Analysis of Personal Jurisdiction in a Claim for Cybersquatting Under the ACPA and the Lanham Act

August 2nd, 2010

The Digby Adler Group LLC v. Image Rent a Car, Inc. decision rendered on July 20, 2010, presented a great opportunity to examine personal jurisdiction analysis in relation to a cybersquatting claim.

cybersquatting law trademark infringementThe case is Digby Adler Group LLC v. Image Rent a Car, Inc., 2010 U.S. Dist. LEXIS 76309, 1-2 (N.D. Cal. July 20, 2010). Plaintiff Digby Adler Group LLC (Adler) originally filed suit in federal district court in the Northern District of California against Defendants Image Rent A Car, Inc. (Image) and Van Rental Co., Inc. (Van Rental), alleging cybersquatting, unfair competition, and false advertising under the Lahnam Act, as well as common law trademark infringement and violation of Section 17200 of California’s Business and Professions Code.

The instant decision was for a Motion to Dismiss or Transfer Venue to the Eastern District of New York and was issued by U.S. District Judge Samuel Conti.

Brief background of the parties involved;

Plaintiff Adler is a California limited-liability company headquartered in San Francisco which rents cars and vans, with a focus on long-term rentals to touring music groups. It has done business under the mark ‘Bandago’ since 2003 and filed an application to register the mark with the U.S. Patent and Trademark Office (USPTO) in 2008 but has not yet received a certificate of registration (here it is important to note that a plaintiff may sue on its mark under a theory of ‘use’ without the mark actually being a federally registered trademark). In 2003, Alder registered the domain name www.bandago.com and has since used that domain in connection with its van rental business.

Defendants Image and Van Rental are also in the business of renting vans and other automobiles. Both Image and Van Rental share the same CEO and both are New York domestic business corporations. Both also have their primary place of business in Brooklyn, New York and maintain rental offices in New York and Florida. Image uses the website www.Imagerentacar.com in conjunction with its van rental services.

Adler alleged that in 2008, Van Rental (as an agent for Image) registered and began using the website www.Bandago.net to redirect visitors to www.Imagerentacar.com. Adler further alleged that Van Rental and Image had never before used the “Bandago” name in commerce, and that they used www.Bandago.net solely to divert Adler’s customers to Image’s website. Adler also claims that it has received calls from confused customers, and claims that some customers have used Defendants’ services rather than Plaintiff’s.

The Motion to Dismiss or Transfer Venue to the Eastern District of New York;

With this motion Van Rental and Image sought to have the case against them dismissed for a lack of jurisdiction or, in the alternative, to transfer venue to the Eastern District of New York. Arguing against the motion, Adler argued that the N.D. California court may properly exercise personal jurisdiction over Van Rental and Image without violating the Due Process Clause of the United States Constitution.

As he addressed the motion, Judge Conti noted that the Ninth Circuit provides a three-part test to determine if jurisdiction comports with due process;

(A) The nonresident defendant must do some act or consummate some transaction with the forum or perform some act by which he purposefully avails himself of the privilege of conducting activities in the forum, thereby invoking the benefits and protections of its laws;

(B) The claim must be one which arises out of or results from the defendant’s forum-related activities; and

(C) Exercise of jurisdiction must be reasonable.
Panavision v. Toeppen, 141 F.3d 1316, 1320 (9th Cir. 1998).

Addressing the first prong (A) of the Panavision test, Conti stated that it can be satisfied either by a party that has purposefully availed itself of the privilege of conducting business activities within the forum or purposefully directed activities toward the forum;

“Purposeful direction exists when a defendant has committed an act outside of the forum state that was intended to and does in fact cause injury within the forum. Calder v. Jones, 465 U.S. 783, 788-89, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984). Under Calder’s “effects test,” the defendant must have (1) committed an intentional act, (2) expressly aimed at the forum state, (3) which causes harm that the defendant knows is likely to be suffered in the forum state. Id.; see also Brayton Purcell LLP v. Recordon & Recordon, 606 F.3d 1124, 1128 (9th Cir. 2010).”

Conti then found that the (1) ‘intentional act’ under the Calder effects test was satisfied by Van Rental’s conduct in registering and using the www.bandago.net domain name to redirect users to the www.Imagerentacar.com website.

Adler sought to demonstrate that the (2) ‘express aiming’ requirement was satisfied and attached 19 print outs of web pages on Image’s website tending to show that Defendants advertised and rented to customers in California. Judge Conti then iterated why these pages were not indicative of advertising to customers in California;

“The numerous web pages Plaintiff cites to contain a great deal of text, most of which is incomprehensible nonsense likely so positioned as an attempt to optimize search engine results through “keyword stuffing.” See Eric Goldman, Deregulating Relevancy in Internet Trademark Law, 54 Emory L.J. 507, 531 n.69 (Winter 2005) (describing “keyword stuffing” as a process in which web developers add repeated text with no relevance to the  content they are publishing to websites in an attempt to improve search engine result rankings and thus increase web traffic). For these reasons, the Court finds that the Imagerentacar.com website alone, absent “something more,” does not satisfy the “express aiming” requirement.”

Continuing to examine ‘express aiming’, operating a passive website doesn’t satisfy express aiming, ‘something more’ is required;

“While maintenance of a passive website alone cannot satisfy the express aiming prong, operating a passive website in conjunction with “something more –conduct directly targeting the forum — is sufficient to confer personal jurisdiction.” Rio Properties, Inc. v. Rio Intern. Interlink, 284 F.3d 1007, 1020 (9th Cir. 2002). Within the cybersquatting context, Panavision suggests that merely registering a domain name and linking it to a website does not alone constitute “express aiming.” 141 F.3d at 1321. In Panavision, the “something more” was the defendant’s scheme to obtain money from the plaintiff — the plaintiff sent the defendant a cease-and-desist letter, and the defendant demanded $ 13,000 in exchange for the name. Id. at 1319.”

The ‘something more’ found to be satisfied where the two parties are in direct competition with each other;

“Defendants allege that they do no business in California, and thus do not compete with Plaintiff for California customers. However, the Court reads Brayton Purcell to hold that the location of the customers is irrelevant, as long as the plaintiff and defendant are in direct competition, the defendant’s alleged tort was in furtherance of this competition, the defendant knew the plaintiff resided in the forum state, and the defendant knew the harm would be felt in the forum state. 606 F.3d at 1130-31. Because all the above elements are alleged by Plaintiff and not rebutted by Defendants, the express aiming prong is satisfied.”

The third requirement of the effects test, (3) that defendant engaged in conduct which causes harm that the defendant knows is likely to be suffered in the forum state is satisfied when the defendant’s intentional act has ‘foreseeable effects’ in the forum.  Judge Conti then found that it was foreseeable that Adler would be harmed by Van Rental’s use of the www.bandango.net domain name, and that the harm would occur in Adler’s principal place of business, California.

With the effects test satisfied, the court found that Van Rental and Image’s activity was sufficient to demonstrate purposeful direction. Then Judge Conti went on to conclude that the second (B) claims arise out of the defendants’ forum-related activities was satisfied because Van Rental and Image’s conduct infringed on Adler’s mark. Further, Conti concluded that (C) an exercise of jurisdiction is reasonable because Defendants failed to specifically address the reasonableness prong in their Motion.

Conclusion;

Judge Conti found in favor of Adler and jurisdiction is proper over Defendants Image Rent A Car, Inc. and Van Rental Co., Inc., and transfer of venue to the Eastern District of New York would not serve the interest of justice. Van Rental and Image’s Motion to Dismiss or Transfer was denied.

What you can retain from this ruling by Judge Conti;

• Conduct that qualifies as infringing on another’s trademark can subject you to specific jurisdiction in that party’s home state (or if a corporation- principal place of business and place(s) of incorporation)
• If a party to a trademark-infringement lawsuit, specifically address all pertinent points of law (in this case Defendants failed to address whether the exercise of jurisdiction was reasonable)
• Foreseeability can extend to situations where one has made use of a domain name that is similar to another’s mark and/or domain name (ex: don’t register and use www.bandago.net if www.bandago.com is in use by the ‘Bandago’ mark owner)