Dimitry Tsimberg, Esq.

Two new internet law cases

Recently, two new federal court cases addressed the ever-changing nature of the internet.

Once Federally Registered Trademark "Freebies" is Now Free For All
The U.S. Court of Appeals for the Fourth Circuit found that the term "freebies" is generic and, thus, cannot be infringed by the internet domain name "freebie.com." Retail Services Inc. v. Freebies Publishing, Case Nos. 03-1272 and 03-1317, 2004 U.S. App. Lexis 7130 (4th Cir. Apr. 13, 2004).

Retail Services Inc. (RSI) was operating its website freebie.com, where customers could redeem their "Freebie Points" for merchandise. The owners of the federal trademark registration for "Freebies" discovered RSI’s use of the word "freebie" on the website and filed an action under the Uniform Domain Name Dispute Resolution Policy. The arbitrator found that RSI’s domain name was confusingly similar to the owners’ registered mark, and ordered the transfer of the domain name to the owners.

RSI brought suit in federal court, arguing that the "freebies" mark had become generic, and the district court agreed. While acknowledging that the federal registration is prima facie evidence that the mark is not generic, the district court noted that this only raises a presumption of validity, which shifts the burden of producing evidence of genericness to the other party. RSI met its burden by producing dictionary definitions of the word "freebie" from various sources; the owners’ generic use of the term in their own website; 1,600-plus websites that incorporate the word "freebie" or "freebies" into their domain names; and a list of 51 news reports using the phrase "freebie site" referring to websites similar to the owners’ freebies.com website. Based on what it considered overwhelming evidence of genericness, the district court granted RSI summary judgment.

On appeal, the owners of the mark argued that summary judgment was inappropriate because an issue of fact existed by virtue of the federal registration and status of incontestability. The Fourth Circuit considered the registration and incontestability status and acknowledged the "significant procedural advantage" they bestowed on the owners of the registration. However, the Court found that the presumption of validity and incontestability do not shield a mark that is generic. The Court clarified that the issuance of a certificate of registration, by itself, does not create a per se issue of fact sufficient to defeat summary judgment.

This case is important because it demonstrates that even validly registered trademarks can be nullified in relatively short fashion (summary judgment). It also shows how use of search engines is helping to prove genericness.



Fair Use Found In Spite of Evidence of "Bad Faith"
Addressing the issue of whether the propriety of the defendant’s conduct is relevant when analyzing fair use, the U.S. Court of Appeals for the Second Circuit affirmed a lower court’s denial of a preliminary injunction even though the defendants had obtained the copyrighted materials in bad faith. NXIVM Corp. v. The Ross Institute, No. 03-7952, 2004 U.S. App. LEXIS 7608 (2d Cir. Apr. 20, 2004).

Plaintiff NXIVM produced the exclusive and expensive "Executive Success" business training seminars. All participants receive a 265-page course manual and are required to sign a non-disclosure agreement that bars them from releasing the manual or its proprietary techniques to non-participants. Defendant Ross runs a for-profit business as a "cult de-programmer," in addition to operating nonprofit websites that provide information on controversial groups that have been accused of mind control tactics. Ross obtained a copy of the NXIVM manual from a one-time participant in the program and commissioned two authors to analyze and critique the materials. The reports, which were highly critical of the program, quoted sections of the manual and were made available to the public on the websites.

NXIVM brought suit and moved for a preliminary injunction to have the copyrighted materials removed from the websites. The district court denied the preliminary injunction, finding that NXIVM had little likelihood of success on the merits because defendants’ fair use defense was likely to succeed. The Second Circuit affirmed the decision, agreeing that defendants’ use was in fact transformative, a finding which will normally tilt this factor in a defendant’s favor.

The Court determined, however, that defendants misappropriated the manual in bad faith, but rather than find for the plaintiff, the Court merely weighed this as a sub factor in its examination of the overall purpose and character of the use. Because the defendants’ use was clearly critical and transformative, the Court found that the bad faith of defendants was not dispositive of its fair use defense. Thus, the Court noted, even with bad faith present, the "purpose and character" of the use factor may still weigh in favor of defendants, and all of the other factors in the fair use analysis still must be given full consideration.

The decision is a major victory for free speech internet advocates. It teaches that copyright law cannot block investigative and critical reporting, even if done for commercial use. Read an article about the ccase (written before the Appeal) here.

This post is for educational and information purposes only. It is not legal advice on any particular case, and merely a general opinion of one California lawyer. You should not rely on it without consulting a competent attorney in your area about your specific case and facts. It is not intended to, and shall not, create an attorney-client relationship. So, be happy you got some free info and use your grey matter!

Need our expertise?

Ask a Lawyer - got a question? Post your case or legal issue for FREE and receive e-mail responses from lawyers.

Legal Articles - read articles written by attorneys about a variety of legal issues.

Business Issues - 15 things every business owner should think about, obtain legal advice on, and have an attorney ready to address and resolve.