ACPA Action Finds That Affordable House Not So Affordable to Designers and Architects

The Anticybersquatting Consumer Protection Act (“ACPA”) enables a trademark owner to sue and retrieve an Internet domain from a defendant – cybersquatter under certain conditions.  This case is a good example of the importance of obtaining a federal trademark registration to protect a website domain name.  Carnivale v. Staub Design, LLC, Case No. 08-764-SLR (U.S. District Court of Delaware, Dec. 13, 2010)(available here).  Plaintiff Carnivale, an architect, wrote a book entitled “The Affordable House” and apparently published the book in 1996.   In 1998 Carnivale republished the book on the internet website www.affordablehouse.com (http://www.affordablehouse.com) after obtaining the domain <affordablehouse.com> in July, 1998.  Carnivale uses his website to advertise the sale of blueprints and copies of the house shown and described in the book.  To protect his domain name, Carnivale filed an application for registration of the mark THE AFFORDABLE HOUSE on January 4, 2005 and the mark was registered in 2006 as Registration No. 3,058,545 (available  here).

Defendant Staub Design is a residential design company focused on the application of autoclaved aerated concrete (“AAC”), a lightweight concrete building material. Staub Design built a house in South Dakota in 2000 and referred to this house as “The Affordable House.”  In the spring of 2004, Staub Design learned of Carnivale’s earlier domain registration during a search of various domains and then registered the domain <theaffordablehouse.com.> The only difference between Carnivale’s domain and Stuab’s domain being “The.”  Staub Design then posted information about its lightweight concrete AAC at <www.theaffordablehouse.com> and used the slogan “The Affordable House – a project of Staub Design LLC” in the banner on each page of the website.  Staub Design further promoted “The Affordable House” at trade shows in 2005 and 2007.  The Staub Design website did not offer anything for sale but it did refer customers and viewers back to the principal designers John and David Staub.

Plaintiff Carnivale Plaintiff discovered defendants’ website at <www.theaffordablehouse.com> in March 2007.  After a cease and desist letter, Staub Design moved the content from the domain <theaffordablehouse.com> to another domain <StaubDesign.com> (http://www.staubdesign.com) but then filed a petition seeking to cancel Carnivale’s federally registered trademark  THE AFFORDABLE HOUSE, Reg. No. 3,058,545.  Carnivale then sued in Delaware federal court under the ACPA and suspended the cancellation proceeding before the Trademark Trial and Appeal Board (TTAB) since the issue was joined in the federal court action.  It is fair to assume that Staub’s actions filing the TTAB cancellation proceeding triggered the federal court ACPA action by Carnivale.

The Delaware Court previously decided on summary judgment that Carnivale had sufficiently proven the distinctiveness of his federally registered mark and that Staub Design’s domain name TheAffordableHouse.com was identical or confusingly similar to Carnivale’s registered mark.  After conducting a bench trial on the issue of bad faith under the ACPA, the court entered judgment in favor of Carnivale and awarded Carnivale $25,000 in damages.  Under the ACPA, the Court can award statutory damages in any amount from $1,000 to $100,000 per domain.  The reported decision did not address Carnivale’s attorneys fees, which also may be requested by an ACPA plaintiff.

The ACPA is part of the Federal Trademark Act, the Lanham Act, at 15 U.S.C. § 1125(d).  Section 43(d)(1)(B)(1) of the Lanham Act, 15 U.S.C.§ 1125(d)(1)(B)(i), provides a non-exhaustive list of nine factors for determining whether a plaintiff has shown the requisite bad faith:

(I) the trademark or other intellectual property rights of the person, if any, in the domain name;
(II) the extent to which the domain name consists of the legal name of the person or a name that is otherwise commonly used to identify that person;
(III) the person’s prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;
(IV) the person’s bona fide non-commercial or fair use of the mark in a site accessible under the domain name;
(V) the person’s intent to divert consumers from the mark owner’s online location to a site accessible under the domain name that could harm the goodwill represented by the mark, either for commercial gain or with the intent to tarnish ro disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;
(VI) the person’s offer to transfer, sell or otherwise assign the domain name to the mark owner or any third party for financial gain without having used, or having an intent to use, the domain name in a bona fide offering of any goods or services, or the person’s prior conduct indicating a pattern of such conduct;
(VII) the person’s provision of material and misleading false contact information when applying for the registration of the domain name, the persons’s intentional failure to maintain accurate contact information, or the person’s prior conduct indicating a pattern of such conduct;
(VIII) the person’s registration or acquisition of multiple domain names which the person knows are identical or confusingly similar to marks of others that are distinctive at the time of registration of such domain names, or dilutive of famous marks of others that are famous at the time of registration of such domain names, without regard to the goods or services of the parties; and
(IX) the extend to which the mark incorporated in the person’s domain name registration is or is not distinctive and famous within the meaning of subsection (c) of this section.
See 15 U.S.C. § 1125(d)(1)(B)(i).

The Court found several bad faith factors. (I) Staub Design did not have trademark rights in the accused domain TheAffordableHouse.com; (II) Staub was not known as “TheAffordableHouse;” (III) Staub Design did not use THE AFFORDABLE HOUSE in a bona fide manner prior to plaintiff’s use of the mark because Carnivale used the mark in 1996, eight years before Staub Design’s use in 2004 (see Int’l Bancorp, L.L.C. v. Societe Des Baines De Mer Et Du Cercle Des Etrangers A Monaco, 192 F. Supp. 2d 467, 486 (E.D. Va. 2002)); (IV) Staub Design did not use the accused domain in a fair use manner due to its use on the banner of each web page (typically, this “banner use” supports a claim of trademark use for the goods or services shown in the website); (V) Staub Design had an intent to divert customers from Carnivale because “courts have held that the wholesale inclusion of a mark in the disputed domain name implies a bad faith intent to divert customers from plaintiff’s website.”   Carnivale v. Staub Design, LLC, slip opn. 9, citing Int’l Bancorp, 192 F. Supp. 2d at 486; and (IX) the Court’s earlier finding that the federally registered mark was distinctive

As to the Court’s NO BAD FAITH findings, ACPA factors (VI) showed that Staub Design did not offer to sell the domain to Carnivale; (VII) noted that all domain registration data used by Staub Design was accurate; and (VIII) Staub Design did not register multiple accused domains.

The following Table shows key dates in this litigation.
Key Date Table:
1996 – Carnivale wrote a book “The Affordable House” and apparently publishes the book
July, 1998 – Carnivale obtains domain <affordablehouse.com>
1998 – Carnivale publishes the book on the internet website www.affordablehouse.com – website advertises the sale of Affordable House blueprints
2000 – Staub Design builds house in South Dakota referred to as “The Affordable House”
Spring, 2004 – Staub Design learns of Carnivale’s earlier domain registration
2004 – Staub Design uses the accused domain <TheAffordableHouse.com> to promote lightweight residential home construction
2005 – Carnivale files a federal trademark application for THE AFFORDABLE HOUSE
2005 – Staub Design promotes “The Affordable House” at trade shows
2006 – Carnivale registers its mark THE AFFORDABLE HOUSE, Reg. No. 3,058,545
2007 – Staub Design further promotes “The Affordable House” at trade shows
March, 2007 – Carnivale learns of the use of the accused domain

Although the Court found the Staub acted in bad faith and violated the ACPA, the chronologic Key Event Table shows that the facts in this case did not heavily favor Plaintiff Carnivale.  For example, if Staub Design had used THE AFFORDABLE HOUSE as a trademark in a defined geographic territory before Carnivale applied for its federal trademark, Staub Design may have been able to obtain concurrent use rights under the Lanham Act. See, for example Sweetarts v. Sunline, Inc., 380 F.2d 923 (8th Cir. 1967).  A finding of concurrent use most likely would have altered ACPA bad faith factors III, IV, V and IX.  Also, one cannot escape the apparent argument that Carnivale was selling “an affordable house” design and this phrase may well have been descriptive of the blueprint designs.  Of course, the Court had earlier found in its summary judgment that Carnivale’s mark was distinctive and its registration was upheld.  The summary judgement ruling foreshadowed the ACPA result.

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