Quickly Correcting Anti-Cybersquatting Violation after Demand Avoids Monetary Damages and Injunctive Relief

The 11th Circuit Court of Appeals, in Pensacola Motor Sales Inc. v. Eastern Shore Toyota, LLC, — F.3d —-, 2012 WL 2345117 (11th Cir.) (Available here), upheld a district court’s finding that defendant Eastern Shore had both a subjective belief and an objectively reasonable belief in the lawfulness of its actions that it did not violate the Anti-Cybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d)(“ACPA”).  The court found that Eastern Shore met the safe harbor provisions in the ACPA.  Plaintiff Pensacola Motor did not introduce any evidence of monetary damages at the jury trial and instead relied upon, to its detriment, the statutory damages provisions in the ACPA .  Since Eastern Shore turned over the accused domains within two (2) weeks after Pensacola Motors’ cease and desist letter, immediately fired the marketing director (an independent consultant), and Pensacola Motor proved no damages at trial and introduced no evidence of potential future use of the accused domains, no money damages or attorneys fees were awarded and no injunction was issued.

The facts adduced during the jury trial showed that Eastern Shore’s (“ES”) marketing consultant pitched two internet marketing strategies to ES, one defensive and the other offensive. The defensive strategy was for ES, under the consultant’s tutelage, to buy and hold desirable domain names in order to keep them out of competitors hands.  As an offensive strategy, the consultant proposed the creation of a large number of mini-websites, or microsites, using a computer program that he would license to ES, a Hyundai dealer, such as owning the domain www.2009camry.com. These hundreds of microsites auto-directed the viewer to ES’ websites. ES had earlier received a cease and desist letter for the “Camry” site which redirected users to ES’ eBay website.  ES turned over that Camry site.  Therefore, it had some inkling of the problem before the events with Plaintiff Pensacola.

Sometime thereafter, Plaintiff Pensacola, a Toyota dealer called Bob Tyler Toyota, discovered one of Eastern Shore’s microsites: www.bobtylerprices.com which had photos copied from Bob Tyler.  At the ES site, users were prompted to enter their email and phone number to complete a credit application for a financing plan.  Pensacola’s cease and desist letter demanded take-down of six (6) microsites and $1,000,000 in compensation.  ES took down the sites and immediately fired the marketing director.  Pensacola’s lawsuit was filed a few weeks after the letter. Pensacola’s second amended complaint asserted claims for: (1) false advertising under the Lanham Act, 15 U.S.C. § 1125(a); (2) unfair competition under the Lanham Act; (3) violation of the Anti-Cybersquatting Consumer Protection Act, § 1125(d); (4) unfair competition under Florida law; (5) violation of Florida’s trademark dilution statute, Fla. Stat. § 495.151; and (6) violation of Florida’s “Antiphising Act,”  Fla. Stat. § 668.704.  The Antiphising Act is discussed later herein.

In response to Pensacola’s motion for summary judgment and  about a month and a half before trial, ES raised for the first time the statutory fair use defense to the anticybersquatting claim: that it “believed and had reasonable grounds to believe that the use of the domain name[s] was a fair use or otherwise lawful,” 15 U.S.C. § 1125(d)(1)(B)(ii). Summary judgment was denied and at trial Pensacola did not introduce any evidence of monetary damages and sought only statutory ACPA damages and attorneys fees.  Per the 11th Circuit: “Even without proof of actual damages, however, Bob Tyler Toyota still had a chance to recover statutory damages on its Florida antiphishing claim, see Fla. Stat. § 668.704(2)(b)(2), and on its federal anticybersquatting claim, 15 U.S.C. § 1117(d).”

“At the close of its case-in-chief, Bob Tyler Toyota [Pensacola] moved for judgment as a matter of law on all of its claims, which the district court denied. Eastern Shore [ES] moved for judgment as a matter of law on Bob Tyler Toyota’s antiphishing claim, which the district court granted. Eastern Shore then asked the district court to deny Bob Tyler Toyota any equitable relief on its claims for federal false advertising, state and federal unfair competition, and state trademark dilution. Eastern Shore argued that no injunctive relief was warranted because it had already surrendered the fourteen domain names and disabled the microsites that went with them. Its position was that it should not be enjoined from doing what it had already quit doing before the lawsuit was filed. The district court agreed, denying any injunctive relief because Bob Tyler Toyota failed to show any likelihood that Eastern Shore would re-register the domain names or reactivate the microsites. The court’s rulings left only the federal anticybersquatting claim for the jury to consider.”

The jury returned its verdict and, in answering questions on the verdict form, (i) found that ES had violated the ACPA and (ii) answered YES to the question that ES “believed and had reasonable grounds to believe that its use of the domain names was a fair use or otherwise lawful” under the ACPA.

“The district court denied injunctive relief because Bob Tyler Toyota could not show that Eastern Shore was likely to register or use the infringing domain names again. As the Supreme Court explained a long time ago, even when voluntary cessation of unlawful conduct does not moot a claim (and there is no argument here that it did), a court has equitable discretion about whether to issue an injunction after the conduct has ceased. See United States v. W.T. Grant Co.,
345 U.S. 629, 632-34, 73 S.Ct. 894, 897-98 (1953).” Slip opn. P. 14.  There was no proof that infringement likely to continue in the future.

“Bob Tyler Toyota [Pensacola] complains that the jury’s answers in its special interrogatory verdict were inconsistent. They were. The jury found both that Eastern Shore Toyota had violated the anticybersquatting act and also that it qualified for the protection of the act’s safe harbor because it had a reasonable belief that the ‘use of the domain name[s] was a fair use or otherwise lawful.’ 15 U.S.C. § 1125(d)(1)(B)(ii). Those answers are inconsistent because a defendant who falls within the scope of the safe harbor provision necessarily lacks the bad faith intent to profit that is necessary to violate the statute. See id. § 1125(d)(1)(A). Even so, Bob Tyler Toyota waived any argument that the verdict was inconsistent by not objecting before the jury was discharged. See Walter Int’l Prods., Inc. v. Salinas, 650 F.3d 1402, 1419 (11th Cir. 2011) (‘We have held that if the party challenging this type of verdict has failed to object before the jury is discharged, that party has waived the right to contest the verdicts on the basis of alleged inconsistency.’ (quotation marks omitted)). The reason for this particular raise-it-or-lose-it rule is that if the inconsistency is raised before the jury is discharged, the jury can be sent back for further deliberations to resolve the inconsistency in its verdict or interrogatory answers.”   Slip opn. Pp. 27-28

“Regardless of how many statutory factors the evidence establishes, Eastern Shore cannot be liable for registering or using the Bob Tyler trademark with a bad faith intent to profit if it nonetheless ‘believed and had reasonable grounds to believe that the use of the domain name was . . . lawful.’ Id. § 1125(d)(1)(B)(ii). To qualify for that safe harbor, Eastern Shore must have had both a subjective belief and an objectively reasonable belief in the lawfulness of its actions.” Slip opn. P. 30.

Florida’s Antiphising Act Claim

Florida’s antiphishing act allows the owner of a web page or trademark “who is adversely affected by [a] violation” to bring a lawsuit under that act. Fla. Stat. § 668.704(1)(c). At trial, Pensacola failed to prove any damages or otherwise show that it had been adversely affected by the microsites or the domain names. The district court correctly concluded that the antiphishing claim failed as a matter of Florida law. Slip opn. P. 15

The Antiphising Act § 668.703 prohibited acts such as “(1) A person with an intent to engage in conduct involving the fraudulent use or possession of another person’s identifying information may not represent oneself, directly or by implication, to be another person without the authority or approval of such other person through the use of a web page or Internet domain name and use that web page, Internet domain name, or a link to that web page or domain name or another site on the Internet to induce, request, or solicit a resident of this state to provide identifying information. (2) A person with an intent to engage in conduct involving the fraudulent use or possession of identifying information may not send or cause to be sent to an electronic mail address held by a resident of this state an electronic mail message that is falsely represented as being sent by another person without the authority or approval of such other person, refers or links the recipient of the message to a web page, and directly or indirectly induces, requests, or solicits the recipient of the electronic mail message to provide identifying information.” Fla. Stat. § 668.703.

Fla. Stat. § 668.704 lists the following remedies: “(1) The following persons may bring a civil action against a person who violates this part: (a) A person engaged in the business of providing Internet access service to the public who is adversely affected by the violation.  (b) A financial institution as defined in s. 655.005(1) that is adversely affected by the violation.  (c) An owner of a web page, trademark, or service mark who is adversely affected by the violation.  (d) The Attorney General.  (2) A person bringing an action under this section may:  (a) Seek injunctive relief to restrain the violator from continuing the violation.  (b) Recover damages in an amount equal to the greater of: 1. Actual damages arising from the violation; or 2. The sum of $ 5,000 for each violation of the same nature.  (3) The court may increase an award of actual damages in an action brought under this section to an amount not to exceed three times the actual damages sustained if the court finds that the violations have occurred with a frequency as to constitute a pattern or practice.  (4) For purposes of this section, violations are of the same nature if the violations consist of the same course of conduct or action, regardless of the number of times the conduct or action occurred.  (5) A plaintiff who prevails in an action filed under this section is entitled to recover reasonable attorney’s fees and court costs.”  Other subsections of the Act discuss jurisdiction, venue, the statute of limitations (3 years); moneys received by the Attorney General and Department of Legal Affairs authority to adopt rules. Fla.Stat. § 668.702 lists the definitions and § 668.705 lists exemptions.

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