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Consumerinfo.Com, Inc. v. Alex Chang

April 8, 2011

CONSUMERINFO.COM, INC.
v.
ALEX CHANG, ET AL.



The opinion of the court was delivered by: Honorable Valerie Baker Fairbank, U.S. District Judge

Joseph Remigio None Present Courtroom Deputy Court Reporter

ATTORNEYS PRESENT FOR PLAINTIFFS: ATTORNEYS PRESENT FOR DEFENDANTS:

None Present None Present

PROCEEDINGS (IN CHAMBERS): MEMORANDUM OF DECISION AND FINDINGS OF FACT AND CONCLUSIONS OF LAW AFTER COURT TRIAL (FED. R. CIV. P. 52(a)(1)); ORDER REGARDING FURTHER BRIEFING

Summary Of Findings And Order Regarding Further Briefing

After reading and considering the briefing and oral argument of the parties and after considering the evidence presented at the bench trial and during the jury trial relating to equitable issues, the Court finds the following:

1. Defendants One Technologies, LP ("OTL") and Adaptive Marketing, LLC ("Adaptive") (collectively, "Defendants") have failed to carry their burden to show that Plaintiff ConsumerInfo.com, Inc.'s ("CI") statements to the U.S. Patent and Trademark Office and subsequent conduct estop CI from asserting its cybersquatting claims against Defendants. Defendants have not shown that CI made statements to the USPTO that are inconsistent with the positions taken with respect to Defendants.

2. Defendants have failed to carry their burden to show that CI has waived its rights to pursue its cybersquatting claims against Defendants.

3. Defendants have failed to carry their burden to show that CI's cybersquatting claims against Defendants are barred by the doctrine of laches. The evidence demonstrates that there is a presumption that laches does not apply with respect to the cybersquatting claims at issue, and Defendants fail to overcome this presumption.

4. Defendants have failed to carry their burden to show that CI's cybersquatting claims against CI are barred by the doctrine of unclean hands.

5. Based on the factual findings of the jury with respect to the damages caused by Defendants' cybersquatting, judgment will be entered in the amount of $450,000 against Adaptive and $120,000 against OTL. An award based on the jury's determination of Defendants' profits would be excessive and inequitable.

6. CI has sufficiently shown that an injunction is warranted under 15 U.S.C. § 1116(a) for violation of CI's rights arising under § 1125(d). However, CI has not shown that the injunction should extend beyond the domain names that were the subject of its cybersquatting claims tried to the jury.

The Court orders that no later than April 18, 2011, each party shall file a [Proposed] Judgment along with a brief no longer than 10 pages supporting any item in the proposed judgment that is not explicitly supported by this order. The briefs should also address CI's requests (1) that the judgment include an award of costs to CI as the "prevailing party," and (2) that the judgment include an award of prejudgment interest to CI. The [Proposed] Judgment should follow the format of Dkt. 590 in No. CV 02-5497, Quiksilver Inc. v.Kymsta Corp.,et al. (C.D.As the Court has already considered the parties' proposed injunctions and objections to competing proposed injunctions (see dkts. 780, 786-90), no further briefing is required on the scope of the injunction.

Once the parties have submitted their briefs, the Court will enter a judgment and permanent injunctions in accordance with this order.

Estoppel

The Court finds that Defendants OTL and Adaptive have failed to carry their burden to prove estoppel. To establish a defense of estoppel, Defendants must prove that: (1) CI knew of the underlying relevant facts; (2) CI intended its conduct to be acted on or acted such that Defendants had a right to believe CI so intended; (3) Defendants were ignorant of the true relevant facts; and (4) Defendants relied on CI's conduct to their own injury. See California State Bd. of Equalization v. Coast Radio Products, 228 F.2d 520, 525 (9th Cir. 1955).

The basis of Adaptive and OTL's claims of estoppel are CI's representations to the PTO made in support of CI's assertions that FREECREDITREPORT.COM was not confusingly similar to CREDITREPORTS.COM. Although Defendants attempt to use CI's statements to the PTO to estop CI from contending that the Accused Domains*fn1 are confusingly similar to FREECREDITREPORT.COM, the representations made to the PTO do not support Defendants' claims of estoppel. Defendants claims of estoppel rest on their showing an inconsistency between CI's statements made to the PTO and CI's positions taken with respect to Defendants, but Defendants have failed to do so. See Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 632 (9th Cir. 2007) (in context of judicial estoppel, a later position must be "clearly inconsistent" it the earlier position); see also Freedom Card, Inc. v. J.P. Morgan Chase & Co., 432 F.3d 463, 476 (prior inconsistent statements may undermine a claim of likelihood of confusion).

First, as CI contends, CI did not make a general assertion that domains with all three terms "free," "credit," and "report" could peacefully coexist; instead CI stated that its mark was distinct from CREDITREPORTS.COM because "while each includes the term CREDITREPORT, [they] are sufficiently different as a whole in sight, sound and meaning to show that no likelihood of confusion exists. Applicant's mark includes the word FREE before CREDITREPORT, and CREDITREPORT is in the singular, while the Cited Mark is plural and without the term FREE, distinguishing it in appearance, recognition and pronounciation of the cited mark." See Faud Decl. Ex. 14 (Tr. Ex. 512) at ECD 38247-48. The Accused Domains include all three of terms "free," "credit," and "report," and thus Defendants do not show that CI's statements to the PTO are inconsistent with their positions in this action.

Second, although CI argued to the PTO that CREDITREPORTS.COM was weak and that CREDITREPORTS.COM had co-existed peacefully with marks that contained the words "Credit Report," CI did not make a statement that FREECREDITREPORT.COM could peacefully coexist with company names and registered domains that contained all three of "free," "credit," and "report." See Tr. Ex. 512 ECD 38250-51 & Ex. 7 ("[T]he phrase CREDIT REPORT also is commonly used as an unregistered mark or name for other goods and services. Applicant's mark has in no way affected the ease with which the public is currently able to distinguish between various marks incorporating the phrase CREDIT REPORT. If there is no confusion between all of the above-reverenced marks, Applicant's mark certainly will not cause a likelihood of confusion with the Cited Mark.").

Third, in light of the evidence that FREECREDITREPORT.COM as a whole is a strong mark (see, e.g., Dkt. 722 § D.1) and CI's assertions that CREDITREPORTS.COM was a weak mark, Defendants do not show an inconsistency in CI's taking the position that the Accused Domains are likely to be confused with FREECREDITREPORT.COM. See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979) (likelihood of confusion evaluated in light of the "strength of the mark").

OTL also asserts that its claims of estoppel are supported by the facts that (1) at least since 2005 CI knew that OTL used the domain names OfficialFreeCreditReport.com and FreeCreditReportsInstantly.com, (2) at least since 2008 CI knew that OTL used FreeCeditReports360.com, (3) when CI sent a cease and desist letter to OTL in 2006, CI made no claim that any OTL domain name was confusingly similar to FREECREDITREPORT.COM, (4) when CI sent a cease and desist letter to OTL in 2008, CI only claimed that MyFreeCreditReport.com was confusingly similar, and (5) CI made no follow-up efforts. OTL Brief (dkt. 746) at 11:6-12:12. First, these contentions are more properly analyzed under the defense of laches rather than estoppel, since the contentions rely on CI's purported delay in action rather than a "concealment or false representation [that] intentionally deceives another party as to the true state of the facts to the detriment of the second party." Cal. State Bd., 228 F.2d at 525; see also Brookfield Commc'ns v. West Coast Entm't Corp., 174 F.3d 1036, 1061 (9th Cir. 1999) (applying elements of laches to claim that a party should be "estopped" from asserting its trademark rights due to delay in enforcement); Section IV, below. Second, the facts cited by OTL are insufficient to support OTL's claims of estoppel because none of the above four domain names are included in the Accused Domains, and also because there is insufficient evidence for the Court to conclude that CI's lack of immediate action against OTL regarding the four domains listed above gave OTL the right to believe that CI would not consider the Accused Domains to be confusingly similar to FREECREDITREPORT.COM. See Dec. 15 a.m. Tran. (Henry), 48:24-50:6; Exs. 66, 447.

In sum, Defendants have not sufficiently shown the elements of estoppel, namely that (1) CI knew of the underlying facts (i.e., either that FREECREDITREPORT.COM and the Accused Domains were confusingly similar, or that CI believed them to be confusingly similar), (2) CI acted in a way such that Defendants had a right to believe that FREECREDITREPORT.COM and the Accused Domains were not confusingly similar or that CI believed them not to be confusingly similar, (3) Defendants were ignorant that FREECREDITREPORT.COM and the Accused Domains were confusingly similar or that CI believed them to be confusingly similar, and (4) that Defendants relied on CI's conduct to their own injury.

Waiver

The Court finds that Defendants OTL and Adaptive have failed to carry their burden to prove waiver. "Waiver is the intentional relinquishment of a known right with knowledge of its existence and the intent to relinquish it." U.S. v. King Features Entertainment, Inc., 843 F.2d 394, 399 (9th Cir. 1988). Waiver may also be found where a "party's acts are so inconsistent with an intent to enforce the right as to induce a reasonable belief that such right has been relinquished." Intel Corp.v. Hartford Acc. & Indem. Co., 952 F.2d 1551, 1559 (9th Cir. 1991).

Adaptive contends that CI's representations to the PTO signaled to any reasonable observer the limits of CI's intent to exclude other uses, but as stated above in Section II, Adaptive has not shown that CI's representations to the PTO are inconsistent with its positions taken against Adaptive. Adaptive also contends that CI's prior enforcement activities confirmed CI's intent to limit the uses CI would exclude because CI targeted people who used domain names differing from FREECREDITREPORT.COM only by a single character. See Donoian Decl, Ex. H (Dec. 28 a.m. Tran. (Dean), 50:21-51:7); Tr. Ex. 1053 ¶ 27. However, this evidence does not show that CI intended to relinquish its rights to enforce its FREECREDITREPORT.COM mark against domains that differ from FREECREDITREPORT.COM to a greater extent, and are not inconsistent with CI's enforcement against the Accused Domains.

OTL contends that CI has known about OTL's domain names conduct, including the Accused Domains and other similar domains, for nearly a decade, and that not once prior to this lawsuit did CI ever suggest to OTL that its ownership and use of the Accused Domains might be cybersquatting. However, as CI contends, CI has brought three Federal lawsuits to enforce its rights in FREECREDITREPORT.COM, applied for a trademark registration, and sent cease and desist letters. See Dec. 21 a.m. Tran. (Taylor), 48:8-18; Dec. 28 Tran. (Dean) 49:8-51:7; Dec. 21 p.m. Tran. (Williams)_63:19-66:6; Tr. Exs. 1058, 3180, 3187,3199.

In sum, Defendants have not shown that CI intentionally relinquished rights in FREECREDITREPORT.COM, or acted so inconsistently with an intent to enforce its rights so as to induce a reasonable belief that CI's rights had been relinquished.

Laches

The Court finds that Defendants OTL and Adaptive have failed to carry their burden to prove laches. Each Defendant is required to prove (1) that CI's delay in bringing suit was unreasonable; and (2) that the Defendant was prejudiced by the delay. See Internet Specialties West, Inc. v. Milon-DiGiogio Enterprises, inc., 559 F.3d 985, 990 (9th Cir.Generally speaking, the relevant delay is the period from when CI knew or should have known of Defendants' allegedly infringing conduct, until the initiation of the lawsuit. See Danjaq LLC v. Sony Corp., 263 F.3d 942, 952 (9th Cir. 2001). If a lawsuit is brought within the most analogous state law statute of limitations (in this case four years), the strong presumption is that laches is inapplicable. See Internet Specialties, 559 F.3d at 990 & n.2. To determine whether delay in filing suit was unreasonable, courts consider (1) the strength and value of the trademark rights asserted; (2) plaintiff's diligence in enforcing the mark; (3) harm to the senior user if relief is denied; (4) good faith ignorance by junior user; (5) competition between senior and junior user; and (6) extent of harm suffered by junior user because of senior user's E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir.Adaptive registered all but three of its Accused Domains (freecreditreport2011.com through freecreditreport2020.com) in March of 2009, about two months before the filing of the lawsuit. See Tr. Ex. 228, 2084. Adaptive registered freecreditreport2009.com and freecreditreport2008.com in April 2008, about thirteen months before the filing of the lawsuit. Id. Adaptive registered the remaining domain, freetriplecreditreport.com, in May 2006, did not begin promoting it or using it until April 2008, and received a cease and desist letter regarding Adaptive's use of the domain in December, 2008. See Tr. Exs. 318, 1048, 3180. Considering the E-Systems factors, Adaptive fails to overcome the presumption that laches is inapplicable: (1) the jury found that FREECREDITREPORT.COM is a famous trademark; (2) CI sent its cease and desist letter within eight months of Adaptive's use of the Accused Domains and filed suit within thirteen months, and thus was reasonably diligent in enforcing its mark; (3) the jury found that Adaptive's cybersquatting caused $450,000 in damage to CI; (4) the jury found that Adaptive cybersquatted with a bad faith intent to profit; (5) Adaptive is in competition with CI; and (6) Adaptive has not built significant business around freecreditreport2009.com through freecreditreport2020.com, and has not built brand awareness around freetriplecreditreport.com and has ceased promoting it in early 2010. dkt. 722, Tr. Ex. 3280, 319; Dec. 29 Tran. (Huntting), 100:16-101:22, Tr. Ex. 192; Dec. 16 a.m. Tran. (Douglas), 61:4-11; Tr. Ex.318.

OTL contends that CI knew as early as 2001 about OTL domain names other than OTL's Accused Domains that included "free," "credit," and "report," yet did not complain until this lawsuit. However, this knowledge and delay is insufficient for OTL to carry its burden to show laches. OTL does not sufficiently show that CI knew about OTL's use of the Accused Domains at issue and delayed suit on those names for an unreasonably long period of time. In addition, any use by OTL of CI's marks from 2001 through January 2006, and from December 2007 through spring 2009 (see OTL Brief (dkt. 746) at 3:8-14), would have inured to the benefit of CI in light of the contractual affiliate marketing relationship between the parties. See Watec Co. v. Liu, 402 F.3d 645, 654 (9th Cir. 2005).

OTL registered the bulk of OTL's Accused Domains in April and May of 2008, approximately twelve or thirteen months before filing suit. Dec.14 Tran. (Moore), 115:12-121:3; Tr. Exs. 19, 155, 3843. The remaining Accused Domain, freecreditreportwebsite.com, was registered in April 2005. Ex. 14. However, there is insufficient evidence that OTL used freecreditreportwebsite.com in a way contrary to CI's rights prior to the laches period or that CI knew of such use, especially in light of the affiliate relationship in effect before January 2006. See Tr. Ex.325.

Instead, the weight of the evidence shows that the OTL's Accused Domains were used contrary to CI's rights only after April or May 2008. See Dec.14 Tran. (Moore), 115:12-121:3; Tr. Ex. 325. Considering the E-Systems factors, OTL fails to overcome the presumption that laches is inapplicable: (1) the jury found that FREECREDITREPORT.COM is a famous trademark; (2) CI filed suit within thirteen months of OTL's use of the Accused Domains and thus was reasonably diligent in enforcing its mark;(3) the jury found that OTL's cybersquatting caused $120,000 in damage to CI; (4) the jury found that OTL cybersquatted with a bad faith intent to profit; (5) OTL is in competition with CI; and (6) OTL does not treat the Accused Domains as trademarks, has not spent a significant ...


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