8
 
Against this framework, the court analyzed the FTDA declaring that "Congress greatly expanded the scope of protection available to owners of famous trademarks."9 Under the law of trademark infringement, the owner of a mark may enjoin a later user of the same or a similar mark offering goods or services in the same segment of commerce if the use of the later mark creates a likelihood of consumer confusion as to the source of the goods or services.  As such, the use of a mark in one segment of commerce generally does not prohibit others from using the same or similar mark in another area of commerce.  This is logical since little confusion generally results from the use of similar marks in unrelated areas of commerce.  The Second Circuit pointed out that "the Dilution Act gives the owner a far greater scope of exclusivity" because it allows the owner of a famous mark to bar the use of the same or similar marks by subsequent users even though the goods or services may well be unrelated to those of the famous mark and no confusion may exist.10  
 
The court also identified an additional difference between the traditional trademark infringement analysis and the FTDA stating that "the class of entities for whose benefit the [FTDA] was created was far narrower" than that under traditional trademark law.11  Prohibiting infringement under the Lanham Act serves two purposes: (1) protecting the interest of consumers by eliminating confusion with the source of goods and services and (2) aiding trademark owners by protecting the names that they promote to identify their goods and services in commerce.  In contrast, the FTDA exists only for the benefit of owners of marks since confusion by the public is not required by the analysis. 
 
Thus, in light of the fact that the Second Circuit found that trademark policies disfavor marks which lack inherent distinctiveness and that the public is not benefited by the FTDA, it concluded that the FTDA "accords its special, broad protection only to marks that have a significant degree of distinctiveness."12 

Relevance

 (b) The relevance of acquired distinctiveness.  The next issue addressed was whether a nondistinctive, descriptive mark could be protected by the FTDA if the nondistinctive mark had achieved "secondary meaning" or "acquired distinctiveness."  The court remarked that "acquired distinctiveness" is "the essential ingredient in the determination of fame, within the meaning of the statute."13 However, the court found that fame in a vacuum was insufficient for this analysis as "the mark must have became famous as its designator of the [owner's] goods or services."14  Therefore, a mark must have acquired distinctiveness in connection with the goods or services of the owner of the mark to be covered by the FTDA. 
 
The Second Circuit interpreted the FTDA language that a mark be "distinctive and famous" as requiring a showing of both "inherent" distinctiveness and "acquired" distinctiveness, respectively.  The court reasoned that because every mark must be famous to be covered by the FTDA, and, thus, have achieved a high degree of acquired distinctiveness, the other prerequisite "distinctiveness" must not be related to fame but rather to the inherent distinctiveness of the mark.  That is, if the existence of fame, or acquired distinctiveness, could meet both the "famous" and "distinctiveness" elements of the FTDA, then the court concluded that the "distinctiveness" inquiry would be superfluous.  As a result, the court concluded that "weak, nondistinctive, descriptive marks do not qualify for [FTDA's] protection, even if famous."15  It further held that since TCPIP's mark "The Children's Place" was descriptive, it lacked inherent distinctiveness and thus could not be protected by the FTDA as the lack of inherent distinctiveness removed the mark from the ambit of the statute.

Fame Is Needed

 (c) The requirement that the mark be famous.  The Second Circuit remarked that the FTDA "does not tell us how famous a mark must be" and noted that the term "famous" may be susceptible to a wide variety of different understandings.16  For example, the court proposed that a small coffee shop that is a favorite meeting place for high school students over a period of years may become "famous" for those who use its services.  Another example recited in the opinion was a catalog for rare plant specimens that may be considered "famous" among 100,000 collectors throughout the country.  The court resolved these hypothetical situations stating that "[i]t seems most unlikely that Congress intended to confer on marks that have enjoyed only brief fame in a small part of the country, or among a small segment of the population, the power to enjoin all other users throughout the nation in all realms of commerce."17  Although TCPIP provided evidence regarding the number of retail stores using the marks, the sales at those stores, and that it had spent "tens of millions of dollars" advertising its mark," the court stated that the evidence was insufficient proof of fame as required by the FTDA.  It noted that TCPIP did not "submit customer surveys, press accounts, or other evidences of fame," did not provide detailed information regarding the continued and exclusive use of the mark before 1994, and improperly relied on what it called "unsubstantiated conclusory phrases like 'the mark The Children's Place has been widely recognized by American consumers.'"18  
 
In conclusion, the Second Circuit did not express a view whether TCPIP would be capable of proving that its mark is famous within the meaning of the FTDA at trial; rather, the court stated that TCPIP did not make an adequate showing for the purposes of the preliminary injunction. 
 
Thus, for the owner of a mark to benefit from the protections provided by the FTDA, the mark must be famous and must be inherently distinctive.  Owners of marks that are descriptive and have acquired "secondary meaning" seemingly cannot seek protection under the FTDA, at least within the Second Circuit.  It remains to be seen whether the other Circuit Courts of Appeal follow the Second Circuit's lead. 

UDRP Developments

 The vast majority of UDRP arbitrations continue to favor the rights of trademark owners against "cybersquatters" who have registered domain names which are identical or confusingly similar to preexisting trademarks.  There have been a growing number of decisions, however, which have not found in favor of the complainant/trademark owner.  WIPO statistics, through the end of February 2001, show that the complainant has been successful in 1,084 proceedings and unsuccessful in 240 since the first decision was issued in late 1999.19
 
One recent noteworthy WIPO decision was rendered in Tyco International Services AG and Tyco International (US) Inc. v. Paul Quinn, Case No. D2000-1740.  There, the administrative panel directed the domain name "tycoventures.com" to be transferred to Complainants Tyco International Services AG and Tyco International (US) Inc. (collectively, "Tyco"). 
 
Tyco was successful even though the panel held that because the mark "Tyco Ventures" was unregistered, an assertion of continuous use since March 2000 by a Tyco subsidiary was insufficient to support a conclusion that Tyco had protectable common law rights in the mark Tyco Ventures.  However, the panel concluded that notwithstanding the apparent overall differences between the two, the domain name tycoventures.com had deceptive similarity to the Tyco "house" mark.  The Tyco mark had been used in the United States and elsewhere around the world for more than 20 years and had been registered in 11 countries, with applications pending in another 60 countries.  
 
The panel further found that because the Respondent had not used the domain name tycoventures.com in connection with any bona fide offering of goods and services, had not undertaken any preparation to do so, had not carried out any business under the name Tyco Ventures and had not been commonly known by that name, Tyco had established that Respondent had no rights or legitimate interest in the disputed domain name.  Finally, the panel found the requisite evidence of bad faith in that Respondent registered the disputed domain name for the purpose of selling or transferring it to Tyco for valuable consideration in excess of his out-of-pocket expenses. 

Conclusion

In conclusion, the panel directed that the registration of the domain name be transferred to the Complainants in light of the continuous use of the name Tyco, the registration of the name Tyco, and the deceptive similarity between Tyco and tycoventures.com.  The panel's decision shows both a reluctance to conclude that common law rights exist where registration has not been obtained, but at the same time a willingness to consider deceptive similarity when a mark and a domain name are not identical. 



 
 (1) 2000 WL 197939 (2d Cir. Feb. 28, 2001).
 (2) Id. at 1.
 (3) Id.
 (4) Id.
 (5) Id. at 2.
 (6) 15 U.S.C. §1125(c)(1)(emphasis added).
 (7) Id. at 4 (quoting Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 10 (2d Cir. 1976)).
 (8) Id. at 4-5.
 (9) Id. at 5.
 (10) Id.
 (11) Id.
 (12) Id. at 6.  In support of its holding, the court refers to the House Report which focused on three famous marks - Dupont, Buick, and Kodak - as potential beneficiaries of the FTDA.  The court stated that these marks are highly distinctive, arbitrary or fanciful marks corresponding to highest level of protection under the Lanham Act and were easily distinguishable from "The Children's Place."  Id. at 7.
 (13) Id. at 8.
 (14) Id. (emphasis added).
 (15) Id. at 9.
 (16) Id.
 (17) Id. at 10.
 (18) Id.
 (19) See WIPO Web site at www.wipo.org.