MEMORANDUM OF DECISION

McGLYNN.

[1] Plaintiff, Playboy Enterprises, Inc. ("PEI") filed this action on October 2, 1996, alleging trademark infringement and related causes of action under the Lanham Act, 15 U.S.C. §§ 1114–1125 and Pennsylvania's anti-dilution law, 54 Pa.C.S.A. § 1124, et. seq. at defendant's web site "adult sex.com/playboy." The Court entered a temporary restraining order and later a consent decree enjoining the defendants use of PEI's trademarks. Thereafter, the complaint was amended to include a counterfeiting claim under 15 U.S.C. § 1116(d).

The matter came on for a final hearing and bench trial on October 8th and 13th, 1998.

Upon consideration of the evidence and the briefs and arguments of counsel, the court makes the following

FINDINGS OF FACT

1. Plaintiff Playboy Enterprises, Inc. (PEI), is a Delaware corporation having offices at 730 Fifth Avenue, New York, New York and a principal place of business in Chicago, Illinois.

2. Defendant Universal Tel–A–Talk, Inc. is a Pennsylvania corporation having a principal place of business in Philadelphia, Pennsylvania. Defendant Stanley Huberman is the president and sole shareholder.

3. Defendant Adult Discount Toys is a business entity having a principal place of business in Philadelphia, Pennsylvania and is owned by defendant Stanley Huberman.^[1]

4. Defendant Stanley Huberman is a citizen and resident of the Commonwealth of Pennsylvania.

5. Since 1953, PEI has published Playboy magazine. Playboy magazine is read by approximately 10 million readers each month and is published worldwide in 16 international editions.

6. Playboy magazine is known for its display of erotic and provocative pictorials of PEI models and adult entertainment material.

7. PEI and its licensees have sold a wide variety of merchandise; such as, wearing apparel, cosmetics, sunglasses, watches and other personal accessories under the trademark PLAYBOY, in interstate commerce, including the Commonwealth of Pennsylvania.

8. PEI is the owner of a number of U.S. trademark registrations for the mark PLAYBOY, including the following registrations: U.S. Reg. No. 600,018 (monthly magazine); U.S. Reg. No. 1,040,491 (sunglasses); U.S. Reg. No. 1,308,905 (watches and clocks); U.S. Reg. No. 1,328,611 (clothing articles, including ties, t-shirts and visors); U.S. Reg. No. 1,320,822 (footwear); and U.S. Reg. No. 755,301 (cigarette lighters).

9. Over the years, PEI has sold merchandise bearing the PLAYBOY trademark. Through its licenses, products bearing the PLAYBOY trademark are sold throughout the United States and in more than 50 countries around the world. PEI and its licensees have and continue to spend considerable time and money promoting the PLAYBOY trademark. As a result of PEI's longstanding use of the PLAYBOY trademark, the PLAYBOY trademark has become well known and has developed a secondary meaning, such that the public has come to associate it with PEI.

[2] 10. In addition to the PLAYBOY trademark, PEI also utilizes a Rabbit Head Design trademark (hereafter the "RABBIT HEAD DESIGN") in connection with Playboy magazine and a wide variety of goods sold by PEI and/or its licensees. Since 1954, PEI has used the RABBIT HEAD DESIGN mark in connection with Playboy magazine. The RABBIT HEAD DESIGN mark traditionally appears in the masthead of Playboy magazine. PEI has also used the RABBIT HEAD DESIGN in connection with a wide variety of merchandise and services.

11. PEI also owns a number of U.S. trademark registrations for the RABBIT HEAD DESIGN mark, including U.S. Reg. No. 643,926 (monthly magazine); U.S. Reg. No. 871,533 (billfolds, pocket secretaries and card cases); U.S. Reg. No. 1,058,294 (sunglasses); U.S. Reg. No. 759,207 (cuff links, tie tacks, earrings, necklaces, key chains, bracelets and pins); U.S. Reg. No. 728,889 (ties and men's and women's shirts); U.S. Reg. No. 1,276,287 (clothing articles, including hats, caps and t-shirts); and U.S. Reg. No. 764,819 (perfume).

12. In addition to the PLAYBOY trademarks and RABBIT HEAD DESIGN, the mark "BUNNY" has been registered by PEI with the United States Patent and Trademark Office.

13. PEI is the owner of U.S. Trademark Registration No. 810,555 for the mark BUNNY.

14. Over the years, PEI has sold merchandise bearing the RABBIT HEAD DESIGN mark. Through its licensees, products bearing the RABBIT HEAD DESIGN mark are sold throughout the United States and in more than 50 countries around the world. Products bearing the RABBIT HEAD DESIGN mark are available worldwide by mail order catalog and through PLAYBOY specialty boutiques, department stores, art galleries and museum shops. PEI and its licensees have spent considerable time and money promoting products bearing the RABBIT HEAD DESIGN mark nationwide and throughout the world. As a result of PEI's longstanding use of the RABBIT HEAD DESIGN mark, the RABBIT HEAD DESIGN mark has become famous and has developed significant goodwill and secondary meaning, such that the public has come to associate it exclusively with PEI.

15. As a result of PEI's use and promotion of the RABBIT HEAD DESIGN mark, the mark BUNNY has also become associated with PEI in connection with adult entertainment services. Indeed, the RABBIT HEAD DESIGN trademark is commonly referred to by the public as the "Playboy Bunny."

16. The Internet is an international computer "super-network" of over 15,000 computer networks which is used by 30 million or more individuals, corporations, organization and educational institutions worldwide. Users of the Internet can access each others computers, can communicate directly with each other (by means of electronic mail or "e-mail"), and can access various types of data and information. Each Internet user has an address, consisting of one or more address components, which address is otherwise commonly referred to within the Internet as a "domain" or "domain name."

[3] 17. Domain names serve as an address for sending and receiving e-mail and for posting information or providing other services. On the Internet, a domain name serves as the primary identifier of the source of information, products or services. It is common practice for companies to form Internet domain names by combining their trade name or one of their famous trademarks as a prefix and their business category as a suffix. The suffix ".com" (usually pronounced "dot com") identifies a service provider as commercial in nature.

18. The domain name is one component of the "Uniform Resource Locator" ("URL"). The URL may also include root directories and subdirectories which serve as a guide to the contents of a Web site.

19. In August, 1994, PEI launched http://www.playboy.com on the Internet on the World Wide Web. The website currently receives approximately six million "hits" a day. The trademark http://www.playboy.com offers access to some of PEI's copyrighted images and other contents from Playboy magazine and other PEI publications. Http://www.playboy.com has also been registered with the U.S. Patent and Trademark Office.

20. PEI also operates http://cyber.playboy.com, a subscription and pay per visit website (the "PLAYBOY CYBER CLUB") which allows members access to individual PLAYMATE home pages, video clips from PLAYMATE home pages, video clips from PLAYBOY home video and PLAYBOY TV and contents of Playboy magazine.

21. Both http://www.playboy.com and http://cyber.playboy.com are used by PEI to promote subscriptions to its monthly Playboy magazine, to display erotic pictorials of PEI models, and to advertise and sell PEI's merchandise and other services under PEI's trademarks. PEI's websites prominently feature the PEI trademarks PLAYBOY and RABBIT HEAD DESIGN, as well as photographs, articles of interest, PEI merchandise, videos and subscription information for Playboy magazine. PEI's Website contains electronic versions of Playboy magazine in that it displays the contents of Playboy magazine on-line. An Internet user is able to view the contents of Playboy magazine by visiting www.playboy.com or the PLAYBOY CYBER CLUB.

22. Defendant Universal Tel–A–Talk, Inc. created and is maintaining several Internet World Wide Web sites which may be accessed throughout the United States, including the Commonwealth of Pennsylvania.

23. On or about October 2, 1996, PEI learned that Universal–Tel–A–Talk, Inc. was using PEI's registered trademarks PLAYBOY and BUNNY in conjunction with their website to advertise on-line a collection of photographs, which both plaintiff and defendant describe as "hard core." However, neither side has defined that term, at least on this record, except as a modifier of the term sexually explicit photographs.

[4] 24. Defendant Universal Tel–A–Talk, Inc.'s website advertises and offers a subscription service called "Playboy's Private Collection" (located at http://www.adult-sex.com (hereafter "Defendant's website") for a charge of $3.95 per month, which features hard core photographs. The PLAYBOY trademark is prominently featured in defendants' website. Defendants also used the term "Bunny" on the navigational bar of the introductory page of the defendants' website. The navigational bar serves as a table of contents and appears on the bottom of the introductory screens and web pages. When a user clicks onto one of six "Bunny" segments of the navigational bar on the introductory page, the user becomes connected to another level of hard core on-line services offered by Defendants.

25. A subscriber to defendants' "Playboys Private Collection" service is greeted by a "home page" which is the equivalent of the cover and table of contents page of a magazine in that it displays the name of the site and a menu of information that is available for review. A subscriber to defendants' Playboy subscription service, upon assessing the URL "adult-sex.com/playboy/members" is welcomed by defendants' home page which reads: "Welcome to PLAYBOYS PRIVATE COLLECTION." Defendants' website http://www.adult-sex.com is an on-line collection of "hard core" photographs sold under the PLAYBOY and BUNNY trademarks and portrayed as an extension of PEI's Playboy magazine. Defendants' unlawful use of the PLAYBOY trademark also appears at least twice on every printed web page. "Playboys Private Collection" appears on the upper left-hand corner and the URL "adult-sex.com/playboy/members/pictures" appears at the upper right-hand corner.

26. Subscribers can "click" onto a portion of the home page which reads: "Let me see the pictures in Playboys Private Collection" and obtain a lengthy list of hard core photographs on a variety of topics which may be viewed on screen, downloaded to disk or printed.

27. Defendants also provided an electronic mail address which utilizes the PLAYBOY trademark in the text of defendants' website. The home page of defendants' service invites subscribers to "Send E-mail to Playboy @adult-sex.com."

28. Defendant has also "linked" their adult-sex website to PEI's website at "Playboy.com." A "link" is a connection of one website to another.

29. Defendants are not now and never have been authorized by PEI to use the PLAYBOY trademark or the BUNNY trademark in connection with any business or service.

30. Defendants consented to the entry of a Preliminary Injunction on Consent on November 29, 1996.

31. Defendants had 1,363 subscribers to its adult-sex.com website between July 13.1990 and October 12, 1996.

32. Defendants used the terms PLAYBOYS PRIVATE COLLECTION and PLAYBOY in connection with the adult-sex.com website for approximately three (3) months.

33. Defendant Huberman personally made the decision to use the term PLAYBOY in connection with the adult-sex.com website and authorized its implementation in the website. Defendant Huberman personally made the decision to use the term BUNNY in connection with the adult-sex.com website and authorized its implementation in the website.

[5] 34. Defendant Universal Tel–A–Talk was on-line for only four months—July 1996 to October 1996.

35. The contents of Plaintiff's website during this period of time did not display the words "Registered in U.S., Patent and Trademark Office" or "Reg.—U.S. Pat & TM Off" or the letter R enclosed in a circle.

36. Plaintiff did not prove any actual loss or injury.

37. Defendant Universal Tel–A–Talk lost money on the operation of its website.

DISCUSSION

This is a civil action for trademark infringement, false designation of origin, dilution and trademark counterfeiting under the Trademark Act of 1946, as amended, 15 U.S.C. §§ 1051–1127; trademark infringement and unfair competition under the Commonwealth of Pennsylvania, and dilution under the statutory law of Pennsylvania, 54 Pa.C.S.A. § 1124 et seq.

PEI has alleged infringement of the PLAYBOY trademark under Section 32 of the Lanham Act (Count I), Section 43(a) of the Lanham Act (Count II) and the common law of the Commonwealth of Pennsylvania (Count IV). The test for infringement is the same for each count, namely, whether the alleged infringement creates a likelihood of confusion. See Scott Paper Co. v. Scott's Liquid Gold, 589 F.2d 1225 (3d Cir.1978).

In order to succeed on the merits, a plaintiff must establish that: (1) the marks are valid and legally protectible; (2) the marks are owned by the plaintiff; and (3) the defendants' use of the marks to identify goods or services is likely to create confusion concerning the origin of the goods and services." Opticians Ass'n v. Independent Opticians, 920 F.2d 187, 192 (3d Cir.1990).

The trademark PLAYBOY has attained incontestable status pursuant to 15 U.S.C. § 1065. PEI's ownership of incontestable U.S. Registrations for the PLAYBOY trademark constitutes prima facie evidence of PEI's ownership of the PLAYBOY trademark and the validity of the mark. Optician's Ass'n v. Independent Opticians, 920 F.2d at 194.

In determining whether a likelihood of confusion exists, the court may take into account

(1) the degree of similarity between the owner's mark and the alleged infringing mark; (2) the strength of owner's mark; (3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (4) the length of time the defendant has used the mark without evidence of actual confusion arising; (5) the intent of the defendant in adopting the mark; (6) the evidence of actual confusion; (7) whether the goods, though not competing, are marketed through the same channels of trade and advertised through [sic] the same media; (8) the extent to which the targets of the parties' sales efforts are the same; (9) the relationship of the goods in the minds of the public because of the similarity of function; (10) other facts suggesting that the consuming public might expect the prior owner to manufacture a product in the defendant's market.

[6] Scott Paper Co. v. Scott's Liquid Gold, supra at 1229.

Defendants' use of the words "Playboy" and "Bunny" in their website and in the identifying directories of defendants' URL's are identical to PEI's duly registered trademarks PLAYBOY and BUNNY. PEI's registered trademarks have previously been adjudicated as very strong. See, Playboy Enterprise, Inc. v. Chuckleberry Pub., Inc., 687 F.2d 563 (2d Cir.1982). Suggestive marks are entitled to protection without proof of secondary meaning. See e.g., Dominion Bankshares Corp. v. Devon Holding Co., Inc., 690 F.Supp. 338, 345 (E.D.Pa.1988); American Diabetes Assn. v. National Diabetes Ass'n, 533 F.Supp. 16, 214 U.S.P.Q. 231, 233 (E.D.Pa.1981).

Even if secondary meaning were required, PEI has established that the PLAYBOY trademark and the RABBIT HEAD DESIGN trademark for adult entertainment goods and services have become famous, and have acquired significant secondary meaning, such that the public has come to associate these trademarks with PEI.

Defendants' intentionally adopted PLAYBOY and BUNNY trademarks in an effort to capitalize on PEI's established reputation in the PLAYBOY and RABBIT HEAD DESIGN marks. This is evidenced by defendant's establishment of a "link" between their website and PEI's actual PLAYBOY website at "Playboy.com" and their appropriation of the words "playboy" and "Bunny" to advertise their own on-line service.

Evidence of actual confusion is not required. It has long been recognized that because evidence of confusion is notoriously difficult to obtain, it is not necessary to find a likelihood of confusion. See, e.g., Coach Leatherware Co. v. Ann Taylor, Inc., 933 F.2d 162 (2d Cir.1991); Lois Sportswear U.S.A., Inc. v. Levi Strauss & Co., 631 F.Supp. 735, 743 (S.D.N.Y.), aff'd, 799 F.2d 867 (2d Cir.1986); Brockum Co. v. Blaylock, 729 F.Supp. 438, 445 (E.D.Pa.1990) (lack of evidence of actual confusion is not a bar to injunctive relief). PEI and defendant market their services through the same channel of trade: the Internet. The consuming public is likely to believe the PEI is connected with defendants' hard core.

With respect to the dilution claim, dilution refers to the lessening of a mark's distinctiveness. Factors to be considered by the Court are: (1) similarity of the marks; (2) similarity of the products covered by the marks; (3) sophistication of customers; (4) predatory intent; (5) renown of senior mark; (6) renown of the junior mark; (7) the duration and extent of advertising of the mark; (8) the geographical extent of the trading area in which the mark is used; and (9) the nature and extent of use of the mark by third parties." 15 U.S.C. § 1125(c)(1); Wawa, Inc. v. Haaf, 40 U.S.P.Q.2d 1629 (E.D.Pa.1996) (citing Mead Data, Inc. v. Toyota Motor Sales, 875 F.2d 1026, 1035 (2d Cir.1989) (Sweet, J. Concurring)). Applying the foregoing factors, the Court concludes that PEI has established its dilution claims with respect to the PLAYBOY trademark.

[7] PEI has also alleged that defendants' activities constitute counterfeiting of PEI's registered trademark PLAYBOY in violation of 15 U.S.C. § 1116(d). In order to prove counterfeiting, a plaintiff must establish that the defendant (1) infringed a registered trademark in violation of 15 U.S.C. § 1114(1)(a). (2) intentionally use the trademark knowing it was counterfeit or was willfully blind to such use. 15 U.S.C. §§ 1116(d), 1117(b); Nintendo of America, Inc. v. Brown, No. 95–15954, 1996 U.S.App. LEXIS 21373 (9th Cir. Aug. 12, 1996); Babbitt Electronics, Inc. v. Dynascan Corporation, 38 F.3d 1161, 1181 (11th Cir.1994); Interstate Battery System v. Wright, 811 F.Supp. 237, 244–45 (N.D.Tex.1993).

"Counterfeiting is the act of producing or selling a product with a sham trademark that is an intentional and calculated reproduction of the genuine trademark." 3 J. THOMAS McCARTHY, McCARTHY ON TRADEMARKS § 25:10 (3d ed.1997). A "counterfeit mark" means:

a counterfeit of a mark that is registered on the principal register in the United States Patent and Trademark Office for such goods or services sold, offered for sale, or distributed and that is in use, whether or not the person against whom relief is sought knew such mark was so registered.

15 U.S.C. § 1116(d)(1)(B)(I); see Electronic Laboratory Supply Co. v. Motorola, Inc., Civ. No. 88–4494, 1989 U.S. Dist. LEXIS 16475, *6 (E.D.Pa. Sept. 20, 1989).

A "counterfeit" is a "spurious mark which is identical with, or substantially indistinguishable from, a registered mark." 15 U.S.C. § 1127; Babbitt Electronics, supra at 1181.

Defendant Huberman contends that he cannot be held personally liable because he was acting as an officer of defendant Universal Tel–A–Talk and that it is defendant Universal Tel–A–Talk which committed the infringing acts complained of by PEI. However, the law is clear that "[a] corporate officer is individually liable for the torts he commits and cannot shield himself behind a corporation when he is an actual participant in the tort." Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3d Cir.1978).

This principle is applicable in cases brought under the Lanham Act. See, e.g., Donsco, 587 F.2d at 606 (unfair competition); Max Daetwyler Corp. v. Input Graphics, Inc., 541 F.Supp. 115 (E.D.Pa.1982) (false advertising); Polo Fashions, Inc. v. BDB, Inc., 223 U.S.P.Q. 43, 44 (D.S.C.1983) (counterfeiting).

The liability of a corporate officer who actively participates in the infringing acts is "distinct from the liability resulting from the 'piercing of the corporate veil' as that term is commonly used." Donsco, 587 F.2d at 606; BDB, Inc., 223 U.S.P.Q. at 44. Moreover, "it is immaterial whether the officer knows that his acts will result in an infringement."Polo Fashions, Inc. v. Branded Apparel Merchandising, Inc., 592 F.Supp. 848, 652–53 (D.Mass.1984).

[8] The defendant Huberman actively participated in the infringing acts. Although Huberman did not physically type the html code for the website, he did make the decision to use the mark PLAYBOY and BUNNY and approved of all work done by Mr. Merkel on the website. In addition, Huberman approved all requests for subscriptions to the PLAYBOYS PRIVATE COLLECTION service.

The Lanham Act provides that a prevailing plaintiff who establishes infringement of its registered trademark is, subject to the principles of equity, entitled to recover (1) defendant's profits; (2) plaintiff's actual damages; and (3) costs of the action. 15 U.S.C. § 1117(a); see Ferrero U.S.A., Inc. v. Ozak trading, Inc., 952 F.2d 44, 47 (3d Cir.1991); Automated Tool & Connector, Co. v. Amphanol Corp., Civ. No. 96–3249, 1997 U.S. Dist. LEXIS 22720, *l (D.N.J. Nov. 17, 1997) (permitting accounting of profits even when defendant is "innocent" infringer). Here, defendants did not have any profits and plaintiff has failed to prove actual damages.

Nevertheless, when a violation of 15 U.S.C. § 1116(d) is involved, plaintiff may elect to recover statutory damages. Statutory damages for counterfeiting are (1) not less than $500 or more than $100,000 per counterfeit mark per type of goods or services sold; or (2) if the Court finds that the use of the counterfeit mark was willful, not more than $1,000,000 per counterfeit mark per type of goods or services sold. 15 U.S.C. § 1117(c).

Defendants' use of PEI's registered trademark PLAYBOY in connection with the sale and offering for sale of adult entertainment images on the PLAYBOYS PRIVATE COLLECTION portion of defendant's adult-sex.com website is a counterfeit use under 15 U.S.C. §§ 1116(d) and 1117(c) entitling plaintiff to an award of statutory damages.

"Trademark policies are designed to '(1) to protect consumers from being misled as to the enterprise, or enterprises, from which the goods or services emanate or with which they are associated; (2) to prevent an impairment of the value of the enterprise which owns the trademark; and (3) to achieve these ends in a manner consistent with the objectives of free competition.'" Intel Corp. v. Terabyte International, Inc., 6 F.3d 614, 618 (9th Cir.1993) (quoting Anti–Monopoly, Inc. v. General Mills Fun Group, 611 F.2d 296, 300–01 (9th Cir.1979).

To the extent this discussion contains findings of fact not specifically mentioned under that heading, they are to be regarded as though they were.

Accordingly, the Court arrives at the following

CONCLUSIONS OF LAW

1. This court has jurisdiction over the parties and the subject matter of this action. 15 U.S.C. § 1121, 28 U.S.C. § 1331, 28 U.S.C. § 1332 and 28 U.S.C. § 1338.

2. Defendants have infringed on Plaintiff's PLAYBOY trademark.

3. Defendants have violated the anti-dilution provision of the Lanham Act, 15 U.S.C. § 1125(c) and Pennsylvania's anti-dilution statute, 54 Pa.C.S. § 1125.

[9] 4. Defendants' activities constituted counterfeiting of plaintiff's registered trademark in violation of 15 U.S.C. § 1116(d).

5. PEI is entitled to judgment against Universal Tel–A–Talk and Stanley Huberman.

6. Defendant Adult Discount Toys is entitled to Judgment against plaintiff PEI.

7. PEI is entitled to recover statutory damages, reasonable counsel fees and costs.

8. PEI is entitled to an injunction permanently enjoining Universal Tel–A–Talk and Stanley Huberman from using the PLAYBOY trademark as more specifically spelled out in a separate order filed herewith.

9. The court awards statutory damages in the amount of $10,000.

10. Plaintiff is entitled to recover reasonable attorney's fees.

INJUNCTION

AND NOW, this day of, 1998, in accordance with the Findings of Fact and Conclusions of Law filed herewith, it is hereby ORDERED:

1. Defendants, Tel–A–Talk and Stanley Huberman, their agents, servants, employees, successors, attorneys, and all those subject to their control are hereby ENJOINED from using the PLAYBOY trademarks or any colorable facsimile thereof in connection with their business, products, services or Web site and, from providing a link to Plaintiff's Web site "Playboy.com."

2. Defendants, their agents, employees, successors, attorneys and all persons in active concert and participation with it or them, are hereby ENJOINED from:

(a) using in any manner the PLAYBOY Trademarks or any term or terms likely to cause confusion therewith as Defendants' domain name, directory, or other such computer address, as the name of their Web site service, on their home page, on computer diskettes or in connection with the retrieval of data or information or on other goods or services, or in connection with the advertising or promotion thereof so long as such goods or services do not emanate from or originate with PEI;

(b) using in any manner the PLAYBOY Trademarks in connection with Defendants' goods or services in such a manner that is likely to create an erroneous belief that said goods or services are authorized by, sponsored by, licensed by or are in some way associated with PEI;

(c) disseminating, using or distributing any Web site pages or other promotional materials whose appearance so resembles the Web site pages used by PEI as to create a likelihood of confusion, mistake or deception; or

(d) linking Defendants' Web site or services to PEI's Web site at "Playboy.com";

(e) otherwise engaging in any other acts or conduct which would cause consumers to erroneously believe that Defendants' goods or services are somehow sponsored by, authorized by, licensed by, or in any other way associated with PEI.

3. Defendants, their officers, agents, servants, employees, attorneys, parent companies, subsidiaries and related companies and all persons acting for, with, by, through or under them, are ENJOINED from diluting the distinctive quality of the PLAYBOY Trademarks.

ORDER

AND NOW, this day of NOVEMBER, 1998, it is hereby

[10] ORDERED that Judgment is entered in favor of the plaintiff Playboy Enterprises, Inc. and against the defendants Universal Tel–A–Talk, Inc. and Stanley Huberman in the amount of $10,000, jointly and severally.

It is further ORDERED that Judgment is entered in favor of the defendant Adult Discount Toys and against the plaintiff Playboy Enterprises, Inc.

[1] As noted below, there is no evidentiary basis for holding Adult Discount Toys liable for the events that are at issue here. Accordingly, Adult Discount Toys will be dismissed. Hereinafter, the use of the word "defendants" applies only to Universal Tel–A–Talk and Stanley Huberman.

Eric Weinstein, New York, NY, for plaintiff.

Jon Muskin, Chicago, IL, for defendant.

OPINION AND ORDER

MARTIN, J.

[1] Plaintiff and defendant both use the title AISLE SAY for theater reviews. Plaintiff whose reviews currently appear regularly in "Singles Almanac," a magazine distributed to approximately 40,000 people in the greater New York area, has used the title AISLE SAY for nineteen years. Defendant has published theater reviews on an Internet web cite using the title AISLE SAY since 1995.

The Court is faced with the situation of two good faith users of the same trade name who operate in distinct markets. Plaintiff has never registered AISLE SAY. While the Court accepts plaintiff's testimony that she introduced herself to defendant in 1992 and mentioned AISLE SAY to him, the Court also credits the testimony of defendant that he has no recollection of this event and was not aware of the plaintiff's use of the name at the time he established his web cite. To avoid confusion, defendant has added a disclaimer to his web page stating that it is not connected to the plaintiff's column. Plaintiff did, however, introduce the testimony of two theater professionals who had been confused by the fact that two reviewers were using the name AISLE SAY.

DISCUSSION

As in all such cases, the parties have placed emphasis on the eight factors set forth by the Second Circuit in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir.1995), cert. denied, 368 U.S. 820, 82 S.Ct. 36, 7 L.Ed.2d 25 (1961). The factors are: (1) the strength of the plaintiff's mark; (2) the similarity between the two marks; (3) the proximity of the products in the marketplace; (4) the likelihood that the prior user will bridge the gap between the two products; (5) evidence of actual confusion; (6) defendant's bad faith; (7) the quality of the defendant's product; and (8) the sophistication of the relevant consumer group. Id.

A review of the Polaroid factors does not provide a clear guide to the proper outcome of this dispute:

1. Strength of the mark. A mark's strength is defined as its tendency to identify goods as emanating from a particular source. This is assessed according to two factors: first, the degree to which the mark is inherently distinctive; and second, the degree to which it is distinctive in the marketplace. The inherent distinctiveness of a mark is gauged according to whether it is generic, descriptive, suggestive or fanciful. W.W.W. Pharmaceutical Co. v. Gillette Co., 984 F.2d 567, 572 (2d Cir.1993).

Plaintiff argues that AISLE SAY is a strong mark because it is fanciful, and defendant argues that it is weak because plaintiff's column is known to a relatively small number of persons. While the Court would consider the mark as more suggestive than fanciful, the mark is original enough that plaintiff would have the right to register it and enforce it against a bad faith user. Defendant is correct, however, that plaintiff's use of the mark is not widely known. Still, this factor favors plaintiff.

2. Similarity of the marks. There is no question that the marks are for practical purposes identical, and this factor favors plaintiff.

[2] 3. The competitive proximity of the products. If one considers the product simply as theater reviews, plaintiff and defendant's products are in direct competition. However, it is more appropriate to ask whether plaintiff's reviews compete with defendant's reviews for readers. The answer to that question is no, because plaintiff's reviews appear in print in a specific magazine while defendant publishes his reviews only at his web cite. Thus, this factor favors defendant.

4. The likelihood that plaintiff will bridge the gap. Plaintiff does not contend that she has any plans to distribute her reviews on the Internet. Thus, this factor favors defendant.

5. Actual confusion. While there was evidence showing some confusion involving two theater professionals, there was no evidence that either the magazine readers of plaintiff's reviews or the Internet visitors to the defendant's web cite were confused. Thus, this factor appears neutral at best.

6. The defendant's good faith. The Court is persuaded that defendant acted in complete good faith in adopting the name AISLE SAY for his web cite, and this factor strongly favors defendant.

7. The quality of the defendant's product. While the evidence indicates that the defendant's reviews are highly regarded, this is a subjective matter and one can understand why someone like plaintiff, who takes great pride in her work, would be concerned that someone else's reviews would be attributed to her. Thus, this factor favors plaintiff.

8. The sophistication of the buyers. To the extent that this factor focuses on the likelihood that the purchaser will be so familiar with the relevant market that he or she will not be confused as to the source of the review, it favors plaintiff, since a sophisticated playgoer may still be unsophisticated concerning the difference between reviews on the Internet and reviews in a magazine.

While four of the eight factors favor plaintiff and only three favor defendant, most of the factors favoring plaintiff tilt only slightly in her favor. Moreover, the eight factor test is not exclusive, and is not to be applied mechanically by totting up the number of factors weighing in each party's favor. Paddington Corp. v. Attiki Importers & Distribs., Inc., 996 F.2d 577, 584 (2d Cir.1993)

"The essence of ... unfair competition claims, under both federal and New York law 'is that the use of the infringing term creates the likelihood of consumer confusion.... The essential inquiry is whether an appreciable number of ordinary prudent prospective [customers] are likely to be confused or misled." ' Marshak v. Green, 505 F.Supp. 1054, 1058 (S.D.N.Y.1981) (quotation and citations omitted); see also Mushroom Makers, Inc. v. R.G. Barry Corp., 580 F.2d 44, 47 (2d Cir.1978).

Here, a balancing of the relevant factors suggests that defendant should not be prohibited from using a name that he adopted in good faith, because there is no danger that an appreciable number of consumers will be misled as to the source of the review they are reading.

[3] Given the fact that there is no real competition between plaintiff's and defendant's reviews and that defendant has added a disclaimer to his web cite, it is unlikely that plaintiff will suffer any real economic disadvantage or damage to her reputation if defendant is permitted to continue to use AISLE SAY to identify his web cite. To enjoin defendant from using the name AISLE SAY would cause him far greater harm.

CONCLUSION

For the foregoing reasons, the complaint is dismissed. To the extent that defendant's counterclaims may be construed as seeking a declaration that he may continue to use AISLE SAY in connection with his web cite, that relief is granted; but otherwise, the counterclaims are dismissed.

SO ORDERED.

[1010] Bruce P. Keller, Esquire (Argued), S. Zev Parnass, Esquire, Debevoise & Plimpton, New York, NY, Robert N. Spinelli, Esquire, Catherine N. Jasons, Esquire, Kelley Jasons McGowan Spinelli & Hanna, Philadelphia, PA, for Appellants.

Tracy P. Hunt, Esquire, Newtown, PA, Paul L. Lauricella, Esquire (Argued), The Beasley Firm, Philadelphia, PA, for Appellee.

Before: AMBRO, CHAGARES and COWEN, Circuit Judges.

OPINION OF THE COURT

AMBRO, Circuit Judge.

Table of Contents

  I. Facts ....................................................................... 1011 II. Procedural History .......................................................... 1012

 [1011] III. Jurisdiction ................................................................ 1013 IV. Standard of Review .......................................................... 1013  V. False Endorsement Under the Lanham Act ...................................... 1014      A. The Legal Standard for Likelihood of Confusion in False Endorsement          Claim Brought Under § 43(a) of the Lanham Act ..................... 1015        1. First Amendment Limits on the Lanham Act .............................. 1015        2. Tailoring the Lapp Factors to False Endorsement Claims ................ 1018        3. Distinguishing Between Subsections of Section 43(a)(1) ................ 1020      B. Application to the Estate's Claim ....................................... 1022        1. The Standard Release Contract ......................................... 1022        2. Genuine Issues of Material Fact Remain ................................ 1023 VI. Unauthorized Use of Name or Likeness Under Pennsylvania Law ................. 1025      A. The NFL's Copyright in the Sound Clips .................................. 1026      B. Express Preemption ...................................................... 1026        1. Equivalent to an Exclusive Right? ..................................... 1027        2. Copyrightable Subject Matter? ......................................... 1027      C. Conflict Preemption ..................................................... 1028VII. Conclusion .................................................................. 1032

John Facenda, a Philadelphia broadcasting legend, provided his voice to many productions of NFL Films, Inc. before his death in 1984. These well-known productions recounted tales of the National Football League with filmed highlights, background music, and Facenda's commanding narration. More than two decades after Facenda's death, NFL Films used small portions of his voice-over work in a cable-television production about the football video game "Madden NFL 06." That production, entitled "The Making of Madden NFL 06," sparked this controversy.

Facenda's Estate ("the Estate") sued NFL Films, the National Football League, and NFL Properties (which we refer to collectively, where appropriate, as "the NFL") in the United States District Court for the Eastern District of Pennsylvania. The Estate claims that the program's use of Facenda's voice falsely suggested that Facenda endorsed the video game, violating the federal Lanham Act, which deals with trademarks and related theories of intellectual property. The Estate also claims that the program was an unauthorized use of Facenda's name or likeness in violation of Pennsylvania's "right of publicity" statute. In its defense the NFL argued, among other things, that its copyrights in the original NFL Films productions that Facenda narrated gave it the exclusive right to use portions of those productions' soundtracks as it saw fit, including in the television piece at issue.

We must resolve this clash between parties claiming different types of intellectual property. Although we agree with much of the Court's trademark analysis, for the reasons that follow we vacate the Court's grant of summary judgment for the Estate and remand for trial on the Lanham Act claim. We affirm, however, the District Court's grant of summary judgment to the Estate on the Pennsylvania right-of-publicity claim.

I. Facts

Facenda won national acclaim for his NFL Films work. His Estate credits that fame to the special qualities of his voice. In various depositions, several representatives for NFL Films described Facenda's deep baritone voice as "distinctive," "recognizable," "legendary," and as known by [1012] many football fans as "the Voice of God." As recently as 1999, NFL Films released works branded as featuring "the Legendary Voice of John Facenda."

For decades, Facenda worked on a session-by-session basis under an oral agreement, receiving a per-program fee. But shortly before he died from cancer in 1984, Facenda signed a "standard release" contract stating that NFL Films enjoys "the unequivocal rights to use the audio and visual film sequences recorded of me, or any part of them . . . in perpetuity and by whatever media or manner NFL Films. . . sees fit, provided, however, such use does not constitute an endorsement of any product or service."

In 2005, NFL Films produced "The Making of Madden NFL 06" about the soon-to-be released annual update of the video game that simulates NFL games. This production is 22 minutes long and was shown on the NFL Network eight times in a three-day span leading up to the release of the video game to retail stores. It featured interviews with NFL players, the game's producers, and others. It also included several sequences comparing the video game's virtual environment with the actual NFL environment, extolling the realism of everything from the stadiums to the game play. The end of the program featured a countdown to the video game's release.

The District Court^[1] found that not a single critical observation was made in this video regarding Madden NFL 06; all the commentary was positive. Other media, outside of the NFL Network, also covered the release of the game and addressed similar topics (albeit with the inclusion of the occasional criticism or recitation of the game's perceived faults).

The program used sound recordings, taken from earlier NFL Films' productions, of three sentences read by Facenda: (1) "Pro Football, the game for the ear and the eye," (2) "This sport is more than spectacle, it is a game for all seasons," and (3) "X's and O's on the blackboard are translated into aggression on the field." These excerpts from his NFL Films work total 13 seconds of the program. In its opening brief to our Court, the NFL admits that these excerpts were chosen "to underscore the degree to which the video game authentically recreates the NFL experience."

The producers of the program used the excerpts in a slightly altered form. The sound waves in the original recording of Facenda's voice were digitally filtered to sound more like the synthesized speech one might hear from a computer. (NFL Films President Steve Sabol described the results of this aesthetic choice by the show's producers as "awful.")

The NFL has an agreement with EA Sports, the makers of Madden NFL 06, which provides the NFL with royalty revenue in return for the use of the NFL's intellectual property. Various e-mail messages in the record suggest that NFL Films sought to create the television program as a promotion for Madden NFL 06, describing it as the "Madden Promo" or as "the Advertisements" in actors' release forms. But in their depositions, many NFL Films executives testified that the program was a documentary and denied that it was a commercial or that it was motivated by promotional considerations.

II. Procedural History

Facenda's Estate initially sued the NFL for false endorsement under § 43(a) of the [1013] Lanham Act, 15 U.S.C. § 1125(a), and for unauthorized use of name or likeness (known as the "right of publicity") under 42 Pa. Cons.Stat. Ann. § 8316.^[2] The District Court split the case into a liability phase and a damages phase. After discovery in the liability phase, the parties cross-moved for summary judgment and agreed at a hearing that the District Court could resolve the liability issues on the evidence already before it. The District Court granted the Estate's motion for summary judgment on both the false-endorsement claim and the right-of-publicity claim. Facenda v. NFL Films, Inc., 488 F.Supp.2d 491, 514 (E.D.Pa.2007).

III. Jurisdiction

The District Court had jurisdiction under 15 U.S.C. § 1121 because of the Estate's Lanham Act claims. It exercised supplemental jurisdiction over the state-law claims under 28 U.S.C. § 1367.

Because our Court has not yet issued an opinion interpreting the Lanham Act in the context of a false-endorsement claim, and because the District Court perceived a conflict between our caselaw (on the general interpretation of § 43(a)(1)(A) of the Lanham Act) and a single district-court case from the Eastern District of Pennsylvania (which dealt with the specific issue of false endorsement), the District Court certified the issue for interlocutory appeal. Facenda v. NFL Films, Inc., No. 06-3128, 2007 WL 1575409, at *2-3 (E.D.Pa. May 24, 2007). It also certified whether copyright law preempts the Estate's state-law right-of-publicity claim because the caselaw (across all federal courts of appeals) does not reflect a "consistent line of reasoning." Id. at *3. We granted the petition for interlocutory appeal and have jurisdiction under 28 U.S.C. § 1292(b).

IV. Standard of Review

We review the District Court's legal conclusions de novo, reading all facts in the light most favorable to the party that did not move for summary judgment—the Estate. Lucent Info. Mgmt., Inc. v. Lucent Techs., Inc., 186 F.3d 311, 315 (3d Cir. 1999). The Estate argues that we review the District Court's "factual findings" under a "clearly erroneous" standard. But, to support this proposition, the Estate cites a case reviewing a preliminary injunction. Sandoz Pharms. Corp. v. Richardson-Vicks, Inc., 902 F.2d 222, 226 (3d Cir.1990). We recently explained the important distinction between the standards of review for a preliminary injunction and summary judgment. Doeblers' Pa. Hybrids, Inc. v. Doebler, 442 F.3d 812, 820 (3d Cir.2006).

"Failure to strictly observe the principles governing summary judgment becomes particularly significant in a trademark or tradename action, where summary judgments are the exception." Country Floors, Inc. v. P'ship Composed of Gepner & Ford, 930 F.2d 1056, 1062-63 (3d Cir.1991). On a summary judgment motion, the District Court must not find facts. See Doeblers', 442 F.3d at 820 ("A District Court should not weigh the evidence and determine the truth itself, but should instead determine whether there is a genuine issue for trial."). Rather, it should identify undisputed facts and resolve the remaining disputed facts in [1014] favor of the non-movant. For example, "[c]redibility determinations that underlie findings of fact are appropriate to a bench verdict," but "[t]hey are inappropriate to the legal conclusions necessary to a ruling on summary judgment." Country Floors, 930 F.2d at 1062. When considering the District Court's grant of summary judgment to the Estate on a particular claim, "the sole question before [our] Court is whether plaintiff met its burden of demonstrating that it was entitled to judgment as a matter of law." Doeblers', 442 F.3d at 820.

V. False Endorsement Under the Lanham Act

The Estate alleges that the use of sound samples of Facenda's voice in "The Making of Madden NFL 06" falsely implied that the Estate had agreed to endorse the video game that is the production's subject. This false endorsement, they argue, violates § 43(a)(1)(A) of the Lanham Act. This provision reads as follows:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person. . .

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).^[3] To prove a violation of § 43(a)(1)(A) in a false endorsement case, a plaintiff must show that: (1) its mark is legally protectable; (2) it owns the mark; and (3) the defendant's use of the mark to identify its goods or services is likely to create confusion concerning the plaintiff's sponsorship or approval of those goods or services. See Commerce Nat'l Ins. Servs., Inc. v. Commerce Ins. Agency, Inc., 214 F.3d 432, 437 (3d Cir.2000) (listing the three prongs of a § 43(a) claim).

The NFL does not deny that courts broadly interpret the terms "name, symbol, or device" in § 43(a)(1) to include other indicia of identity, such as a person's voice. See Waits v. Frito-Lay, Inc., 978 F.2d 1093, 1106-07 (9th Cir.1992) (holding that § 43(a) claims based on voice are cognizable). Nor does the NFL deny that Facenda's voice is distinctive and generally protectable as an unregistered mark. Thus, the Estate has satisfied the first prong of a § 43(a) claim. The NFL also declines to contest the second prong—that the mark is owned by the Estate.

Our case thus focuses on the third prong: whether the NFL's use of Facenda's voice was "likely to cause confusion" among consumers by suggesting that Facenda's Estate has an "affiliation, connection, or association" with EA Sports's video game implying that the Estate "sponsor[s]" or "approve[s] of" that product. 15 U.S.C. § 1125(a)(1)(A).

[1015] A. The Legal Standard for Likelihood of Confusion in False Endorsement Claims Brought Under § 43(a) of the Lanham Act

The NFL contends that the District Court applied the wrong legal standard under § 43(a)(1) to the Estate's false-endorsement claim. It also argues that our Constitution's First Amendment right to free speech prohibited application of the Lanham Act to its television production in this case. Because the NFL's First Amendment defense presents a threshold issue that would affect how we apply trademark law in this case, we address that argument first. Ultimately rejecting the First Amendment defense, we outline the multi-factor test courts use to evaluate the likelihood of consumer confusion when faced with a false-endorsement claim under § 43(a)(1)(A). Finally, we respond to the NFL's various disagreements with the District Court's analysis. The NFL's primary argument is that the legal standards under § 43(a)(1)(A) and § 43(a)(1)(B)^[4] do not differ from each other, which implies that the Estate was required to bring evidence of actual confusion to prove a likelihood of confusion. We reject that argument and thus adopt a trademark analysis similar to the District Court's.

1. First Amendment Limits on the Lanham Act

The NFL argues that its production constitutes informational expression, artistic expression, or both, and is thus protected by the First Amendment. It asks our Court to adopt the balancing test of the Second Circuit Court of Appeals' decision in Rogers v. Grimaldi, which weighs "the public interest in avoiding consumer confusion" against "the public interest in free expression." 875 F.2d 994, 999 (2d Cir. 1989). In that case, the dancer and actress Ginger Rogers sued the producers and distributors of "Ginger and Fred," a film about a pair of Italian dancers nicknamed for Rogers and Fred Astaire. The court rejected Rogers's false-endorsement claim. Under the Rogers test, the proper balance between trademark law and free expression "will normally not support application of the [Lanham] Act unless the title [1] has no artistic relevance to the underlying work whatsoever, or . . . [2] the title explicitly misleads as to the source or the content of the work." Id. Because the film's title (1) had an "ironic" and "ambiguous" meaning related to its subject, id. at 1001, and (2) did not directly state that it depicted Rogers, free-speech concerns outweighed survey evidence that "some members of the public would draw the incorrect inference that Rogers had some involvement with the film," id.

The analysis of Rogers has been adopted by three other Courts of Appeals. See Parks v. LaFace Records, 329 F.3d 437, 451-52 (6th Cir.2003) (applying Rogers to a song title); Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 902 (9th Cir.2002) (same); Sugar Busters LLC v. Brennan, 177 F.3d 258, 269 & n. 7 (5th Cir.1999) (adopting Rogers in a case concerning a book title). Soon after announcing the Rogers test, the Second Circuit stated that the test is "generally applicable to Lanham Act claims against works of artistic expression, a category that includes parody." Cliffs Notes, Inc. v. Bantam Doubleday Dell Publ'g Group, 886 F.2d 490, 495 (2d Cir.1989) (applying Rogers to a parody book cover). But we have identified only [1016] one federal appellate case other than Cliffs Notes that applies the Rogers test to something other than the title of a creative work. See ETW Corp. v. Jireh Publ'g, Inc., 332 F.3d 915, 936-37 (6th Cir.2003) (applying Rogers to a commemorative sports painting of Tiger Woods's victory at the Masters golf tournament in 1997). But see id. at 943-49 (Clay, J., dissenting) (declining to endorse the application of Rogers in that case and arguing that the majority had applied Rogers in a faulty fashion).

The NFL asks us also to adopt Rogers and apply it to the use of "The Making of Madden NFL 06." Before considering whether either prong of the Rogers test applies, however, we must decide whether the television production is a "work[ ] of artistic expression," Cliffs Notes, 886 F.2d at 495, as understood in the context of construing the Lanham Act narrowly to avoid a conflict with the First Amendment, see Rogers, 875 F.2d at 998. Although the District Court did not address the NFL's First Amendment defense in its opinion,^[5] the categorization of speech is a question of law that we must resolve through independent review of the program. See Connick v. Myers, 461 U.S. 138, 148 n. 7, 150 n. 10, 103 S.Ct. 1684, 75 L.Ed.2d 708 (1983) ("[W]e are compelled to examine for ourselves the statements in issue and the circumstances under which they are made to see whether . . . they . . . are of a character which the principles of the First Amendment . . . protect." (quotation marks omitted)).

The NFL posits that its program, taken as a whole, is a work of artistic expression, and that the producers' use of the particular sound clips at issue in this case represented an artistic choice. In the NFL's view, the strong association between Facenda's voice and the NFL means that the use of his voice conveyed the message that Madden NFL 06 provides an accurate rendering of NFL game play. By applying digital sound effects to make the voice sound computerized and adding a metallic echo, the program's producers aimed to connect the NFL's history (symbolized by Facenda's voice, which narrated much of that history) to a modern video game (symbolized by digital filtering of the voice). The NFL contends that it had the right to choose how to convey those messages, even if it meant using portions of recordings of Facenda's voice.

The NFL argues additionally that its program cannot be mere commercial speech—which is defined as "speech that does no more than propose a commercial transaction," United States v. United Foods, Inc., 533 U.S. 405, 409, 121 S.Ct. 2334, 150 L.Ed.2d 438 (2001), and is not as protected as artistic expression, id.—because it contains information that also appeared in news accounts of the release of Madden NFL 06. This informational material includes descriptions of the video game's realism, explanations of the game's features, and reports of gamers' and NFL players' enthusiasm for the new version. In this sense, the NFL argues, its program functions as a documentary explaining how the video game was made and depicting the phenomenon of the game's popularity.

The NFL also argues that, even if the program has promotional aspects (a point which it concedes only for the sake of argument), they are "inextricably intertwined" with the artistic and informational elements, meaning that we must treat the [1017] program as "fully protected speech." Riley v. Nat'l Fed'n of the Blind of N.C., Inc., 487 U.S. 781, 796, 798, 108 S.Ct. 2667, 101 L.Ed.2d 669 (1988) (applying "exacting First Amendment scrutiny" to a state regulation of charitable solicitation materials); see In re Orthopedic Bone Screw Prods. Liab. Litig., 193 F.3d 781, 793 (3d Cir. 1999) (stating that Riley applies where "speech consists of `complex mixtures of commercial and noncommercial elements'" (quoting Bolger v. Youngs Drug Prods. Corp., 463 U.S. 60, 81, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983) (Stevens, J., concurring))).

The Estate contends that the program is commercial speech, and we agree. Our Court has "three factors to consider in deciding whether speech is commercial: (1) is the speech an advertisement; (2) does the speech refer to a specific product or service; and (3) does the speaker have an economic motivation for the speech." U.S. Healthcare, Inc. v. Blue Cross of Greater Phila., 898 F.2d 914, 933 (3d Cir. 1990) (citing Bolger, 463 U.S. at 66-67, 103 S.Ct. 2875). "An affirmative answer to all three questions provides `strong support' for the conclusion that the speech is commercial." Id. (quoting Bolger, 463 U.S. at 67, 103 S.Ct. 2875). This inquiry involves making "a `"commonsense distinction between speech proposing a commercial transaction . . . and other varieties of speech."'" Orthopedic Bone Screw, 193 F.3d at 792 (quoting Bolger, 463 U.S. at 65, 103 S.Ct. 2875 (quoting Ohralik v. Ohio State Bar Ass'n, 436 U.S. 447, 455-56, 98 S.Ct. 1912, 56 L.Ed.2d 444 (1978))).

The first factor presents a novel issue, because the program is not a traditional 30- or 60-second television advertisement. But ultimately the question is not close. The Estate's comparison of the program to a late-night, half-hour-long "infomercial" is apt. Like an infomercial, the program focuses on one product, explaining both how it works and the source of its innovations, all in a positive tone.^[6] While it does not advertise the game's price, the program did feature a clock at its ending that displayed the number of days until the video game's release for sale. Furthermore, the program was only broadcast eight times in a three-day span immediately before the release of the video game to retail stores—much like an advertisement for an upcoming film. The second factor is easily satisfied because the program's sole subject is Madden NFL 06. The show does not refer to other video games— excepting previous years' versions of "Madden," which the program portrays as antiquated. The third factor is satisfied by NFL's licensing agreement with EA Sports, which gives the NFL a direct financial interest in sales of the video game.^[7] Moreover, the video game's general promotion of NFL-branded football provides an additional indirect financial motivation. In this context, we deem "The Making of [1018] Madden NFL 06" to be commercial speech.

Although we err on the side of fully protecting speech when confronted with works near the line dividing commercial and noncommercial speech, we do not view "The Making of Madden NFL 06" as close to that boundary. Unlike the film title in Rogers, the books in Cliffs Notes, or the painting in ETW, the work accused of trademark infringement in our case aims to promote another creative work, the video game. Even if Rogers should apply beyond titles (an extension undertaken, to our knowledge, in only the two cases mentioned above), we decline to apply it here in a context with that additional degree of separation. Moreover, the artistic and informational messages that the NFL contends the program conveys amount to mere praise for the product, attesting to its realism and popularity. As the District Court noted, "no one in The Making of Madden had a negative thing to say about the game," 488 F.Supp.2d at 500, unlike news accounts that mentioned various criticisms. This belies any argument that the program has a documentary purpose.

Because we hold that "The Making of Madden NFL 06" is commercial speech rather than artistic expression, we need not reach the issue whether our Court will adopt the Rogers test. We acknowledge that commercial speech does receive some First Amendment protection. See, e.g., United Foods, Inc., 533 U.S. at 409, 121 S.Ct. 2334; Central Hudson Gas & Elec. Corp. v. Pub. Serv. Comm'n of N.Y., 447 U.S. 557, 561, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Yet the Lanham Act customarily avoids violating the First Amendment, in part by enforcing a trademark only when consumers are likely to be misled or confused by the alleged infringer's use. See id. at 563, 100 S.Ct. 2343 ("[T]here can be no constitutional objection to the suppression of commercial messages that do not accurately inform the public about lawful activity."); see also 6 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 31:142, at 31-229 (4th ed. 1996 & Supp.2008) (describing the low level of First Amendment protection for misleading speech); Alex Kozinski, Trademarks Unplugged, 68 N.Y.U. L.Rev. 960, 973 (1993) ("So long as trademark law limits itself to its traditional role of avoiding confusion in the marketplace, there's little likelihood that free expression will be hindered."). Thus, we reject the NFL's First Amendment defense and proceed to analyze the Estate's false-endorsement claim under trademark law without overlaying the balancing test of Rogers.

2. Tailoring the Lapp Factors to False Endorsement Claims

The Estate claims that the NFL violated § 43(a)(1)(A) of the Lanham Act by falsely implying that Facenda (or, as here, his successor in interest) had endorsed Madden NFL 06. This claim is considered a trademark claim because Facenda's voice is a distinctive mark, the Estate owns the mark, and "The Making of Madden NFL 06" allegedly creates a likelihood of confusion that Facenda's Estate has an "affiliation, connection, or association" with the Madden NFL 06 video game implying that the Estate "sponsor[s]" or "approve[s] of" that game. 15 U.S.C. § 1125(a)(1)(A).

Section 43(a)(1)(A) covers more than just false endorsement claims. In fact, false endorsement claims are rare enough that our Court has not previously announced the legal standard that applies to them. A more typical claim under § 43(a)(1)(A) involves one company accusing another company of using the first company's unregistered mark. We therefore must determine whether the District [1019] Court analyzed the Estate's Lanham Act claim under a standard suitably tailored to the false endorsement context.

Our Court evaluates § 43(a)(1)(A) claims under the ten-factor test outlined in Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 463 (3d Cir.1983) (quoting Scott Paper Co. v. Scott's Liquid Gold, Inc., 589 F.2d 1225, 1229 (3d Cir.1978), abrogated on other grounds by Pullman-Standard v. Swint, 456 U.S. 273, 287, 102 S.Ct. 1781, 72 L.Ed.2d 66 (1982)). We subsequently adapted Lapp slightly to accommodate cases involving either directly competing or non-competing goods. Applying Lapp, we consider the following ten factors:

(1) the degree of similarity between the owner's mark and the alleged infringing mark;

(2) the strength of the owner's mark;

(3) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase;

(4) the length of time the defendant has used the mark without evidence of actual confusion arising;

(5) the intent of the defendant in adopting the mark;

(6) the evidence of actual confusion;

(7) whether the goods, competing or not competing, are marketed through the same channels of trade and advertised through the same media;

(8) the extent to which the targets of the parties' sales efforts are the same;

(9) the relationship of the goods in the minds of consumers, whether because of the near-identity of the products, the similarity of function, or other factors; [and]

(10) other facts suggesting that the consuming public might expect the prior owner to manufacture both products, or expect the prior owner to manufacture a product in the defendant's market, or expect that the prior owner is likely to expand into the defendant's market.

A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 237 F.3d 198, 215 (3d Cir.2000).

The Lapp factors allow courts to compare the marks of two competing or non-competing goods. But this makes Lapp an uncomfortable fit in a false-endorsement case like this one. This case presents the question whether the NFL used the Estate's mark (i.e., Facenda's voice) in a way that falsely implied that the Estate endorsed a video game. Rather than protecting its mark with respect to a particular product, the Estate seeks to reserve the exclusive right to grant or deny permission to those who wish to use Facenda's voice to promote unspecified products in the future.

To address this disconnect between Lapp and false-endorsement claims, the District Court concluded that under § 43(a)(1)(A) the traditional Lapp factors apply in a modified form specifically crafted for false-endorsement cases by the Ninth Circuit Court of Appeals:

1. the level of recognition that the plaintiff has among the segment of the society for whom the defendant's product is intended;

2. the relatedness of the fame or success of the plaintiff to the defendant's product;

3. the similarity of the likeness used by the defendant to the actual plaintiff;

4. evidence of actual confusion;

5. marketing channels used;

6. likely degree of purchaser care;

7. defendant's intent [in] selecting the plaintiff; and

8. likelihood of expansion of the product lines.

[1020] Although these are all factors that are appropriate for consideration in determining the likelihood of confusion, they are not necessarily of equal importance, nor do they necessarily apply to every case.

Downing v. Abercrombie & Fitch, 265 F.3d 994, 1007-08 (9th Cir.2001).

The District Court reasoned that each of the Downing factors corresponds to one or more of the Lapp factors. Facenda, 488 F.Supp.2d at 510 n. 6. The Court linked Downing factor 1 to Lapp factors 2 and 8, Downing factor 2 to Lapp factor 9, Downing factor 3 to Lapp factor 1, Downing factor 4 to Lapp factor 6 (a nearly exact correspondence), Downing factor 7 to Lapp factor 5 (also an especially close correspondence), and Downing factor 8 to Lapp factor 10. Id. The only Lapp factor left unmatched is the fourth, which we address below.

We substantially agree with the District Court's approach to tailoring the Lapp factors in the manner of Downing. We augment the list set out above by noting that Downing factor 5 is analogous to Lapp factor 7, and that Downing factor 6 relates to Lapp factor 3. Also, we modify the fourth factor of Downing by adding the words "and the length of time the defendant employed the allegedly infringing work before any evidence of actual confusion arose." This accounts for the fourth Lapp factor, which has no corresponding factor in Downing. Otherwise, we hold that the Downing factors retain the substance of Lapp while appropriately tailoring the language to false endorsement claims. Cf. Century 21 Real Estate Corp. v. Lendingtree, Inc., 425 F.3d 211, 224-26 (3d Cir.2005) (tailoring the Lapp factors for "nominative use" cases, in which the alleged infringer refers to a competitor's product in discussing its own product); A & H Sportswear, 237 F.3d at 207 ("Although all of the factors can be useful, the Lanham Act does not require that [the Lapp factors] be followed precisely so long as the relevant comparisons suggested by the test are made.").

In adopting our slightly modified version of Downing, affirming the District Court's approach in large part, we emphasize that this formulation of the Lapp factors applies only to false endorsement claims. This holding—seeking only to uphold the substance of Lapp as the set of factors for courts to consider when evaluating likelihood of confusion—does not critique any of our Court's prior precedent in the area of trademark infringement.

3. Distinguishing Between Subsections of Section 43(a)(1)

Under the slightly modified Downing test, evidence of actual confusion among consumers about whether Facenda's Estate had agreed to endorse Madden NFL 06 is one factor to consider among eight. A common way of providing such evidence of actual confusion is to conduct a survey, but the Estate did not conduct one. The District Court held that the lack of survey evidence (or even anecdotal evidence of actual confusion) was "not fatal." Facenda, 488 F.Supp.2d at 512. Even though the actual-confusion factor can be important, survey evidence is expensive and difficult to obtain, leading some courts not to penalize plaintiffs for failing to obtain it. Id. at 512-13. Moreover, evidence of actual confusion was especially difficult to obtain in this case because the program aired on NFL Network (a cable network, we note, to which many households do not have access) only eight times. See id. at 513. Weighing all the Downing factors, the District Court held that a likelihood of confusion did exist about whether Facenda's Estate agreed to endorse Madden NFL 06. Id.

[1021] The NFL strenuously objects to the District Court's choice of legal standard under § 43(a)(1)(A) as well as its legal conclusion about whether evidence of actual confusion was required. It argues that subsections (a)(1)(A) and (a)(1)(B) have the same standard, which distinguishes impliedly false endorsements from expressly false endorsements. It also contends that claims of impliedly false endorsement like the Estate's—as opposed to, for example, an expressly false endorsement consisting of sound clips of Facenda's voice digitally stitched together to say "I think you should buy Madden NFL 06"—must be proven with evidence that the program actually confused consumers. At the very least, the NFL argues, the District Court should have required evidence that consumers actually received the implied message. (The NFL distinguishes receipt of a false message from belief in that falsehood.)

We reject the NFL's arguments about the proper legal standard. The Lapp factors apply, modified for false endorsement cases as described above, and no single factor is dispositive. Our Court has made the difference in the standards under (a)(1)(A) and (a)(1)(B) explicit:

Some actions brought under the Lanham Act require proof of actual confusion and others do not. In an action brought under sections 32 and 43(a) of the Lanham Act for trademark infringement, 15 U.S.C. §§ 1114(1) and 1125(a)(1)(A), plaintiff need not provide proof of actual confusion; he need only show likelihood of confusion. In an action brought under another part of section 43(a) of the Lanham Act for false advertising, 15 U.S.C. § 1125(a)(1)(B), plaintiff need not prove the challenged advertising misled the public if he can show it was literally false. However, if his claim is not that the advertising was false but that it was misleading, he must prove the public was actually misled or confused by it.

Fisons Horticulture, Inc. v. Vigoro Indus., Inc., 30 F.3d 466, 472 n. 8 (3d Cir.1994) (citations omitted). For claims brought under subsection (a)(1)(A), only a likelihood of confusion is required. The distinction between impliedly false and expressly false statements that the NFL urges us to apply comes from the jurisprudence under subsection (a)(1)(B). We decline the NFL's invitation to muddle the two separate bodies of law that have developed under the separate subsections of § 43(a).

The statutory text of the two subsections differs; only subsection (a)(1)(A) includes the phrase "likely to cause confusion." 15 U.S.C. § 1125(a)(1)(A); see Facenda, 488 F.Supp.2d at 507-08. The case law also differs; our Court has long applied the Lapp factors in (a)(1)(A) cases but not in (a)(1)(B) cases. See Facenda, 488 F.Supp.2d at 508-09. The leading treatise on trademark law explains that plaintiffs could bring false endorsement claims under either (a)(1)(A) or (a)(1)(B). 5 McCarthy on Trademarks § 28.15, at 28-20 ("Both prongs of the post-1989 version of § 43(a) would seem to be implicated in false endorsement cases."). But that does not mean that plaintiffs must bring claims under both subsections. Nor does it mean that the elements of (a)(1)(A) claims and (a)(1)(B) claims are the same, as the NFL alleges. In fact, (a)(1)(A) requires only a likelihood of confusion whereas claims of impliedly false statements under (a)(1)(B) require showing actual confusion or misleading statements.

The NFL cites a number of cases for the proposition that we must require evidence of actual confusion by (or, at a minimum, actual receipt of) the false-endorsement [1022] message. All but one of these cases were decided under subsection (a)(1)(B), the false advertising prong of § 43(a). See Novartis Consumer Health, Inc. v. Johnson & Johnson-Merck Consumer Pharms. Co., 290 F.3d 578, 586 (3d Cir.2002) (quoting § 43(a)(1)(B) and describing the legal standard for false advertising claims); Warner-Lambert Co. v. Breathasure, Inc., 204 F.3d 87, 91-92 (3d Cir.2000) (same); Johnson & Johnson-Merck Consumer Pharms. Co. v. Rhone-Poulenc Rorer Pharms., Inc., 19 F.3d 125, 129 & n. 6 (3d Cir.1994) (same); Sandoz, 902 F.2d at 227 (quoting only § 43(a), not specifying which subsection, but describing the § 43(a) claim as one for false advertising); U.S. Healthcare, 898 F.2d at 921-23 (quoting § 43(a) and both subsections' predecessors but citing and discussing false-advertising cases).

Only a single opinion from a district court both cites subsection (a)(1)(A) and requires evidence of actual confusion. Seale v. Gramercy Pictures, 964 F.Supp. 918 (E.D.Pa.1997). That case analyzed a false endorsement claim under subsection (a)(1)(B), the false advertising prong of § 43(a)(1). Yet, when quoting the statutory language at the outset of its analysis, the Court quoted the language of subsection (a)(1)(A) but stated immediately thereafter the standard for "[a] claim for false advertising under the Lanham Act." Id. at 930 (emphasis added). As we read that case, the District Court in Seale erred (likely inadvertently) by quoting the language of subsection (a)(1)(A) rather than (a)(1)(B) as it apparently intended. But that small passage in Seale forced the District Court here to resolve the apparent conflict between Seale and our Court's precedent, including Fisons. It reviewed several cases in both the (a)(1)(A) line and the (a)(1)(B) line before deciding, correctly, that Fisons was the correct statement of the law. Facenda, 488 F.Supp.2d at 505-10. The oversight in Seale also led the NFL to spend much of its opening brief to our Court attempting to blur the distinction between (a)(1)(A) and (a)(1)(B).

We thus reject the NFL's challenge to the legal standard applied by the District Court. We adhere to the language in Fisons summarizing the difference between the subsections and view the contrary language in Seale,^[8] which regardless is not binding on our Court, as an oversight in a case that otherwise dealt with false advertising.

B. Application to the Estate's Claim

With the legal standard under § 43(a)(1)(A) settled, we turn to the application of that standard to the facts of the Estate's claim. First, we briefly explain the limited significance of the standard release contract between Facenda and NFL Films, signed shortly before his death. Second, we evaluate whether summary judgment for the Estate on its Lanham-Act false-endorsement claim was appropriate.

1. The Standard Release Contract

A threshold inquiry is whether the "standard release" contract that Facenda signed serves as a "complete defense" to the Estate's claims, as the NFL argued in the District Court. The contract states that the NFL can use its recordings featuring Facenda's voice as it sees fit, "provided, however, such use does not constitute an endorsement of any product or service." The District Court rejected the NFL's defense. It concluded that "The [1023] Making of Madden NFL 06" is "commercial in nature"—i.e., that it constitutes an endorsement of the video game—and does not fall within the terms of the contract. Id. at 501.^[9]

In interpreting the language of the contract, we would not focus on whether the program as a whole constitutes an endorsement. Instead, we would ask whether the use of Facenda's voice within the program constitutes an endorsement. Viewed in this light, the District Court's rationale does not support rejecting the defense. Yet we agree with the Court's conclusion that the contract does not bar the Estate's false-endorsement claim.

In the contract, Facenda waived his rights with regard to any uses that were not endorsements. But if the Estate succeeds in proving the elements of its false-endorsement claim, such a finding by the District Court will demonstrate that the NFL's use of Facenda's voice was an endorsement, falling outside the contract's waiver clause. On the other hand, if the Estate's false-endorsement claim were to fail, meaning that the use was not an endorsement, the contract's waiver would apply to that claim. Thus, what falls inside the Lanham Act's prohibitions defines what is outside the contract's waiver. This renders further analysis of the contract as an independent defense moot. The significance of the contract is that Facenda did not waive the right to bring a claim under the Lanham Act for false endorsement.

2. Genuine Issues of Material Fact Remain

Applying the eight Downing factors, the District Court concluded that six factors favored the Estate, while only one factor, evidence of actual confusion, favored the NFL. 488 F.Supp.2d at 510-513. (It held that the sixth factor, likely degree of purchaser care, did not apply. Id. at 513.) On balance, the Court concluded that "The Making of Madden NFL 06" was likely to confuse consumers as to whether the Estate sponsored or approved of the video game. Id. Although the NFL barely addressed the issue in its briefing to our Court, under our de novo standard of review on a grant of summary judgment, we must examine whether the District Court properly awarded summary judgment to the Estate.

The parties told the District Court that no more evidence was necessary to decide their cross-motions for summary judgment. Id. at 499 ("[B]oth parties agreed that they had no need of further discovery, and that the Court could resolve all the liability issues on the evidence already before it."). But "the mere fact that both parties seek summary judgment does not constitute a waiver of a full trial or the right to have the case presented to a jury." 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2720 (3d ed.1998), at 330-31 (citing Rains v. Cascade Indus., Inc., 402 F.2d 241, 245 (3d Cir.1968)). Although it might seem to serve principles of judicial economy, parties may not stipulate to forgoing a trial when genuine issues of material fact remain that prevent either side from succeeding on a motion for summary judgment.

Genuine disputes over material facts do exist in our case. For example, the NFL [1024] denies that it had the intent to profit unjustly from its use of Facenda's voice in the program. NFL Films executives testified in depositions, for instance, that they thought they had the right to use the sound clips they did—as long as the program was not a commercial. See Facenda, 488 F.Supp.2d at 499. The NFL Films producers did not see the production as a violation of the standard release contract because of how they perceived its documentary-like aspects. Although we concluded in Section V.A.1 above that the program is commercial speech for First Amendment purposes, that legal conclusion does not dictate the result of a factual inquiry into the NFL's intent.

The District Court appears to have disbelieved the NFL Films executives' testimony regarding intent. A dim view of deposition testimony that contradicts internal e-mails (that testimony including statements like "The whole show is a `making of' show[,] so all it does it promotes [M]adden," id. at 497) may have ample justification. But the NFL has a plausible point that the District Court was rejecting contrary evidence and making a credibility judgment, which is disallowed when ruling on a summary judgment motion. See Country Floors, 930 F.2d at 1062; cf. 10B Wright, Miller & Kane, Federal Practice and Procedure § 2730 (suggesting that summary judgment is often inappropriate when a state of mind, such as intent or knowledge, is an element of a claim).

Another issue of disputed fact is whether any consumers actually received the message that Facenda endorsed Madden NFL 06. This falls under the fourth factor of Downing, evidence of actual confusion. The Estate introduced no consumer survey evidence and no anecdotal evidence. Facenda, 488 F.Supp.2d at 498. But the Estate did produce an expert witness on the issue of consumer confusion—Jon Albert Levy, who "testified that viewers would `probably' believe, mistakenly, that there was an affiliation between Mr. Facenda and the Madden game." Id. Levy's expertise centers on providing celebrities and music to appear in advertisements and pricing those appearances. Although he admitted having no experience with consumer surveys, he also testified that he must judge whether an appearance requires permission to determine the price owed to the celebrity or musical artist (i.e., whether that price should be greater than zero). The District Court stated that this Downing factor overwhelmingly favored the NFL. Id. at 512. But that conclusion was the result of weighing competing evidence, which the summary judgment standard forbids.

The larger question here is whether the overall weighing of the Downing factors is a question of law or one of fact. "The Lanham Act's `likelihood of confusion' standard is predominantly factual in nature. Thus, summary judgment is inappropriate when a jury could reasonably conclude that there is a likelihood of confusion." Downing, 265 F.3d at 1008 (internal citation omitted). The presence of genuine disputes over some of the Downing factors suggests that this fact-intensive inquiry should have been handled at trial.

We follow Downing in holding that likelihood of confusion is a question of fact. See, e.g., A & H Sportswear, Inc. v. Victoria's Secret Stores, Inc., 166 F.3d 191, 194 (3d Cir.1999); Dranoff-Perlstein Assocs. v. Sklar, 967 F.2d 852, 862 (3d Cir. 1992). Thus, we vacate the District Court's grant of summary judgment for the Estate and remand this issue for trial. On remand, the District Court should apply Downing (adding the fourth Lapp factor to its consideration of the fourth Downing factor as described above, see Section V.A.2 supra) to determine whether [1025] the NFL's program was likely to cause confusion among consumers regarding the Estate's sponsorship or approval of Madden NFL 06.^[10]

VI. Unauthorized Use of Name or Likeness Under Pennsylvania Law

Pennsylvania law grants individuals the exclusive right to their name and likeness, which includes voice. 42 Pa. Cons.Stat. Ann. § 8316. "Any natural person whose name or likeness has commercial value and is used for any commercial or advertising purpose" without consent may sue for an injunction and damages. Id. § 8316(a). A deceased person's estate may bring such an action, id. § 8316(b)(3), although the right only lasts until thirty years after the person's death, id. § 8316(c).

The District Court held that the NFL violated this statute with its use of Facenda's voice because (a) his voice's commercial value was not disputed, (b) the NFL used his voice for a commercial purpose, and (c) the standard release Facenda signed did not consent to the use of his voice in endorsements. Facenda, 488 F.Supp.2d at 502. The NFL argued that its use of Facenda's voice was merely "incidental." See 2 J. Thomas McCarthy, The Rights of Publicity and Privacy § 7:20, at 42 (2d ed. 2000 & Supp.2008). The District Court rejected this defense because the NFL stated a specific purpose for using the three sound clips of Facenda's voice: "enhanc[ing] the parallel between Madden NFL [06] and NFL football." Facenda, 488 F.Supp.2d at 503. The NFL does not pursue its incidental-or-fleeting-use defense on appeal and we thus deem that argument to be waived.

We agree that the NFL has violated § 8316 on its face for precisely the reasons provided by the District Court, and we see no disputed issues of material fact on that question. On appeal, the NFL instead focuses on another argument it raised in the District Court—that copyright law preempts the Estate's right-of-publicity [1026] claim.^[11]

A. The NFL's Copyright in the Sound Clips

A threshold issue for the NFL's preemption defense is whether the NFL has a valid copyright in the sound recordings of Facenda's voice. The NFL notes that it excerpted the sound clips at issue from copyrighted productions of NFL Films. Moreover, the sound clips represent Facenda's readings of copyrighted NFL scripts, making the clips "derivative works" (of the scripts) in which a distinct copyright exists. See 17 U.S.C. § 106(2) (granting copyright holders the exclusive right to prepare derivative works); id. § 102(a)(7) (allowing copyrights in sound recordings, which are separate and distinct from the copyrights in musical compositions of § 102(a)(2)). Either way, the NFL had the copyright in the sound clips.

By using the sound clips of Facenda's voice in "The Making of Madden NFL 06," the NFL was exercising its exclusive right to make derivative works of those sound clips under § 106(2). In effect, it was "sampling" itself, making a collage, taking a small piece of an old work and using it in a new work—as when a hip-hop group samples the drum part from James Brown's "Funky Drummer." It is well-established that copyrights extend to samples, even brief samples. See, e.g., Grand Upright Music Ltd. v. Warner Bros. Records, Inc., 780 F.Supp. 182, 183 (S.D.N.Y. 1991). For instance, no third party to this case may use those recordings unless a limitation on or exception to the NFL's § 106 rights applies, such as the fair use doctrine of 17 U.S.C. § 107. See Campbell v. Acuff-Rose Music, Inc., 510 U.S. 569, 571-72, 579-80, 114 S.Ct. 1164, 127 L.Ed.2d 500 (1994) (holding a parody of Roy Orbison's "Oh, Pretty Woman" may be a fair use). Thus, the NFL is correct that copyright law, taken in isolation, gives it the exclusive right (absent a limitation or exception) to use the sound recordings of Facenda's voice in the way that it did.

The question for us is how the NFL's (federal) copyright relates to Facenda's (state-law) right of publicity. Does the state-law right of publicity exist irrespective of the federal copyright? Put another way, does federal copyright law preempt the right of publicity claim under Pennsylvania law?

B. Express Preemption

The Copyright Code has an express preemption provision, which provides that

all legal or equitable rights that [1] are equivalent to any of the exclusive rights within the general scope of copyright as specified by section 106 in [2] works of authorship that are fixed in a tangible medium of expression and come within the subject matter of copyright as specified by sections 102 and 103 ... are governed exclusively by this title.

17 U.S.C. § 301(a). In other words, for a state-law claim to be preempted by copyright law, it must protect (1) an exclusive right in (2) a work within copyright's subject matter. The same section of the Copyright Code goes on to explain that this provision is not meant to "annul[] or limit[]" any rights in works outside the subject matter of copyright under state law. Id. § 301(b)(1). Nor does it limit [1027] any intellectual property rights from other federal statutes, which is why there is no question of preemption regarding the Estate's Lanham Act claim. See id. § 301(d).

1. Equivalent to an Exclusive Right?

The Estate's claim seeks to block the NFL from exercising its exclusive rights under 17 U.S.C. § 106 to reproduce, distribute, perform, and make derivative works from sound recordings in which it owns the copyrights. In that sense, it could be thought "equivalent" to a copyright holder's exclusive rights. 17 U.S.C. § 301(a), (b)(3); cf. Harper & Row, Publishers, Inc. v. Nation Enters., 723 F.2d 195, 201 (2d Cir.1983), rev'd on other grounds, 471 U.S. 539, 105 S.Ct. 2218, 85 L.Ed.2d 588 (1985) ("If there is a qualitative difference between the asserted right [a claim for tortious interference with contract] and the exclusive right under the Act of preparing derivative works based on the copyrighted work, we are unable to discern it. In both cases, it is the act of unauthorized publication which causes the violation.").

Under the first prong of express copyright preemption analysis, some courts have looked to the elements of a state-law cause of action. The presence of an "additional element" required to state a cause of action under state law, beyond what a copyright-infringement claim would require, renders the state-law cause of action not equivalent to a copyright. See Dielsi v. Falk, 916 F.Supp. 985, 991-93 (C.D.Cal.1996).

Pennsylvania's right-of-publicity statute requires a showing of commercial value, defined as a "[v]aluable interest in a natural person's name or likeness that is developed through the investment of time, effort and money." 42 Pa. Cons.Stat. Ann. § 8316(e). The requirement under the statute that Facenda's voice have "commercial value," id. § 8316(a), provides an additional element beyond what a copyright-infringement claim requires, see 1 Nimmer on Copyright § 1.01[B][1][c], at 1-29 to -30 ("Invasion of privacy may sometimes occur by acts of reproduction, distribution, performance, or display, but inasmuch as the essence of the tort does not lie in such acts, pre-emption should not apply. The same may be said of the right of publicity."); accord 2 McCarthy, Rights of Publicity and Privacy § 11:50, at 785. Because the Estate's right-of-publicity claim relied on an element not equivalent to any of the exclusive rights granted to federal copyright holders, we hold that the first prong of § 301(a) is not satisfied here.

2. Copyrightable Subject Matter?

Looking to the second prong of 17 U.S.C. § 301(a), does Facenda's voice fall under the subject matter of copyright? The Court of Appeals for the Ninth Circuit has stated, in the context of vocal imitations, that "[a] voice is not copyrightable. The sounds are not `fixed.' What is put forward as protectible [sic] here is more personal than any work of authorship." Midler v. Ford Motor Co., 849 F.2d 460, 462 (9th Cir.1988). One can fix Facenda's voice in a tangible medium by recording it, but one cannot divorce his distinctive voice itself from the Facenda identity (or persona). See 1 Nimmer on Copyright § 1.01[B][1][c], at 1-30 ("The `work' that is the subject of the right of publicity is the persona, i.e., the name and likeness of a celebrity or other individual. A persona can hardly be said to constitute a `writing' of an `author' within the meaning of the Copyright Clause of the Constitution."); 2 McCarthy, Rights of Publicity and Privacy § 11:53, at 802 ("The sound in plaintiff's recording is merely an indicium by which the listening public can identify plaintiff's persona and identity."). We hold that Facenda's voice is outside the subject matter [1028] of copyright.^[12] Thus, the second prong of § 301(a) is not satisfied.

* * * * * *

We conclude thus that copyright's express preemption provision, 17 U.S.C. § 301(a), does not bar the Estate's right-of-publicity claim. Thus, we affirm the holding of the District Court to this effect.

C. Conflict Preemption

Our analysis, however, does not stop there. We also consider whether federal copyright law impliedly preempts the Estate's right-of-publicity claim.

The analysis works as follows. Copyright law does not expressly preempt the right of publicity because an individual's identity or persona is outside the subject matter of copyright. See, e.g., Waits, 978 F.2d at 1100; Midler, 849 F.2d at 462. Yet in some situations, including this case, the right of publicity clashes with the exploitation of a defendant's copyright. Unlike the plaintiffs in cases involving vocal imitations, see, e.g., Midler, 849 F.2d at 460, Facenda collaborated with the NFL to create the copyrighted sound recordings at issue. In our view, this gives the NFL a stronger preemption defense than the vocal-imitation defendants, for example. Where a defendant in a right-of-publicity claim obtained a copyright in a work featuring the plaintiff, courts must separate legitimate exploitations of what Congress intended to be a copyright holder's exclusive rights from particular uses that infringe the right of publicity. Otherwise, few copyright holders would be safe from suits by performers who agreed to appear in the holders' works. See 2 McCarthy, Rights of Publicity and Privacy § 11:55, at 817 ("[W]hen another reproduces a recorded performance in an expressive, non-advertising medium, this should not be the concern of right of publicity law.").

Conflict preemption is a particular species of implied preemption that "renders state law `without effect' when, without `express congressional command,' state law conflicts with federal law." Pa. Employees Benefit Trust Fund v. Zeneca Inc., 499 F.3d 239, 247 (3d Cir.2007) (citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992)). As one copyright treatise puts it:

Therefore, even apart from Section 301, the general proposition pertains in copyright law, as elsewhere, that a state law is invalid that "stands as an obstacle to the accomplishment of the full purposes and objectives of Congress." Such "conflict pre-emption" equally pertains when compliance with both federal and state mandates is a physical impossibility.

1 Nimmer on Copyright § 1.01[B][3][a], at 1-77. The Estate's claim, if successful, will constrain the NFL's ability to exercise its full array of exclusive rights under the Copyright Code. Yet federal copyrights are not absolute.

Courts have found conflict preemption where state laws interfere with federal copyright law's goal of leaving some works, or uses of works, in the public domain. See id. § 1.01[B][1][c], at 1-33 (citing Brown v. Ames, 201 F.3d 654, 660-61 (5th Cir.2000)). For example, these concerns might arise with respect to state laws offering protection for "sound-alike" sound recordings, which copyright does not protect. See id. § 1.01[B][3][b][i], at 1-82 to -83 (discussing Midler, 849 F.2d at 460); see also Vault Corp. v. Quaid Software Ltd., 847 F.2d 255, 269-70 (5th Cir.1988) (holding that a Louisiana state law permitting [1029] a software producer to prohibit disassembly of its computer program conflicted with rights Congress left to software purchasers [under what is now 17 U.S.C. § 117(a) of the federal Copyright Code] and was therefore unenforceable).

Our case presents a different kind of potential conflict. Here we are concerned with the conflict between copyright law and the right of publicity. When does the right of individuals to avoid commercial exploitation of their identities interfere with the rights of copyright owners to exploit their works? In addition, we must confront the role of the standard release contract. Does a contract acknowledging a right-of-publicity for defendant's copyright in a work containing a plaintiff's identity mean that the defendant may use that work in any way it sees fit?

David Nimmer has proposed a two-part framework for handling cases at the intersection of copyright, the right of publicity, and contract.^[13] First, we look to how the copyrighted work featuring the plaintiff's identity is used. Surveying the case law, Nimmer finds that when defendants use the work "for the purposes of trade," such as in an advertisement, plaintiffs' right-of-publicity claims have not been held to be preempted. See 1 Nimmer on Copyright § 1.01[B][3][b][iv][I], at 1-88.2(9)-(11).^[14] On the other hand, when defendants' uses constitute "expressive works," right-of-publicity claims have been preempted. See id. § 1.01[B][3][b][iv][I], at 1-88.2(11).^[15] The rationale is that state law has a role in regulating practices of trade, including advertising. But limiting the way that material can be used in expressive works extends beyond the purview of state law and into the domain of copyright law.

Seale v. Gramercy Pictures was Nimmer's inspiration for this framework, and [1030] illustrates the distinction he draws. 949 F.Supp. 331 (E.D.Pa.1996). Seale's right-of-publicity claim for use of his likeness to make a "docudrama" about the Black Panthers failed as a matter of law. Id. at 337-38. Nimmer contends that this claim should have been preempted because it targeted an expressive work. See 1 Nimmer on Copyright § 1.01[B][3][b][iv][I], at 1-88.2(12). On the other hand, Seale's claim based on the use of his image to sell compact discs (on which he did not perform) went to trial, Seale, 949 F.Supp. at 337 (although the defendants ultimately prevailed, Seale, 964 F.Supp. at 931). Nimmer suggests that this claim should not have been preempted even though it proved unsuccessful. See 1 Nimmer on Copyright § 1.01[B][3][b][iv][I], at 1-88.2(12) to -88.2(13).

The NFL used the sound recordings of Facenda's voice in a television production promoting the video game Madden NFL 06. This kind of use, in what amounts to a 22-minute promotional piece akin to advertising, does not count as an expressive work. Following the case law, this suggests that conflict preemption is inappropriate in our case.

The second part of Nimmer's framework addresses the way that contracts affect the preemption analysis. Nimmer proposes that courts should examine the purpose of the use to which the plaintiff initially consented when signing over the copyright in a contract. He argues that the proper question in cases involving advertising and a contract between the plaintiff and the defendant—such as our case—is whether the plaintiff "collaborated in the creation of a copyrighted advertising product." 1 Nimmer on Copyright § 1.01[B][3][b][iv][II], at 1-88.2(20). If the plaintiff did collaborate in that fashion, then the party holding the copyright is in a very strong position to contend that allowing the plaintiff to assert a right of publicity against use of its likeness in advertising would interfere with the rights it acquired. If, on the other hand, the plaintiff did not collaborate specifically in the creation of advertising content, then the plaintiff is in a strong position to assert continuing control over the use of his image.

Three cases, along with the District Court's opinion in our case, provide the most important background case law for the second part of Nimmer's analysis. Fleet v. CBS, Inc. involved a right-of-publicity claim by actors seeking to prevent a movie-distribution company from distributing a film in which they appeared. 50 Cal.App.4th 1911, 58 Cal.Rptr.2d 645, 646-47 (1996). The actors had contracted away their rights in the film, but had not received compensation. They apparently hoped to obtain leverage in seeking payment by enjoining distribution of the film. The California Court of Appeal held that the actors' claim was preempted, stating that "a party who does not hold the copyright in a performance captured on film cannot prevent the one who does from exploiting it by resort to state law." Id. at 652-53.

The Ninth Circuit Court of Appeals in Laws v. Sony Music Entertainment, Inc., evaluated singer Debra Laws's claims that Sony had violated her right of publicity by using a sample of one of her recordings in a song by Jennifer Lopez and LL Cool J. 448 F.3d at 1135-36. A third party, Elektra Asylum Records, owned the copyright in the original sound recording that featured Laws. Elektra granted Sony a license to use the sample in the J. Lo-LL Cool J song. Laws's recording contract with Elektra gave Elektra the right to grant licenses, subject to contractual conditions. In that context, whether Laws authorized the sample license was a contract issue between Laws and Elektra. [1031] But Laws sued Sony, the end user of the sample. See id. at 1143 ("To the extent that Laws has enforceable, contractual rights regarding the use of Elektra's copyright, her remedy may lie in a breach of contract claim against Elektra for licensing [her song] `Very Special' without her authorization."). Even though Laws might have been able to state a contract claim against Elektra, her right-of-publicity claim against Sony was preempted by § 301(a).

In Toney v. L'Oreal U.S.A., Inc., the plaintiff, a model, sued L'Oreal for the unauthorized use of her image on product packaging. 406 F.3d at 907. The plaintiff had a contract with L'Oreal's corporate predecessor to use her image in that way, but it had expired. The Court of Appeals for the Seventh Circuit held that the plaintiff's claim was not preempted. Id. at 911. "There is no `work of authorship' at issue in Toney's right of publicity claim. A person's likeness—her persona—is not authored and it is not fixed. The fact that an image of the person might be fixed in a copyrightable photograph does not change this." Id. at 910. Thus, the second express-preemption requirement of § 301(a) (that the state law at issue purports to protect something that falls within the subject matter of copyright) was not met, and accordingly Toney's claim was not preempted.

To illustrate this second part of his framework, Nimmer puts the fact situations in Fleet, Laws, and Toney on one side, and the fact situation of our case (which he uses as his main counter-example, based on the District Court's opinion) on the other:

Fleet acted in a movie; for that reason, he could not complain when that very movie was later exploited, by being broadcast on television. Laws sang for a recording; for that reason, she could not complain when that very recording was later exploited, by being used as background for Jennifer Lopez. Toney posed for the packaging of "Ultra Sheen Supreme." Parallel reasoning indicates that she should not be able to complain about subsequent exploitation of that very work. The defendants in that case, in short, did not "appropriate[] the commercial value of a [Toney]'s identity by using [it] without consent." Far from it—they simply did exactly what she agreed to. In that regard, they stand poles apart from the NFL, when it took anchorman Facenda's sports commentary and transmuted it into part of a pitch for a computer game.

1 Nimmer on Copyright § 1.01[B][3][b][iv][II], at 1-88.2(18). Thus, with regard to Toney's claim, Nimmer answers the question "Did she collaborate in the production of a copyrighted advertising product?" in the affirmative. He argues that her case should have been an exception to the usual rule that right-of-publicity claims for uses in advertisements would not be preempted (and thus the Seventh Circuit erred). But in our case, Nimmer suggests that preemption is not appropriate. Facenda consented to participation in films documenting NFL games, not an advertisement for a football video game. The release form Facenda signed did not implicitly waive his right to publicity, the core of which is the right not to have one's identity used in advertisements. See, e.g., 1 McCarthy, Rights of Publicity and Privacy § 1:3, at 3. In fact, the release specifically preserved that right by carving out endorsements.

The NFL argues that Facenda's only remedy should lie in contract. While we agree that Facenda could state a claim for breach of contract, we believe that he also retained his tort-derived remedy for violation of Pennsylvania's right-of-publicity [1032] statute. Parties may waive tort remedies via contract. It follows that they may also preserve them. Cf. 1 Nimmer on Copyright § 1.01[B][3][b][iv][II], at 1-88.2(16) (discussing the relationship between "copyright, contract, and the right of publicity"). While performing artists should have the burden of reserving publicity rights when contracting away any rights under copyright law they might have, we hold that Facenda successfully bore that burden here and preserved his state-law right-to-publicity claim.

Despite our holding, we emphasize that courts must circumscribe the right of publicity so that musicians, actors, and other voice artists do not get a right that extends beyond commercial advertisements to other works of artistic expression. If courts failed to do so, then every record contract or movie contract would no longer suffice to authorize record companies and movie studios to distribute their works. In addition to copyrights, entertainment companies would need additional licenses for artists' rights of publicity in every case.

Thus, we believe that Laws was rightly decided—Debra Laws sought to enforce a right that she had contracted away. We do not intend to express any disagreement with the Ninth Circuit Court of Appeals by distinguishing the facts of our case from those of Laws. Our case simply presents a different scenario than Laws. Just as Facenda did not, in the standard release contract, waive the right to bring a false-endorsement claim, see supra Section V.B.1, he did not grant the NFL the right to use his voice in a promotional television program. This contrasts with the situation in Laws. Debra Laws's voice was not used in an endorsement, but in a work of artistic expression.

In the endorsement context, an individual's identity and credibility are put directly on point.^[16] Advertisements are special in the way they implicate an individual's identity. Precisely what Pennsylvania's right of publicity is meant to protect is a citizen's prerogative not to have his or her name, likeness, voice, or identity used in a commercial advertisement, whether that citizen is a celebrity or not.

In our case, we have no precedent to hold that the right of publicity in an individual's voice is analogous to the public domain. In this void, we believe state-law protection of an individual's voice will not upset copyright law's balance as long as the state law is not construed too broadly. Pennsylvania's § 8316 focuses solely on the commercial-advertising context. It is targeted at endorsements, not the full universe of creative works. The Estate's claim lies at the heart of the statute's focus. For these reasons, the state-law right of publicity does not conflict with federal copyright law in this case.

* * * * * *

We hold that neither express nor implied conflict preemption bars the Estate's right-of-publicity claim under Pennsylvania law. We affirm the District Court's grant of summary judgment to the Estate on that claim.

VII. Conclusion

This case presents dueling intellectual property rights of differing kinds. The NFL seeks to exploit its copyrighted films and scripts, yet the Estate has asserted [1033] both a trademark and a right of publicity in John Facenda's famous voice. In this sense, the Estate's guarding of its intellectual property rights has constrained the NFL's enjoyment of its intellectual property rights. In another clash of rights of a different variety, the NFL asserted a First Amendment defense against the Estate's false-endorsement claim. As a general matter, the District Court should have considered whether enforcement of the Estate's intellectual property rights under the Lanham Act overly constrained the NFL's right to free speech, though here we hold the NFL's First Amendment defense to trademark infringement fails.

We agree with the District Court that Downing usefully implements the well-known Lapp factors, so long as the fourth Downing factor is modified so that the substance of each of the ten Lapp factors is covered with an analogous factor.

Because § 43(a) of the Lanham Act protects the Estate's mark (Facenda's voice) only to the extent that consumers are likely to be confused by the NFL's use—a factual issue, we vacate the grant of summary judgment and remand to the District Court for trial on that claim.

As for Pennsylvania's right-of-publicity statute, it protects Facenda's voice in a way that does not conflict with federal copyright law. We thus hold that the Estate's right-of-publicity claim was not preempted.

[1] With the consent of the parties, Magistrate Judge Jacob P. Hart exercised jurisdiction as the District Court in this case pursuant to 28 U.S.C. § 636(c).

[2] The Estate's complaint also included a claim for invasion of privacy under Pennsylvania common law. The Estate effectively abandoned this claim at the summary judgment stage, possibly because, as the District Court stated, Pennsylvania's right-of-publicity statute subsumed the common-law tort of invasion of privacy. The District Court entered summary judgment for the NFL on this claim and the Estate did not appeal.

[3] The phrase "another person" in § 43(a)(1)(A) indicates that "Congress selected language broad enough to encompass a claim by a deceased celebrity's [e]state or by any celebrity's assignee." Cairns v. Franklin Mint Co., 24 F.Supp.2d 1013, 1032 (C.D.Cal. 1998) (explaining that Princess Diana's estate had stated a cognizable claim for false endorsement under § 43(a)(1)(A) against a manufacturer of jewelry, commemorative plates, sculptures, and dolls featuring the Princess's likeness).

[4] Subsection 43(a)(1)(B) prohibits the use of another person's mark that, "in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities." 15 U.S.C. § 1125(a)(1)(B).

[5] Nor did it certify the First Amendment question for interlocutory appeal. We may, however, address any issue implicit in the District Court's order granting summary judgment to the Estate on liability. See NVE, Inc. v. Dep't of Health & Human Servs., 436 F.3d 182, 196 (3d Cir.2006).

[6] Jon Albert Levy, an expert witness for the Estate, described the program as "not quite an infomercial" because "[t]here's no 800 number on it. There's not a call to action on it." He therefore described the program as a "documercial," apparently meaning that it had characteristics of a documentary in addition to characteristics of a traditional television advertisement. Yet those observations do not contradict his conclusion that the program is "a hundred percent promotional." The production uses informational and documentary techniques for the purpose of promoting the video game, and thus proposes a commercial transaction.

[7] The exact amount of royalties that EA Sports paid to the NFL in consideration for the exclusive right to use NFL trademarks and marketing support was redacted from the record. But NFL licensing manager Timothy Langley testified that "the more copies [of Madden NFL 06] that are sold, the more money we would make."

[8] But as noted below (infra Section VI.C) an earlier decision in the Seale case, 949 F.Supp. 331 (E.D.Pa.1996), proves especially useful in another context in sparking a framework for analyzing whether federal copyright law preempts a state-based right-of-publicity claim.

[9] On appeal, the NFL does not emphasize its argument that the release provides a defense. But it continues to dispute the District Court's characterization of the production as commercial in its briefing to our Court. Because the District Court relied on that characterization to reject the defense, we deem the NFL not to have waived this defense. This does not prejudice the Estate, because nothing turns on the standard release contract, as we explain in this Section.

[10] We note here that while the District Court was correct in applying the Downingfactors to the Estate's Lanham Act claim, it applied two of those factors—the fifth and eighth—in a manner that it is inconsistent with how those factors have been applied in prior cases.

First, the Court stated that the fifth factor, marketing channels used, favors the Estate because the program appeared on the NFL Network, the channel "most likely to attract viewers who would recognize John Facenda's voice as being associated with football." Facenda, 488 F.Supp.2d at 512. Yet the usual fifth-factor analysis does not ask about audience recognition (which is the domain of the first Downing factor—level of recognition in the targeted market segment), inquiring instead about whether the defendant used marketing channels in which the plaintiff's endorsements are likely to appear. See White v. Samsung Elecs. Am., Inc., 971 F.2d 1395, 1400 (9th Cir.1992) (focusing on the extent to which products the plaintiff actually endorsed were marketed through the same channels and media in which the defendant's alleged unauthorized use of the plaintiff's likeness occurred).

Second, the eighth Downing factor, expansion of product lines, does not focus on future opportunities for the defendant to use the plaintiff's image, as the District Court implied. See Facenda, 488 F.Supp.2d at 512 (the eighth Downing factor favors Facenda because the NFL's ongoing marketing agreement with EA Sports means "the question of NFL's right to use Facenda's recordings is likely to arise in the future"). Rather, the eighth factor concerns whether (a) the plaintiff plans to endorse a product that competes with a defendant's existing product or (b) the defendant plans to launch a new product that competes with a product the plaintiff already endorses. See Wendt v. Host Int'l, Inc., 125 F.3d 806, 814 (9th Cir.1997) (applying the eighth Downing factor to consider the potential that the plaintiff may in the future endorse goods similar to those defendant had been marketing using plaintiff's likeness).

[11] The NFL did not raise a First Amendment defense to the Estate's right-of-publicity claim, thereby waiving that defense. Thus, we need not engage in a First Amendment analysis with respect to this claim, though we note that freedom of expression issues arise in the right-of-publicity context analogous to those discussed above. See supra Section V.A.1.

[12] This is so even though Facenda's voice is protectable as a trademark. See supra Section V.

[13] The cases that Nimmer uses to develop this framework are, for the most part, ones in which the court analyzed the preemption issue under the express-preemption test set out in 17 U.S.C. § 301(a). Nonetheless, Nimmer persuasively argues that "courts confronting the interface of rights of publicity with copyrighted works" deal with an issue "rooted more in conflict pre-emption and the Supremacy Clause of the U.S. Constitution than in express pre-emption and Section 301." 1 Nimmer on Copyright § 1.01[B][3][b][iv][I], at 1-882(15). Thus, we will treat the framework he develops as one that applies to analysis for either of these preemption contexts.

[14] The cases Nimmer places in this category of commercial or advertising uses are Midler, 849 F.2d at 460 (voice imitation in advertisement); Waits v. Frito-Lay, Inc., 978 F.2d at 1093 (same); White v. Samsung Electronics America, Inc., 971 F.2d at 1395 (robot with game show hostess's likeness used in advertisement); Wendt, 125 F.3d at 806 (robots with actors' likenesses used to market an airport restaurant); Toney v. L'Oreal U.S.A., Inc., 406 F.3d 905 (7th Cir.2005) (model's likeness on product packaging); Downing, 265 F.3d at 994 (surfer's images, including T-shirts, in catalog); Seifer v. PHE, Inc., 196 F.Supp.2d 622 (S.D.Ohio 2002) (performer's likeness in promotional materials for video); Comedy III Productions, Inc. v. Gary Saderup, Inc., 25 Cal.4th 387, 106 Cal.Rptr.2d 126, 21 P.3d 797 (2001) (actors' images on T-shirts); and— most importantly—the District Court's opinion in our case.

[15] Nimmer puts into the category of expressive uses Fleet v. CBS, Inc., 50 Cal.App.4th 1911, 58 Cal.Rptr.2d 645 (1996) (distributing a movie in which the plaintiff acted); Laws v. Sony Music Entertainment, Inc., 448 F.3d 1134 (9th Cir.2006) (licensing of a song by non-plaintiffs that included another portion of a song in which the plaintiff sang); Hoffman v. Capital Cities/ABC, Inc., 255 F.3d 1180 (9th Cir.2001) (publishing a digitized image of an actor in a movie); Astaire v. Best Film & Video Corp., 136 F.3d 1208 (9th Cir.1997) (using public domain footage of an actor in a new video); Polydoros v. Twentieth Century Fox Film Corp., 67 Cal.App.4th 318, 79 Cal. Rptr.2d 207 (1997) (using high school classmate's name in a film); and Ahn v. Midway Mfg. Co., 965 F.Supp. 1134 (N.D.Ill.1997) (using images of individuals in a video game).

[16] Having one's voice used as a sample in someone else's song may implicate a musician's identity. But listeners are probably less likely to assume that the sampled musician vouches for or approves of a new creative work that samples her work than consumers are likely to assume that an individual's presence in an advertisement reflects an active choice to endorse a product.

OPINION & ORDER

KIMBA M. WOOD, District Judge.

[1] Plaintiff Planned Parenthood Federation of America, Inc. ("Planned Parenthood") has moved to preliminarily enjoin defendant Richard Bucci ("Bucci"), doing business as Catholic Radio, from using the domain name "plannedparenthood.com," and from identifying his web site on the Internet under the name "www.plannedparenthood.com." The Court held a hearing on February 20, 1997 and February 21, 1997,^[1] and now issues the preliminary injunction sought by Planned Parenthood.

I. Undisputed Facts

The parties do not dispute the following facts. Plaintiff Planned Parenthood, founded in 1922, is a non-profit, reproductive health care organization that has used its present name since 1942. Plaintiff registered the stylized service mark "Planned Parenthood" on the Principal Register of the United States Patent and Trademark Office on June 28, 1955, and registered the block service mark "Planned Parenthood" on the Principal Register of the United States Patent and Trademark Office on September 9, 1975. Plaintiff's 146 separately incorporated affiliates, in 48 states and the District of Columbia, are licensed to use the mark "Planned Parenthood." Plaintiff expends a considerable sum of money in promoting and advertising its services. The mark "Planned Parenthood" is strong and incontestable.

Plaintiff operates a web site at "www.ppfa.org," using the domain name "ppfa.org." Plaintiff's home page offers Internet users resources regarding sexual and reproductive health, contraception and family planning, pregnancy, sexually transmitted diseases, and abortion, as well as providing links to other relevant web sites. In addition, plaintiff's home page offers Internet users suggestions on how to get involved with plaintiff's mission and solicits contributions.^[2]

Defendant Bucci is the host of "Catholic Radio," a daily radio program broadcast on the WVOA radio station in Syracuse, New York. Bucci is an active participant in the anti-abortion movement. Bucci operates web sites at "www.catholicradio.com" and at "lambsofchrist.com." On August 28, 1996, Bucci registered the domain name "plannedparenthood.com" with Network Solutions, Inc. ("NSI"), a corporation that administers the assignment of domain names on the Internet. After registering the domain name, Bucci set up a web site and home page on the Internet at the address "www.plannedparenthood.com."

Internet users who type in the address "www.plannedparenthood.com," or who use a search engine such as Yahoo or Lycos to find web sites containing the term "planned parenthood," can reach Bucci's web site and home page. Once a user accesses Bucci's home page, she sees on the computer screen the words "Welcome to the PLANNED PARENTHOOD HOME PAGE!"^[3]These words appear on the screen first, because the text of a home page downloads from top to bottom. Tr. 2/20/97 at 47. Once the whole home page has loaded, the user sees a scanned image of the cover of a book entitled The Cost of Abortion, by Lawrence Roberge ("Roberge"), under which appear several links: "Foreword," "Afterword," "About the Author," "Book Review," and "Biography."

[2] After clicking on a link, the user accesses text related to that link. By clicking on "Foreword" or "Afterword," the Internet user simply accesses the foreword or afterword of the book The Cost of Abortion. That text eventually reveals that The Cost of Abortion is an anti-abortion book. The text entitled "About the Author" contains the curriculum vitae of author Roberge. It also notes that "Mr. Roberge is available for interview and speaking engagements," and provides his telephone number. The "Book Review" link brings the Internet user to a selection of quotations by various people endorsing The Cost of Abortion. Those quotations include exhortations to read the book and obtain the book. "Biography" offers more information about Roberge's background.

II. Disputed Facts

The parties dispute defendant's motive in choosing plaintiff's mark as his domain name. Plaintiff alleges that defendant used plaintiff's mark with the "specific intent to damage Planned Parenthood's reputation and to confuse unwitting users of the Internet." Pl. Rep. Mem. at 2. Discussing the difference between the domain name at issue here and defendant's other web sites, defendant's counsel states that "[t]he WWWPLANNNEDPARENTHOOD.COM [sic] website ... enables Defendant's message to reach a broader audience." Def. Mem. in Opp. at 3. Defendant's counsel made the following statement to the Court regarding defendant's use of plaintiff's mark to designate his web site:

My belief is that it was intended to reach people who would be sympathetic to the proabortion position.... [I]t is an effort to get the ... political and social message to people we might not have been otherwise able to reach. I think it's analogous to putting an advertisement in the New York Times rather than The National Review. You are more likely to get people who are sympathetic to the proabortion position, and that's who you want to reach. I believe that is exactly what Mr. Bucci did when he selected Planned Parenthood. Tr. 2/5/97 at 23.

Defendant did not dispute that his counsel was correct in that statement. Tr. 2/21/97 at 35. Defendant's counsel also admitted that Bucci was trying to reach Internet users who thought, in accessing his web site, that they would be getting information from plaintiff.Id. at 23–24.

Defendant stated that his motive in using plaintiff's mark as his domain name was "to reach, primarily, Catholics that are disobedient to the natural law." Id. at 21. In an affidavit submitted to the Court, defendant stated that he wanted his "anti-abortion message to reach as many people as possible, and particularly the people who do not think that abortion has an inimical effect on society." Def. Aff. at ¶ 3.^[4] Defendant conceded that he was aware that by using plaintiff's mark to identify his web site, he was likely to draw in Internet users who are "pro-abortion." Tr. 2/21/97 at 36.^[5] Defendant demonstrated full knowledge of plaintiff's name and activities, and admitted to an understanding that using plaintiff's mark as his domain name would attract "pro-abortion" Internet users to his web site because of their misapprehension as to the site's origin. Id.^[6] I therefore now make the factual finding that defendant's motive in choosing plaintiff's mark as his domain name was, at least in part, to attract to his home page Internet users who sought plaintiff's home page.

III. Analysis

A. Standard for Preliminary Injunction

[3] In order to obtain a preliminary injunction, a movant must demonstrate "(a) irreparable harm and (b) either (1) likelihood of success on the merits or (2) sufficiently serious questions going to the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly toward the party requesting the preliminary injunction." Hasbro, Inc. v. Lanard Toys. Ltd., 858 F.2d 70, 73 (2d Cir.1988) (internal citations omitted). In cases brought under the Lanham Act, a showing of likelihood of confusion establishes both a likelihood of success on the merits and irreparable harm, once the plaintiff has established that it has a protectible mark. Id. at 73. Because defendant concedes that plaintiff's mark is protectible, the inquiry before me is twofold: (1) whether the Lanham Act is applicable here, and (2) is there a likelihood of confusion? I now address these questions.

B. Whether the Lanham Act is Applicable

Defendant argues that his use of plaintiff's mark cannot be reached under the Lanham Act because it is non-commercial speech. Planned Parenthood has brought suit under §§ 1114, 1125(a), and 1125(c) of the Lanham Act, Title 15, United States Code. Section 1114 of the Lanham Act forbids a party to "use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." (Emphasis added). An injunction under § 1125(c) is proper to stop "commercial use in commerce of a mark or trade name" if that use causes dilution of a famous mark. (Emphasis added). Finally, with respect to § 1125(a), defendant may be liable if he has used the plaintiff's mark "in commerce" in a way that either "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person," § 1125(a)(1)(A), or "in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities," § 1125(a)(1)(B). (Emphasis added). Section 1125(c)(4)(B) specifically exempts from the scope of all provisions of § 1125 the "noncommercial use of a mark." (Emphasis added).

As a preliminary matter, I note that although the parties agreed at a hearing before me on February 21, 1997 that defendant's use of plaintiff's mark is "in commerce" within the meaning of the Lanham Act, Tr. 2/21/97 at 77, defendant now argues that his activities are not subject to the Lanham Act because they are not "in commerce." I find this argument meritless. The "use in commerce" requirement of the Lanham Act is a jurisdictional predicate to any law passed by Congress. It is well settled that the scope of "in commerce" as a jurisdictional predicate of the Lanham Act is broad and has a sweeping reach. Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952). The activity involved in this action meets the "in commerce" standard for two reasons. First, defendant's actions affect plaintiff's ability to offer plaintiff's services, which, as health and information services offered in forty-eight states and over the Internet, are surely "in commerce." Thus, even assuming, arguendo, that defendant's activities are not in interstate commerce for Lanham Act purposes, the effect of those activities on plaintiff's interstate commerce activities would place defendant within the reach of the Lanham Act. See Franchised Stores of New York. Inc. v. Winter, 394 F.2d 664, 669 (2d Cir.1968). Second, Internet users constitute a national, even international, audience, who must use interstate telephone lines to access defendant's web site on the Internet. The nature of the Internet indicates that establishing a typical home page on the Internet, for access to all users, would satisfy the Lanham Act's "in commerce" requirement. See Intermatic v. Toeppen, 947 F.Supp. 1227, 1239 (N.D.Ill.1996), quoting 1 Gilson, Trademark Protection and Practice, § 5.11(2), p. 5–234 ("there is little question that the 'in commerce' requirement would be met in a typical Internet message"). Therefore, I conclude that defendant's actions are "in commerce" within the meaning of that term for jurisdictional purposes.^[7] I now turn to the specific language of each provision of the Lanham Act under which plaintiff has brought suit.

1. Section 1114

[4] Notwithstanding its jurisdictional "in commerce" requirement, Section 1114 contains no commercial activity requirement; rather, it prohibits any person from, without consent of the registrant of a mark, using the mark "in connection with the sale, offering for sale, distribution, or advertising of any good or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive." The question the Court must decide, then, is whether defendant's use of plaintiff's mark is properly viewed as in connection with the distribution or advertising of goods or services.

Defendant's use of plaintiff's mark satisfies the requirement of § 1114 in a variety of ways. First, defendant has stated that he chose to place materials about The Cost of Abortion on the "www.plannedparenthood.com" web site because he wanted to help Roberge "plug" his book. Tr. 2/21/97 at 25. In addition, defendant agreed that he, by this activity, was helping the author sell his book. Id. at 30. Although defendant receives no money from any sales of the book that result from its exposure on his home page, there is no personal profit requirement in § 1114. The materials on the home page, which are similar to a publisher's publicity kit, certainly relate to the advertisement and distribution of The Cost of Abortion.

Second, defendant's home page is merely one portion of his, and Catholic Radio's, broader effort to educate Catholics about the anti-abortion movement. With respect to that effort, defendant solicits funds and encourages supporters to join him in his protest activities. Id. at 16. Much like plaintiff, defendant has a practical as well as a political motive. While plaintiff seeks to make available what it terms "reproductive services," including, inter alia, birth control and abortion services, defendant offers informational services for use in convincing people that certain activities, including the use of plaintiff's services, are morally wrong. In this way, defendant offers his own set of services, and his use of plaintiff's mark is in connection with the distribution of those services over the Internet. See MGM–Pathe Communications v. Pink Panther Patrol, 774 F.Supp. 869 (S.D.N.Y.1991) (holding that a group formed to offer the free service of protecting gay individuals from assault was subject to § 1114).

In addition, defendant's use of plaintiff's mark is "in connection with the distribution of services" because it is likely to prevent some Internet users from reaching plaintiff's own Internet web site. Prospective users of plaintiff's services who mistakenly access defendant's web site may fail to continue to search for plaintiff's own home page, due to anger, frustration, or the belief that plaintiff's home page does not exist. One witness explained, "We didn't resume the search [for plaintiff's web site] after [finding defendant's web site] because ... we were pretty much thrown off track." Tr. 2/20/97 at 49. Therefore, defendant's action in appropriating plaintiff's mark has a connection to plaintiff's distribution of its services. For these reasons, § 1114 is applicable to defendant's use of plaintiff's mark.

2. Section 1125(c)

[5] Section 1125(c), the Lanham Act's anti-dilution provision, provides that the owner of a famous mark is entitled to an injunction against another person's "commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark." The provision has no requirement that there be advertising or a sale of goods or services. Defendant argues that his use is not "commercial" within the meaning of § 1125(c). I hold, however, that defendant's use of plaintiff's mark is "commercial" for three reasons: (1) defendant is engaged in the promotion of a book, (2) defendant is, in essence, a non-profit political activist who solicits funds for his activities, and (3) defendant's actions are designed to, and do, harm plaintiff commercially.

First, as discussed above, defendant's home page is a showcase for The Cost of Abortion, offering excerpts of the book, information about the author (specifically including how to contact the author for speaking engagements), and endorsements of the book (including statements such as "I want to see this book in the hands of EVERY Catholic priest and Protestant minister in the country"). This showcase is surely commercial in nature, despite the fact that defendant derives no monetary gain from these activities. Although defendant does not seek a profit from his actions, § 1125(c) carries no "for-profit" requirement. Therefore, defendant's use of plaintiff's mark to further his self-styled effort to "plug" The Cost of Abortion falls within the purview of the commercial use requirement of § 1125(c).

Second, defendant's use of plaintiff's mark to identify his web site is one part of defendant's sustained effort, through his radio show and other means, to achieve his end of persuading the public to eschew birth control and abortion. Defendant is a vocal supporter of the anti-abortion movement. Tr. 2/21/97 at 14. Defendant also opposes the use of contraceptives. Id. at 15. Through his radio program, he seeks to educate his listeners about the teachings of the Catholic church, specifically trying to discourage his audience from using birth control and obtaining abortions. Id. at 14–15. In this connection, defendant is a vocal critic of plaintiff and plaintiff's activities. Id. at 15–16.

In MGM–Pathe, 774 F.Supp. 869, Judge Leval considered whether a non-profit group that uses another's trademark in support of its own non-profit aims is subject to the Lanham Act. Specifically, he examined whether a group whose aim was to provide protection to the gay community and to educate the general public about violence against that community could appropriate a part of the name of a movie produced by plaintiff ("Pink Panther"). After finding that there was a likelihood of confusion, Judge Leval concluded that defendant's goal of political activism did not confer immunity from the Lanham Act, noting that "[t]he seriousness and virtue of a cause do not confer any right to the use of the trademark of another." Id. at 877. Defendant attempts to distinguish MGM–Pathe from the case now before the Court on the ground that defendant in this action has used plaintiff's mark in an effort to criticize plaintiff, while the MGM–Pathe defendants had no intent to criticize the Pink Panther movies. The Court finds this distinction unhelpful. The mere fact that defendant seeks to criticize plaintiff cannot automatically immunize a use that is otherwise prohibited by the Lanham Act.

[6] Additionally, defendant has testified that he solicits contributions on his "Catholic Radio" radio show and has solicited contributions on the air in connection with the instant lawsuit. Tr. 2/21/97 at 16. Defendant's ownership of the domain name "plannedparenthood.com" is part and parcel of Catholic Radio's broader efforts in the anti-abortion movement. Specifically, defendant has told his radio listeners that "Catholic Radio owns the name 'Planned Parenthood.' " Pl.Ex. 6A.^[8]Courts have found that fund-raising activities may bring a defendant's actions within the scope of the Lanham Act. See Cancer Research Institute. Inc. v. Cancer Research Society, Inc., 694 F.Supp. 1051 (S.D.N.Y.1988) (enjoining defendant from using plaintiff's name for soliciting funds for cancer research), Girls Club of Am., Inc. v. Boys Clubs of Am., Inc., 683 F.Supp. 50, 53 (S.D.N.Y.), aff'd,859 F.2d 148 (2d Cir.1988) (enjoining defendant from adding plaintiff's name to its own for broad range of non-profit activities including fundraising); Brach van Houten Holding v. Save Brach's Coalition, 856 F.Supp. 472 (N.D.Ill.1994) (enjoining defendant from use of plaintiff's name in soliciting funds); American Diabetic Assoc. v. National Diabetic Assoc., 533 F.Supp. 16, 20 (E.D.Pa.1981) (enjoining defendant from use of similar name in relation to its non-profit fund-raising). I find that defendant's use of plaintiff's mark is sufficiently tied to defendant's fund-raising efforts for the use to be deemed "commercial" within the meaning of § 1125(c).

Finally, defendant's use is commercial because of its effect on plaintiff's activities. First, defendant has appropriated plaintiff's mark in order to reach an audience of Internet users who want to reach plaintiff's services and viewpoint, intercepting them and misleading them in an attempt to offer his own political message. Second, defendant's appropriation not only provides Internet users with competing and directly opposing information, but also prevents those users from reaching plaintiff and its services and message. In that way, defendant's use is classically competitive: he has taken plaintiff's mark as his own in order to purvey his Internet services—his web site—to an audience intending to access plaintiff's services.

I note that although defendant relies on the holding of Panavision Int'l, L.P. v. Toeppen, 945 F.Supp. 1296 (C.D.Cal.1996) for the proposition that registering a domain name is not a commercial use within the meaning of the anti-dilution provision of the Lanham Act, Panavision is not controlling in this case. Defendant simply ignores the fact that he has done more than merely register a domain name; he has created a home page that uses plaintiff's mark as its address, conveying the impression to Internet users that plaintiff is the sponsor of defendant's web site. The Panavision court noted that the "exception for noncommercial use of a famous mark is intended to prevent courts from enjoining constitutionally-protected speech." Id. at 1303. However, whether defendant's use of the mark is commercial within the meaning of the Lanham Act is a distinct question from whether defendant's use of the mark is protected by the First Amendment; I reach the latter question below. The holding of Panavision does not suggest that defendant's use of plaintiff's mark is not commercial.

3. Section 1125(a)(1)(A)

[7] In relevant part, § 1125(a)(1)(A) prohibits a person from using in commerce any term or false designation of origin which "is likely to cause confusion ... as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person." Section 1125(a)(1) is also limited by § 1125(c)(4)(B), which states that "noncommercial use of a mark" is not actionable under the Lanham Act.

Here, as discussed above, defendant offers informational services relating to the anti-abortion and anti-birth control movement, specifically providing his audience with relevant literature and the means to contact Roberge. In addition, defendant's solicitation of funds in relation to his anti-abortion efforts are commercial in nature. Therefore, because defendant's labelling of his web site with plaintiff's mark relates to the "origin, sponsorship, or approval" by plaintiff of defendant's web site, I find that § 1125(a)(1)(A) may govern defendant's actions in this case.

4. Section 1125(a)(1)(B)

With respect to § 1125(a)(1)(B), defendant can be liable only if he has used the plaintiff's mark "in commercial advertising or promotion." Courts have disagreed as to the scope and meaning of "commercial advertising and promotion." Compare Seven–Up Co. v. Coca–Cola Co., 86 F.3d 1379, 1384 (5th Cir.1996) (defining commercial advertising as commercial speech, by a defendant in commercial competition with plaintiff, for purpose of influencing consumers to buy defendant's goods or services) with Semco, Inc. v. Amcast, Inc., 52 F.3d 108, 111–12 (6th Cir.1995) (noting conflicting legislative history of § 1125(a)(1)(B) as to whether commercial advertising is merely coextensive with commercial speech, or includes all speech that is not political). Because I have concluded that defendant's activity is subject to the provisions of the Lanham Act discussed above, I need not reach the issue of whether his activity is subject to § 1125(a)(1)(B). I therefore do not address the issue of the meaning of "commercial advertising and promotion."

I therefore determine that § 1114, § 1125(c), and § 1125(a)(1)(a) of the Lanham Act are applicable here. I turn now to whether defendant's use of plaintiff's mark results in a likelihood of confusion.

C. The Likelihood of Confusion

1. The Polaroid Factors

The Second Circuit set out the factors a court must consider in determining the likelihood of consumer confusion in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir.1961). Those factors include: the strength of plaintiff's mark, the degree of similarity between the two marks, the competitive proximity of the products or services, the likelihood that the plaintiff will bridge the gap between the two markets, the existence of actual confusion, the defendant's good faith in adopting the mark, the quality of the defendant's product, and the sophistication of the purchasers.

a. The Strength of the Mark

[8] The strength of plaintiffs' mark is conceded by defendant, which is reasonable in light of plaintiffs' trademark registration of the mark and plaintiffs' continued use of the mark for over 50 years. Tr. 2/20/97 at 7–9. The strength of plaintiffs' mark weighs in favor of likelihood of confusion.

b. The Degree of Similarity Between the Marks

The two marks, "Planned Parenthood" and "plannedparenthood.com "are nearly identical; the only distinctions are the latter's lack of initial capitalization, the lack of a space between words, and the ".com" that is necessary to designate a domain name. The degree of similarity between defendant's domain name and the domain name owned by plaintiff's affiliate, Planned Parenthood of Houston, "plannedparenthood.org," is even stronger.^[9] Plaintiff was originally under the impression that according to Internet usage, it could operate using only a ".org" designation. Tr. 2/20/97 at 14. Currently, however, NSI allows non-profit corporations, as well as for-profit businesses and individuals, to use the ".com" designation. Id. The ".com" designation is commonly used by businesses. Id. at 48. The degree of similarity between the marks thus increases the likelihood of confusion among Internet users.

c. The Competitive Proximity of the Products or Services

The web sites of plaintiff and defendant are both located on the World Wide Web. Therefore, defendant's web site at "www.plannedparenthood.com" is close in proximity to plaintiff's own web site, "www.ppfa.org." Both sites compete for the same audience—namely, Internet users who are searching for a web site that uses plaintiff's mark as its address. The degree of competitive proximity, therefore, increases the likelihood of confusion among Internet users.

d. The Likelihood that Plaintiff Will Bridge the Gap Between the Markets

Because plaintiff's web site and defendant's web site are both on the Internet, the parties are vying for users in the same "market." Where the market for competing goods or services is the same, there is no need to consider whether plaintiff will bridge the gap between the markets. Paddington Corp. v. Attiki Importers & Distributors, Inc., 996 F.2d 577, 586 (2d Cir.1993). I therefore do not consider this factor in determining the likelihood of confusion.

e. The Existence of Actual Confusion

Plaintiff has produced testimony demonstrating that actual confusion has occurred among Internet users. Tr. 2/20/97 at 47–49, 54–57. The confusion has occurred both in a user who attempted to go directly to "www.plannedparenthood.com," thinking that it was likely to be plaintiff's web address, Id. at 46, and in a user who used a search engine to find web sites containing, or designated by, plaintiff's mark. Id. at 53–54.

This specific testimony exemplifies the likelihood of confusion due to the nature of domain names and home page addresses. First, because ".com" is a popular designation for Internet domain names, an Internet user is likely to assume that ".com" after a corporation's name will bring her to that corporation's home page, if one exists.^[10] Second, an Internet user cannot immediately determine the content of a home page maintained by the owner of a particular domain name or located at a specific address. Only after a user has seen or entered "plannedparenthood.com" can she access the web site; such access occurs after at least a temporary delay. In addition, there is a delay while the home page "loads" into the computer. Because the words on the top of the page load first, the user is first greeted solely with the "Welcome to the Planned Parenthood Home Page!"It is highly likely that an Internet user will still believe that she has found plaintiff's web site at that point.

[9] Even when the picture of The Cost of Abortion finally does appear on the screen, the user is unlikely to know that she is not at plaintiff's home page. Id. at 19, 47, 55–56. The book's ambiguous title "The Cost of Abortion," alone, cannot disabuse every Internet user of the notion that she has found plaintiff's home page. The Internet user must actually click on a link to read excerpts from the book, biographical information about the author, or book endorsements. only in the course of reading those items can the user determine that she has not reached plaintiff's home page. Depending on which link the user has chosen to access, there may be an additional delay before the user can grasp that plaintiff is not the true provider of the home page.^[11] This lengthy delay between attempting to access plaintiff's home page and learning that one has failed to do so increases the likelihood of consumer confusion.

f. The Defendant's Good Faith in Adopting the Mark

Defendant's testimony, and his counsel's admission at the hearing before this Court on the temporary restraining order, show that defendant chose his domain name and home page name with full knowledge and intent that some Internet users seeking to find plaintiff's home page would instead encounter his. However, defendant may have acted under the good faith assumption that his actions were protected by the First Amendment. I need not conclude that defendant acted in bad faith to conclude that there is a likelihood of confusion, and I therefore make no such finding at this time.

g. The Quality of Defendant's Product

A comparison of the quality of plaintiff's and defendant's products—their web sites—is irrelevant; the Court cannot compare the two web sites in terms of superior or inferior quality. However, I note that the two products are vastly different and convey quite divergent messages. Plaintiff's web site offers educational resources, suggests ways to get involved in plaintiff's activities, to join plaintiff in its advocacy mission, and to contribute to plaintiff, and offers links to plaintiff's local affiliates, related organizations, and job listings. In sum, plaintiff's web site provides Internet users with an array of information and services related to Planned Parenthood's mission of providing reproductive choice for women. Defendant's home page bearing plaintiff's mark offers users information, including an advertisement for a book, and ways to contact a vocal anti-abortion advocate. Any ensuing confusion resulting from defendant's use of plaintiff's mark as his domain name and home page address is likely to be destructive to the image that plaintiff, the senior user of the mark, has established. See MGM–Pathe, 774 F.Supp. at 876.

h. The Sophistication of the Purchasers

Plaintiff argues that its primary purchasers are low income, relatively unsophisticated women. I note that those with access to the Internet may not be coextensive with the segment of the population to whom plaintiff normally offers its services; those with Internet access may be more sophisticated. However, testimony has shown that even sophisticated Internet users were confused by defendant's web site. Although the sophisticated Internet user may discover, after reading the text of one of the links on defendant's home page, that she has not reached plaintiff's web site, some users may not be so immediately perspicacious. Because the sophistication of the user is no guarantee, here, that the consumer will not be confused, I find that this factor is of limited value in determining whether the consumer is likely to be confused.

[10] In sum, I find that the bulk of the Polaroid factors demonstrate that there is a significant likelihood of confusion that warrants the granting of a preliminary injunction.

D. Defendant's Additional Defenses

Defendant also argues that his use of plaintiff's mark is protected from injunction because (1) it is a parody, and (2) it is protected speech under the First Amendment. I consider these arguments in turn.

1. The Parody Exception

Defendant argues that his use of the "planned parenthood" mark is not likely to confuse because it is similar to a parody. A parody "depends on a lack of confusion to make its point," and " 'must convey two simultaneous—and contradictory—messages: that it is the original, but also that it is not the original and is instead a parody.' " Hormel Food Corp. v. Jim Henson Productions. Inc., 73 F.3d 497, 503 (2d Cir.1996)(internal citations omitted). Here, an Internet user may either find the defendant's web site through a search engine or may simply enter the words "planned parenthood" in the expectation that she will find the plaintiff's web site. Seeing or typing the "planned parenthood" mark and accessing the web site are two separate and nonsimultaneous activities. Furthermore, the greeting "Welcome to the Planned Parenthood Home Page!" does not immediately contradict an Internet user's assumption that she has accessed the plaintiff's home page. Only when an Internet user actually "clicks" on one of the topics and accesses commentary on The Cost of Abortion does she encounter defendant's message.

I am not persuaded by defendant's argument that the message of the home page provides an ironic and contrasting allusion to plaintiff, nor do I find convincing his argument that the banner heading of the home page is sarcastic. Similarly, I do not conclude that defendant's use of the term "planned parenthood" in the context described above is intended not to confuse the user into an association with plaintiff, but rather "to reference Plaintiff as the 'enemy.' "^[12] Because defendant's use of "planned parenthood" does not convey the simultaneous message that the home page and web site are those of plaintiff and those of defendant, defendant's argument that his use of the mark is a parody fails. Thus, the Polaroid factors must govern the issue of whether there is a likelihood of confusion. Here, I have found that the Polaroid factors demonstrate that there is a likelihood of confusion that arises from defendant's use of the domain name "plannedparenthood.com," the home page address "www.plannedparenthood.com," and the banner at the top of the home page stating, "Welcome to the Planned Parenthood Home Page!"

2. The First Amendment Exception

Defendant also argues that his use of the "planned parenthood" mark is protected by the First Amendment. As defendant argues, trademark infringement law does not curtail or prohibit the exercise of the First Amendment right to free speech. I note that plaintiff has not sought, in any way, to restrain defendant from speech that criticizes Planned Parenthood or its mission, or that discusses defendant's beliefs regarding reproduction, family, and religion. The sole purpose of the Court's inquiry has been to determine whether the use of the "planned parenthood" mark as defendant's domain name and home page address constitutes an infringement of plaintiff's trademark. Defendant's use of another entity's mark is entitled to First Amendment protection when his use of that mark is part of a communicative message, not when it is used to identify the source of a product. Yankee Publishing. Inc. v. News America Publishing, Inc., 809 F.Supp. 267, 275 (S.D.N.Y.1992). By using the mark as a domain name and home page address and by welcoming Internet users to the home page with the message "Welcome to the Planned Parenthood Home Page!" defendant identifies the web site and home page as being the product, or forum, of plaintiff. I therefore determine that, because defendant's use of the term "planned parenthood" is not part of a communicative message, his infringement on plaintiff's mark is not protected by the First Amendment.

[11] Defendant argues that his use of the "Planned Parenthood" name for his web site is entitled to First Amendment protection, relying primarily on the holding of Yankee Publishing, 809 F.Supp. at 275. In that case, Judge Leval noted that the First Amendment can protect unauthorized use of a trademark when such use is part of an expression of a communicative message: "the Second Circuit has construed the Lanham Act narrowly when the unauthorized use of the trademark is for the purpose of a communicative message, rather than identification of product origin." Id. Defendant argues that his use of the "Planned Parenthood" name for his web site is a communicative message.

However, Yankee Publishing carefully draws a distinction between communicative messages and product labels or identifications:

When another's trademark ... is used without permission for the purpose of source identification, the trademark law generally prevails over the First Amendment. Free speech rights do not extend to labelling or advertising products in a manner that conflicts with the trademark rights of others.

Id. at 276. Defendant offers no argument in his papers as to why the Court should determine that defendant's use of "plannedparenthood.com" is a communicative message rather than a source identifier. His use of "plannedparenthood.com" as a domain name to identify his web site is on its face more analogous to source identification than to a communicative message; in essence, the name identifies the web site, which contains defendant's home page. The statement that greets Internet users who access defendant's web site, "Welcome to the Planned Parenthood Home Page," is also more analogous to an identifier than to a communication. For those reasons, defendant's use of the trademarked term "planned parenthood" is not part of a communicative message, but rather, serves to identify a product or item, defendant's web site and home page, as originating from Planned Parenthood.

Defendant's use of plaintiff's mark is not protected as a title under Rogers v. Grimaldi, 875 F.2d 994, 998 (2d Cir.1989). There, the Court of Appeals determined that the title of the film "Ginger and Fred" was not a misleading infringement, despite the fact that the film was not about Ginger Rogers and Fred Astaire, because of the artistic implications of a title. The Court of Appeals noted that "[f]ilmmakers and authors frequently rely on word-play, ambiguity, irony, and allusion in titling their works.' Id. The Court of Appeals found that the use of a title such as the one at issue in Rogers was acceptable 'unless the title has no artistic relevance to the underlying work"; even when the title has artistic relevance, it may not be used to "explicitly mislead[ ] [the consumer] as to the source or content of the work." Id. Here, even treating defendant's domain name and home page address as titles, rather than as source identifiers, I find that the title "plannedparenthood.com" has no artistic implications, and that the title is being used to attract some consumers by misleading them as to the web site's source or content. Given defendant's testimony indicating that he knew, and intended, that his use of the domain name "plannedparenthood.com" would cause some "pro-abortion" Internet users to access his web site, Tr. 2/21/97 at 36, he cannot demonstrate that his use of "planned parenthood" is entitled to First Amendment protection.

[12] Because defendant's use of plaintiff's mark is subject to the Lanham Act, because the Polaroid factors demonstrate that there is a likelihood of confusion arising from defendant's use of plaintiff's mark, and because defendant has not raised a defense that protects his use of the mark, plaintiff has met its burden of demonstrating that a preliminary injunction against defendant's use of plaintiff's mark is warranted. Hasbro, 858 F.2d at 73.

E. Whether A Disclaimer Will Cure the Confusion

Defendant argues that a disclaimer, rather than an injunction, is the appropriate remedy here. I disagree. Due to the nature of Internet use, defendant's appropriation of plaintiff's mark as a domain name and home page address cannot adequately be remedied by a disclaimer. Defendant's domain name and home page address are external labels that, on their face, cause confusion among Internet users and may cause Internet users who seek plaintiff's web site to expend time and energy accessing defendant's web site. Therefore, I determine that a disclaimer on defendant's home page would not be sufficient to dispel the confusion induced by his home page address and domain name.

F. Attorneys' Fees

Plaintiff has requested costs, including attorneys' fees. When an injunction is granted pursuant to 15 U.S.C. § 1125, the court may award the relief provided in §§ 1117(a), including reasonable attorneys' fees in "exceptional cases" under 15 U.S.C. § 1117(a). According to the Second Circuit, "exceptional" circumstances include cases of willful infringement. Bambu Sales, Inc. V. Ozark Trading Inc., 58 F.3d 849, 854 (2d Cir.1995).

There is insufficient evidence and/or legal briefing before me to determine that defendant's use of plaintiff's mark constitutes willful infringement. I therefore order plaintiff to submit to the Court, no later than April 7, 1997, any memorandum of law or factual submissions in support of its request for attorneys' fees. Defendant shall reply to that submission no later than April 21, 1997. Plaintiff's response, if any, is due on May 5, 1997. The parties are, of course, encouraged to settle the costs issue between themselves, if possible.

IV. Conclusion

For the foregoing reasons, I grant plaintiff's motion for a preliminary injunction. I hereby enjoin defendant, his agents, servants, employees, representatives, attorneys, related companies, successors, assigns, and all others in active concert or participation with him, (1) from using to identify defendant's web site, home page, domain name or in any other materials available on the Internet or elsewhere the Planned Parenthood® mark, any colorable imitation of the Planned Parenthood® mark, and any thing or mark confusingly similar thereto or likely to cause dilution of the distinctiveness of the Planned Parenthood® mark or injury to the business reputation of the Planned Parenthood Federation of America, Inc. or any of its affiliates; and (2) from representing by any means whatsoever that defendant, or any products or services offered by defendant, including information services provided via defendant's web site or the Internet, are associated in any way with plaintiff or its products or services, and from taking other action likely to cause confusion or mistake on the part of Internet users or consumers.

[13] The remaining relief sought by plaintiff will be the subject of further proceedings herein.

SO ORDERED

[1] The Court held a hearing on plaintiff's request for a temporary restraining order on February 5, 1997.

[2] Plaintiff's Houston affiliate owns the domain name "plannedparenthood.org," and is in the process of transferring that domain name to plaintiff. Tr. 2/20/97 at 14.

[3] The text of defendant's home page is part of the record before the Court, as Pl.Ex. 2.

[4] In light of defendant's sworn affidavit, the Court does not find Bucci's statement that he "never gave [his] audience a thought," Tr. 2/21/97 at 26, credible.

[5] The Court notes that defendant has submitted, as Exhibit 1 to his affidavit, a statement by his "spiritual adviser," Father Norman Weslin, that defendant wants to place on "www.plannedparenthood.com" web site. In that statement, Father Weslin explains that the web site "is considered a highly effective instrument by the Roman Catholic Church in exposing [plaintiff's] efforts which seek to impose the culture of death upon the culture of life and to inform not only the Roman Catholic faithful but also those who are opposed to God's "planned parenthood ...." (emphasis added).

[6] In addition, after plaintiff contacted defendant about the use of its mark as a domain name, defendant made the following statement on his radio show, Catholic Radio: "Of course, we knew this would happen. We knew we would draw the fire of Planned Parenthood.... So we've got ourselves into a real fight. Hey listen, we're asking for it." Pl.Ex. 6A at 1.

[7] Defendant argues that the Court should define "use in commerce" as it is defined in 15 U.S.C. § 1127. There, Congress defines the "use [of a mark] in commerce" as, inter alia, its use "on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services."

Plaintiff notes that the narrower definition of "use in commerce" as set out in § 1127 has been used by the Patent and Trademark Office in initially determining whether a mark qualifies for federal registration. See, e.g., ConAgra. Inc. v. George A. Hormel & Co., 990 F.2d 368, 371 (8th Cir.1993); 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 25:57 (3d ed. 1996) ("It is difficult to conceive of an act of infringement which is not 'in commerce' in the sense of the modern decisions.... However, the Patent and Trademark Office still appears to adopt a higher standard of use in commerce for purposes of qualifying for federal registration in the first instance.")

In any event, I note that defendant satisfies the requirements of § 1127. First, his activities over the Internet occur everywhere that Internet users may access his web site. Testimony has shown that Internet users in Texas, Tr. 2/20/97 at 17, Massachusetts, id. at 46, and Delaware, id. at 52, have accessed defendant's home page. Second, defendant is "engaged in commerce" in connection with his web site due to his use of the Internet and his effect on plaintiff's activities, because those activities constitute commerce within the meaning of § 1127, which defines "commerce" as "all commerce which may lawfully be regulated by Congress."

[8] Plaintiffs' Exhibit 6A is a transcript of a cassette tape, Pl.Ex. 6, labeled "Bucci Catholic Radio January 9, 1997." That tape contains a portion of defendant's Catholic Radio broadcast describing Catholic Radio's ownership of the domain name "plannedparenthood.com." Defendant, on that broadcast, asks his audience for "suggestions on how to make the most of this Web site," and says, "if any of you folks out there have any, any ideas how we can make the most of this Web site, please contact me." Pl.Ex. 6A at 1–2.

[9] In comparing plaintiff's product with defendant's product, the Court looks to the "www.ppfa.org" web site and the "www.plannedparenthood.com" website.

[10] A vast number of corporations use their corporate name, or some easily recognizable variant thereof, followed by ".com," as a domain name and home page address. Therefore, a typical Internet user who wants to go to a corporation's home page may attempt to find the page by simply typing into her computer "www.[corporation name].com". Examples of such home page addresses include: "www.nytimes.com," "www.mtv.com," "www.randomhouse.com," "www.sony.com," "www.harrys-shoes.com," and "www.mercuryvehicles.com."

[11] Defendant himself agreed that after clicking on the first link listed on the home page, the "Foreword," a user would not ascertain the anti-abortion message until the middle of the second paragraph. Tr. 2/21/97 at 42–43.

Similarly, the "Book Review" link contains endorsements that are ambiguous. "The concerns which [the author] raises affect EVERY American who cares about this country's future prosperity," reads one quote; another notes, "This well reasoned exposition should be read by thoughtful people on both sides of the issue."

[12] Although counsel for defendant argued that defendant's use of plaintiff's mark was "merely to reference plaintiff as the enemy," Def. Mem. in Opp. at 14, defendant could not point to any portion of the home page that referred to plaintiff as the enemy. Tr. 2/21/97 at 45.

950 F.Supp. 737 (1997)

Civil Action No. 2:96cv896.

January 16, 1997.

Benjamin J. Madison, Gregory N. Stillman, Hunton & Williams, Norfolk, VA, for plaintiff.

[738] Webster R. McGee, WRM & Associates, Beaumont, TX, pro se.

MEMORANDUM OPINION, FINAL ORDER, AND PERMANENT INJUNCTION

CLARKE, District Judge.

This matter comes before this Court for the hearing of evidence in the bench trial of whether Plaintiff Cardservice International, Inc., is entitled to a permanent injunction pursuant to 15 U.S.C. Section 1116^[1] against Defendants Webster R. McGee and WRM & Associates banning the use by the Defendants of words similar to Plaintiff's trademark "Cardservice". This Court, in a prior hearing in which the Defendants participated, previously entered a preliminary injunction against the Defendants in this matter. Defendants have proceeded throughout these proceedings pro se.^[2] The Court ruled from the Bench and awarded Cardservice International a permanent injunction and reasonable attorneys fees. The Court hereby incorporates that ruling into this Opinion and Order. For the reasons stated below, the Court GRANTS Plaintiff's request for a permanent injunction and further ORDERS the Defendants to pay Plaintiff's reasonable attorneys fees.

I.

This action was brought by Cardservice International seeking injunctive relief and damages for alleged infringements of its trademark "Cardservice" by the Defendants. Cardservice International provides credit and debit card processing and processes "billions of dollars in transactions annually." Plaintiff's Exhibit 3 at 2. Cardservice International registered the trademark "Cardservice International" with the United States Patent and Trademark Office as Reg. No. 1,864,924 effective Nov. 29, 1994. Plaintiff's Exhibit 1. No claim was made to the exclusive right to the word "international." Plaintiff's Exhibit 1.

McGee, through his sole proprietorship WRM & Associates has also provided credit and debit card services. Cardservice International claims that in 1994, McGee applied to become a representative of Cardservice International. McGee claims that he was only associated with an agent of Cardservice International, but never sought to become associated with Cardservice International itself. In March of 1995 and without the permission of Cardservice International, McGee registered the internet domain name^[3] "cardservice.com" with Network Solutions, Inc., the company responsible for regulating use of domain names on the internet. In advertisements located at the internet site "cardservice.com", McGee advertised merchant card services through a company held out to be "EMS — Card Service on the Caprock". See Plaintiff's Exhibits 10 & 11.

In May and August 1995, Cardservice International contacted McGee by letter demanding that McGee "cease and desist all Cardservice related activity." Plaintiff's Exhibits 8 & 9. Subsequent discussions between Cardservice International and McGee focused on McGee's use of "cardservice.com". When McGee refused to surrender the domain name, Cardservice International retained counsel, who called McGee's attention to Cardservice International's trademark and again demanded that McGee cease and desist use of the term "Cardservice" and any variation of it on the internet.

McGee refused to relinquish "cardservice.com" or to cease use of "Card Service" on the internet. McGee claimed that the [739] name of his business inserts a space between "card" and "service" and that he is therefore not in violation of the trademark laws. He further claimed that "cardservice.com" was one word because the internet does not allow spaces in domain names. When Cardservice International expanded its services onto the internet, it was forced to use the domain name "cardsvc.com".

Cardservice International then filed this action in September 1996. Cardservice International filed counts alleging violations of Section 32 of the Lanham Act, 15 U.S.C. Section 1114, for trademark infringement; Section 43(a) of the Lanham Act, 42 U.S.C. Section 1125(a), for unfair competition; and common law unfair competition, misappropriation, and unjust enrichment. McGee answered these allegations and filed counterclaims seeking declaratory relief that he was the proper owner of the domain name "cardservice.com.", that Cardservice International had interfered with Defendants' business relationships by attempting to have the domain name "cardservice.com" transferred from McGee to Cardservice International, and that Cardservice International had engaged in trademark misuse and wire fraud.

By Order dated October 30, 1996, this Court granted Plaintiff's motion for a preliminary injunction and ordered the Defendants to end all direct and indirect use of any variation of "cardservice" on the internet and to delete all content from the internet site "cardservice.com". McGee then sought to amend his answer and counterclaim to assert personal jurisdiction and venue defenses. By Order dated December 18, 1996, this Court found that the Defendants' amendment was untimely and that, according to Federal Rule of Civil Procedure 12(h), the Defendants had waived any defenses involving personal jurisdiction and venue. By that Order, this Court also granted Plaintiff's Motion to Dismiss the Defendants' counterclaims and dismissed Plaintiff's damage claims, leaving only equitable issues and thereby obviating the need for a jury trial.

Cardservice International then filed a Motion to Show Cause Why Defendants Should Not Be Held in Contempt alleging violations by the Defendants of this Court's preliminary injunction. Cardservice International alleged that McGee, after entry of the preliminary injunction, continued to refer to Cardservice International at his internet site identified by the domain name "wrm.com" and introduced evidence indicating that McGee intended to use a new site identified by the domain name "csimall.com" — a name apparently derived the letters "CSI" which has been used to refer to Cardservice International — to engage in "guerilla warfare" on the internet against Cardservice International. See Plaintiff's Exhibit 25. On January 13, 1997, this Court found that McGee had violated the preliminary injunction and found McGee in contempt. The Court ordered that McGee pay attorneys fees and expenses incurred in the show cause motion. The Court further ordered that the parties meet to devise a plan for ending McGee's violations. On January 14, 1997, the Court entered an Order agreed to by both Cardservice International and McGee setting forth a plan to alleviate McGee's violations of the preliminary injunction.

On January 13, 1997, the Court also proceeded with the bench trial on the merits of Cardservice International's claim in which Cardservice International sought attorneys fees and a permanent injunction. McGee indicated his desire to end the litigation and stated that he would not contest Cardservice International's evidence.

II.

The Court ruled from the Bench that Cardservice International is entitled to a permanent injunction against McGee and WRM & Associates requiring the Defendants to cease use of any variation of the registered mark "Cardservice" and to relinquish any interest in the domain name "cardservice.com". Federal Rule of Civil Procedure 65(d)^[4] requires this Court to state the reasons [740] for the grant of the permanent injunction.

First, the Court addresses a preliminary issue. McGee has argued that because he registered the domain name "cardservice.com" with Network Solutions, he is entitled to the domain name. McGee cites Network Solutions' policy of granting domain names on a first-come-first-served basis. Such a policy cannot trump federal law. Holders of valid trademarks under federal law are not subject to company policy, nor can the rights of those trademark holders be changed without congressional actions. If trademark laws apply to domain names, anyone who obtains a domain name under Network Solutions' "first-come-first-served" policy must do so subject to whatever liability is provided for by federal law.

Holders of valid trademarks are protected from infringements of that trademark by the Lanham Act. According to Section 32 of the Lanham Act

Any person who shall, without the consent of the registrant —

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ...

shall be liable for trademark infringement. 15 U.S.C. Section 1114(1). Section 43 of the Lanham Act applies to

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which —

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities....

15 U.S.C. Section 1125(a). The Fourth Circuit has stated that in order to prevail in actions under these statutes, "a complainant must demonstrate that it has a valid, protectible trademark and that the defendant's use of a colorable imitation of the trademark is likely to cause confusion among consumers." Lone Star Steakhouse & Saloon v. Alpha of Virginia, 43 F.3d 922 (4th Cir.1995).

It is undisputed that Cardservice International owns a valid, protectible trademark. Until McGee informed the Court that he would not contest Cardservice International's evidence, he primarily argued that his use of "cardservice.com" and "Card Service on the Caprock" would not cause confusion on the internet. The Court disagrees and finds that there is a likelihood of confusion between Cardservice International's registered mark and McGee's use of "cardservice.com" and "Card Service" on the internet.

The factors relevant to a determination of whether there is a likelihood of confusion are as follows:

a) the strength or distinctiveness of the mark;

b) the similarity of the two marks;

c) the similarity of the goods/services the marks identify;

d) the similarity of the facilities the two parties use in their businesses;

e) the similarity of the advertising used by the two parties;

f) the defendant's intent;

g) actual confusion.

Pizzeria Uno Corp. v. Temple, 747 F.2d 1522, 1527 (4th Cir.1984). Not all of these factors are relevant to any given set of facts, nor must all factors be in the registrant's favor for a finding of confusion. Id.

In this case, several of the Pizzeria Uno factors favor a finding that McGee's use of "cardservice.com" and "Card Service" is likely to cause confusion. It is clear that [741] McGee's use of "cardservice.com" and "Card Service on the Caprock" are strikingly similar to Cardservice International's registered mark. Although McGee's use of the term "Card Service" does not exactly duplicate "Cardservice", minor differences between the registered mark and the unauthorized use of the mark do not preclude liability under the Lanham Act when the unauthorized use is likely to cause confusion. See Lone Star Steakhouse, supra (finding use of "Lone Star Grill" to be an infringement of registered mark "Lone Star Steakhouse and Saloon"). The use of the term "cardservice" in Defendants' domain name exactly duplicates the registered mark "Cardservice".

Further, both parties are using the internet as the facility to provide their services. Because of the nature of the internet and domain names in particular, this factor becomes even more important in cases of trademark infringement over the internet. Domain names present a unique circumstance when determining the likelihood of confusion caused by possible trademark violations. Traditionally, trademark disputes involved two or more parties using the same or similar mark. Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 1233-34 (N.D.Ill.1996) (Williams, Mag.). With regard to domain names, however, only one party can hold any particular domain name. Id. Who has access to that domain name is made even more important by the fact that there is nothing on the internet equivalent to a phone book or directory assistance. A customer who is unsure about a company's domain name will often guess that the domain name is also the company's name. For this reason, "a domain name mirroring a corporate name may be a valuable corporate asset, as it facilitates communication with a customer base." MTV Networks, Inc. v. Curry, 867 F.Supp. 202, 203-04 n. 2 (S.D.N.Y.1994). Thus, a domain name is more than a mere internet address. It also identifies the internet site to those who reach it, much like a person's name identifies a particular person, or, more relevant to trademark disputes, a company's name identifies a specific company.

Because of McGee's use of "cardservice.com", Cardservice International has no access to an internet domain name containing its registered mark, and must use a different domain name. Cardservice International's customers who wish to take advantage of its internet services but do not know its domain name are likely to assume that "cardservice.com" belongs to Cardservice International. These customers would instead reach McGee and see a home page for "Card Service". They would find that McGee's internet site offers advertisements for and provides access to the same services as Cardservice International — credit and debit card processing. Many would assume that they have reached Cardservice International or, even if they realize that is not who they have reached, take advantage of McGee's services because they do not otherwise know how to reach Cardservice International. Such confusion is not only likely, but, according to McGee, has actually occurred at least four or five times since he began using "cardservice.com". Transcript of Preliminary Injunction Hearing at 366.

Such a result is exactly what the trademark laws were designed to protect against. Cardservice International has obtained a trademark to ensure that the name "cardservice" will be associated by consumers only with Cardservice International. Regardless of the fact that McGee's business is small compared to Cardservice International's, confusion will result among consumers who are seeking Cardservice International by searching for its trademark as a domain name on the internet. The fact that Cardservice International has been awarded a trademark means that it should not be forced to compete with others who would also use the words "cardservice". The terms of the Lanham Act do not limit themselves in any way which would preclude application of federal trademark law to the internet. Unauthorized use of a domain name which includes a protected trademark to engage in commercial activity over the internet constitutes use "in commerce", 15 U.S.C. Section 1114(1), of a registered mark. Such use is in direct conflict with federal trademark law. See ActMedia, Inc. v. Active Media Int'l, No. 96c3448, 1996 WL 466527 (N.D.Ill. July 17, 1996) (finding defendant's use of domain name "actmedia.com" precluded plaintiff [742] from reserving the domain name incorporating its registered mark and therefore violated 15 U.S.C. Section 1125); see also Panavision Int'l v. Toeppen, 945 F.Supp. 1296 (C.D.Cal.1996) (finding defendant's reservation of domain name "panavision.com" which incorporated registered mark of plaintiff to be in violation of the Federal Trademark Dilution Act of 1995, 15 U.S.C. Section 1125(c)).

Accordingly, the Court finds that McGee's use of "cardservice.com" and "Card Service on the Caprock" constitutes trademark infringement in violation of the Lanham Act and that Cardservice International is entitled to a permanent injunction against such use pursuant to 15 U.S.C. Section 1116. The Court emphasizes that its finding against McGee is based on evidence which McGee ultimately chose not to contest at trial.

IV.

In addition to a permanent injunction, Cardservice International requested that reasonable attorneys fees incurred in pursuing the preliminary and permanent injunctions be assessed against McGee. The Court ruled from the Bench that Cardservice International's request for attorneys fees would be granted.

In trademark infringement cases, the court may award reasonable attorneys fees in "exceptional cases." 15 U.S.C. Section 1117(a). The decision to grant attorneys fees in such exceptional cases rests within the discretion of the trial judge. Shell Oil Co. v. Commercial Petroleum, Inc., 928 F.2d 104, 108 n. 6 (4th Cir.1991). In order for the trial court to exercise its discretion and award attorneys fees, the Fourth Circuit has interpreted Section 1117 to require that a prevailing plaintiff "show that the defendant acted in bad faith." Scotch Whisky Ass'n v. Majestic Distilling Co., Inc., 958 F.2d 594, 599 (4th Cir.), cert. denied, 506 U.S. 862, 113 S.Ct. 181, 121 L.Ed.2d 126 (1992). In reaching this conclusion, the Fourth Circuit relied upon legislative history referring to acts characterized as "malicious, fraudulent, deliberate and willful." Id. at 600.

In cases in which there is no showing that the infringement was intentional at the time the defendant adopted the registrant's mark, or when such intent is unclear from the record, "[u]nreasonable post-adoption conduct rising to the level of bad faith could be evidence of the exceptional nature of a case, but the reasonable continuation of litigation should not automatically be such." Moore Business Forms, Inc. v. Ryu, 960 F.2d 486, 492 (5th Cir.1992).

In this case, there is some dispute as to whether McGee knew he was appropriating Cardservice International's registered mark when he began using "Card Service on the Caprock" and the domain name "cardservice.com." At the least, McGee did know of the existence of Cardservice International and had done some work for an agent of Cardservice International. If this were all that was in the record, it is doubtful that this case would rise to the level of one involving "exceptional circumstances."

McGee's conduct after Cardservice International notified him of the trademark infringement and his conduct after the initiation of this litigation, though, leads this Court to find that he was acting in bad faith and with malicious intent. McGee's response to Cardservice International's attempts to protect its registered mark was not to determine whether he was in fact in violation of the mark, but to post statements at "cardservice.com" accusing Cardservice International of trying to steal his domain name. Plaintiff's Exhibit 15 at 1. In addition to accusing Cardservice International of theft, McGee used "cardservice.com" to refer readers to competitors of Cardservice International, which McGee referred to as the "Good Guys." Plaintiff's Exhibit 15 at 3. Later, McGee referred to guerilla warfare and the use of a new domain name "csimall.com". Plaintiff's Exhibit 25 at 2. McGee also told Cardservice International that he was about to use the internet to "`bad mouth' the heck out of CSI." Plaintiff's Exhibit 26 at 1. In this vein, McGee issued the following warning to Cardservice International: "CSI can expect the internet not to be a source of additional business. Quite the contrary. The internet (with my help) may divert some of CSI's potential business elsewhere." Plaintiff's Exhibit 26 at 2 (emphasis added).

[743] Such malicious actions and statements are not made in the "reasonable continuation of litigation" and indicate an intention by McGee to use Cardservice International's registered mark to harm the company's reputation and ability to do business on the internet. The Court finds that Cardservice International has fulfilled its burden of demonstrating bad faith on the part of McGee and that an award of attorneys fees is warranted.

The Court further finds that the attorneys fees presented by the Plaintiff, see Plaintiff's Exhibit 27, in the amount of $59,591.25 are reasonable and sets its award in that amount. This amount shall be in addition to the $3,655.00 awarded as reasonable attorneys fees to Cardservice International for its expenses in pursuing its Motion to Show Cause pursuant to this Court's Order dated January 14, 1997.^[5]

V.

ORDER AND PERMANENT INJUNCTION

Pursuant to authority vested in this Court by 15 U.S.C. Section 1116, it is hereby ORDERED that the Defendants, their agents, servants, employees, successors, assigns, any others working in concert with the Defendants, including but not limited to internet "search engines", and anyone else with actual notice of this injunction, shall forthwith and as soon as possible cease all direct or indirect use of the words "cardservice", "card service", or any variation thereof, including but not limited to "csi" or "csimall", in the Defendants' internet identification, domain name, advertising, text, operation, or maintenance of any internet site, or in any communications over the internet in relation to business activities, or in the provision of any services through the internet.

It is further ORDERED that the Defendants shall forthwith and as soon as possible relinquish all interests in the domain names "cardservice.com" and "csimall.com".

It is further ORDERED that the Defendants shall pay to the Plaintiff reasonable attorneys' fees and expenses in the amount of $59,691.25. This amount shall be in addition to the $3,655.00 Defendant was ordered to pay as reasonable attorney's fees pursuant to this Court's Order dated January 14, 1997.

This Court reserves jurisdiction over this matter in order to enforce its findings and this Permanent Injunction.

The Clerk is DIRECTED to send a copy of this Order to counsel for the Plaintiff and to the Defendants.

IT IS SO ORDERED.

[1] Section 1116 states in relevant part:

The several courts vested with jurisdiction of civil actions arising under this chapter shall have power to grant injunctions, according to the principles of equity and upon such terms as the court may deem reasonable, to prevent the violation of any right of the registrant of a mark registered in the Patent and Trademark Office or to prevent a violation under section 1125(a) of this title.

15 U.S.C. Section 1116.

[2] WRM & Associates is a sole proprietorship owned by Defendant Webster McGee. Because only McGee has an ownership interest in WRM & Associates, this Court allowed McGee, in addition to himself, to represent WRM & Associates pro se.

[3] For a discussion of domain names and the internet, see, e.g., Panavision Int'l v. Toeppen, 945 F.Supp. 1296 (C.D.Cal.1996).

[4] Rule 65(d) states in relevant part: "Every order granting an injunction and every restraining order shall set forth the reasons for its issuance; shall be specific in terms; shall describe in reasonable detail, and not by reference to the complaint or other document, the act or acts sought to be restrained...." F.R.C.P. 65(d).

[5] The figure of $59,691.25 was reached by subtracting the $3,655.00 awarded in the Order dated January 14, 1997, from Cardservice International's total attorney's fees of $63,346 which included expenses in pursuit of the preliminary injunction, permanent injunction, and the Motion to Show Cause.

992 F.Supp. 1070 (1997)

No. C-97-177-MJM.

September 25, 1997.

[1071] [1072] Mark T. Hamer, Charles A. Meardon, Meardon Sueppel Downer & Hayes, Iowa City, IA, Ralph H. Lane, Pattishall McAuliffe Newbury Hilliard & Geraldson, Chicago, IL, for Plaintiff.

Donald G. Thompson, Bradley & Riley, Cedar Rapids, IA, for Defendant.

OPINION AND ORDER ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION

MELLOY, Chief Judge.

The sole issue before the Court is whether to compel Independence Corn By-Products Co. (ICBP) to convey the domain name "greenproducts.com" to the plaintiff, Green Products Co. (Green Products), for its use during the pendency of this litigation.

Green Products claims that ICBP violated Section 43(a) of the Lanham Trademark Act, 15 U.S.C. § 1125(a), as well as state laws, when ICBP registered the domain name "greenproducts.com" as one of its own domain names on the internet.^[1] Green Products moved for a preliminary injunction: (1) to enjoin ICBP from using the domain name "greenproducts.com", (2) to enjoin ICBP from using the expressions "green products" and "green pet products" as the whole or part of a trademark, trade name, or domain name, and (3) to compel ICBP to convey the [1073] ownership of the domain name "greenproducts.com" to Green Products.^[2]

In response, ICBP agreed to the first and second parts of Green Products' request, but it resisted the third part. During the pendency of the litigation, ICBP has consented (1) not to use the domain name "greenproducts.com", and (2) not to use the expressions "green products" and "green pet products" as the whole or part of any trademark, trade name, or domain name, but ICBP will continue to use those names "in ways that do not constitute trademark infringement, such as comparative advertising."^[3] (See Def.'s Mem., at 7, Doc # 15.) In order to analyze the merits of Green Products' motion to compel ICBP to transfer ownership of the domain name "greenproducts.com" during the pendency of the litigation, the Court will begin with a brief background of relevant language and information.

Background

The Internet is an international network of interconnected computers. Reno v. ACLU, ___ U.S. ___, ___, 117 S.Ct. 2329, 2334, 138 L.Ed.2d 874 (1997). The best known method of communication over the Internet is the World Wide Web (the web), which allows users to search for and retrieve information stored in remote computers. Id. Documents known as "web pages" (or "web sites") contain whatever information the site designer has decided to put there. These sites generally contain "links" — known as "hyperlinks" — to other documents created by that site's designer, or to other related sites. Id., at 2235.

To navigate the web, an internet user can type an alphanumeric "domain name" such as "microsoft.com" to view the web site that is linked to that domain name. Internet domain names are "similar to telephone number mnemonics, but they are of greater importance, since there is no satisfactory Internet equivalent to a telephone company white pages or directory assistance, and domain names can often be guessed." MTV v. Curry, 867 F.Supp. 202, 203 n. 2 (S.D.N.Y.1994). In addition to domain names, another way to navigate the web is to enter one or more keywords into a commercial "search engine" in an effort to locate specific sites.

Because the web is filled with a vast array of sites, from the user's standpoint the web is comparable to both a "vast library of information and to a sprawling mall offering goods and services." Reno, ___ U.S. at ___, 117 S.Ct. at 2335. From the designer's viewpoint, the web is a "platform from which to address and hear from a world-wide audience[] ... of readers, viewers, researchers, and buyers." Id.

[1074] In the case before this Court, Green Products and ICBP are direct competitors in the corncob by-products industry. On May 30, 1997, ICBP registered two domain names, "icbp.com" and "bestcob.com",^[4] with the goal of eventually designing a web site that users could find through either domain name. On June 9, 1997, ICBP registered seven other domain names — five of which are formed by using the trade names of ICBP's competitors: e.g., "greenproducts.com." On July 16, 1997, Green Products tried to register "greenproducts.com" and "freshnest.com" (a sister company's name), but was told that ICBP had already registered those two domain names.^[5] Green Products then filed a complaint and a motion for a preliminary injunction against ICBP.

Discussion

A. Preliminary Injunction Standards

To decide whether to grant the motion for a preliminary injunction, the Court must consider: (1) the probability that Green Products will succeed on the merits; (2) the threat of irreparable harm to Green Products; (3) the state of the balance between this harm and the injury that granting the injunction will inflict on other parties; and (4) the public interest. See Dataphase Sys., Inc. v. CL Sys., Inc., 640 F.2d 109, 113 (8th Cir.1981) (en banc); see also Calvin Klein Cosmetics Corp. v. Lenox Labs., Inc., 815 F.2d 500, 503 (8th Cir.1987); Sports Design and Dev., Inc., v. Schoneboom, 871 F.Supp. 1158 (N.D.Iowa 1995). When weighing these factors, "no single factor is itself dispositive; in each case all factors must be considered to determine on balance whether they weigh towards granting the injunction." Calvin Klein, 815 F.2d at 503.

The primary function of a preliminary injunction is to preserve the status quo until, upon final hearing, a court may grant full, effective relief. Sanborn Mfg. Co., Inc. v. Campbell Hausfeld/Scott Fetzer Co., 997 F.2d 484, 489 (8th Cir.1993); Ferry-Morse Seed Co. v. Food Corn, Inc., 729 F.2d 589, 593 (8th Cir.1984). Even though "preserving the status quo" is the primary function of a preliminary injunction, there are certain circumstances in which the Court has discretion to issue a preliminary injunction that does more than simply preserve the status quo. For example, when the moving party proves that simply preserving the status quo would still cause irreparable harm, the Court can use its discretion to order the parties to take some kind of affirmative action. See, e.g., Ferry-Morse, 729 F.2d at 593 (ordering company to deliver seed corn).^[6] Additionally, where granting the preliminary injunction would grant essentially the same relief that the moving party would obtain if it won at trial, the movant's burden to prove that the balance of factors weighs in its favor is a "heavy one." See Sanborn, 997 F.2d at 486, citing Dakota Indus., Inc. v. Ever Best Ltd., 944 F.2d 438, 440 (8th Cir.1991). Ultimately, the Court has discretion to grant or deny the [1075] motion, and its decision may not be disturbed absent a clearly erroneous factual determination, an error of law, or an abuse of discretion. Calvin Klein, 815 F.2d at 503. With this standard in mind, the Court will address each factor in turn.

B. Analysis of Dataphase Factors

1. Probability that Green Products will succeed on the merits

In deciding whether to grant a preliminary injunction, the Court's initial estimation of the strength of the plaintiff's case plays a role, but it is not determinative. The probability of success does not require that the party seeking relief prove a greater than fifty percent likelihood that it will succeed on the merits. Dataphase Sys. Inc., 640 F.2d at 113. Instead of a rigid measuring stick, the Court flexibly weighs the particular circumstances of the case to determine "whether the balance of equities so favors the movant that justice requires the court to intervene to preserve the status quo until the merits are determined." Calvin Klein, 815 F.2d at 503, quoting Dataphase, 640 F.2d at 113.

An essential element to a trademark infringement action is that the plaintiff must prove that a defendant's use of a particular name "`creates a likelihood of confusion, deception, or mistake among an appreciable number of ordinary buyers as to the source or association' between the two names." Maritz, Inc. v. Cybergold, Inc., 947 F.Supp. 1338, 1339 (E.D.Mo.1996) (quoting Duluth News-Tribune v. Mesabi Publ'g Co., 84 F.3d 1093, 1096 (8th Cir.1996)). Factors relevant to determine the likelihood of confusion or deception are:

(1) the strength of the trademark;

(2) the similarity between the plaintiff's and defendant's marks;

(3) the competitive proximity of the parties' products;

(4) the alleged infringer's intent to confuse the public;

(5) evidence of any actual confusion; and

(6) the degree of care reasonably expected of the plaintiff's potential customers.

Maritz, 947 F.Supp. at 1340, citing Anheuser-Busch, Inc. v. Balducci Publications, 28 F.3d 769, 774 (8th Cir.1994), cert. denied, 513 U.S. 1112, 115 S.Ct. 903, 130 L.Ed.2d 787 (1995). The Court will next examine each of these factors in turn, although not all of the factors are applicable in this case.

In order to determine whether the trademark is entitled to protection, the Court examines the first factor — strength of the trademark — and classifies the plaintiffs mark as either (1) arbitrary or fanciful, (2) suggestive, (3) descriptive, or (4) generic. See Cellular Sales, Inc. v. Mackay, 942 F.2d 483, 485 (8th Cir.1991); see also Duluth News-Tribune, 84 F.3d at 1096. An arbitrary or fanciful mark is the strongest type of mark and is afforded the highest level of protection. Cellular, 942 F.2d at 486. At the other end, a generic term is used by the general public to identify a category of goods, so it does not receive trademark protection. Duluth News-Tribune, 84 F.3d at 1096, citing Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75, 79-81 (7th Cir.1977) (holding "Lite Beer" to be generic). "Suggestive and descriptive marks fall somewhere in between. A suggestive mark is one that requires some measure of imagination to reach a conclusion about the nature of the product." Id. (citation omitted). In contrast, a descriptive mark "immediately conveys the nature or function of the product and is entitled to protection only if it has become distinctive by acquiring a secondary meaning." Id. (citation omitted) ("Cozy Warm ENERGY-SAVERS" is descriptive). Here, the Court finds that Green Products' trademark^[7] — the name "Green Products" — is at least suggestive. The name "Green Products" requires at least some imagination to connect it with corncob by-products.^[8]

[1076] The next factor requires the Court to consider the similarity between the plaintiffs and defendant's marks. ICBP concedes that its domain name "greenproducts.com" is "undisputedly similar to the mark Green Products Co." (Def.'s Mem., at 15, Doc # 15.) However, ICBP also argues that its use of the mark must be viewed in the context of the marketplace, and that the "domain name only has meaning as an Internet address linking to ICBP's future web site and the web site will take every precaution to ensure there is no consumer confusion." (Def.'s Mem., at 15.)

In essence, ICBP's argument is that the Court should only compare the similarity of domain names and web sites linked to those domain names — not the similarity of ICBP's domain name and Green Products' trademark — because ICBP is not "selling a product on store shelves using the mark `greenproducts.com'." (Def.'s Mem., at 15.)

The Court finds ICBP's argument clever, but ultimately unpersuasive. ICBP's argument is analogous to saying that ICBP has the right to hang a sign in front of its store that reads, "Green Products." When customers enter the store expecting to be able to see (and possibly, to buy) products made by Green Products, ICBP then announces, "Actually, this store isn't owned by Green Products; it's owned by ICBP. We don't sell anything made by Green Products, but as long as you're here, we'll tell you how our products are better than Green Products." In essence, ICBP is capitalizing on the strong similarity between Green Products' trademark and ICBP's domain name to lure customers onto its web page.

Turning to the third factor, the competitive proximity of the parties' products, ICBP concedes that ICBP and Green Products are both competitors in the corncob byproducts industry. (Def.'s Mem., at 16.) Despite being direct competitors, ICBP argues that this Court should not focus on their similar corn by-products, but on domain names and their respective web sites: "the relevant `products' for the likelihood of confusion analysis are not corncob products because ICBP does not sell any corncob products with the mark `greenproducts.com' on a label or package design." (Def.'s Mem., at 16.) Instead, ICBP suggests, the Court should analyze whether a web site located at "greenproducts.com" is proximate to a web site located at "green-products.com" or "greenproductsco.com." (Def.'s Mem., at 16.) ICBP believes that these domain names are not proximate, because anyone who knows Green Products' domain name can use that name to go directly to Green Products' web site and "will likely never even see ICBP's web site." (Def.'s Mem., 16.) ICBP does, however, concede that the web sites are "proximate in the sense that a person guessing at Green Product Co.'s domain name might access ICBP's web site if it first tries `greenproducts.com' ...." (Def.'s Mem., at 16.)

ICBP's argument basically boils down to the idea that the Court should view the domain names as mere addresses which — along with the web sites attached to each name — are products in and of themselves. The Court disagrees. There is a close competitive proximity between the products that the two companies sell, and there is also a close competitive proximity between the domain name "greenproducts.com" and the trademark "Green Products". The domain name "greenproducts.com" identifies the internet site to those who reach it, "much like a person's name identifies a particular person, or, more relevant to trademark disputes, a company's name identifies a specific company." Cardservice, 950 F.Supp. 737, 42 U.S.P.Q.2d at 1853. Because customers who do not know what a company's domain name is will often guess that the domain name is [1077] the same as the company's name, a "domain name mirroring a corporate name may be a valuable corporate asset, as it facilitates communication with a customer base." MTV Networks, 867 F.Supp. at 203-204 n. 2.

Alternatively, even if this Court were persuaded that it should only compare the alphanumeric domain names (and not the products that each company sells, nor the similarity between ICBP's domain name and Green Products' trademark), this Court would still find a close proximity between the domain name "greenproducts.com" and any of the alternative domain names that ICBP suggests, such as "green-products.com", "greenproductsco.com", or "greenproductsco.com." Under either analysis, there is a close competitive proximity, and that close competitive proximity further increases the opportunity of consumer confusion. See Maritz, 947 F.Supp. at 1341.

Fourth, this Court examines whether ICBP intended to cause consumer confusion by creating an ICBP web site accessed through the domain name "greenproducts.com." ICBP maintains that it had no intent to "pass off" its products as those of Green Products, and that its only intent was to distinguish ICBP's products from those of Green Products through comparative advertising. McMorris, Aff. ¶¶ 7-8. ICBP believes that there will be no consumer confusion because internet users will immediately know that the web site belongs to ICBP once the actual web page appears on the screen (after users have typed the domain name "greenproducts.com"). To support this argument, ICBP distinguishes its planned web site from that in Planned Parenthood Fed. of Am., Inc. v. Bucci, 42 U.S.P.Q.2d 1430 (S.D.N.Y.1997), where an anti-abortion activist who registered the domain name "plannedparenthood.com" to lure pro-abortion internet users onto his web site designed a web page that deceptively announced that it was "Planned Parenthood's" site — instead of clearly announcing that the Planned Parenthood Federation of America had nothing to do with it.

While it is true that the Planned Parenthood court discussed how the graphics and design of the web page misled users into believing that the Planned Parenthood Federation was operating an anti-abortion web page, see 42 U.S.P.Q.2d at 1432, ICBP overlooks the fact that the Planned Parenthood court also found that a disclaimer would not have cured the confusion caused by the domain name:

Due to the nature of Internet use, defendant's appropriation of plaintiffs mark as a domain name and home page address cannot adequately be remedied by a disclaimer. Defendant's domain name and home page address are external labels that, on their face, cause confusion among Internet users and may cause Internet users who seek plaintiffs web site to expend time and energy accessing defendant's web site. Therefore, I determine that a disclaimer on defendant's home page would not be sufficient to dispel the confusion induced by his home page address and domain name.

Planned Parenthood, 42 U.S.P.Q.2d at 1441.

Because ICBP's web site has not been designed yet, this Court will make no finding as to whether ICBP's web page is likely to cause consumer confusion between the products of ICBP and those of Green Products. However, based on the briefs, affidavits, and evidence presented at the hearing, this Court finds that the use of plaintiff's trademark as defendant's own domain name is likely to cause consumer confusion as to who owns the site. Just as customers entering a store that advertises "Green Products" as its store name would be initially confused to find, upon entering the store, that ICBP actually owned it, so will customers typing the domain name "greenproducts.com" be initially confused to find that ICBP owns the web site.

The Court acknowledges that such an interpretation of "consumer confusion" is somewhat different than that typically used to find consumer confusion in trademark infringement cases. Typically, the courts examine whether a company intended to confuse consumers into thinking that its own products were made by a competitor company. See, e.g., SquirtCo v. Seven-Up Co., 628 F.2d 1086, 1091 (8th Cir.1980) ("Intent on the part of the alleged infringer to pass off its [1078] goods as the product of another raises an inference of likelihood of confusion, but intent is not an element of a claim for trademark infringement.").

Here, ICBP did not intend to sell its corn by-products by passing them off as having been made by Green Products. However, ICBP did intend to pass off its domain name as though it belonged to Green Products. As a result of the confusion in thinking that Green Products' web site could be found through the "greenproducts.com" domain name, ICBP could deceptively lure potential customers onto its own turf, where customers would be told how ICBP is better than Green Products. This Court finds that such a deceptive use of a competitor's trademark as a way to lure customers away from the competitor is a kind of consumer confusion.

Moreover, even if such an interpretation of "consumer confusion" is not the relevant mode of inquiry, this Court also finds that ICBP's ownership of the domain name "greenproducts.com" — even without an adjoining web site — could cause consumer confusion about the corporate status of Green Products. Currently, if internet users browsing the web type the domain name "greenproducts.com", they are told that "[n]o documents match the query." After reading this message, users might randomly input other domain names, guessing that Green Products is registered under some variation of its trademark. Other users might try to find out who owns the domain name "greenproducts.com" by using various functions on the web where people can type specific domain names and find out who owns them. (See Carter Decl., attached exhibit; discussed in further detail at the hearing held Sept. 11, 1997.) Users who do this will learn that ICBP owns the "greenproducts.com" web site, and they will also learn the address and phone number of ICBP. Potential customers who see this information may be confused into thinking that ICBP has taken over Green Products, or that Green Products has merged into ICBP. As a result, customers may decide to buy from ICBP, believing that Green Products no longer exists or that ICBP now owns it. The consumer confusion thereby caused by ICBP's ownership of the domain name "greenproducts.com" during the pendency of litigation would cause Green Products to lose customers.

The fifth factor is incidents of actual confusion. Green Products concedes that because the web site is not yet operational, there have been no incidents of actual confusion (Pl.'s Mem., at 6, Doc # 4), so the Court need not examine this factor further.

The last factor is the degree of care reasonably expected of Green Products' potential customers. To determine this, the Court looks at the "ordinary purchaser, buying under the normally prevalent conditions of the market and giving the attention such purchasers usually give in buying that class of goods." General Mills, Inc. v. Kellogg Co., 824 F.2d 622, 627 (8th Cir.1987) (quotation omitted). In contrast to focusing on how ordinary purchasers buy products, Green Products and ICBP speculate about the care with which ordinary internet users will search for Green Products' web site — presumably as a means by which to decide whether to buy its products. Green Products argues that customers "who would like to use Green Products' Internet services but do not know its domain name are likely to assume that `greenproducts.com' belongs to Green Products." (Pl.'s Mem., at 7.) In response, ICBP argues that even though an internet user "may have some reasonable expectation that typing in a famous mark of a huge corporation like `nike.com' or `ibm.com' will lead to those corporate web sites, the same cannot be said for `greenproducts.com', which is not a famous mark and which is made up of common generic words that are used in many contexts." (Def.'s Mem., at 17.)

ICBP's argument fails in its analysis of the relevant market, as well as in its insistence that Green Products is not a famous mark. This Court has found that Green Products' trademark is not generic, and is at least suggestive. (See discussion, supra.) Furthermore, Green Products presented evidence at the hearing that within the corncob by-products industry, Green Products and ICBP are two of approximately five major players, and ICBP did not dispute this evidence.^[9] [1079] Thus within the relevant market (i.e., the corncob by-products industry), Green Products' trademark is well known.

Despite the fact that Green Products' trademark is well known, ICBP argues that a consumer is just as likely to type "greenproductsco.com", "green-products.com", or "greenproducts-co.com" as it is to type "greenproducts.com". (Hearing, Sept. 11, 1997.) ICBP uses this hypothesis to suggest that Green Products could easily register "greenproductsco.com" as its domain name. It is interesting that ICBP makes this argument in light of the fact that ICBP's full name is "Independence Corn By-Products, Company," and that ICBP chose "icbp.com" — not "icbpco.com" — as its own domain name. Furthermore, the fact that ICBP chose to register "greenproducts.com" and not "greenproductsco.com" as the domain name for its "comparative advertising" plan could be viewed as further evidence that ICBP believed that potential customers would more likely type "greenproducts.com" than "greenproductsco.com".

Based on all the evidence before it at this point in the proceedings — including the finding that Green Products is at least a suggestive mark and that within the corncob byproducts industry, Green Products' name is well known — this Court finds that ordinary internet users do not undergo a highly sophisticated analysis when searching for domain names. Because of the low level of care used to search for domain names, an ordinary internet user trying to find Green Products' web site would likely guess that Green Products' domain name was the same as its trademark, and thus type "greenproducts.com".^[10]

In summary, despite the fact that neither Green Products nor ICBP can present or refute evidence of actual consumer confusion because ICBP's web site is not yet operational, this Court also considers the strength of Green Products' trademark, the strong similarity between Green Products' trademark and ICBP's domain name "greenproducts.com", the close competitive proximity, the likelihood that ICBP intended to capitalize on consumer confusion as a strategy to lure potential customers onto ICBP's web site (even though the actual web site will announce that Green Products does not own the site), and the degree of care that Green Products' potential customers will reasonably exercise in browsing the web to find Green Products' site. Based on this overall balancing, this Court finds a substantial probability that Green Products will prevail on the merits.

2. Irreparable harm to Green Products

The Court next analyzes the degree of harm, if any, that Green Products would suffer if not granted a preliminary injunction. The Eighth Circuit has held that a district court can presume irreparable injury from a finding of probable success on the merits of a Section 43(a) Lanham Trademark Act case. Sports Design, 871 F.Supp. at 1165, citing Sanborn Mfg., 997 F.2d at 489. While this Court could thus presume irreparable injury based on its finding of probable success on the merits, it will also examine the specific circumstances of this case in order to decide whether allowing ICBP to retain ownership of the domain name "greenproducts.com" during the pendency of litigation would cause irreparable harm to Green Products.

Although ICBP has consented to putting the domain name "greenproducts.com" on hold until the final merits are determined, Green Products is concerned that even [1080] though ICBP would not have an actual web site that could be viewed by typing the domain name "greenproducts.com", customers could use other functions on the web to discover that ICBP owns that domain name. (Hearing, Sept. 11, 1997.) As a result, potential or actual customers might mistakenly conclude that ICBP has purchased the Green Products corporation, or that Green Products has merged with ICBP. This confusion could result in Green Products losing both customers and revenue during the pendency of the litigation, and it would be impossible to calculate how much money or how many customers were lost.

For these reasons, in addition to the fact that the Court believes that Green Products is likely to succeed on the merits, the Court finds that it would cause Green Products irreparable harm if ICBP were allowed to retain ownership of the domain name "greenproducts.com" during the pendency of the litigation.

3. Balance between this harm and the injury that granting the injunction will inflict on other parties

ICBP has not finalized what its web page will look like, has not advertised that it owns a web page that can be viewed by typing the domain name "greenproducts.com", and has not listed "greenproducts.com" as one of its domain names in the Thomas Register.^[11] If ICBP is compelled to relinquish ownership of the domain name "greenproducts.com" to Green Products during the pendency of the litigation, ICBP would still be able to launch its own web site via its registered domain names "icbp.com" or "bestcob.com". Furthermore, the act of transferring ownership of "greenproducts.com" would not hinder ICBP's ability to launch a web site that compares its products to those of Green Products: ICBP could still design and implement a web site that compares the products of ICBP to those of Green Products, and internet users could access this web site through ICBP's other registered domain names.

While these factors weigh in support of compelling ICBP to transfer ownership of the domain name, there are also certain factors that weigh against the transfer. For example, if ICBP were to prevail at trial, Green Products would have to transfer the "greenproducts.com" domain name back to ICBP. This could cause some initial confusion, and possibly hostility, from customers who might have become accustomed to accessing Green Products' web site through the "greenproducts.com" domain name. In addition, because Green Products would like to advertise its domain name "greenproducts.com" in the Thomas Register, and because final changes to the printed version of the Thomas Register must be made by November 1, 1997, neither Green Products nor ICBP will be able to change the 1998 edition of the printed Thomas Register if ICBP prevails at trial.^[12] As a result, ICBP worries that it "would risk incurring the anger of these customers if that domain name was suddenly switched...." (Def.'s Mem., at 13.)

After weighing the potential harm that ICBP would experience by not being able to use its competitor's trademark as its own domain name, against the harm Green Products would experience by not being able to use its own trademark as its domain name, this Court finds that the harm to Green Products is more extensive and severe than the harm to ICBP. Although ICBP would experience some harm by transferring ownership of the domain name during the pendency of litigation, the transfer is not irreversible; if ICBP ultimately prevails on the merits, the Court will transfer ownership of the domain name back to ICBP. Additionally, even though some customers who may have become accustomed to finding Green Products' web page through the "greenproducts.com" domain name may be initially upset when they find that the domain name "greenproducts.com" has become the domain [1081] name for ICBP's web page (if ICBP prevails at trial), any harm that ICBP may experience because of Green Products' temporary ownership of the domain name could be tempered by a carefully designed web page or by hyperlinks to Green Products' web page. Moreover, given ICBP's goal of distinguishing its products from those of Green Products, the opportunity for ICBP to establish a comparative advertising web site located through the "greenproducts.com" domain name could be even more advantageous to ICBP if Green Products has already attracted customers to the "greenproducts.com" domain name.

For all of the above reasons, and especially considering the fact that the transfer of ownership is not irreversible because the Court will order the domain name transferred back to ICBP if ICBP prevails in litigation, the Court finds that the harm to Green Products is more extensive and severe than the harm to ICBP.

4. Public interest

In a trademark infringement action, the Court must balance the interest of protecting the public from confusion and deception against the interest of facilitating a competitive market. Woodroast Sys., Inc. v. Restaurants Unlimited, Inc., 793 F.Supp. 906, 919 (D.Minn.1992), affd, 994 F.2d 844 (8th Cir.1993). Green Products argues that the public interest is best served by: (1) preventing trademark infringement and unfair competition; (2) enjoining ICBP from being able to capitalize on the "confusion or ensnarement of potential purchasers browsing the web"; and (3) helping consumers to avoid being "seduced into unwanted advertising messages, which is, in essence, what ICBP's homepage would be." (Pl.'s Mem., at 9-10.) ICBP argues that the public interest is best served by keeping the domain name on hold during the pendency of litigation, and that compelling ICBP to relinquish ownership of the domain name would "actually foster public confusion" if ICBP were ultimately awarded ownership of the domain name through trial and the domain name reverted to ICBP. (Def.'s Mem., at 21.)

Because this Court believes that Green Products is likely to prevail at trial, this Court is not convinced that the public confusion which could result in the unlikely event that the domain name reverts to ICBP is so great as to prevent Green Products from obtaining immediate ownership of the domain name. Furthermore, even though one way to achieve a competitive market is through comparative advertising, the public interest is not well served when potential customers are lured onto a competitor's web site under the guise of comparative advertising. If ICBP were to prevail at trial and be awarded ownership of the domain name "greenproducts.com", such a result would have far-reaching consequences for both internet browsers and for companies seeking to advertise on the web.^[13]

Based on the above analysis of the Dataphase factors, the Court concludes that Green Products has shown a probability that it will succeed on the merits at trial, that Green Products would suffer irreparable harm if it were not allowed to use its trademark as its domain name during the pendency of the litigation, that the harm that Green Products would experience if it cannot own the domain name "greenproducts.com" is more severe than any harm ICBP would experience in being forced to relinquish it, and that the public interest is best served by compelling ICBP to relinquish ownership of the domain name "greenproducts.com" during the pendency of litigation. Within this analysis, the Court has also considered that the transfer of ownership of the domain [1082] name is not irreversible, so if ICBP does prevail at trial, the Court can order Green Products to transfer ownership back to ICBP.

Additionally, the Court finds that Green Products has met a "heavy" burden of proof in establishing that not only will Green Products probably win at trial, but that the harm that Green Products would suffer if it were not allowed to use its own trademark as its domain name during the pendency of the litigation is severe enough to warrant affirmative action to compel ICBP to transfer ownership of the domain name.

Accordingly, it is ORDERED:

Green Products' motion for a preliminary injunction shall be GRANTED, as follows:

During the pendency of litigation,

(1) ICBP shall not use the domain name "greenproducts.com";

(2) ICBP shall not use the expressions "green products" and "green pet products" as the whole or part of a trademark, trade name, or domain name; and

(3) ICBP shall transfer the ownership of the domain name "greenproducts.com" to Green Products.

To transfer the domain name "greenproducts.com" to Green Products, this Court will provide an additional certified copy of this Order to Green Products, so that Green Products may send the Order to Network Solutions, Inc., thereby informing Network Solutions of the Court's judgment and authorizing Network Solutions to transfer ownership of the domain name to Green Products.

[1] As of August 6, 1997, an internet domain search of all web sites owned by ICBP revealed that ICBP had registered a total of nine domain names. Carter Decl. (Doc # 6).

[2] In full, Green Products moves this Court for an order: "preliminarily enjoining use of the domain name greenproducts.com and from using the expressions GREEN PRODUCTS and GREEN PET PRODUCTS, or any of them, as the whole, or any part of a trademark, a trade name, or a domain name on or in connection with its products made of corncobs, including litter or bedding for caged birds or for small animals; and compelling them, or such of them as may own or control the domain name greenproducts.com, to convey the domain name greenproducts.com to Green Products Co." (Pl.'s Mot. for Prelim. Inj., at 1, Doc # 3.)

[3] At a hearing on the preliminary injunction, held September 11, 1997, Green Products agreed that the only issue before the Court was whether to compel ICBP to relinquish ownership of the domain name "greenproducts.com" to Green Products during the pendency of the litigation. With this acceptance, Green Products seemingly agreed that ICBP should be able to use the name "Green Products" or "Green Pet Products" for "comparative advertising" purposes.

Later in the hearing, however, ICBP used the phrase "comparative advertising" in a way that did not comport with traditional notions of comparative advertising (discussed infra). Because ICBP relies on this expanded notion of comparative advertising in refusing to relinquish the domain name "greenproducts.com" to Green Products, this Court finds it necessary to clarify what it understands that both parties have agreed to accept as suitable preliminary relief:

ICBP will refrain from using the names "Green Products" or "Green Pet Products" as any part of ICBP's trademark, trade name, or domain name, but ICBP may compare its products to those of Green Products by referring to the name "Green Products" in advertisements or informational brochures. For example, ICBP may compare its products to those of Green Products, and thereby use the name Green Products, in a comparative advertisement designed on ICBP's own web page, accessed through ICBP's domain names "icbp.com" or "bestcob.com".

[4] According to Green Products, "Bestcob" is a claimed trademark of ICBP. (Pl.'s Mem., at 2, Doc # 4)

[5] ICBP and Green Products have resolved through negotiation the ownership of the "freshnest.com" domain name, resulting in ICBP's relinquishing ownership of "freshnest.com" to Green Products. Schryver Decl. ¶ 8.

[6] In Ferry-Morse, the Eighth Circuit also noted that "where the status quo is a condition not of rest, but of action, and the condition of rest ... will cause irreparable harm, a mandatory preliminary injunction is proper." Ferry-Morse, 729 F.2d at 593. To understand what this means, it is helpful to know some of the specific facts of Ferry-Morse. Ferry-Morse was a seed corn company that had contracted to market Food Corn's seed corn. 729 F.2d at 593. Ferry-Morse had been marketing Food Corn's seed corn for awhile, when a disagreement developed over the terms of its contract with Food Corn. Id., at 590. While they were disagreeing about the terms of the contract, Food Corn refused to give Ferry-Morse several thousand bags of seed corn. Id., at 590. The Court issued a preliminary injunction ordering Food Corn not to market the hybrid seed corn to any other party but Ferry-Morse, and to compel Food Corn to deliver the seed corn to Ferry-Morse. Id., at 591. The Court found, inter alia, that the status quo was a condition of action (Ferry-Morse's marketing of the seed corn, as it had been before the disagreement developed), and that the condition of rest was Food Corn's refusal to deliver the seed corn. Id., at 593. Because the Court found that the condition of rest would cause irreparable harm, it held that the mandatory injunction of compelling Food Corn to give Ferry-Morse the seed corn was proper. Id., at 593.

[7] While the name "Green Products" is both a trade name and a trademark, the Court will use the term "trademark" to refer to both the trade name and trademark. (See Pl.'s Mem., at 4) (stating that the "domain name greenproducts.com ... is derived from Green Products' trademark, service mark, or trade name GREEN PRODUCTS and/or the salient part of its corporate name (hereinafter referred to collectively as the `trademark GREEN PRODUCTS'))."

[8] In addition, the Court also finds that the name Green Products has acquired second meaning meriting trademark protection. See Duluth News-Tribune, 84 F.3d at 1096. The Court bases this finding on the following facts: Green Products first began using the trademark "Green Products" in 1947, in connection with its alfalfa products, then after it began selling corncob byproducts in 1985, the trademark "Green Products" became associated with that new enterprise. Schryver Decl. ¶¶ 4-5. Since 1947, Green Products has spent in excess of $225,000 to advertise and promote its trademark "Green Products" and has earned a cumulative retail value in excess of $30 million. Schryver Decl. ¶¶ 4-6. The trademark is prominently displayed on its product bags and trucks. (See Pl.'s Exhibits 1, 2 & 3, Hearing held Sept. 11, 1997.)

[9] Moreover, ICBP maintains that one of the main purposes of its web page will be to distinguish itself from Green Products. (Def.'s Mem., at 16.) If Green Products were not a major competitor, ICBP would probably not expend so much energy trying to establish a web site to distinguish itself from Green Products.

[10] This finding is further supported by ICBP's own evidence. According to ICBP, an AltaVista search for the words "green+products" retrieved 876 web sites, and the query "green + product" retrieved 418 web sites. Kraus Aff. ¶¶ 3-4. Thus even if an ordinary internet user began to search for Green Products' web site by typing key words into a search engine (instead of starting the search by guessing at what Green Products' domain name is), the number of web sites the search engine would retrieve may encourage the internet user to try to guess the domain name by typing Green Products' trademark, instead of muddling through the eight-hundred some sites that the search engine retrieved.

[11] The Thomas Register of Manufacturing is one of the methods by which both Green Products and ICBP advertise their products. Green Products has received substantial orders for its corncob products as a direct result of advertising in the Thomas Register. Schryver Decl. ¶ 10.

[12] At the hearing held September 11, 1997, ICBP also said that the Thomas Register is available on-line on the web, and that ICBP presumes that on-line Thomas Register information can be updated more frequently than information can be updated in the printed version.

[13] The seriousness with which some courts and large corporations have viewed such ramifications can be partially seen by the trend in recent arbitration, settlements, and court judgments to award domain names to the companies which own the trademark. For example, other corporations which faced a similar situation to that faced by Green Products ultimately prevailed in the right to own the domain name containing their trademark: The Princeton Review Company relinquished the domain name "kaplan.com" to Kaplan Education Center; Sprint relinquished "mci.com" to MCI; an anti-abortion activist relinquished "plannedparenthood.com" to Planned Parenthood; a New York journalist relinquished "mcdonalds.com" to McDonalds, Corp.; an exdisc jockey relinquished "mtv.com" to MTV; and The Lectric Law Library relinquished "inter-law. com" to Interlaw, Ltd.

174 F.3d 1036 (1999)

No. 98-56918.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 10, 1999.
Decided April 22, 1999.

[1037] [1038] [1039] [1040] [1041] Richard L. Stone (argued), Ronald S. Cohen, Carlo F. Van den Bosch, Sheppard, Mullin, Richter & Hampton, Los Angeles, California, for the plaintiff-appellant.

Dennis G. Martin (argued), Christina L. Johnson, Willmore F. Holbrow, III, Blakely, Sokoloff, Taylor & Zafman, Los Angeles, California, for the defendant-appellee.

Before: CANBY, O'SCANNLAIN, and WARDLAW, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must venture into cyberspace to determine whether federal trademark and unfair competition laws prohibit a video rental store chain from using an entertainment-industry information provider's trademark in the domain name of its web site and in its web site's metatags.

I

Brookfield Communications, Inc. ("Brookfield") appeals the district court's denial of its motion for a preliminary injunction prohibiting West Coast Entertainment Corporation ("West Coast") from using in commerce terms confusingly similar to Brookfield's trademark, "MovieBuff." Brookfield gathers and sells information about the entertainment industry. Founded in 1987 for the purpose of creating and marketing software and services for professionals in the entertainment industry, Brookfield initially offered software applications featuring information such as recent film submissions, industry credits, professional contacts, and future projects. These offerings targeted major Hollywood film studios, independent production companies, agents, actors, directors, and producers.

Brookfield expanded into the broader consumer market with computer software featuring a searchable database containing entertainment-industry related information marketed under the "MovieBuff" mark around December 1993.^[1] Brookfield's "MovieBuff" software now targets smaller companies and individual consumers who are not interested in purchasing Brookfield's professional level alternative, The Studio System, and includes comprehensive, searchable, entertainment-industry databases and related software applications containing information such as movie credits, box office receipts, films in development, film release schedules, entertainment news, and listings of executives, agents, actors, and directors. This "MovieBuff" software comes in three versions— (1) the MovieBuff Pro Bundle, (2) the MovieBuff Pro, and (3) MovieBuff—and is sold through various retail stores, such as Borders, Virgin Megastores, Nobody Beats [1042] the Wiz, The Writer's Computer Store, Book City, and Samuel French Bookstores.

Sometime in 1996, Brookfield attempted to register the World Wide Web ("the Web") domain name "moviebuff.com" with Network Solutions, Inc. ("Network Solutions"),^[2] but was informed that the requested domain name had already been registered by West Coast. Brookfield subsequently registered "brookfieldcomm.com" in May 1996 and "moviebuffonline.com" in September 1996.^[3] Sometime in 1996 or 1997, Brookfield began using its web sites to sell its "MovieBuff" computer software and to offer an Internet-based searchable database marketed under the "MovieBuff" mark. Brookfield sells its "MovieBuff" computer software through its "brookfieldcomm.com" and "moviebuffonline.com" web sites and offers subscribers online access to the MovieBuff database itself at its "inhollywood.com" web site.

On August 19, 1997, Brookfield applied to the Patent and Trademark Office (PTO) for federal registration of "MovieBuff" as a mark to designate both goods and services. Its trademark application describes its product as "computer software providing data and information in the field of the motion picture and television industries." Its service mark application describes its service as "providing multiple-user access to an on-line network database offering data and information in the field of the motion picture and television industries." Both federal trademark registrations issued on September 29, 1998. Brookfield had previously obtained a California state trademark registration for the mark "MovieBuff" covering "computer software" in 1994.

In October 1998, Brookfield learned that West Coast—one of the nation's largest video rental store chains with over 500 stores—intended to launch a web site at "moviebuff.com" containing, inter alia, a searchable entertainment database similar to "MovieBuff." West Coast had registered "moviebuff.com" with Network Solutions on February 6, 1996 and claims that it chose the domain name because the term "Movie Buff" is part of its service mark, "The Movie Buff's Movie Store," on which a federal registration issued in 1991 covering "retail store services featuring video cassettes and video game cartridges" and "rental of video cassettes and video game cartridges." West Coast notes further that, since at least 1988, it has also used various phrases including the term "Movie Buff" to promote goods and services available at its video stores in Massachusetts, including "The Movie Buff's Gift Guide"; "The Movie Buff's Gift Store"; "Calling All Movie Buffs!"; "Good News Movie Buffs!"; "Movie Buffs, Show Your Stuff!"; "the Perfect Stocking Stuffer for the Movie Buff!"; "A Movie Buff's Top Ten"; "The Movie Buff Discovery Program"; "Movie Buff Picks"; "Movie Buff Series"; "Movie Buff Selection Program"; and "Movie Buff Film Series."

On November 10, Brookfield delivered to West Coast a cease-and-desist letter alleging that West Coast's planned use of the "moviebuff.com" would violate Brookfield's trademark rights; as a "courtesy" Brookfield attached a copy of a complaint that it threatened to file if West Coast did not desist.

The next day, West Coast issued a press release announcing the imminent launch of its web site full of "movie reviews, Hollywood news and gossip, provocative commentary, and coverage of the independent film scene and films in production." The press release declared that the site would feature "an extensive database, which aids consumers in making educated decisions [1043] about the rental and purchase of" movies and would also allow customers to purchase movies, accessories, and other entertainment-related merchandise on the web site.

Brookfield fired back immediately with a visit to the United States District Court for the Central District of California, and this lawsuit was born. In its first amended complaint filed on November 18, 1998, Brookfield alleged principally that West Coast's proposed offering of online services at "moviebuff.com" would constitute trademark infringement and unfair competition in violation of sections 32 and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114, 1125(a).^[4] Soon thereafter, Brookfield applied ex parte for a temporary restraining order ("TRO") enjoining West Coast "[f]rom using ... in any manner ... the mark MOVIEBUFF, or any other term or terms likely to cause confusion therewith, including moviebuff.com, as West Coast's domain name, ... as the name of West Coast's website service, in buried code or metatags on their home page or web pages, or in connection with the retrieval of data or information on other goods or services."

On November 27, West Coast filed an opposition brief in which it argued first that Brookfield could not prevent West Coast from using "moviebuff.com" in commerce because West Coast was the senior user. West Coast claimed that it was the first user of "MovieBuff" because it had used its federally registered trademark, "The Movie Buff's Movie Store,"^[5] since 1986 in advertisements, promotions, and letterhead in connection with retail services featuring videocassettes and video game cartridges. Alternatively, West Coast claimed seniority on the basis that it had garnered common-law rights in the domain name by using "moviebuff.com" before Brookfield began offering its "MovieBuff" Internet-based searchable database on the Web. In addition to asserting seniority, West Coast contended that its planned use of "moviebuff.com" would not cause a likelihood of confusion with Brookfield's trademark "MovieBuff" and thus would not violate the Lanham Act.

The district court heard arguments on the TRO motion on November 30. Later that day, the district court issued an order construing Brookfield's TRO motion as a motion for a preliminary injunction and denying it. The district court concluded that West Coast was the senior user of the mark "MovieBuff" for both of the reasons asserted by West Coast. The court also determined that Brookfield had not established a likelihood of confusion.

Brookfield responded by filing a notice of appeal from the denial of preliminary injunction followed by a motion in the district court for injunction pending appeal, which motion the district court denied. On January 16, 1999, West Coast launched its web site at "moviebuff.com." Fearing that West Coast's fully operational web site would cause it irreparable injury, Brookfield filed an emergency motion for injunction pending appeal with this court a few days later. On February 24, we granted Brookfield's motion and entered an order enjoining West Coast "from using, or facilitating the use of, in any manner, including advertising and promotion, the mark MOVIEBUFF, or any other term or terms likely to cause confusion therewith, including @moviebuff.com or moviebuff.com, as the name of West Coast's web site service, in buried code or metatags on its home page or web pages, or in connection with the retrieval of data or information on other goods or services." The injunction was to take effect upon the posting of a $25,000 bond in the district court by Brookfield. We scheduled oral [1044] argument on an expedited basis for March 10.

West Coast thereupon filed a motion for reconsideration and modification—seeking a stay of the injunction pending appeal and an increase in the bond requirement to $400,000—which we denied. After oral argument on March 10, we ordered that our previously issued injunction remain in effect pending the issuance of this opinion.

II

To resolve the legal issues before us, we must first understand the basics of the Internet and the World Wide Web. Because we will be delving into technical corners of the Internet—dealing with features such as domain names and metatags —we explain in some detail what all these things are and provide a general overview of the relevant technology.

The Internet is a global network of interconnected computers which allows individuals and organizations around the world to communicate and to share information with one another. The Web, a collection of information resources contained in documents located on individual computers around the world, is the most widely used and fastest-growing part of the Internet except perhaps for electronic mail ("e-mail"). See United States v. Microsoft, 147 F.3d 935, 939 (D.C.Cir.1998). With the Web becoming an important mechanism for commerce, see Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 2334, 138 L.Ed.2d 874 (1997) (citing an estimate that over 200 million people will use the Internet in 1999), companies are racing to stake out their place in cyberspace. Prevalent on the Web are multimedia "web pages" — computer data files written in Hypertext Markup Language ("HTML")—which contain information such as text, pictures, sounds, audio and video recordings, and links to other web pages. See id. at 2335; Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1318 (9th Cir.1998).

Each web page has a corresponding domain address, which is an identifier somewhat analogous to a telephone number or street address. Domain names consist of a second-level domain—simply a term or series of terms (e.g., westcoastvideo)—followed by a top-level domain, many of which describe the nature of the enterprise. Top-level domains include ".com" (commercial), ".edu" (educational), ".org" (non-profit and miscellaneous organizations), ".gov" (government), ".net" (networking provider), and ".mil" (military). See Panavision, 141 F.3d at 1318. Commercial entities generally use the ".com" top-level domain, which also serves as a catchall top-level domain. See id. To obtain a domain name, an individual or entity files an application with Network Solutions listing the domain name the applicant wants. Because each web page must have an unique domain name, Network Solution checks to see whether the requested domain name has already been assigned to someone else. If so, the applicant must choose a different domain name. Other than requiring an applicant to make certain representations, Network Solutions does not make an independent determination about a registrant's right to use a particular domain name. See id. at 1318-19.

Using a Web browser, such as Netscape's Navigator or Microsoft's Internet Explorer, a cyber "surfer" may navigate the Web—searching for, communicating with, and retrieving information from various web sites. See id.; Microsoft, 147 F.3d at 939-40, 950. A specific web site is most easily located by using its domain name. See Panavision, 141 F.3d at 1327. Upon entering a domain name into the web browser, the corresponding web site will quickly appear on the computer screen. Sometimes, however, a Web surfer will not know the domain name of the site he is looking for, whereupon he has two principal options: trying to guess the domain name or seeking the assistance of an Internet "search engine."

Oftentimes, an Internet user will begin by hazarding a guess at the domain name, especially if there is an obvious domain [1045] name to try. Web users often assume, as a rule of thumb, that the domain name of a particular company will be the company name followed by ".com." See id.; Playboy Enterprises v. Universal Tel-A-Talk, Inc., No. 96-6961, 1998 WL 767440, at *2 (E.D.Pa. Nov.3, 1998); Cardservice Int'l, Inc. v. McGee, 950 F.Supp. 737, 741 (E.D.Va.1997), aff'd by, 129 F.3d 1258 (4th Cir.1997). For example, one looking for Kraft Foods, Inc. might try "kraftfoods.com," and indeed this web site contains information on Kraft's many food products. Sometimes, a trademark is better known than the company itself, in which case a Web surfer may assume that the domain address will be "`trademark'.com." See Panavision, 141 F.3d at 1327; Beverly v. Network Solutions, Inc., No. 98-0337, 1998 WL 320829, at *1 (N.D.Cal. June 12, 1998) ("Companies attempt to make the search for their web site as easy as possible. They do so by using a corporate name, trademark or service mark as their web site address."). One interested in today's news would do well visiting "usatoday.com," which features, as one would expect, breaking stories from Gannett's USA Today. Guessing domain names, however, is not a risk-free activity. The Web surfer who assumes that "`X'.com" will always correspond to the web site of company X or trademark X will, however, sometimes be misled. One looking for the latest information on Panavision, International, L.P., would sensibly try "panavision.com." Until recently, that Web surfer would have instead found a web site owned by Dennis Toeppen featuring photographs of the City of Pana, Illinois. See Panavision, 141 F.3d at 1319. Having registered several domain names that logically would have corresponded to the web sites of major companies such as Panavision, Delta Airlines, Neiman Marcus, Lufthansa, Toeppen sought to sell "panavision.com" to Panavision, which gives one a taste of some of the trademark issues that have arisen in cyberspace. See id.; see also, e.g., Cardservice, 950 F.Supp. at 740-42.

A Web surfer's second option when he does not know the domain name is to utilize an Internet search engine, such as Yahoo, Altavista, or Lycos. See ACLU v. Reno, 31 F.Supp.2d 473, 484 (E.D.Pa. 1999); Washington Speakers Bureau, Inc. v. Leading Authorities, Inc., 33 F.Supp.2d 488, 499 (E.D.Va.1999). When a keyword is entered, the search engine processes it through a self-created index of web sites to generate a (sometimes long) list relating to the entered keyword. Each search engine uses its own algorithm to arrange indexed materials in sequence, so the list of web sites that any particular set of keywords will bring up may differ depending on the search engine used. See Niton Corp. v. Radiation Monitoring Devices, Inc., 27 F.Supp.2d 102, 104 (D.Mass.1998); Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 1231-32 (N.D.Ill.1996); Shea v. Reno, 930 F.Supp. 916, 929 (S.D.N.Y.1996), aff'd, ___ U.S. ___, 117 S.Ct. 2501, 138 L.Ed.2d 1006 (1997). Search engines look for keywords in places such as domain names, actual text on the web page, and metatags. Metatags are HTML code intended to describe the contents of the web site. There are different types of metatags, but those of principal concern to us are the "description" and "keyword" metatags. The description metatags are intended to describe the web site; the keyword metatags, at least in theory, contain keywords relating to the contents of the web site. The more often a term appears in the metatags and in the text of the web page, the more likely it is that the web page will be "hit" in a search for that keyword and the higher on the list of "hits" the web page will appear. See Niton, 27 F.Supp.2d at 104.

With this basic understanding of the Internet and the Web, we may now analyze the legal issues before us.

III

We review the district court's denial of preliminary injunctive relief for an abuse of discretion. See, e.g., Foti v. City [1046] of Menlo Park, 146 F.3d 629, 634-35 (9th Cir.1998). Under this standard, reversal is appropriate only if the district court based its decision on clearly erroneous findings of fact or erroneous legal principles. See FDIC v. Garner, 125 F.3d 1272, 1276 (9th Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 1299, 140 L.Ed.2d 466 (1998). "A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law," Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990), so we review the underlying legal issues injunction de novo, see, e.g., Barahona Gomez v. Reno, 167 F.3d 1228, 1234 (9th Cir.1999); S.O.C., Inc. v. County of Clark, 152 F.3d 1136, 1142 (9th Cir.1998), amended by, 160 F.3d 541 (9th Cir.1998); Foti, 146 F.3d at 635; Garner, 125 F.3d at 1276; San Antonio Community Hosp. v. Southern Cal. Dist. Council of Carpenters, 125 F.3d 1230, 1234 (9th Cir.1997).

"A plaintiff is entitled to a preliminary injunction in a trademark case when he demonstrates either (1) a combination of probable success on the merits and the possibility of irreparable injury or (2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in his favor." Sardi's Restaurant Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.1985). To establish a trademark infringement claim under section 32 of the Lanham Act or an unfair competition claim under section 43(a) of the Lanham Act, Brookfield must establish that West Coast is using a mark confusingly similar to a valid, protectable trademark of Brookfield's.^[6]See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348 (9th Cir.1979). The district court denied Brookfield's motion for preliminary injunctive relief because it concluded that Brookfield had failed to establish that it was the senior user of the "MovieBuff" mark or that West Coast's use of the "moviebuff.com" domain name created a likelihood of confusion.

We review each of the district court's conclusions in turn.^[7]

IV

To resolve whether West Coast's use of "moviebuff.com" constitutes trademark infringement or unfair competition,^[8] [1047] we must first determine whether Brookfield has a valid, protectable trademark interest in the "MovieBuff" mark. Brookfield's registration of the mark on the Principal Register in the Patent and Trademark Office constitutes prima facie evidence of the validity of the registered mark and of Brookfield's exclusive right to use the mark on the goods and services specified in the registration. See 15 U.S.C. §§ 1057(b); 1115(a). Nevertheless, West Coast can rebut this presumption by showing that it used the mark in commerce first, since a fundamental tenet of trademark law is that ownership of an inherently distinctive mark such as "MovieBuff"^[9] is governed by priority of use. See Sengoku Works Ltd. v. RMC Int'l, Ltd., 96 F.3d 1217, 1219 (9th Cir.1996) ("It is axiomatic in trademark law that the standard test of ownership is priority of use. To acquire ownership of a trademark it is not enough to have invented the mark first or even to have registered it first; the party claiming ownership must have been the first to actually use the mark in the sale of goods or services."), cert. denied, 521 U.S. 1103, 117 S.Ct. 2478, 138 L.Ed.2d 987 (1997). The first to use a mark is deemed the "senior" user and has the right to enjoin "junior" users from using confusingly similar marks in the same industry and market or within the senior user's natural zone of expansion. See Union Nat'l Bank of Tex., Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex., 909 F.2d 839, 842-43 (5th Cir.1990); Tally-Ho, Inc. v. Coast Community College Dist., 889 F.2d 1018, 1023 (11th Cir.1989); New West Corp. v. NYM Co. of Cal., 595 F.2d 1194, 1200-01 (9th Cir.1979).

It is uncontested that Brookfield began selling "MovieBuff" software in 1993 and that West Coast did not use "moviebuff.com" until 1996. According to West Coast, however, the fact that it has used "The Movie Buff's Movie Store" as a trademark since 1986 makes it the first user for purposes of trademark priority. In the alternative, West Coast claims priority on the basis that it used "moviebuff.com" in commerce before Brookfield began offering its "MovieBuff" searchable database on the Internet. We analyze these contentions in turn.

A

Conceding that the first time that it actually used "moviebuff.com" was in 1996, West Coast argues that its earlier use of "The Movie Buff's Movie Store" constitutes use of "moviebuff.com."^[10] West Coast has not provided any Ninth Circuit precedent approving of this constructive use theory, but neither has Brookfield pointed us to any case law rejecting it. We are not without guidance, however, as our sister circuits have explicitly recognized the ability of a trademark owner to claim priority in a mark based on the first use date of a similar, but technically distinct, mark—but only in the exceptionally narrow instance where "the previously used mark is `the legal equivalent of the mark in question or indistinguishable [1048] therefrom' such that consumers `consider both as the same mark.'" Data Concepts, Inc. v. Digital Consulting, Inc., 150 F.3d 620, 623 (6th Cir.1998) (quoting Van Dyne-Crotty, Inc. v. Wear-Guard Corp., 926 F.2d 1156, 1159 (Fed.Cir.1991)); accord Van Dyne-Crotty, 926 F.2d at 1159. This constructive use theory is known as "tacking," as the trademark holder essentially seeks to "tack" his first use date in the earlier mark onto the subsequent mark. See generally 2 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 17:25-27 (4th ed.1998) [hereafter "McCarthy"].

We agree that tacking should be allowed if two marks are so similar that consumers generally would regard them as essentially the same. Where such is the case, the new mark serves the same identificatory function as the old mark. Giving the trademark owner the same rights in the new mark as he has in the old helps to protect source-identifying trademarks from appropriation by competitors and thus furthers the trademark law's objective of reducing the costs that customers incur in shopping and making purchasing decisions. See Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 163-64, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995); Falcon Rice Mill, Inc. v. Community Rice Mill, Inc., 725 F.2d 336, 348 (5th Cir.1984).

Without tacking, a trademark owner's priority in his mark would be reduced each time he made the slightest alteration to the mark, which would discourage him from altering the mark in response to changing consumer preferences, evolving aesthetic developments, or new advertising and marketing styles. In Hess's of Allentown, Inc. v. National Bellas Hess, Inc., for example, a department store ("Allentown") with trademark rights in the terms "Hess Brothers" and "Hess" dating from 1899 began promoting itself in 1952 instead as "Hess's," largely because customers and employees commonly referred to the store as "Hess's" rather than "Hess Brothers" or "Hess." See 169 U.S.P.Q. 673, 674-75, 1971 WL 16482 (T.T.A.B.1971). Another department store ("Bellas") first used "Hess" in its mark around 1932. In light of the fact that Allentown first used "Hess's" after Bellas commenced using "Hess," Bellas would have priority on the basis of the actual first use dates of those two marks. Even though Allentown had acquired over a half-century's worth of goodwill in the essentially identical marks "Hess" and "Hess Brothers," Allentown no longer had trademark rights in those terms because it had ceased using those marks when it adopted "Hess's." Nevertheless, the Trademark Board allowed the owner of "Hess's" to tack his first use date of "Hess Brothers" and "Hess" onto "Hess's" since those terms were viewed as identical by the public. See id. at 677.

The standard for "tacking," however, is exceedingly strict: "The marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked." Van Dyne-Crotty, 926 F.2d at 1159 (emphasis added) (citations and quotation marks omitted). In other words, "the previously used mark must be the legal equivalent of the mark in question or indistinguishable therefrom, and the consumer should consider both as the same mark." Id. (emphasis added); see also Data Concepts, 150 F.3d at 623 (adopting the Van Dyne-Crotty test). This standard is considerably higher than the standard for "likelihood of confusion," which we discuss infra.

The Federal Circuit, for example, concluded that priority in "CLOTHES THAT WORK. FOR THE WORK YOU DO" could not be tacked onto "CLOTHES THAT WORK." See Van Dyne-Crotty, 926 F.2d at 1160 (holding that the shorter phrase was not the legal equivalent of the longer mark). The Sixth Circuit held that "DCI" and "dci" were too dissimilar to support tacking. See Data Concepts, 150 F.3d at 623-24. And the Trademark Board has rejected tacking in a case involving "American Mobilphone" with a star [1049] and stripe design and "American Mobilphone Paging" with the identical design, see American Paging, Inc. v. American Mobilphone, Inc., 13 U.S.P.Q.2d 2036, 1989 WL 274416 (T.T.A.B.1989), aff'd, 923 F.2d 869, 17 U.S.P.Q.2d 1726 (Fed.Cir.1990), as well as in a case involving "PRO-CUTS" and "PRO-KUT," see Pro-Cuts v. Schilz-Price Enterprises, 27 U.S.P.Q.2d 1224, 1227, 1993 WL 266611 (T.T.A.B.1993).

In contrast to cases such as Van Dyne-Crotty and American Paging, which were close questions, the present case is clear cut: "The Movie Buff's Movie Store" and "moviebuff.com" are very different, in that the latter contains three fewer words, drops the possessive, omits a space, and adds ".com" to the end. Because West Coast failed to make the slightest showing that consumers view these terms as identical, we must conclude that West Coast cannot tack its priority in "The Movie Buff's Movie Store" onto "moviebuff.com." As the Federal Circuit explained, "it would be clearly contrary to well-established principles of trademark law to sanction the tacking of a mark with a narrow commercial impression onto one with a broader commercial impression." Van Dyne-Crotty, 926 F.2d at 1160 (noting that prior use of "SHAPE UP" could not be tacked onto "EGO," that prior use of "ALTER EGO" could not be tacked onto "EGO," and that prior use of "Marco Polo" could not be tacked onto "Polo").

Since tacking does not apply, we must therefore conclude that Brookfield is the senior user because it marketed "MovieBuff" products well before West Coast began using "moviebuff.com" in commerce: West Coast's use of "The Movie Buff's Movie Store" is simply irrelevant. Our priority determination is consistent with the decisions of our sister circuits in Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 106 F.3d 355, 362-63 (11th Cir.1997), modified by, 122 F.3d 1379 (11th Cir.1997) (per curiam), and J. Wiss & Sons Co. v. W.E. Bassett Co., 59 C.C.P.A. 1269, 462 F.2d 567, 568-69 (C.C.P.A.1972). Like the present case, J. Wiss & Sons is a three-competing-trademark situation in which one company owned a single mark with a first use date in between the first use dates of the two marks owned by the other company. In that case, the intervening mark ("Trim") was found to be confusingly similar with the later mark ("Trim-Line"), but not with the earlier mark ("Quick-Trim"); similarly here, the intervening mark ("MovieBuff") is purported to be confusingly similar with the later mark "moviebuff.com," see infra Part V, but is not confusingly similar with the earlier used mark "The Movie Buff's Movie Store," see infra p. 1050. The Court of Customs and Patent Appeals (now the Court of Appeals for the Federal Circuit) concluded that priority depended upon which of the two confusingly similar marks was used first—disregarding the first use date of the earlier used mark since it was not confusingly similar with the others. It thus awarded priority to the holder of the intervening mark, as we do similarly here.

Longhorn Steaks, involving the same basic three-competing-trademark situation, is particularly instructive. The defendant owned the mark "Lone Star Steaks" with a first use date between the plaintiff's earlier used mark "Lone Star Cafe" and its later used mark "Lone Star Steakhouse & Saloon." In its initial opinion, the Eleventh Circuit awarded priority to the holder of "Lone Star Steaks" on the basis that "Lone Star Steaks" was used before "Lone Star Steakhouse & Saloon." See Longhorn Steaks, 106 F.3d at 362-63. The Eleventh Circuit, however, later modified its opinion, stating that the conclusion reached in its initial opinion would be correct only if defendant's "Lone Star Steaks" was not confusingly similar to plaintiff's earlier used mark, "Lone Star Cafe." See Longhorn Steaks, 122 F.3d 1379 (11th Cir. 1997).^[11]

[1050] West Coast makes a half-hearted claim that "MovieBuff" is confusingly similar to its earlier used mark "The Movie Buff's Movie Store." If this were so, West Coast would undoubtedly be the senior user. See id. "Of course, if the symbol or device is already in general use, employed in such a manner that its adoption as an index of source or origin would only produce confusion and mislead the public, it is not susceptible of adoption as a trademark." Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415, 36 S.Ct. 357, 60 L.Ed. 713 (1916). West Coast, however, essentially conceded that "MovieBuff" and "The Movie Buff's Movie Store" are not confusingly similar when it stated in its pre-argument papers that it does not allege actual confusion between "MovieBuff" and West Coast's federally registered mark. We cannot think of more persuasive evidence that there is no likelihood of confusion between these two marks than the fact that they have been simultaneously used for five years without causing any consumers to be confused as to who makes what. See Libman Co. v. Vining Indus., Inc., 69 F.3d 1360, 1361 (7th Cir.1995) ("Vining sold several hundred thousand of the allegedly infringing brooms, yet there is no evidence that any consumer ever made such an error; if confusion were likely, one would expect at least one person out of this vast multitude to be confused ...."). The failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy. See Eclipse Associates Ltd. v. Data Gen. Corp., 894 F.2d 1114, 1118-19 (9th Cir. 1990); Sleekcraft, 599 F.2d at 353. West Coast, however, did not state that it could not prove actual confusion; rather, it conceded that there has been none. This is a crucial difference. Although there may be the rare case in which a likelihood of future confusion is possible even where it is conceded that two marks have been used simultaneously for years with no resulting confusion, West Coast has not shown this to be such a case.

Our conclusion comports with the position of the PTO, which effectively announced its finding of no likelihood of confusion between "The Movie Buff's Movie Store" and "MovieBuff" when it placed the latter on the principal register despite West Coast's prior registration of "The Movie Buff's Movie Store." Priority is accordingly to be determined on the basis of whether Brookfield used "MovieBuff" or West Coast used "moviebuff.com" first.^[12]

B

West Coast argues that we are mixing apples and oranges when we compare its first use date of "moviebuff.com" with the first sale date of "MovieBuff" software. West Coast reminds us that Brookfield uses the "MovieBuff" mark with both computer software and the provision of an Internet database; according to West Coast, its use of "moviebuff.com" can cause confusion only with respect to the latter. West Coast asserts that we should accordingly determine seniority by comparing West Coast's first use date of "moviebuff.com" not with when Brookfield first sold software, but with when it first offered its database online.

As an initial matter, we note that West Coast's argument is premised on the assumption that its use of "moviebuff.com" does not cause confusion between its web site and Brookfield's "MovieBuff" software [1051] products. Even though Brookfield's computer software and West Coast's offerings on its web site are not identical products, likelihood of confusion can still result where, for example, there is a likelihood of expansion in product lines. See Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1394 (9th Cir.1993). As the leading trademark commentator explains: "When a senior user of a mark on product line A expands later into product line B and finds an intervening user, priority in product line B is determined by whether the expansion is `natural' in that customers would have been confused as to source or affiliation at the time of the intervening user's appearance." 2 McCarthy § 16:5. We need not, however, decide whether the Web was within Brookfield's natural zone of expansion, because we conclude that Brookfield's use of "MovieBuff" as a service mark preceded West Coast's use.

Brookfield first used "MovieBuff" on its Internet-based products and services in August 1997,^[13] so West Coast can prevail only if it establishes first use earlier than that. In the literal sense of the word, West Coast "used" the term "moviebuff.com" when it registered that domain address in February 1996. Registration with Network Solutions, however, does not in itself constitute "use" for purposes of acquiring trademark priority. See Panavision, 141 F.3d at 1324-25. The Lanham Act grants trademark protection only to marks that are used to identify and to distinguish goods or services in commerce —which typically occurs when a mark is used in conjunction with the actual sale of goods or services. The purpose of a trademark is to help consumers identify the source, but a mark cannot serve a source-identifying function if the public has never seen the mark and thus is not meritorious of trademark protection until it is used in public in a manner that creates an association among consumers between the mark and the mark's owner.

Such use requirement is firmly established in the case law, see, e.g., Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305 U.S. 315, 334, 59 S.Ct. 191, 83 L.Ed. 195 (1938); New West, 595 F.2d at 1198-99, and, moreover, is embodied in the Lanham Act itself. See 15 U.S.C. § 1127 ("The term `trademark' includes any word, name, symbol, or device, or any combination thereof ... used by a person ... to identify and distinguish his or her goods.") (emphasis added); id. ("The term `service mark' means any word, name, symbol, or device, or any combination thereof ... used by a person ... to identify and distinguish the services of one person) (emphasis added). In fact, Congress amended the Lanham Act in 1988 to strengthen this "use in commerce" requirement, making clear that trademark rights can be conveyed only through "the bona fide use of a mark in the ordinary course of trade, and not [use] made merely to reserve a mark." 15 U.S.C. § 1127. Congress provided more specifically:

For purposes of this chapter, a mark shall be deemed to be in use in commerce—

(1) on goods when—

[1052] (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

Id.

The district court, while recognizing that mere registration of a domain name was not sufficient to constitute commercial use for purposes of the Lanham Act, nevertheless held that registration of a domain name with the intent to use it commercially was sufficient to convey trademark rights. This analysis, however, contradicts both the express statutory language and the case law which firmly establishes that trademark rights are not conveyed through mere intent to use a mark commercially, see, e.g., Allard Enters. v. Advanced Programming Resources, Inc., 146 F.3d 350, 356 (6th Cir.1998); Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 504 (7th Cir.1992) ("[A]n intent to use a mark creates no rights a competitor is bound to respect."), nor through mere preparation to use a term as a trademark, see, e.g., Hydro-Dynamics, Inc. v. George Putnam & Co., 811 F.2d 1470, 1473-74 (Fed.Cir. 1987); Computer Food Stores, Inc. v. Corner Store Franchises, 176 U.S.P.Q. 535, 538, 1973 WL 19922 (T.T.A.B.1973).

West Coast no longer disputes that its use—for purposes of the Lanham Act—of "moviebuff.com" did not commence until after February 1996. It instead relies on the alternate argument that its rights vested when it began using "moviebuff.com" in e-mail correspondence with lawyers and customers sometime in mid-1996. West Coast's argument is not without support in our case law—we have indeed held that trademark rights can vest even before any goods or services are actually sold if "the totality of [one's] prior actions, taken together, [can] establish a right to use the trademark." New West, 595 F.2d at 1200. Under New West, however, West Coast must establish that its e-mail correspondence constituted "`[u]se in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.'" Id. (quoting New England Duplicating Co. v. Mendes, 190 F.2d 415, 418 (1st Cir. 1951)); see also Marvel Comics Ltd. v. Defiant, 837 F.Supp. 546, 550 (S.D.N.Y.1993) ("[T]he talismanic test is whether or not the use was sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.") (quotation marks and citation omitted).

West Coast fails to meet this standard. Its purported "use" is akin to putting one's mark "on a business office door sign, letterheads, architectural drawings, etc." or on a prototype displayed to a potential buyer, both of which have been held to be insufficient to establish trademark rights. See Steer Inn Systems, Inc. v. Laughner's Drive-In, Inc., 56 C.C.P.A. 911, 405 F.2d 1401, 1402 (C.C.P.A.1969); Walt Disney Productions v. Kusan Inc., 204 U.S.P.Q. 284, 288 (C.D.Cal.1979). Although widespread publicity of a company's mark, such as Marvel Comics's announcement to 13 million comic book readers that "Plasma" would be the title of a new comic book, see Marvel Comics, 837 F.Supp. at 550, or the mailing of 430,000 solicitation letters with one's mark to potential subscribers of a magazine, see New West, 595 F.2d at 1200, may be sufficient to create an association among the public between the mark and West Coast, mere use in limited e-mail correspondence with lawyers and a few customers is not.

[1053] West Coast first announced its web site at "moviebuff.com" in a public and widespread manner in a press release of November 11, 1998, and thus it is not until at least that date that it first used the "moviebuff.com" mark for purposes of the Lanham Act.^[14] Accordingly, West Coast's argument that it has seniority because it used "moviebuff.com" before Brookfield used "MovieBuff" as a service mark fails on its own terms. West Coast's first use date was neither February 1996 when it registered its domain name with Network Solutions as the district court had concluded, nor April 1996 when it first used "moviebuff.com" in e-mail communications, but rather November 1998 when it first made a widespread and public announcement about the imminent launch of its web site. Thus, West Coast's first use of "moviebuff.com" was preceded by Brookfield's first use of "MovieBuff" in conjunction with its online database, making Brookfield the senior user.

For the foregoing reasons, we conclude that the district court erred in concluding that Brookfield failed to establish a likelihood of success on its claim of being the senior user.

V

Establishing seniority, however, is only half the battle. Brookfield must also show that the public is likely to be somehow confused about the source or sponsorship of West Coast's "moviebuff.com" web site—and somehow to associate that site with Brookfield. See 15 U.S.C. § 1114(1); 1125(a).^[15] The Supreme Court has described "the basic objectives of trademark law" as follows: "trademark law, by preventing others from copying a source-identifying mark, `reduce[s] the customer's costs of shopping and making purchasing decisions,' for it quickly and easily assures a potential customer that this item—the item with this mark—is made by the same producer as other similarly marked items that he or she liked (or disliked) in the past. At the same time, the law helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product." Qualitex, 514 U.S. at 163-64 (internal citations omitted). Where two companies each use a different mark and the simultaneous use of those marks does not cause the consuming public to be confused as to who makes what, granting one company exclusive rights over both marks does nothing to further the objectives of the trademark laws; in fact, prohibiting the use of a mark that the public has come to associate with a company would actually contravene the intended purposes of the trademark law by making it more difficult to identify and to distinguish between different brands of goods.

"The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products." Official Airline Guides, 6 F.3d at 1391 (quoting E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir.1992)) (quotation marks omitted); accord International Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 825 (9th Cir.1993); Metro Publishing, Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir.1993). We look to the following factors for guidance in determining the likelihood of confusion: similarity of the conflicting designations; relatedness or proximity of the two companies' products or services; strength of Brookfield's mark; marketing channels used; degree of care likely to be exercised by purchasers in selecting goods; West Coast's intent in selecting its mark; evidence of actual confusion; and likelihood of [1054] expansion in product lines. See Dr. Seuss Enters. v. Penguin Books USA, Inc., 109 F.3d 1394, 1404 (9th Cir.1997), petition for cert. dismissed by, ___ U.S. ___, 118 S.Ct. 27, 138 L.Ed.2d 1057 (1997); Sleekcraft, 599 F.2d at 348-49; see also Restatement (Third) of Unfair Competition §§ 20-23 (1995). These eight factors are often referred to as the Sleekcraft factors.

A word of caution: this eight-factor test for likelihood of confusion is pliant. Some factors are much more important than others, and the relative importance of each individual factor will be case-specific. Although some factors— such as the similarity of the marks and whether the two companies are direct competitors —will always be important, it is often possible to reach a conclusion with respect to likelihood of confusion after considering only a subset of the factors. See Dreamwerks Prod. Group v. SKG Studio, 142 F.3d 1127, 1130-32 (9th Cir.1998). Moreover, the foregoing list does not purport to be exhaustive, and non-listed variables may often be quite important. We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach.

A

We begin by comparing the allegedly infringing mark to the federally registered mark.^[16] The similarity of the marks will always be an important factor. Where the two marks are entirely dissimilar, there is no likelihood of confusion. "Pepsi" does not infringe Coca-Cola's "Coke." Nothing further need be said. Even where there is precise identity of a complainant's and an alleged infringer's mark, there may be no consumer confusion—and thus no trademark infringement—if the alleged infringer is in a different geographic area or in a wholly different industry. See Weiner King, Inc. v. Wiener King Corp., 615 F.2d 512, 515-16, 521-22 (C.C.P.A.1980) (permitting concurrent use of "Weiner King" as a mark for restaurants featuring hot dogs in New Jersey and "Wiener King" as a mark for restaurants in North Carolina); Pinocchio's Pizza Inc. v. Sandra Inc., 11 U.S.P.Q.2d 1227, 1228, 1989 WL 297867 (T.T.A.B.1989) (permitting concurrent use of "PINOCCHIO'S" as a service mark for restaurants in Maryland and "PINOCCHIOS" as a service mark for restaurants elsewhere in the country). Nevertheless, the more similar the marks in terms of appearance, sound, and meaning, the greater the likelihood of confusion. See, e.g., Dreamwerks, 142 F.3d at 1131; Goss, 6 F.3d at 1392 ("The court assesses the similarity of the marks in terms of their sight, sound, and meaning."). In analyzing this factor, "[t]he marks must be considered in their entirety and as they appear in the marketplace," Goss, 6 F.3d at 1392 (citing Nutri/System, Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 605-06 (9th Cir. 1987)), with similarities weighed more heavily than differences, see id. (citing [1055] Rodeo Collection Ltd. v. West Seventh, 812 F.2d 1215, 1219 (9th Cir.1987)).

In the present case, the district court found West Coast's domain name "moviebuff.com" to be quite different than Brookfield's domain name "moviebuffonline.com." Comparison of domain names, however, is irrelevant as a matter of law, since the Lanham Act requires that the allegedly infringing mark be compared with the claimant's trademark, see 15 U.S.C. § 1114(1), 1125(a), which here is "MovieBuff," not "moviebuffonline.com." Properly framed, it is readily apparent that West Coast's allegedly infringing mark is essentially identical to Brookfield's mark "MovieBuff." In terms of appearance, there are differences in capitalization and the addition of ".com" in West Coast's complete domain name, but these differences are inconsequential in light of the fact that Web addresses are not capssensitive and that the ".com" top-level domain signifies the site's commercial nature.

Looks aren't everything, so we consider the similarity of sound and meaning. The two marks are pronounced the same way, except that one would say "dot com" at the end of West Coast's mark. Because many companies use domain names comprised of ".com" as the top-level domain with their corporate name or trademark as the second-level domain, see Beverly, 1998 WL 320829, at *1, the addition of ".com" is of diminished importance in distinguishing the mark. The irrelevance of the ".com" becomes further apparent once we consider similarity in meaning. The domain name is more than a mere address: like trademarks, second-level domain names communicate information as to source. As we explained in Part II, many Web users are likely to associate "moviebuff.com" with the trademark "MovieBuff," thinking that it is operated by the company that makes "MovieBuff" products and services.^[17] Courts, in fact, have routinely concluded that marks were essentially identical in similar contexts. See, e.g., Public Serv. Co. v. Nexus Energy Software, Inc., 36 F.Supp.2d 436, ___ (D.Mass.1999) (finding "energyplace.com" and "Energy Place" to be virtually identical); Minnesota Mining & Mfg. Co. v. Taylor, 21 F.Supp.2d 1003, 1005 (D.Minn. 1998) (finding "post-it.com" and "Post—It" to be the same); Interstellar Starship Services, Ltd. v. EPIX, Inc., 983 F.Supp. 1331, 1335 (D.Or.1997) ("In the context of Internet use, [`epix.com'] is the same mark as [`EPIX']."); Planned Parenthood Federation of America, Inc. v. Bucci, No. 97-0629, 1997 WL 133313, at *8 (S.D.N.Y. Mar.24, 1997) (concluding that "planned-parenthood.com" and "Planned Parenthood" were essentially identical), aff'd by, 152 F.3d 920, 1998 WL 336163 (2d Cir. 1998), cert. denied, ___ U.S. ___, 119 S.Ct. 90, 142 L.Ed.2d 71 (1998). As "MovieBuff" and "moviebuff.com" are, for all intents and purposes, identical in terms of sight, sound, and meaning, we conclude that the similarity factor weighs heavily in favor of Brookfield.^[18]

The similarity of marks alone, as we have explained, does not necessarily lead to consumer confusion. Accordingly, we must proceed to consider the relatedness of the products and services offered. Related goods are generally more likely than unrelated goods to confuse the public as to the producers of the goods. See Official Airline Guides, 6 F.3d at 1392 [1056] (citing Sleekcraft, 599 F.2d at 350). In light of the virtual identity of marks, if they were used with identical products or services likelihood of confusion would follow as a matter of course. See Lindy Pen Co. v. Bic Pen Corp., 796 F.2d 254, 256-57 (9th Cir.1986) (reversing a district court's finding of no likelihood of confusion even though the six other likelihood of confusion factors all weighed against a finding of likelihood of confusion); Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 462 (3d Cir.1983). If, on the other hand, Brookfield and West Coast did not compete to any extent whatsoever, the likelihood of confusion would probably be remote. A Web surfer who accessed "moviebuff.com" and reached a web site advertising the services of Schlumberger Ltd. (a large oil drilling company) would be unlikely to think that Brookfield had entered the oil drilling business or was sponsoring the oil driller. See, e.g., Toys "R" Us, Inc. v. Feinberg, 26 F.Supp.2d 639, 643 (S.D.N.Y.1998) (no likelihood of confusion between "gunsrus.com" firearms web site and "Toys `R' Us" trademark); Interstellar Starship, 983 F.Supp. at 1336 (finding no likelihood of confusion between use of "epix.com" to advertise the Rocky Horror Picture Show and "Epix" trademark registered for use with computer circuit boards). At the least, Brookfield would bear the heavy burden of demonstrating (through other relevant factors) that consumers were likely to be confused as to source or affiliation in such a circumstance.

The district court classified West Coast and Brookfield as non-competitors largely on the basis that Brookfield is primarily an information provider while West Coast primarily rents and sells videotapes. It noted that West Coast's web site is used more by the somewhat curious video consumer who wants general movie information, while entertainment industry professionals, aspiring entertainment executives and professionals, and highly focused moviegoers are more likely to need or to want the more detailed information provided by "MovieBuff." This analysis, however, overemphasizes differences in principal lines of business, as we have previously instructed that "the relatedness of each company's prime directive isn't relevant." Dreamwerks, 142 F.3d at 1131. Instead, the focus is on whether the consuming public is likely somehow to associate West Coast's products with Brookfield. See id. Here, both companies offer products and services relating to the entertainment industry generally, and their principal lines of business both relate to movies specifically and are not as different as guns and toys, see Toys "R" Us, 26 F.Supp.2d at 643, or computer circuit boards and the Rocky Horror Picture Show, see Interstellar Starship, 983 F.Supp. at 1336. Thus, Brookfield and West Coast are not properly characterized as non-competitors. See American Int'l Group, Inc. v. American Int'l Bank, 926 F.2d 829, 832 (9th Cir. 1991) (concluding that although the parties were not direct competitors, they both provided financial services and that customer confusion could result in light of the similarities between the companies' services).

Not only are they not non-competitors, the competitive proximity of their products is actually quite high. Just as Brookfield's "MovieBuff" is a searchable database with detailed information on films, West Coast's web site features a similar searchable database, which Brookfield points out is licensed from a direct competitor of Brookfield. Undeniably then, the products are used for similar purposes. "[T]he rights of the owner of a registered trademark . . . extend to any goods related in the minds of consumers," E. Remy Martin & Co. v. Shaw-Ross Int'l Imports, Inc., 756 F.2d 1525, 1530 (11th Cir.1985), and Brookfield's and West Coast's products are certainly so related to some extent. The relatedness is further evidenced by the fact that the two companies compete for the patronage of an overla-lapping audience. The use of similar marks to offer similar products accordingly weighs heavily in favor of likelihood of confusion. See Sleekcraft, 599 F.2d at 348 (concluding that high-speed waterskiing [1057] racing boats are sufficiently related to family-oriented recreational boats that the public is likely to be confused as to the source of the boats); Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149, 153-55 (9th Cir.1963) (concluding that beer and whiskey are sufficiently similar to create a likelihood of confusion regarding the source of origin when sold under the same trade name); see also Champions Golf Club, Inc. v. Champions Golf Club, Inc., 78 F.3d 1111, 1118 (6th Cir.1996).

In addition to the relatedness of products, West Coast and Brookfield both utilize the Web as a marketing and advertising facility, a factor that courts have consistently recognized as exacerbating the likelihood of confusion. See, e.g., Public Serv. Co., 36 F.Supp.2d at 439; Washington Speakers Bureau, Inc. v. Leading Authorities, Inc., 33 F.Supp.2d 488, 499 (E.D.Va.1999); Jews for Jesus v. Brodsky, 993 F.Supp. 282, 304-05 (D.N.J. 1998), aff'd, 159 F.3d 1351 (3d Cir.1998); Interstellar Starship Servs., 983 F.Supp. at 1336; Planned Parenthood Fed'n of America, 1997 WL 133313, at *8. Both companies, apparently recognizing the rapidly growing importance of Web commerce, are maneuvering to attract customers via the Web. Not only do they compete for the patronage of an overlapping audience on the Web, both "MovieBuff" and "moviebuff.com" are utilized in conjunction with Web-based products.

Given the virtual identity of "moviebuff.com" and "MovieBuff," the relatedness of the products and services accompanied by those marks, and the companies' simultaneous use of the Web as a marketing and advertising tool, many forms of consumer confusion are likely to result. People surfing the Web for information on "MovieBuff" may confuse "MovieBuff" with the searchable entertainment database at "moviebuff.com" and simply assume that they have reached Brookfield's web site. See, e.g., Cardservice Int'l, 950 F.Supp. at 741. In the Internet context, in particular, entering a web site takes little effort—usually one click from a linked site or a search engine's list; thus, Web surfers are more likely to be confused as to the ownership of a web site than traditional patrons of a brick-and-mortar store would be of a store's ownership. Alternatively, they may incorrectly believe that West Coast licensed "MovieBuff" from Brookfield, see, e.g., Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd., 34 F.3d 410, 415-16 (7th Cir. 1994), or that Brookfield otherwise sponsored West Coast's database, see E. Remy Martin, 756 F.2d at 1530; Fuji Photo Film Co. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 596 (5th Cir.1985). Other consumers may simply believe that West Coast bought out Brookfield or that they are related companies.

Yet other forms of confusion are likely to ensue. Consumers may wrongly assume that the "MovieBuff" database they were searching for is no longer offered, having been replaced by West Coast's entertainment database, and thus simply use the services at West Coast's web site. See, e.g., Cardservice Int'l, 950 F.Supp. at 741. And even where people realize, immediately upon accessing "moviebuff.com," that they have reached a site operated by West Coast and wholly unrelated to Brookfield, West Coast will still have gained a customer by appropriating the goodwill that Brookfield has developed in its "MovieBuff" mark. A consumer who was originally looking for Brookfield's products or services may be perfectly content with West Coast's database (especially as it is offered free of charge); but he reached West Coast's site because of its use of Brookfield's mark as its second-level domain name, which is a misappropriation of Brookfield's goodwill by West Coast. See infra Part V.B.

The district court apparently assumed that likelihood of confusion exists only when consumers are confused as to the source of a product they actually purchase. It is, however, well established that the Lanham Act protects against the many other forms of confusion that we have outlined. See Pebble Beach, 155 F.3d at 544; [1058] Indianapolis Colts, 34 F.3d at 415-16; Fuji Photo Film, 754 F.2d at 596; HMH Pub. Co. v. Brincat, 504 F.2d 713, 716-17 & n.7 (9th Cir.1974); Fleischmann Distilling, 314 F.2d at 155.

The factors that we have considered so far—the similarity of marks, the relatedness of product offerings, and the overlap in marketing and advertising channels —lead us to the tentative conclusion that Brookfield has made a strong showing of likelihood of confusion. Because it is possible that the remaining factors will tip the scale back the other way if they weigh strongly enough in West Coast's favor, we consider the remaining likelihood of confusion factors, beginning with the strength of Brookfield's mark. The stronger a mark—meaning the more likely it is to be remembered and associated in the public mind with the mark's owner—the greater the protection it is accorded by the trademark laws. See Kenner Parker Toys Inc. v. Rose Art Indus., Inc., 963 F.2d 350, 353 (Fed.Cir.1992); Nutri/System, 809 F.2d at 605. Marks can be conceptually classified along a spectrum of generally increasing inherent distinctiveness as generic, descriptive, suggestive, arbitrary, or fanciful.^[19]See Two Pesos, 505 U.S. at 768. West Coast asserts that Brookfield's mark is "not terribly distinctive," by which it apparently means suggestive, but only weakly so. Although Brookfield does not seriously dispute that its mark is only suggestive, it does defend its (mark's) muscularity.

We have recognized that, unlike arbitrary or fanciful marks which are typically strong, suggestive marks are presumptively weak. See, e.g., Nutri/System, 809 F.2d at 605. As the district court recognized, placement within the conceptual distinctiveness spectrum is not the only determinant of a mark's strength, as advertising expenditures can transform a suggestive mark into a strong mark, see id., where, for example, that mark has achieved actual marketplace recognition, see Streetwise Maps, Inc. v. Vandam, Inc., 159 F.3d 739, 743-44 (2d Cir.1998). Brookfield, however, has not come forth with substantial evidence establishing the widespread recognition of its mark; although it argues that its strength is established from its use of "MovieBuff" for over five years, its federal and California state registrations, and its expenditure of $100,000 in advertising its mark, the district court did not clearly err in classifying "MovieBuff" as weak. Some weak marks are weaker than others, and although "MovieBuff" falls within the weak side of the strength spectrum, the mark is not so flabby as to compel a finding of no likelihood of confusion in light of the other factors that we have considered. Importantly, Brookfield's trademark is not descriptive because it does not describe either the software product or its purpose. Instead, it is suggestive—and thus strong enough to warrant trademark protection— because it requires a mental leap from the mark to the product. See Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902, 910-11 (9th Cir.1995). Because the products involved are closely related and West Coast's domain name is nearly identical to Brookfield's [1059] trademark, the strength of the mark is of diminished importance in the likelihood of confusion analysis. See McCarthy ¶ 11:76 ("Whether a mark is weak or not is of little importance where the conflicting mark is identical and the goods are closely related.").

We thus turn to intent. "The law has long been established that if an infringer `adopts his designation with the intent of deriving benefit from the reputation of the trade-mark or trade name, its intent may be sufficient to justify the inference that there are confusing similarities.'" Pacific Telesis v. International Telesis Comms., 994 F.2d 1364, 1369 (9th Cir.1993) (quoting Restatement of Torts, § 729, Comment on Clause (b)f (1938)). An inference of confusion has similarly been deemed appropriate where a mark is adopted with the intent to deceive the public. See Gallo, 967 F.2d at 1293 (citing Sleekcraft, 599 F.2d at 354). The district court found that the intent factor favored West Coast because it did not adopt the "moviebuff.com" mark with the specific purpose of infringing Brookfield's trademark. The intent prong, however, is not so narrowly confined.

This factor favors the plaintiff where the alleged infringer adopted his mark with knowledge, actual or constructive, that it was another's trademark. See Official Airline Guides, 6 F.3d at 1394 ("When an alleged infringer knowingly adopts a mark similar to another's, courts will presume an intent to deceive the public."); Fleischmann Distilling, 314 F.2d 149 at 157. In the Internet context, in particular, courts have appropriately recognized that the intentional registration of a domain name knowing that the second-level domain is another company's valuable trademark weighs in favor of likelihood of confusion. See, e.g., Washington Speakers, 33 F.Supp.2d 488, 500. There is, however, no evidence in the record that West Coast registered "moviebuff.com" with the principal intent of confusing consumers.^[20] Brookfield correctly points out that, by the time West Coast launched its web site, it did know of Brookfield's claim to rights in the trademark "MovieBuff." But when it registered the domain name with Network Solutions, West Coast did not know of Brookfield's rights in "MovieBuff" (at least Brookfield has not established that it did). Although Brookfield asserts that West Coast could easily have launched its web site at its alternate domain address, "westcoastvideo.com," thereby avoiding the infringement problem, West Coast claims that it had already invested considerable sums in developing its "moviebuff.com" web site by the time that Brookfield informed it of its rights in the trademark. Considered as a whole, this factor appears indeterminate.

Importantly, an intent to confuse consumers is not required for a finding of trademark infringement. See Dreamwerks, 142 F.3d at 1132 n. 12 ("Absence of malice is no defense to trademark infringement"); Daddy's Junky Music Stores, 109 F.3d at 287 ("As noted, the presence of intent can constitute strong evidence of confusion. The converse of this proposition, however, is not true: the lack of intent by a defendant is largely irrelevant in determining if consumers likely will be confused as to source.") (internal quotation marks and citations omitted); Fleischmann Distilling, 314 F.2d at 157. Instead, this factor is only relevant to the extent that it bears upon the likelihood that consumers will be confused by the alleged infringer's mark (or to the extent that a court wishes to consider it as an equitable consideration). See Sleekcraft Boats, 599 F.2d at 348 n. 10. Here, West Coast's intent does not appear to bear upon the likelihood of confusion because it [1060] did not act with such an intent from which it is appropriate to infer consumer confusion.

The final three Sleekcraft factors—evidence of actual confusion, likelihood of expansion in product lines, and purchaser care—do not affect our ultimate conclusion regarding the likelihood of confusion. The first two factors do not merit extensive comment. Actual confusion is not relevant because Brookfield filed suit before West Coast began actively using the "moviebuff.com" mark and thus never had the opportunity to collect information on actual confusion. The likelihood of expansion in product lines factor is relatively unimportant where two companies already compete to a significant extent. See Official Airline Guides, 6 F.3d at 1394. In any case, it is neither exceedingly likely nor unlikely that West Coast will enter more directly into Brookfield's principal market, or vice versa.

Although the district court did not discuss the degree of care likely to be exercised by purchasers of the products in question, we think that this issue deserves some consideration. Likelihood of confusion is determined on the basis of a "reasonably prudent consumer." Dreamwerks, 142 F.3d at 1129; Sleekcraft, 599 F.2d at 353. What is expected of this reasonably prudent consumer depends on the circumstances. We expect him to be more discerning —and less easily confused—when he is purchasing expensive items, see, e.g., Official Airline Guides, 6 F.3d at 1393 (noting that confusion was unlikely among advertisers when the products in question cost from $2,400 to $16,000), and when the products being sold are marketed primarily to expert buyers, see, e.g., Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1537 (9th Cir.1989). We recognize, however, that confusion may often be likely even in the case of expensive goods sold to discerning customers. See Sleekcraft, 599 F.2d at 353; see also, e.g., Daddy's Junky Music Stores, 109 F.3d at 286; Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 492 (2d Cir.1988). On the other hand, when dealing with inexpensive products, customers are likely to exercise less care, thus making confusion more likely. See, e.g., Gallo, 967 F.2d at 1293 (wine and cheese).

The complexity in this case arises because we must consider both entertainment professionals, who probably will take the time and effort to find the specific product they want, and movie devotees, who will be more easily confused as to the source of the database offered at West Coast's web site. In addition, West Coast's site is likely to be visited by many casual movie watchers. The entertainment professional, movie devotee, and casual watcher are likely to exercise high, little, and very little care, respectively. Who is the reasonably prudent consumer? Although we have not addressed the issue of purchaser care in mixed buyer classes, another circuit has held that "the standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer." Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 283 (3d Cir.1991); see also Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1195 (2d Cir. 1971) (instructing that, where a product is targeted both to discriminating and casual buyers, a court must consider the likelihood of confusion on the part of the relatively unknowledgeable buyers as well as of the former group); 3 McCarthy § 23:100 (advocating this approach). This is not the only approach available to us, as we could alternatively use a weighted average of the different levels of purchaser care in determining how the reasonably prudent consumer would act. We need not, however, decide this question now because the purchaser confusion factor, even considered in the light most favorable to West Coast, is not sufficient to overcome the likelihood of confusion strongly established by the other factors we have analyzed.

West Coast makes one last ditch argument—that, even if there is a likelihood of confusion, Brookfield should be [1061] estopped from asserting its trademark rights because it waited too long to file suit. Although we have applied laches to bar trademark infringement claims, we have done so only where the trademark holder knowingly allowed the infringing mark to be used without objection for a lengthy period of time. See E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir.1983). In E-Systems, for example, we estopped a claimant who did not file suit until after the allegedly infringing mark had been used for eight years where the claimant had known of the infringing use for at least six years. See id.; see also Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 803 (9th Cir.1970). We specifically cautioned, however, that "had defendant's encroachment been minimal, or its growth slow and steady, there would be no laches." E-Systems, 720 F.2d at 607; accord Carter-Wallace, 434 F.2d at 803 n. 4. Here, although Brookfield waited over two years before notifying West Coast that its intended use of "moviebuff.com" would infringe on Brookfield's trademark, West Coast did not do anything with its domain address during that time, and Brookfield filed suit the very day that West Coast publicly announced its intention to launch a web site at "moviebuff.com." Accordingly, we conclude that Brookfield's delay was not such that it should be estopped from pursuing an otherwise meritorious claim. See generally American Int'l Group, 926 F.2d at 831 (outlining six-factor test for determining whether laches operates to bar a claim of trademark infringement).^[21]

In light of the foregoing analysis, we conclude that Brookfield has demonstrated a likelihood of success on its claim that West Coast's use of "moviebuff.com" violates the Lanham Act. We are fully aware that although the question of "[w]hether confusion is likely is a factual determination woven into the law," we nevertheless must review only for clear error the district court's conclusion that the evidence of likelihood of confusion in this case was slim. See Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1356 (9th Cir. 1985) (en banc). Here, however, we are "left with the definite and firm conviction that a mistake has been made." Pacific Telesis Group v. International Telesis Comms., 994 F.2d 1364, 1367 (9th Cir. 1993).^[22]

B

So far we have considered only West Coast's use of the domain name "moviebuff.com." Because Brookfield requested that we also preliminarily enjoin West Coast from using marks confusingly similar to "MovieBuff" in metatags and buried code, we must also decide whether West Coast can, consistently with the trademark and unfair competition laws, use "MovieBuff" or "moviebuff.com" in its HTML code.^[23]

At first glance, our resolution of the infringement issues in the domain name [1062] context would appear to dictate a similar conclusion of likelihood of confusion with respect to West Coast's use of "moviebuff.com" in its metatags. Indeed, all eight likelihood of confusion factors outlined in Part V-A—with the possible exception of purchaser care, which we discuss below—apply here as they did in our analysis of domain names; we are, after all, dealing with the same marks, the same products and services, the same consumers, etc. Disposing of the issue so readily, however, would ignore the fact that the likelihood of confusion in the domain name context resulted largely from the associational confusion between West Coast's domain name "moviebuff.com" and Brookfield's trademark "MovieBuff." The question in the metatags context is quite different. Here, we must determine whether West Coast can use "MovieBuff" or "moviebuff.com" in the metatags of its web site at "westcoastvideo.com" or at any other domain address other than "moviebuff.com" (which we have determined that West Coast may not use).

Although entering "MovieBuff" into a search engine is likely to bring up a list including "westcoastvideo.com" if West Coast has included that term in its metatags, the resulting confusion is not as great as where West Coast uses the "moviebuff.com" domain name. First, when the user inputs "MovieBuff" into an Internet search engine, the list produced by the search engine is likely to include both West Coast's and Brookfield's web sites. Thus, in scanning such list, the Web user will often be able to find the particular web site he is seeking. Moreover, even if the Web user chooses the web site belonging to West Coast, he will see that the domain name of the web site he selected is "westcoastvideo.com." Since there is no confusion resulting from the domain address, and since West Coast's initial web page prominently displays its own name, it is difficult to say that a consumer is likely to be confused about whose site he has reached or to think that Brookfield somehow sponsors West Coast's web site.

Nevertheless, West Coast's use of "moviebuff.com" in metatags will still result in what is known as initial interest confusion. Web surfers looking for Brookfield's "MovieBuff" products who are taken by a search engine to "westcoastvideo.com" will find a database similar enough to "MovieBuff" such that a sizeable number of consumers who were originally looking for Brookfield's product will simply decide to utilize West Coast's offerings instead. Although there is no source confusion in the sense that consumers know they are patronizing West Coast rather than Brookfield, there is nevertheless initial interest confusion in the sense that, by using "moviebuff.com" or "MovieBuff" to divert people looking for "MovieBuff" to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark. Recently in Dr. Seuss, we explicitly recognized that the use of another's trademark in a manner calculated "to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion, may be still an infringement." Dr. Seuss, 109 F.3d at 1405 (citing Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 257-58 (2d Cir. 1987)).^[24]

[1063] The Dr. Seuss court, in recognizing that the diversion of consumers' initial interest is a form of confusion against which the Lanham Act protects, relied upon Mobil Oil. In that case, Mobil Oil Corporation ("Mobil") asserted a federal trademark infringement claim against Pegasus Petroleum, alleging that Pegasus Petroleum's use of "Pegasus" was likely to cause confusion with Mobil's trademark, a flying horse symbol in the form of the Greek mythological Pegasus. Mobil established that "potential purchasers would be misled into an initial interest in Pegasus Petroleum" because they thought that Pegasus Petroleum was associated with Mobil. Id. at 260. But these potential customers would generally learn that Pegasus Petroleum was unrelated to Mobil well before any actual sale was consummated. See id. Nevertheless, the Second Circuit held that "[s]uch initial confusion works a sufficient trademark injury." Id.

Mobil Oil relied upon its earlier opinion in Grotrian, Helfferich, Schulz, Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1341-42 (2d Cir.1975). Analyzing the plaintiff's claim that the defendant, through its use of the "Grotrian-Steinweg" mark, attracted people really interested in plaintiff's "Steinway" pianos, the Second Circuit explained:

We decline to hold, however, that actual or potential confusion at the time of purchase necessarily must be demonstrated to establish trademark infringement under the circumstances of this case.

The issue here is not the possibility that a purchaser would buy a Grotrian-Steinweg thinking it was actually a Steinway or that Grotrian had some connection with Steinway and Sons. The harm to Steinway, rather, is the likelihood that a consumer, hearing the "Grotrian-Steinweg" name and thinking it had some connection with "Steinway," would consider it on that basis. The "Grotrian-Steinweg" name therefore would attract potential customers based on the reputation built up by Steinway in this country for many years.

Grotrian, 523 F.2d at 1342.

Both Dr. Seuss and the Second Circuit hold that initial interest confusion is actionable under the Lanham Act, which holdings are bolstered by the decisions of many other courts which have similarly recognized that the federal trademark and unfair competition laws do protect against this form of consumer confusion. See Green Prods., 992 F.Supp. 1070, 1076 (N.D.Iowa 1997) ("In essence, ICBP is capitalizing on the strong similarity between Green Products' trademark and ICBP's domain name to lure customers onto its web page."); Securacomm Consulting, Inc. v. Securacom Inc., 984 F.Supp. 286, 298 (D.N.J.1997) ("`Infringement can be based upon confusion that creates initial customer interest, even though no actual sale is finally completed as a result of the confusion.'") (citing 3 McCarthy § 23:6), rev'd on other grounds, 166 F.3d 182, 186 (3d Cir.1999) ("In this appeal, [appellant] does not challenge the district court's finding of infringement or order of injunctive relief."); Kompan A.S. v. Park Structures, Inc., 890 F.Supp. 1167, 1180 (N.D.N.Y.1995) ("Kompan argues correctly that it can prevail by showing that confusion between the Kompan and Karavan lines and names will mistakenly lead the consumer to believe there is some connection between the two and therefore develop an interest in the Karavan line that it would not otherwise have had."); Blockbuster Entertainment Group v. Laylco, Inc., 869 F.Supp. 505, 513 (E.D.Mich. 1994) ("Because the names are so similar and the products sold are identical, some unwitting customers might enter a Video Busters store thinking it is somehow connected to Blockbuster. Those customers probably will realize shortly that Video Busters is not related to Blockbuster, but under [Ferrari S.P.A. Esercizio v. Roberts, 944 F.2d 1235 (6th Cir.1991)] and Grotrian that is irrelevant."); Jordache Enters., Inc. v. Levi Strauss & Co., 841 F.Supp. [1064] 506, 514-15 (S.D.N.Y.1993) ("Types of confusion that constitute trademark infringement include where ... potential consumers initially are attracted to the junior user's mark by virtue of its similarity to the senior user's mark, even though these consumers are not actually confused at the time of purchase."); Sara Lee Corp. v. Kayser-Roth Corp., No. 92-00460, 1992 WL 436279, at *24 (W.D.N.C. Dec. 1, 1992) ("That situation offers an opportunity for sale not otherwise available by enabling defendant to interest prospective customers by confusion with the plaintiff's product."); Television Enter. Network, Inc. v. Entertainment Network, Inc., 630 F.Supp. 244, 247 (D.N.J.1986) ("Even if the confusion is cured at some intermediate point before the deal is completed, the initial confusion may be damaging and wrongful."); Koppers Co. v. Krupp-Koppers GmbH, 517 F.Supp. 836, 844 (W.D.Pa. 1981) ("[S]ecuring the initial business contact by the defendant because of an assumed association between the parties is wrongful even though the mistake is later rectified."). See also Forum Corp. of North America v. Forum, Ltd., 903 F.2d 434, 442 n. 2 (7th Cir.1990) ("We point out that the fact that confusion as to the source of a product or service is eventually dispelled does not eliminate the trademark infringement which has already occurred."). But see Astra Pharm. Prods., Inc. v. Beckman Instruments, Inc., 718 F.2d 1201, 1206-08 (1st Cir.1983) (suggesting that only confusion that affects "the ultimate decision of a purchaser whether to buy a particular product" is actionable); Teletech Customer Care Mgmt. (Cal.), Inc. v. Tele-Tech Co., 977 F.Supp. 1407, 1410, 1414 (C.D.Cal.1997) (finding likelihood of initial interest confusion but concluding that such "brief confusion is not cognizable under the trademark laws").

Using another's trademark in one's metatags is much like posting a sign with another's trademark in front of one's store. Suppose West Coast's competitor (let's call it "Blockbuster") puts up a billboard on a highway reading—"West Coast Video: 2 miles ahead at Exit 7" —where West Coast is really located at Exit 8 but Blockbuster is located at Exit 7. Customers looking for West Coast's store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. Even consumers who prefer West Coast may find it not worth the trouble to continue searching for West Coast since there is a Blockbuster right there. Customers are not confused in the narrow sense: they are fully aware that they are purchasing from Blockbuster and they have no reason to believe that Blockbuster is related to, or in any way sponsored by, West Coast. Nevertheless, the fact that there is only initial consumer confusion does not alter the fact that Blockbuster would be misappropriating West Coast's acquired goodwill. See Blockbuster, 869 F.Supp. at 513 (finding trademark infringement where the defendant, a video rental store, attracted customers' initial interest by using a sign confusingly to its competitor's even though confusion would end long before the point of sale or rental); see also Dr. Seuss, 109 F.3d at 1405; Mobil Oil, 818 F.2d at 260; Green Prods., 992 F.Supp. at 1076.

The few courts to consider whether the use of another's trademark in one's metatags constitutes trademark infringement have ruled in the affirmative. For example, in a case in which Playboy Enterprises, Inc. ("Playboy") sued AsiaFocus International, Inc. ("AsiaFocus") for trademark infringement resulting from AsiaFocus's use of the federally registered trademarks "Playboy" and "Playmate" in its HTML code, a district court granted judgment in Playboy's favor, reasoning that AsiaFocus intentionally misled viewers into believing that its Web site was connected with, or sponsored by, Playboy. See Playboy Enters. v. Asiafocus Int'l, Inc., No. CIV.A. 97-734-A, 1998 WL 724000, at *3, *6-*7 (E.D.Va. Apr.10, 1998).

In a similar case also involving Playboy, a district court in California concluded that Playboy had established a likelihood of [1065] success on the merits of its claim that defendants' repeated use of "Playboy" within "machine readable code in Defendants' Internet Web pages, so that the PLAYBOY trademark [was] accessible to individuals or Internet search engines which attempt[ed] to access Plaintiff under Plaintiff's PLAYBOY registered trademark" constituted trademark infringement. See Playboy Enters. v. Calvin Designer Label, 985 F.Supp. 1220, 1221 (N.D.Cal.1997). The court accordingly enjoined the defendants from using Playboy's marks in buried code or metatags. See id. at 1221-22.

In a metatags case with an interesting twist, a district court in Massachusetts also enjoined the use of metatags in a manner that resulted in initial interest confusion. See Niton, 27 F.Supp.2d at 102-05. In that case, the defendant Radiation Monitoring Devices ("RMD") did not simply use Niton Corporation's ("Niton") trademark in its metatags. Instead, RMD's web site directly copied Niton's web site's metatags and HTML code. As a result, whenever a search performed on an Internet search engine listed Niton's web site, it also listed RMD's site. Although the opinion did not speak in terms of initial consumer confusion, the court made clear that its issuance of preliminary injunctive relief was based on the fact that RMD was purposefully diverting people looking for Niton to its web site. See id. at 104-05.

Consistently with Dr. Seuss, the Second Circuit, and the cases which have addressed trademark infringement through metatags use, we conclude that the Lanham Act bars West Coast from including in its metatags any term confusingly similar with Brookfield's mark. West Coast argues that our holding conflicts with Holiday Inns, in which the Sixth Circuit held that there was no trademark infringement where an alleged infringer merely took advantage of a situation in which confusion was likely to exist and did not affirmatively act to create consumer confusion. See Holiday Inns, 86 F.3d at 622 (holding that the use of "1-800-405-4329" —which is equivalent to "1-800-H[zero]LIDAY" —did not infringe Holiday Inn's trademark, "1-800-HOLIDAY"). Unlike the defendant in Holiday Inns, however, West Coast was not a passive figure; instead, it acted affirmatively in placing Brookfield's trademark in the metatags of its web site, thereby creating the initial interest confusion. Accordingly, our conclusion comports with Holiday Inns.

C

Contrary to West Coast's contentions, we are not in any way restricting West Coast's right to use terms in a manner which would constitute fair use under the Lanham Act. See New Kids on the Block v. News America Pub., Inc., 971 F.2d 302, 306-09 (9th Cir.1992); see also August Storck K.G. v. Nabisco, Inc., 59 F.3d 616, 617-18 (7th Cir.1995). It is well established that the Lanham Act does not prevent one from using a competitor's mark truthfully to identify the competitor's goods, see, e.g., Smith v. Chanel, Inc., 402 F.2d 562, 563 (9th Cir.1968) (stating that a copyist may use the originator's mark to identify the product that it has copied), or in comparative advertisements, see New Kids on the Block, 971 F.2d at 306-09. This fair use doctrine applies in cyberspace as it does in the real world. See Radio Channel Networks, Inc. v. Broadcast.Com, Inc., No. 98 Civ. 4799, 1999 WL 124455, at *5-*6 (S.D.N.Y. Mar.8, 1999); Bally Total Fitness Holding Corp. v. Faber, 29 F.Supp.2d 1161 (C.D.Cal.1998); Welles, 7 F.Supp.2d at 1103-04; Patmont Motor Werks, Inc. v. Gateway Marine, Inc., No. 96-2703, 1997 WL 811770, at *3-*4 & n. 6 (N.D.Cal. Dec.18, 1997); see also Universal Tel-A-Talk, 1998 WL 767440, at *9.

In Welles, the case most on point, Playboy sought to enjoin former Playmate of the Year Terri Welles ("Welles") from using "Playmate" or "Playboy" on her web site featuring photographs of herself. See 7 F.Supp.2d at 1100. Welles's web site advertised the fact that she was a former [1066] Playmate of the Year, but minimized the use of Playboy's marks; it also contained numerous disclaimers stating that her site was neither endorsed by nor affiliated with Playboy. The district court found that Welles was using "Playboy" and "Playmate" not as trademarks, but rather as descriptive terms fairly and accurately describing her web page, and that her use of "Playboy" and "Playmate" in her web site's metatags was a permissible, good faith attempt to index the content of her web site. It accordingly concluded that her use was permissible under the trademark laws. See id. at 1103-04.

We agree that West Coast can legitimately use an appropriate descriptive term in its metatags. But "MovieBuff" is not such a descriptive term. Even though it differs from "Movie Buff" by only a single space, that difference is pivotal. The term "Movie Buff" is a descriptive term, which is routinely used in the English language to describe a movie devotee. "MovieBuff" is not. The term "MovieBuff" is not in the dictionary. See Merriam-Webster's Collegiate Dictionary 762 (10th ed.1998); American Heritage College Dictionary 893 (3d ed.1997); Webster's New World College Dictionary 889 (3d ed.1997); Webster's Third New Int'l Dictionary 1480 (unabridged 1993). Nor has that term been used in any published federal or state court opinion. In light of the fact that it is not a word in the English language, when the term "MovieBuff" is employed, it is used to refer to Brookfield's products and services, rather than to mean "motion picture enthusiast." The proper term for the "motion picture enthusiast" is "Movie Buff," which West Coast certainly can use. It cannot, however, omit the space.

Moreover, West Coast is not absolutely barred from using the term "MovieBuff." As we explained above, that term can be legitimately used to describe Brookfield's product. For example, its web page might well include an advertisement banner such as "Why pay for MovieBuff when you can get the same thing here for FREE?" which clearly employs "MovieBuff" to refer to Brookfield's products. West Coast, however, presently uses Brookfield's trademark not to reference Brookfield's products, but instead to describe its own product (in the case of the domain name) and to attract people to its web site in the case of the metatags. That is not fair use.

VI

Having concluded that Brookfield has established a likelihood of success on the merits of its trademark infringement claim, we analyze the other requirement for preliminary injunctive relief inquiry, irreparable injury. Although the district court did not address this issue, irreparable injury may be presumed from a showing of likelihood of success on the merits of a trademark infringement claim. See Metro Pub., Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir.1993) ("Once the plaintiff has demonstrated a likelihood of confusion, it is ordinarily presumed that the plaintiff will suffer irreparable harm if injunctive relief is not granted."). Preliminary injunctive relief is appropriate here to prevent irreparable injury to Brookfield's interests in its trademark "MovieBuff" and to promote the public interest in protecting trademarks generally as well.

VII

As we have seen, registration of a domain name for a Web site does not trump long-established principles of trademark law. When a firm uses a competitor's trademark in the domain name of its web site, users are likely to be confused as to its source or sponsorship. Similarly, using a competitor's trademark in the metatags of such web site is likely to cause what we have described as initial interest confusion. These forms of confusion are exactly what the trademark laws are designed to prevent.

Accordingly, we reverse and remand this case to the district court with instructions to enter a preliminary injunction in [1067] favor of Brookfield in accordance with this opinion.

REVERSED and REMANDED.

[1] The parties quibble over whether the exact date was in December 1993 or in January 1994, but this dispute is irrelevant.

[2] Pursuant to a contract with the National Science Foundation, Network Solutions was, at all relevant times, the exclusive registrar of certain domain names, including those ending in ".com" The intricacies of the Internet and the Web are explained in detail in Part II.

[3] It also registered "inhollywood.com," but exactly when it did so is unclear from the record.

[4] Brookfield also asserted a trademark dilution claim under 15 U.S.C. § 1125(c) and California state law trademark and unfair competition claims.

[5] West Coast applied for a federal trademark registration for this term in 1989, which issued in 1991 and became incontestable in 1996. West Coast purports to have spent over $15,000,000 on advertisements and promotions featuring this mark.

[6] Section 32(1) of the Lanham Act applies to federally registered marks and provides in pertinent part:

Any person who shall, without the consent of the registrant—

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; . . .

shall be liable in a civil action by the registrant for the remedies hereinafter provided.

15 U.S.C. § 1114(1). The same standard is embodied in section 43(a)(1) of the Lanham Act, which applies to both registered and unregistered trademarks:

Any person who, on or in connection with any goods or services, ... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, ...

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

[7] Brookfield chose not to argue its trademark dilution claim or its state law causes of action in its opening brief. We accordingly deem those issues waived, see All Pacific Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427, 1434 (9th Cir.1993), and limit our attention to Brookfield's trademark infringement and unfair competition claims.

[8] As is often done, Brookfield frames its claims under sections 32 and 43(a) of the Lanham Act in terms of trademark infringement and unfair competition, respectively. Whereas section 32 provides protection only to registered marks, section 43(a) protects against infringement of unregistered marks and trade dress as well as registered marks, see, e.g., Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery, 150 F.3d 1042, 1046 (9th Cir.1998), and protects against a wider range of practices such as false advertising and product disparagement, see 15 U.S.C. § 1125(a)(1)(B); Two Pesos, Inc. v. Taco Cabana, 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). Despite these differences, the analysis under the two provisions is oftentimes identical. Because we find this to be the case here, we use, for simplicity's sake, the term "infringement" to refer to Brookfield's claims under both sections 32 and 43(a) throughout the remainder of the opinion.

[9] Both parties agree that "MovieBuff" is a suggestive mark, which falls within the category of inherently distinctive marks. The issue of inherent distinctiveness is discussed in further detail in Part V-A, infra.

[10] West Coast's federally registered trademark "The Movie Buff's Movie Store" is now incontestable, meaning that its validity and legal protectability, as well as West Coast's ownership therein, are all conclusively presumed (subject to certain defenses not relevant here). See 15 U.S.C. §§ 1065, 1115(b); Park `N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 196, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985).

[11] The court then remanded the case to the district court to make a determination on this question. See id. at 1382.

[12] The present case differs from the Fourth Circuit's Lone Star case (yet another involving the same three-trademark setup) for exactly the same reason that it differs from the Eleventh Circuit's Lone Star case. See Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922 (4th Cir.1995). The Fourth Circuit awarded priority to the company owning the earlier and later trademarks over the company owning the intervening mark, because the intervening mark ("Lone Star Grill") was found to be confusingly similar with the earlier of the other two marks ("Lone Star Cafe") as well as with the later mark ("Lone Star Steakhouse & Saloon"). See id. at 931-32.

[13] The exact date that Brookfield began offering "MovieBuff" products over the Web is the subject of bitter dispute. In its opening brief, Brookfield specifically averred: "In January of 1996, Brookfield also launched a web site that made the MOVIEBUFF software and database available via the Internet." West Coast questions the veracity of Brookfield's claims, pointing out that Brookfield did not even register a domain name with Network Solutions until May 1996. Having reviewed the evidence before us, we too find it a mystery how Brookfield could have "launched a web site" in January 1996 when it did not have a domain address at which it could operate a web site until May 1996. See infra Part II.

Accordingly, we conclude that Brookfield failed to produce evidence establishing its claim that it began using the "MovieBuff" in conjunction with its Internet database in January 1996. Because "MovieBuff" is a federally registered trademark, however, Brookfield is entitled to a presumptive first used date equivalent to the filing date of its trademark registration application, which was August 1997. See Rolley, Inc. v. Younghusband, 204 F.2d 209, 210 (9th Cir.1953).

[14] Brookfield is willing to grant West Coast a first use date of November 11, 1998. Thus, we need not decide here whether the issuance of the press release was indeed sufficient to constitute use in commerce under the Lanham Act. See 15 U.S.C. § 1127.

[15] More precisely, because we are at the preliminary injunction stage, Brookfield must establish that it is likely to be able to show such a likelihood of confusion. See Sardi's Restaurant, 755 F.2d at 723.

[16] Many cases begin the likelihood of confusion analysis by considering the strength of the allegedly infringed mark. Heeding our repeated warnings against simply launching into a mechanical application of the eight-factor Sleekcraft test, see, e.g., Dreamwerks, 142 F.3d at 1129; Dr. Seuss, 109 F.3d at 1404, and `rather than automatically adopting the ordering of Sleekcraft and Dr. Seuss, we consider the Sleekcraft factors (roughly) in order of their importance in this particular case. See, e.g., Dreamwerks, 142 F.3d at 1130-31 (considering the eight Sleekcraft factors "out of order").

Although the Ninth Circuit has yet to apply the likelihood of confusion analysis in the Internet context, a district court applying Ninth Circuit law based its finding of likelihood of confusion on (1) the virtual identity of marks, (2) the relatedness of plaintiff's and defendant's goods, and (3) the simultaneous use of the Web as a marketing channel. See Comp Examiner Agency, Inc. v. Juris, Inc., No. 96-0213, 1996 WL 376600, at *1 (C.D.Cal. Apr.26, 1996). Consistently with Comp Examiner, we conclude that these three Sleekcraft factors are the most important in this case and accordingly commence our analysis by examining these factors first.

[17] In an analogous context, courts have granted trademark protection to phone numbers that spell out a corporation's name, trademark, or slogan. See Dial-A-Mattress Franchise Corp. v. Page, 880 F.2d 675, 677-78 (2d Cir.1989) (granting trademark protection to "(area code)-MATTRES"); American Airlines, Inc. v. A 1-800-A-M-E-R-I-C-A-N Corp., 622 F.Supp. 673, 683-84 (N.D.Ill. 1985); see also Dranoff-Perlstein Assocs. v. Sklar, 967 F.2d 852, 856-58 (3d Cir.1992). But see Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619, 622 (6th Cir.1996).

[18] The fact that West Coast's second-level domain is exactly the same as Brookfield's mark is particularly important since potential customers of "MovieBuff" will go to "moviebuff.com," and not, for example, "moviebuffs.com." Had West Coast used the latter mark, the similarity factor would have favored Brookfield to a lesser extent.

[19] Generic terms are those used by the public to refer generally to the product rather than a particular brand of the product. See, e.g., Blinded Veterans Assoc. v. Blinded American Veterans Found., 872 F.2d 1035, 1041 (D.C.Cir.1989) ("Blinded Veterans"); Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75 (7th Cir.1977) ("Light Beer" or "Lite Beer"). Descriptive terms directly describe the quality or features of the product. See, e.g., Application of Keebler Co., 479 F.2d 1405 (C.C.P.A.1973) ("Rich `N Chips" chocolate chip cookies). A suggestive mark conveys an impression of a good but requires the exercise of some imagination and perception to reach a conclusion as to the product's nature. See, e.g., American Home Prods. Corp. v. Johnson Chem Co., 589 F.2d 103 (2d Cir.1978) ("Roach Motel" insect trap). Arbitrary and fanciful marks have no intrinsic connection to the product with which the mark is used; the former consists of words commonly used in the English language, see, e.g., Fleischmann Distilling, 314 F.2d 149 ("Black & White" scotch whiskey), whereas the latter are wholly made-up terms, see, e.g., Clorox Chem. Co. v. Chlorit Mfg. Corp., 25 F.Supp. 702 (E.D.N.Y. 1938) ("Clorox" bleach).

[20] Nor did West Coast register its domain name for the specific purpose of subsequently selling the domain name to the trademark owner. See, e.g., Minnesota Mining, 21 F.Supp.2d at 1005; Intermatic, 947 F.Supp. at 1229 (involving the infamous cyber squatter Dennis Toeppen who registered domain names including "aircanada.com," "deltaairlines.com," "eddiebauer.com," and "neimanmarcus.com" and has been the subject of many lawsuits).

[21] We note, however, that Brookfield should have suspected that West Coast would eventually open a web site at the domain name it had registered, and that the present dispute might have been more easily resolved at an earlier time had Brookfield acted in a more prompt manner.

[22] Although there are no other circuit opinions addressing the issue of trademark infringement via domain name use, our holding comports with the decisions of many district courts. See, e.g., Public Serv. Co., 36 F.Supp.2d at 439; ("energyplace.com" and "Energy Place"); Washington Speakers Bureau, 33 F.Supp.2d at 498 ("washingtonspeakers.com" and "Washington Speakers Bureau"); Minnesota Mining, 21 F.Supp.2d at 1004-05 ("post-it.com" and "Post-it"); Cardservice Int'l, 950 F.Supp. at 741-42 ("cardservice.com" and "Card Service"); Green Prods., 992 F.Supp. at 1079 ("greenproducts.com" and "Green Products"); Comp Examiner Agency, 1996 WL 376600, at *1 ("juris.com" and "Juris"). Compare Toys "R" Us, 26 F.Supp.2d at 643-44 (no likelihood of confusion between "gunsrus.com" and "Toys `R' Us"); CD Solutions, Inc. v. Tooker, 15 F.Supp.2d 986, 989 (D.Or.1998) (no likelihood of confusion between "cds.com" and "CDS" as latter is a generic term).

[23] As we explained in Part II, metatags are HTML code not visible to Web users but used by search engines in determining which sites correspond to the keywords entered by a Web user. Although Brookfield never explained what it meant by "buried code," the leading trademark treatise explains that "buried code" is another term for the HTML code that is used by search engines but that is not visible to users. See 3 McCarthy, supra, at § 25:69 n. 1. We will use the term metatags as encompassing HTML code generally.

[24] The Dr. Seuss court discussed initial interest confusion within its purchaser care analysis. As a district court within our circuit recognized in a recent case involving a claim of trademark infringement via metatags usage, "[t]his case ... is not a standard trademark case and does not lend itself to the systematic application of the eight factors." Playboy Enters. v. Welles, 7 F.Supp.2d 1098 (S.D.Cal.1998). Because we agree that the traditional eight-factor test is not well-suited for analyzing the metatags issue, we do not attempt to fit our discussion into one of the Sleekcraft factors.

174 F.3d 1036 (1999)

No. 98-56918.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 10, 1999.
Decided April 22, 1999.

[1037] [1038] [1039] [1040] [1041] Richard L. Stone (argued), Ronald S. Cohen, Carlo F. Van den Bosch, Sheppard, Mullin, Richter & Hampton, Los Angeles, California, for the plaintiff-appellant.

Dennis G. Martin (argued), Christina L. Johnson, Willmore F. Holbrow, III, Blakely, Sokoloff, Taylor & Zafman, Los Angeles, California, for the defendant-appellee.

Before: CANBY, O'SCANNLAIN, and WARDLAW, Circuit Judges.

O'SCANNLAIN, Circuit Judge:

We must venture into cyberspace to determine whether federal trademark and unfair competition laws prohibit a video rental store chain from using an entertainment-industry information provider's trademark in the domain name of its web site and in its web site's metatags.

I

Brookfield Communications, Inc. ("Brookfield") appeals the district court's denial of its motion for a preliminary injunction prohibiting West Coast Entertainment Corporation ("West Coast") from using in commerce terms confusingly similar to Brookfield's trademark, "MovieBuff." Brookfield gathers and sells information about the entertainment industry. Founded in 1987 for the purpose of creating and marketing software and services for professionals in the entertainment industry, Brookfield initially offered software applications featuring information such as recent film submissions, industry credits, professional contacts, and future projects. These offerings targeted major Hollywood film studios, independent production companies, agents, actors, directors, and producers.

Brookfield expanded into the broader consumer market with computer software featuring a searchable database containing entertainment-industry related information marketed under the "MovieBuff" mark around December 1993.^[1] Brookfield's "MovieBuff" software now targets smaller companies and individual consumers who are not interested in purchasing Brookfield's professional level alternative, The Studio System, and includes comprehensive, searchable, entertainment-industry databases and related software applications containing information such as movie credits, box office receipts, films in development, film release schedules, entertainment news, and listings of executives, agents, actors, and directors. This "MovieBuff" software comes in three versions— (1) the MovieBuff Pro Bundle, (2) the MovieBuff Pro, and (3) MovieBuff—and is sold through various retail stores, such as Borders, Virgin Megastores, Nobody Beats [1042] the Wiz, The Writer's Computer Store, Book City, and Samuel French Bookstores.

Sometime in 1996, Brookfield attempted to register the World Wide Web ("the Web") domain name "moviebuff.com" with Network Solutions, Inc. ("Network Solutions"),^[2] but was informed that the requested domain name had already been registered by West Coast. Brookfield subsequently registered "brookfieldcomm.com" in May 1996 and "moviebuffonline.com" in September 1996.^[3] Sometime in 1996 or 1997, Brookfield began using its web sites to sell its "MovieBuff" computer software and to offer an Internet-based searchable database marketed under the "MovieBuff" mark. Brookfield sells its "MovieBuff" computer software through its "brookfieldcomm.com" and "moviebuffonline.com" web sites and offers subscribers online access to the MovieBuff database itself at its "inhollywood.com" web site.

On August 19, 1997, Brookfield applied to the Patent and Trademark Office (PTO) for federal registration of "MovieBuff" as a mark to designate both goods and services. Its trademark application describes its product as "computer software providing data and information in the field of the motion picture and television industries." Its service mark application describes its service as "providing multiple-user access to an on-line network database offering data and information in the field of the motion picture and television industries." Both federal trademark registrations issued on September 29, 1998. Brookfield had previously obtained a California state trademark registration for the mark "MovieBuff" covering "computer software" in 1994.

In October 1998, Brookfield learned that West Coast—one of the nation's largest video rental store chains with over 500 stores—intended to launch a web site at "moviebuff.com" containing, inter alia, a searchable entertainment database similar to "MovieBuff." West Coast had registered "moviebuff.com" with Network Solutions on February 6, 1996 and claims that it chose the domain name because the term "Movie Buff" is part of its service mark, "The Movie Buff's Movie Store," on which a federal registration issued in 1991 covering "retail store services featuring video cassettes and video game cartridges" and "rental of video cassettes and video game cartridges." West Coast notes further that, since at least 1988, it has also used various phrases including the term "Movie Buff" to promote goods and services available at its video stores in Massachusetts, including "The Movie Buff's Gift Guide"; "The Movie Buff's Gift Store"; "Calling All Movie Buffs!"; "Good News Movie Buffs!"; "Movie Buffs, Show Your Stuff!"; "the Perfect Stocking Stuffer for the Movie Buff!"; "A Movie Buff's Top Ten"; "The Movie Buff Discovery Program"; "Movie Buff Picks"; "Movie Buff Series"; "Movie Buff Selection Program"; and "Movie Buff Film Series."

On November 10, Brookfield delivered to West Coast a cease-and-desist letter alleging that West Coast's planned use of the "moviebuff.com" would violate Brookfield's trademark rights; as a "courtesy" Brookfield attached a copy of a complaint that it threatened to file if West Coast did not desist.

The next day, West Coast issued a press release announcing the imminent launch of its web site full of "movie reviews, Hollywood news and gossip, provocative commentary, and coverage of the independent film scene and films in production." The press release declared that the site would feature "an extensive database, which aids consumers in making educated decisions [1043] about the rental and purchase of" movies and would also allow customers to purchase movies, accessories, and other entertainment-related merchandise on the web site.

Brookfield fired back immediately with a visit to the United States District Court for the Central District of California, and this lawsuit was born. In its first amended complaint filed on November 18, 1998, Brookfield alleged principally that West Coast's proposed offering of online services at "moviebuff.com" would constitute trademark infringement and unfair competition in violation of sections 32 and 43(a) of the Lanham Act, 15 U.S.C. §§ 1114, 1125(a).^[4] Soon thereafter, Brookfield applied ex parte for a temporary restraining order ("TRO") enjoining West Coast "[f]rom using ... in any manner ... the mark MOVIEBUFF, or any other term or terms likely to cause confusion therewith, including moviebuff.com, as West Coast's domain name, ... as the name of West Coast's website service, in buried code or metatags on their home page or web pages, or in connection with the retrieval of data or information on other goods or services."

On November 27, West Coast filed an opposition brief in which it argued first that Brookfield could not prevent West Coast from using "moviebuff.com" in commerce because West Coast was the senior user. West Coast claimed that it was the first user of "MovieBuff" because it had used its federally registered trademark, "The Movie Buff's Movie Store,"^[5] since 1986 in advertisements, promotions, and letterhead in connection with retail services featuring videocassettes and video game cartridges. Alternatively, West Coast claimed seniority on the basis that it had garnered common-law rights in the domain name by using "moviebuff.com" before Brookfield began offering its "MovieBuff" Internet-based searchable database on the Web. In addition to asserting seniority, West Coast contended that its planned use of "moviebuff.com" would not cause a likelihood of confusion with Brookfield's trademark "MovieBuff" and thus would not violate the Lanham Act.

The district court heard arguments on the TRO motion on November 30. Later that day, the district court issued an order construing Brookfield's TRO motion as a motion for a preliminary injunction and denying it. The district court concluded that West Coast was the senior user of the mark "MovieBuff" for both of the reasons asserted by West Coast. The court also determined that Brookfield had not established a likelihood of confusion.

Brookfield responded by filing a notice of appeal from the denial of preliminary injunction followed by a motion in the district court for injunction pending appeal, which motion the district court denied. On January 16, 1999, West Coast launched its web site at "moviebuff.com." Fearing that West Coast's fully operational web site would cause it irreparable injury, Brookfield filed an emergency motion for injunction pending appeal with this court a few days later. On February 24, we granted Brookfield's motion and entered an order enjoining West Coast "from using, or facilitating the use of, in any manner, including advertising and promotion, the mark MOVIEBUFF, or any other term or terms likely to cause confusion therewith, including @moviebuff.com or moviebuff.com, as the name of West Coast's web site service, in buried code or metatags on its home page or web pages, or in connection with the retrieval of data or information on other goods or services." The injunction was to take effect upon the posting of a $25,000 bond in the district court by Brookfield. We scheduled oral [1044] argument on an expedited basis for March 10.

West Coast thereupon filed a motion for reconsideration and modification—seeking a stay of the injunction pending appeal and an increase in the bond requirement to $400,000—which we denied. After oral argument on March 10, we ordered that our previously issued injunction remain in effect pending the issuance of this opinion.

II

To resolve the legal issues before us, we must first understand the basics of the Internet and the World Wide Web. Because we will be delving into technical corners of the Internet—dealing with features such as domain names and metatags —we explain in some detail what all these things are and provide a general overview of the relevant technology.

The Internet is a global network of interconnected computers which allows individuals and organizations around the world to communicate and to share information with one another. The Web, a collection of information resources contained in documents located on individual computers around the world, is the most widely used and fastest-growing part of the Internet except perhaps for electronic mail ("e-mail"). See United States v. Microsoft, 147 F.3d 935, 939 (D.C.Cir.1998). With the Web becoming an important mechanism for commerce, see Reno v. ACLU, 521 U.S. 844, 117 S.Ct. 2329, 2334, 138 L.Ed.2d 874 (1997) (citing an estimate that over 200 million people will use the Internet in 1999), companies are racing to stake out their place in cyberspace. Prevalent on the Web are multimedia "web pages" — computer data files written in Hypertext Markup Language ("HTML")—which contain information such as text, pictures, sounds, audio and video recordings, and links to other web pages. See id. at 2335; Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1318 (9th Cir.1998).

Each web page has a corresponding domain address, which is an identifier somewhat analogous to a telephone number or street address. Domain names consist of a second-level domain—simply a term or series of terms (e.g., westcoastvideo)—followed by a top-level domain, many of which describe the nature of the enterprise. Top-level domains include ".com" (commercial), ".edu" (educational), ".org" (non-profit and miscellaneous organizations), ".gov" (government), ".net" (networking provider), and ".mil" (military). See Panavision, 141 F.3d at 1318. Commercial entities generally use the ".com" top-level domain, which also serves as a catchall top-level domain. See id. To obtain a domain name, an individual or entity files an application with Network Solutions listing the domain name the applicant wants. Because each web page must have an unique domain name, Network Solution checks to see whether the requested domain name has already been assigned to someone else. If so, the applicant must choose a different domain name. Other than requiring an applicant to make certain representations, Network Solutions does not make an independent determination about a registrant's right to use a particular domain name. See id. at 1318-19.

Using a Web browser, such as Netscape's Navigator or Microsoft's Internet Explorer, a cyber "surfer" may navigate the Web—searching for, communicating with, and retrieving information from various web sites. See id.; Microsoft, 147 F.3d at 939-40, 950. A specific web site is most easily located by using its domain name. See Panavision, 141 F.3d at 1327. Upon entering a domain name into the web browser, the corresponding web site will quickly appear on the computer screen. Sometimes, however, a Web surfer will not know the domain name of the site he is looking for, whereupon he has two principal options: trying to guess the domain name or seeking the assistance of an Internet "search engine."

Oftentimes, an Internet user will begin by hazarding a guess at the domain name, especially if there is an obvious domain [1045] name to try. Web users often assume, as a rule of thumb, that the domain name of a particular company will be the company name followed by ".com." See id.; Playboy Enterprises v. Universal Tel-A-Talk, Inc., No. 96-6961, 1998 WL 767440, at *2 (E.D.Pa. Nov.3, 1998); Cardservice Int'l, Inc. v. McGee, 950 F.Supp. 737, 741 (E.D.Va.1997), aff'd by, 129 F.3d 1258 (4th Cir.1997). For example, one looking for Kraft Foods, Inc. might try "kraftfoods.com," and indeed this web site contains information on Kraft's many food products. Sometimes, a trademark is better known than the company itself, in which case a Web surfer may assume that the domain address will be "`trademark'.com." See Panavision, 141 F.3d at 1327; Beverly v. Network Solutions, Inc., No. 98-0337, 1998 WL 320829, at *1 (N.D.Cal. June 12, 1998) ("Companies attempt to make the search for their web site as easy as possible. They do so by using a corporate name, trademark or service mark as their web site address."). One interested in today's news would do well visiting "usatoday.com," which features, as one would expect, breaking stories from Gannett's USA Today. Guessing domain names, however, is not a risk-free activity. The Web surfer who assumes that "`X'.com" will always correspond to the web site of company X or trademark X will, however, sometimes be misled. One looking for the latest information on Panavision, International, L.P., would sensibly try "panavision.com." Until recently, that Web surfer would have instead found a web site owned by Dennis Toeppen featuring photographs of the City of Pana, Illinois. See Panavision, 141 F.3d at 1319. Having registered several domain names that logically would have corresponded to the web sites of major companies such as Panavision, Delta Airlines, Neiman Marcus, Lufthansa, Toeppen sought to sell "panavision.com" to Panavision, which gives one a taste of some of the trademark issues that have arisen in cyberspace. See id.; see also, e.g., Cardservice, 950 F.Supp. at 740-42.

A Web surfer's second option when he does not know the domain name is to utilize an Internet search engine, such as Yahoo, Altavista, or Lycos. See ACLU v. Reno, 31 F.Supp.2d 473, 484 (E.D.Pa. 1999); Washington Speakers Bureau, Inc. v. Leading Authorities, Inc., 33 F.Supp.2d 488, 499 (E.D.Va.1999). When a keyword is entered, the search engine processes it through a self-created index of web sites to generate a (sometimes long) list relating to the entered keyword. Each search engine uses its own algorithm to arrange indexed materials in sequence, so the list of web sites that any particular set of keywords will bring up may differ depending on the search engine used. See Niton Corp. v. Radiation Monitoring Devices, Inc., 27 F.Supp.2d 102, 104 (D.Mass.1998); Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 1231-32 (N.D.Ill.1996); Shea v. Reno, 930 F.Supp. 916, 929 (S.D.N.Y.1996), aff'd, ___ U.S. ___, 117 S.Ct. 2501, 138 L.Ed.2d 1006 (1997). Search engines look for keywords in places such as domain names, actual text on the web page, and metatags. Metatags are HTML code intended to describe the contents of the web site. There are different types of metatags, but those of principal concern to us are the "description" and "keyword" metatags. The description metatags are intended to describe the web site; the keyword metatags, at least in theory, contain keywords relating to the contents of the web site. The more often a term appears in the metatags and in the text of the web page, the more likely it is that the web page will be "hit" in a search for that keyword and the higher on the list of "hits" the web page will appear. See Niton, 27 F.Supp.2d at 104.

With this basic understanding of the Internet and the Web, we may now analyze the legal issues before us.

III

We review the district court's denial of preliminary injunctive relief for an abuse of discretion. See, e.g., Foti v. City [1046] of Menlo Park, 146 F.3d 629, 634-35 (9th Cir.1998). Under this standard, reversal is appropriate only if the district court based its decision on clearly erroneous findings of fact or erroneous legal principles. See FDIC v. Garner, 125 F.3d 1272, 1276 (9th Cir.1997), cert. denied, ___ U.S. ___, 118 S.Ct. 1299, 140 L.Ed.2d 466 (1998). "A district court would necessarily abuse its discretion if it based its ruling on an erroneous view of the law," Cooter & Gell v. Hartmarx Corp., 496 U.S. 384, 405, 110 S.Ct. 2447, 110 L.Ed.2d 359 (1990), so we review the underlying legal issues injunction de novo, see, e.g., Barahona Gomez v. Reno, 167 F.3d 1228, 1234 (9th Cir.1999); S.O.C., Inc. v. County of Clark, 152 F.3d 1136, 1142 (9th Cir.1998), amended by, 160 F.3d 541 (9th Cir.1998); Foti, 146 F.3d at 635; Garner, 125 F.3d at 1276; San Antonio Community Hosp. v. Southern Cal. Dist. Council of Carpenters, 125 F.3d 1230, 1234 (9th Cir.1997).

"A plaintiff is entitled to a preliminary injunction in a trademark case when he demonstrates either (1) a combination of probable success on the merits and the possibility of irreparable injury or (2) the existence of serious questions going to the merits and that the balance of hardships tips sharply in his favor." Sardi's Restaurant Corp. v. Sardie, 755 F.2d 719, 723 (9th Cir.1985). To establish a trademark infringement claim under section 32 of the Lanham Act or an unfair competition claim under section 43(a) of the Lanham Act, Brookfield must establish that West Coast is using a mark confusingly similar to a valid, protectable trademark of Brookfield's.^[6]See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348 (9th Cir.1979). The district court denied Brookfield's motion for preliminary injunctive relief because it concluded that Brookfield had failed to establish that it was the senior user of the "MovieBuff" mark or that West Coast's use of the "moviebuff.com" domain name created a likelihood of confusion.

We review each of the district court's conclusions in turn.^[7]

IV

To resolve whether West Coast's use of "moviebuff.com" constitutes trademark infringement or unfair competition,^[8] [1047] we must first determine whether Brookfield has a valid, protectable trademark interest in the "MovieBuff" mark. Brookfield's registration of the mark on the Principal Register in the Patent and Trademark Office constitutes prima facie evidence of the validity of the registered mark and of Brookfield's exclusive right to use the mark on the goods and services specified in the registration. See 15 U.S.C. §§ 1057(b); 1115(a). Nevertheless, West Coast can rebut this presumption by showing that it used the mark in commerce first, since a fundamental tenet of trademark law is that ownership of an inherently distinctive mark such as "MovieBuff"^[9] is governed by priority of use. See Sengoku Works Ltd. v. RMC Int'l, Ltd., 96 F.3d 1217, 1219 (9th Cir.1996) ("It is axiomatic in trademark law that the standard test of ownership is priority of use. To acquire ownership of a trademark it is not enough to have invented the mark first or even to have registered it first; the party claiming ownership must have been the first to actually use the mark in the sale of goods or services."), cert. denied, 521 U.S. 1103, 117 S.Ct. 2478, 138 L.Ed.2d 987 (1997). The first to use a mark is deemed the "senior" user and has the right to enjoin "junior" users from using confusingly similar marks in the same industry and market or within the senior user's natural zone of expansion. See Union Nat'l Bank of Tex., Laredo, Tex. v. Union Nat'l Bank of Tex., Austin, Tex., 909 F.2d 839, 842-43 (5th Cir.1990); Tally-Ho, Inc. v. Coast Community College Dist., 889 F.2d 1018, 1023 (11th Cir.1989); New West Corp. v. NYM Co. of Cal., 595 F.2d 1194, 1200-01 (9th Cir.1979).

It is uncontested that Brookfield began selling "MovieBuff" software in 1993 and that West Coast did not use "moviebuff.com" until 1996. According to West Coast, however, the fact that it has used "The Movie Buff's Movie Store" as a trademark since 1986 makes it the first user for purposes of trademark priority. In the alternative, West Coast claims priority on the basis that it used "moviebuff.com" in commerce before Brookfield began offering its "MovieBuff" searchable database on the Internet. We analyze these contentions in turn.

A

Conceding that the first time that it actually used "moviebuff.com" was in 1996, West Coast argues that its earlier use of "The Movie Buff's Movie Store" constitutes use of "moviebuff.com."^[10] West Coast has not provided any Ninth Circuit precedent approving of this constructive use theory, but neither has Brookfield pointed us to any case law rejecting it. We are not without guidance, however, as our sister circuits have explicitly recognized the ability of a trademark owner to claim priority in a mark based on the first use date of a similar, but technically distinct, mark—but only in the exceptionally narrow instance where "the previously used mark is `the legal equivalent of the mark in question or indistinguishable [1048] therefrom' such that consumers `consider both as the same mark.'" Data Concepts, Inc. v. Digital Consulting, Inc., 150 F.3d 620, 623 (6th Cir.1998) (quoting Van Dyne-Crotty, Inc. v. Wear-Guard Corp., 926 F.2d 1156, 1159 (Fed.Cir.1991)); accord Van Dyne-Crotty, 926 F.2d at 1159. This constructive use theory is known as "tacking," as the trademark holder essentially seeks to "tack" his first use date in the earlier mark onto the subsequent mark. See generally 2 J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition § 17:25-27 (4th ed.1998) [hereafter "McCarthy"].

We agree that tacking should be allowed if two marks are so similar that consumers generally would regard them as essentially the same. Where such is the case, the new mark serves the same identificatory function as the old mark. Giving the trademark owner the same rights in the new mark as he has in the old helps to protect source-identifying trademarks from appropriation by competitors and thus furthers the trademark law's objective of reducing the costs that customers incur in shopping and making purchasing decisions. See Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 163-64, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995); Falcon Rice Mill, Inc. v. Community Rice Mill, Inc., 725 F.2d 336, 348 (5th Cir.1984).

Without tacking, a trademark owner's priority in his mark would be reduced each time he made the slightest alteration to the mark, which would discourage him from altering the mark in response to changing consumer preferences, evolving aesthetic developments, or new advertising and marketing styles. In Hess's of Allentown, Inc. v. National Bellas Hess, Inc., for example, a department store ("Allentown") with trademark rights in the terms "Hess Brothers" and "Hess" dating from 1899 began promoting itself in 1952 instead as "Hess's," largely because customers and employees commonly referred to the store as "Hess's" rather than "Hess Brothers" or "Hess." See 169 U.S.P.Q. 673, 674-75, 1971 WL 16482 (T.T.A.B.1971). Another department store ("Bellas") first used "Hess" in its mark around 1932. In light of the fact that Allentown first used "Hess's" after Bellas commenced using "Hess," Bellas would have priority on the basis of the actual first use dates of those two marks. Even though Allentown had acquired over a half-century's worth of goodwill in the essentially identical marks "Hess" and "Hess Brothers," Allentown no longer had trademark rights in those terms because it had ceased using those marks when it adopted "Hess's." Nevertheless, the Trademark Board allowed the owner of "Hess's" to tack his first use date of "Hess Brothers" and "Hess" onto "Hess's" since those terms were viewed as identical by the public. See id. at 677.

The standard for "tacking," however, is exceedingly strict: "The marks must create the same, continuing commercial impression, and the later mark should not materially differ from or alter the character of the mark attempted to be tacked." Van Dyne-Crotty, 926 F.2d at 1159 (emphasis added) (citations and quotation marks omitted). In other words, "the previously used mark must be the legal equivalent of the mark in question or indistinguishable therefrom, and the consumer should consider both as the same mark." Id. (emphasis added); see also Data Concepts, 150 F.3d at 623 (adopting the Van Dyne-Crotty test). This standard is considerably higher than the standard for "likelihood of confusion," which we discuss infra.

The Federal Circuit, for example, concluded that priority in "CLOTHES THAT WORK. FOR THE WORK YOU DO" could not be tacked onto "CLOTHES THAT WORK." See Van Dyne-Crotty, 926 F.2d at 1160 (holding that the shorter phrase was not the legal equivalent of the longer mark). The Sixth Circuit held that "DCI" and "dci" were too dissimilar to support tacking. See Data Concepts, 150 F.3d at 623-24. And the Trademark Board has rejected tacking in a case involving "American Mobilphone" with a star [1049] and stripe design and "American Mobilphone Paging" with the identical design, see American Paging, Inc. v. American Mobilphone, Inc., 13 U.S.P.Q.2d 2036, 1989 WL 274416 (T.T.A.B.1989), aff'd, 923 F.2d 869, 17 U.S.P.Q.2d 1726 (Fed.Cir.1990), as well as in a case involving "PRO-CUTS" and "PRO-KUT," see Pro-Cuts v. Schilz-Price Enterprises, 27 U.S.P.Q.2d 1224, 1227, 1993 WL 266611 (T.T.A.B.1993).

In contrast to cases such as Van Dyne-Crotty and American Paging, which were close questions, the present case is clear cut: "The Movie Buff's Movie Store" and "moviebuff.com" are very different, in that the latter contains three fewer words, drops the possessive, omits a space, and adds ".com" to the end. Because West Coast failed to make the slightest showing that consumers view these terms as identical, we must conclude that West Coast cannot tack its priority in "The Movie Buff's Movie Store" onto "moviebuff.com." As the Federal Circuit explained, "it would be clearly contrary to well-established principles of trademark law to sanction the tacking of a mark with a narrow commercial impression onto one with a broader commercial impression." Van Dyne-Crotty, 926 F.2d at 1160 (noting that prior use of "SHAPE UP" could not be tacked onto "EGO," that prior use of "ALTER EGO" could not be tacked onto "EGO," and that prior use of "Marco Polo" could not be tacked onto "Polo").

Since tacking does not apply, we must therefore conclude that Brookfield is the senior user because it marketed "MovieBuff" products well before West Coast began using "moviebuff.com" in commerce: West Coast's use of "The Movie Buff's Movie Store" is simply irrelevant. Our priority determination is consistent with the decisions of our sister circuits in Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 106 F.3d 355, 362-63 (11th Cir.1997), modified by, 122 F.3d 1379 (11th Cir.1997) (per curiam), and J. Wiss & Sons Co. v. W.E. Bassett Co., 59 C.C.P.A. 1269, 462 F.2d 567, 568-69 (C.C.P.A.1972). Like the present case, J. Wiss & Sons is a three-competing-trademark situation in which one company owned a single mark with a first use date in between the first use dates of the two marks owned by the other company. In that case, the intervening mark ("Trim") was found to be confusingly similar with the later mark ("Trim-Line"), but not with the earlier mark ("Quick-Trim"); similarly here, the intervening mark ("MovieBuff") is purported to be confusingly similar with the later mark "moviebuff.com," see infra Part V, but is not confusingly similar with the earlier used mark "The Movie Buff's Movie Store," see infra p. 1050. The Court of Customs and Patent Appeals (now the Court of Appeals for the Federal Circuit) concluded that priority depended upon which of the two confusingly similar marks was used first—disregarding the first use date of the earlier used mark since it was not confusingly similar with the others. It thus awarded priority to the holder of the intervening mark, as we do similarly here.

Longhorn Steaks, involving the same basic three-competing-trademark situation, is particularly instructive. The defendant owned the mark "Lone Star Steaks" with a first use date between the plaintiff's earlier used mark "Lone Star Cafe" and its later used mark "Lone Star Steakhouse & Saloon." In its initial opinion, the Eleventh Circuit awarded priority to the holder of "Lone Star Steaks" on the basis that "Lone Star Steaks" was used before "Lone Star Steakhouse & Saloon." See Longhorn Steaks, 106 F.3d at 362-63. The Eleventh Circuit, however, later modified its opinion, stating that the conclusion reached in its initial opinion would be correct only if defendant's "Lone Star Steaks" was not confusingly similar to plaintiff's earlier used mark, "Lone Star Cafe." See Longhorn Steaks, 122 F.3d 1379 (11th Cir. 1997).^[11]

[1050] West Coast makes a half-hearted claim that "MovieBuff" is confusingly similar to its earlier used mark "The Movie Buff's Movie Store." If this were so, West Coast would undoubtedly be the senior user. See id. "Of course, if the symbol or device is already in general use, employed in such a manner that its adoption as an index of source or origin would only produce confusion and mislead the public, it is not susceptible of adoption as a trademark." Hanover Star Milling Co. v. Metcalf, 240 U.S. 403, 415, 36 S.Ct. 357, 60 L.Ed. 713 (1916). West Coast, however, essentially conceded that "MovieBuff" and "The Movie Buff's Movie Store" are not confusingly similar when it stated in its pre-argument papers that it does not allege actual confusion between "MovieBuff" and West Coast's federally registered mark. We cannot think of more persuasive evidence that there is no likelihood of confusion between these two marks than the fact that they have been simultaneously used for five years without causing any consumers to be confused as to who makes what. See Libman Co. v. Vining Indus., Inc., 69 F.3d 1360, 1361 (7th Cir.1995) ("Vining sold several hundred thousand of the allegedly infringing brooms, yet there is no evidence that any consumer ever made such an error; if confusion were likely, one would expect at least one person out of this vast multitude to be confused ...."). The failure to prove instances of actual confusion is not dispositive against a trademark plaintiff, because actual confusion is hard to prove; difficulties in gathering evidence of actual confusion make its absence generally unnoteworthy. See Eclipse Associates Ltd. v. Data Gen. Corp., 894 F.2d 1114, 1118-19 (9th Cir. 1990); Sleekcraft, 599 F.2d at 353. West Coast, however, did not state that it could not prove actual confusion; rather, it conceded that there has been none. This is a crucial difference. Although there may be the rare case in which a likelihood of future confusion is possible even where it is conceded that two marks have been used simultaneously for years with no resulting confusion, West Coast has not shown this to be such a case.

Our conclusion comports with the position of the PTO, which effectively announced its finding of no likelihood of confusion between "The Movie Buff's Movie Store" and "MovieBuff" when it placed the latter on the principal register despite West Coast's prior registration of "The Movie Buff's Movie Store." Priority is accordingly to be determined on the basis of whether Brookfield used "MovieBuff" or West Coast used "moviebuff.com" first.^[12]

B

West Coast argues that we are mixing apples and oranges when we compare its first use date of "moviebuff.com" with the first sale date of "MovieBuff" software. West Coast reminds us that Brookfield uses the "MovieBuff" mark with both computer software and the provision of an Internet database; according to West Coast, its use of "moviebuff.com" can cause confusion only with respect to the latter. West Coast asserts that we should accordingly determine seniority by comparing West Coast's first use date of "moviebuff.com" not with when Brookfield first sold software, but with when it first offered its database online.

As an initial matter, we note that West Coast's argument is premised on the assumption that its use of "moviebuff.com" does not cause confusion between its web site and Brookfield's "MovieBuff" software [1051] products. Even though Brookfield's computer software and West Coast's offerings on its web site are not identical products, likelihood of confusion can still result where, for example, there is a likelihood of expansion in product lines. See Official Airline Guides, Inc. v. Goss, 6 F.3d 1385, 1394 (9th Cir.1993). As the leading trademark commentator explains: "When a senior user of a mark on product line A expands later into product line B and finds an intervening user, priority in product line B is determined by whether the expansion is `natural' in that customers would have been confused as to source or affiliation at the time of the intervening user's appearance." 2 McCarthy § 16:5. We need not, however, decide whether the Web was within Brookfield's natural zone of expansion, because we conclude that Brookfield's use of "MovieBuff" as a service mark preceded West Coast's use.

Brookfield first used "MovieBuff" on its Internet-based products and services in August 1997,^[13] so West Coast can prevail only if it establishes first use earlier than that. In the literal sense of the word, West Coast "used" the term "moviebuff.com" when it registered that domain address in February 1996. Registration with Network Solutions, however, does not in itself constitute "use" for purposes of acquiring trademark priority. See Panavision, 141 F.3d at 1324-25. The Lanham Act grants trademark protection only to marks that are used to identify and to distinguish goods or services in commerce —which typically occurs when a mark is used in conjunction with the actual sale of goods or services. The purpose of a trademark is to help consumers identify the source, but a mark cannot serve a source-identifying function if the public has never seen the mark and thus is not meritorious of trademark protection until it is used in public in a manner that creates an association among consumers between the mark and the mark's owner.

Such use requirement is firmly established in the case law, see, e.g., Armstrong Paint & Varnish Works v. Nu-Enamel Corp., 305 U.S. 315, 334, 59 S.Ct. 191, 83 L.Ed. 195 (1938); New West, 595 F.2d at 1198-99, and, moreover, is embodied in the Lanham Act itself. See 15 U.S.C. § 1127 ("The term `trademark' includes any word, name, symbol, or device, or any combination thereof ... used by a person ... to identify and distinguish his or her goods.") (emphasis added); id. ("The term `service mark' means any word, name, symbol, or device, or any combination thereof ... used by a person ... to identify and distinguish the services of one person) (emphasis added). In fact, Congress amended the Lanham Act in 1988 to strengthen this "use in commerce" requirement, making clear that trademark rights can be conveyed only through "the bona fide use of a mark in the ordinary course of trade, and not [use] made merely to reserve a mark." 15 U.S.C. § 1127. Congress provided more specifically:

For purposes of this chapter, a mark shall be deemed to be in use in commerce—

(1) on goods when—

[1052] (A) it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto, or if the nature of the goods makes such placement impracticable, then on documents associated with the goods or their sale, and

(B) the goods are sold or transported in commerce, and

(2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce, or the services are rendered in more than one State or in the United States and a foreign country and the person rendering the services is engaged in commerce in connection with the services.

Id.

The district court, while recognizing that mere registration of a domain name was not sufficient to constitute commercial use for purposes of the Lanham Act, nevertheless held that registration of a domain name with the intent to use it commercially was sufficient to convey trademark rights. This analysis, however, contradicts both the express statutory language and the case law which firmly establishes that trademark rights are not conveyed through mere intent to use a mark commercially, see, e.g., Allard Enters. v. Advanced Programming Resources, Inc., 146 F.3d 350, 356 (6th Cir.1998); Zazu Designs v. L'Oreal, S.A., 979 F.2d 499, 504 (7th Cir.1992) ("[A]n intent to use a mark creates no rights a competitor is bound to respect."), nor through mere preparation to use a term as a trademark, see, e.g., Hydro-Dynamics, Inc. v. George Putnam & Co., 811 F.2d 1470, 1473-74 (Fed.Cir. 1987); Computer Food Stores, Inc. v. Corner Store Franchises, 176 U.S.P.Q. 535, 538, 1973 WL 19922 (T.T.A.B.1973).

West Coast no longer disputes that its use—for purposes of the Lanham Act—of "moviebuff.com" did not commence until after February 1996. It instead relies on the alternate argument that its rights vested when it began using "moviebuff.com" in e-mail correspondence with lawyers and customers sometime in mid-1996. West Coast's argument is not without support in our case law—we have indeed held that trademark rights can vest even before any goods or services are actually sold if "the totality of [one's] prior actions, taken together, [can] establish a right to use the trademark." New West, 595 F.2d at 1200. Under New West, however, West Coast must establish that its e-mail correspondence constituted "`[u]se in a way sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.'" Id. (quoting New England Duplicating Co. v. Mendes, 190 F.2d 415, 418 (1st Cir. 1951)); see also Marvel Comics Ltd. v. Defiant, 837 F.Supp. 546, 550 (S.D.N.Y.1993) ("[T]he talismanic test is whether or not the use was sufficiently public to identify or distinguish the marked goods in an appropriate segment of the public mind as those of the adopter of the mark.") (quotation marks and citation omitted).

West Coast fails to meet this standard. Its purported "use" is akin to putting one's mark "on a business office door sign, letterheads, architectural drawings, etc." or on a prototype displayed to a potential buyer, both of which have been held to be insufficient to establish trademark rights. See Steer Inn Systems, Inc. v. Laughner's Drive-In, Inc., 56 C.C.P.A. 911, 405 F.2d 1401, 1402 (C.C.P.A.1969); Walt Disney Productions v. Kusan Inc., 204 U.S.P.Q. 284, 288 (C.D.Cal.1979). Although widespread publicity of a company's mark, such as Marvel Comics's announcement to 13 million comic book readers that "Plasma" would be the title of a new comic book, see Marvel Comics, 837 F.Supp. at 550, or the mailing of 430,000 solicitation letters with one's mark to potential subscribers of a magazine, see New West, 595 F.2d at 1200, may be sufficient to create an association among the public between the mark and West Coast, mere use in limited e-mail correspondence with lawyers and a few customers is not.

[1053] West Coast first announced its web site at "moviebuff.com" in a public and widespread manner in a press release of November 11, 1998, and thus it is not until at least that date that it first used the "moviebuff.com" mark for purposes of the Lanham Act.^[14] Accordingly, West Coast's argument that it has seniority because it used "moviebuff.com" before Brookfield used "MovieBuff" as a service mark fails on its own terms. West Coast's first use date was neither February 1996 when it registered its domain name with Network Solutions as the district court had concluded, nor April 1996 when it first used "moviebuff.com" in e-mail communications, but rather November 1998 when it first made a widespread and public announcement about the imminent launch of its web site. Thus, West Coast's first use of "moviebuff.com" was preceded by Brookfield's first use of "MovieBuff" in conjunction with its online database, making Brookfield the senior user.

For the foregoing reasons, we conclude that the district court erred in concluding that Brookfield failed to establish a likelihood of success on its claim of being the senior user.

V

Establishing seniority, however, is only half the battle. Brookfield must also show that the public is likely to be somehow confused about the source or sponsorship of West Coast's "moviebuff.com" web site—and somehow to associate that site with Brookfield. See 15 U.S.C. § 1114(1); 1125(a).^[15] The Supreme Court has described "the basic objectives of trademark law" as follows: "trademark law, by preventing others from copying a source-identifying mark, `reduce[s] the customer's costs of shopping and making purchasing decisions,' for it quickly and easily assures a potential customer that this item—the item with this mark—is made by the same producer as other similarly marked items that he or she liked (or disliked) in the past. At the same time, the law helps assure a producer that it (and not an imitating competitor) will reap the financial, reputation-related rewards associated with a desirable product." Qualitex, 514 U.S. at 163-64 (internal citations omitted). Where two companies each use a different mark and the simultaneous use of those marks does not cause the consuming public to be confused as to who makes what, granting one company exclusive rights over both marks does nothing to further the objectives of the trademark laws; in fact, prohibiting the use of a mark that the public has come to associate with a company would actually contravene the intended purposes of the trademark law by making it more difficult to identify and to distinguish between different brands of goods.

"The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products." Official Airline Guides, 6 F.3d at 1391 (quoting E. & J. Gallo Winery v. Gallo Cattle Co., 967 F.2d 1280, 1290 (9th Cir.1992)) (quotation marks omitted); accord International Jensen, Inc. v. Metrosound U.S.A., Inc., 4 F.3d 819, 825 (9th Cir.1993); Metro Publishing, Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir.1993). We look to the following factors for guidance in determining the likelihood of confusion: similarity of the conflicting designations; relatedness or proximity of the two companies' products or services; strength of Brookfield's mark; marketing channels used; degree of care likely to be exercised by purchasers in selecting goods; West Coast's intent in selecting its mark; evidence of actual confusion; and likelihood of [1054] expansion in product lines. See Dr. Seuss Enters. v. Penguin Books USA, Inc., 109 F.3d 1394, 1404 (9th Cir.1997), petition for cert. dismissed by, ___ U.S. ___, 118 S.Ct. 27, 138 L.Ed.2d 1057 (1997); Sleekcraft, 599 F.2d at 348-49; see also Restatement (Third) of Unfair Competition §§ 20-23 (1995). These eight factors are often referred to as the Sleekcraft factors.

A word of caution: this eight-factor test for likelihood of confusion is pliant. Some factors are much more important than others, and the relative importance of each individual factor will be case-specific. Although some factors— such as the similarity of the marks and whether the two companies are direct competitors —will always be important, it is often possible to reach a conclusion with respect to likelihood of confusion after considering only a subset of the factors. See Dreamwerks Prod. Group v. SKG Studio, 142 F.3d 1127, 1130-32 (9th Cir.1998). Moreover, the foregoing list does not purport to be exhaustive, and non-listed variables may often be quite important. We must be acutely aware of excessive rigidity when applying the law in the Internet context; emerging technologies require a flexible approach.

A

We begin by comparing the allegedly infringing mark to the federally registered mark.^[16] The similarity of the marks will always be an important factor. Where the two marks are entirely dissimilar, there is no likelihood of confusion. "Pepsi" does not infringe Coca-Cola's "Coke." Nothing further need be said. Even where there is precise identity of a complainant's and an alleged infringer's mark, there may be no consumer confusion—and thus no trademark infringement—if the alleged infringer is in a different geographic area or in a wholly different industry. See Weiner King, Inc. v. Wiener King Corp., 615 F.2d 512, 515-16, 521-22 (C.C.P.A.1980) (permitting concurrent use of "Weiner King" as a mark for restaurants featuring hot dogs in New Jersey and "Wiener King" as a mark for restaurants in North Carolina); Pinocchio's Pizza Inc. v. Sandra Inc., 11 U.S.P.Q.2d 1227, 1228, 1989 WL 297867 (T.T.A.B.1989) (permitting concurrent use of "PINOCCHIO'S" as a service mark for restaurants in Maryland and "PINOCCHIOS" as a service mark for restaurants elsewhere in the country). Nevertheless, the more similar the marks in terms of appearance, sound, and meaning, the greater the likelihood of confusion. See, e.g., Dreamwerks, 142 F.3d at 1131; Goss, 6 F.3d at 1392 ("The court assesses the similarity of the marks in terms of their sight, sound, and meaning."). In analyzing this factor, "[t]he marks must be considered in their entirety and as they appear in the marketplace," Goss, 6 F.3d at 1392 (citing Nutri/System, Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 605-06 (9th Cir. 1987)), with similarities weighed more heavily than differences, see id. (citing [1055] Rodeo Collection Ltd. v. West Seventh, 812 F.2d 1215, 1219 (9th Cir.1987)).

In the present case, the district court found West Coast's domain name "moviebuff.com" to be quite different than Brookfield's domain name "moviebuffonline.com." Comparison of domain names, however, is irrelevant as a matter of law, since the Lanham Act requires that the allegedly infringing mark be compared with the claimant's trademark, see 15 U.S.C. § 1114(1), 1125(a), which here is "MovieBuff," not "moviebuffonline.com." Properly framed, it is readily apparent that West Coast's allegedly infringing mark is essentially identical to Brookfield's mark "MovieBuff." In terms of appearance, there are differences in capitalization and the addition of ".com" in West Coast's complete domain name, but these differences are inconsequential in light of the fact that Web addresses are not capssensitive and that the ".com" top-level domain signifies the site's commercial nature.

Looks aren't everything, so we consider the similarity of sound and meaning. The two marks are pronounced the same way, except that one would say "dot com" at the end of West Coast's mark. Because many companies use domain names comprised of ".com" as the top-level domain with their corporate name or trademark as the second-level domain, see Beverly, 1998 WL 320829, at *1, the addition of ".com" is of diminished importance in distinguishing the mark. The irrelevance of the ".com" becomes further apparent once we consider similarity in meaning. The domain name is more than a mere address: like trademarks, second-level domain names communicate information as to source. As we explained in Part II, many Web users are likely to associate "moviebuff.com" with the trademark "MovieBuff," thinking that it is operated by the company that makes "MovieBuff" products and services.^[17] Courts, in fact, have routinely concluded that marks were essentially identical in similar contexts. See, e.g., Public Serv. Co. v. Nexus Energy Software, Inc., 36 F.Supp.2d 436, ___ (D.Mass.1999) (finding "energyplace.com" and "Energy Place" to be virtually identical); Minnesota Mining & Mfg. Co. v. Taylor, 21 F.Supp.2d 1003, 1005 (D.Minn. 1998) (finding "post-it.com" and "Post—It" to be the same); Interstellar Starship Services, Ltd. v. EPIX, Inc., 983 F.Supp. 1331, 1335 (D.Or.1997) ("In the context of Internet use, [`epix.com'] is the same mark as [`EPIX']."); Planned Parenthood Federation of America, Inc. v. Bucci, No. 97-0629, 1997 WL 133313, at *8 (S.D.N.Y. Mar.24, 1997) (concluding that "planned-parenthood.com" and "Planned Parenthood" were essentially identical), aff'd by, 152 F.3d 920, 1998 WL 336163 (2d Cir. 1998), cert. denied, ___ U.S. ___, 119 S.Ct. 90, 142 L.Ed.2d 71 (1998). As "MovieBuff" and "moviebuff.com" are, for all intents and purposes, identical in terms of sight, sound, and meaning, we conclude that the similarity factor weighs heavily in favor of Brookfield.^[18]

The similarity of marks alone, as we have explained, does not necessarily lead to consumer confusion. Accordingly, we must proceed to consider the relatedness of the products and services offered. Related goods are generally more likely than unrelated goods to confuse the public as to the producers of the goods. See Official Airline Guides, 6 F.3d at 1392 [1056] (citing Sleekcraft, 599 F.2d at 350). In light of the virtual identity of marks, if they were used with identical products or services likelihood of confusion would follow as a matter of course. See Lindy Pen Co. v. Bic Pen Corp., 796 F.2d 254, 256-57 (9th Cir.1986) (reversing a district court's finding of no likelihood of confusion even though the six other likelihood of confusion factors all weighed against a finding of likelihood of confusion); Interpace Corp. v. Lapp, Inc., 721 F.2d 460, 462 (3d Cir.1983). If, on the other hand, Brookfield and West Coast did not compete to any extent whatsoever, the likelihood of confusion would probably be remote. A Web surfer who accessed "moviebuff.com" and reached a web site advertising the services of Schlumberger Ltd. (a large oil drilling company) would be unlikely to think that Brookfield had entered the oil drilling business or was sponsoring the oil driller. See, e.g., Toys "R" Us, Inc. v. Feinberg, 26 F.Supp.2d 639, 643 (S.D.N.Y.1998) (no likelihood of confusion between "gunsrus.com" firearms web site and "Toys `R' Us" trademark); Interstellar Starship, 983 F.Supp. at 1336 (finding no likelihood of confusion between use of "epix.com" to advertise the Rocky Horror Picture Show and "Epix" trademark registered for use with computer circuit boards). At the least, Brookfield would bear the heavy burden of demonstrating (through other relevant factors) that consumers were likely to be confused as to source or affiliation in such a circumstance.

The district court classified West Coast and Brookfield as non-competitors largely on the basis that Brookfield is primarily an information provider while West Coast primarily rents and sells videotapes. It noted that West Coast's web site is used more by the somewhat curious video consumer who wants general movie information, while entertainment industry professionals, aspiring entertainment executives and professionals, and highly focused moviegoers are more likely to need or to want the more detailed information provided by "MovieBuff." This analysis, however, overemphasizes differences in principal lines of business, as we have previously instructed that "the relatedness of each company's prime directive isn't relevant." Dreamwerks, 142 F.3d at 1131. Instead, the focus is on whether the consuming public is likely somehow to associate West Coast's products with Brookfield. See id. Here, both companies offer products and services relating to the entertainment industry generally, and their principal lines of business both relate to movies specifically and are not as different as guns and toys, see Toys "R" Us, 26 F.Supp.2d at 643, or computer circuit boards and the Rocky Horror Picture Show, see Interstellar Starship, 983 F.Supp. at 1336. Thus, Brookfield and West Coast are not properly characterized as non-competitors. See American Int'l Group, Inc. v. American Int'l Bank, 926 F.2d 829, 832 (9th Cir. 1991) (concluding that although the parties were not direct competitors, they both provided financial services and that customer confusion could result in light of the similarities between the companies' services).

Not only are they not non-competitors, the competitive proximity of their products is actually quite high. Just as Brookfield's "MovieBuff" is a searchable database with detailed information on films, West Coast's web site features a similar searchable database, which Brookfield points out is licensed from a direct competitor of Brookfield. Undeniably then, the products are used for similar purposes. "[T]he rights of the owner of a registered trademark . . . extend to any goods related in the minds of consumers," E. Remy Martin & Co. v. Shaw-Ross Int'l Imports, Inc., 756 F.2d 1525, 1530 (11th Cir.1985), and Brookfield's and West Coast's products are certainly so related to some extent. The relatedness is further evidenced by the fact that the two companies compete for the patronage of an overla-lapping audience. The use of similar marks to offer similar products accordingly weighs heavily in favor of likelihood of confusion. See Sleekcraft, 599 F.2d at 348 (concluding that high-speed waterskiing [1057] racing boats are sufficiently related to family-oriented recreational boats that the public is likely to be confused as to the source of the boats); Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149, 153-55 (9th Cir.1963) (concluding that beer and whiskey are sufficiently similar to create a likelihood of confusion regarding the source of origin when sold under the same trade name); see also Champions Golf Club, Inc. v. Champions Golf Club, Inc., 78 F.3d 1111, 1118 (6th Cir.1996).

In addition to the relatedness of products, West Coast and Brookfield both utilize the Web as a marketing and advertising facility, a factor that courts have consistently recognized as exacerbating the likelihood of confusion. See, e.g., Public Serv. Co., 36 F.Supp.2d at 439; Washington Speakers Bureau, Inc. v. Leading Authorities, Inc., 33 F.Supp.2d 488, 499 (E.D.Va.1999); Jews for Jesus v. Brodsky, 993 F.Supp. 282, 304-05 (D.N.J. 1998), aff'd, 159 F.3d 1351 (3d Cir.1998); Interstellar Starship Servs., 983 F.Supp. at 1336; Planned Parenthood Fed'n of America, 1997 WL 133313, at *8. Both companies, apparently recognizing the rapidly growing importance of Web commerce, are maneuvering to attract customers via the Web. Not only do they compete for the patronage of an overlapping audience on the Web, both "MovieBuff" and "moviebuff.com" are utilized in conjunction with Web-based products.

Given the virtual identity of "moviebuff.com" and "MovieBuff," the relatedness of the products and services accompanied by those marks, and the companies' simultaneous use of the Web as a marketing and advertising tool, many forms of consumer confusion are likely to result. People surfing the Web for information on "MovieBuff" may confuse "MovieBuff" with the searchable entertainment database at "moviebuff.com" and simply assume that they have reached Brookfield's web site. See, e.g., Cardservice Int'l, 950 F.Supp. at 741. In the Internet context, in particular, entering a web site takes little effort—usually one click from a linked site or a search engine's list; thus, Web surfers are more likely to be confused as to the ownership of a web site than traditional patrons of a brick-and-mortar store would be of a store's ownership. Alternatively, they may incorrectly believe that West Coast licensed "MovieBuff" from Brookfield, see, e.g., Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd., 34 F.3d 410, 415-16 (7th Cir. 1994), or that Brookfield otherwise sponsored West Coast's database, see E. Remy Martin, 756 F.2d at 1530; Fuji Photo Film Co. v. Shinohara Shoji Kabushiki Kaisha, 754 F.2d 591, 596 (5th Cir.1985). Other consumers may simply believe that West Coast bought out Brookfield or that they are related companies.

Yet other forms of confusion are likely to ensue. Consumers may wrongly assume that the "MovieBuff" database they were searching for is no longer offered, having been replaced by West Coast's entertainment database, and thus simply use the services at West Coast's web site. See, e.g., Cardservice Int'l, 950 F.Supp. at 741. And even where people realize, immediately upon accessing "moviebuff.com," that they have reached a site operated by West Coast and wholly unrelated to Brookfield, West Coast will still have gained a customer by appropriating the goodwill that Brookfield has developed in its "MovieBuff" mark. A consumer who was originally looking for Brookfield's products or services may be perfectly content with West Coast's database (especially as it is offered free of charge); but he reached West Coast's site because of its use of Brookfield's mark as its second-level domain name, which is a misappropriation of Brookfield's goodwill by West Coast. See infra Part V.B.

The district court apparently assumed that likelihood of confusion exists only when consumers are confused as to the source of a product they actually purchase. It is, however, well established that the Lanham Act protects against the many other forms of confusion that we have outlined. See Pebble Beach, 155 F.3d at 544; [1058] Indianapolis Colts, 34 F.3d at 415-16; Fuji Photo Film, 754 F.2d at 596; HMH Pub. Co. v. Brincat, 504 F.2d 713, 716-17 & n.7 (9th Cir.1974); Fleischmann Distilling, 314 F.2d at 155.

The factors that we have considered so far—the similarity of marks, the relatedness of product offerings, and the overlap in marketing and advertising channels —lead us to the tentative conclusion that Brookfield has made a strong showing of likelihood of confusion. Because it is possible that the remaining factors will tip the scale back the other way if they weigh strongly enough in West Coast's favor, we consider the remaining likelihood of confusion factors, beginning with the strength of Brookfield's mark. The stronger a mark—meaning the more likely it is to be remembered and associated in the public mind with the mark's owner—the greater the protection it is accorded by the trademark laws. See Kenner Parker Toys Inc. v. Rose Art Indus., Inc., 963 F.2d 350, 353 (Fed.Cir.1992); Nutri/System, 809 F.2d at 605. Marks can be conceptually classified along a spectrum of generally increasing inherent distinctiveness as generic, descriptive, suggestive, arbitrary, or fanciful.^[19]See Two Pesos, 505 U.S. at 768. West Coast asserts that Brookfield's mark is "not terribly distinctive," by which it apparently means suggestive, but only weakly so. Although Brookfield does not seriously dispute that its mark is only suggestive, it does defend its (mark's) muscularity.

We have recognized that, unlike arbitrary or fanciful marks which are typically strong, suggestive marks are presumptively weak. See, e.g., Nutri/System, 809 F.2d at 605. As the district court recognized, placement within the conceptual distinctiveness spectrum is not the only determinant of a mark's strength, as advertising expenditures can transform a suggestive mark into a strong mark, see id., where, for example, that mark has achieved actual marketplace recognition, see Streetwise Maps, Inc. v. Vandam, Inc., 159 F.3d 739, 743-44 (2d Cir.1998). Brookfield, however, has not come forth with substantial evidence establishing the widespread recognition of its mark; although it argues that its strength is established from its use of "MovieBuff" for over five years, its federal and California state registrations, and its expenditure of $100,000 in advertising its mark, the district court did not clearly err in classifying "MovieBuff" as weak. Some weak marks are weaker than others, and although "MovieBuff" falls within the weak side of the strength spectrum, the mark is not so flabby as to compel a finding of no likelihood of confusion in light of the other factors that we have considered. Importantly, Brookfield's trademark is not descriptive because it does not describe either the software product or its purpose. Instead, it is suggestive—and thus strong enough to warrant trademark protection— because it requires a mental leap from the mark to the product. See Self-Realization Fellowship Church v. Ananda Church of Self-Realization, 59 F.3d 902, 910-11 (9th Cir.1995). Because the products involved are closely related and West Coast's domain name is nearly identical to Brookfield's [1059] trademark, the strength of the mark is of diminished importance in the likelihood of confusion analysis. See McCarthy ¶ 11:76 ("Whether a mark is weak or not is of little importance where the conflicting mark is identical and the goods are closely related.").

We thus turn to intent. "The law has long been established that if an infringer `adopts his designation with the intent of deriving benefit from the reputation of the trade-mark or trade name, its intent may be sufficient to justify the inference that there are confusing similarities.'" Pacific Telesis v. International Telesis Comms., 994 F.2d 1364, 1369 (9th Cir.1993) (quoting Restatement of Torts, § 729, Comment on Clause (b)f (1938)). An inference of confusion has similarly been deemed appropriate where a mark is adopted with the intent to deceive the public. See Gallo, 967 F.2d at 1293 (citing Sleekcraft, 599 F.2d at 354). The district court found that the intent factor favored West Coast because it did not adopt the "moviebuff.com" mark with the specific purpose of infringing Brookfield's trademark. The intent prong, however, is not so narrowly confined.

This factor favors the plaintiff where the alleged infringer adopted his mark with knowledge, actual or constructive, that it was another's trademark. See Official Airline Guides, 6 F.3d at 1394 ("When an alleged infringer knowingly adopts a mark similar to another's, courts will presume an intent to deceive the public."); Fleischmann Distilling, 314 F.2d 149 at 157. In the Internet context, in particular, courts have appropriately recognized that the intentional registration of a domain name knowing that the second-level domain is another company's valuable trademark weighs in favor of likelihood of confusion. See, e.g., Washington Speakers, 33 F.Supp.2d 488, 500. There is, however, no evidence in the record that West Coast registered "moviebuff.com" with the principal intent of confusing consumers.^[20] Brookfield correctly points out that, by the time West Coast launched its web site, it did know of Brookfield's claim to rights in the trademark "MovieBuff." But when it registered the domain name with Network Solutions, West Coast did not know of Brookfield's rights in "MovieBuff" (at least Brookfield has not established that it did). Although Brookfield asserts that West Coast could easily have launched its web site at its alternate domain address, "westcoastvideo.com," thereby avoiding the infringement problem, West Coast claims that it had already invested considerable sums in developing its "moviebuff.com" web site by the time that Brookfield informed it of its rights in the trademark. Considered as a whole, this factor appears indeterminate.

Importantly, an intent to confuse consumers is not required for a finding of trademark infringement. See Dreamwerks, 142 F.3d at 1132 n. 12 ("Absence of malice is no defense to trademark infringement"); Daddy's Junky Music Stores, 109 F.3d at 287 ("As noted, the presence of intent can constitute strong evidence of confusion. The converse of this proposition, however, is not true: the lack of intent by a defendant is largely irrelevant in determining if consumers likely will be confused as to source.") (internal quotation marks and citations omitted); Fleischmann Distilling, 314 F.2d at 157. Instead, this factor is only relevant to the extent that it bears upon the likelihood that consumers will be confused by the alleged infringer's mark (or to the extent that a court wishes to consider it as an equitable consideration). See Sleekcraft Boats, 599 F.2d at 348 n. 10. Here, West Coast's intent does not appear to bear upon the likelihood of confusion because it [1060] did not act with such an intent from which it is appropriate to infer consumer confusion.

The final three Sleekcraft factors—evidence of actual confusion, likelihood of expansion in product lines, and purchaser care—do not affect our ultimate conclusion regarding the likelihood of confusion. The first two factors do not merit extensive comment. Actual confusion is not relevant because Brookfield filed suit before West Coast began actively using the "moviebuff.com" mark and thus never had the opportunity to collect information on actual confusion. The likelihood of expansion in product lines factor is relatively unimportant where two companies already compete to a significant extent. See Official Airline Guides, 6 F.3d at 1394. In any case, it is neither exceedingly likely nor unlikely that West Coast will enter more directly into Brookfield's principal market, or vice versa.

Although the district court did not discuss the degree of care likely to be exercised by purchasers of the products in question, we think that this issue deserves some consideration. Likelihood of confusion is determined on the basis of a "reasonably prudent consumer." Dreamwerks, 142 F.3d at 1129; Sleekcraft, 599 F.2d at 353. What is expected of this reasonably prudent consumer depends on the circumstances. We expect him to be more discerning —and less easily confused—when he is purchasing expensive items, see, e.g., Official Airline Guides, 6 F.3d at 1393 (noting that confusion was unlikely among advertisers when the products in question cost from $2,400 to $16,000), and when the products being sold are marketed primarily to expert buyers, see, e.g., Accuride Int'l, Inc. v. Accuride Corp., 871 F.2d 1531, 1537 (9th Cir.1989). We recognize, however, that confusion may often be likely even in the case of expensive goods sold to discerning customers. See Sleekcraft, 599 F.2d at 353; see also, e.g., Daddy's Junky Music Stores, 109 F.3d at 286; Banff, Ltd. v. Federated Dep't Stores, Inc., 841 F.2d 486, 492 (2d Cir.1988). On the other hand, when dealing with inexpensive products, customers are likely to exercise less care, thus making confusion more likely. See, e.g., Gallo, 967 F.2d at 1293 (wine and cheese).

The complexity in this case arises because we must consider both entertainment professionals, who probably will take the time and effort to find the specific product they want, and movie devotees, who will be more easily confused as to the source of the database offered at West Coast's web site. In addition, West Coast's site is likely to be visited by many casual movie watchers. The entertainment professional, movie devotee, and casual watcher are likely to exercise high, little, and very little care, respectively. Who is the reasonably prudent consumer? Although we have not addressed the issue of purchaser care in mixed buyer classes, another circuit has held that "the standard of care to be exercised by the reasonably prudent purchaser will be equal to that of the least sophisticated consumer." Ford Motor Co. v. Summit Motor Prods., Inc., 930 F.2d 277, 283 (3d Cir.1991); see also Omega Importing Corp. v. Petri-Kine Camera Co., 451 F.2d 1190, 1195 (2d Cir. 1971) (instructing that, where a product is targeted both to discriminating and casual buyers, a court must consider the likelihood of confusion on the part of the relatively unknowledgeable buyers as well as of the former group); 3 McCarthy § 23:100 (advocating this approach). This is not the only approach available to us, as we could alternatively use a weighted average of the different levels of purchaser care in determining how the reasonably prudent consumer would act. We need not, however, decide this question now because the purchaser confusion factor, even considered in the light most favorable to West Coast, is not sufficient to overcome the likelihood of confusion strongly established by the other factors we have analyzed.

West Coast makes one last ditch argument—that, even if there is a likelihood of confusion, Brookfield should be [1061] estopped from asserting its trademark rights because it waited too long to file suit. Although we have applied laches to bar trademark infringement claims, we have done so only where the trademark holder knowingly allowed the infringing mark to be used without objection for a lengthy period of time. See E-Systems, Inc. v. Monitek, Inc., 720 F.2d 604, 607 (9th Cir.1983). In E-Systems, for example, we estopped a claimant who did not file suit until after the allegedly infringing mark had been used for eight years where the claimant had known of the infringing use for at least six years. See id.; see also Carter-Wallace, Inc. v. Procter & Gamble Co., 434 F.2d 794, 803 (9th Cir.1970). We specifically cautioned, however, that "had defendant's encroachment been minimal, or its growth slow and steady, there would be no laches." E-Systems, 720 F.2d at 607; accord Carter-Wallace, 434 F.2d at 803 n. 4. Here, although Brookfield waited over two years before notifying West Coast that its intended use of "moviebuff.com" would infringe on Brookfield's trademark, West Coast did not do anything with its domain address during that time, and Brookfield filed suit the very day that West Coast publicly announced its intention to launch a web site at "moviebuff.com." Accordingly, we conclude that Brookfield's delay was not such that it should be estopped from pursuing an otherwise meritorious claim. See generally American Int'l Group, 926 F.2d at 831 (outlining six-factor test for determining whether laches operates to bar a claim of trademark infringement).^[21]

In light of the foregoing analysis, we conclude that Brookfield has demonstrated a likelihood of success on its claim that West Coast's use of "moviebuff.com" violates the Lanham Act. We are fully aware that although the question of "[w]hether confusion is likely is a factual determination woven into the law," we nevertheless must review only for clear error the district court's conclusion that the evidence of likelihood of confusion in this case was slim. See Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1356 (9th Cir. 1985) (en banc). Here, however, we are "left with the definite and firm conviction that a mistake has been made." Pacific Telesis Group v. International Telesis Comms., 994 F.2d 1364, 1367 (9th Cir. 1993).^[22]

B

So far we have considered only West Coast's use of the domain name "moviebuff.com." Because Brookfield requested that we also preliminarily enjoin West Coast from using marks confusingly similar to "MovieBuff" in metatags and buried code, we must also decide whether West Coast can, consistently with the trademark and unfair competition laws, use "MovieBuff" or "moviebuff.com" in its HTML code.^[23]

At first glance, our resolution of the infringement issues in the domain name [1062] context would appear to dictate a similar conclusion of likelihood of confusion with respect to West Coast's use of "moviebuff.com" in its metatags. Indeed, all eight likelihood of confusion factors outlined in Part V-A—with the possible exception of purchaser care, which we discuss below—apply here as they did in our analysis of domain names; we are, after all, dealing with the same marks, the same products and services, the same consumers, etc. Disposing of the issue so readily, however, would ignore the fact that the likelihood of confusion in the domain name context resulted largely from the associational confusion between West Coast's domain name "moviebuff.com" and Brookfield's trademark "MovieBuff." The question in the metatags context is quite different. Here, we must determine whether West Coast can use "MovieBuff" or "moviebuff.com" in the metatags of its web site at "westcoastvideo.com" or at any other domain address other than "moviebuff.com" (which we have determined that West Coast may not use).

Although entering "MovieBuff" into a search engine is likely to bring up a list including "westcoastvideo.com" if West Coast has included that term in its metatags, the resulting confusion is not as great as where West Coast uses the "moviebuff.com" domain name. First, when the user inputs "MovieBuff" into an Internet search engine, the list produced by the search engine is likely to include both West Coast's and Brookfield's web sites. Thus, in scanning such list, the Web user will often be able to find the particular web site he is seeking. Moreover, even if the Web user chooses the web site belonging to West Coast, he will see that the domain name of the web site he selected is "westcoastvideo.com." Since there is no confusion resulting from the domain address, and since West Coast's initial web page prominently displays its own name, it is difficult to say that a consumer is likely to be confused about whose site he has reached or to think that Brookfield somehow sponsors West Coast's web site.

Nevertheless, West Coast's use of "moviebuff.com" in metatags will still result in what is known as initial interest confusion. Web surfers looking for Brookfield's "MovieBuff" products who are taken by a search engine to "westcoastvideo.com" will find a database similar enough to "MovieBuff" such that a sizeable number of consumers who were originally looking for Brookfield's product will simply decide to utilize West Coast's offerings instead. Although there is no source confusion in the sense that consumers know they are patronizing West Coast rather than Brookfield, there is nevertheless initial interest confusion in the sense that, by using "moviebuff.com" or "MovieBuff" to divert people looking for "MovieBuff" to its web site, West Coast improperly benefits from the goodwill that Brookfield developed in its mark. Recently in Dr. Seuss, we explicitly recognized that the use of another's trademark in a manner calculated "to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion, may be still an infringement." Dr. Seuss, 109 F.3d at 1405 (citing Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 257-58 (2d Cir. 1987)).^[24]

[1063] The Dr. Seuss court, in recognizing that the diversion of consumers' initial interest is a form of confusion against which the Lanham Act protects, relied upon Mobil Oil. In that case, Mobil Oil Corporation ("Mobil") asserted a federal trademark infringement claim against Pegasus Petroleum, alleging that Pegasus Petroleum's use of "Pegasus" was likely to cause confusion with Mobil's trademark, a flying horse symbol in the form of the Greek mythological Pegasus. Mobil established that "potential purchasers would be misled into an initial interest in Pegasus Petroleum" because they thought that Pegasus Petroleum was associated with Mobil. Id. at 260. But these potential customers would generally learn that Pegasus Petroleum was unrelated to Mobil well before any actual sale was consummated. See id. Nevertheless, the Second Circuit held that "[s]uch initial confusion works a sufficient trademark injury." Id.

Mobil Oil relied upon its earlier opinion in Grotrian, Helfferich, Schulz, Th. Steinweg Nachf. v. Steinway & Sons, 523 F.2d 1331, 1341-42 (2d Cir.1975). Analyzing the plaintiff's claim that the defendant, through its use of the "Grotrian-Steinweg" mark, attracted people really interested in plaintiff's "Steinway" pianos, the Second Circuit explained:

We decline to hold, however, that actual or potential confusion at the time of purchase necessarily must be demonstrated to establish trademark infringement under the circumstances of this case.

The issue here is not the possibility that a purchaser would buy a Grotrian-Steinweg thinking it was actually a Steinway or that Grotrian had some connection with Steinway and Sons. The harm to Steinway, rather, is the likelihood that a consumer, hearing the "Grotrian-Steinweg" name and thinking it had some connection with "Steinway," would consider it on that basis. The "Grotrian-Steinweg" name therefore would attract potential customers based on the reputation built up by Steinway in this country for many years.

Grotrian, 523 F.2d at 1342.

Both Dr. Seuss and the Second Circuit hold that initial interest confusion is actionable under the Lanham Act, which holdings are bolstered by the decisions of many other courts which have similarly recognized that the federal trademark and unfair competition laws do protect against this form of consumer confusion. See Green Prods., 992 F.Supp. 1070, 1076 (N.D.Iowa 1997) ("In essence, ICBP is capitalizing on the strong similarity between Green Products' trademark and ICBP's domain name to lure customers onto its web page."); Securacomm Consulting, Inc. v. Securacom Inc., 984 F.Supp. 286, 298 (D.N.J.1997) ("`Infringement can be based upon confusion that creates initial customer interest, even though no actual sale is finally completed as a result of the confusion.'") (citing 3 McCarthy § 23:6), rev'd on other grounds, 166 F.3d 182, 186 (3d Cir.1999) ("In this appeal, [appellant] does not challenge the district court's finding of infringement or order of injunctive relief."); Kompan A.S. v. Park Structures, Inc., 890 F.Supp. 1167, 1180 (N.D.N.Y.1995) ("Kompan argues correctly that it can prevail by showing that confusion between the Kompan and Karavan lines and names will mistakenly lead the consumer to believe there is some connection between the two and therefore develop an interest in the Karavan line that it would not otherwise have had."); Blockbuster Entertainment Group v. Laylco, Inc., 869 F.Supp. 505, 513 (E.D.Mich. 1994) ("Because the names are so similar and the products sold are identical, some unwitting customers might enter a Video Busters store thinking it is somehow connected to Blockbuster. Those customers probably will realize shortly that Video Busters is not related to Blockbuster, but under [Ferrari S.P.A. Esercizio v. Roberts, 944 F.2d 1235 (6th Cir.1991)] and Grotrian that is irrelevant."); Jordache Enters., Inc. v. Levi Strauss & Co., 841 F.Supp. [1064] 506, 514-15 (S.D.N.Y.1993) ("Types of confusion that constitute trademark infringement include where ... potential consumers initially are attracted to the junior user's mark by virtue of its similarity to the senior user's mark, even though these consumers are not actually confused at the time of purchase."); Sara Lee Corp. v. Kayser-Roth Corp., No. 92-00460, 1992 WL 436279, at *24 (W.D.N.C. Dec. 1, 1992) ("That situation offers an opportunity for sale not otherwise available by enabling defendant to interest prospective customers by confusion with the plaintiff's product."); Television Enter. Network, Inc. v. Entertainment Network, Inc., 630 F.Supp. 244, 247 (D.N.J.1986) ("Even if the confusion is cured at some intermediate point before the deal is completed, the initial confusion may be damaging and wrongful."); Koppers Co. v. Krupp-Koppers GmbH, 517 F.Supp. 836, 844 (W.D.Pa. 1981) ("[S]ecuring the initial business contact by the defendant because of an assumed association between the parties is wrongful even though the mistake is later rectified."). See also Forum Corp. of North America v. Forum, Ltd., 903 F.2d 434, 442 n. 2 (7th Cir.1990) ("We point out that the fact that confusion as to the source of a product or service is eventually dispelled does not eliminate the trademark infringement which has already occurred."). But see Astra Pharm. Prods., Inc. v. Beckman Instruments, Inc., 718 F.2d 1201, 1206-08 (1st Cir.1983) (suggesting that only confusion that affects "the ultimate decision of a purchaser whether to buy a particular product" is actionable); Teletech Customer Care Mgmt. (Cal.), Inc. v. Tele-Tech Co., 977 F.Supp. 1407, 1410, 1414 (C.D.Cal.1997) (finding likelihood of initial interest confusion but concluding that such "brief confusion is not cognizable under the trademark laws").

Using another's trademark in one's metatags is much like posting a sign with another's trademark in front of one's store. Suppose West Coast's competitor (let's call it "Blockbuster") puts up a billboard on a highway reading—"West Coast Video: 2 miles ahead at Exit 7" —where West Coast is really located at Exit 8 but Blockbuster is located at Exit 7. Customers looking for West Coast's store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. Even consumers who prefer West Coast may find it not worth the trouble to continue searching for West Coast since there is a Blockbuster right there. Customers are not confused in the narrow sense: they are fully aware that they are purchasing from Blockbuster and they have no reason to believe that Blockbuster is related to, or in any way sponsored by, West Coast. Nevertheless, the fact that there is only initial consumer confusion does not alter the fact that Blockbuster would be misappropriating West Coast's acquired goodwill. See Blockbuster, 869 F.Supp. at 513 (finding trademark infringement where the defendant, a video rental store, attracted customers' initial interest by using a sign confusingly to its competitor's even though confusion would end long before the point of sale or rental); see also Dr. Seuss, 109 F.3d at 1405; Mobil Oil, 818 F.2d at 260; Green Prods., 992 F.Supp. at 1076.

The few courts to consider whether the use of another's trademark in one's metatags constitutes trademark infringement have ruled in the affirmative. For example, in a case in which Playboy Enterprises, Inc. ("Playboy") sued AsiaFocus International, Inc. ("AsiaFocus") for trademark infringement resulting from AsiaFocus's use of the federally registered trademarks "Playboy" and "Playmate" in its HTML code, a district court granted judgment in Playboy's favor, reasoning that AsiaFocus intentionally misled viewers into believing that its Web site was connected with, or sponsored by, Playboy. See Playboy Enters. v. Asiafocus Int'l, Inc., No. CIV.A. 97-734-A, 1998 WL 724000, at *3, *6-*7 (E.D.Va. Apr.10, 1998).

In a similar case also involving Playboy, a district court in California concluded that Playboy had established a likelihood of [1065] success on the merits of its claim that defendants' repeated use of "Playboy" within "machine readable code in Defendants' Internet Web pages, so that the PLAYBOY trademark [was] accessible to individuals or Internet search engines which attempt[ed] to access Plaintiff under Plaintiff's PLAYBOY registered trademark" constituted trademark infringement. See Playboy Enters. v. Calvin Designer Label, 985 F.Supp. 1220, 1221 (N.D.Cal.1997). The court accordingly enjoined the defendants from using Playboy's marks in buried code or metatags. See id. at 1221-22.

In a metatags case with an interesting twist, a district court in Massachusetts also enjoined the use of metatags in a manner that resulted in initial interest confusion. See Niton, 27 F.Supp.2d at 102-05. In that case, the defendant Radiation Monitoring Devices ("RMD") did not simply use Niton Corporation's ("Niton") trademark in its metatags. Instead, RMD's web site directly copied Niton's web site's metatags and HTML code. As a result, whenever a search performed on an Internet search engine listed Niton's web site, it also listed RMD's site. Although the opinion did not speak in terms of initial consumer confusion, the court made clear that its issuance of preliminary injunctive relief was based on the fact that RMD was purposefully diverting people looking for Niton to its web site. See id. at 104-05.

Consistently with Dr. Seuss, the Second Circuit, and the cases which have addressed trademark infringement through metatags use, we conclude that the Lanham Act bars West Coast from including in its metatags any term confusingly similar with Brookfield's mark. West Coast argues that our holding conflicts with Holiday Inns, in which the Sixth Circuit held that there was no trademark infringement where an alleged infringer merely took advantage of a situation in which confusion was likely to exist and did not affirmatively act to create consumer confusion. See Holiday Inns, 86 F.3d at 622 (holding that the use of "1-800-405-4329" —which is equivalent to "1-800-H[zero]LIDAY" —did not infringe Holiday Inn's trademark, "1-800-HOLIDAY"). Unlike the defendant in Holiday Inns, however, West Coast was not a passive figure; instead, it acted affirmatively in placing Brookfield's trademark in the metatags of its web site, thereby creating the initial interest confusion. Accordingly, our conclusion comports with Holiday Inns.

C

Contrary to West Coast's contentions, we are not in any way restricting West Coast's right to use terms in a manner which would constitute fair use under the Lanham Act. See New Kids on the Block v. News America Pub., Inc., 971 F.2d 302, 306-09 (9th Cir.1992); see also August Storck K.G. v. Nabisco, Inc., 59 F.3d 616, 617-18 (7th Cir.1995). It is well established that the Lanham Act does not prevent one from using a competitor's mark truthfully to identify the competitor's goods, see, e.g., Smith v. Chanel, Inc., 402 F.2d 562, 563 (9th Cir.1968) (stating that a copyist may use the originator's mark to identify the product that it has copied), or in comparative advertisements, see New Kids on the Block, 971 F.2d at 306-09. This fair use doctrine applies in cyberspace as it does in the real world. See Radio Channel Networks, Inc. v. Broadcast.Com, Inc., No. 98 Civ. 4799, 1999 WL 124455, at *5-*6 (S.D.N.Y. Mar.8, 1999); Bally Total Fitness Holding Corp. v. Faber, 29 F.Supp.2d 1161 (C.D.Cal.1998); Welles, 7 F.Supp.2d at 1103-04; Patmont Motor Werks, Inc. v. Gateway Marine, Inc., No. 96-2703, 1997 WL 811770, at *3-*4 & n. 6 (N.D.Cal. Dec.18, 1997); see also Universal Tel-A-Talk, 1998 WL 767440, at *9.

In Welles, the case most on point, Playboy sought to enjoin former Playmate of the Year Terri Welles ("Welles") from using "Playmate" or "Playboy" on her web site featuring photographs of herself. See 7 F.Supp.2d at 1100. Welles's web site advertised the fact that she was a former [1066] Playmate of the Year, but minimized the use of Playboy's marks; it also contained numerous disclaimers stating that her site was neither endorsed by nor affiliated with Playboy. The district court found that Welles was using "Playboy" and "Playmate" not as trademarks, but rather as descriptive terms fairly and accurately describing her web page, and that her use of "Playboy" and "Playmate" in her web site's metatags was a permissible, good faith attempt to index the content of her web site. It accordingly concluded that her use was permissible under the trademark laws. See id. at 1103-04.

We agree that West Coast can legitimately use an appropriate descriptive term in its metatags. But "MovieBuff" is not such a descriptive term. Even though it differs from "Movie Buff" by only a single space, that difference is pivotal. The term "Movie Buff" is a descriptive term, which is routinely used in the English language to describe a movie devotee. "MovieBuff" is not. The term "MovieBuff" is not in the dictionary. See Merriam-Webster's Collegiate Dictionary 762 (10th ed.1998); American Heritage College Dictionary 893 (3d ed.1997); Webster's New World College Dictionary 889 (3d ed.1997); Webster's Third New Int'l Dictionary 1480 (unabridged 1993). Nor has that term been used in any published federal or state court opinion. In light of the fact that it is not a word in the English language, when the term "MovieBuff" is employed, it is used to refer to Brookfield's products and services, rather than to mean "motion picture enthusiast." The proper term for the "motion picture enthusiast" is "Movie Buff," which West Coast certainly can use. It cannot, however, omit the space.

Moreover, West Coast is not absolutely barred from using the term "MovieBuff." As we explained above, that term can be legitimately used to describe Brookfield's product. For example, its web page might well include an advertisement banner such as "Why pay for MovieBuff when you can get the same thing here for FREE?" which clearly employs "MovieBuff" to refer to Brookfield's products. West Coast, however, presently uses Brookfield's trademark not to reference Brookfield's products, but instead to describe its own product (in the case of the domain name) and to attract people to its web site in the case of the metatags. That is not fair use.

VI

Having concluded that Brookfield has established a likelihood of success on the merits of its trademark infringement claim, we analyze the other requirement for preliminary injunctive relief inquiry, irreparable injury. Although the district court did not address this issue, irreparable injury may be presumed from a showing of likelihood of success on the merits of a trademark infringement claim. See Metro Pub., Ltd. v. San Jose Mercury News, 987 F.2d 637, 640 (9th Cir.1993) ("Once the plaintiff has demonstrated a likelihood of confusion, it is ordinarily presumed that the plaintiff will suffer irreparable harm if injunctive relief is not granted."). Preliminary injunctive relief is appropriate here to prevent irreparable injury to Brookfield's interests in its trademark "MovieBuff" and to promote the public interest in protecting trademarks generally as well.

VII

As we have seen, registration of a domain name for a Web site does not trump long-established principles of trademark law. When a firm uses a competitor's trademark in the domain name of its web site, users are likely to be confused as to its source or sponsorship. Similarly, using a competitor's trademark in the metatags of such web site is likely to cause what we have described as initial interest confusion. These forms of confusion are exactly what the trademark laws are designed to prevent.

Accordingly, we reverse and remand this case to the district court with instructions to enter a preliminary injunction in [1067] favor of Brookfield in accordance with this opinion.

REVERSED and REMANDED.

[1] The parties quibble over whether the exact date was in December 1993 or in January 1994, but this dispute is irrelevant.

[2] Pursuant to a contract with the National Science Foundation, Network Solutions was, at all relevant times, the exclusive registrar of certain domain names, including those ending in ".com" The intricacies of the Internet and the Web are explained in detail in Part II.

[3] It also registered "inhollywood.com," but exactly when it did so is unclear from the record.

[4] Brookfield also asserted a trademark dilution claim under 15 U.S.C. § 1125(c) and California state law trademark and unfair competition claims.

[5] West Coast applied for a federal trademark registration for this term in 1989, which issued in 1991 and became incontestable in 1996. West Coast purports to have spent over $15,000,000 on advertisements and promotions featuring this mark.

[6] Section 32(1) of the Lanham Act applies to federally registered marks and provides in pertinent part:

Any person who shall, without the consent of the registrant—

(a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive; . . .

shall be liable in a civil action by the registrant for the remedies hereinafter provided.

15 U.S.C. § 1114(1). The same standard is embodied in section 43(a)(1) of the Lanham Act, which applies to both registered and unregistered trademarks:

Any person who, on or in connection with any goods or services, ... uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which—

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, ...

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

[7] Brookfield chose not to argue its trademark dilution claim or its state law causes of action in its opening brief. We accordingly deem those issues waived, see All Pacific Trading, Inc. v. Vessel M/V Hanjin Yosu, 7 F.3d 1427, 1434 (9th Cir.1993), and limit our attention to Brookfield's trademark infringement and unfair competition claims.

[8] As is often done, Brookfield frames its claims under sections 32 and 43(a) of the Lanham Act in terms of trademark infringement and unfair competition, respectively. Whereas section 32 provides protection only to registered marks, section 43(a) protects against infringement of unregistered marks and trade dress as well as registered marks, see, e.g., Kendall-Jackson Winery, Ltd. v. E. & J. Gallo Winery, 150 F.3d 1042, 1046 (9th Cir.1998), and protects against a wider range of practices such as false advertising and product disparagement, see 15 U.S.C. § 1125(a)(1)(B); Two Pesos, Inc. v. Taco Cabana, 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992). Despite these differences, the analysis under the two provisions is oftentimes identical. Because we find this to be the case here, we use, for simplicity's sake, the term "infringement" to refer to Brookfield's claims under both sections 32 and 43(a) throughout the remainder of the opinion.

[9] Both parties agree that "MovieBuff" is a suggestive mark, which falls within the category of inherently distinctive marks. The issue of inherent distinctiveness is discussed in further detail in Part V-A, infra.

[10] West Coast's federally registered trademark "The Movie Buff's Movie Store" is now incontestable, meaning that its validity and legal protectability, as well as West Coast's ownership therein, are all conclusively presumed (subject to certain defenses not relevant here). See 15 U.S.C. §§ 1065, 1115(b); Park `N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 196, 105 S.Ct. 658, 83 L.Ed.2d 582 (1985).

[11] The court then remanded the case to the district court to make a determination on this question. See id. at 1382.

[12] The present case differs from the Fourth Circuit's Lone Star case (yet another involving the same three-trademark setup) for exactly the same reason that it differs from the Eleventh Circuit's Lone Star case. See Lone Star Steakhouse & Saloon, Inc. v. Alpha of Virginia, Inc., 43 F.3d 922 (4th Cir.1995). The Fourth Circuit awarded priority to the company owning the earlier and later trademarks over the company owning the intervening mark, because the intervening mark ("Lone Star Grill") was found to be confusingly similar with the earlier of the other two marks ("Lone Star Cafe") as well as with the later mark ("Lone Star Steakhouse & Saloon"). See id. at 931-32.

[13] The exact date that Brookfield began offering "MovieBuff" products over the Web is the subject of bitter dispute. In its opening brief, Brookfield specifically averred: "In January of 1996, Brookfield also launched a web site that made the MOVIEBUFF software and database available via the Internet." West Coast questions the veracity of Brookfield's claims, pointing out that Brookfield did not even register a domain name with Network Solutions until May 1996. Having reviewed the evidence before us, we too find it a mystery how Brookfield could have "launched a web site" in January 1996 when it did not have a domain address at which it could operate a web site until May 1996. See infra Part II.

Accordingly, we conclude that Brookfield failed to produce evidence establishing its claim that it began using the "MovieBuff" in conjunction with its Internet database in January 1996. Because "MovieBuff" is a federally registered trademark, however, Brookfield is entitled to a presumptive first used date equivalent to the filing date of its trademark registration application, which was August 1997. See Rolley, Inc. v. Younghusband, 204 F.2d 209, 210 (9th Cir.1953).

[14] Brookfield is willing to grant West Coast a first use date of November 11, 1998. Thus, we need not decide here whether the issuance of the press release was indeed sufficient to constitute use in commerce under the Lanham Act. See 15 U.S.C. § 1127.

[15] More precisely, because we are at the preliminary injunction stage, Brookfield must establish that it is likely to be able to show such a likelihood of confusion. See Sardi's Restaurant, 755 F.2d at 723.

[16] Many cases begin the likelihood of confusion analysis by considering the strength of the allegedly infringed mark. Heeding our repeated warnings against simply launching into a mechanical application of the eight-factor Sleekcraft test, see, e.g., Dreamwerks, 142 F.3d at 1129; Dr. Seuss, 109 F.3d at 1404, and `rather than automatically adopting the ordering of Sleekcraft and Dr. Seuss, we consider the Sleekcraft factors (roughly) in order of their importance in this particular case. See, e.g., Dreamwerks, 142 F.3d at 1130-31 (considering the eight Sleekcraft factors "out of order").

Although the Ninth Circuit has yet to apply the likelihood of confusion analysis in the Internet context, a district court applying Ninth Circuit law based its finding of likelihood of confusion on (1) the virtual identity of marks, (2) the relatedness of plaintiff's and defendant's goods, and (3) the simultaneous use of the Web as a marketing channel. See Comp Examiner Agency, Inc. v. Juris, Inc., No. 96-0213, 1996 WL 376600, at *1 (C.D.Cal. Apr.26, 1996). Consistently with Comp Examiner, we conclude that these three Sleekcraft factors are the most important in this case and accordingly commence our analysis by examining these factors first.

[17] In an analogous context, courts have granted trademark protection to phone numbers that spell out a corporation's name, trademark, or slogan. See Dial-A-Mattress Franchise Corp. v. Page, 880 F.2d 675, 677-78 (2d Cir.1989) (granting trademark protection to "(area code)-MATTRES"); American Airlines, Inc. v. A 1-800-A-M-E-R-I-C-A-N Corp., 622 F.Supp. 673, 683-84 (N.D.Ill. 1985); see also Dranoff-Perlstein Assocs. v. Sklar, 967 F.2d 852, 856-58 (3d Cir.1992). But see Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619, 622 (6th Cir.1996).

[18] The fact that West Coast's second-level domain is exactly the same as Brookfield's mark is particularly important since potential customers of "MovieBuff" will go to "moviebuff.com," and not, for example, "moviebuffs.com." Had West Coast used the latter mark, the similarity factor would have favored Brookfield to a lesser extent.

[19] Generic terms are those used by the public to refer generally to the product rather than a particular brand of the product. See, e.g., Blinded Veterans Assoc. v. Blinded American Veterans Found., 872 F.2d 1035, 1041 (D.C.Cir.1989) ("Blinded Veterans"); Miller Brewing Co. v. G. Heileman Brewing Co., 561 F.2d 75 (7th Cir.1977) ("Light Beer" or "Lite Beer"). Descriptive terms directly describe the quality or features of the product. See, e.g., Application of Keebler Co., 479 F.2d 1405 (C.C.P.A.1973) ("Rich `N Chips" chocolate chip cookies). A suggestive mark conveys an impression of a good but requires the exercise of some imagination and perception to reach a conclusion as to the product's nature. See, e.g., American Home Prods. Corp. v. Johnson Chem Co., 589 F.2d 103 (2d Cir.1978) ("Roach Motel" insect trap). Arbitrary and fanciful marks have no intrinsic connection to the product with which the mark is used; the former consists of words commonly used in the English language, see, e.g., Fleischmann Distilling, 314 F.2d 149 ("Black & White" scotch whiskey), whereas the latter are wholly made-up terms, see, e.g., Clorox Chem. Co. v. Chlorit Mfg. Corp., 25 F.Supp. 702 (E.D.N.Y. 1938) ("Clorox" bleach).

[20] Nor did West Coast register its domain name for the specific purpose of subsequently selling the domain name to the trademark owner. See, e.g., Minnesota Mining, 21 F.Supp.2d at 1005; Intermatic, 947 F.Supp. at 1229 (involving the infamous cyber squatter Dennis Toeppen who registered domain names including "aircanada.com," "deltaairlines.com," "eddiebauer.com," and "neimanmarcus.com" and has been the subject of many lawsuits).

[21] We note, however, that Brookfield should have suspected that West Coast would eventually open a web site at the domain name it had registered, and that the present dispute might have been more easily resolved at an earlier time had Brookfield acted in a more prompt manner.

[22] Although there are no other circuit opinions addressing the issue of trademark infringement via domain name use, our holding comports with the decisions of many district courts. See, e.g., Public Serv. Co., 36 F.Supp.2d at 439; ("energyplace.com" and "Energy Place"); Washington Speakers Bureau, 33 F.Supp.2d at 498 ("washingtonspeakers.com" and "Washington Speakers Bureau"); Minnesota Mining, 21 F.Supp.2d at 1004-05 ("post-it.com" and "Post-it"); Cardservice Int'l, 950 F.Supp. at 741-42 ("cardservice.com" and "Card Service"); Green Prods., 992 F.Supp. at 1079 ("greenproducts.com" and "Green Products"); Comp Examiner Agency, 1996 WL 376600, at *1 ("juris.com" and "Juris"). Compare Toys "R" Us, 26 F.Supp.2d at 643-44 (no likelihood of confusion between "gunsrus.com" and "Toys `R' Us"); CD Solutions, Inc. v. Tooker, 15 F.Supp.2d 986, 989 (D.Or.1998) (no likelihood of confusion between "cds.com" and "CDS" as latter is a generic term).

[23] As we explained in Part II, metatags are HTML code not visible to Web users but used by search engines in determining which sites correspond to the keywords entered by a Web user. Although Brookfield never explained what it meant by "buried code," the leading trademark treatise explains that "buried code" is another term for the HTML code that is used by search engines but that is not visible to users. See 3 McCarthy, supra, at § 25:69 n. 1. We will use the term metatags as encompassing HTML code generally.

[24] The Dr. Seuss court discussed initial interest confusion within its purchaser care analysis. As a district court within our circuit recognized in a recent case involving a claim of trademark infringement via metatags usage, "[t]his case ... is not a standard trademark case and does not lend itself to the systematic application of the eight factors." Playboy Enters. v. Welles, 7 F.Supp.2d 1098 (S.D.Cal.1998). Because we agree that the traditional eight-factor test is not well-suited for analyzing the metatags issue, we do not attempt to fit our discussion into one of the Sleekcraft factors.

562 F.3d 123 (2009)

Docket No. 06-4881-cv.

Argued: April 3, 2008.
Decided: April 3, 2009.

[124] Edmund J. Gegan, Rescuecom Corporation, Syracuse, NY, for Appellant.

Michael H. Page, Keker & Van Nest, LLP, San Francisco, CA (Mark A. Lemley and Joseph C. Gratz, on the brief), for Appellee.

Before: LEVAL, CALABRESI, WESLEY, Circuit Judges.

LEVAL, Circuit Judge:

Appeal by Plaintiff Rescuecom Corp. from a judgment of the United States District Court for the Northern District of New York (Mordue, Chief Judge) dismissing its action against Google, Inc., under Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Rescuecom's Complaint alleges that Google is liable under §§ 32 and 43 of the Lanham Act, 15 U.S.C. §§ 1114 & 1125, for infringement, false designation of origin, and dilution of Rescuecom's eponymous trademark. The district court believed the dismissal of the action was compelled by our holding in 1-800 Contacts, Inc. v. WhenU. Com, Inc., 414 F.3d 400 (2d Cir.2005) ("1-800"), because, according to the district court's understanding of that opinion, Rescuecom failed to allege that Google's use of its mark was a "use in commerce" within the meaning of § 45 of the Lanham Act, 15 U.S.C. § 1127. We believe this misunderstood the holding of 1-800. While we express no view as to whether Rescuecom can prove a Lanham Act violation, an actionable claim is adequately alleged in its pleadings. Accordingly, we vacate the judgment dismissing the action and remand for further proceedings.

BACKGROUND

As this appeal follows the grant of a motion to dismiss, we must take as true the facts alleged in the Complaint and draw all reasonable inferences in favor of Rescuecom. Lentell v. Merrill Lynch & [125] Co., Inc., 396 F.3d 161, 165 (2d Cir.2005). Rescuecom is a national computer service franchising company that offers on-site computer services and sales. Rescuecom conducts a substantial amount of business over the Internet and receives between 17,000 to 30,000 visitors to its website each month. It also advertises over the Internet, using many web-based services, including those offered by Google. Since 1998, "Rescuecom" has been a registered federal trademark, and there is no dispute as to its validity.

Google operates a popular Internet search engine, which users access by visiting www.google.com. Using Google's website, a person searching for the website of a particular entity in trade (or simply for information about it) can enter that entity's name or trademark into Google's search engine and launch a search. Google's proprietary system responds to such a search request in two ways. First, Google provides a list of links to websites, ordered in what Google deems to be of descending relevance to the user's search terms based on its proprietary algorithms. Google's search engine assists the public not only in obtaining information about a provider, but also in purchasing products and services. If a prospective purchaser, looking for goods or services of a particular provider, enters the provider's trademark as a search term on Google's website and clicks to activate a search, within seconds, the Google search engine will provide on the searcher's computer screen a link to the webpage maintained by that provider (as well as a host of other links to sites that Google's program determines to be relevant to the search term entered). By clicking on the link of the provider, the searcher will be directed to the provider's website, where the searcher can obtain information supplied by the provider about its products and services and can perhaps also make purchases from the provider by placing orders.

The second way Google responds to a search request is by showing context-based advertising. When a searcher uses Google's search engine by submitting a search term, Google may place advertisements on the user's screen. Google will do so if an advertiser, having determined that its ad is likely to be of interest to a searcher who enters the particular term, has purchased from Google the placement of its ad on the screen of the searcher who entered that search term. What Google places on the searcher's screen is more than simply an advertisement. It is also a link to the advertiser's website, so that in response to such an ad, if the searcher clicks on the link, he will open the advertiser's website, which offers not only additional information about the advertiser, but also perhaps the option to purchase the goods and services of the advertiser over the Internet. Google uses at least two programs to offer such context-based links: AdWords and Keyword Suggestion Tool.

AdWords is Google's program through which advertisers purchase terms (or keywords). When entered as a search term, the keyword triggers the appearance of the advertiser's ad and link. An advertiser's purchase of a particular term causes the advertiser's ad and link to be displayed on the user's screen whenever a searcher launches a Google search based on the purchased search term.^[1] Advertisers pay Google based on the number of times Internet users "click" on the advertisement, so as to link to the advertiser's website. [126] For example, using Google's AdWords, Company Y, a company engaged in the business of furnace repair, can cause Google to display its advertisement and link whenever a user of Google launches a search based on the search term, "furnace repair." Company Y can also cause its ad and link to appear whenever a user searches for the term "Company X," a competitor of Company Y in the furnace repair business. Thus, whenever a searcher interested in purchasing furnace repair services from Company X launches a search of the term X (Company X's trademark), an ad and link would appear on the searcher's screen, inviting the searcher to the furnace repair services of X's competitor, Company Y. And if the searcher clicked on Company Y's link, Company Y's website would open on the searcher's screen, and the searcher might be able to order or purchase Company Y's furnace repair services.

In addition to AdWords, Google also employs Keyword Suggestion Tool, a program that recommends keywords to advertisers to be purchased. The program is designed to improve the effectiveness of advertising by helping advertisers identify keywords related to their area of commerce, resulting in the placement of their ads before users who are likely to be responsive to it. Thus, continuing the example given above, if Company Y employed Google's Keyword Suggestion Tool, the Tool might suggest to Company Y that it purchase not only the term "furnace repair" but also the term "X," its competitor's brand name and trademark, so that Y's ad would appear on the screen of a searcher who searched Company X's trademark, seeking Company X's website.

Once an advertiser buys a particular keyword, Google links the keyword to that advertiser's advertisement. The advertisements consist of a combination of content and a link to the advertiser's webpage. Google displays these advertisements on the search result page either in the right margin or in a horizontal band immediately above the column of relevance-based search results. These advertisements are generally associated with a label, which says "sponsored link." Rescuecom alleges, however, that a user might easily be misled to believe that the advertisements which appear on the screen are in fact part of the relevance-based search result and that the appearance of a competitor's ad and link in response to a searcher's search for Rescuecom is likely to cause trademark confusion as to affiliation, origin, sponsorship, or approval of service. This can occur, according to the Complaint, because Google fails to label the ads in a manner which would clearly identify them as purchased ads rather than search results. The Complaint alleges that when the sponsored links appear in a horizontal bar at the top of the search results, they may appear to the searcher to be the first, and therefore the most relevant, entries responding to the search, as opposed to paid advertisements.

Google's objective in its AdWords and Keyword Suggestion Tool programs is to sell keywords to advertisers. Rescuecom alleges that Google makes 97% of its revenue from selling advertisements through its AdWords program. Google therefore has an economic incentive to increase the number of advertisements and links that appear for every term entered into its search engine.

Many of Rescuecom's competitors advertise on the Internet. Through its Keyword Suggestion Tool, Google has recommended the Rescuecom trademark to Rescuecom's competitors as a search term to be purchased. Rescuecom's competitors, [127] some responding to Google's recommendation, have purchased Rescuecom's trademark as a keyword in Google's AdWords program, so that whenever a user launches a search for the term "Rescuecom," seeking to be connected to Rescuecom's website, the competitors' advertisement and link will appear on the searcher's screen. This practice allegedly allows Rescuecom's competitors to deceive and divert users searching for Rescuecom's website. According to Rescuecom's allegations, when a Google user launches a search for the term "Rescuecom" because the searcher wishes to purchase Rescuecom's services, links to websites of its competitors will appear on the searcher's screen in a manner likely to cause the searcher to believe mistakenly that a competitor's advertisement (and website link) is sponsored by, endorsed by, approved by, or affiliated with Rescuecom.

The District Court granted Google's 12(b)(6) motion and dismissed Rescuecom's claims. The court believed that our 1-800 decision compels the conclusion that Google's allegedly infringing activity does not involve use of Rescuecom's mark in commerce, which is an essential element of an action under the Lanham Act. The district court explained its decision saying that even if Google employed Rescuecom's mark in a manner likely to cause confusion or deceive searchers into believing that competitors are affiliated with Rescuecom and its mark, so that they believe the services of Rescuecom's competitors are those of Rescuecom, Google's actions are not a "use in commerce" under the Lanham Act because the competitor's advertisements triggered by Google's programs did not exhibit Rescuecom's trademark. The court rejected the argument that Google "used" Rescuecom's mark in recommending and selling it as a keyword to trigger competitor's advertisements because the court read 1-800 to compel the conclusion that this was an internal use and therefore cannot be a "use in commerce" under the Lanham Act.

DISCUSSION

"This Court reviews de novo a district court's grant of a motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6)." PaineWebber Inc. v. Bybyk, 81 F.3d 1193, 1197 (2d Cir. 1996). When reviewing a motion to dismiss, a court must "accept as true all of the factual allegations set out in plaintiff's complaint, draw inferences from those allegations in the light most favorable to plaintiff, and construe the complaint liberally." Gregory v. Daly, 243 F.3d 687, 691 (2d Cir.2001) (citations omitted).

I. Google's Use of Rescuecom's Mark Was a "Use in Commerce"

Our court ruled in 1-800 that a complaint fails to state a claim under the Lanham Act unless it alleges that the defendant has made "use in commerce" of the plaintiff's trademark as the term "use in commerce" is defined in 15 U.S.C. § 1127. The district court believed that this case was on all fours with 1-800, and that its dismissal was required for the same reasons as given in 1-800. We believe the cases are materially different. The allegations of Rescuecom's complaint adequately plead a use in commerce.

In 1-800, the plaintiff alleged that the defendant infringed the plaintiff's trademark through its proprietary software, which the defendant freely distributed to computer users who would download and install the program on their computer. The program provided contextually relevant advertising to the user by generating pop-up advertisements to the user depending on the website or search term the user [128] entered in his browser. Id. at 404-05. For example, if a user typed "eye care" into his browser, the defendant's program would randomly display a pop-up advertisement of a company engaged in the field of eye care. Similarly, if the searcher launched a search for a particular company engaged in eye care, the defendant's program would display the pop-up ad of a company associated with eye care. See id. at 412. The pop-up ad appeared in a separate browser window from the website the user accessed, and the defendant's brand was displayed in the window frame surrounding the ad, so that there was no confusion as to the nature of the pop-up as an advertisement, nor as to the fact that the defendant, not the trademark owner, was responsible for displaying the ad, in response to the particular term searched. Id. at 405.

Sections 32 and 43 of the Act, which we also refer to by their codified designations, 15 U.S.C. §§ 1114 & 1125, inter alia, impose liability for unpermitted "use in commerce" of another's mark which is "likely to cause confusion, or to cause mistake, or to deceive," § 1114, "as to the affiliation... or as to the origin, sponsorship or approval of his or her goods [or] services... by another person." § 1125(a)(1)(A). The 1-800 opinion looked to the definition of the term "use in commerce" provided in § 45 of the Act, 15 U.S.C. § 1127. That definition provides in part that "a mark shall be deemed to be in use in commerce... (2) on services when it is used or displayed in the sale or advertising of services and the services are rendered in commerce." 15 U.S.C. § 1127.^[2] Our court found that the plaintiff failed to show that the defendant made a "use in commerce" of the plaintiff's mark, within that definition.

At the outset, we note two significant aspects of our holding in 1-800, which distinguish it from the present case. A key element of our court's decision in 1-800 was that under the plaintiff's allegations, the defendant did not use, reproduce, or display the plaintiff's mark at all. The search term that was alleged to trigger the pop-up ad was the plaintiff's website address. 1-800 noted, notwithstanding the similarities between the website address and the mark, that the website address was not used or claimed by the plaintiff as a trademark. Thus, the transactions alleged to be infringing were not transactions involving use of the plaintiff's trademark. Id. at 408-09.^[3]1-800 suggested in dictum that is highly relevant to our case that had the defendant used the plaintiff's trademark as the trigger to pop-up an advertisement, such conduct might, depending on other elements, have been actionable. 414 F.3d at 409 & n. 11.

Second, as an alternate basis for its decision, 1-800 explained why the defendant's program, which might randomly [129] trigger pop-up advertisements upon a searcher's input of the plaintiff's website address, did not constitute a "use in commerce," as defined in § 1127. Id. at 408-09. In explaining why the plaintiff's mark was not "used or displayed in the sale or advertising of services," 1-800 pointed out that, under the defendant's program, advertisers could not request or purchase keywords to trigger their ads. Id. at 409, 412. Even if an advertiser wanted to display its advertisement to a searcher using the plaintiff's trademark as a search term, the defendant's program did not offer this possibility. In fact, the defendant "did not disclose the proprietary contents of [its] directory to its advertising clients. ..." Id. at 409. In addition to not selling trademarks of others to its customers to trigger these ads, the defendant did not "otherwise manipulate which category-related advertisement will pop up in response to any particular terms on the internal directory." Id. at 411. The display of a particular advertisement was controlled by the category associated with the website or keyword, rather than the website or keyword itself. The defendant's program relied upon categorical associations such as "eye care" to select a pop-up ad randomly from a predefined list of ads appropriate to that category. To the extent that an advertisement for a competitor of the plaintiff was displayed when a user opened the plaintiff's website, the trigger to display the ad was not based on the defendant's sale or recommendation of a particular trademark.

The present case contrasts starkly with those important aspects of the 1-800 decision. First, in contrast to 1-800, where we emphasized that the defendant made no use whatsoever of the plaintiff's trademark, here what Google is recommending and selling to its advertisers is Rescuecom's trademark. Second, in contrast with the facts of 1-800 where the defendant did not "use or display," much less sell, trademarks as search terms to its advertisers, here Google displays, offers, and sells Rescuecom's mark to Google's advertising customers when selling its advertising services. In addition, Google encourages the purchase of Rescuecom's mark through its Keyword Suggestion Tool. Google's utilization of Rescuecom's mark fits literally within the terms specified by 15 U.S.C. § 1127. According to the Complaint, Google uses and sells Rescuecom's mark "in the sale ... of [Google's advertising] services.. . rendered in commerce." § 1127.

Google, supported by amici, argues that 1-800 suggests that the inclusion of a trademark in an internal computer directory cannot constitute trademark use. Several district court decisions in this Circuit appear to have reached this conclusion. See e.g., S & L Vitamins, Inc. v. Australian Gold, Inc., 521 F.Supp.2d 188, 199-202 (E.D.N.Y.2007) (holding that use of a trademark in metadata did not constitute trademark use within the meaning of the Lanham Act because the use "is strictly internal and not communicated to the public"); Merck & Co., Inc. v. Mediplan Health Consulting, Inc., 425 F.Supp.2d 402, 415 (S.D.N.Y.2006) (holding that the internal use of a keyword to trigger advertisements did not qualify as trademark use). This over-reads the 1-800 decision. First, regardless of whether Google's use of Rescuecom's mark in its internal search algorithm could constitute an actionable trademark use, Google's recommendation and sale of Rescuecom's mark to its advertising customers are not internal uses. Furthermore, 1-800 did not imply that use of a trademark in a software program's internal directory precludes a finding of trademark use. Rather, influenced by the fact that the defendant was not using the plaintiff's trademark at all, much less using it as the basis of a commercial transaction, [130] the court asserted that the particular use before it did not constitute a use in commerce. See 1-800, 414 F.3d at 409-12. We did not imply in 1-800 that an alleged infringer's use of a trademark in an internal software program insulates the alleged infringer from a charge of infringement, no matter how likely the use is to cause confusion in the marketplace. If we were to adopt Google and its amici's argument, the operators of search engines would be free to use trademarks in ways designed to deceive and cause consumer confusion.^[4] This is surely neither within the intention nor the letter of the Lanham Act.

Google and its amici contend further that its use of the Rescuecom trademark is no different from that of a retail vendor who uses "product placement" to allow one vender to benefit from a competitors' name recognition. An example of product placement occurs when a store-brand generic product is placed next to a trademarked product to induce a customer who specifically sought out the trademarked product to consider the typically less expensive, generic brand as an alternative. See 1-800, 414 F.3d at 411. Google's argument misses the point. From the fact that proper, non-deceptive product placement does not result in liability under the Lanham Act, it does not follow that the label "product placement" is a magic shield against liability, so that even a deceptive plan of product placement designed to confuse consumers would similarly escape liability. It is not by reason of absence of a use of a mark in commerce that benign product placement escapes liability; it escapes liability because it is a benign practice which does not cause a likelihood of consumer confusion. In contrast, if a retail seller were to be paid by an off-brand purveyor to arrange product display and delivery in such a way that customers seeking to purchase a famous brand would receive the off-brand, believing they had gotten the brand they were seeking, we see no reason to believe the practice would escape liability merely because it could claim the mantle of "product placement." The practices attributed to Google by the Complaint, which at this stage we must accept as true, are significantly different from benign product placement that does not violate the Act.

Unlike the practices discussed in 1-800, the practices here attributed to Google by Rescuecom's complaint are that Google has made use in commerce of Rescuecom's mark. Needless to say, a defendant must do more than use another's mark in commerce to violate the Lanham Act. The gist of a Lanham Act violation is an unauthorized use, which "is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, ... or as to the origin, sponsorship, or approval of ... goods [or] services." See 15 U.S.C. § 1125(a); Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1508-09 (2d Cir.1997). We have no idea whether Rescuecom can prove that Google's use of Rescuecom's trademark in its AdWords program causes likelihood of confusion or mistake. Rescuecom has alleged that it does, in that would-be purchasers (or explorers) of its services who search for its website on Google are misleadingly [131] directed to the ads and websites of its competitors in a manner which leads them to believe mistakenly that these ads or websites are sponsored by, or affiliated with Rescuecom. This is particularly so, Rescuecom alleges, when the advertiser's link appears in a horizontal band at the top of the list of search results in a manner which makes it appear to be the most relevant search result and not an advertisement. What Rescuecom alleges is that by the manner of Google's display of sponsored links of competing brands in response to a search for Rescuecom's brand name (which fails adequately to identify the sponsored link as an advertisement, rather than a relevant search result), Google creates a likelihood of consumer confusion as to trademarks. If the searcher sees a different brand name as the top entry in response to the search for "Rescuecom," the searcher is likely to believe mistakenly that the different name which appears is affiliated with the brand name sought in the search and will not suspect, because the fact is not adequately signaled by Google's presentation, that this is not the most relevant response to the search. Whether Google's actual practice is in fact benign or confusing is not for us to judge at this time. We consider at the 12(b)(6) stage only what is alleged in the Complaint.

We conclude that the district court was mistaken in believing that our precedent in 1-800 requires dismissal.

CONCLUSION

The judgment of the district court is vacated and the case is remanded for further proceedings.

APPENDIX

On the Meaning of "Use in Commerce" in Sections 32 and 43 of the Lanham Act^[5]

In 1-800 Contacts, Inc. v. WhenU.com, Inc., 414 F.3d 400 (2d Cir.2005) ("1-800"), our court followed the reasoning of two district court opinions from other circuits, U-Haul Int'l, Inc. v. WhenU.com, Inc., 279 F.Supp.2d 723 (E.D.Va.2003) and Wells Fargo & Co., v. WhenU.com, Inc., 293 F.Supp.2d 734 (E.D.Mich.2003), which dismissed suits on virtually identical claims against the same defendant. Those two district courts ruled that the defendant's conduct was not actionable under §§ 32 & 43(a) of the Lanham Act, 15 U.S.C. § § 1114 & 1125(a), even assuming that conduct caused likelihood of trademark confusion, because the defendant had not made a "use in commerce" of the plaintiff's mark, within the definition of that phrase set forth in § 45 of the Lanham Act, 15 U.S.C. § 1127. In quoting definitional language of § 1127 that is crucial to their holdings, however, U-Haul and Wells Fargo overlooked and omitted portions of the statutory text which make clear that the definition provided in § 1127 was not intended by Congress to apply in the manner that the decisions assumed.

Our court's ruling in 1-800 that the Plaintiff had failed to plead a viable claim under §§ 1114 & 1125(a) was justified by numerous good reasons and was undoubtedly the correct result. In addition to the questionable ground derived from the district court opinions, which had overlooked key statutory text, our court's opinion cited other highly persuasive reasons for dismissing the action — among them that the plaintiff did not claim a trademark in the [132] term that served as the basis for the claim of infringement; nor did the defendant's actions cause any likelihood of confusion, as is crucial for such a claim.

We proceed to explain how the district courts in U-Haul and Wells Fargo adopted reasoning which overlooked crucial statutory text that was incompatible with their ultimate conclusion. Section 43(a), codified at 15 U.S.C. § 1125(a), imposes liability on "any person who, on or in connection with any goods or services, uses in commerce any word, term, name, symbol, or device ... which— (A) is likely to cause confusion. ..." (emphasis added). Section 32, codified at 15 U.S.C. § 1114, similarly imposes liability on one who "without the consent of the registrant-(a) use[s] in commerce any reproduction ... [or] copy ... of a registered mark ... in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive" (emphasis added). To determine the meaning of the phrase "uses in commerce," which appears in both sections, the U-Haul and Wells Fargo courts quite understandably looked to the definition of the term "use in commerce," set forth among the Act's definitions in § 45, codified at 15 U.S.C. § 1127. That definition, insofar as quoted by the courts, stated, with respect to services, that a mark shall be deemed to be "used in commerce only when it is used or displayed in the sale or advertising of services and the services are rendered in commerce." Wells Fargo, 293 F.Supp.2d at 757 (internal quotations omitted); U-Haul, 279 F.Supp.2d at 727 (specifying a similar requirement with respect to goods). Adhering to this portion of the definition, and determining that on the particular facts of the case, the defendant had not used or displayed a mark in the sale or advertising of services, those courts concluded that the defendant's conduct was not within the scope of the Act.

In quoting the § 1127 definition, however, those district courts overlooked and omitted two portions of the statutory text, which we believe make clear that the definition provided in § 1127 is not intended to apply to §§ 1114 & 1125(a). First, those courts, no doubt reasonably, assumed that the definition of "use in commerce" set forth in § 1127 necessarily applies to all usages of that term throughout the Act. This was, however, not quite accurate. Section 1127 does not state flatly that the defined terms have the assigned meanings when used in the statute. The definition is more guarded and tentative. It states rather that the terms listed shall have the given meanings "unless the contrary is plainly apparent from the context."

The second part of § 1127 which those courts overlooked was the opening phrase of the definition of "use in commerce," which makes it "plainly apparent from the context" that the full definition set forth in § 1127 cannot apply to the infringement sections. The definition in § 1127 begins by saying, "The term `use in commerce' means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark." 15 U.S.C. § 1127 (emphasis added). The requirement that a use be a bona fide use in the ordinary course of trade in order to be considered a "use in commerce" makes clear that the particular definition was not intended as a limitation on conduct of an accused infringer that might cause liability. If § 1127's definition is applied to the definition of conduct giving rise to liability in §§ 1114 and 1125, this would mean that an accused infringer would escape liability, notwithstanding deliberate deception, precisely because he acted in bad faith. A bad faith infringer would not have made a use in commerce, and therefore a necessary element of liability would be lacking. Liability would fall only on those defendants who acted in good faith. We think [133] it inconceivable that the statute could have intended to exempt infringers from liability because they acted in bad faith. Such an interpretation of the statute makes no sense whatsoever. It must be that Congress intended § 1127's definition of "use in commerce" to apply to other iterations of the term "use in commerce," (as we explore below) and not to the specification of conduct by an alleged infringer which causes imposition of liability.^[6]

A more detailed examination of the construction of the Lanham Act, and its historical evolution, demonstrates how this unlikely circumstance came to be. The Act employs the term "use in commerce" in two very different contexts. The first context sets the standards and circumstances under which the owner of a mark can qualify to register the mark and to receive the benefits and protection provided by the Act. For example, 15 U.S.C. § 1051 provides that "[t]he owner of a trademark used in commerce may request registration of its trademark on the principal register," thereby receiving the benefits of enhanced protection (emphasis added).^[7] This part of the statute describes the conduct which the statute seeks to encourage, reward, and protect. The second context in which the term "use in commerce" appears is at the opposite pole. As exemplified in §§ 1114 & 1125(a), the term "use in commerce," as quoted above, also appears as part of the Act's definition of reprehensible conduct, i.e., the conduct which the Act identifies as infringing of the rights of the trademark owner, and for which it imposes liability.

When one considers the entire definition of "use in commerce" set forth in § 1127, it becomes plainly apparent that this definition was intended to apply to the Act's use of that term in defining favored conduct, which qualifies to receive the protection of the Act. The definition makes perfect sense in this context. In order to qualify to register one's mark and receive the enhanced protections that flow from registration (giving the world notice of one's exclusive rights in the mark), the owner must have made "bona fide use of the mark in the ordinary course of trade, and not merely to reserve a right in the mark." Id. § 1127. The bona fide "use" envisioned is, with respect to "goods, when [the mark] is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto ..., and the goods are sold or transported in commerce; and on services when [the mark] is used or displayed in the sale or advertising of services... rendered in commerce." Id. This definition sensibly insures that one who in good faith places his mark on goods or services in commerce qualifies for the Act's protection. In contrast, it would make no sense whatsoever for Congress to have insisted, in relation to § 1114 for example, that one who "without the consent of the registrant ... use[d] ... [a] counterfeit ... of a registered mark in [134] connection with the sale ... of ... goods [thereby] caus[ing] confusion" will be liable to the registrant only if his use of the counterfeit was a "bona fide use of [the] mark in the ordinary course of trade." Id. §§ 1114 & 1127. Such a statute would perversely penalize only the fools while protecting the knaves, which was surely not what Congress intended.

The question then arises how it came to pass that the sections of the statute identifying conduct giving rise to liability included the phrase "use in commerce" as an essential element of liability. This answer results in part from a rearrangement of this complex statute, which resulted in joining together words which, as originally written, were separated from one another. The first incidence of employment of the phrase "use in commerce" in § 1114 occurred in 1962 as the result of a mere "rearrangement" of sections, not intended to have substantive significance, which brought together the jurisdiction-invoking phrase, "in commerce" with the verb "use." Prior to the 1962 rearrangement, the term "use in commerce" appeared as an essential element of a trademark owner's qualification for registration and for the benefits of the Act, but did not appear as an essential element of a defendant's conduct necessary for liability. The Act frequently employs the term "in commerce" for the distinct purpose of invoking Congress's Commerce Clause jurisdiction and staying within its limits.^[8] The statute also frequently employs the word "use," either as a noun or verb, because that word so naturally and aptly describes what one does with a trademark. Not surprisingly, in the extensive elaborate course of drafting, revision, and rearrangement which the Act has undergone from time to time, as explained below, the words "use" and "in commerce" came into proximity with each other in circumstances where there was no intent to invoke the specialized restrictive meaning given by § 1127. In 1988, when Congress enacted the present form of § 1127's definition, which was designed to deny registration to an owner who made merely token use of his mark, the accompanying Congressional report made clear that the definition was understood as applying only to the requirements of qualification for registration and other benefits of the Act, and not to conduct causing liability. We briefly trace the history of this evolution below, to show that the restrictive definition of "use in commerce" set forth in § 1127 never was intended as a restriction on the types of conduct that could result in liability.

History of the Phrase "Use in Commerce" in the Lanham Act

In 1879 in The Trade-Mark Cases, 100 U.S. 82, 25 L.Ed. 550 (1879), the Supreme Court struck down the existing trademark statutes passed in the 1870s because the Copyright Clause of the Constitution was not a proper basis of Congressional authority to regulate trademarks. While ruling that the Copyright Clause did not give Congress authority to protect trademarks, the Court specified that if Congress wished to invoke the Commerce Clause to justify its assertion of the power to regulate trademarks, it needed to invoke that authority "on the face of the law." Id. at 96. Two years later, Congress enacted a statute to "authorize the registration of trade-marks and protect the same," Act of March 3, 1881, 21 Stat. 502, which explicitly and repeatedly invoked Congress's Commerce Clause power on "the face of [135] the law," using language virtually identical to the constitutional grant of power.^[9]

A major revision to federal trademark law came in 1946 with the passage of the Lanham Act. Congressman Fritz Lanham, Chairman of the Subcommittee on Trade-Marks of the House Committee on Patents, had first introduced his bill, HR 9041, in 1938. At the time, in order to qualify to register a trademark and receive the resulting protections, a trademark owner needed to "affix" his mark to goods in interstate commerce. See Act of February 20, 1905, 33 Stat. 724, 724 (stating that one of the requirements for registration is that the trademark owner must file an application that states the "mode in which [the trademark] is applied and affixed to goods"); see also Western Stove Co. v. Geo. D. Roper Corp., 82 F.Supp. 206, 216 (S.D.Cal.1949) (stating that to obtain a common law trademark or a trademark under the Act of 1905, "it is clear that the trade-mark had to be affixed substantially either to the product, or the container thereof"). The 1939 version of Lanham's bill thus defined "affixation," stating that a "trademark shall be deemed to be affixed to an article when it is placed in any manner in or upon either the article or its container or display or upon tags or labels or is otherwise used in the advertisement or sale thereof." H.R. 4744, 76th Cong. § 46 (1st Sess.1939). The version presented in Congress two years later in 1941, H.R. 5461, instead of defining "affixation," introduced the less complicated, more accommodating definition of "use in commerce" as the conduct by which an owner would qualify to register a mark. The bill included in § 45 (which eventually became § 1127) a definition of "use[] in commerce," which was similar to the definition of affixation in the prior H.R. 4744 in 1939, but more expansive, including both goods and services.

This definition provided,

For purposes of this Act a mark shall be deemed to be used in commerce (a) on goods when it is placed in any manner on the goods or their containers or the displays associated therewith or on the tags or labels affixed thereto and the goods are sold or transported in commerce and (b) on services when used or displayed in the sale of advertising of services in commerce.

H.R. 5461, 77th Cong. § 45 (1st Sess.1941). This text of § 45 of the 1941 bill was eventually enacted in the 1946 version in substantially the same form, and in later codification became the definition set forth in § 1127. It is important to note that in the 1941 bill, in which first appeared the defined term, "used in commerce," that term served as a requirement for registration, but the term nowhere appeared in the language defining conduct that would constitute [136] infringement under § 32. Section 32, which defined infringement, made reference to "commerce" but did not employ the defined term "used in commerce."

In the form in which the Act was eventually passed in 1946, the term "used in commerce" continued to be a prerequisite to registration, but remained generally absent, with one small exception, from the statutory language defining infringement. Section 32, eventually codified as § 1114, at the time contained no instance of the term. Section 43(a), eventually codified as § 1125(a), provided liability for infringing conduct by "[a]ny person who shall ... cause or procure the [trademark] to be transported or used in commerce or deliver the [trademark] to any carrier to be transported or used." See Lanham Act, 60 Stat. 427, 441 (1946) (emphasis added). Thus, the Act allowed the imposition of liability on any infringer under § 32 without regard to whether he "used in commerce" the mark, and under § 43(a) on any infringer who "cause[d] or procure[d]" the transportation of a mark in commerce, or who "deliver[ed a mark] to any carrier to be transported," as well as to one who "cause[d] or procure[d]" the mark or delivered it to a carrier to be "used in commerce." Regardless of whether the "use in commerce" language in § 43(a) was intended to carry the definition in § 45, the Lanham Act as passed in 1946, on any reading, did not restrict liability for infringement to those who "used in commerce," as defined in § 45's restrictive terms. Such a "use in commerce" was simply one of several ways to satisfy one of several elements of a cause of action under § 43(a). By contrast, to justify imposition of liability on an infringer, the Act required, as an element of the cause of action, that the infringer "cause the [infringing] goods or services to enter into commerce" — a jurisdictional predicate for Congress's power to legislate in this area. See id. Thus, on the question whether the definition set forth in § 45 (§ 1127) should be understood as applying to, and thus restricting, conduct causing liability, one of the leading commentators on trademark law notes,

The Lanham Act § 45 narrowing definition of what constitutes "use in commerce" is just a relaxed remnant of trademark law's once-hyper-technical "affixation" requirement. This statutory anachronism certainly was never intended to limit the scope of "uses" that would constitute infringement.

4 McCarthy on Trademarks and Unfair Competition § 23:11.50 (4th ed.1994 & updated 2008).

The Amendment of § 1114 in 1962

A confusing change in statutory diction occurred in 1962 when Congress amended § 1114. The purpose of the amendment was to broaden liability for infringement. Previously, the statutory requirement of confusion, mistake, or deception applied only with respect to "purchasers as to the source of origin of such goods or services." See 1 McCarthy § 5:6 (4th ed.1994 & updated 2008). Congress eliminated this requirement to expand the scope of deceptive, or misleading conduct that could constitute infringement. Id. (noting that this amendment "has been viewed as expanding the range of actions that can constitute infringement of a trademark by not limiting it to confusion of purchasers and not limiting it to confusion as to the source of goods"). At the same time as making this broadening substantive change, the 1962 amendment made structural changes to the order of the language in § 1114. See H.R. Rep. No. 1108, 87th Cong. at 8 (1961). Previously, § 1114 had listed a series of actions which, when taken by "any person ... in commerce" would cause liability. Among [137] the liability-causing actions listed was, under clause (a), a person's "use, without the consent of the registrant, [of] any reproduction...." Lanham Act, 60 Stat. 427, 437 § 32 (1946) (emphasis added). Thus, in the pre-1962 version, the terms "use" and "in commerce" occurred in separate clauses. One of the changes, which is not described in the House or Senate Reports as having any substantive significance, was a rearrangement of the order of words so that "use" and "in commerce" came to appear side by side in the amended version, rather than in separate clauses. In its amended form, it read "[a]ny person who shall, without the consent of the registrant (a) use in commerce any reproduction ... shall be liable in a civil action." 76 Stat. 769, 773 (1962) (emphasis added). As the result of the rearrangement, the consolidated phrase "use in commerce" appeared for the first time in § 1114. The House and Senate reports describe these amendments as intended simply to "rearrang[e] the language." See H.R.Rep. No. 1108, 87th Cong. at 8 (1961); S.Rep. No. 1685, 86th Cong. 1685 at 8 (1960). The only change to § 1114 specifically discussed in the Report was the deletion of the phrase "purchasers as to the source of such goods or services" for the stated purpose of broadening liability. Id. It would be unreasonable to construe mere "rearrange[ment]" of language in § 1114 as having intended to convert the broad liability-imposing term, "use" into a restrictive, defined term, which had previously applied only to a trademark owner's qualification for registration of the mark — especially when Congress made no mention beyond describing the change as a rearrangement. See Whitman v. Am. Trucking Assoc., 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001) (Congress does not "hide elephants in mouseholes.").^[10]

The 1988 Amendment to § 1127

If there was any doubt prior to 1988 on the question whether the narrowing definition of "use in commerce" set forth in § 1127, was intended to apply to the utilization of that phrase in the sections providing for the liability of infringers, the doubt was put to rest by the Trademark Law Revision Act of 1988,^[11] which inserted into § 1127 the requirement that a "use in commerce" be a "bona fide use of a mark in the ordinary course of trade and not merely made to reserve a right in a mark." This was part of a change intended to bring the federal trademark registration system into harmony with the registration system of other nations, see Pub.L. No. 100-667, 102 Stat. 3935 (Nov. 16, 1988), by providing the possibility of reserving a trademark for intended future use. Previously, one could not establish exclusive rights to a mark, or eligibility to register one's claim to the mark, except by using the mark in commerce. One who had a bona fide intent to use a mark in the future on a product not yet released into commerce could not be assured that, during product development preceding distribution of the product under the mark, another user might not establish a priority [138] in the same mark. In at least one case in this Circuit, an attempt to reserve priority in a mark by making token use during the product development period had been found ineffective. Procter & Gamble Co. v. Johnson & Johnson Inc., 485 F.Supp. 1185 (S.D.N.Y.1979), aff'd 636 F.2d 1203 (2d Cir.1980). The 1988 amendment provided relief by allowing applicants to file an intent to use application, by which they could reserve their priority in a mark for a limited period without making use of it in commerce. Pub.L. No. 100-667, § 103.

While these amendments provided relief in the form of effective reservation of a mark for a time on the basis of a filing of intent to use, registration of a mark under § 1051 continued to be limited to those who have in fact "used [the mark] in commerce." And the definition of "use in commerce" set forth in § 1127 was amended to require that the use be a "bona fide use... in the ordinary course of trade and not made merely to reserve a right in the mark." 15 U.S.C. § 1127. Those wishing to reserve a right in the mark were provided for by the new intent-to-use provisions. Actual registration, however, was reserved to mark owners making bona fide use in commerce. As noted above, this definition of "use in commerce" makes eminent good sense as a prerequisite for a mark owner to register the mark and claim the benefits the Act provides to the owners of marks. It makes no conceivable sense as a limitation shielding bad-faith abusers of the marks of others from liability for causing trademark confusion.

The Senate Report for the 1988 amendment confirms that the definition in § 1127 was meant to apply only to registering a mark rather than infringing one. The Senate Report explained that the "revised [use in commerce] definition is intended to apply to all aspects of the trademark registration process," and that "[c]learly, however, use of any type will continue to be considered in an infringement action." See S. Rep. 100-515 100th Cong. at 45 (1988) (emphasis added). This, of course, is consistent with the Lanham Act's intent to make actionable the deceptive and misleading use of marks in commerce-an intent which has not changed since the Lanham Act was first enacted. See Lanham Act, 60 Stat. 427, § 45 (1946); 15 U.S.C. § 1127. According to the Senate Report, a purpose in amending this section was to add "a reference to make clear that the section applies only to acts or practices which occur in [or] affect commerce." See S. Rep. 100-515 100th Cong. at 41 (1988). The amendment left only one reference to commerce in § 1125(a), which was the "uses in commerce" language. This term was thus employed in the 1988 revision to make clear that liability would be imposed for acts that occur in or affect commerce, i.e. those within Congress's Commerce Clause power. Thus, the term "uses in commerce" in the current § 1125(a) is intended to refer to a use that falls within Congress's commerce power, and not to the restrictive definition of "use in commerce," set forth in § 45 to define standards of qualification for an owner to register a mark and receive the benefits and protection of the Act.

It therefore appears that the history of the development of the Lanham Act confirms what is also indicated by a commonsense understanding of the provisions. The definition of the term "use in commerce" provided by § 1127, was intended to continue to apply, as it did when the definition was conceived in the 1941 bill, to the sections governing qualification for registration and for the benefits of the Act. In that version, the term "use in commerce" did not appear in § 32, which established the elements of liability for infringing upon a federally registered mark. The eventual appearance of that phrase in [139] that section did not represent an intention that the phrase carry the restrictive definition which defined an owner's entitlement to registration. The appearance rather resulted from happenstance pairing of the verb "use" with the term "in commerce," whose purpose is to claim the jurisdictional authority of the Commerce Clause. Section 1127, as noted, does not prescribe that its definitions necessarily apply throughout the Act. They apply "unless the contrary is plainly apparent from the context."

The Interpretation of § 1127's Definition of "Use in Commerce" with Respect to Alleged Infringers

In light of the preceding discussion, how should courts today interpret the definition of "use in commerce" set forth in 15 U.S.C. § 1127, with respect to acts of infringement prescribed by §§ 1114 and 1125(a)? The foregoing review of the evolution of the Act seems to us to make clear that Congress did not intend that this definition apply to the sections of the Lanham Act which define infringing conduct. The definition was rather intended to apply to the sections which used the phrase in prescribing eligibility for registration and for the Act's protections. However, Congress does not enact intentions. It enacts statutes. And the process of enacting legislation is of such complexity that understandably the words of statutes do not always conform perfectly to the motivating intentions. This can create for courts difficult problems of interpretation. Because pertinent amendments were passed in 1962 and in 1988, and because the 1988 amendment did not change the pre-existing parts of the definition in § 1127, but merely added a sentence, it seems useful to approach the question of the current meaning in two steps. First, what did this definition mean between 1962 and 1988 — prior to the 1988 amendment? Then, how was the meaning changed by the 1988 amendment?

Between 1962 and 1988, notwithstanding the likelihood shown by the legislative history that Congress intended the definition to apply only to registration and qualification for benefits and not to infringement, a court addressing the issue nonetheless would probably have concluded that the section applied to alleged infringement, as well. Section 1127 states that its definitions apply "unless the contrary is plainly apparent from the context." One who considered the question at the time might well have wondered why Congress would have provided this restrictive definition for acts of trademark infringement with the consequence that deceptive and confusing uses of another's mark with respect to goods would escape liability if the conduct did not include the placement of the mark on goods or their containers, displays, or sale documents, and with respect to services if the conduct did not include the use or display of the mark in the in the sale or advertising of the services. It is easy to imagine perniciously confusing conduct involving another's mark which does not involve placement of the mark in the manner specified in the definition. Nonetheless, in spite of those doubts, one could not have said it was "plainly apparent from the context" that those restrictions did not apply to sections defining infringement. In all probability, therefore, a court construing the provision between 1962 and 1988 would have concluded that in order to be actionable under §§ 1114 or 1125(a) the allegedly infringing conduct needed to include placement of the mark in the manner specified in the definition of "use in commerce" in § 1127.

The next question is how the meaning of the § 1127 definition was changed by the 1988 amendment, which, as noted, left the preexisting language about placement of the mark unchanged, but added a prior sentence requiring that a "use in commerce" [140] be "a bona fide use in the ordinary course of trade, and not made merely to reserve a right in a mark." While it is "plainly apparent from the context" that the new first sentence cannot reasonably apply to statutory sections defining infringing conduct, the question remains whether the addition of this new sentence changed the meaning of the second sentence of the definition without changing its words.

We see at least two possible answers to the question, neither of which is entirely satisfactory. One interpretation would be that, by adding the new first sentence, Congress changed the meaning of the second sentence of the definition to conform to the new first sentence, without altering the words. The language of the definition, which, prior to the addition of the new first sentence, would have been construed to apply both to sections defining infringement, and to sections specifying eligibility for registration, would change its meaning, despite the absence of any change in its words, so that the entire definition now no longer applied to the sections defining infringement. Change of meaning without change of words is obviously problematic.

The alternative solution would be to interpret the two sentences of the statutory definition as of different scope. The second sentence of the definition, which survived the 1988 amendment unchanged, would retain its prior meaning and continue to apply as before the amendment to sections defining infringement, as well as to sections relating to a mark owner's eligibility for registration and for enjoyment of the protections of the Act. The new first sentence, which plainly was not intended to apply to infringements, would apply only to sections in the latter category — those relating to an owner's eligibility to register its mark and enjoy the Act's protection. Under this interpretation, liability for infringement under §§ 1114 and 1125(a) would continue, as before 1988, to require a showing of the infringer's placement of another's mark in the manner specified in the second sentence of the § 1127 definition. It would not require a showing that the alleged infringer made "bona fide use of the mark in the ordinary course of trade, and not merely to reserve a right in the mark." On the other hand, eligibility of mark owners for registration and for the protections of the Act would depend on their showing compliance with the requirements of both sentences of the definition.

We recognize that neither of the two available solutions is altogether satisfactory. Each has advantages and disadvantages. At least for this Circuit, especially given our prior 1-800 precedent, which applied the second sentence of the definition to infringement, the latter solution, according a different scope of application to the two sentences of the definition, seems to be preferable.^[12]

The judges of the 1-800 panel have read this Appendix and have authorized us to state that they agree with it. At the same time we note that the discussion in this Appendix does not affect the result of this case. We assumed in the body of the opinion, in accordance with the holding of 1-800, that the requirements of the second sentence of the definition of "use in commerce" in § 1127 apply to infringing conduct and found that such use in commerce was adequately pleaded. The discussion in this Appendix is therefore dictum and not a binding opinion of the court. It would be [141] helpful for Congress to study and clear up this ambiguity.

[1] Although we generally refer to a single advertiser, there is no limit on the number of advertisers who can purchase a particular keyword to trigger the appearance of their ads.

[2] The Appendix to this opinion discusses the applicability of § 1127's definition of "use in commerce" to sections of the Lanham Act proscribing infringement.

[3] We did not imply in 1-800 that a website can never be a trademark. In fact, the opposite is true. See Trademark Manual of Examining Procedures § 1209.03(m) (5th ed. 2007) ("A mark comprised of an Internet domain name is registrable as a trademark or service mark only if it functions as an identifier of the source of goods or services."); see also Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (Section 43(a) of the Lanham Act protects unregistered trademarks as long as the mark could qualify for registration under the Lanham Act.); Thompson Med. Co., Inc. v. Pfizer Inc., 753 F.2d 208, 215-216 (2d Cir.1985) (same). The question whether the plaintiff's website address was an unregistered trademark was never properly before the 1-800 court because the plaintiff did not claim that it used its website address as a trademark.

[4] For example, instead of having a separate "sponsored links" or paid advertisement section, search engines could allow advertisers to pay to appear at the top of the "relevance" list based on a user entering a competitor's trademark—a functionality that would be highly likely to cause consumer confusion. Alternatively, sellers of products or services could pay to have the operators of search engines automatically divert users to their website when the users enter a competitor's trademark as a search term. Such conduct is surely not beyond judicial review merely because it is engineered through the internal workings of a computer program.

[5] In this discussion, all iterations of the phrase "use in commerce" whether in the form of a noun (a "use in commerce"), a verb ("to use in commerce"), or adjective ("used in commerce"), are intended without distinction as instances of that phrase.

[6] The Wells Fargo decision, which followed and cited U-Haul, unlike U-Haul, did quote the part of § 1127 which requires a "bona fide use of a mark in the ordinary course of trade," 293 F.Supp.2d at 758, but failed to note the incompatibility of that requirement with a section defining prohibited actionable conduct.

[7] In addition to § 1051, a non-exhaustive list of other sections that employ the term "use in commerce" in the same general way, in defining what is necessary to secure the benefits of the Act, include § 1065 (incontestability of a mark); § 1058 (renewal of a mark), § 1091 (eligibility for the supplemental register); § 1112 (registration of a mark in plurality of classes); and § 1062 (republication of marks registered under acts prior to the Lanham Act).

[8] Section 1127 defines "commerce" to mean "all commerce which may lawfully be regulated by Congress."

[9] For example, in specifying how a trademark owner would qualify for the benefits of federal registration of the trademark, the statute stated, "[t]hat owners of trade-marks used in commerce with foreign nations, or with the Indian tribes, ... may obtain registration of [] trademarks." Id. at 502 (emphasis added); see also Act of February 20, 1905, 33 Stat. 724, 724 ("[T]he owner of a trademark used in commerce with foreign nations, or among the several States, or with Indian Tribes . . . may obtain [trademark] registration."). And in specifying the conduct that would incur liability for infringement, the Act similarly prescribed that an aggrieved party could "enjoin the wrongful use of such trade-mark used in foreign commerce or commerce with Indian tribes." Act of March 3, 1881, 21 Stat. 502, 504; see also Act of February 20, 1905, Stat. 724, 728 ("Any person who shall, without consent of the owner thereof, reproduce, counterfeit, copy, or colorably imitate any such trade-mark . . . and shall use or shall have used, such reproduction, counterfeit, copy, or colorable imitation in commerce among the several States, or with a foreign nation, or with the Indian tribes, shall be liable".).

[10] In 1962, Congress also amended six paragraphs of § 1127's definitions of terms other than "use in commerce," but left the "use in commerce" definition intact. See Lanham Act, 75 Stat. 769, 774 (1962). Despite broadening infringement liability in § 1114, Congress did not redefine "use in commerce" as applying only to registration and protection, and not to infringement.

[11] The Trademark Law Revision Act of 1988 was enacted on November 16, 1988 and went into effect November 16, 1989. Some courts and commentators refer to this Act as the 1988 amendment while others refer to it as the 1989 amendment.

[12] We express no view which of the alternative available solutions would seem preferable if our Circuit had not previously applied the second sentence to sections of the Act defining infringement.

354 F.3d 1020 (2004)

Nos. 00-56648, 00-56662.

Argued and Submitted September 11, 2001.
Filed January 14, 2004.

[1021] [1022] Barry G. Felder, Brown Raysman Millstein Felder & Steiner LLP, Los Angeles, CA, for the plaintiff-appellant.

Jeffrey K. Riffer, Stanely M. Gibson and Jim D. Bauch, Jeffer, Mangels, Butler & Marmaro LLP, Los Angeles, CA, for the defendants-appellees.

Before: B. FLETCHER, T.G. NELSON, and BERZON, Circuit Judges.

T.G. NELSON, Circuit Judge.

Playboy Enterprises International, Inc. (PEI) appeals from the district court's grant of summary judgment in favor of Netscape Communications Corporation and Excite, Inc. PEI sued defendants for trademark infringement and dilution. We have jurisdiction pursuant to 28 U.S.C. § 1291. Because we conclude that genuine issues of material fact preclude summary judgment on both the trademark infringement and dilution claims, we reverse and remand.

I. FACTS

This case involves a practice called "keying" that defendants use on their Internet search engines. Keying allows advertisers to target individuals with certain interests by linking advertisements to pre-identified terms. To take an innocuous example, a person who searches for a term related to [1023] gardening may be a likely customer for a company selling seeds. Thus, a seed company might pay to have its advertisement displayed when searchers enter terms related to gardening. After paying a fee to defendants, that company could have its advertisements appear on the page listing the search results for gardening-related terms: the ad would be "keyed" to gardening-related terms. Advertisements appearing on search result pages are called "banner ads" because they run along the top or side of a page much like a banner.^[1]

Defendants have various lists of terms to which they key advertisers' banner ads. Those lists include the one at issue in this case, a list containing terms related to sex and adult-oriented entertainment. Among the over-400 terms in this list are two for which PEI holds trademarks: "playboy" and "playmate."^[2] Defendants require adult-oriented companies to link their ads to this set of words. Thus, when a user types in "playboy," "playmate," or one of the other listed terms, those companies' banner ads appear on the search results page.^[3]

PEI introduced evidence that the adult-oriented banner ads displayed on defendants' search results pages are often graphic in nature and are confusingly labeled or not labeled at all. In addition, the parties do not dispute that buttons on the banner ads say "click here." When a searcher complies, the search results page disappears, and the searcher finds him or herself at the advertiser's website. PEI presented uncontroverted evidence that defendants monitor "click rates," the ratio between the number of times searchers click on banner ads and the number of times the ads are shown. Defendants use click rate statistics to convince advertisers to renew their keyword contracts. The higher the click rate, the more successful they deem a banner ad.

PEI sued defendants, asserting that they were using PEI's marks in a manner that infringed upon and diluted them. The district court denied PEI's request for a preliminary injunction, and this court affirmed in an unpublished disposition.^[4] On remand, the parties filed cross-motions for summary judgment. The district court granted summary judgment in favor of defendants. We reverse.

II. STANDARD OF REVIEW

We review the district court's grant of summary judgment de novo.^[5] Viewing the evidence in the light most favorable to PEI, and drawing all reasonable inferences in PEI's favor, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law.^[6] The moving party — in this case, the defendants — bears the "initial [1024] burden of identifying for the court the portions of the materials on file that it believes demonstrate the absence of any genuine issue of material fact."^[7] If the moving party meets its initial burden, the burden shifts to the non-moving party to "set forth, by affidavit or as otherwise provided by Rule 56, `specific facts showing that there is a genuine issue for trial.'"^[8] We may not weigh the evidence or determine the truth of the matter but may only determine whether there is a genuine issue for trial.^[9]

III. DISCUSSION

A. Trademark Infringement

With regard to PEI's trademark infringement claim, the parties disagree on three points. First, the parties dispute whether a direct or a contributory theory of liability applies to defendants' actions. We conclude that defendants are potentially liable under one theory and that we need not decide which one. Second, the parties disagree regarding whether PEI has successfully shown that a genuine issue of material fact exists regarding the likelihood of consumer confusion resulting from defendants' use of PEI's marks. We conclude that a genuine issue of material fact does exist. Finally, the parties dispute whether any affirmative defenses apply. We conclude that no defenses apply. We will address each dispute in turn.

1. Theory of liability.

Whether the defendants are directly or merely contributorily liable proves to be a tricky question. However, we need not decide that question here. We conclude that defendants are either directly or contributorily liable. Under either theory, PEI's case may proceed. Thus, we need not decide this issue.

2. PEI's case for trademark infringement.

The "core element of trademark infringement," the likelihood of confusion, lies at the center of this case.^[10] No dispute exists regarding the other requirements set forth by the statute: PEI clearly holds the marks in question and defendants used the marks in commerce^[11] without PEI's permission.^[12]

PEI's strongest argument for a likelihood of confusion is for a certain kind of confusion: initial interest confusion.^[13] [1025] Initial interest confusion is customer confusion that creates initial interest in a competitor's product.^[14] Although dispelled before an actual sale occurs, initial interest confusion impermissibly capitalizes on the goodwill associated with a mark and is therefore actionable trademark infringement.^[15]

PEI asserts that, by keying adult-oriented advertisements to PEI's trademarks, defendants actively create initial interest confusion in the following manner. Because banner advertisements appear immediately after users type in PEI's marks, PEI asserts that users are likely to be confused regarding the sponsorship of un-labeled banner advertisements.^[16] In addition, many of the advertisements instruct users to "click here." Because of their confusion, users may follow the instruction, believing they will be connected to a PEI cite. Even if they realize "immediately upon accessing" the competitor's site that they have reached a site "wholly unrelated to" PEI's, the damage has been done: Through initial consumer confusion, the competitor "will still have gained a customer by appropriating the goodwill that [PEI] has developed in its [] mark."^[17]

PEI's theory strongly resembles the theory adopted by this court in Brookfield Communications, Inc. v. West Coast Entertainment Corporation.^[18] In Brookfield, a video rental company, West Coast Entertainment Corporation, planned on using "moviebuff.com" as a domain name for its website and using a similar term in the metatags for the site.^[19] Brookfield had trademarked the term "MovieBuff," however, and sued West Coast for trademark infringement.^[20] The court ruled in favor of Brookfield. It reasoned that Internet users entering Brookfield's mark (plus ".com") or searching for Brookfield's mark on search engines using metatags, would find themselves at West Coast's website. Although they might "realize, immediately upon accessing `moviebuff.com,' that they have reached a site operated by West Coast and wholly unrelated to Brookfield," some customers who were originally seeking Brookfield's website "may be perfectly content with West Coast's database (especially as it is offered free of charge)."^[21] Because those customers would have found West Coast's site due to West Coast's "misappropriation of Brookfield's goodwill" in its mark, the court concluded that Brookfield withstood summary judgment.^[22]

In this case, PEI claims that defendants, in conjunction with advertisers, have misappropriated the goodwill of PEI's marks by leading Internet users to competitors' websites just as West Coast video misappropriated the goodwill of Brookfield's mark. Some consumers, initially seeking PEI's sites, may initially believe that unlabeled banner advertisements are links to PEI's sites or to sites affiliated with PEI. Once they follow the instructions to "click here," and they access the site, they may well realize that they are not at a PEI-sponsored site. However, they may be perfectly happy to remain on the competitor's site, just as the Brookfield court surmised that some searchers initially [1026] seeking Brookfield's site would happily remain on West Coast's site. The Internet user will have reached the site because of defendants' use of PEI's mark. Such use is actionable.^[23]

Although analogies to Brookfield suggest that PEI will be able to show a likelihood of confusion sufficient to defeat summary judgment, we must test PEI's theory using this circuit's well-established eight-factor test for the likelihood of confusion to be certain. Accordingly, we turn to that test now.

The Ninth Circuit employs an eight-factor test, originally set forth in AMF Inc. v. Sleekcraft Boats,^[24] to determine the likelihood of confusion. The eight factors are:

1. strength of the mark;

2. proximity of the goods;

3. similarity of the marks;

4. evidence of actual confusion;

5. marketing channels used;

6. type of goods and the degree of care likely to be exercised by the purchaser;

7. defendant's intent in selecting the mark; and

8. likelihood of expansion of the product lines.^[25]

In the Internet context, courts must be flexible in applying the factors, as some may not apply.^[26] Moreover, some factors are more important than others. For example, a showing of actual confusion among significant numbers of consumers provides strong support for the likelihood of confusion.^[27] For that reason, we turn first to an examination of factor four: evidence of actual confusion.

a. Factor 4: Evidence of Actual Confusion.

The expert study PEI introduced establishes a strong likelihood of initial interest confusion among consumers. Thus, factor four alone probably suffices to reverse the grant of summary judgment.

PEI's expert, Dr. Ford, concluded that a statistically significant number of Internet users searching for the terms "playboy" and "playmate" would think that PEI, or an affiliate, sponsored banner ads containing adult content that appear on the search results page. When study participants were shown search results for the term "playboy," 51% believed that PEI sponsored or was otherwise associated with the adult-content banner ad displayed.^[28] When shown results for the term "playmate," 31% held the same belief. Using control groups, Dr. Ford also concluded that for 29% of those participants viewing "playboy" searches and 22% of those viewing "playmate" searches, the confusion stemmed from the targeting of the banner advertisements. The individuals were not confused by random, un-targeted advertisements.

Defendants criticize Dr. Ford's procedures and conclusions. They offer their own interpretations of his data, with significantly [1027] lower rates of confusion. Defendants cite cases identifying probabilities of confusion of 7.6% and less as de minimis and then argue that Dr. Ford's results showed de minimis confusion as well. Their critique of Dr. Ford's methods and interpretations formed the basis of a motion to exclude his expert testimony and report before the district court. The district court denied that motion, however, and allowed the introduction of the evidence.

Defendants may have valid criticism of Dr. Ford's methods and conclusions, and their critique may justify reducing the weight eventually afforded Dr. Ford's expert report. The district court's evidentiary ruling is not before us on appeal, however, and weighing admissible evidence at this stage is improper.^[29] Defendants' arguments prove the point that a genuine issue of material fact exists regarding actual confusion. The presence of Dr. Ford's criticized (but uncontradicted) report, with its strong conclusions that a high likelihood of initial interest confusion exists among consumers, thus generates a genuine issue of material fact on the actual confusion issue.

Because actual confusion is at the heart of the likelihood of confusion analysis,^[30] Dr. Ford's report alone probably precludes summary judgment. In the interest of being thorough, however, we will examine the other seven Sleekcraft factors. On balance, they also support PEI.

b. Factor One: Strength of the Mark.

PEI has established that strong secondary meanings for its descriptive marks exist, and that a genuine issue of material fact exists as to whether it created the secondary meanings.^[31] Thus, the first Sleekcraft factor favors PEI.

At this point, defendants concede that they use the marks for their secondary meanings.^[32] Thus, they concede that the marks have secondary meanings. They offer only a weak argument regarding the strength of the meanings.^[33] Given that defendants themselves use the terms precisely because they believe that Internet [1028] searchers associate the terms with their secondary meanings, disputing the strength of the secondary meanings is somewhat farfetched. The only meaningful dispute is whether PEI created the strong secondary meanings associated with the mark.

PEI offered evidence, in the form of expert reports, tending to show that PEI did create the secondary meanings of "playboy" and "playmate." PEI's expert evidence countered the defendants' expert evidence to the contrary, and suffices to generate a genuine issue of material fact on this issue.

c. Factor Two: Proximity of the Goods.

From an Internet searcher's perspective, the relevant "goods" are the links to the websites being sought and the goods or services available at those sites. The proximity between PEI's and its competitor's goods provides the reason Netscape keys PEI's marks to competitor's banner advertisements in the first place. Accordingly, this factor favors PEI as well.

d. Factor Three: Similarity of the Marks.

No doubt exists regarding this factor. Aside from their lack of capitalization, their font, and the fact that defendants use the plural form of "playmate," the terms defendants use are identical to PEI's marks. Thus, they are certainly similar.^[34]

e. Factor Five: Marketing Channels Used.

This factor is equivocal. PEI and the advertisers use identical marketing channels: the Internet. More specifically, each of their sites appears on defendants' search results pages. Given the broad use of the Internet today, the same could be said for countless companies. Thus, this factor merits little weight.

f. Factor Six: Type of Goods and Degree of Consumer Care Expected.

This factor favors PEI. Consumer care for inexpensive products is expected to be quite low.^[35] Low consumer care, in turn, increases the likelihood of confusion.^[36]

In addition to price, the content in question may affect consumer care as well. We presume that the average searcher seeking adult-oriented materials on the Internet is easily diverted from a specific product he or she is seeking if other options, particularly graphic ones, appear more quickly. Thus, the adult-oriented and graphic nature of the materials weighs in PEI's favor as well.

g. Factor Seven: Defendants' Intent in Selecting the Mark.

This factor favors PEI somewhat. A defendant's intent to confuse constitutes probative evidence of likely confusion:^[37] Courts assume that the defendant's intentions were carried out successfully. In this case, the evidence does not definitively establish defendants' intent. At a minimum, however, it does suggest that defendants do nothing to prevent click-throughs^[38] that result from confusion. Moreover, they profit from such click-throughs.

[1029] Defendants monitor "click-through" rates on the advertisements they display. That is, they monitor the number of times consumers are diverted to their advertisers' sites. They use the click-through rates as a way to gauge the success of the advertisements and to keep advertisers coming back to their services. Although some click-throughs may be the result of legitimate consumer interest, not confusion, some may be expected to result from confusion. Defendants will profit from both kinds of click-throughs. And they do nothing to ensure that only click-throughs based on legitimate interest, as opposed to confusion, occur.

PEI introduced evidence suggesting that labeling the advertisements would reduce click-through rates. It would also reduce confusion. However, although defendants control the content of advertisements in other contexts, defendants do not require that advertisers identify themselves on their banner ads. Moreover, they do not label the advertisements themselves. Perhaps even more telling, defendants refuse to remove the highly-rated terms "playboy" and "playmate" from their lists of keywords, even when advertisers request that they do so.^[39]

The above evidence suggests, at a minimum, that defendants do nothing to alleviate confusion, even when asked to do so by their advertisers, and that they profit from confusion. Although not definitive, this factor provides some evidence of an intent to confuse on the part of defendants. This factor thus favors PEI.

h. Factor Eight: Likelihood of Expansion of Product Lines.

Because the advertisers' goods and PEI's are already related, as discussed within factor two, this factor is irrelevant.

Having examined all of the Sleekcraft factors, we conclude that the majority favor PEI. Accordingly, we conclude that a genuine issue of material fact exists as to the substantial likelihood of confusion. We now proceed to the defenses advanced by defendants.

3. Defenses.

Defendants assert three defenses: fair use, nominative use, and functional use. Because we have found that a genuine issue of fact exists as to likelihood of confusion under Sleekcraft, we must deny summary judgment as to the fair use defense. A fair use may not be a confusing use.^[40] Accordingly, we turn to defendants' other asserted defenses.

Defendants assert that they make a nominative use of PEI's marks. We apply a slightly different test for confusion in the nominative use, as opposed to the fair use, context.^[41] To be considered a nominative use, the use of a mark must meet the following three-factor test:

First, the product or service in question must be one not readily identifiable without use of the trademark; second, only so much of the mark or marks may be used as is reasonably necessary to [1030] identify the product or service; and third, the user must do nothing that would, in conjunction with the mark, suggest sponsorship or endorsement by the trademark holder.^[42]

Before we apply this test to the facts at hand, we would like to emphasize what facts are not at hand. We note that defendants' use of PEI's marks to trigger the listing of PEI sites, and other sites that legitimately use PEI's marks,^[43] is not at issue here. In addition, we note that we are not addressing a situation in which a banner advertisement clearly identifies its source with its sponsor's name,^[44] or in which a search engine clearly identifies a banner advertisement's source. We are also not addressing a situation in which advertisers or defendants overtly compare PEI's products to a competitor's — saying, for example "if you are interested in Playboy, you may also be interested in the following message from[a different, named company]." Rather, we are evaluating a situation in which defendants display competitors' unlabeled banner advertisements, with no label or overt comparison to PEI, after Internet users type in PEI's trademarks.

The situation with which we are dealing runs afoul of the first requirement for nominative use. Accordingly, we do not consider the other prongs.

Defendants could use other words, besides PEI's marks, to trigger adult-oriented banner advertisements. Indeed, they already do so. The list they sell to advertisers includes over 400 terms besides PEI's marks. There is nothing indispensable, in this context, about PEI's marks.^[45] Defendants do not wish to identify PEI or its products when they key banner advertisements to PEI's marks.^[46] Rather, they wish to identify consumers who are interested in adult-oriented entertainment so they can draw them to competitors' websites. Accordingly, their use is not nominative. Thus, we reverse the district court's grant of summary judgment based on nominative use.

Defendants' final asserted defense, functional use, also fails. Defendants appear not to have raised this defense before the district court. Even if they have not waived the defense, however, it fails. Under the functional use doctrine, parts of a design that have a functional use may not receive trademark protection.^[47] We do not have such a case here.

Nothing about the marks used to identify PEI's products is a functional part of [1031] the design of those products. PEI could easily have called its magazine and its models entirely different things without losing any of their intended function. Thus, the marks are not functional and may be granted trademark protection.^[48]

The fact that the marks make defendants' computer program more functional is irrelevant. Defendants designed their program to identify consumers interested in adult-oriented entertainment so that some percentage of those consumers might be attracted to competitors' websites, thereby helping defendants generate advertising revenue. Thus, defendants might conceivably be unable to trademark some of the terms used in their program because those terms are functional within that program. Because we are not dealing with defendants' wish to trademark their computer program, but with PEI's ability to protect the trademarks it already uses to identify its products, the doctrine of functional use does not help defendants here.

We hold that genuine issues of material fact exist with respect to defendants' keying practices. Thus, we conclude that summary judgment was inappropriate on the trademark infringement claim.

B. Trademark Dilution

We reverse the district court's grant of summary judgment on PEI's second cause of action, trademark dilution,^[49] and remand for further proceedings. We conclude that PEI has established that genuine issues of material fact exist regarding two of the three elements that the parties dispute: the famousness of the marks and defendants' commercial use of the mark.^[50] We will address each of the three disputed elements in turn.

1. Famousness of the mark.

The federal dilution statute provides eight factors courts may use, along with other relevant factors, "[i]n determining whether a mark is distinctive and famous."^[51] Those eight factors are:

(A) the degree of inherent or acquired distinctiveness of the mark;

(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

(C) the duration and extent of advertising and publicity of the mark;

(D) the geographical extent of the trading area in which the mark is used;

(E) the channels of trade for the goods or services with which the mark is used;

(F) the degree of recognition of the mark in the trading areas and channels of trade used by the marks' owner and the person against whom the injunction is sought;

[1032] (G) the nature and extent of use of the same or similar marks by third parties; and

(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.^[52]

No grounds exist to contest factors (B), (C), (D), (E), and (H), all of which favor PEI. Defendants directly contest only factor (G): "the nature and extent of use of the same or similar marks by third parties."^[53] We conclude that PEI has established a genuine issue of material fact regarding factor (G). Accordingly, the first contested requirement of trademark dilution favors PEI for purposes of summary judgment.

Defendants introduced evidence that more than forty third-party trademark registrations exist for the terms "playboy" and "playmate," as well as evidence that hundreds of companies use the terms within their company names. Plaintiffs countered, however, by showing that: (a) many of the companies cited by defendants are active infringers whom PEI is diligently pursuing; (b) others are merely companies who have applied for similar marks but who have not yet received them; and (c) still others are listed several times. The remainder, PEI asserts, are in different fields or in localized areas and should not be counted, at least not when considering whether PEI's marks are famous within their market.^[54]

Thus, defendants introduced evidence of third-party use and PEI disputed the evidence with evidence of its own showing that defendants' list was substantially over-inclusive. A dispute of material fact thus exists as to the only factor relevant to the famousness of the marks that defendants contest. Accordingly, the first contested requirement of dilution favors PEI on summary judgment.

2. Defendants' commercial use of the mark.

Congress intended to limit only commercial speech, as opposed to political or other more closely protected speech, when it passed the dilution statute; thus, it included the requirement that the use be a commercial one.^[55] A successful argument that defendants make no commercial use of the marks, then, would be an argument that the speech associated with their actions was political, not commercial. Defendants do not make such an argument, and it would be difficult to do so in light of the clear evidence of the commercial nature of their enterprise. Accordingly, PEI has satisfied the second disputed requirement of dilution.

[1033] 3. Dilution of distinctive quality of marks.

We conclude that the district court erred when it held, applying the standard then in force,^[56] that PEI had shown no likelihood of dilution. However, because the Supreme Court recently clarified the standard for withstanding summary judgment on dilution claims, we vacate the district court's decision on this point and remand with instructions to re-open discovery to allow the parties to introduce evidence that may satisfy, or undermine, the new standard.^[57]

Under the old standard, PEI established a genuine issue of material fact regarding likelihood of dilution. With respect to blurring,^[58] PEI introduced evidence suggesting that a significant number of Internet users assume that advertisements are sponsored or somehow affiliated with PEI after a search using PEI's trademarked terms. Defendants did not counter that evidence. With respect to tranishment,^[59] plaintiffs introduced evidence tending to show that consumers consider the materials in the banner ads to be inferior to the materials offered by PEI and that consumers are confused regarding sponsorship of the banner ads. Defendants also did not counter that evidence.

Defendants argue that dilution cannot be found because they do not label their own goods with PEI's marks. However, when one considers things from the consumers' perspective, defendants' argument fails. According to PEI's evidence, in the minds of consumers, defendants implicitly label the goods of PEI's competitors with its marks.

Finding fault with the methods used to collect and evaluate PEI's evidence regarding Internet searchers' association between the keyed advertisements and PEI, defendants criticize PEI's evidence regarding the likelihood of blurring. As with the evidence regarding the likelihood of confusion in the infringement claim, however, defendants' critique of PEI's evidence pointed to a genuine issue of fact on this issue, not to summary judgment.

Defendants did not counter PEI's evidentiary showing in support of tarnishment. Accordingly, PEI showed a likelihood of tarnishment as well.

Because we conclude that the district court erred under the traditional theories of dilution, we need not reach the parties' arguments regarding whether Panavision International, L.P. v. Toeppen^[60] applies, whether it created a new species of dilution, or whether it remains valid after Congress enacted the Anticybersquatting Consumer Protection Act of 1999.^[61] Accordingly, [1034] if the old standard applied, we would reverse and remand for post-summary judgment proceedings.

Because the old standard, requiring a showing of a mere likelihood of dilution, no longer applies, we vacate the district court's decision as to the third element of the dilution claim and remand in order to allow the district court to apply the proper standard.^[62] Under that standard, to withstand summary judgment, a party must show that actual dilution has occurred.^[63] PEI's current evidence does not establish actual dilution. Thus, we remand with instructions to re-open discovery and to allow motions directed at the new standard.

Genuine issues of material fact preclude summary judgment on PEI's dilution claim. The fame of the marks and the likelihood of dilution are in dispute, thereby precluding summary judgment.

IV. CONCLUSION

Genuine issues of material fact exist as to PEI's trademark infringement and dilution claims. Accordingly, we reverse the district court's grant of summary judgment in favor of defendants and remand for further proceedings.

REVERSED AND REMANDED.

BERZON, Circuit Judge, concurring.

I concur in Judge Nelson's careful opinion in this case, as it is fully consistent with the applicable precedents. I write separately, however, to express concern that one of those precedents was wrongly decided and may one day, if not now, need to be reconsidered en banc.

I am struck by how analytically similar keyed advertisements are to the metatags found infringing in Brookfield Communications v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir.1999). In Brookfield, the court held that the defendant could not use the trademarked term "moviebuff" as one of its metatags. Metatags are part of the HTML code of a web page, and therefore are invisible to internet users. Search engines use these metatags to pull out websites applicable to search terms. See also Promatek Indus., Ltd. v. Equitrac Corp., 300 F.3d 808, 812-13 (7th Cir.2002) (adopting the Brookfield holding).

Specifically, Brookfield held that the use of the trademarked terms in metatags violated the Lanham Act because it caused "initial interest confusion." Brookfield, 174 F.3d at 1062-66. The court explained that even though "there is no source confusion in the sense that consumers know[who] they are patronizing, ... there is nevertheless initial interest confusion in the sense that, by using `moviebuff.com' or `MovieBuff' to divert people looking for `MovieBuff' to its website, [the defendant] improperly benefits from the goodwill that [the plaintiff] developed in its mark." Id. at 1062.

As applied to this case, Brookfield might suggest that there could be a Lanham Act violation even if the banner advertisements were clearly labeled, either by the advertiser or by the search engine. I do not believe that to be so. So read, the metatag holding in Brookfield would expand the reach of initial interest confusion from situations in which a party is initially confused to situations in which a party is never confused. I do not think it is reasonable to find initial interest confusion when a consumer is never confused as to source or affiliation, but instead knows, or should know, from the outset that a product or web link is not related to that of the trademark holder because the list produced [1035] by the search engine so informs him.

There is a big difference between hijacking a customer to another website by making the customer think he or she is visiting the trademark holder's website (even if only briefly), which is what may be happening in this case when the banner advertisements are not labeled, and just distracting a potential customer with another choice, when it is clear that it is a choice. True, when the search engine list generated by the search for the trademark ensconced in a metatag comes up, an internet user might choose to visit westcoastvideo.com, the defendant's website in Brookfield, instead of the plaintiff's moviebuff.com website, but such choices do not constitute trademark infringement off the internet, and I cannot understand why they should on the internet.

For example, consider the following scenario: I walk into Macy's and ask for the Calvin Klein section and am directed upstairs to the second floor. Once I get to the second floor, on my way to the Calvin Klein section, I notice a more prominently displayed line of Charter Club clothes, Macy's own brand, designed to appeal to the same people attracted by the style of Calvin Klein's latest line of clothes. Let's say I get diverted from my goal of reaching the Calvin Klein section, the Charter Club stuff looks good enough to me, and I purchase some Charter Club shirts instead. Has Charter Club or Macy's infringed Calvin Klein's trademark, simply by having another product more prominently displayed before one reaches the Klein line? Certainly not. See Gregory Shea, Note, Trademarks and Keyword Banner Advertising, 75 S. CAL. L. REV. 529, 554 (2002) (comparing keyed banner advertisements to a customer entering a supermarket, requesting Tylenol, and then being directed to the pain reliever section which includes generic Acetaminophen, along with other generic and name-brand pain relievers); Julie A. Rajzer, Comment, Misunderstanding the Internet: How Courts are Overprotecting Trademarks Used in Metatags, 2001 L. REV. MICH. ST. U.C.L. 427, 462-63 (2001) (highlighting the brick-and-mortar world in which Kellogg's Raisin Bran and Post Raisin Bran both appear next to one another on the same aisle).

Similarly, suppose a customer walks into a bookstore and asks for Playboy magazine and is then directed to the adult magazine section, where he or she sees Penthouse or Hustler up front on the rack while Playboy is buried in back. One would not say that Penthouse or Hustler had violated Playboy's trademark. This conclusion holds true even if Hustler paid the store owner to put its magazines in front of Playboy's.

One can test these analogies with an on-line example: If I went to Macy's website and did a search for a Calvin Klein shirt, would Macy's violate Calvin Klein's trademark if it responded (as does Amazon.com, for example) with the requested shirt and pictures of other shirts I might like to consider as well? I very much doubt it.

Accordingly, I simply cannot understand the broad principle set forth in Brookfield. Even the main analogy given in Brookfield belies its conclusion. The Court gives an example of Blockbuster misdirecting customers from a competing video store, West Coast Video, by putting up a highway billboard sign giving directions to Blockbuster but telling customers that a West Coast Video store is located there. Brookfield, 174 F.3d at 1064. Even though customers who arrive at the Blockbuster realize that it is not West Coast Video, they were initially misled and confused. Id.

But there was no similar misdirection in Brookfield, nor would there be similar misdirection in this case were the banner ads [1036] labeled or otherwise identified. The Brookfield defendant's website was described by the court as being accurately listed as westcoastvideo.com in the applicable search results. Consumers were free to choose the official moviebuff.com website and were not hijacked or misdirected elsewhere. I note that the billboard analogy has been widely criticized as inapplicable to the internet situation, given both the fact that customers were not misdirected and the minimal inconvenience in directing one's web browser back to the original list of search results. See J. THOMAS McCARTHY, McCARTHY ON TRADEMARKS & UNFAIR COMPETITION § 25:69 (4th ed.2003); Shea, supra at 552.

The degree to which this questionable aspect of Brookfield affects this case is not clear to me. Our opinion limits the present holding to situations in which the banner advertisements are not labeled or identified. See ante at 1029-1030. Whether, on remand, the case will remain so limited is questionable. PEI may seek to reach labeled advertisements as well.

There will be time enough to address the continuing vitality of Brookfield should the labeled advertisement issue arise later. I wanted to flag the issue, however, as another case based on the metatag aspect of Brookfield was decided recently, Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036 (9th Cir.2003), so the issue is a recurring one. Should the question arise again, in this case or some other, this court needs to consider whether we want to continue to apply an insupportable rule.

[1] Not all banner ads are keyed. Some advertisers buy space for their banner ads but only pay to have their ads displayed randomly. Such ads cost less because they are un-targeted and are therefore considered less effective.

[2] The other terms are generally un-trade-marked words associated with adult entertainment, ranging from the expected (sex, parts of the human anatomy, etc.) to the disturbing (gangbangers).

[3] The search results page lists websites relevant to the search terms pursuant to the search engine's computer program. A user can click on any item in the list to link to the website of the organization listed. Defendants' search results pages for the terms "playboy" and "playmate" include links to PEI's websites.

[4] Playboy Enters., Inc. v. Netscape Communications Corp., 55 F.Supp.2d 1070 (C.D.Cal.), aff'd, 202 F.3d 278 (9th Cir.1999).

[5] Lopez v. Smith, 203 F.3d 1122, 1131 (9th Cir.2000).

[6] Id.

[7] T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987).

[8] Id. (quoting Fed.R.Civ.P. 56(c)).

[9] Abdul-Jabbar v. Gen. Motors Corp., 85 F.3d 407, 410 (9th Cir.1996).

[10] Brookfield Communications, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1053 (9th Cir.1999). Because California trademark law claims are "substantially congruent," we do not examine them separately in this opinion, just as the district court did not. Denbicare U.S.A. Inc. v. Toys R Us, Inc., 84 F.3d 1143, 1152 (9th Cir.1996) (internal quotation marks omitted).

[11] Federal jurisdiction over trademark cases rests on the Commerce Clause, sweeps as broadly as possible, and clearly encompasses the circumstances of this case. 15 U.S.C. § 1127 (defining "commerce" for jurisdictional purposes as "all commerce which may lawfully be regulated by Congress"); see Steele v. Bulova Watch Co., 344 U.S. 280, 283-84, 73 S.Ct. 252, 97 L.Ed. 319 (1952). In addition to defining "commerce," 15 U.S.C. § 1127 also defines "use in commerce." 15 U.S.C. § 1127. That latter definition applies to the required use a plaintiff must make in order to have rights in a mark, as defined by 15 U.S.C. § 1051. See Planetary Motion, Inc. v. Techsplosion, Inc., 261 F.3d 1188, 1194-95 (11th Cir.2001). It does not enter into our jurisdictional analysis.

[12] 15 U.S.C. § 1114(1)(a).

[13] Indeed, we find insufficient evidence to defeat summary judgment on any other theory.

[14] Brookfield, 174 F.3d at 1062-63.

[15] Id. at 1057.

[16] Note that if a banner advertisement clearly identified its source or, even better, overtly compared PEI products to the sponsor's own, no confusion would occur under PEI's theory.

[17] Brookfield, 174 F.3d at 1057.

[18] 174 F.3d 1036 (9th Cir.1999).

[19] Id. at 1042.

[20] Id. at 1043.

[21] Id. at 1057.

[22] Id.

[23] Id. at 1062-65.

[24] 599 F.2d 341, 348-49 (9th Cir.1979).

[25] Id.

[26] Brookfield, 174 F.3d at 1054. In this case, we conclude that only the final factor — the likelihood of expansion of product lines — does not apply.

[27] Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894, 902 (9th Cir.2002) ("Evidence of actual confusion constitutes persuasive proof that future confusion is likely.... If enough people have been actually confused, then a likelihood that people are confused is established.") (internal quotation marks omitted).

[28] Surveys are commonly introduced as probative evidence of actual confusion. See Schering Corp. v. Pfizer Inc., 189 F.3d 218, 225 (2d Cir.1999).

[29] Abdul-Jabbar, 85 F.3d at 410.

[30] Thane, 305 F.3d at 902.

[31] Sleekcraft, 599 F.2d at 349 n. 12 (noting that, once a party establishes that it has created secondary meaning, "the protection afforded should be commensurate with the degree of consumer association proven").

[32] Indeed, to argue that they use the marks for their primary meaning, as defendants did below, is absurd. Defendants obviously do not use the term "playmate," for example, for its dictionary definition: "a companion, especially of a child, in games and play." WEBSTER'S NEW WORLD DICTIONARY, 3d coll. ed. (1988).

[33] Defendants cite third-party use of the mark as evidence that the secondary meanings of PEI's marks are weak. However, as discussed in the dilution context in section III.B, the degree of third-party use is in dispute in this case, and we do not find their evidence helpful here. Although evidence of extensive third-party use of a mark may be useful in evaluating the strength of the secondary meaning of a mark, we note that such evidence can cut both ways. On the one hand, extensive third-party use of a mark might tend to show that consumers are likely to associate the mark with companies and meanings other than the markholder's. See, e.g., Amstar Corp. v. Domino's Pizza, Inc., 615 F.2d 252, 259-60 (5th Cir.1980). However, if consumers associate the mark with the markholder, and the markholder's secondary meaning, despite extensive third-party use, the third-party uses would tend to show the strength of the association created by the markholder. Finally, the markets in which the markholder and the third parties use the mark must be considered. See Nat'l Lead Co. v. Wolfe, 223 F.2d 195, 204 (9th Cir.1955) (considering, and rejecting, evidence of third-party use because use within the relevant market, for paint, was de minimis). Evidence of third-party use in markets similar to the markholder's is more compelling than evidence of third-party use in unrelated markets. See id. Thus, even if relevant to our inquiry in the infringement context, the evidence would not be dispositive on summary judgment.

[34] See Sleekcraft, 599 F.2d at 350-52.

[35] See Brookfield, 174 F.3d at 1060 ("[W]hen dealing with inexpensive products, customers are likely to exercise less care, thus making confusion more likely.").

[36] Id.

[37] See Sleekcraft, 599 F.2d at 348 n. 9.

[38] If users click on a banner advertisement, Netscape has designed its program to link them immediately to the advertiser's website. Thus, the user has "clicked-through" the advertisements to the advertiser's website.

[39] PEI introduced evidence that, even when advertisers objected to using PEI's marks to key advertisements, defendants refused to remove the marks from the keying list. This places advertisers in a difficult situation, as described infra.

[40] Lindy Pen Co., Inc. v. Bic Pen Corp., 725 F.2d 1240, 1248 (9th Cir.1984) (declining to adopt an interpretation of fair use under which a use might be fair "even where likelihood of confusion has been shown," but noting that liability may not be imposed for truthful comparative advertising, an example of a nominative use).

[41] See PEI v. Welles, 279 F.3d 796, 801 (9th Cir.2002) (citing New Kids on the Block v. News America Publ'g, Inc., 971 F.2d 302, 309 (9th Cir.1992)).

[42] New Kids on the Block, 971 F.2d at 308 (footnote omitted).

[43] See, e.g., PEI v. Welles, 279 F.3d at 803-04 (concluding that defendant's use of PEI's marks in the metatags of her website was a permissible, nominative use).

[44] Doing so might eliminate the likelihood of initial interest confusion that exists in this case.

[45] Compare Welles, 279 F.3d at 802 (explaining that, because Welles would have to use absurd and lengthy turns of phrase to describe her title as a Playboy Playmate of the Year without using the marks, her use of the marks satisfied the first requirement of nominative use).

[46] Id. at 801 (noting that, unlike a traditional fair use, a nominative use is a defendant's use of a mark to identify "not its own product, but the plaintiff's").

[47] Qualitex Co. v. Jacobson Prods. Co., 514 U.S. 159, 164-66, 115 S.Ct. 1300, 131 L.Ed.2d 248 (1995) (finding color of sponge to be non-functional and therefore granting it trademark protection); Fisher Stoves, Inc. v. All Nighter Stove Works, Inc., 626 F.2d 193, 195-96 (1st Cir.1980) (finding stove roof design functional and therefore denying it trademark protection); Compaq Computer Corp. v. Procom Tech., Inc., 908 F.Supp. 1409, 1423 (S.D.Tex.1995) (finding that words may, in rare instances, be functional and that use of the word "Compaq" as an identifier was functional in case at hand).

[48] Qualitex, 514 U.S. at 169-70, 115 S.Ct. 1300.

[49] PEI asserted claims under federal and state law. Analysis of the state law is substantially similar to analysis of the federal law. See Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 874 (9th Cir.1999). Accordingly, we do not separately address state law claims.

[50] The dilution statute, 15 U.S.C. § 1125(c), provides relief to the owners of famous marks by providing "an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark...." The only portion of PEI's claim not in dispute is the time of defendants' use, which was clearly after PEI registered the mark. That leaves the famousness of the mark, defendants' commercial use of the mark, and dilution of the mark in dispute.

[51] 15 U.S.C. § 1125(c).

[52] Id. at (c)(1).

[53] Id. We reject defendants' contention that PEI has waived the remaining factors. PEI argued that its mark was famous before the district court and both parties introduced evidence that was relevant to that issue, including evidence relevant to the factors listed by the statute. Thus, no waiver has occurred.

[54] PEI thus argues that the market for seeds to which "Playboy" sweet potatoes and yams are targeted and the market for children's toys and games to which "Playmate" toys are targeted do not affect PEI's fame within its entirely different niche. PEI makes a strong argument for niche fame which defendants do not adequately counter and which the district court appears not to have considered. This alone provides grounds for reversal. See Syndicate Sales, Inc. v. Hampshire Paper Corp., 192 F.3d 633, 640-41 (7th Cir.1999) (holding that the lower court erred in failing to consider fame within a niche market where defendant was directing activity towards the same market); Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 878 (9th Cir.1999).

[55] See J. McCARTHY, TRADEMARKS AND UNFAIR COMPETITION § 24:97:2 (4th ed.2001); House Rep. No. 104-374 (Nov. 30, 1995).

[56] See Moseley v. V Secret Catalogue, Inc., 537 U.S. 418, 123 S.Ct. 1115, 1124, 155 L.Ed.2d 1 (2003) (setting forth the current standard, which requires a showing of actual dilution to withstand summary judgment).

[57] See Horphag Research Ltd. v. Pellegrini, 337 F.3d 1036, 1041 (9th Cir.2003) (remanding to allow district court to re-consider motion to dismiss under new standard, where mark holder had satisfied old standard).

[58] Blurring occurs when another's use of a mark creates "the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product." Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1326 n. 7 (9th Cir.1998).

[59] Tarnishment occurs "when a famous mark is improperly associated with an inferior or offensive product or service." Id.

[60] 141 F.3d 1316, 1326 (9th Cir.1998) (approving a district court's finding of dilution where the defendant's conduct — registering plaintiff Panavision's trademarks in domain names — diminished "the capacity of the Panavision marks to identify and distinguish Panavision's goods and services on the Internet") (internal quotation marks omitted).

[61] 15 U.S.C. § 1125(d).

[62] See Horphag, 328 F.3d at 1113.

[63] Moseley, 123 S.Ct. at 1124.

638 F.3d 1137 (2011)

No. 10-55840.

Argued and Submitted December 8, 2010.
Filed March 8, 2011.

[1141] Courtney L. Stuart-Alban (argued), Brent H. Blakely, Blakely Law Group, Hollywood, CA, for the plaintiff-appellant.

James E. Doroshow (argued), Fox Rothschild LLP, Los Angeles, CA, for the defendant-appellee.

Before: STEPHEN S. TROTT and KIM McLANE WARDLAW, Circuit Judges, and MICHAEL W. MOSMAN, District Judge.^[1]

OPINION

WARDLAW, Circuit Judge:

"We must be acutely aware of excessive rigidity when applying the law in the [1142] Internet context; emerging technologies require a flexible approach."

Brookfield Commc'ns, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1054 (9th Cir.1999).

Network Automation ("Network") and Advanced Systems Concepts ("Systems") are both in the business of selling job scheduling and management software, and both advertise on the Internet. Network sells its software under the mark Auto-Mate, while Systems' product is sold under the registered trademark ActiveBatch. Network decided to advertise its product by purchasing certain keywords, such as "ActiveBatch," which when keyed into various search engines, most prominently Google and Microsoft Bing, produce a results page showing "www.Network Automation.com" as a sponsored link. Systems' objection to Network's use of its trademark to interest viewers in Network's website gave rise to this trademark infringement action.

The district court was confronted with the question whether Network's use of ActiveBatch to advertise its products was a clever and legitimate use of readily available technology, such as Google's AdWords, or a likely violation of the Lanham Act, 15 U.S.C. § 1114. The court found a likelihood of initial interest confusion by applying the eight factors we established more than three decades ago in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979), and reasoning that the three most important factors in "cases involving the Internet" are (1) the similarity of the marks; (2) the relatedness of the goods; and (3) the marketing channel used. The court therefore issued a preliminary injunction against Network's use of the mark ActiveBatch.

Mindful that the sine qua non of trademark infringement is consumer confusion, and that the Sleekcraft factors are but a nonexhaustive list of factors relevant to determining the likelihood of consumer confusion, we conclude that Systems' showing of a likelihood of confusion was insufficient to support injunctive relief. Therefore, we vacate the injunction and reverse and remand.

I. FACTUAL AND PROCEDURAL BACKGROUND

Systems is a software engineering and consulting firm founded in 1981. It has used the ActiveBatch trademark since 2000, and it procured federal registration of the mark in 2001. Systems markets ActiveBatch software to businesses, which use the product to centralize and manage disparate tasks. Network is a software company founded in 1997 under the name Unisyn. Its signature product, AutoMate, also provides businesses with job scheduling, event monitoring, and related services. Network has approximately 15,000 total customers, and between 4,000 and 5,000 active customers, including Fortune 500 companies and mid-sized and small firms. The cost of a license to use AutoMate typically ranges from $995 to $10,995. There is no dispute that Network and Systems are direct competitors, or that ActiveBatch and AutoMate are directly competing products.

Google AdWords is a program through which the search engine sells "keywords," or search terms that trigger the display of a sponsor's advertisement. When a user enters a keyword, Google displays the links generated by its own algorithm in the main part of the page, along with the advertisements in a separate "sponsored links" section next to or above the objective results. See Appendix A.^[2] Multiple [1143] advertisers can purchase the same keyword, and Google charges sponsors based on the number of times users click on an ad to travel from the search results page to the advertiser's own website. Network purchased "ActiveBatch" as a keyword from Google AdWords and a comparable program offered by Microsoft's Bing search engine.

As a result, consumers searching for business software who enter "ActiveBatch" as a search term would locate a results page where the top objective results are links to Systems' own website and various articles about the product. See Appendix A. In the "Sponsored Links" or "Sponsored Sites" section of the page, above or to the right of the regular results, users see Network's advertisement, either alone or alongside Systems' own sponsored link. The text of Network's advertisements begin with phrases such as "Job Scheduler," "Intuitive Job Scheduler," or "Batch Job Scheduling," and end with the company's web site address, www.Network Automation.com. The middle line reads: "Windows Job Scheduling + Much More. Easy to Deploy, Scalable. D/L Trial."

On November 16, 2009, Systems demanded that Network cease and desist from using the ActiveBatch mark in its search engine advertising, as it was not "authorized to use these marks in commerce." In a second letter, Systems explained that Network's use of ActiveBatch in its Google AdWords keyword advertising infringed Systems' trademark rights by deceiving customers into believing that Network's software products were affiliated with Systems' products. Systems threatened litigation unless Network immediately ceased all use of Systems' mark, including removing the mark from the Google AdWords Program. Network responded that its use of the ActiveBatch mark was non-infringing as a matter of law, and filed this lawsuit seeking a declaratory judgment of non-infringement. Systems counterclaimed on February 22, 2010, alleging trademark infringement under the Lanham Act, 15 U.S.C. § 1114(1), and moved for a preliminary injunction against Network's use of the ActiveBatch mark pending trial.

The district court granted injunctive relief on April 30, 2010. Noting that the parties did not dispute the validity or ownership of the ActiveBatch mark, the district court ruled that Systems was likely to succeed in satisfying the Lanham Act's "use in commerce" requirement by showing that Network "used" the mark when it purchased advertisements from search engines triggered by the term "ActiveBatch." Applying the eight-factor Sleekcraft test for source confusion,^[3] the district court emphasized three factors it viewed as significant for "cases involving the Internet": the similarity of the marks, relatedness of the goods or services, and simultaneous use of the Web as a marketing channel. The district court concluded that all three factors favored Systems: Network used the identical mark to sell a directly competing product, and both advertised on the Internet.

The district court also concluded that Systems' mark was strong because, as a federally registered trademark, Active-Batch is presumptively distinctive. It concluded that the degree of consumer care suggested likely confusion because "there is generally a low degree of care exercised [1144] by Internet consumers." Moreover, Network intentionally used Systems' mark to advertise its own product. Finally, the district court noted that neither party introduced evidence of actual confusion, and that the likelihood of product expansion was not relevant.

The district court also analyzed whether Network infringed Systems' mark by creating initial interest confusion—as opposed to source confusion—which "occurs when the defendant uses the plaintiff's trademark in a manner calculated to capture initial consumer attention, even though no actual sale is finally completed as a result of the confusion." (quoting Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002, 1018 (9th Cir.2004) (internal quotations omitted)). Because the district court found that Network's advertisements did not clearly divulge their source, it concluded that consumers might be confused into unwittingly visiting Network's website, allowing the company to "impermissibly capitalize[ ] on [Systems'] goodwill."

Based on its analysis of the Sleekcraft factors and its finding of likely initial interest confusion, the district court concluded that Systems had a strong likelihood of success on the merits of its trademark infringement claim. It then presumed a likelihood of irreparable harm, and concluded that the balance of hardships and the public interest favored Systems. Following entry of the preliminary injunction, Network timely appealed.

II. JURISDICTION AND STANDARD OF REVIEW

We have jurisdiction pursuant to 28 U.S.C. § 1292(a)(1). We review the grant of a preliminary injunction for abuse of discretion. See Advertise.com, Inc. v. AOL Advertising, Inc., 616 F.3d 974, 976 (9th Cir.2010). "The district court `should be reversed if [it] based its decision on an erroneous legal standard or on clearly erroneous findings of fact.'" Id. (quoting Stormans, Inc. v. Selecky, 586 F.3d 1109, 1119 (9th Cir.2009) (quotation marks omitted)).

III. DISCUSSION

"A plaintiff seeking a preliminary injunction must establish that he is likely to succeed on the merits, that he is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his favor, and that an injunction is in the public interest." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 129 S.Ct. 365, 374, 172 L.Ed.2d 249 (2008). Network argues that the district court erred by ruling that Systems was likely to succeed on the merits of its trademark claim, and by then presuming a likelihood of irreparable injury. It also contends that the preliminary injunction is overbroad.

To prevail on a claim of trademark infringement under the Lanham Act, 15 U.S.C. § 1114, a party "must prove: (1) that it has a protectible ownership interest in the mark; and (2) that the defendant's use of the mark is likely to cause consumer confusion." Dep't of Parks & Recreation v. Bazaar Del Mundo Inc., 448 F.3d 1118, 1124 (9th Cir.2006).

Network does not contest the ownership or its use of the mark. We note that the district court correctly found the prerequisite "use in commerce" in Network's use of the mark to purchase keywords to advertise its products for sale on the Internet. Previously we have assumed, without expressly deciding, that the use of a trademark as a search engine keyword that triggers the display of a competitor's advertisement is a "use in commerce" under the Lanham Act. See Playboy Enters., Inc. v. Netscape Commc'ns Corp., 354 F.3d 1020, 1024 (9th Cir.2004); Brookfield, 174 F.3d at 1053; see also Finance Express LLC v. Nowcom [1145] Corp., 564 F.Supp.2d 1160, 1172-73 (C.D.Cal.2008). We now agree with the Second Circuit that such use is a "use in commerce" under the Lanham Act. See Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2d Cir.2009) (holding that Google's sale of trademarks as search engine keywords is a use in commerce); see also J. Thomas McCarthy, McCarthy on Trademarks & Unfair Competition §§ 23:11.50, 25:70:25 (4th ed. 2010) (suggesting that cases taking a more restrictive view of "use" in this context are based on an erroneous interpretation of the Lanham Act).

This case, therefore, turns on whether Network's use of Systems' trademark is likely to cause consumer confusion. Network argues that its use of Systems' mark is legitimate "comparative, contextual advertising" which presents sophisticated consumers with clear choices. Systems characterizes Network's behavior differently, accusing it of misleading consumers by hijacking their attention with intentionally unclear advertisements. To resolve this dispute we must apply the Sleekcraft test in a flexible manner, keeping in mind that the eight factors it recited are not exhaustive, and that only some of them are relevant to determining whether confusion is likely in the case at hand.

A.

In Sleekcraft, we analyzed the likelihood of consumer source confusion between boats that were sold under the marks "Sleekcraft" and "Slickcraft." We noted that "[w]hen the goods produced by the alleged infringer compete for sales with those of the trademark owner, infringement usually will be found if the marks are sufficiently similar that confusion can be expected." 599 F.2d at 348. Although both boats were designed for towing water skiers, and despite a potential overlap in the markets, we concluded that because "Slickcraft" boats appealed to consumers desiring family recreation and "Sleekcraft" boats appealed to the "highly skilled enthusiast" requiring Sleekcraft's higher speeds, the owners were not direct competitors. Id. Because the goods were not competitive, but merely related, factors in addition to the similarity of the marks were "added to the calculus." Id.

We identified eight "relevant" factors for determining whether consumers would likely be confused by related goods: "[1] strength of the mark; [2] proximity of the goods; [3] similarity of the marks; [4] evidence of actual confusion; [5] marketing channels used; [6] type of goods and the degree of care likely to be exercised by the purchaser; [7] defendant's intent in selecting the mark; and [8] likelihood of expansion of the product lines." Id. at 348-49. We also noted that "the list is not exhaustive," and that "[o]ther variables may come into play depending on the particular facts presented." Id. at 348 n. 11.

The Sleekcraft factors are intended as an adaptable proxy for consumer confusion, not a rote checklist. See, e.g., Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgmt., Inc., 618 F.3d 1025, 1030 (9th Cir.2010) ("This eight-factor analysis is `pliant,' illustrative rather than exhaustive, and best understood as simply providing helpful guideposts."); Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1129 (9th Cir.1998) ("The factors should not be rigidly weighed; we do not count beans."); Eclipse Assoc. Ltd. v. Data Gen. Corp., 894 F.2d 1114, 1118 (9th Cir. 1990) ("These tests were not meant to be requirements or hoops that a district court need jump through to make the determination.").

When we first confronted issues of trademark infringement and consumer confusion in the Internet context over a decade ago in Brookfield, we noted that "[w]e must be acutely aware of excessive rigidity when applying the law in the Internet [1146] context; emerging technologies require a flexible approach." 174 F.3d at 1054. There, Brookfield, a software company, marketed an entertainment database program under the mark MovieBuff. It sold the software, and offered access to the database, on its website, moviebuffonline.com. Id. at 1041-42. West Coast, a video retailer, had registered the mark The Movie Buff's Movie Store. West Coast operated a website using the domain name moviebuff.com, which included a film database that competed with Brookfield's product. Id. at 1043.

We held that Brookfield was likely to succeed in its claim to be the senior user of MovieBuff, and that there was a likelihood of source confusion stemming from West Coast's use of the mark in its domain name. Id. at 1053, 1060. "Heeding our repeated warnings against simply launching into a mechanical application of the eight-factor Sleekcraft test," we determined that three of the eight factors were the most important in analyzing source confusion in the context of Internet domain names: (1) the similarity of the marks; (2) the relatedness of the goods and services offered; and (3) the simultaneous use of the Internet as a marketing channel. Id. at 1054 n. 16. Reasoning that the two marks were virtually identical in terms of sight, sound and meaning, id. at 1055, that West Coast and Brookfield both offered products and services relating to movies, id. at 1056, and that they both used the Web as a marketing and advertising device, id. at 1057, we concluded that consumer confusion was likely, particularly given the nature of the consumers at issue, who included casual movie watchers unlikely to realize that they had mistakenly clicked on to West Coast's site when they had intended to reach Brookfield's, id. at 1060.

Brookfield also asserted that West Coast infringed its mark by causing initial interest confusion because it had included MovieBuff in its "metatags," code not visible to web users embedded in a website to attract search engines seeking a corresponding keyword.^[4]Id. at 1061 n. 23. Although were we to apply the same analysis in the metatags context as we did in the domain name context, we would easily reach the same conclusion as to each of the factors (with the possible exception of purchaser care), we declined to do so, reasoning that the "question in the metatags context is quite different." Id. at 1062. In the metatags context, the question was whether West Coast could use the mark MovieBuff in the metatags of its website to attract search engines to locate its site when the keyword "MovieBuff" was entered, a question analogous to the issue presented here. As in the domain name context, the degree of care and sophistication of the consumer was a key factor, although the outcome differed. We did not find a likelihood of source confusion because the results list from a search for "MovieBuff" would result in a list that included both Brookfield's and West Coast's websites, and if the consumer clicked on West Coast's site its own name was "prominently display[ed]." Id. Thus a consumer was much less likely to be confused about which site he was viewing.

Finding no source confusion, we nonetheless concluded that West Coast's use of MovieBuff in its metatags was likely to cause initial interest confusion. That is, by using Brookfield's mark MovieBuff to direct persons searching for Brookfield's product to the West Coast site, West Coast derived an improper benefit from the goodwill Brookfield developed in its mark. Id.

[1147] Five years later in Playboy, we considered the practice of "keying"—another situation analogous to that here. Netscape operated a search engine that offered an early version of a keyword advertising program. It sold lists of terms to sponsors, and when users searched for the keywords on the list, the sponsor's advertisement would be displayed on the results page. 354 F.3d at 1022. Netscape required its advertisers from the adult entertainment industry to link their ads to one such list that contained more than 400 terms, including trademarks held by Playboy. Id. at 1023. Playboy sued, contending that this practice infringed its trademarks in violation of the Lanham Act. The district court entered summary judgment in favor of Netscape. Id.

We reversed, holding that summary judgment was inappropriate because genuine issues of material fact existed as to whether Netscape's keying practices constituted actionable infringement. Id. at 1031. Following Brookfield, we analyzed the keying issue in terms of initial interest confusion, "find[ing] insufficient evidence to defeat summary judgment on any other theory." Id. at 1024 n. 13. Playboy claimed that Netscape "misappropriated the goodwill of [its] marks by leading Internet users to competitors' websites just as West Coast . . . misappropriated the goodwill of Brookfield's mark." Id. at 1025. In framing the initial interest confusion inquiry, we stressed that Playboy's infringement claim relied on the fact that the linked banner advertisements were "unlabeled," and were, therefore, more likely to mislead consumers into believing they had followed a link to Playboy's own website. Id.

In Playboy, as in Brookfield, we applied the Sleekcraft test flexibly, determining that evidence of actual confusion was the most important factor. Id. at 1026. Playboy had introduced an expert study showing that a "statistically significant number" of Internet users searching for the terms "playboy" and "playmate" would think that Playboy itself sponsored the banner advertisements which appeared on the search results page. Id. We noted that this study "alone probably suffices to reverse the grant of summary judgment," but we nonetheless analyzed other relevant Sleekcraft factors. Id. As to the strength of the mark, we credited Playboy's expert reports showing it had created strong secondary meanings for "playboy" and "playmate." This suggested that consumers who entered these terms were likely searching for Playboy's products in particular. Id. at 1028. Analyzing the nature of the goods and consumer, we "presume[d] that the average searcher seeking adult-oriented materials on the Internet is easily diverted from a specific product he or she is seeking if other options, particularly graphic ones, appear more quickly." Id. at 1028. We concluded that there were genuine issues of material fact with respect to whether consumers were likely to be confused by Netscape's keying practices. Id. at 1031.

Concurring, Judge Berzon was struck by how analytically similar the keyed advertisements in Playboy were to the infringing metatags in Brookfield. We agree, and also find similarity to the use of the keyword "ActiveBatch" in this case. Judge Berzon cautioned that a broad reading of Brookfield's metatags holding could result in a finding of initial interest confusion "when a consumer is never confused as to source or affiliation, but instead knows, or should know, from the outset that a product or web link is not related to that of the trademark holder because the list produced by the search engine so informs him." Id. at 1034-35 (Berzon, J., concurring). She clarified that the Playboy panel's holding was limited to "situations [1148] in which the banner advertisements are not labeled or identified." Id. at 1036.

Judge Berzon analogized the experience of browsing clearly labeled keyword advertisements to shopping at Macy's, explaining that if a shopper en route to the Calvin Klein section is diverted by a prominently displayed Charter Club (Macy's own brand) collection and never reaches the Calvin Klein collection, it could not be said that Macy's had infringed on Calvin Klein's trademark by diverting the customer to it with a clearly labeled, but more prominent display. Id. at 1035. Therefore, it would be wrong to expand the initial interest confusion theory of infringement beyond the realm of the misleading and deceptive to the context of legitimate comparative and contextual advertising.

B.

Here we consider whether the use of another's trademark as a search engine keyword to trigger one's own product advertisement violates the Lanham Act. We begin by examining the Sleekcraft factors that are most relevant to the determination whether the use is likely to cause initial interest confusion.^[5] While the district court analyzed each of the Sleekcraft factors, it identified the three most important factors as (1) the similarity of the marks, (2) the relatedness of the goods or services, and (3) the simultaneous use of the Web as a marketing channel, for any case addressing trademark infringement on the Internet. For this proposition the district court cited GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199 (9th Cir.2000), which followed Brookfield in emphasizing these three factors. See GoTo.com, 202 F.3d at 1205; Brookfield, 174 F.3d at 1054 n. 16.

However, we did not intend Brookfield to be read so expansively as to forever enshrine these three factors—now often referred to as the "Internet trinity" or "Internet troika"—as the test for trademark infringement on the Internet. Brookfield was the first to present a claim of initial interest confusion on the Internet; we recognized at the time it would not be the last, and so emphasized flexibility over rigidity. Depending on the facts of each specific case arising on the Internet, other factors may emerge as more illuminating on the question of consumer confusion. In Brookfield, we used the "troika" factors to analyze the risk of source confusion generated by similar domain names, but we did not wholesale adopt them in the metatag analysis. 174 F.3d at 1054-55. Subsequent courts similarly have found the "troika" helpful to resolve disputes involving websites with similar names or appearances. See, e.g., Internet Specialties West, Inc. v. Milon-DiGiorgio Enters., Inc., 559 F.3d 985, 988-89 (9th Cir.2009); Perfumebay.com Inc. v. eBay, Inc., 506 F.3d 1165, 1169, 1173 (9th Cir.2007); Interstellar Starship Servs., Ltd. v. Epix, Inc., 304 F.3d 936, 939, 942 (9th Cir.2002); GoTo. com, 202 F.3d at 1203-05. The leading trademark treatise correctly explains that the "troika" analysis "is appropriate for domain name disputes." McCarthy at § 24:39.

Given the multifaceted nature of the Internet and the ever-expanding ways in which we all use the technology, however, it makes no sense to prioritize the same three factors for every type of potential online commercial activity. The "troika" is a particularly poor fit for the question presented here. See Jonathan Moskin, Virtual Trademark Use—The Parallel [1149] World of Keyword Ads, 98 Trademark Reporter 873, 892-93 (2008) (arguing that the "troika" is inadequate for analyzing trademark infringement claims based on search engine keyword advertising because it omits important factors). The potential infringement in this context arises from the risk that while using Systems' mark to search for information about its product, a consumer might be confused by a results page that shows a competitor's advertisement on the same screen, when that advertisement does not clearly identify the source or its product.

In determining the proper inquiry for this particular trademark infringement claim, we adhere to two long stated principles: the Sleekcraft factors (1) are non-exhaustive, and (2) should be applied flexibly, particularly in the context of Internet commerce. Finally, because the sine qua non of trademark infringement is consumer confusion, when we examine initial interest confusion, the owner of the mark must demonstrate likely confusion, not mere diversion.

We turn to an examination of each Sleekcraft factor to analyze whether there is a likelihood of consumer confusion in this case, assigning each factor appropriate weight in accordance with its relevance to the factual circumstances presented here.

1. Strength of the Mark

"The stronger a mark—meaning the more likely it is to be remembered and associated in the public mind with the mark's owner—the greater the protection it is accorded by the trademark laws." Brookfield, 174 F.3d at 1058. Two relevant measurements are conceptual strength and commercial strength. Conceptual strength involves classification of a mark "along a spectrum of generally increasing inherent distinctiveness as generic, descriptive, suggestive, arbitrary, or fanciful." Id. "A mark's conceptual strength depends largely on the obviousness of its connection to the good or service to which it refers." Fortune Dynamic, 618 F.3d at 1032-33. Federal trademark "[r]egistration alone may be sufficient in an appropriate case to satisfy a determination of distinctiveness." Lahoti v. VeriCheck, Inc., 586 F.3d 1190, 1199 (9th Cir.2009). However, "while the registration adds something on the scales, we must come to grips with an assessment of the mark itself." Zobmondo Entertainment, LLC v. Falls Media, LLC, 602 F.3d 1108, 1115 (9th Cir.2010). Commercial strength is based on "actual marketplace recognition," and thus "advertising expenditures can transform a suggestive mark into a strong mark." Brookfield, 174 F.3d at 1058.

This factor is probative of confusion here because a consumer searching for a generic term is more likely to be searching for a product category. See id. at 1058 n. 19 ("Generic terms are those used by the public to refer generally to the product rather than a particular brand of the product."). That consumer is more likely to expect to encounter links and advertisements from a variety of sources. By contrast, a user searching for a distinctive term is more likely to be looking for a particular product, and therefore could be more susceptible to confusion when sponsored links appear that advertise a similar product from a different source. See 1-800 Contacts, Inc. v. Lens.com, Inc., 755 F.Supp.2d 1151, 2010 WL 5150800 at *17 (D.Utah 2010) (determining that "1800 Contacts" was a weak mark in a keyword advertising case because the "nature of how third parties use generic and descriptive words on search engines" suggested that users who entered the term were likely searching for a type of product). On the other hand, if the ordinary consumers [1150] of this particular product are particularly sophisticated and knowledgeable, they might also be aware that Systems is the source of ActiveBatch software and not be confused at all.

The district court acknowledged that the parties failed to address the strength of the mark, but it concluded that the factor favors Systems. It reasoned that ActiveBatch is a suggestive mark because it "requires a mental leap from the mark to the product," (quoting Brookfield, 174 F.3d at 1058), and as a registered trademark it is "inherently distinctive." We agree. Because the mark is both Systems' product name and a suggestive federally registered trademark, consumers searching for the term are presumably looking for its specific product, and not a category of goods. Nonetheless, that may not be the end of the inquiry about this factor, as the sophistication of the consumers of the product may also play a role. The district court properly declined to consider commercial strength, which, as an evidence-intensive inquiry, is unnecessary at the preliminary injunction stage.

2. Proximity of the Goods

"Related goods are generally more likely than unrelated goods to confuse the public as to the producers of the goods." Brookfield, 174 F.3d at 1055. "[T]he danger presented is that the public will mistakenly assume there is an association between the producers of the related goods, though no such association exists." Sleekcraft, 599 F.2d at 350. The proximity of goods is measured by whether the products are: (1) complementary; (2) sold to the same class of purchasers; and (3) similar in use and function. Id.

The proximity of the goods was relevant in Playboy, where unsophisticated consumers were confronted with unlabeled banner advertisements that touted adult-oriented material very similar to Playboy's own products. There, we concluded that under the circumstances, the relatedness of the goods bolstered the likelihood of confusion, and therefore favored Playboy. Playboy, 354 F.3d at 1028. However, the proximity of the goods would become less important if advertisements are clearly labeled or consumers exercise a high degree of care, because rather than being misled, the consumer would merely be confronted with choices among similar products. Id. at 1035 (Berzon, J., concurring) ("[S]uch choices do not constitute trademark infringement off the internet, and I cannot understand why they should on the internet.").

Because the products at issue here are virtually interchangeable, this factor may be helpful, but it must be considered in conjunction with the labeling and appearance of the advertisements and the degree of care exercised by the consumers of the ActiveBatch software. By weighing this factor in isolation and failing to consider whether the parties' status as direct competitors would actually lead to a likelihood of confusion, the district court allowed this factor to weigh too heavily in the analysis.

3. Similarity of the Marks

"[T]he more similar the marks in terms of appearance, sound, and meaning, the greater the likelihood of confusion." Brookfield, 174 F.3d at 1054. "Where the two marks are entirely dissimilar, there is no likelihood of confusion." Id. "Similarity of the marks is tested on three levels: sight, sound, and meaning. Each must be considered as they are encountered in the marketplace." Sleekcraft, 599 F.2d at 351 (citations omitted).

In Sleekcraft, we concluded that the marks "Sleekcraft" and "Slickcraft" were similar in terms of sight, sound, and meaning by examining the actual situations in which consumers were likely to read, hear, [1151] and consider the meaning of the terms. Id. at 351-52. Such an inquiry is impossible here where the consumer does not confront two distinct trademarks. Rather, after entering one company's mark as a search term, the consumer sees a competitor's sponsored link that displays neither company's trademarks. The district court erroneously treated "ActiveBatch," the keyword purchased by Network, as conceptually separate from ActiveBatch the trademark owned by Systems. This is an artificial distinction that does not reflect what consumers "encountered in the marketplace." Again, however, because the consumer keys in Systems' trademark, which results in Network's sponsored link, depending on the labeling and appearance of the advertisement, including whether it identifies Network's own mark, and the degree of care and sophistication of the consumer, it could be helpful in determining initial interest confusion.

4. Evidence of Actual Confusion

"[A] showing of actual confusion among significant numbers of consumers provides strong support for the likelihood of confusion." Playboy, 354 F.3d at 1026 (citing Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894, 902 (9th Cir.2002)) ("Evidence of actual confusion constitutes persuasive proof that future confusion is likely. . . . If enough people have been actually confused, then a likelihood that people are confused is established."). However, "actual confusion is not necessary to a finding of likelihood of confusion under the Lanham Act." Academy of Motion Picture Arts & Sciences v. Creative House Promotions, Inc., 944 F.2d 1446, 1456 (9th Cir.1991) (citing American Int'l Group, Inc. v. American Int'l Bank, 926 F.2d 829, 832 (9th Cir.1991)). Indeed, "[p]roving actual confusion is difficult . . . and the courts have often discounted such evidence because it was unclear or insubstantial." Sleekcraft, 599 F.2d at 352.

In Playboy, the expert report showing a significant number of users were confused by the keying practice at issue was strong evidence that Playboy's infringement claim should be allowed to proceed. 354 F.3d at 1027. Playboy, however, was decided at the summary judgment stage, whereas here we examine a sparse record supporting preliminary injunctive relief. As the district court noted, neither Network nor Systems provided evidence regarding actual confusion, which is not surprising given the procedural posture. Therefore, while this is a relevant factor for determining the likelihood of confusion in keyword advertising cases, its importance is diminished at the preliminary injunction stage of the proceedings. The district court correctly concluded that this factor should be accorded no weight.

5. Marketing Channels

"Convergent marketing channels increase the likelihood of confusion." Sleekcraft, 599 F.2d at 353. In Sleekcraft, the two products were sold in niche marketplaces, including boat shows, specialty retail outlets, and trade magazines. Id. at 353. However, this factor becomes less important when the marketing channel is less obscure. Today, it would be the rare commercial retailer that did not advertise online, and the shared use of a ubiquitous marketing channel does not shed much light on the likelihood of consumer confusion. See Playboy, 354 F.3d at 1028 ("Given the broad use of the Internet today, the same could be said for countless companies. Thus, this factor merits little weight.").

Therefore, the district court's determination that because both parties advertise on the Internet this factor weighed in favor of Systems was incorrect.

[1152] 6. Type of Goods and Degree of Care

"Low consumer care . . . increases the likelihood of confusion." Playboy, 354 F.3d at 1028. "In assessing the likelihood of confusion to the public, the standard used by the courts is the typical buyer exercising ordinary caution. . . . When the buyer has expertise in the field, a higher standard is proper though it will not preclude a finding that confusion is likely. Similarly, when the goods are expensive, the buyer can be expected to exercise greater care in his purchases; again, though, confusion may still be likely." Sleekcraft, 599 F.2d at 353 (citations omitted).

The nature of the goods and the type of consumer is highly relevant to determining the likelihood of confusion in the keyword advertising context. A sophisticated consumer of business software exercising a high degree of care is more likely to understand the mechanics of Internet search engines and the nature of sponsored links, whereas an un-savvy consumer exercising less care is more likely to be confused. The district court determined that this factor weighed in Systems' favor because "there is generally a low degree of care exercised by Internet consumers." However, the degree of care analysis cannot begin and end at the marketing channel. We still must consider the nature and cost of the goods, and whether "the products being sold are marketed primarily to expert buyers." Brookfield, 174 F.3d at 1060.

In Brookfield, the websites were visited by both sophisticated entertainment industry professionals and amateur film fans, which supported the conclusion that at least some of the consumers were likely to exercise a low degree of care. Id. at 1056. In Playboy, the relevant consumer was looking for cheap, interchangeable adult-oriented material, which similarly led to our court's finding that the consumers at issue would exercise a low degree of care. 354 F.3d at 1029. In both cases, we looked beyond the medium itself and to the nature of the particular goods and the relevant consumers.

We have recently acknowledged that the default degree of consumer care is becoming more heightened as the novelty of the Internet evaporates and online commerce becomes commonplace. In Toyota Motor Sales v. Tabari, 610 F.3d 1171 (9th Cir. 2010), we vacated a preliminary injunction that prohibited a pair of automobile brokers from using Toyota's "Lexus" mark in their domain names.^[6] We determined that it was unlikely that a reasonably prudent consumer would be confused into believing that a domain name that included a product name would necessarily have a formal affiliation with the maker of the product, as "[c]onsumers who use the internet for shopping are generally quite sophisticated about such matters." Id. at 1178. The Tabari panel reasoned,

[I]n the age of FIOS, cable modems, DSL and T1 lines, reasonable, prudent and experienced internet consumers are accustomed to such exploration by trial and error. They skip from site to site, ready to hit the back button whenever they're not satisfied with a site's contents. They fully expect to find some sites that aren't what they imagine [1153] based on a glance at the domain name or search engine summary. Outside the special case of . . . domains that actively claim affiliation with the trademark holder, consumers don't form any firm expectations about the sponsorship of a website until they've seen the landing page—if then.

Id. at 1179 (citations omitted).

We further explained that we expect consumers searching for expensive products online to be even more sophisticated. Id. at 1176 ("Unreasonable, imprudent and inexperienced web-shoppers are not relevant.").

Therefore the district court improperly concluded that this factor weighed in Systems' favor based on a conclusion reached by our court more than a decade ago in Brookfield and GoTo.com that Internet users on the whole exercise a low degree of care. While the statement may have been accurate then, we suspect that there are many contexts in which it no longer holds true.

7. Defendant's Intent

"When the alleged infringer knowingly adopts a mark similar to another's, reviewing courts presume that the defendant can accomplish his purpose: that is, that the public will be deceived." Sleekcraft, 599 F.2d at 354. Nevertheless, we have also "recognized that liability for infringement may not be imposed for using a registered trademark in connection with truthful comparative advertising." Lindy Pen Co., Inc. v. Bic Pen Corp., 725 F.2d 1240, 1248 (9th Cir.1984).

Therefore, much like the proximity of the goods, the defendant's intent may be relevant here, but only insofar as it bolsters a finding that the use of the trademark serves to mislead consumers rather than truthfully inform them of their choice of products. The district court incorrectly considered the intent factor in isolation, and concluded that it weighed in Systems' favor without first determining that Network intended to deceive consumers rather than compare its product to ActiveBatch.

8. Likelihood of Expansion of the Product Lines

"Inasmuch as a trademark owner is afforded greater protection against competing goods, a `strong possibility' that either party may expand his business to compete with the other will weigh in favor of finding that the present use is infringing. When goods are closely related, any expansion is likely to result in direct competition." Sleekcraft, 599 F.2d at 354 (citations omitted). Where two companies are direct competitors, this factor is unimportant. Cf. Brookfield, 174 F.3d at 1060. Therefore, the district court correctly declined to consider the likelihood of expansion.

9. Other Relevant Factors

The eight Sleekcraft factors are "not exhaustive. Other variables may come into play depending on the particular facts presented." Sleekcraft, 599 F.2d at 348 n. 11. In the keyword advertising context the "likelihood of confusion will ultimately turn on what the consumer saw on the screen and reasonably believed, given the context." Hearts on Fire Co. v. Blue Nile, Inc., 603 F.Supp.2d 274, 289 (D.Mass.2009).^[7] In Playboy, we found it important that the consumers saw banner [1154] advertisements that were "confusingly labeled or not labeled at all." 354 F.3d at 1023. We noted that clear labeling "might eliminate the likelihood of initial interest confusion that exists in this case." Id. at 1030 n. 43.

The appearance of the advertisements and their surrounding context on the user's screen are similarly important here. The district court correctly examined the text of Network's sponsored links, concluding that the advertisements did not clearly identify their source. However, the district court did not consider the surrounding context. In Playboy, we also found it important that Netscape's search engine did not clearly segregate the sponsored advertisements from the objective results. 354 F.3d at 1030. Here, even if Network has not clearly identified itself in the text of its ads, Google and Bing have partitioned their search results pages so that the advertisements appear in separately labeled sections for "sponsored" links. The labeling and appearance of the advertisements as they appear on the results page includes more than the text of the advertisement, and must be considered as a whole.

C.

Given the nature of the alleged infringement here, the most relevant factors to the analysis of the likelihood of confusion are: (1) the strength of the mark; (2) the evidence of actual confusion; (3) the type of goods and degree of care likely to be exercised by the purchaser; and (4) the labeling and appearance of the advertisements and the surrounding context on the screen displaying the results page.

The district court did not weigh the Sleekcraft factors flexibly to match the specific facts of this case. It relied on the Internet "troika," which is highly illuminating in the context of domain names, but which fails to discern whether there is a likelihood of confusion in a keywords case. Because the linchpin of trademark infringement is consumer confusion, the district court abused its discretion in issuing the injunction. See United States v. Hinkson, 585 F.3d 1247, 1262 (9th Cir.2009) (en banc) (holding that a district court abuses its discretion by failing to identify the correct legal rule to apply); see also Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 637 (9th Cir.2007) (holding that the district court abused its discretion in its application of the Sleekcraft factors). We need not reach the three remaining preliminary injunction elements, or consider the remaining issues on appeal. See Advertise.com, Inc. v. AOL Advertising, Inc., 616 F.3d 974, 982 (9th Cir.2010).

IV. CONCLUSION

We REVERSE the district court's order granting Systems' motion for a preliminary injunction, VACATE the injunction, and REMAND for further proceedings consistent with this opinion.

APPENDIX A

[1155]

[1156]

[1157]

[1158]

[1159]

[1160]

[1161]

[1162]

[1163]

[1] The Honorable Michael W. Mosman, United States District Judge for the District of Oregon, sitting by designation.

[2] Appendix A presents a compilation of exhibits from the district court record showing results pages displayed when users search for "ActiveBatch" on Google or Bing.

[3] The eight factors we identified in Sleekcraft were: "[1] strength of the mark; [2] proximity of the goods; [3] similarity of the marks; [4] evidence of actual confusion; [5] marketing channels used; [6] type of goods and the degree of care likely to be exercised by the purchaser; [7] defendant's intent in selecting the mark; and [8] likelihood of expansion of the product lines." 599 F.2d at 348-49.

[4] Modern search engines such as Google no longer use metatags. Instead they rely on their own algorithms to find websites. See McCarthy at § 25:69.

[5] Systems' argument rests only on the theory of initial interest confusion. It does not argue source confusion.

[6] The Tabari court applied the nominative fair use test rather than the Sleekcraft factors, but it explained that Sleekcraft's consumer confusion inquiry was "analogous." Id. at 1176. Network has not argued that nominative fair use applies here. We find the initial interest confusion analysis more appropriate for the circumstances of this case. Cf. New Kids on the Block v. News Am. Publ'g, Inc., 971 F.2d 302, 308 (9th Cir. 1992) (explaining that nominative fair use applies when "the only word reasonably available to describe a particular thing is pressed into service").

[7] The Hearts on Fire court identified a new seven-factor test to determine whether there is a likelihood of consumer confusion arising from a firm's use of a competitor's trademark as a search engine keyword triggering its own sponsored links. 603 F.Supp.2d at 289. Network urges us to adopt the Hearts on Fire factors. While we agree that the decision's reasoning is useful, we decline to add another multi-factor test to the extant eight-factor Sleekcraft test.

119 F.Supp.2d 309 (2000)

No. 00 Civ. 1664(SAS).

United States District Court, S.D. New York.

September 25, 2000.

[310] [311] Brian E. Maas, Wendy Stryker, Beldock Levine & Hoffman, LLP, New York, NY, for Plaintiffs.

Anne W. Salisbury, Russell H. Falconer, Baker Botts, L.L.P., New York, NY, for Defendants.

OPINION AND ORDER

SCHEINDLIN, District Judge.

Plaintiffs Marianne Bihari and Bihari Interiors, Inc. (collectively "Bihari") move to preliminarily enjoin defendants Craig Gross and Yolanda Truglio (collectively "Gross") from using the names "Bihari" or "Bihari Interiors" in the domain names or metatags of any of their websites ("the Gross websites"), claiming that such use violates the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d)(1), and infringes on Bihari's common-law service mark in violation of § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1)(A). Additionally, Bihari moves to enjoin defendants from publishing defamatory statements against Bihari and Bihari Interiors on the Gross websites, contending that the defamatory statements constitute common law libel.^[1]

I have reviewed Bihari's Complaint, Motion for Preliminary Injunction, Amended Complaint, Supplemental Memorandum of Law, and Reply Memorandum of Law, and I have also reviewed defendants' Answer and Opposing Memorandum of Law. A telephone conference with all counsel, addressing the merits of the case, was held on August 28, 2000. Neither party has requested an evidentiary hearing. For the reasons set forth below, Bihari's motion for preliminary injunctive relief is denied.

I. Introduction

Although the Internet has become part of our daily life, its technological aspects largely remain a mystery to all but the most savvy. A brief review of the fundamentals should prove useful. The Internet is an international network of interconnected computers that enables tens of millions of people, if not more, to communicate with one another and to access vast amounts of information from around the world. See Reno v. American Civil Liberties Union, 521 U.S. 844, 850, 117 S.Ct. 2329, 138 L.Ed.2d 874 (1997). Information on the Internet is housed on webpages.

When searching for information on the Internet, an individual user may choose one of two search techniques. The first involves conducting a specific domain name^[2] search, in which the user types the company name or logo followed by the suffix ".com". A news network such as CNN, for example, has the website "cnn.com". However, companies will often choose as a domain name one that does not precisely reflect their company name. For instance, the domain name for the New York Times is "nytimes.com". If an Internet user were to type the domain name "newyorktimes.com", the user would arrive at a site unaffiliated with the New York Times but devoted to readers' comments about the New York Times.

Because entering the company's name as the domain name often fails to take the user to the desired webpage, many users [312] prefer the second search technique. Here, a websurfer enters a particular company name or search request in a search engine. The search engine then displays a list of websites that match the user's request. The search engine ranks the relevant sites according to the relative frequency with which the word or phrase appears in the metatags^[3] and in the text of the websites. The websurfer then chooses, based on any number of considerations, which website to visit. Most often, that choice is based on the domain name listed for each search result and a brief description of each webpage provided by the search engine.

II. Background

A. The Failed Contract

Marianne Bihari is an interior designer who has been providing interior design services in New York City, New Jersey, Connecticut, California, Florida and Italy since 1984. See 3/3/00 Affidavit of Marianne Bihari in Support of Plaintiffs' Motion for a Preliminary Injunction ("Bihari Aff.") ¶ 2. Since 1989, she has been continuously doing business as Bihari Interiors or Marianne Bihari d/b/a Bihari Interiors. See id. The Bihari Interiors name is well known, particularly in the New York City high-end residential interior design market. See id. ¶¶ 2, 4. Bihari does not engage in paid advertising to promote her services; rather, she relies on referrals from clients and other design-industry professionals. See id. ¶ 3.

Craig Gross is a former client of Bihari Interiors. See id. ¶ 1. Yolanda Truglio is Gross's girlfriend. See id. ¶ 21. On February 12, 1998, Gross, on behalf of 530 East 76th Street, Inc., retained Bihari Interiors to provide interior and architectural design services for his condominium apartment on East 76th Street ("the Contract"). See Amended Complaint ¶ 13; Defendants' Answer to Plaintiffs' Amended Complaint ("Answer") ¶ 14. For various reasons not relevant to this action, the relationship between Bihari and Gross soured, and the Contract was never completed. See Amended Complaint ¶¶ 17-25.

On June 14, 1999, Gross filed suit against Marianne Bihari and Bihari Interiors in New York State Supreme Court alleging fraud and breach of contract ("the State Suit"). See id. ¶ 26. On August 12, 1999, Gross submitted an amended verified complaint in the State Suit ("the First Amended Complaint"). On April 3, 2000, the state court dismissed two of the fraud claims, but granted Gross a right to replead one of those claims. See Amended Complaint ¶ 94; 8/4/00 Affidavit of Craig Gross in Opposition to Motion for a Preliminary Injunction ¶ 5 ("Gross Aff."). Gross has since filed a second amended complaint which is currently pending in New York State Supreme Court ("the Second Amended Complaint"). See Gross Aff. ¶ 5.

B. The Alleged Harassment

Approximately two months after Gross first filed the complaint in the State Suit, on August 10, 1999, Bihari, Gross and Truglio engaged in settlement negotiations, which were ultimately unsuccessful. See Amended Complaint ¶¶ 27-29. Four days later, Gross registered the domain names "bihari.com" and "bihariinteriors.com". See id. ¶ 31. On August 16, 1999, Bihari received an anonymous facsimile alerting her to the website. See id. ¶ 32. The following day, Bihari accessed the website "www.bihariinteriors.com". See id. ¶ 36. Disturbed by the unauthorized use of her name and her business name in the domain name, as well as the disparaging statements on the website, Bihari contacted [313] her attorney. See Bihari Aff. ¶¶ 26, 27. On August 31, 1999, Bihari's attorney sent a letter to Gross demanding that he terminate the website. See Amended Complaint ¶ 40. Rather than complying with Bihari's demand, Gross delivered to Bihari's residence pens bearing the words "w ww.bihariinteriors.com".^[4]See id. ¶ 44. In addition, Bihari alleges that subsequent to the delivery of the pens, Bihari received frequent "hang-up telephone calls" which lasted until approximately November 22, 1999. See id. ¶¶ 45, 48.^[5] Bihari filed a criminal complaint for aggravated harassment against Gross and Truglio on October 3, 1999, but the District Attorney's office declined to prosecute. See id. ¶¶ 46, 47.

Bihari was the subject of a criminal complaint several months later. Before the contract relationship between Gross and Bihari deteriorated, Bihari Interiors sold Gross three sofas purchased from a vendor. See Amended Complaint ¶ 49. Bihari Interiors made the initial payments for the sofas. See id. By the terms of the Contract, if Bihari Interiors failed to pay in full by a certain date, the vendor would be free to resell the sofas. See id. ¶ 50. After the payment deadline expired, Gross paid the vendor the balance due on the sofas, thereby avoiding payment of Bihari Interiors' commission. See id. ¶ 51; Answer ¶ 51. The sofas, however, were not delivered to Gross, but to Bihari, who took possession of them pending resolution of the State Suit. See Amended Complaint ¶ 52. Bihari alleges that Gross then filed a criminal complaint against her for theft of the sofas. See id. ¶ 53. On December 20, 1999, Bihari was arrested, held for approximately six hours, and "charged with criminal possession of stolen property in the fifth degree, a misdemeanor offense." Id. ¶ 56. On January 24, 2000, Bihari was informed that the District Attorney's office had declined to prosecute her case. See id. ¶ 57.

C. The Websites

On March 7, 2000, Bihari served Gross with the instant Complaint and motion for injunctive relief. See id. ¶ 58. Gross then offered to take down the "bihariinteriors.com" website pending a preliminary injunction hearing. See id. ¶ 59. He has since relinquished the domain names "bihari.com" and "bihariinteriors.com" and is taking all necessary steps to return those domain names to Network Solutions, Inc., the provider of domain name registrations. See 8/29/00 Letter of Defendants' Attorney Anne W. Salisbury to the Court ("8/29/00 Salisbury Letter").

On March 7, 2000, the day that Bihari served Gross with the Complaint, Bihari also learned of another website created by Gross, "designscam.com", by using an Internet search engine and searching for the words "Bihari Interiors". See id. ¶ 60. Bihari discovered that the "designscam.com" website contained the same content as the "bihariinteriors.com" website. See id. ¶¶ 60, 61. Then, on March 11, 2000, Gross registered a fourth website, "manhattaninteriordesign.com", containing the identical material as "designscam.com". See id. ¶ 63.

All of the Gross websites use "Bihari Interiors" as metatags embedded within the websites' HTML code. See id. ¶ 66. The description metatags of the Gross websites state "This site deals with the problems experienced when hiring a new [sic] York City (Manhattan) designer. It discusses Marianne Bihari[,] fraud and deceit and interior decorating." See 3/3/2000 Affidavit of John Running, a computer systems administrator and HTML programmer employed by Bihari's attorneys, in [314] Support of Plaintiffs' Motion for a Preliminary Injunction ("Running Aff.") ¶ 13.

D. The Website Content

Each of the Gross websites is critical of Bihari and her interior design services. An Internet user accessing any of the websites first sees a large caption reading "The Real Story Behind Marianne Bihari & Bihari Interiors." See id. ¶ 72. Directly beneath this title are three photographic reproductions of scenic New York. See id. ¶ 73. Beneath the photographs is a counter indicating how many visitors the website has had. As of June 26, 2000, the counter indicated that 9,774 people have visited the website since August 15, 1999. See Print-out of "manhattaninteriordesign.com" Website, Ex. E to Plaintiffs' Amended Notice of Motion. Also appearing on the first page of the websites are various hyperlinks^[6] including "Tips on Picking a Designer," "New York City Information," "Who's Who in Interior Design," "Kabalarians Philosophy," "A Humorous Look," "Tell A Friend," "Send E-Mail," "Sign or Read the Guest Book," and "Participate in the Bihari Poll." Id.

A long block of text appears beneath these hyperlinks and it states:

Welcome to the first web site designed to protect people from the alleged ill intentions of Marianne Bihari & Bihari Interiors. Keep in mind that this site reflects only the view points and experiences of one Manhattan couple that allegedly fell prey to Marianne Bihari & Bihari Interiors. There possibly may be others that have experienced similar alleged fraud and deceit from Marianne Bihari & Bihari Interiors. Please feel free to e-mail us if you think you were victimized by Marianne Bihari & Bihari Interiors. Our goal is to protect you from experiencing the overwhelming grief and aggravation in dealing with someone that allegedly only has intentions to defraud. If you think you need advice before entering into a contract with Marianne Bihari & Bihari Interiors —Please Click Here.

See id.; Amended Complaint ¶¶ 78, 79.

Below this text a viewer finds additional hyperlinks to "The Initial Meeting," "The Contract," "The Scam," and "The Law Suit" [sic]. See Amended Complaint ¶ 80. Viewers who connect with these links do not immediately receive the information, but are told that if they send an e-mail, they will receive a copy of the requested information. See id. ¶ 81.

In addition to these comments, the Gross websites contain a "guestbook" where visitors leave messages for other visitors to the websites. See id. ¶ 83. Some of the guestbook entries indicate that potential clients declined to retain Bihari's services because of the Gross websites. See id. ¶ 86. Other messages simply comment or inquire about the Gross websites' design. See Guestbook Entries for "www.bihariinteriors.com" from 3/1/2000 ("Guestbook Entries"), Ex. B. to Bihari Aff. Many other entries disparage Bihari and Bihari Interiors.^[7]See Amended [315] Complaint ¶ 87. Bihari alleges that many of the guestbook entries were written by Gross and Truglio, and do not reflect true dissatisfaction with Bihari or Bihari Interiors. See id. ¶ 85.^[8]

The "designscam.com" and "manhattaninteriordesign.com" websites also contain a box which presents in blinking green letters the following incomplete statement quoted from Bihari's March 3, 2000 Affidavit: "I was arrested and charged with criminal possession of stolen property in the Fifth Degree." See id. ¶ 62. Gross neither includes the rest of the sentence— which reveals that the arrest was for a misdemeanor offense—nor informs the reader that the District Attorney's Office declined to prosecute the case. See id.

In June 2000, Gross launched amended versions of the "designscam.com" and "manhattaninteriordesign.com" websites. See id. ¶ 90. The new websites are substantially identical to the former version, with two exceptions. See id. First, Gross deleted the statement, "Our goal is to protect you from experiencing the overwhelming grief and aggravation in dealing with someone that allegedly only has intentions to defraud." See id. ¶ 93. Second, he added two hyperlinks—from the words "alleged fraud" and "lawsuit"—to a copy of the First Amended Complaint in the State Suit. See id. ¶ 94.

E. Motive and Intent

The parties dispute defendants' motive and intent in creating the websites. Bihari alleges that Gross's motive was to harass Bihari and to pressure her into settling the State Suit. See Bihari Aff. ¶ 23. Gross counters that he created the websites because he was disturbed by Bihari's "deceitful practices," and was "dedicated to assisting consumers who are in the process of choosing a designer in New York City, as well as informing others of my experiences with Bihari." Gross Aff. ¶ 7. While there is no direct proof that Gross's motive is to pressure Bihari to settle the State Suit, there is proof that Gross intends to harm Bihari's business. Gross's specific intent, as memorialized in his own words on his websites, is to warn potential customers of Bihari's "alleged ill intentions" and to "protect" them from experiencing "the overwhelming grief and aggravation" he has experienced in dealing with Bihari. Amended Complaint ¶ 79. Undeniably, Gross's intent is to cause Bihari commercial harm.

III. Applicable Legal Standard

"Because of the great potential for harm which may occur from the issuance of a preliminary injunction, the party seeking the injunction must sustain a heavy burden." Ringling Brothers-Barnum & Bailey Combined Shows, Inc. v. B.E. Windows Corp., 937 F.Supp. 204, 207 (S.D.N.Y. 1996). The party seeking such relief must demonstrate: (1) likelihood of irreparable harm should the injunction be denied; and (2) either (a) likelihood of ultimate success on the merits, or (b) sufficiently serious questions going to the merits and a balance of hardships tipping decidedly toward the party seeking relief. See SmithKline Beecham Consumer Healthcare, L.P. v. Watson Pharms., Inc., 211 F.3d 21, 24 (2d [316] Cir.2000); Maryland Cas. Co. v. Realty Advisory Board on Labor Relations, 107 F.3d 979, 984 (2d Cir.1997).

IV. Discussion

A. The Lanham Act Claims

1. Irreparable Harm

"Irreparable harm is an injury that is not remote or speculative but actual and imminent, and for which a monetary award cannot be adequate compensation." Tom Doherty Assocs. v. Saban Entertainment, Inc., 60 F.3d 27, 37 (2d Cir.1995) (internal citations omitted). In a trademark infringement case, a presumption of irreparable harm arises where a plaintiff makes a showing of likelihood of confusion. See Tough Traveler, Ltd. v. Outbound Products, 60 F.3d 964, 967 (2d Cir.1995); Standard & Poor's Corp. v. Commodity Exchange, Inc., 683 F.2d 704, 708 (2d Cir. 1982). A showing of likelihood of confusion, therefore, will establish the irreparable harm requisite for a preliminary injunction.

2. Likelihood of Success on the ACPA Claim

On November 29, 1999, Congress adopted the ACPA "to remedy the perceived shortcomings of applying the FTDA [Federal Trademark Dilution Act] in cybersquatting cases." Sporty's Farm L.L.C. v. Sportsman's Market, Inc., 202 F.3d 489, 495 (2d Cir.2000). To establish a claim of cybersquatting, a plaintiff must show: (1) that she had a distinctive mark at the time of the registration of the domain name; (2) that the defendant "registers, traffics in, or uses a domain name" that is identical or confusingly similar to that mark; and (3) that the defendant has "a bad faith intent to profit from that mark." 15 U.S.C. § 1125(d)(1).^[9] A preliminary injunction is a remedy authorized by the ACPA. See 15 U.S.C. § 1116(a).

In March 2000, Bihari claimed that Gross's registration of "bihari.com" and "bihariinteriors.com" violated the ACPA because he registered the confusingly similar domain names with a bad faith intent to profit by pressuring Bihari into settling the State Suit at terms favorable to Gross. Since then, Gross has abandoned those two websites and promised to transfer the domain names back to Network Solutions, Inc. See 8/29/00 Salisbury Letter.

However, during the August 28 telephone conference, Bihari's attorney claimed that use of "Bihari Interiors" in the metatags violates the ACPA. Neither Bihari's attorney, nor this Court, has been able to find a single case applying the ACPA to metatags. Although no court has expressly stated that the ACPA does not apply to metatags, the plain meaning of the statute and its legislative history make this conclusion apparent. See 15 U.S.C. § 1125(d)(A)(1)(ii) (ACPA provides an action against one who "registers, traffics in, or uses a domain name ....") (emphasis added); Mattel, Inc. v. Internet Dimensions Inc., 99 Civ. 10066, 2000 WL 973745 at *2 (S.D.N.Y. July 13, 2000) (Congress's purpose in adopting the ACPA was to "protect consumers and American businesses ... by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names ....") (quoting S.Rep. No. 106-140, at 4 (1999)) (emphasis added). Therefore, the ACPA is no longer a basis for preliminary injunctive relief as Gross has voluntarily relinquished the Bihari domain name.

3. Likelihood of Success on the Trademark Infringement Claim

A claim of trademark infringement under § 43(a) of the Lanham Act requires the plaintiff to show (1) that she has a [317] valid mark that is entitled to protection under the Lanham Act, and (2) that use of that mark by another "is likely to cause confusion ... as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities by another person."^[10] 15 U.S.C. § 1125(a)(1)(A); Estee Lauder Inc. v. The Gap, Inc., 108 F.3d 1503, 1508-09 (2d Cir. 1997). As discussed more fully below, Bihari has failed to demonstrate a likelihood of success on the merits of this claim because Gross's use of the "Bihari Interiors" mark in the metatags is not likely to cause confusion and is protected as a fair use.

a. The Strength of Bihari's Mark

"Bihari Interiors" is not a registered trademark with the United States Patent and Trademark Office. Rather, Bihari claims that she is entitled to a common-law service mark.^[11] Registration is not a prerequisite to protection under § 43(a) of the Lanham Act. See Forschner Group, Inc. v. Arrow Trading Co., 124 F.3d 402, 407 (2d Cir.1997). The four judicially-developed categories of trademarks, listed in ascending order of their strength are (1) generic, (2) descriptive, (3) suggestive, and (4) arbitrary or fanciful. See Arrow Fastener Co. v. Stanley Works, 59 F.3d 384, 391 (2d Cir.1995); Abercrombie & Fitch Co. v. Hunting World, Inc., 537 F.2d 4, 9 (2d Cir.1976). A generic mark can never be protected, but a descriptive mark can obtain registration if it has acquired "secondary meaning." See Lane Capital, 192 F.3d at 344. "Fanciful, arbitrary and suggestive marks are deemed inherently distinctive. Their intrinsic nature serves to identify a particular source of a product, so they will be automatically protected" without a showing of secondary meaning. Id. A term is descriptive if it "tells something about a product, its qualities, ingredients or characteristics." Estee Lauder Inc., 108 F.3d at 1509. In contrast, a term is suggestive if it "requires imagination, thought, and perception to reach a conclusion as to the nature of the goods" or services it represents. Bristol-Myers Squibb Co. v. McNeil-P.P.C., Inc., 973 F.2d 1033, 1039 (2d Cir.1992).

Generally, personal names used as trademarks are regarded as descriptive terms, protected only if they have acquired distinctive and secondary meaning. See Lane Capital, 192 F.3d at 345; Abraham Zion Corp. v. Lebow, 761 F.2d 93, 104 (2d Cir.1985). However, "Bihari Interiors" is a suggestive rather than a descriptive mark because it suggests Bihari's services. The mark requires an imaginative leap to correctly identify Bihari's services. The word "interiors" does not immediately identify interior design services. It could [318] as easily describe a company producing home furnishings, seat covers for automobiles^[12] or services such as carpet cleaning or wall painting. As a suggestive mark, "Bihari Interiors" is inherently distinctive and entitled to protection.

b. Commercial Use

The plain language of the Lanham Act makes apparent that § 43(a) is only applicable to commercial uses of another's mark. First, the statute only applies to actions taken by individuals "in connection with any goods or services." 15 U.S.C. § 1125(a)(1); see also Int'l Ass'n of Machinists and Aerospace Workers, AFLCIO v. Winship Green Nursing Ctr., 914 F.Supp. 651, 654, n. 2 (D.Me.) (the statutory language "in connection with goods or services" serves the purpose of keeping most applications of the Lanham Act "within the realm of `commercial speech'" so that "conflicts with the First Amendment are minimized"), aff'd, 103 F.3d 196 (1st Cir.1996). Second, § 43(a) is limited to uses likely to cause confusion "as to the origin, sponsorship, or approval of [the defendant's] goods, services, or commercial activities ...." 15 U.S.C. § 1125(a)(1)(A) (emphasis added). Third, § 43(a) is limited by 15 U.S.C. § 1125(c)(4)(B), which states that "[n]oncommercial use of a mark" is not actionable under the Lanham Act. See 15 U.S.C. § 1125(c)(4)(B); Planned Parenthood Federation of America, Inc. v. Bucci, 97 Civ. 0629, 1997 WL 133313, at *7 (S.D.N.Y. Mar. 24, 1997).

The commercial use requirement in § 43(a) tracks the commercial speech doctrine as developed by the United States Supreme Court. See Central Hudson Gas & Elec. Corp. v. Public Serv. Comm. of New York, 447 U.S. 557, 561, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980). Following the Supreme Court's precedent, the Second Circuit has explained that "[t]he `core notion' of commercial speech includes `speech which does no more than propose a commercial transaction.'" Bad Frog Brewery, Inc. v. New York State Liquor Authority, 134 F.3d 87, 97 (2d Cir.1998) (quoting Bolger v. Youngs Drug Prod. Corp., 463 U.S. 60, 66, 103 S.Ct. 2875, 77 L.Ed.2d 469 (1983)).

"The mere use of another's name on the Internet ... is not per se commercial use." Bally Total Fitness Holding Corp. v. Faber, 29 F.Supp.2d 1161, 1166 (C.D.Cal. 1998). Nor do the Gross websites offer any "commercial transaction." Defendants are not interior designers and do not sell visitors any products or services. However, the Gross websites contain hyperlinks to other websites which promote the services of other interior designers. See supra Part II.D. The Gross websites effectively act as a conduit, steering potential customers away from Bihari Interiors and toward its competitors, thereby transforming his otherwise protected speech into a commercial use. See Jews For Jesus v. Brodsky, 993 F.Supp. 282, 308 (D.N.J.1998) (defendant's site devoted to criticizing the Jews for Jesus movement is commercial because it includes a hyperlink to another Internet site which sells certain merchandise).

c. Likelihood of Confusion

Plaintiffs argue that inclusion of "Bihari" and "Bihari Interiors" in the metatags of the Gross websites is likely to cause confusion. Plaintiffs overstate their case. See Memorandum of Law in Support of Plaintiffs' Motion for a Preliminary Injunction ("Pl.Mem.") at 29 ("[I]t is impossible for even the most sophisticated Internet viewer to ascertain at first glance that Gross's web site is NOT sponsored by Bihari or BIHARI INTERIORS."); Supplemental Memorandum of Law in Support [319] of Plaintiffs' Motion for a Preliminary Injunction ("Pl.Sup.Mem.") at 8. Because the purpose of the websites is to injure Bihari Interiors commercially, no reasonable viewer would believe that the disparaging comments regarding Bihari's business ethics—comments which appear on the first page of the websites—are endorsed by Bihari. Moreover, in the instant case, there is no "lengthy delay between attempting to access plaintiff's home page and learning that one has failed to do so." See Planned Parenthood, 1997 WL 133313, at *8 (finding likelihood of confusion where viewer misled by website to believe that it is the Planned Parenthood website and deception is not clarified until user links to other pages of the website). Therefore, any likelihood of confusion is minimal.^[13]

d. Initial Interest Confusion

Even if actual confusion is unlikely, Plaintiffs argue that there is a likelihood of "initial interest confusion." See Pl. Sup. Mem. at 7-10. Accepting, arguendo, the concept of initial interest confusion in an Internet case,^[14] Bihari has failed to prove a likelihood of initial interest confusion.

An infringement action may be based on a claim that the alleged infringement creates initial consumer interest, even if no actual sale is completed as a result of the confusion. In the cyberspace context, the concern is that potential customers of one website will be diverted and distracted to a competing website. The harm is that the potential customer believes that the competing website is associated with the website the customer was originally searching for and will not resume searching for the original website.

The Ninth Circuit recently provided a useful metaphor for explaining the harm of initial interest confusion in cyberspace:

Using another's trademark in one's metatags is much like posting a sign with another's trademark in front of one's store. Suppose West Coast's, [the defendant], competitor (let's call it "Blockbuster") puts up a billboard on a highway reading—"West Coast Video: 2 miles ahead at Exit 7"—where West Coast is really located at Exit 8 but [320] Blockbuster is located at Exit 7. Customers looking for West Coast's store will pull off at Exit 7 and drive around looking for it. Unable to locate West Coast, but seeing the Blockbuster store right by the highway entrance, they may simply rent there. Even consumers who prefer West Coast may find it not worth the trouble to continue searching for West Coast since there is a Blockbuster right there.

Brookfield Communications, 174 F.3d at 1064.^[15]

The highway analogy pinpoints what is missing in this case. Inserting "Bihari Interiors" in the metatags is not akin to a misleading "billboard," which diverts drivers to a competing store and "misappropriat[es] [plaintiff's] acquired goodwill." Id. ("[T]he fact that there is only initial consumer confusion does not alter the fact that [the defendant] would be misappropriating [the plaintiff's] good will."). Far from diverting "people looking for information on Bihari Interiors," as plaintiffs allege, see Pl. Sup. Mem. at 8, the Gross websites provide users with information about Bihari Interiors. Furthermore, the Gross websites cannot divert Internet users away from Bihari's website because Bihari does not have a competing website. See BigStar Entertainment, 105 F.Supp.2d at 209-10 (stating that initial interest confusion does not arise where parties are not in close competitive proximity).

Furthermore, users are unlikely to experience initial interest confusion when searching the Internet for information about Bihari Interiors. In support of their motion, Plaintiffs' counsel provided a typical search result when "Bihari Interiors" is entered into the search field. See Meta-Crawler Search Results from March 16, 2000 ("3/16/2000 Search Results"), Ex. C to 3/16/00 Letter from Brian Maas, Esq., Counsel for Bihari, to Court ("3/16/00 Maas Letter"). The search revealed twelve websites, eight of which appear to be the Gross websites. Of those eight, five bear the heading "Manhattan Interior Design Scam—Bihari Interiors." Each website with that heading contains the following description underneath the title: "This site deals with the problems experienced when hiring a New York City (Manhattan) designer. It discusses Marianne Bihari[,] fraud and deceit and...." 3/16/2000 Search Results, Ex. C to 3/16/2000 Maas Letter, at 1 (ellipses in original). An Internet user who reads this text, and then sees the domain name of "designs-cam.com" or "manhattaninteriordesign.com", is unlikely to believe that these websites belong to Bihari Interiors or Bihari.^[16]See Brookfield Communications, 174 F.3d at 1062 (relying on search engine results and different domain names to show that level of confusion is less severe when mark is included as a metatag as compared to mark's inclusion in domain name).

[321] The few decisions holding that use of another entity's trademark in metatags constitutes trademark infringement involved very different circumstances. Niton Corp. v. Radiation Monitoring Devices, Inc., 27 F.Supp.2d 102 (D.Mass. 1998), for example, provides a good example of the use of metatags to divert a competitor's customers. First, Radiation Monitoring Devices ("RMD") and Niton Corporation ("Niton") were direct competitors. Second, RMD did not simply use Niton's trademark in its metatag. Rather, RMD directly copied Niton's metatags and HTML code. As a result, an Internet search using the phrase "home page of Niton Corporation" revealed three matches for Niton's website and five for RMD's website. See id. at 104. RMD obviously was taking advantage of Niton's good will to divert customers to the RMD website.

Similarly, in Playboy Enters., Inc. v. Asiafocus Int'l, Inc., No. Civ. A. 97-734-A, 1998 WL 724000, at *3,**6-7 (E.D.Va. Apr. 10, 1998), the court enjoined use of the marks "Playboy" and "Playmate" in the domain name and metatags of defendant's website. The defendant provided adult nude photos on webpages located at "asian-playmates.com" and "playmates-asian.com". The "Playboy" and "Playmate" trademarks were embedded in the metatags such that a search for Playboy Enterprises Inc.'s ("Playboy") website would produce a list that included "asian-playmates.com". See id. at *3,*5-6; see also Playboy Enters., Inc. v. Calvin Designer Label, 985 F.Supp. 1220, 1221 (N.D.Cal. 1997) (preliminarily enjoining defendant's website, "www.playboyxxx.com" and repeated use of the "Playboy" trademark in defendant's metatags). Defendants in these cases were clearly attempting to divert potential customers from Playboy's website to their own.

Even Brookfield Communications, where initial interest confusion was first applied to metatags, presents convincing proof of diversion. Brookfield sought to protect its trademark in its "Moviebuff" software, which provides entertainment-industry information. Brookfield had created a website offering an Internet-based searchable database under the "Moviebuff" mark. The defendant, West Coast, a video rental store chain, registered a site at "moviebuff.com" which also contained a searchable entertainment database. The court held that defendant's use of the "moviebuff.com" domain name constituted trademark infringement. See id. at 1061. The court also enjoined West Coast from using any term confusingly similar to "moviebuff" in the metatags based on the initial interest confusion caused by the use of Brookfield's mark, which would redound to West Coast's financial benefit. See id. at 1065.

In each of these cases, the defendant was using the plaintiff's mark to trick Internet users into visiting defendant's website, believing either that they were visiting plaintiff's website or that the defendant's website was sponsored by the plaintiff. As more fully discussed below, see infra Part IV.A.3.e, Gross's use of the "Bihari Interiors" mark in the metatags is not a bad-faith attempt to trick users into visiting his websites, but rather a means of cataloging those sites.

e. The Fair Use Doctrine

Even if the Gross websites cause consumer confusion, use of the "Bihari Interiors" mark in the metatags is protected as a fair use. The Lanham Act codified a common law fair use defense in 15 U.S.C. § 1115(b)(4). The fair use doctrine applies to the Internet as readily as to the print media. See Radio Channel Networks, Inc. v. Broadcast.Com, Inc., 98 Civ. 4799, 1999 WL 124455, at **5-6 (S.D.N.Y. Mar. 8, 1999) (permitting defendant's fair use of the term "The Radio Channel" on its website, which transmits broadcasts over the Internet, even though plaintiff had registered the service mark "The Radio Channel").

[322] "Fair use is established when the challenged term is a use, otherwise than as a mark, ... of a term or device which is descriptive of and used fairly and in good faith only to describe the goods or services of such party...." 15 U.S.C. § 1115(b)(4). In other words, "fair use permits others to use a protected mark to describe aspects of their own goods." Car-Freshner Corp. v. S.C. Johnson & Son, Inc., 70 F.3d 267, 270 (2d Cir.1995). It is not necessary that the plaintiff's mark be classified as "descriptive" to benefit from the fair use defense. See id. at 269-270. Instead, the central considerations are whether the defendant has used the mark (1) in its descriptive sense, and (2) in good faith. See id.

(i) Use of the Term in its Descriptive Sense

The requirement that a trademark be used in its descriptive sense is met where the mark is used in an index or catalog, or to describe the defendant's connection to the business claiming trademark protection. See Nihon Keizai Shimbun, Inc. v. Comline Bus. Data, Inc., 166 F.3d 65, 73-74 (2d Cir.1999) (permitting fair use defense where defendant, a company that gathers news articles and sells "abstracts" summarizing the articles, routinely used the plaintiff's mark in the reference line of its abstracts to identify the source of the article abstracted by the defendant); Restatement (Third) of Unfair Competition § 28 cmt. a (1995) (fair use defense protects a subsequent user's use of a personal name designation "if the name is used solely to indicate truthfully the named person's connection with the goods, services, or business."). Applying this general rule to the metatag context, Professor McCarthy states: "[T]he fair use defense applies ... if another's trademark is used in a meta tag solely to describe the defendant or defendant's goods or services...." 4 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition ("McCarthy"), § 25:69 at 25-137 (4th ed.1999). This position finds support in recent cases. In Playboy Enters., Inc. v. Welles, 7 F.Supp.2d 1098 (S.D.Cal.1998), Playboy sought to enjoin Terri Welles, a former "Playmate of the Month" and "Playmate of the Year", from utilizing the trademarked terms "Playboy" and "Playmate" in the metatags of Welles's website. The court denied the injunction, holding that use of the trademarked terms in the metatags is a fair use. The court stated:

With respect to the meta tags, the court finds there to be no trademark infringement where defendant has used plaintiff's trademarks in good faith to index the content of her website. The meta tags are not visible to the websurfer although some search engines rely on these tags to help websurfers find certain websites. Much like the subject index of a card catalog, the meta tags give the websurfer using a search engine a clearer indication of the content of a website. The use of the term Playboy is not an infringement because it references not only her identity as a "Playboy Playmate of the Year 1981," but it may also reference the legitimate editorial uses of the term Playboy contained in the text of defendant's website.

Id. at 1104; see also Brookfield Communications, 174 F.3d at 1066 (stating that West Coast can use Brookfield's trademark on its website to "legitimately ... describe Brookfield's product. For example, [West Coast can] ... include an advertisement banner such as `Why pay for MovieBuff when you can get the same thing here for FREE?'").

Here, Gross has included "Bihari Interiors" in the metatags of his websites because the websites provide information about Bihari Interiors and Marianne Bihari. Gross has not used the terms "Bihari Interiors" and "Bihari" in the metatags as a mark, but rather, to fairly identify the content of his websites. In short, Gross uses the "Bihari Interiors" mark in its descriptive sense only.

[323] Moreover, use of the "Bihari Interiors" mark in the metatags of his websites is the only way Gross can get his message to the public. See Bally Total Fitness, 29 F.Supp.2d at 1165 ("Prohibiting [the defendant] from using Bally's name in the machine readable code would effectively isolate him from all but the most savvy of Internet users."). A broad rule prohibiting use of "Bihari Interiors" in the metatags of websites not sponsored by Bihari would effectively foreclose all discourse and comment about Bihari Interiors, including fair comment. Courts must be particularly cautious of overextending the reach of the Lanham Act and intruding on First Amendment values. Cf. Rogers v. Grimaldi, 875 F.2d 994, 998 (2d Cir.1989) (holding that movie titles using a celebrity's name will not be actionable under the Lanham Act unless the title has no artistic relevance to the underlying work or if the title misleads as to the source or the content of the work); 4 McCarthy, § 27:91 at 27-140 ("Whether through the use of statutory interpretation or concern for free speech, traditional protections for commentators and critics on business and commercial affairs must not be jettisoned. It is important to create critical breathing space for legitimate comment and criticism about products and services."). The Second Circuit's warning in a recent Internet case to proceed cautiously when dealing with the frontier of expressive speech on the Internet is particularly instructive:

In considering whether domain names constitute expressive speech, we observe that the lightning speed development of the Internet poses challenges for the common-law adjudicative process—a process which, ideally while grounded in the past, governs the present and offers direction for the future based on understandings of current circumstances. Mindful of the often unforeseeable impact of rapid technological change, we are wary of making legal pronouncements based on highly fluid circumstances, which almost certainly will give way to tomorrow's new realities.

Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573 (2d Cir.2000) (stating that top level domain names may, one day, constitute expressive speech).

(ii) Gross's Good Faith

To benefit from the defense of fair use, Gross must have acted in good faith. The inquiry into a defendant's good faith focuses on whether "the defendant adopted its mark with the intention of capitalizing on plaintiff's reputation and goodwill and any confusion between his and the senior user's product." Lang v. Retirement Living Pub. Co., Inc., 949 F.2d 576, 583 (2d Cir.1991).

Bihari argues, in a conclusory fashion, that Gross did not adopt the "Bihari Interiors" mark in good faith. Rather, Gross intended to divert individuals searching for information about Bihari Interiors to his websites. See Pl. Mem. at 33; Pl. Sup. Mem. at 8. This argument is not persuasive. Metatags serve as a cataloging system for a search engine. Gross has the right to catalog the contents of his websites. Furthermore, the fact that Gross knew of the prior use of the "Bihari Interiors" mark does not in itself prove a lack of good faith. "[P]rior knowledge of [plaintiff's] trade name does not give rise to a necessary inference of bad faith, because adoption of a trademark with actual knowledge of another's prior registration ... may be consistent with good faith." Lang, 949 F.2d at 583-84; Restatement (Third) of Unfair Competition § 28 cmt. d ("Knowledge of a prior trademark use of the term does not in itself prove a lack of good faith.").

In addition, the domain names of the Gross websites and the disclaimer prove that Gross is using "Bihari Interiors" in good faith. The domain names of his websites in no way confuse Internet users into believing that his site is actually that of Bihari Interiors. See, e.g., Planned Parenthood, 1997 WL 133313, at **8-10 (defendant's anti-abortion website violates the [324] Lanham Act because, among other reasons, it was registered at "www.planned-parenthood.com", and the site greeted users with "Welcome to the PLANNED PARENTHOOD HOME PAGE"). Moreover, the Gross websites include a disclaimer: "Keep in mind that this site reflects only the view points and experiences of one Manhattan couple...." See Amended Complaint ¶ 92. Although a disclaimer cannot insulate Gross from liability, it indicates good faith use of the service marks and weighs in Gross's favor. See Consumers Union of United States, Inc. v. General Signal Corp., 724 F.2d 1044, 1053 (2d Cir.1983) ("Disclaimers are a favored way of alleviating consumer confusion as to source or sponsorship"); Welles, 7 F.Supp.2d at 1104. Even if the Gross websites are mean-spirited and vindictive, bad faith cannot be imputed as well to Gross's use of the "Bihari Interiors" mark in the metatags. See Nihon Keizai Shimbun, 166 F.3d at 74 (holding that use of plaintiff's mark is in good faith even though "other aspects of defendants' behavior may have evidenced bad faith.").

B. The Common Law Libel Claim

Plaintiffs also seek to enjoin Gross from disparaging Bihari. Bihari alleges that four sets of statements on the Gross websites constitute libel: (1) the allegations that Bihari has "alleged ill intentions", has engaged in "alleged fraud and deceit", has "victimized" her clients, and engaged in a "scam", see Amended Complaint ¶¶ 121, 122; supra Part II.D; (2) including hyper-links to the First Amended Complaint because that complaint includes two claims of fraud which were dismissed by the state court judge, with leave to replead only one, see Pl. Sup. Mem. at 5, 12; supra Part II.A; (3) the following quote from Bihari's Affidavit: "I was arrested and charged with criminal possession of stolen property in the Fifth Degree," Amended Complaint ¶ 62; see supra Part II.D; and (4) guest-book entries "invented ... to suggest to other visitors ... that the breadth of the dissatisfaction with Ms. Bihari is broader than it is," Pl. Supp. Mem. at 11; see supra Part II.D.

A preliminary injunction is a prior restraint, and as such, "bear[s] a heavy presumption against its constitutional validity." Bantam Books, Inc. v. Sullivan, 372 U.S. 58, 70, 83 S.Ct. 631, 9 L.Ed.2d 584 (1963). Nearly thirty years ago, in Organization for a Better Austin v. Keefe, 402 U.S. 415, 91 S.Ct. 1575, 29 L.Ed.2d 1 (1971), the Supreme Court struck as unconstitutional a state court's order enjoining distribution of leaflets critical of the respondent's business practices. The Supreme Court emphasized:

It is elementary, of course, that in a case of this kind the courts do not concern themselves with the truth or validity of the publication. Under Near v. Minnesota, the injunction, so far as it imposes prior restraint on speech and publication, constitutes an impermissible restraint on First Amendment rights.... No prior decisions support the claim that the interest of an individual in being free from public criticism of his business practices in pamphlets or leaflets warrants use of the injunctive power of a court.

Id. at 418-19, 91 S.Ct. 1575 (internal citations omitted). This is consistent with Supreme Court decisions holding prior restraints to be presumptively invalid, even when the potential harm was much greater than injury to reputation. See Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 570, 96 S.Ct. 2791, 49 L.Ed.2d 683 (1976) (rejecting prior restraint issued to ensure protection of criminal defendant's Sixth Amendment right to a fair trial); New York Times Co. v. United States, 403 U.S. 713, 91 S.Ct. 2140, 29 L.Ed.2d 822 (1971) (even during wartime, newspapers not enjoined from publishing papers that government feared could threaten national security).

Our Circuit Court of Appeals has longed warned against enjoining libel: "Equity will not restrain by injunction the threatened publication of a libel, as such, however [325] great the injury to property may be. This is the universal rule in the United States and was formerly the rule in England." American Malting Co. v. Keitel, 209 F. 351, 354 (2d Cir.1913); see also Crosby v. Bradstreet Co., 312 F.2d 483, 485 (2d Cir.1963) ("We are concerned with the power of a court of the United States to enjoin publication of information about a person, without regard to truth, falsity, or defamatory character of that information. Such an injunction, enforceable through the contempt power, constitutes a prior restraint by the United States against the publication of facts which the community has a right to know...."); Parker v. Columbia Broadcasting System, Inc., 320 F.2d 937, 939 (2d Cir.1963).

The lower courts and state courts have taken the same approach. See, e.g., Stop the Olympic Prison v. United States Olympic Comm., 489 F.Supp. 1112, 1124-25 (S.D.N.Y.1980) ("A court of equity will not, except in special circumstances, issue an injunctive order restraining libel or slander or otherwise restricting free speech. To enjoin any publication, no matter how libelous, would be repugnant to the First Amendment to the Constitution, and to historic principles of equity.") (quoting Konigsberg v. Time, Inc., 288 F.Supp. 989, 989 (S.D.N.Y.1968)); Quinn v. Aetna Life & Casualty Co., 482 F.Supp. 22, 29 (E.D.N.Y.1979) (dismissing action to enjoin insurance company from running ads claiming that tort claims resulted in excessive jury awards); Ramos v. Madison Square Garden Corp., 257 A.D.2d 492, 684 N.Y.S.2d 212, 213 (1st Dep't 1999) ("Even if some form of equitable remedy were appropriate for defamation, a dubious proposition at best, the particular equitable relief here sought, in the nature of a prior restraint, is strongly disfavored.").

The rule against preliminarily enjoining libel rests on two grounds. First, a preliminary injunction would be unconstitutional as a prior restraint on freedom of expression. "The special vice of a prior restraint is that communication will be suppressed ... before an adequate determination that it is unprotected by the First Amendment." Pittsburgh Press Co. v. Pittsburgh Comm'n on Human Relations, 413 U.S. 376, 390, 93 S.Ct. 2553, 37 L.Ed.2d 669 (1973). Prior restraints of future speech are particularly dangerous because of the difficulty courts face in designing an order that does not chill protected speech. See Latino Officers Ass'n, New York, Inc. v. City of New York, 196 F.3d 458, 465 (2d Cir.1999) ("The danger of a prior restraint, as opposed to ex post disciplinary action, is precisely that making predictions ex ante as to what restrictions on speech will ultimately be found permissible is hazardous and may chill protected speech."); McLaughlin v. New York, 784 F.Supp. 961, 977 (N.D.N.Y.1992) (refusing to enjoin defendant's "blacklisting" of former employee because the "court could not possibly design an order that would be concise enough to avoid chilling defendants' protected speech relating to the plaintiff."). Second, injunctive relief is unnecessary because plaintiffs have an adequate remedy at law. See American Malting Co., 209 F. at 356 ("The fact that the false statements may injure the plaintiff in his business or as to his property does not alone constitute a sufficient ground for the issuance of an injunction[] [because] [t]he party wronged has an adequate remedy at law."); McLaughlin, 784 F.Supp. at 977 (N.D.N.Y.1992) ("The fact that a sufficient after-the-fact remedy, in the form of a defamation suit, would be available to redress future `blacklisting' prevents this court from awarding plaintiff's request for an enjoinder of defendants' future speech."); Ramos, 684 N.Y.S.2d at 213 (refusing to grant declaratory relief in defamation suit because plaintiff can seek post-publication damages).

The Gross websites concern the business practices and alleged fraud of a well-known interior designer. Such speech is "arguably within the sphere of legitimate public concern," which imbues [326] the speech with a heavy presumption of constitutional protection. See Rookard v. Health and Hospitals Corp., 710 F.2d 41, 46 (2d Cir.1983) (complaint of fraudulent and corrupt practices at municipal hospital constitutes speech on a matter of public concern); Chapadeau v. Utica Observer-Dispatch, Inc., 38 N.Y.2d 196, 199, 379 N.Y.S.2d 61, 341 N.E.2d 569 (1975) (under New York law, speech "arguably within the sphere of legitimate public concern" is constitutionally privileged unless the plaintiff proves that the publisher acted in a "grossly irresponsible manner"). Similarly, New York law places a heavy burden on the plaintiff to prove that the disparaging statements are not opinion, which is granted absolute protection. See Celle v. Filipino Reporter Enters. Inc., 209 F.3d 163, 179 (2d Cir.2000) (under New York law, burden of proving that statement is not protected opinion rests with plaintiff); Immuno AG. v. Moor-Jankowski, 77 N.Y.2d 235, 248-50, 566 N.Y.S.2d 906, 567 N.E.2d 1270 (1991) (holding that expressions of "pure" opinion receive absolute protection under the New York Constitution). Because the burden of proof in New York is so high, the risk that a preliminary injunction would suppress constitutionally protected speech is magnified.

Plaintiffs correctly note that a preliminary injunction is more readily available where the defamation is in furtherance of another tort. See Trojan Elec. & Mach. Co. v. Heusinger, 162 A.D.2d 859, 557 N.Y.S.2d 756, 758 (3d Dep't 1990) ("While equity will not intervene to restrain the publication of words on a mere showing of falsity ... [a]n injunction will lie to restrain libel when the publication is made as part and parcel of a course of conduct deliberately carried on to further a fraudulent or unlawful purpose."); 1 Robert D. Sack, Sack on Defamation, § 10.6.1 (3d ed. 1999) ("In unusual situations where, for example, defamatory words are in aid of another tort such as fraud, injunction may issue."). Consequently, plaintiffs maintain that Gross's speech is part and parcel of his scheme to harass plaintiffs to settle the State Suit. See Pl. Mem. at 15 ("Gross's conduct goes far beyond ordinary libel. Here, Gross has engaged in a deliberate course of conduct designed to harass and pressure Bihari into succumbing to his financial demands by creating and maintaining a web site easily accessible by all her potential customers.").

Plaintiffs' characterization of Gross's speech and conduct as part and parcel of the tort of harassment is not convincing. As discussed supra Part II.B. and supra Part II.E, plaintiffs have not provided sufficient evidence that Gross's purpose is to harass plaintiffs or extort a higher settlement in the State Suit. At most, plaintiffs have proven that Gross intends to cause plaintiffs commercial harm. See supra Part II.E. This intent, however improper, cannot justify a prior restraint of constitutionally protected speech. See Organization for a Better Austin, 402 U.S. at 419, 91 S.Ct. 1575 ("The claim that the expressions were intended to exercise a coercive impact on respondent does not remove them from the reach of the First Amendment.... [S]o long as the means are peaceful, the communication need not meet standards of acceptability."); Quinn, 482 F.Supp. at 30 ("[T]he protection given to speech directed at issues of public concern [is not] lost because of improper intent of the speaker. The First Amendment protects the speech itself.... `(T)he people in our democracy are entrusted with the responsibility for judging and evaluating the relative merits of conflicting arguments.' It is presumed that in evaluating such speech `the source and credibility of the advocate' will be considered.") (quoting First National Bank v. Bellotti, 435 U.S. 765, 791-92, 98 S.Ct. 1407, 55 L.Ed.2d 707 (1978)) (internal citations omitted).

Furthermore, the type of harassment in cases where courts have issued preliminary injunctions is much more egregious than that presented here. Generally, such cases involve an invasion of plaintiff's privacy or defamatory speech directed at a [327] captive audience. See, e.g., Metropolitan Opera Ass'n v. Local 100, 00 Civ. 3613, 2000 WL 872829, **3-5, **6-9,*13 (S.D.N.Y. June 1, 2000) (upholding injunction against picketing by union members outside the Metropolitan Opera, where union members were engaging in defamatory speech, trespassing, harassment and intimidation of employees and potential donors); Ansonia Assocs. Ltd. Partnership v. Ansonia Tenants' Coalition, Inc., 253 A.D.2d 706, 677 N.Y.S.2d 575, 576 (1st Dep't 1998) (upholding injunction where tenants' coalition was distributing leaflets outside plaintiff's business); Bingham v. Struve, 184 A.D.2d 85, 591 N.Y.S.2d 156, 158 (1st Dep't 1992) (upholding injunction where defendant picketed outside plaintiff's apartment building wearing a sign accusing plaintiff of raping her, an accusation which was "unsupported by any objective evidence or corroborating testimony"); Trojan Elec., 557 N.Y.S.2d at 758-59 (upholding injunction where defendant, who was involved in contract dispute with developer of condominium project, was picketing outside project to discourage potential purchasers).

In the case at bar, Gross has not invaded Bihari's privacy or forced his disparaging message on any listener. Although Gross has produced pens with the logo "www.bihariinteriors.com" and may have engaged in "hang-up telephone calls" to Bihari's residence, see supra Part II.B, such conduct does not constitute the "truly exceptional circumstances" justifying a preliminary injunction. See Floyd Abrams, Prior Restraints, 580 PLI/PAT 429, 582 (1999). Moreover, Gross's harassing conduct ceased more than seven months before Bihari filed this lawsuit and plaintiffs have not alleged that the harassment has resumed. See supra Part II.B. Most important, plaintiffs are not seeking to enjoin any harassing conduct by Gross. Rather, plaintiffs seek to enjoin the websites, making it quite clear that the speech itself is what plaintiffs are targeting, not Gross's alleged past harassment. In short, plaintiffs have not met the heavy burden required to secure a prior restraint.

V. Conclusion

For the foregoing reasons, Bihari's motion for a preliminary injunction is denied in its entirety. A pretrial conference is scheduled for October 2, 2000 at 2:30 p.m.

[1] Bihari's Amended Complaint asserts six claims against Gross. Although plaintiffs moved for a preliminary injunction based on the Amended Complaint, in its entirety, an examination of plaintiffs' Memorandum of Law reveals that the preliminary injunction is sought pursuant only to plaintiffs' federal claims and common law libel claim. Therefore, the other three claims—trademark dilution under state law, common law unfair competition, and intentional interference with prospective business relations—are not pertinent to resolution of this preliminary injunction motion.

[2] A domain name, the address given to a webpage, consists of two parts: a top level domain and a secondary level domain.

[3] A metatag is hypertext markup language ("HTML") code, invisible to the Internet user, that permits web designers to describe their webpage. There are two different types of metatags: keyword and description. The keyword metatag permits designers to identify search terms for use by search engines. Description metatags allow designers to briefly describe the contents of their pages. This description appears as sentence fragments beneath the webpage's listing in a search result.

[4] Gross admits that he delivered these pens to Bihari's residence. See Answer ¶ 44.

[5] Bihari contends that because her phone was equipped with caller identification, she could identify the source "for several of the calls as being defendants' home." Id. ¶ 45. Gross and Truglio deny making these phone calls. See Answer ¶¶ 45, 48.

[6] A hyperlink is "`highlighted text or images that, when selected by the user, permit[s][her] to view another, related Web document.'" Bensusan Restaurant Corp. v. King, 126 F.3d 25, 27 n. 1 (2d Cir.1997).

[7] Bihari provides six examples of disparaging guestbook entries, which she seeks to enjoin:

a. Finally someone who speaks the truth about this horrible interior decorator. I myself fell victim to this company and have been to [sic] ashamed to speak until coming across this web site. Thank you for sharing your suffering. I no longer feel alone. Sincerely, Mr. Taken Advantage.

b. Rumor has it this designer recently stepped over the line ... She may soon find herself in new surroundings (if you know what I mean).

c. Knowing Marianne Bihari this site does not surprise us ... Rumor has it she is in a little tangle with another showroom in our building. Sincerely, Friends of Bihari Victims.

d. How is it possible that this woman can get away with all you claim? Is there no justice in the world, or at least in New York.

e. My friend invited me to her New Years Eve party last night. Conversation came up about M. Bihari. Is there any truth regarding her arrest?

f. Bihari behind bars? Is this true? If it is, why wouldn't this site have the details. Please enlighten us.

Amended Complaint ¶ 87.

[8] Bihari submitted two affidavits to support this allegation. The first affidavit was written by her friend George Manos, who stated that of the fifty guestbook entries in the "www.bihariinteriors.com" guestbook, eighteen were signed by individuals who left their e-mail addresses. See 3/2/00 Affidavit of George Manos in Support of Plaintiffs' Motion for a Preliminary Injunction ("Manos Aff.") ¶ 3. Manos sent an e-mail message to those eighteen individuals, but twelve of those e-mail messages were "bounced back" to him. Id. ¶ 4. From this fact, John Running concluded in his affidavit that "some other individuals left the guestbook messages and signed with a phony e-mail address." See Running Aff. ¶ 17.

[9] If a plaintiff can show that her mark was famous at the time the defendant registered the domain name, she can prove a violation of the ACPA by showing a bad faith intent to profit and that the domain name "is identical or confusingly similar to or dilutive of that mark." 15 U.S.C. § 1125(d)(1) (emphasis added).

[10] Section 43(a) of the Lanham Act states:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact—which

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person's goods, services, or commercial activities, shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

[11] Service marks are essentially trademarks used in the sale of services, instead of goods. Both service marks and trademarks are governed by identical standards. See, e.g., Lane Capital Management v. Lane Capital Management, 192 F.3d 337, 344 n. 2 (2d Cir.1999). A service mark includes words used "to identify and distinguish the services of one person, including a unique service, from the services of others and to indicate the source of the services, even if that source is unknown." 15 U.S.C. § 1127.

[12] "Starclass Interiors," a company which produces seatcovers and convertible tops for vehicles, received federal trademark registration. See Int'l Star Class Yacht Racing Ass'n. v. Tommy Hilfiger, Inc., 94 Civ. 2663, 1994 WL 681720, at *2 n. 1 (S.D.N.Y. Dec. 2, 1994).

[13] The likelihood of confusion question generally requires analysis of the classic eight factor test established in Polaroid Corp. v. Polarad Elecs. Corp., 287 F.2d 492, 495 (2d Cir. 1961). However, the Polaroid factors are of little assistance here. The Gross websites do not sell any goods or directly compete with Bihari Interiors. Even in the Internet context, this case is unique. In instances in which a website uses another entity's trademark in the domain name, application of the Polaroid factors is simple because the defendant has adopted a mark—namely, the website domain name—that incorporates or is strikingly similar to another mark. See, e.g., Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999) (defendant adopted domain name of "moviebuff.com"); New York State Society of Certified Public Accountants v. Eric Louis Assocs., 79 F.Supp.2d 331, 340 (S.D.N.Y.1999) (defendant adopted domain name of "www.nysscpa.com" even though the New York State Society of Certified Public Accountants already had a trademark in "NYSSCPA"); Jews For Jesus, 993 F.Supp. at 290 (defendant adopted domain name of "jewsfor-jesus.org"); Planned Parenthood, 1997 WL 133313, at *7 n. 9 (defendant adopted domain name of "www.plannedparenthood.com"). However, the Gross websites no longer use the "Bihari Interiors" mark in the domain name. This makes the Polaroid factors inapplicable. See Brookfield Communications, 174 F.3d at 1062 (stating that using mark in metatags is less likely to cause actual confusion).

[14] Although the Second Circuit has not explicitly applied this doctrine in an Internet case, the Ninth Circuit has. See Brookfield Communications, 174 F.3d at 1062-63 (relying on Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 257-58 (2d Cir.1987)). In addition, at least two courts in the Second Circuit have analyzed a trademark case involving metatags by applying the initial interest confusion doctrine. See New York State Society of Certified Public Accountants, 79 F.Supp.2d at 341; OBH, Inc. v. Spotlight Magazine, Inc., 86 F.Supp.2d 176, 190 (W.D.N.Y.2000); but see BigStar Entertainment, Inc. v. Next Big Star, Inc., 105 F.Supp.2d 185, 207-210 (S.D.N.Y.2000) (refusing to apply initial interest confusion doctrine).

[15] Use of the highway billboard metaphor is not the best analogy to a metatag on the Internet. The harm caused by a misleading billboard on the highway is difficult to correct. In contrast, on the information superhighway, resuming one's search for the correct website is relatively simple. With one click of the mouse and a few seconds delay, a viewer can return to the search engine's results and resume searching for the original website.

[16] The other three bear the headings "Bihari Poll", "Info Page", and "Guestbook". The description underneath the "Bihari Poll" heading states, in part: "After visiting this site I would: never hire Marianne Bihari or Bihari Interiors...." 3/16/2000 Search Results, Ex. C to 3/16/2000 Maas Letter, at 2 (ellipses in original). The "Info Page" description states, "If you are thinking of hiring Marianne Bihari or Bihari Interiors, please feel free to e-mail us. We will be more than glad to share with you our...." Id. (ellipses in original). The description underneath the "Guestbook" title states, in part, "I almost hired Ms. Bihari ... Hi, I was refered [sic] to this web site by my real estate broker in Manhattan. If any one [sic] on this posting board can recommend a very creative architect / designer it would be greatly appreciated." Id. (ellipses in original). No reasonable person would believe that any of these three websites were sponsored or endorsed by Bihari.

319 F.3d 770 (2003)

Nos. 01-2648, 01-2725.

Argued: October 16, 2002.
Decided and Filed: February 7, 2003.

[771] Douglas W. Sprinkle (argued), Julie A. Greenberg (briefed), Gifford, Krass, Groh, Sprinkle, Anderson & Citkowski, Birmingham, MI, for Plaintiff-Appellee.

Paul A. Levy (argued and briefed), Public Citizen Litigation Group, Washington, DC, Webfeats, Carrollton, TX, Henry Mishkoff, Carrollton, TX, for Defendants-Appellants.

Ann Beeson (briefed), American Civil Liberties Union Foundation, Reproductive Freedom Project, New York, NY, Michael J. Steinberg (brifed), Kary L. Moss (briefed), American Civil Liberties Union Fund of Michigan, Detroit, MI, Kevin S. Bankston (briefed), ACLU Immigration Rights Project, New York, NY, for Amicus Curiae.

Before: BOGGS, SUHRHEINRICH and CLAY, Circuit Judges.

OPINION

SUHRHEINRICH, Circuit Judge.

Defendant-Appellant Henry Mishkoff, d/b/a Webfeats, appeals from two preliminary injunctions, respectively entered on October 11, 2001, and December 7, 2001, in the United States District Court for the Eastern District of Michigan, together granting Plaintiff-Appellee the Taubman Company's (Taubman) request to prevent Mishkoff from using six internet domain names because they likely violate Taubman's trademarks in the terms "Taubman," and "The Shops at Willow Bend."

Mishkoff claims two assignments of error. First, he contends that the United States District Court for the Eastern District [772] of Michigan lacked personal jurisdiction over him. Second, he claims that even if jurisdiction was proper, Taubman is unlikely to succeed on the merits of its trademark claims because it has not demonstrated that customers would likely be confused between the origin of Taubman's and Mishkoff's products.

We reverse the decision of the district court and dissolve both injunctions. We find, first, that Mishkoff has waived any challenge he might have to the personal jurisdiction of the district court in the Eastern District of Michigan. Second, Taubman had failed to demonstrate a likelihood of success on the merits because Mishkoff's use was not "in connection with the sale or advertising of goods or services," and there is no likelihood of confusion among consumers.

I. Facts

Mishkoff is a resident of Carrollton, Texas, and a web designer by trade. Upon hearing the news that Taubman, a Delaware corporation with its principal place of business in Michigan, was building a shopping mall called "The Shops at Willow Bend," in Plano, Texas, Mishkoff registered the domain name, "shopsatwillowbend.com," and created an internet website with that address. Mishkoff had no connection to the mall except for the fact that it was being built near his home.

Mishkoff's website featured information about the mall, with a map and links to individual websites of the tenant stores. The site also contained a prominent disclaimer, indicating that Mishkoff's site was unofficial, and a link to Taubman's official site for the mall, found at the addresses "theshopsatwillowbend.com," and "shopwillowbend.com."

Mishkoff describes his site as a "fan site," with no commercial purpose. The site did, however, contain a link to the website of a company run by Mishkoff's girlfriend, Donna Hartley, where she sold custom-made shirts under the name "shirtbiz.com;" and to Mishkoff's site for his web design business, "Webfeats."

When Taubman discovered that Mishkoff had created this site, it demanded he remove it from the internet. Taubman claimed that Mishkoff's use of the domain name "shopsatwillowbend.com" infringed on its registered mark, "The Shops at Willow Bend." Taubman filed a complaint on August 7, 2001, claiming, inter alia, trademark infringement under the Lanham Act, 15 U.S.C. § 1114, asking for a preliminary injunction, and demanding surrender of Mishkoff's domain name.

Mishkoff responsively registered five more domain names: 1) taubmansucks.com; 2) shopsatwillowbendsucks.com; 3) theshopsatwillowbendsucks.com; 4) willowbendmallsucks.com; and 5) willowbendsucks.com. All five of these web names link to the same site, which is a running editorial on Mishkoff's battle with Taubman and its lawyers, and exhaustively documents his proceedings in both the district court and this Court, both through visual scans of filed motions, as well as a first person narrative from Mishkoff. In internet parlance, a web name with a "sucks.com" moniker attached to it is known as a "complaint name," and the process of registering and using such names is known as "cybergriping."^[1]See, e.g., Martha Kelley, Is Liabilty Just a [773] Link Away? Trademark Dilution by Tarnishment Under the Federal Trademark Dilution Act of 1995 and Hyperlinks on the World Wide Web, 9 J. Intell. Prop. L. 361, 375 (2002) (defining "cybergriping"); Ronald F. Lopez, Corporate Strategies for Addressing Internet "Complaint" Sites, 14 Int'l L. Practicum 101, 101-02 (Autumn 2001) (giving examples of different types of "complaint" sites).

On October 11, 2001, the district court granted Taubman's motion for a preliminary injunction, enjoining Mishkoff from using the first host name, "shopsatwillowbend.com."^[2] On October 15, 2001, Taubman filed a motion to amend the preliminary injunction to include the five "complaint names" used by Mishkoff. On December 7, 2001, the district court allowed the amendment and enjoined Mishkoff from using the complaint names.

On November 9, Mishkoff filed a notice of appeal from the October 11 injunction. On December 10, Mishkoff filed a notice of appeal from the December 7 injunction. Accordingly, each case is timely before this Court under Fed. R.App. P. 4(a)(1)(A). The cases have been consolidated on appeal.

II. Personal Jurisdiction

Mishkoff first claims that the United States District Court for the Eastern District of Michigan lacks personal jurisdiction over him. He asserts that since he is a resident of Texas, the websites were created in Texas, and the mall which is the subject of the websites stands in Texas, a federal court in Michigan cannot exercise jurisdiction over him as a defendant.

Although Mishkoff raises serious doubts in our minds about whether the district court properly held jurisdiction, his motion was ultimately untimely. Although subject-matter jurisdiction can be challenged at any time, Fed.R.Civ.P. 12(h); see also Ambrose v. Welch, 729 F.2d 1084, 1085 (6th Cir.1984), even collaterally after disposition, see Fed. R.Civ. P. 60(b)(4), a challenge to personal jurisdiction must be raised in the first responsive pleading or be waived. Fed.R.Civ.P. 12(h)(1); see, e.g., Reynolds v. Int'l Amateur Athletic Fed'n, 23 F.3d 1110, 1120 (6th Cir.1994); In Re Wolverine Radio Co., 930 F.2d 1132, 1137 n. 5 (6th Cir.1991). Mishkoff did not raise the issue of personal jurisdiction in his original answer.

Mishkoff asks this court for leeway, in light of the fact that he was originally litigating this case pro se. Unfortunately, as the district court stated, there is no legal basis for so doing. This is not to say that this Court will never grant leeway to a pro se party, but Mishkoff has not presented the kind of extraordinary circumstances that would warrant such action. Accordingly, we find that Mishkoff has waived any challenge to personal jurisdiction.

III. Analysis

Mishkoff claims the injunctions preventing his use of the domain name "shopsatwillowbend.com" and the five "complaint names" are inappropriate because Taubman has not demonstrated a likelihood of success on the merits and because the orders represent a prior restraint on his First Amendment right to speak.

[774] A. Standard of Review

We review the district court's grant of a motion for a preliminary injunction for abuse of discretion. Marchwinski v. Howard, 309 F.3d 330, 333 (6th Cir.2002); Blue Cross & Blue Shield Mut. of Ohio v. Blue Cross & Blue Shield Ass'n, 110 F.3d 318, 322 (6th Cir.1997). "A district court abuses its discretion when it relies on clearly erroneous findings of fact ... or when it improperly applies the law or uses an erroneous legal standard. Under this standard, this court must review the district court's legal conclusions de novo and its factual findings for clear error." Owner-Operator Indep. Drivers Ass'n v. Bissell, 210 F.3d 595, 597 (6th Cir.2000).

We have held that an injunction is proper in trademark cases where:

1) There is a likelihood of success on the merits;

2) There is the potential for irreparable harm;

3) There is the potential of adverse public impact;

4) Potential harm to the plaintiff outweighs the potential harm to the defendant.

See Rock and Roll Hall of Fame and Museum Inc. v. Gentile Prods., 134 F.3d 749, 753 (6th Cir.1998). None of these factors, standing alone, is a prerequisite to relief; rather, they must be balanced. Golden v. Kelsey-Hayes Co., 73 F.3d 648, 653 (6th Cir.1996); see also County Sec. Agency v. Ohio Dep't of Commerce, 296 F.3d 477, 485 (6th Cir.2002).

B. Propriety of the Injunctions

1. Likelihood of Success on the Merits

The likelihood of success of Taubman's claim rests with the language of the Lanham Act, 15 U.S.C. § 1114(1), which imposes liability for infringement of trademarks on:

Any person who shall, without the consent of the registrant

a) use in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive....

Mishkoff proposes that, regardless of whether his use of Taubman's marks violates the Lanham Act, any injunction prohibiting his use violates the Constitution as a prior restraint on his First Amendment right of Free Speech. Since Mishkoff has raised Free Speech concerns, we will first explain the interrelation between the First Amendment and the Lanham Act. First, this Court has held that the Lanham Act is constitutional. Semco, Inc. v. Amcast, Inc., 52 F.3d 108, 111-12 (6th Cir.1995) (stating that reach of Lanham Act is limited so as to be constitutional); see also Seven-Up v. Coca-Cola Co., 86 F.3d 1379, 1383 n. 6 (5th Cir.1996). The Lanham Act is constitutional because it only regulates commercial speech, which is entitled to reduced protections under the First Amendment. Central Hudson Gas & Elec. Corp. v. Public Serv. Comm'n of New York, 447 U.S. 557, 563, 100 S.Ct. 2343, 65 L.Ed.2d 341 (1980) (stating that regulation of commercial speech is subject only to intermediate scrutiny). Thus, we must first determine if Mishkoff's use is commercial and therefore within the jurisdiction of the Lanham Act, worthy of lesser First Amendment protections.

If Mishkoff's use is commercial, then, and only then, do we analyze his use for a likelihood of confusion. If Mishkoff's use is also confusing, then it is misleading commercial speech, and outside the First [775] Amendment. See 134 Cong. Rec. 31, 851 (Oct. 19, 1988) (statement of Rep. Kastenmeier) (stating that § 43 of the Lanham Act only affects misleading commercial speech); cf. Va. Bd. of Pharmacy v. Va. Citizens Consumer Council, Inc., 425 U.S. 748, 771 & n. 24, 96 S.Ct. 1817, 48 L.Ed.2d 346 (1976) (stating that misleading commercial speech is not protected by the First Amendment); Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 157, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989) (stating that a trademark owner has at best a quasi-property right in his mark, and can only prevent its use so as to maintain a confusion-free purchasing public) (quoting Crescent Tool Co. v. Kilborn & Bishop Co., 247 F. 299, 301(2d Cir.1917) (L.Hand, J.)).

Hence, as per the language of the Lanham Act, any expression embodying the use of a mark not "in connection with the sale ... or advertising of any goods or services," and not likely to cause confusion, is outside the jurisdiction of the Lanham Act and necessarily protected by the First Amendment. Accordingly, we need not analyze Mishkoff's constitutional defenses independent of our Lanham Act analysis. With this backdrop in mind, we proceed to analyze the nature of the two websites.

a. November 9 Injunction — The "shopsatwillowbend" Website

In regard to the first website, "shopsatwillowbend.com," Mishkoff argues that his use is completely non-commercial and not confusing, and therefore speech entitled to the full protections of the First Amendment. Taubman offers three arguments that Mishkoff is using its name commercially to sell or advertise goods or services. First, Mishkoff had a link to a site owned by Hartley's blouse company, "shirtbiz.com." Second, he had a link to his own site for his web design company, Webfeats. Third, Mishkoff had accepted a $1000 offer to relinquish the name to Taubman.

Although Mishkoff claims his intention in creating his website was non-commercial, the proper inquiry is not one of intent. Daddy's Junky Music Stores, Inc. v. Big Daddy's Family Music Center, 109 F.3d 275, 287 (6th Cir.1997). In that sense, the Lanham Act is a strict liability statute. See Hard Rock Café Licensing Corp. v. Concession Servs., Inc., 955 F.2d 1143, 1152 n. 6 (7th Cir.1992). If consumers are confused by an infringing mark, the offender's motives are largely irrelevant. Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1188 (6th Cir.1988) (citing Lois Sportswear, U.S.A., Inc. v. Levi Strauss & Co., 799 F.2d 867, 875 (2d Cir.1986)). We believe the advertisements on Mishkoff's site, though extremely minimal, constituted his use of Taubman's mark "in connection with the advertising" of the goods sold by the advertisers. This is precisely what the Lanham Act prohibits.

However, Mishkoff had at least removed the shirtbiz.com link prior to the injunction. A preliminary injunction is proper only to prevent an on-going violation. See, e.g. Hecht Co. v. Bowles, 321 U.S. 321, 329-30, 64 S.Ct. 587, 88 L.Ed. 754 (1944) (recounting the historical role of courts of equity and stating that purpose of injunctive relief is "to deter, not to punish"). As long as Mishkoff has no commercial links on either of his websites, including links to shirtbiz.com, Webfeats, or any other business, we find no use "in connection with the advertising" of goods and services to enjoin, and the Lanham Act cannot be properly invoked.^[3]

[776] Taubman's assertion that its offer to buy the domain name "shopsatwillowbend.com" from Mishkoff qualifies Mishkoff's use of the mark as "in connection with the sale of goods" is meritless. Although other courts have held that a so-called cybersquatter, who registers domain names with the intent to sell the name to the trademark holder, uses the mark "in connection with the sale of goods," they have also limited their holdings to such instances where the defendant had made a habit and a business of such practices. See, e.g., E & J Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 270 (5th Cir.2002) (noting that defendant had made a business practice of selling domain names on eBay for no less than $10,000); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir.1998).

In Panavision, the defendant, Toeppen, purchased and offered to sell the name "panavision.com" to Panavision for $13,000. Id. at 1318. Evidence showed that Toeppen had attempted similar deals with a myriad of other companies, ranging from Delta Airlines to Eddie Bauer. Id. at 1319. The Ninth Circuit found Toeppen's intent to sell the domain name relevant in determining that his creation of the site was a commercial use of Panavision's mark. Id. at 1325. In contrast, not only has Mishkoff not made a practice of registering and selling domain names, but he did not even initiate the bargaining process here. Although Taubman's counsel intimated at oral argument that Mishkoff had in fact initiated the negotiation process, correspondence in the record supports the opposite conclusion, and shows that Taubman first offered Mishkoff $1000 to relinquish the site on August 16, 2001, and Mishkoff initially accepted it under threat of litigation. Hence, this case is distinguishable from Panavision. There is no evidence that Mishkoff's initial motive in selecting Taubman's mark was to re-sell the name. Therefore, we hold his use of the name "shopsatwillowbend.com" is not "in connection with the sale of goods."

Even if Mishkoff's use is commercial speech, i.e., "in connection with the sale ... or advertising of any goods or services," and within the jurisdiction of the Lanham Act, there is a violation only if his use also creates a likelihood of confusion among customers. 15 U.S.C. § 1114(1). Moreover, the only important question is whether there is a likelihood of confusion between the parties' goods or services. Bird v. Parsons, 289 F.3d 865, 877 (6th Cir.2002). Under Lanham Act jurisprudence, it is irrelevant whether customers would be confused as to the origin of the websites, unless there is confusion as to the origin of the respective products. See also Daddy's Junky Music Stores, 109 F.3d at 280.

Since its inception, Mishkoff had always maintained a disclaimer on the website, indicating that his was not the official website. In Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619 (6th Cir.1996), we found the existence of a disclaimer very informative, and held that there was no likelihood of confusion, partly on that basis.

In Holiday Inns, the plaintiff hotel chain used the phone number 1-800-HOLIDAY for its guest room reservation hotline. Holiday Inns claimed a Lanham Act violation when the defendant company, a business that profited by taking reservations [777] for several hotel chains, used the phone number 1-800-H0LIDAY (with a zero instead of an "O") in order to take advantage of any calls misdialed by customers seeking Holiday Inns' hotline. We found no Lanham Act violation, partly because the defendant played an unmistakable disclaimer upon answering each call, explaining that it was unaffiliated with Holiday Inns, and providing customers with Holiday Inns' correct phone number. Id. at 621. We found that the defendant was, in fact, directing business to Holiday Inns that otherwise would have been lost, and although some callers chose to do business with the defendant, others hung up and called Holiday Inns. Had it not been for defendants' service, Holiday Inns would likely never have recovered many customers who had misdialed. Id. at 625.

We find the analysis here indistinguishable from the disclaimer analysis in Holiday Inns.^[4] Mishkoff has placed a conspicuous disclaimer informing customers that they had not reached Taubman's official mall site. Furthermore, Mishkoff placed a hyperlink to Taubman's site within the disclaimer. We find this measure goes beyond even what was done by the defendant in Holiday Inns. There, a customer who reached the defendant's hotline in error had to hang up and redial the correct Holiday Inns number. Id. Here, a misplaced customer simply has to click his mouse to be redirected to Taubman's site. Moreover, like Holiday Inns, the customers who stumble upon Mishkoff's site would otherwise have reached a dead address. They would have received an error message upon typing "shopsatwillowbend.com," simply stating that the name was not a proper domain name, with no message relating how to arrive at the official site. Hence, Mishkoff's website and its disclaimer actually serve to re-direct lost customers to Taubman's site that might otherwise be lost. Accordingly, we find no likelihood that a customer would be confused as to the source of Taubman's and Mishkoff's respective goods.

b. December 7 Injunction — The "sucks" Site

In regard to Mishkoff's "complaint site," Taubman claims that Mishkoff's use is necessarily "in connection with the sale of goods" because his intent behind the use of the names "taubmansucks.com," et al., is to harm Taubman economically.

In Planned Parenthood Fed'n of Amer., Inc. v. Bucci, No. 97 Civ. 0629, 1997 WL 133313 (S.D.N.Y. March 24, 1997), aff'd, No. 97-7492, 1998 WL 336163 (2d Cir. Feb.9, 1998), the defendant usurped the domain name "plannedparenthood.com" and created a website displaying anti-abortion pictures and pro-life messages in clear contradiction of the plaintiff's stated mission. Id. at *1. The court there found that, although not selling or advertising any goods, the defendant's use of Planned Parenthood's mark was commercial because he had used plaintiff's mark and attempted to cause economic harm. Id. at *4. (noting that Lanham Act is applicable because "defendant's action in appropriating plaintiff's mark has a connection to plaintiff's distribution of its services").

Following Planned Parenthood, Taubman argues that all cybergriping sites are per se commercial and "in connection with the sale of goods." However, Planned Parenthood, as an unpublished district court opinion, is not binding on this Court, and is nonetheless distinguishable. Even if Mishkoff's use is commercial, it must [778] still lead to a likelihood of confusion to be violative of the Lanham Act. 15 U.S.C. § 1114(1). In Planned Parenthood, the defendant used the plaintiff's trade name as a domain name, without the qualifying moniker "sucks," or any other such addendum to indicate that the plaintiff was not the proprietor of the website. In contrast, "taubmansucks.com" removes any confusion as to source. We find no possibility of confusion and no Lanham Act violation.

We find that Mishkoff's use of Taubman's mark in the domain name "taubmansucks.com" is purely an exhibition of Free Speech, and the Lanham Act is not invoked. And although economic damage might be an intended effect of Mishkoff's expression, the First Amendment protects critical commentary when there is no confusion as to source, even when it involves the criticism of a business. Such use is not subject to scrutiny under the Lanham Act. In fact, Taubman concedes that Mishkoff is "free to shout `Taubman Sucks!' from the rooftops...." Brief for Respondent, at 58. Essentially, this is what he has done in his domain name. The rooftops of our past have evolved into the internet domain names of our present. We find that the domain name is a type of public expression, no different in scope than a billboard or a pulpit, and Mishkoff has a First Amendment right to express his opinion about Taubman, and as long as his speech is not commercially misleading, the Lanham Act cannot be summoned to prevent it.

2. The Remaining Injunctive Factors

When, as here, a preliminary injunction would infringe upon a constitutional right, the likelihood of success on the merits is often the determinative factor. Detroit Free Press v. Ashcroft, 303 F.3d 681, 710 (6th Cir.2002); Connection Distrib. Co. v. Reno, 154 F.3d 281, 288 (6th Cir.1998). Even so, the other three factors also suggest that a preliminary injunction is not proper. Because Mishkoff is not using Taubman's mark to peddle competing goods, and because any damages would be economic in nature and fully compensable monetarily, we find no potential for irreparable harm to Taubman that should lead us to uphold the injunctions. See Overstreet v. Lexington-Fayette Urban County Gov't, 305 F.3d 566, 578 (6th Cir.2002) (citing Basicomputer Corp. v. Scott, 973 F.2d 507, 511 (6th Cir.1992)). Moreover, absent a likelihood of confusion, we find no negative impact on the public interest caused by Mishkoff's use. In fact, due to the Free Speech concerns present, we find the potential for irreparable harm to Mishkoff more likely, and that the public would be negatively impacted, should we not dissolve the injunctions. See Overstreet, 305 F.3d at 578 (stating that the potential for irreparable harm is present when it is constitutional rights that are being enjoined); see also Connection Distrib. Co., 154 F.3d at 288 (stating that the loss of constitutional rights for even a minimal amount of time constitutes irreparable harm).

Lastly, although no economic harm will accrue to Mishkoff should he be prevented from maintaining his sites, there is little potential harm to Taubman, or any other party, as well, because Mishkoff is not a competitor in the marketplace. Accordingly, upon a balancing of the factors for injunctive relief, we dissolve both injunctions.

3. The Safe Distance Rule

Lastly, Taubman argues that the Safe Distance Rule, a little used tenet which pre-dates the Lanham Act by nearly twenty years, applies to bar Mishkoff's use of Taubman's mark on his "complaint site." The Safe Distance Rule was created to prevent known infringers from using [779] trademarks whose use by non-infringers would not necessarily be actionable. See Broderick & Bascom Rope Co. v. Manoff, 41 F.2d 353 (6th Cir.1930). Taubman insists that since Mishkoff has infringed its mark on his "shopsatwillowbend.com" site, the Safe Distance rule can be invoked to curtail his use of "taubmansucks.com," even if use of "taubmansucks.com" would not be infringing otherwise.

In Broderick, Judge Denison stated the Safe Distance Rule as follows:

[The defendants] had organized and built up a business based upon a fraudulent appropriation of what belonged to the plaintiff. To permit them to continue without interruption, and to the full scope of identity permitted to an honest competitor, would be to preserve for them a good will acquired through fraud. The due protection of trade-mark and similar rights requires that a competitive business, once convicted of unfair competition in a given particular, should thereafter be required to keep a safe distance away from the margin line-even if that requirement involves a handicap as compared with those who have not disqualified themselves.

Id. at 354.^[5] So, in spite of Taubman's assertions otherwise, the Safe Distance Rule is likewise founded on a likelihood of confusion standard. The rule simply notes that once an infringer has confused the public, that confusion is not magically remedied by a name change. Instead, the confusion lingers, creating the need for the infringer not only to secure a new non-infringing name (or other infringing characteristic) for his product, but one so far removed from any characteristic of the plaintiff so as to put the public on notice that the two are not related.

We need not find whether the Safe Distance Rule has survived the enactment of the Lanham Act, because even if it is still good law, it does not apply here. First, the Safe Distance Rule has only been applied in settings where the second use was merely a slight deviation of the first use and was also commercial. See Broderick, 41 F.2d at 353-54 (developing Safe Distance Rule in instance when infringer attempted to change offending use from "au-tow-line" to "auto-tow-line"); Badger Meter, Inc. v. Grinnell Corp., 13 F.3d 1145, 1156 (7th Cir.1994) (applying Safe Distance Rule to prevent infringer from changing infringing logo in trivial ways, because such changes would force relitigation of essentially the same issue). The Safe Distance Rule has never been applied when the second use is a non-commercial critical commentary, but only where the second use is a different name for the same product. See, e.g., Tamko Roofing Prods., Inc. v. Ideal Roofing Co., Ltd., 282 F.3d 23, 40 (1st Cir.2002) (applying Safe Distance Rule where infringer simply tried to escape liability by changing infringing "Heritage Series" to "H-Series"); Broderick, 41 F.2d at 353-54. As stated above, the First Amendment protects Mishkoff's commentary and criticism, and negates the Safe Distance Rule to any extent it might otherwise have applied.

Second, the Safe Distance Rule was meant to be applied only against proven [780] infringers. See Broderick, 41 F.2d at 354 (referring only to persons "once convicted of unfair competition"); see also, Tamko Roofing Products, 282 F.3d at 30 (applying Safe Distance Rule only after defendant had been found in contempt of an injunction); cf. Prince of Peace Enters. v. Kwok Shing Import-Export Inc., No. C 94-04183, 1997 WL 475699 at *5 (July 8, 1997 N.D.Cal.) (stating that the Safe Distance Rule does not apply where "one was not `caught' infringing a trademark"). Mishkoff has not previously been found liable of infringement, nor in contempt of either injunction. Accordingly, our finding above that Taubman is not likely to succeed on the merits of the "shopsatwillowbend.com" claim precludes any further discussion of the Safe Distance Rule.

IV. Conclusion

For the foregoing reasons, we REVERSE the decision of the district court and dissolve both preliminary injunctions preventing Mishkoff from using the domain name, "shopsatwillowbend.com," and the five "complaint names" listed above.

[1] Since the issuance of the injunctions, Mishkoff has apparently created a sixth "complaint site," "giffordkrassgrohsprinklesucks.com," referencing the law firm representing Taubman on appeal. This domain name was not a part of the December 7, 2001 preliminary injunction order that enjoined Mishkoff from maintaining the other "complaint names."

[2] Taubman sought the injunction under other claims too, including violation of the Anticybersquatting Act. However, the district court granted the injunction based only on the Lanham Act claim. Accordingly, that is the only issue before this Court.

[3] Mishkoff sent a letter to Taubaman's attorneys on August 10, 2001, referencing the removal of the shirtbiz.com link, and declaring that Mishkoff "will not place any advertising of any kind on the site in the future." It is unclear whether Mishkoff also removed the Webfeats link at this time. To be clear, we also find the Webfeats link to be "use in connection with the advertising of goods and services" which likewise must remain removed to avoid a finding of commerciality.

[4] In Holiday Inns, the defendant did not actually use the plaintiff's trademark, "Holiday," but used the most common "misspelling" of it. Accordingly, we also found no infringement in Holiday Inns because there was no "use" of the plaintiff's mark.

[5] The rule has its roots even before Broderick. In Coca Cola Co. v. Gay-Ola Co., 200 F. 720 (6th Cir.1912), though not referring to the Safe Distance Rule as such, we held that a soft drink manufacturer, once found to be infringing on Coca-Cola's trademarks, could no longer continue to use any mark which might be found to resemble Coca-Cola — namely unmarked red barrels. This was so even though red barrels in and of themselves would not constitute infringement of a trademark, either in 1912 or under the Lanham Act today. But continued use of the barrels after being found to be an infringer, would have permitted the defendant to continue to capitalize from confusion garnered from the earlier infringement. Id. at 723.

403 F.3d 672 (2005)

No. 04-55962.

Argued and Submitted March 8, 2005.
Filed April 4, 2005.

[673] [674] Diana M. Torres, O'Melveny & Myers, Los Angeles, CA, for the plaintiff-appellant.

Paul Alan Levy, Public Citizen Litigation Group, Washington, DC, for the defendant-appellee.

Before: T.G. NELSON, SILVERMAN, and TALLMAN, Circuit Judges.

SILVERMAN, Circuit Judge.

Defendant Michael Kremer was dissatisfied with the hair restoration services provided to him by the Bosley Medical Institute, Inc. In a bald-faced effort to get even, Kremer started a website at www.BosleyMedical.com, which, to put it mildly, was uncomplimentary of the Bosley Medical Institute. The problem is that "Bosley Medical" is the registered trademark of the Bosley Medical Institute, Inc., which brought suit against Kremer for trademark infringement and like claims. Kremer argues that noncommercial use of the mark is not actionable as infringement under the Lanham Act. Bosley responds that Kremer is splitting hairs.

Like the district court, we agree with Kremer. We hold today that the noncommercial use of a trademark as the domain name of a website — the subject of which is consumer commentary about the products and services represented by the mark — does not constitute infringement under the Lanham Act.

Bosley Medical's cybersquatting claim is another matter. The issue under the Anticybersquatting Consumer Protection Act was whether Kremer had a "bad faith intent to profit" from the use of the trademark in his domain name, such as by making an extortionate offer to sell the BosleyMedical.com site to Bosley. Because discovery regarding that claim had not been completed, and the issue itself was not within the scope of the summary judgment motions, the district court erred in granting summary judgment to Kremer as to cybersquatting.

Finally, we hold that the district court should not have granted Kremer's motion to strike Bosley Medical's state-law claims pursuant to the California anti-SLAPP statute. Bosley Medical's complaint about the unauthorized use of its trademark as Kremer's domain name was not so lacking in merit as to be susceptible to an anti-SLAPP motion to strike at an early stage of the case.

I. Background

Bosley Medical provides surgical hair transplantation, restoration, and replacement services to the public. Bosley Medical owns the registered trademark "BOSLEY MEDICAL,"^[1] has used the mark "BOSLEY MEDICAL" since 1992, and registered the mark with the United States Patent and Trademark Office in January 2001. Bosley has spent millions of dollars on advertising and promotion [675] throughout the United States and the rest of the world.

Michael Kremer is a dissatisfied former patient of Bosley. Unhappy with the results of a hair replacement procedure performed by a Bosley physician in Seattle, Washington, he filed a medical malpractice lawsuit against Bosley Medical in 1994. That suit was eventually dismissed.

In January 2000, Kremer purchased the domain name www.BosleyMedical.com, the subject of this appeal, as well as the domain name www.BosleyMedicalViolations.com, which is not challenged by Bosley. Five days after registering the domain name, Kremer went to Bosley Medical's office in Beverly Hills, California and delivered a two-page letter to Dr. Bosley, Founder and President of Bosley Medical. The first page read:

Let me know if you want to discuss this. Once it is spread over the internet it will have a snowball effect and be too late to stop. M. Kremer [phone number]. P.S. I always follow through on my promises.

The second page was entitled "Courses of action against BMG" and listed eleven items. The first item stated: "1. Net web sites disclosing true operating nature of BMG. Letter 3/14/96 from LAC D.A. Negative testimonials from former clients. Links. Provide BMG competitors with this information." The letter contains no mention of domain names or any other reference to the Internet.

Kremer began to use www.BosleyMedical.com in 2001. His site summarizes the Los Angeles County District Attorney's 1996 investigative findings about Bosley, and allows visitors to view the entire document. It also contains other information that is highly critical of Bosley. Kremer earns no revenue from the website and no goods or services are sold on the website. There are no links to any of Bosley's competitors' websites. BosleyMedical.com does link to Kremer's sister site, BosleyMedicalViolations.com, which links to a newsgroup entitled alt.baldspot, which in turn contains advertisements for companies that compete with Bosley. BosleyMedical.com also contained a link to the Public Citizen website. Public Citizen is the organization that represents Kremer in this case.

Bosley brought this suit alleging trademark infringement, dilution, unfair competition, various state law claims, and a libel claim that was eventually settled. Bosley sought to take discovery aimed at the trademark and libel claims. The magistrate judge granted limited discovery on the libel claims. Following discovery, Bosley dismissed the libel claims and amended the complaint.

Kremer moved to dismiss the First Amended Complaint and in addition moved for partial summary judgment on the issues of commercial use and likelihood of confusion. Bosley filed a cross-motion for partial summary judgment on the infringement and dilution claims. Kremer agreed that the facts were undisputed with regard to the issues of commercial use and likelihood of confusion, and that these issues were ripe for summary judgment.

Ruling that Kremer's use of "Bosley Medical" in the domain name was noncommercial and unlikely to cause confusion, the district court entered summary judgment for Kremer on the federal claims and dismissed the state law claims under California's anti-SLAPP statute. Bosley now appeals.

II. Jurisdiction and Standard of Review

We have jurisdiction under 28 U.S.C. § 1291 and review a district court's grant of summary judgment de novo, viewing the evidence in the light most favorable [676] to the non-moving party. Prison Legal News v. Lehman, 397 F.3d 692, 698 (9th Cir.2005). A district court's grant of a special motion to strike under California's anti-SLAPP statute, Cal. Civ. P.Code § 425.16, is also reviewed de novo. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1102 (9th Cir.2003).

III. Analysis

A. Trademark Infringement and Dilution Claims

The Trademark Act of 1946 ("Lanham Act") prohibits uses of trademarks, trade names, and trade dress that are likely to cause confusion about the source of a product or service. See 15 U.S.C. §§ 1114, 1125(a). In 1996, Congress amended § 43 of the Lanham Act to provide a remedy for the dilution of a famous mark. See 15 U.S.C. § 1125(c).

Infringement claims are subject to a commercial use requirement. The infringement section of the Lanham Act, 15 U.S.C. § 1114, states that any person who "use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ..." can be held liable for such use. 15 U.S.C. § 1114(1)(a).

In 1996, Congress expanded the scope of federal trademark law when it enacted the Federal Trademark Dilution Act ("FTDA"). The FTDA allows the "owner of a famous mark" to obtain "an injunction against another person's commercial use in commerce of a mark or trade name...." 15 U.S.C. § 1125(c)(1) (emphasis added). While the meaning of the term "commercial use in commerce" is not entirely clear, we have interpreted the language to be roughly analogous to the "in connection with" sale of goods and services requirement of the infringement statute. See Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir.2002) ("Although this statutory language is ungainly, its meaning seems clear: It refers to a use of a famous and distinctive mark to sell goods other than those produced or authorized by the mark's owner."); see also Huthwaite, Inc. v. Sunrise Assisted Living, Inc., 261 F.Supp.2d 502, 517 (E.D.Va.2003) (holding that the commercial use requirement of the FTDA is "virtually synonymous with the `in connection with the sale, offering for sale, distribution, or advertising of goods and services' requirement" of the Lanham Act).

The inclusion of these requirements in the Lanham Act serves the Act's purpose: "to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 774, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (internal quotation marks and citations omitted). In other words, the Act is designed to protect consumers who have formed particular associations with a mark from buying a competing product using the same or substantially similar mark and to allow the mark holder to distinguish his product from that of his rivals. See Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 873 (9th Cir.1999).

The Supreme Court has made it clear that trademark infringement law prevents only unauthorized uses of a trademark in connection with a commercial transaction in which the trademark is being used to confuse potential consumers. See Prestonettes, Inc. v. Coty, 264 U.S. 359, 368, 44 S.Ct. 350, 68 L.Ed. 731 (1924) ("A trade-mark only gives the right to prohibit the use of it so far as to protect [677] the owner's good will against the sale of another's product as his." [emphasis added]); see also Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205, 62 S.Ct. 1022, 86 L.Ed. 1381 (1942) (explaining that the main purpose of the Lanham Act is to prevent the use of identical or similar marks in a way that confuses the public about the actual source of goods and services).

As the Second Circuit held, "[t]he Lanham Act seeks to prevent consumer confusion that enables a seller to pass off his goods as the goods of another.... [T]rademark infringement protects only against mistaken purchasing decisions and not against confusion generally." Lang v. Ret. Living Publ'g Co., Inc., 949 F.2d 576, 582-83 (2d Cir.1991) (internal quotation marks and citation omitted) (emphasis added).

As a matter of First Amendment law, commercial speech may be regulated in ways that would be impermissible if the same regulation were applied to noncommercial expressions. Florida Bar v. Went For It, Inc., 515 U.S. 618, 623, 115 S.Ct. 2371, 132 L.Ed.2d 541 (1995). "The First Amendment may offer little protection for a competitor who labels its commercial good with a confusingly similar mark, but trademark rights do not entitle the owner to quash an unauthorized use of the mark by another who is communicating ideas or expressing points of view." Mattel, 296 F.3d at 900(internal quotation marks and citations omitted).

The district court ruled that Kremer's use of Bosley's mark was noncommercial. To reach that conclusion, the court focused on the "use in commerce" language rather than the "use in connection with the sale of goods" clause. This approach is erroneous. "Use in commerce" is simply a jurisdictional predicate to any law passed by Congress under the Commerce Clause. See Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952); OBH, Inc. v. Spotlight Magazine, Inc., 86 F.Supp.2d 176, 185 (W.D.N.Y.2000). 15 U.S.C. § 1127 states that "unless the contrary is plainly apparent from the context ... [t]he word `commerce' means all commerce which may lawfully be regulated by Congress." Therefore, the district court should have determined instead whether Kremer's use was "in connection with a sale of goods or services" rather than a "use in commerce." However, we can affirm the district court's grant of summary judgment on any ground supported by the record. Lamps Plus, Inc. v. Seattle Lighting Fixture Co., 345 F.3d 1140, 1143 (9th Cir.2003). The question before us, then, boils down to whether Kremer's use of Bosley Medical as his domain name was "in connection with a sale of goods or services." If it was not, then Kremer's use was "noncommercial" and did not violate the Lanham Act.

Bosley argues that it has met the commercial use requirement in three ways. First, it argues that a mark used in an otherwise noncommercial website or as a domain name for an otherwise noncommercial website is nonetheless used in connection with goods and services where a user can click on a link available on that website to reach a commercial site. Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002 (9th Cir.2004). However, Bosley's reliance on Nissan is unfounded.

In Nissan, Nissan Motor Company sued Nissan Computer Corporation for using the Internet websites www.Nissan.com and www.Nissan.net. Id. at 1006. In Nissan, however, commercial use was undisputed, as the core function of the defendant's website was to advertise his computer business. Id. Additionally, the defendant in Nissan, like the defendant in [678] Taubman Co. v. Webfeats, 319 F.3d 770 (6th Cir.2003), placed links to other commercial businesses directly on their website. 319 F.3d at 772-73. Kremer's website contains no commercial links, but rather contains links to a discussion group, which in turn contains advertising. This roundabout path to the advertising of others is too attenuated to render Kremer's site commercial. At no time did Kremer's BosleyMedical.com site offer for sale any product or service or contain paid advertisements from any other commercial entity. See TMI, Inc. v. Maxwell, 368 F.3d 433, 435, 438 (5th Cir.2004) (holding that the commercial use requirement is not satisfied where defendant's site had no outside links).

Bosley also points out that Kremer's site contained a link to Public Citizen, the public interest group representing Kremer throughout this litigation. We hold that Kremer's identification of his lawyers and his provision of a link to same did not transform his noncommercial site into a commercial one.

Bosley's second argument that Kremer's website satisfies the "in connection with the sale of goods or services" requirement of the Lanham Act is that Kremer created his website to enable an extortion scheme in an attempt to profit from registering BosleyMedical.com. In Panavision International, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir.1998), this court held that a defendant's "commercial use was his attempt to sell the trademarks themselves." Id. at 1325. Similarly, in Intermatic Inc. v. Toeppen, 947 F.Supp. 1227 (N.D.Ill.1996), the court found that "Toeppen's intention to arbitrage the `intermatic.com' domain name constitute[d] a commercial use." Id. at 1239; see also Boston Prof'l Hockey Ass'n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004, 1010 (5th Cir.1975) (holding that trademark law protects the trademark itself, despite the fact that only "a reproduction of the trademark itself is being sold, unattached to any other goods or services").

However, in this case, there is no evidence that Kremer was trying to sell the domain name itself. The letter delivered by Kremer to Bosley's headquarters is a threat to expose negative information about Bosley on the Internet, but it makes no reference whatsoever to ransoming Bosley's trademark or to Kremer's use of the mark as a domain name.

Bosley argues that it was denied an opportunity to pursue discovery on commercial use, and had it been allowed to proceed with discovery, it could further establish that Kremer has attempted to sell the domain name. However, in opposing Kremer's motion for summary judgment, Bosley did not make any such objections. Bosley failed to request further discovery under Federal Rule of Civil Procedure 56(f), but instead moved for summary judgment itself. Although Bosley's reply brief supporting its own motion for summary judgment complained about limited discovery in a footnote, Bosley did not move for leave to take discovery. The district court did not abuse its discretion in granting the summary judgment without permitting further discovery.

Bosley's third and final argument that it satisfied the commercial use requirement of the Lanham Act is that Kremer's use of Bosley's trademark was in connection with Bosley's goods and services. In other words, Kremer used the mark "in connection with goods and services" because he prevented users from obtaining the plaintiff's goods and services. See People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir.2001) ("PETA"). In PETA, defendants created a site that promoted ideas antithetical to those of the PETA group. Id. at 362-63. The Fourth Circuit held that the defendant's [679] parody site, though not having a commercial purpose and not selling any goods or services, violated the Lanham Act because it "prevented users from obtaining or using PETA's goods or services." Id. at 365.

However, in PETA, the defendant's website "provide[d] links to more than 30 commercial operations offering goods and services." Id. at 366. To the extent that the PETA court held that the Lanham Act's commercial use requirement is satisfied because the defendant's use of the plaintiff's mark as the domain name may deter customers from reaching the plaintiff's site itself, we respectfully disagree with that rationale. While it is true that www.BosleyMedical.com is not sponsored by Bosley Medical, it is just as true that it is about Bosley Medical. The PETA approach would place most critical, otherwise protected consumer commentary under the restrictions of the Lanham Act. Other courts have also rejected this theory as over-expansive. See L.L. Bean, Inc. v. Drake Publishers, Inc., 811 F.2d 26, 33 (1st Cir.1987); see also Ford Motor Co. v. 2600 Enters., 177 F.Supp.2d 661, 664 (E.D.Mich.2001).

The PETA court's reading of the Lanham Act would encompass almost all uses of a registered trademark, even when the mark is merely being used to identify the object of consumer criticism.^[2] This broad view of the Lanham Act is supported by neither the text of the statute nor the history of trademark laws in this country. "[T]rademark laws are intended to protect" consumers from purchasing the products of an infringer "under the mistaken assumption that they are buying a product produced or sponsored by [the trademark holder]." Beneficial Corp. v. Beneficial Capital Corp., 529 F.Supp. 445, 450 (S.D.N.Y.1982). Limiting the Lanham Act to cases where a defendant is trying to profit from a plaintiff's trademark is consistent with the Supreme Court's view that "[a trademark's] function is simply to designate the goods as the product of a particular trader and to protect his good will against the sale of another's product as his." United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 63 L.Ed. 141 (1918); see also 1 McCarthy on Trademarks and Unfair Competition § 2:7 (4th ed.2004).

The Second Circuit held in United We Stand America, Inc. v. United We Stand, America New York, Inc., 128 F.3d 86, 90 (2d Cir.1997), that the "use in connection with the sale of goods and services" requirement of the Lanham Act does not require any actual sale of goods and services. Thus, the appropriate inquiry is whether Kremer offers competing services to the public. Kremer is not Bosley's competitor; he is their critic. His use of the Bosley mark is not in connection with a sale of goods or services — it is in connection with the expression of his opinion about Bosley's goods and services.

The dangers that the Lanham Act was designed to address are simply not at issue in this case. The Lanham Act, expressly enacted to be applied in commercial contexts, does not prohibit all unauthorized uses of a trademark. Kremer's use of the Bosley Medical mark simply cannot mislead consumers into buying a competing [680] product — no customer will mistakenly purchase a hair replacement service from Kremer under the belief that the service is being offered by Bosley. Neither is Kremer capitalizing on the good will Bosley has created in its mark. Any harm to Bosley arises not from a competitor's sale of a similar product under Bosley's mark, but from Kremer's criticism of their services. Bosley cannot use the Lanham Act either as a shield from Kremer's criticism, or as a sword to shut Kremer up.^[3]

B. Anticybersquatting Consumer Protection Act

In 1999, Congress passed the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d), as an amendment to the Lanham Act to prohibit cybersquatting.

[C]ybersquatting occurs when a person other than the trademark holder registers the domain name of a well known trademark and then attempts to profit from this by either ransoming the domain name back to the trademark holder or by using the domain name to divert business from the trademark holder to the domain name holder.

DaimlerChrysler v. The Net Inc., 388 F.3d 201, 204 (6th Cir.2004) (internal quotation marks omitted).

The ACPA states:

A person shall be liable in a civil action by the owner of a mark ... if, without regard to the goods or services of the parties, that person (i) has a bad faith intent to profit from that mark ...; and (ii) registers, traffics in, or uses a domain name [that is confusingly similar to another's mark or dilutes another's famous mark].

15 U.S.C. § 1125(d)(1)(A) (2004).

The district court dismissed Bosley's ACPA claim for the same reasons that it dismissed the infringement and dilution claims — namely, because Kremer did not make commercial use of Bosley's mark. However, the ACPA does not contain a commercial use requirement, and we therefore reverse.

Kremer argues that the "noncommercial use" proviso that appears in the dilution portion of § 1125 applies to cybersquatting claims with equal force. Admittedly, the language in § 1125 is confusing. 15 U.S.C. § 1125(c)(4) reads: "The following shall not be actionable under this section: ... (B) Noncommercial use of a mark." 15 U.S.C. § 1125(c)(4)(B). Kremer asserts that by using the word "section," rather than the more precise term "subsection," Congress meant for the proviso to apply to all of § 1125, as opposed to subsection (c).

This argument fails for two reasons. The noncommercial use exception, which appears in a different part of the Lanham Act, is in direct conflict with the language of the ACPA. The ACPA makes it clear that "use" is only one possible way to violate the Act ("registers, traffics in, or uses"). Allowing a cybersquatter to register the domain name with a bad faith intent to profit but get around the law by making noncommercial use of the mark would run counter to the purpose of the Act. "[T]he use of a domain name in connection with a site that makes a noncommercial or fair use of the mark does not necessarily mean that the domain name registrant lacked bad faith." Coca-Cola Co. v. Purdy, 382 F.3d 774, 778 (8th Cir. [681] 2004) (internal quotation marks and citation omitted); see also H.R.Rep. No. 106-412 at 11 (1999) ("This factor is not intended to create a loophole that otherwise might swallow the bill, however, by allowing a domain name registrant to evade application of the Act by merely putting up a noninfringing site under an infringing domain name."). "It is a well-established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute." Bob Jones Univ. v. United States, 461 U.S. 574, 586, 103 S.Ct. 2017, 76 L.Ed.2d 157 (1983); see also Albertson's, Inc. v. Commissioner, 42 F.3d 537, 546 (9th Cir.1994).

Additionally, one of the nine factors listed in the statute that courts must consider is the registrant's "bona fide noncommercial or fair use of the mark in a site accessible under the domain name." 15 U.S.C. § 1125(d)(1)(B)(i)(IV). This factor would be meaningless if the statute exempted all noncommercial uses of a trademark within a domain name. We try to avoid, where possible, an interpretation of a statute "that renders any part of it superfluous and does not give effect to all of the words used by Congress." Nevada v. Watkins, 939 F.2d 710, 715 (9th Cir.1991) (internal quotation marks and citation omitted).

Finally, other courts that have construed the ACPA have not required commercial use. In DaimlerChrysler, the Sixth Circuit held that a

trademark owner asserting a claim under the ACPA must establish the following: (1) it has a valid trademark entitled to protection; (2) its mark is distinctive or famous; (3) the defendant's domain name is identical or confusingly similar to, or in the case of famous marks, dilutive of, the owner's mark; and (4) the defendant used, registered, or trafficked in the domain name (5) with a bad faith intent to profit.

388 F.3d at 204. See also Ford Motor Co. v. Catalanotte, 342 F.3d 543, 546 (6th Cir.2003); E. & J. Gallo Winery v. Spider Webs Ltd., 129 F.Supp.2d 1033, 1047-48 (S.D.Tex.2001), aff'd, 286 F.3d 270 (5th Cir.2002) ("As reflected by the language of the ACPA and the case law interpreting it, there is no requirement ... that the `use' be a commercial use to run afoul of the ACPA").

The district court erred in applying the commercial use requirement to Bosley's ACPA claim. Rather, the court should confine its inquiry to the elements of the ACPA claim listed in the statute, particularly to whether Kremer had a bad faith intent to profit from his use of Bosley's mark in his site's domain name. Bosley has met the first prong of the ACPA (that the domain name is identical to the mark) because Kremer used an unmodified version of Bosley's mark as his domain name.

Concluding that all of Bosley's claims, including the ACPA claim, were subject to a commercial use requirement, the district judge granted summary judgment in Kremer's favor. But the ACPA claim was not in front of the district court in the motions for summary judgment. The court did not provide notice to Bosley that it would rule on this claim, and did not give Bosley an opportunity to conduct discovery on the issue. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). For this reason, the district court erred in granting summary judgment for Kremer on the ACPA claim. It remains to be seen whether Bosley can establish that Kremer registered the domain name in bad faith or can authenticate other letters that Bosley alleges were written and sent by Kremer.

[682] C. California's Anti-SLAPP Law

In 1993, responding to the "disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances," the California Legislature enacted the Anti-Strategic Lawsuit Against Public Participation ("anti-SLAPP") statute. Cal.Civ.Proc.Code § 425.16(a). "The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party's case will be weakened or abandoned, and of deterring future litigation." United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 970-71 (9th Cir.1999) (citing Wilcox v. Superior Court, 27 Cal.App.4th 809, 814-17, 33 Cal.Rptr.2d 446, 449-50 (1994)). The anti-SLAPP statute was designed to curtail these lawsuits by establishing a procedure to promptly expose and dismiss meritless and harassing claims seeking to chill protected expression. The statute provides that a defendant may move to strike a plaintiff's complaint if it "aris[es] from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." Cal.Civ.Proc.Code § 425.16(b)(1).

A defendant filing an anti-SLAPP motion to strike "must make an initial prima facie showing that the plaintiff's suit arises from an act in furtherance of defendant's right of petition or free speech." Braun v. Chronicle Publ'g Co., 52 Cal.App.4th 1036, 1042-43, 61 Cal.Rptr.2d 58, 61 (1997). The defendant need not show that plaintiff's suit was brought with the intention to chill defendant's speech; the plaintiff's "intentions are ultimately beside the point." Equilon Enters., LLC v. Consumer Cause, Inc., 29 Cal.4th 53, 67, 124 Cal.Rptr.2d 507, 519, 52 P.3d 685, 694 (2002).

The district court ruled that Bosley was seeking to limit Kremer's free speech and granted Kremer's anti-SLAPP motion to strike Bosley's state law trademark claims. We now reverse. An infringement lawsuit by a trademark owner over a defendant's unauthorized use of the mark as his domain name does not necessarily impair the defendant's free speech rights. As noted by the Second Circuit, "[d]omain names ... per se are neither automatically entitled to nor excluded from the protections of the First Amendment, and the appropriate inquiry is one that fully addresses particular circumstances presented with respect to each domain name." Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 585 (2d Cir.2000). In Panavision, we stated that "[a] significant purpose of a domain name is to identify the entity that owns the web site," 141 F.3d at 1327, and we explained in Mattel that a source identifier is not entitled to full First Amendment protection. 296 F.3d at 900. While a summary judgment motion might have been well-taken, an anti-SLAPP motion to strike was not. We reverse the grant of the anti-SLAPP motion to strike and remand to the district court for further proceedings on the state law claims.

IV. Conclusion

We affirm the district court's entry of summary judgment in favor of Kremer with respect to the infringement and dilution claims. We remand the ACPA claim for further proceedings. The district court's grant of the anti-SLAPP motion to strike the state law claims is reversed.

[683] AFFIRMED in part, REVERSED in part, and REMANDED. No costs allowed.

[1] Bosley also owns the following trademarks: BOSLEY, BOSLEY HEALTHY HAIR, BOSLEY HEALTHY HAIR FORMULA, and BOSLEY HEALTHY HAIR COMPLEX.

[2] In fact, such a holding would suggest that any time a non-holder of a trademark uses the mark as his domain name, he would violate the Lanham Act. However, when Congress amended the Lanham Act to add the Anticybersquatting Consumer Protection Act, it limited violations only to situations where a person registers the site with a bad faith intent to profit. To find a Lanham Act violation without finding commercial use may contradict Congress' intent.

[3] Because we hold that Kremer's use of Bosley's mark was noncommercial, we do not reach the issue of initial interest confusion which was addressed in Interstellar Starship Services, Ltd. v. Epix, Inc., 304 F.3d 936 (9th Cir.2002).

610 F.3d 1088 (2010)

[1089] Bradley L. Booke, Moriarity, Badaruddin & Booke, Las Vegas, NV, for the defendant-appellant.

Michael J. McCue, Lewis and Roca LLP, Las Vegas, NV, for the plaintiff-appellee.

Before: ALEX KOZINSKI, Chief Judge, J. CLIFFORD WALLACE and RICHARD R. CLIFTON, Circuit Judges.

KOZINSKI, Chief Judge:

She sells sea shells by the sea shore. That's swell, but how about Shell espresso, Tide motor oil, Apple bicycles and Playboy computers? We consider the application of anti-dilution law to trademarks that are also common English words.

Facts

Joseph Orr runs eVisa, a "multilingual education and information business that exists and operates exclusively on the Internet," at www.evisa.com. At least he did, until the district court enjoined him. Orr traces the name eVisa back to an English language tutoring service called "Eikaiwa Visa" that he ran while living in Japan. "Eikaiwa" is Japanese for English conversation, and the "e" in eVisa is short for Eikaiwa. The use of the word "visa" in both eVisa and Eikaiwa Visa is meant to suggest "the ability to travel, both linguistically and physically, through the English-speaking world." Orr founded eVisa shortly before his return to America, where he started running it out of his apartment in Brooklyn, New York.

Visa International Service Association sued JSL Corporation, through which Orr operates eVisa, claiming that eVisa is likely to dilute the Visa trademark. The district court granted summary judgment for Visa, and JSL appeals.

Analysis

A plaintiff seeking relief under federal anti-dilution law must show that its [1090] mark is famous and distinctive, that defendant began using its mark in commerce after plaintiff's mark became famous and distinctive, and that defendant's mark is likely to dilute plaintiff's mark. See Jada Toys, Inc. v. Mattel, Inc., 518 F.3d 628, 634 (9th Cir.2008). JSL does not dispute that the Visa mark is famous and distinctive or that JSL began using the eVisa mark in commerce after Visa achieved its renown. JSL claims only that the district court erred when it found as a matter of law that eVisa was likely to dilute the Visa trademark.

There are two types of dilution, but here we are concerned only with dilution by blurring, which occurs when a mark previously associated with one product also becomes associated with a second. See 15 U.S.C. § 1125(c)(2)(B); Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903-04 (9th Cir.2002). This weakens the mark's ability to evoke the first product in the minds of consumers. "For example, Tylenol snowboards, Netscape sex shops and Harry Potter dry cleaners would all weaken the `commercial magnetism' of these marks and diminish their ability to evoke their original associations." Mattel, 296 F.3d at 903. Dilution isn't confusion; quite the contrary. Dilution occurs when consumers form new and different associations with the plaintiff's mark. "Even if no one suspects that the maker of analgesics has entered into the snowboard business, the Tylenol mark will now bring to mind two products, not one." Id.

Whether a defendant's mark creates a likelihood of dilution is a factual question generally not appropriate for decision on summary judgment. See Jada Toys, Inc., 518 F.3d at 632. Nevertheless, summary judgment may be granted in a dilution case, as in any other, if no reasonable fact-finder could fail to find a likelihood of dilution. Congress has enumerated factors courts may use to analyze the likelihood of dilution, including the similarity between the two marks and the distinctiveness and recognition of the plaintiff's mark. 15 U.S.C. § 1125(c)(2)(B)(i), (ii), (iv); see also Perfumebay.com, Inc. v. EBAY, Inc., 506 F.3d 1165, 1181 n. 9 (9th Cir.2007). And, in an appropriate case, the district court may conclusively determine one or more of these factors before trial.

The marks here are effectively identical; the only difference is the prefix "e," which is commonly used to refer to the electronic or online version of a brand. That prefix does no more to distinguish the two marks than would the words "Corp." or "Inc." tacked onto the end. See Horphag Research Ltd. v. Garcia, 475 F.3d 1029, 1036 (9th Cir.2007) (use of identical mark provides "circumstantial evidence" of dilution).

And Visa is a strong trademark. "In general, the more unique or arbitrary a mark, the more protection a court will afford it." Nutri/System, Inc. v. Con-Stan Indus., Inc., 809 F.2d 601, 605 (9th Cir.1987). The Visa mark draws on positive mental associations with travel visas, which make potentially difficult transactions relatively simple and facilitate new opportunities and experiences. Those are good attributes for a credit card. But those associations are sufficiently remote that the word visa wouldn't make people think of credit cards if it weren't for the Visa brand. "This suggests that any association is the result of goodwill and deserves broad protection from potential infringers." Dreamwerks Prod. Grp., Inc. v. SKG Studio, 142 F.3d 1127, 1130 n. 7 (9th Cir.1998). Visa also introduced uncontroverted evidence that Visa is the world's top brand in financial services and is used for online purchases almost as often as all [1091] other credit cards combined. This was enough to support the district court's summary judgment.

JSL vigorously contests the validity of market surveys and expert testimony introduced by Visa to show that eVisa dilutes the Visa mark, and it claims that evidence should have been excluded under Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 113 S.Ct. 2786, 125 L.Ed.2d 469 (1993). But a plaintiff seeking to establish a likelihood of dilution is not required to go to the expense of producing expert testimony or market surveys; it may rely entirely on the characteristics of the marks at issue. See 15 U.S.C. § 1125(c)(2)(B) (listing relevant factors). Expert testimony and survey evidence may be necessary in marginal cases, or where a defendant introduces significant evidence to show that dilution is unlikely. But JSL presented nothing, other than Orr's statement that he did not intend to dilute the Visa mark, to rebut the inference of likely dilution created by the strength and similarity of the marks. Good intentions alone do not negate a showing of a likelihood of dilution. We therefore need not reach the admissibility of Visa's expert testimony and market survey evidence.

JSL claims the eVisa mark cannot cause dilution because, in addition to being an electronic payment network that's everywhere you want to be, a visa is a travel document authorizing the bearer to enter a country's territory. When a trademark is also a word with a dictionary definition, it may be difficult to show that the trademark holder's use of the word is sufficiently distinctive to deserve anti-dilution protection because such a word is likely to be descriptive or suggestive of an essential attribute of the trademarked good. Moreover, such a word may already be in use as a mark by third parties. For example, we rejected a dilution claim by Trek Bicycle Corporation for its "Trek" mark in part because it played heavily off the dictionary meaning of "trek," suggesting that the bicycles were designed for long or arduous journeys. Thane Int'l, Inc. v. Trek Bicycle Corp., 305 F.3d 894, 912 n. 14 (9th Cir.2002). Additionally, the creators of the Star Trek series had already "incorporated this common English language word into their trademark," and the "glow of this celebrity ma[de] it difficult for Trek to obtain fame using the same word." Id. In our case, Visa's use of the word visa is sufficiently distinctive because it plays only weakly off the dictionary meaning of the term and JSL presented no evidence that a third party has used the word as a mark.

It's true that the word visa is used countless times every day for its common English definition, but the prevalence of such non-trademark use does not undermine the uniqueness of Visa as a trademark. See 2 McCarthy on Trademarks and Unfair Competition § 11:87 (4th ed.2010). "The significant factor is not whether the word itself is common, but whether the way the word is used in a particular context is unique enough to warrant trademark protection." Wynn Oil Co. v. Thomas, 839 F.2d 1183, 1190 n. 4 (6th Cir.1988). In the context of anti-dilution law, the "particular context" that matters is use of the word in commerce to identify a good or service. There are, for instance, many camels, but just one Camel; many tides, but just one Tide. Camel cupcakes and Tide calculators would dilute the value of those marks. Likewise, despite widespread use of the word visa for its common English meaning, the introduction of the eVisa mark to the marketplace means that there are now two products, and not just one, competing for association with that word. This is the quintessential harm addressed by anti-dilution law.

[1092] JSL is not using the word visa for its literal dictionary definition, and this would be a different case if it were. Visa does not claim that it could enforce its Visa trademark to prevent JSL from opening "Orr's Visa Services," any more than Apple could shut down Orr's Apple Orchard or Camel could fold up Orr's Camel Breeders. Visa doesn't own the word "visa" and may not "deplete the stock of useful words" by asserting otherwise. New Kids on the Block v. News America Publ'g, Inc., 971 F.2d 302, 306 (9th Cir.1992); cf. Kellogg Co. v. Nat'l Biscuit Co., 305 U.S. 111, 116-17, 59 S.Ct. 109, 83 L.Ed. 73 (1938). Conferring anti-dilution rights to common English words would otherwise be untenable, as whole swaths of the dictionary could be taken out of circulation. Nor would a suit against Orr's Visa Services advance the purpose of anti-dilution law. Such use of the word would not create a new association for the word with a product; it would merely evoke the word's existing dictionary meaning, as to which no one may claim exclusivity.

JSL argues that its use of the word "visa" is akin to Orr's Visa Services because the eVisa mark is meant to "connote the ability to travel, both linguistically and physically, through the English-speaking world" and therefore employs the word's common English meaning. JSL's site depicted the eVisa mark next to a booklet that looks like a passport, and it divided the services offered into the categories "Travel Passport," "Language Passport" and "Technology Passport." But these allusions to the dictionary definition of the word visa do not change the fact that JSL has created a novel meaning for the word: to identify a "multilingual education and information business." This multiplication of meanings is the essence of dilution by blurring. Use of the word "visa" to refer to travel visas is permissible because it doesn't have this effect; the word elicits only the standard dictionary definition. Use of the word visa in a trademark to refer to a good or service other than a travel visa, as in this case, undoubtedly does have this effect; the word becomes associated with two products, rather than one. This is true even when use of the word also gestures at the word's dictionary definition.

JSL's allusions to international travel are more obvious and heavy-handed than Visa's, and JSL claims that its use of the word is therefore "different" from Visa's. That's true; Visa plays only weakly off the word's association with international travel, whereas JSL embraced the metaphor with gusto. But dilution always involves use of a mark by a defendant that is "different" from the plaintiff's use; the injury addressed by anti-dilution law in fact occurs when marks are placed in new and different contexts, thereby weakening the mark's ability to bring to mind the plaintiff's goods or services. See Mattel, 296 F.3d at 903. The only context that matters is that the marks are both used in commerce as trademarks to identify a good or service, as they undoubtedly are in this case.

The district court was quite right in granting summary judgment to Visa and enjoining JSL's use of the mark.

AFFIRMED.

141 F.3d 1316 (1998)

No. 97-55467.

Argued and Submitted March 3, 1998.

Decided April 17, 1998.

[1317] Joseph D. Murphy, Meyer, Capel, Hirschfeld, Muncy, Jahn & Aldeen, P.C., Champaign, IL, for defendants-appellants.

William E. Thomson, Jr. and Micah R. Jacobs, McCutchen, Doyle, Brown & Enersen, LLP, Ivy Kagan Bierman, Charles M. Stern and Edward L. Adams, Katten Muchin & Zavis, Los Angeles, CA, for plaintiff-appellee.

[1318] Before: BRUNETTI, THOMPSON and T.G. NELSON, Circuit Judges.

DAVID R. THOMPSON, Circuit Judge:

This case presents two novel issues. We are asked to apply existing rules of personal jurisdiction to conduct that occurred, in part, in "cyberspace." In addition, we are asked to interpret the Federal Trademark Dilution Act as it applies to the Internet.

Panavision accuses Dennis Toeppen of being a "cyber pirate" who steals valuable trademarks and establishes domain names on the Internet using these trademarks to sell the domain names to the rightful trademark owners.

The district court found that under the "effects doctrine," Toeppen was subject to personal jurisdiction in California. Panavision International, L.P. v. Toeppen, 938 F.Supp. 616, 620 (C.D.Cal.1996). The district court then granted summary judgment in favor of Panavision, concluding that Toeppen's conduct violated the Federal Trademark Dilution Act of 1995, 15 U.S.C. § 1125(c), and the California Anti-dilution statute, California Business & Professions Code § 14330. Panavision International, L.P. v. Toeppen, 945 F.Supp. 1296, 1306 (C.D.Cal.1996).

Toeppen appeals. He argues that the district court erred in exercising personal jurisdiction over him because any contact he had with California was insignificant, emanating solely from his registration of domain names on the Internet, which he did in Illinois. Toeppen further argues that the district court erred in granting summary judgment because his use of Panavision's trademarks on the Internet was not a commercial use and did not dilute those marks.

We have jurisdiction under 28 U.S.C. § 1291 and we affirm. The district court's exercise of jurisdiction was proper and comported with the requirements of due process. Toeppen did considerably more than simply register Panavision's trademarks as his domain names on the Internet. He registered those names as part of a scheme to obtain money from Panavision. Pursuant to that scheme, he demanded $13,000 from Panavision to release the domain names to it. His acts were aimed at Panavision in California, and caused it to suffer injury there.

We also conclude Panavision was entitled to summary judgment under the federal and state dilution statutes. Toeppen made commercial use of Panavision's trademarks and his conduct diluted those marks.

I

BACKGROUND

The Internet is a worldwide network of computers that enables various individuals and organizations to share information. The Internet allows computer users to access millions of web sites and web pages. A web page is a computer data file that can include names, words, messages, pictures, sounds, and links to other information.

Every web page has its own web site, which is its address, similar to a telephone number or street address. Every web site on the Internet has an identifier called a "domain name." The domain name often consists of a person's name or a company's name or trademark. For example, Pepsi has a web page with a web site domain name consisting of the company name, Pepsi, and .com, the "top level" domain designation: Pepsi.com.^[1]

The Internet is divided into several "top level" domains: .edu for education; .org for organizations; .gov for government entities; .net for networks; and .com for "commercial" which functions as the catchall domain for Internet users.

Domain names with the .com designation must be registered on the Internet with Network Solutions, Inc. ("NSI"). NSI registers names on a first-come, first-served basis for a $100 registration fee. NSI does not make [1319] a determination about a registrant's right to use a domain name. However, NSI does require an applicant to represent and warrant as an express condition of registering a domain name that (1) the applicant's statements are true and the applicant has the right to use the requested domain name; (2) the "use or registration of the domain name ... does not interfere with or infringe the rights of any third party in any jurisdiction with respect to trademark, service mark, trade name, company name or any other intellectual property right"; and (3) the applicant is not seeking to use the domain name for any unlawful purpose, including unfair competition.

A domain name is the simplest way of locating a web site. If a computer user does not know a domain name, she can use an Internet "search engine." To do this, the user types in a key word search, and the search will locate all of the web sites containing the key word. Such key word searches can yield hundreds of web sites. To make it easier to find their web sites, individuals and companies prefer to have a recognizable domain name.

Panavision holds registered trademarks to the names "Panavision" and "Panaflex" in connection with motion picture camera equipment. Panavision promotes its trademarks through motion picture and television credits and other media advertising.

In December 1995, Panavision attempted to register a web site on the Internet with the domain name Panavision.com. It could not do that, however, because Toeppen had already established a web site using Panavision's trademark as his domain name. Toeppen's web page for this site displayed photographs of the City of Pana, Illinois.

On December 20, 1995, Panavision's counsel sent a letter from California to Toeppen in Illinois informing him that Panavision held a trademark in the name Panavision and telling him to stop using that trademark and the domain name Panavision.com. Toeppen responded by mail to Panavision in California, stating he had the right to use the name Panavision.com on the Internet as his domain name. Toeppen stated:

If your attorney has advised you otherwise, he is trying to screw you. He wants to blaze new trails in the legal frontier at your expense. Why do you want to fund your attorney's purchase of a new boat (or whatever) when you can facilitate the acquisition of `PanaVision.com' cheaply and simply instead?

Toeppen then offered to "settle the matter" if Panavision would pay him $13,000 in exchange for the domain name. Additionally, Toeppen stated that if Panavision agreed to his offer, he would not "acquire any other Internet addresses which are alleged by Panavision Corporation to be its property."

After Panavision refused Toeppen's demand, he registered Panavision's other trademark with NSI as the domain name Panaflex.com. Toeppen's web page for Panaflex.com simply displays the word "Hello."

Toeppen has registered domain names for various other companies including Delta Airlines, Neiman Marcus, Eddie Bauer, Lufthansa, and over 100 other marks. Toeppen has attempted to "sell" domain names for other trademarks such as intermatic.com to Intermatic, Inc. for $10,000 and americanstandard.com to American Standard, Inc. for $15,000.

Panavision filed this action against Toeppen in the District Court for the Central District of California. Panavision alleged claims for dilution of its trademark under the Federal Trademark Dilution Act of 1995, 15 U.S.C. § 1125(c), and under the California Anti-dilution statute, California Business and Professions Code § 14330. Panavision alleged that Toeppen was in the business of stealing trademarks, registering them as domain names on the Internet and then selling the domain names to the rightful trademark owners. The district court determined it had personal jurisdiction over Toeppen, and granted summary judgment in favor of Panavision on both its federal and state dilution claims. This appeal followed.

II

DISCUSSION

A. Personal Jurisdiction

A district court's determination that personal jurisdiction can properly be exercised [1320] is a question of law reviewable de novo when the underlying facts are undisputed. Fireman's Fund Ins. Co. v. National Bank of Coops., 103 F.3d 888, 893 (9th Cir.1996). A district court's factual findings regarding jurisdiction are reviewed for clear error. Adler v. Federal Rep. of Nig., 107 F.3d 720, 723 (9th Cir.1997).

There is no applicable federal statute governing personal jurisdiction in this case. Accordingly, we apply the law of California, the state in which the district court sits. Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1484 (9th Cir.1993). California's longarm statute permits a court to exercise personal jurisdiction over a defendant to the extent permitted by the Due Process Clause of the Constitution. Cal.Code Civ. P. § 410.10; Gordy v. Daily News, L.P., 95 F.3d 829, 831 (9th Cir.1996). The issue we address, therefore, is whether the requirements of due process are satisfied by the district court's exercise of personal jurisdiction over Toeppen. Core-Vent, 11 F.3d at 1484.

Personal jurisdiction may be founded on either general jurisdiction or specific jurisdiction.

1. General Jurisdiction

General jurisdiction exists when a defendant is domiciled in the forum state or his activities there are "substantial" or "continuous and systematic." Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414-16, 104 S.Ct. 1868, 1872-73, 80 L.Ed.2d 404 (1984). The district court correctly concluded that it did not have general jurisdiction over Toeppen. Toeppen is domiciled in Illinois and his activities in California are not substantial or continuous and systematic. See Toeppen, 938 F.Supp. at 620.

2. Specific Jurisdiction

We apply a three-part test to determine if a district court may exercise specific jurisdiction:

(1) 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; (2) the claim must be one which arises out of or results from the defendant's forum-related activities; and (3) exercise of jurisdiction must be reasonable.

Omeluk v. Langsten Slip & Batbyggeri A/S, 52 F.3d 267, 270 (9th Cir.1995) (quotation omitted).

The first of these requirements is purposeful availment.

a. Purposeful Availment

The purposeful availment requirement ensures that a nonresident defendant will not be haled into court based upon "random, fortuitous or attenuated" contacts with the forum state. Burger King Corp. v. Rudzewicz, 471 U.S. 462, 475, 105 S.Ct. 2174, 2183-84, 85 L.Ed.2d 528 (1985). This requirement is satisfied if the defendant "has taken deliberate action" toward the forum state. Ballard v. Savage, 65 F.3d 1495, 1498 (9th Cir.1995). It is not required that a defendant be physically present or have physical contacts with the forum, so long as his efforts are "purposefully directed" toward forum residents. Id.

i. Application to the Internet

Applying principles of personal jurisdiction to conduct in cyberspace is relatively new. "With this global revolution looming on the horizon, the development of the law concerning the permissible scope of personal jurisdiction based on Internet use is in its infant stages. The cases are scant." Zippo Mfg. Co. v. Zippo Dot Com, Inc., 952 F.Supp. 1119, 1123 (W.D.Pa.1997). We have, however, recently addressed the personal availment aspect of personal jurisdiction in a case involving the Internet. See Cybersell, Inc. v. Cybersell, Inc., 130 F.3d 414 (9th Cir.1997).

In Cybersell, an Arizona corporation, Cybersell, Inc. ("Cybersell AZ"), held a registered servicemark for the name Cybersell. A Florida corporation, Cybersell, Inc. ("Cybersell FL"), created a web site with the domain name cybsell.com. The web page had the word "Cybersell" at the top and the phrase, "Welcome to Cybersell!" Id. at 415. [1321] Cybersell AZ claimed that Cybersell FL infringed its registered trademark and brought an action in the district court in Arizona. We held the Arizona court could not exercise personal jurisdiction over Cybersell FL, because it had no contacts with Arizona other than maintaining a web page accessible to anyone over the Internet. Id. at 419-420.

In reaching this conclusion in Cybersell, we carefully reviewed cases from other circuits regarding how personal jurisdiction should be exercised in cyberspace. We concluded that no court had ever held that an Internet advertisement alone is sufficient to subject a party to jurisdiction in another state. Id. at 418. In each case where personal jurisdiction was exercised, there had been "something more" to "indicate that the defendant purposefully (albeit electronically) directed his activity in a substantial way to the forum state." Id. Cybersell FL had not done this, and the district court could not exercise personal jurisdiction over it.

Personal jurisdiction was properly exercised, however, in CompuServe, Inc. v. Patterson, 89 F.3d 1257 (6th Cir.1996). There, the Sixth Circuit held that a Texas resident who had advertised his product via a computer information service, CompuServe, located in Ohio, was subject to personal jurisdiction in Ohio. The court found that the Texas resident had taken direct actions that created a connection with Ohio. Id. at 1264. He subscribed to CompuServe, he loaded his software onto the CompuServe system for others to use, and he advertised his software on the CompuServe system. Id.

In the present case, the district court's decision to exercise personal jurisdiction over Toeppen rested on its determination that the purposeful availment requirement was satisfied by the "effects doctrine." That doctrine was not applicable in our Cybersell case. There, we said: "Likewise unpersuasive is Cybersell AZ's reliance on Panavision International v. Toeppen, 938 F.Supp. 616 (C.D.Cal.1996), [the district court's published opinion in this case], where the court found the `purposeful availment' prong satisfied by the effects felt in California, the home state of Panavision, from Toeppen's alleged out-of-state scheme to register domain names using the trademarks of California companies, including Panavision, for the purpose of extorting fees from them. Again, there is nothing analogous about Cybersell FL's conduct." Cybersell, 130 F.3d at 420 n. 6.

Our reference in Cybersell to "the effects felt in California" was a reference to the effects doctrine.

ii. The Effects Doctrine

In tort cases, jurisdiction may attach if the defendant's conduct is aimed at or has an effect in the forum state. Ziegler v. Indian River County, 64 F.3d 470, 473 (9th Cir. 1995); see Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984) (establishing an "effects test" for intentional action aimed at the forum state). Under Calder, personal jurisdiction can be based upon: "(1) intentional actions (2) expressly aimed at the forum state (3) causing harm, the brunt of which is suffered-and which the defendant knows is likely to be suffered-in the forum state." Core-Vent Corp. v. Nobel Industries AB, 11 F.3d 1482, 1486 (9th Cir.1993).

As the district court correctly stated, the present case is akin to a tort case. Panavision, 938 F.Supp. at 621; see also Ziegler, 64 F.3d at 473 (application of the purposeful availment prong differs depending on whether the underlying claim is a tort or contract claim). Toeppen purposefully registered Panavision's trademarks as his domain names on the Internet to force Panavision to pay him money. Panavision, 938 F.Supp. at 621. The brunt of the harm to Panavision was felt in California. Toeppen knew Panavision would likely suffer harm there because, although at all relevant times Panavision was a Delaware limited partnership, its principal place of business was in California, and the heart of the theatrical motion picture and television industry is located there. Id. at 621-622.

The harm to Panavision is similar to the harm to the Indianapolis Colts football team in Indianapolis Colts, Inc. v. Metropolitan Baltimore Football Club Ltd. Partnership, 34 F.3d 410 (7th Cir.1994). There, the Indianapolis Colts brought a trademark infringement action in the district court in Indiana [1322] against the Canadian Football League's new team, the "Baltimore CFL Colts." Id. at 411. The Seventh Circuit held that the Baltimore CFL Colts team was subject to personal jurisdiction in Indiana even though its only activity directed toward Indiana was the broadcast of its games on nationwide cable television. Id. Because the Indianapolis Colts used their trademarks in Indiana, any infringement of those marks would create an injury which would be felt mainly in Indiana, and this, coupled with the defendant's "entry" into the state by the television broadcasts, was sufficient for the exercise of personal jurisdiction. Id.

Toeppen argues he has not directed any activity toward Panavision in California, much less "entered" the state. He contends that all he did was register Panavision's trademarks on the Internet and post web sites using those marks; if this activity injured Panavision, the injury occurred in cyberspace.^[2]

We agree that simply registering someone else's trademark as a domain name and posting a web site on the Internet is not sufficient to subject a party domiciled in one state to jurisdiction in another. Cybersell, 130 F.3d at 418. As we said in Cybersell, there must be "something more" to demonstrate that the defendant directed his activity toward the forum state. Id. Here, that has been shown. Toeppen engaged in a scheme to register Panavision's trademarks as his domain names for the purpose of extorting money from Panavision. His conduct, as he knew it likely would, had the effect of injuring Panavision in California where Panavision has its principal place of business and where the movie and television industry is centered.^[3] Under the "effects test," the purposeful availment requirement necessary for specific, personal jurisdiction is satisfied.

b. Defendant's Forum-Related Activities

The second requirement for specific, personal jurisdiction is that the claim asserted in the litigation arises out of the defendant's forum related activities. Ziegler, 64 F.3d at 474. We must determine if the plaintiff Panavision would not have been injured "but for" the defendant Toeppen's conduct directed toward Panavision in California. See Ballard, 65 F.3d at 1500.

This requirement is satisfied. Toeppen's registration of Panavision's trademarks as his own domain names on the Internet had the effect of injuring Panavision in California. But for Toeppen's conduct, this injury would not have occurred. Panavision's claims arise out of Toeppen's California-related activities.

c. Reasonableness

Even if the first two requirements are met, in order to satisfy the Due Process Clause, the exercise of personal jurisdiction must be reasonable. Ziegler, 64 F.3d at 474-75. For jurisdiction to be reasonable, it must comport with "fair play and substantial justice." Burger King, 471 U.S. at 476, 105 S.Ct. at 2184. "[W]here a defendant who purposefully has directed his activities at forum residents seeks to defeat jurisdiction, he must present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Core-Vent, 11 F.3d at 1487 (citing Burger King, 471 U.S. at 476-77, 105 S.Ct. at 2184-85).

As we have said, Toeppen purposefully directed his activities at Panavision in California. This placed the burden on him to "present a compelling case that the presence of some other considerations would render jurisdiction unreasonable." Id.

[1323] In addressing the question of reasonableness, we consider seven factors: (1) the extent of a defendant's purposeful interjection; (2) the burden on the defendant in defending in the forum; (3) the extent of conflict with the sovereignty of the defendant's state; (4) the forum state's interest in adjudicating the dispute; (5) the most efficient judicial resolution of the controversy; (6) the importance of the forum to the plaintiff's interest in convenient and effective relief; and (7) the existence of an alternative forum. Burger King, 471 U.S. at 476-77, 105 S.Ct. at 2184-85. No one factor is dispositive; a court must balance all seven. CoreVent, 11 F.3d at 1488.

The district court found that Toeppen had not presented a compelling case that jurisdiction was unreasonable. Panavision, 938 F.Supp. at 622. We agree. The balance of the Burger King factors which we articulated in Core-Vent tips in favor of the exercise of personal jurisdiction.

i. Purposeful Interjection

"Even if there is sufficient `interjection' into the state to satisfy the purposeful availment prong, the degree of interjection is a factor to be weighed in assessing the overall reasonableness of jurisdiction under the reasonableness prong." Core-Vent, 11 F.3d at 1488 (citing Insurance Company of North America v. Marina Salina Cruz, 649 F.2d 1266, 1271 (9th Cir.1981)). Here, the degree of interjection was substantial.

Toeppen's acts were aimed at Panavision in California. He registered Panavision's trademarks as his domain names, knowing that this would likely injure Panavision in California. In addition, he sent a letter to Panavision in California demanding $13,000 to release his registration of Panavision.com. The purposeful interjection factor weighs strongly in favor of the district court's exercise of personal jurisdiction.

ii. Defendant's Burden in Litigating

A defendant's burden in litigating in the forum is a factor in the assessment of reasonableness, but unless the "inconvenience is so great as to constitute a deprivation of due process, it will not overcome clear justifications for the exercise of jurisdiction." Caruth v. International Psychoanalytical Ass'n, 59 F.3d 126, 128-29 (9th Cir.1995) (citing Roth v. Garcia Marquez, 942 F.2d 617, 623 (9th Cir.1991)).

The burden on Toeppen as an individual living in Illinois to litigate in California is significant, but the inconvenience is not so great as to deprive him of due process. As the district court stated, "`in this era of fax machines and discount air travel' requiring Toeppen to litigate in California is not constitutionally unreasonable." Panavision, 938 F.Supp. at 622 (quoting Sher v. Johnson, 911 F.2d 1357, 1365 (9th Cir.1990)).

iii. Sovereignty

This factor concerns the extent to which the district court's exercise of jurisdiction in California would conflict with the sovereignty of Illinois, Toeppen's state of domicile. Core-Vent, 11 F.3d at 1489. Such a conflict is not a concern in this case. The allegations in support of Panavision's state law claim and those in support of its federal claim under the Trademark Dilution Act require the same analysis. The federal analysis would be the same in either Illinois or California. In this circumstance, the exercise of jurisdiction by a federal court in California does not implicate sovereignty concerns of Illinois.

iv. Forum State's Interest

"California maintains a strong interest in providing an effective means of redress for its residents tortiously injured." Gordy v. Daily News, L.P., 95 F.3d 829, 836 (9th Cir.1996) (citing Sinatra v. National Enquirer, Inc., 854 F.2d 1191, 1200 (9th Cir.1988)). Panavision's principal place of business is in California. This factor weighs in Panavision's favor.

v. Efficient Resolution

This factor focuses on the location of the evidence and witnesses. Caruth, 59 F.3d at 129. It is no longer weighed heavily given the modern advances in communication and transportation. Id. In any event, due to the limited amount of evidence and few potential [1324] witnesses in the present litigation, this factor is probably neutral.

vi. Convenient & Effective Relief for Plaintiff

In evaluating the convenience and effectiveness of relief for the plaintiff, we have given little weight to the plaintiff's inconvenience. Ziegler, 64 F.3d at 476. It may be somewhat more costly and inconvenient for Panavision to litigate in another forum, but the burden on Panavision is relatively slight. This factor is essentially neutral, perhaps weighing slightly in Toeppen's favor.

vii. Alternative Forum

Panavision has not demonstrated the unavailability of an alternative forum. In this case, Illinois is an alternative forum. As stated above, it may be more costly and inconvenient for Panavision to litigate in Illinois, but this is not an unreasonable burden. This factor weighs in Toeppen's favor.

In balancing the Burger King factors, we conclude that although some factors weigh in Toeppen's favor, he failed to present a compelling case that the district court's exercise of jurisdiction in California would be unreasonable.

We conclude that all of the requirements for the exercise of specific, personal jurisdiction are satisfied. The district court properly exercised personal jurisdiction over Toeppen. We next consider the district court's summary judgment in favor of Panavision on its trademark dilution claims.

B. Trademark Dilution Claims

The Federal Trademark Dilution Act provides:

The owner of a famous mark shall be entitled ... to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark....

15 U.S.C. § 1125(c).

The California Anti-dilution statute is similar. See Cal. Bus. & Prof.Code § 14330. It prohibits dilution of "the distinctive quality" of a mark regardless of competition or the likelihood of confusion. The protection extends only to strong and well recognized marks. Panavision's state law dilution claim is subject to the same analysis as its federal claim.

In order to prove a violation of the Federal Trademark Dilution Act, a plaintiff must show that (1) the mark is famous; (2) the defendant is making a commercial use of the mark in commerce; (3) the defendant's use began after the mark became famous; and (4) the defendant's use of the mark dilutes the quality of the mark by diminishing the capacity of the mark to identify and distinguish goods and services. 15 U.S.C. § 1125(c).

Toeppen does not challenge the district court's determination that Panavision's trademark is famous, that his alleged use began after the mark became famous, or that the use was in commerce. Toeppen challenges the district court's determination that he made "commercial use" of the mark and that this use caused "dilution" in the quality of the mark.

1. Commercial Use

Toeppen argues that his use of Panavision's trademarks simply as his domain names cannot constitute a commercial use under the Act. Case law supports this argument. See Panavision International, L.P. v. Toeppen, 945 F.Supp. 1296, 1303 (C.D.Cal. 1996) ("Registration of a trade[mark] as a domain name, without more, is not a commercial use of the trademark and therefore is not within the prohibitions of the Act."); Academy of Motion Picture Arts & Sciences v. Network Solutions, Inc., ___ F.Supp. ___, 1997 WL 810472 (C.D.Cal. Dec.22, 1997) (the mere registration of a domain name does not constitute a commercial use); Lockheed Martin Corp. v. Network Solutions, Inc., 985 F.Supp. 949 (C.D.Cal.1997) (NSI's acceptance of a domain name for registration is not a commercial use within the meaning of the Trademark Dilution Act).

Developing this argument, Toeppen contends that a domain name is simply an address used to locate a web page. He asserts [1325] that entering a domain name on a computer allows a user to access a web page, but a domain name is not associated with information on a web page. If a user were to type Panavision.com as a domain name, the computer screen would display Toeppen's web page with aerial views of Pana, Illinois. The screen would not provide any information about "Panavision," other than a "location window" which displays the domain name. Toeppen argues that a user who types in Panavision.com, but who sees no reference to the plaintiff Panavision on Toeppen's web page, is not likely to conclude the web page is related in any way to the plaintiff, Panavision.

Toeppen's argument misstates his use of the Panavision mark. His use is not as benign as he suggests. Toeppen's "business" is to register trademarks as domain names and then sell them to the rightful trademark owners. He "act[s] as a `spoiler,' preventing Panavision and others from doing business on the Internet under their trademarked names unless they pay his fee." Panavision, 938 F.Supp. at 621. This is a commercial use. See Intermatic Inc. v. Toeppen, 947 F.Supp. 1227, 1230 (N.D.Ill.1996) (stating that "[o]ne of Toeppen's business objectives is to profit by the resale or licensing of these domain names, presumably to the entities who conduct business under these names.").

As the district court found, Toeppen traded on the value of Panavision's marks. So long as he held the Internet registrations, he curtailed Panavision's exploitation of the value of its trademarks on the Internet, a value which Toeppen then used when he attempted to sell the Panavision.com domain name to Panavision.

In a nearly identical case involving Toeppen and Intermatic Inc., a federal district court in Illinois held that Toeppen's conduct violated the Federal Trademark Dilution Act. Intermatic, 947 F.Supp. at 1241. There, Intermatic sued Toeppen for registering its trademark on the Internet as Toeppen's domain name, intermatic.com. It was "conceded that one of Toeppen's intended uses for registering the Intermatic mark was to eventually sell it back to Intermatic or to some other party." Id. at 1239. The court found that "Toeppen's intention to arbitrage the `intermatic.com' domain name constitute[d] a commercial use." Id.See also Teletech Customer Care Management, Inc. v. Tele-Tech Co., 977 F.Supp. 1407 (C.D.Cal.1997) (granting a preliminary injunction under the Trademark Dilution Act for use of a trademark as a domain name).

Toeppen's reliance on Holiday Inns, Inc. v. 800 Reservation, Inc., 86 F.3d 619 (6th Cir.1996), cert. denied, ___ U.S. ___, 117 S.Ct. 770, 136 L.Ed.2d 715 (1997) is misplaced. In Holiday Inns, the Sixth Circuit held that a company's use of the most commonly misdialed number for Holiday Inns' 1-800 reservation number was not trademark infringement.

Holiday Inns is distinguishable. There, the defendant did not use Holiday Inns' trademark. Rather, the defendant selected the most commonly misdialed telephone number for Holiday Inns and attempted to capitalize on consumer confusion.

A telephone number, moreover, is distinguishable from a domain name because a domain name is associated with a word or phrase. A domain name is similar to a "vanity number" that identifies its source. Using Holiday Inns as an example, when a customer dials the vanity number "1-800-Holiday," she expects to contact Holiday Inns because the number is associated with that company's trademark. A user would have the same expectation typing the domain name Holiday-Inns.com. The user would expect to retrieve Holiday Inns' web page.^[4]

Toeppen made a commercial use of Panavision's trademarks. It does not matter that he did not attach the marks to a product. Toeppen's commercial use was his attempt to sell the trademarks themselves.^[5] Under the [1326] Federal Trademark Dilution Act and the California Anti-dilution statute, this was sufficient commercial use.

2. Dilution

"Dilution" is defined as "the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) likelihood of confusion, mistake or deception." 15 U.S.C. § 1127.^[6]

Trademark dilution on the Internet was a matter of Congressional concern. Senator Patrick Leahy (D-Vt.) stated:

[I]t is my hope that this anti-dilution statute can help stem the use of deceptive Internet addresses taken by those who are choosing marks that are associated with the products and reputations of others.

141 Cong. Rec. § 19312-01 (daily ed. Dec. 29, 1995) (statement of Sen. Leahy). See also Teletech Customer Care Management, Inc. v. Tele-Tech Co., Inc., 977 F.Supp. 1407, 1413 (C.D.Cal.1997).

To find dilution, a court need not rely on the traditional definitions such as "blurring" and "tarnishment."^[7] Indeed, in concluding that Toeppen's use of Panavision's trademarks diluted the marks, the district court noted that Toeppen's conduct varied from the two standard dilution theories of blurring and tarnishment. Panavision, 945 F.Supp. at 1304. The court found that Toeppen's conduct diminished "the capacity of the Panavision marks to identify and distinguish Panavision's goods and services on the Internet." Id. See also Intermatic, 947 F.Supp. at 1240 (Toeppen's registration of the domain name, "lessens the capacity of Intermatic to identify and distinguish its goods and services by means of the Internet.").

This view is also supported by Teletech. There, TeleTech Customer Care Management Inc., ("TCCM"), sought a preliminary injunction against Tele-Tech Company for use of TCCM's registered service mark, "TeleTech," as an Internet domain name. Teletech, 977 F.Supp. at 1410. The district court issued an injunction, finding that TCCM had demonstrated a likelihood of success on the merits on its trademark dilution claim. Id. at 1412. The court found that TCCM had invested great resources in promoting its servicemark and Teletech's registration of the domain name teletech.com on the Internet would most likely dilute TCCM's mark. Id. at 1413.

Toeppen argues he is not diluting the capacity of the Panavision marks to identify goods or services. He contends that even though Panavision cannot use Panavision.com and Panaflex.com as its domain name addresses, [1327] it can still promote its goods and services on the Internet simply by using some other "address" and then creating its own web page using its trademarks.

We reject Toeppen's premise that a domain name is nothing more than an address. A significant purpose of a domain name is to identify the entity that owns the web site.^[8] "A customer who is unsure about a company's domain name will often guess that the domain name is also the company's name." Cardservice Int'l v. McGee, 950 F.Supp. 737, 741 (E.D.Va.1997). "[A] domain name mirroring a corporate name may be a valuable corporate asset, as it facilitates communication with a customer base." MTV Networks, Inc. v. Curry, 867 F.Supp. 202, 203-204 n. 2 (S.D.N.Y.1994).

Using a company's name or trademark as a domain name is also the easiest way to locate that company's web site. Use of a "search engine" can turn up hundreds of web sites, and there is nothing equivalent to a phone book or directory assistance for the Internet. See Cardservice, 950 F.Supp. at 741.

Moreover, potential customers of Panavision will be discouraged if they cannot find its web page by typing in "Panavision.com," but instead are forced to wade through hundreds of web sites. This dilutes the value of Panavision's trademark. We echo the words of Judge Lechner, quoting Judge Wood: "Prospective users of plaintiff's services who mistakenly access defendant's web site may fail to continue to search for plaintiff's own home page, due to anger, frustration or the belief that plaintiff's home page does not exist." Jews for Jesus v. Brodsky, 993 F.Supp. 282, 306-07 (D.N.J. 1998) (Lechner, J., quoting Wood, J. in Planned Parenthood v. Bucci, 1997 WL 133313 at *4); see also Teletech, 977 F.Supp. at 1410 (finding that use of a search engine can generate as many as 800 to 1000 matches and it is "likely to deter web browsers from searching for Plaintiff's particular web site").

Toeppen's use of Panavision.com also puts Panavision's name and reputation at his mercy. See Intermatic, 947 F.Supp. at 1240 ("If Toeppen were allowed to use `intermatic.com,' Intermatic's name and reputation would be at Toeppen's mercy and could be associated with an unimaginable amount of messages on Toeppen's web page.").

We conclude that Toeppen's registration of Panavision's trademarks as his domain names on the Internet diluted those marks within the meaning of the Federal Trademark Dilution Act, 15 U.S.C. § 1125(c), and the California Anti-dilution statute, Cal.Bus. & Prof.Code § 14330.

III

CONCLUSION

Toeppen engaged in a scheme to register Panavision's trademarks as his domain names on the Internet and then to extort money from Panavision by trading on the value of those names. Toeppen's actions were aimed at Panavision in California and the brunt of the harm was felt in California. The district court properly exercised personal jurisdiction over Toeppen.

We also affirm the district court's summary judgment in favor of Panavision under the Federal Trademark Dilution Act, 15 U.S.C. § 1125(c), and the California Anti-dilution statute, Cal.Bus. & Prof.Code § 14330. Toeppen made commercial use of Panavision's trademarks and his conduct diluted those marks.

AFFIRMED.

[1] We use the arrow keys ( ) to set out a domain name or a web site. These arrows are not part of the name or the site.

[2] In a subset of this argument, Toeppen contends that a large organization such as Panavision does not suffer injury in one location. See Cybersell, 130 F.3d at 420 (A corporation "does not suffer harm in a particular geographic location in the same sense that an individual does.") However, in Core-Vent, we stated that Calder v. Jones, 465 U.S. 783, 104 S.Ct. 1482, 79 L.Ed.2d 804 (1984), does not preclude a determination that a corporation suffers the brunt of harm in its principal place of business. Core-Vent, 11 F.3d at 1487. Panavision was previously a limited partnership and is now a corporation. Under either form of business organization, however, the brunt of the harm suffered by Panavision was in the state where it maintained its principal place of business, California.

[3] We discuss the nature of Panavision's injury in following Part B.

[4] See Carl Oppedahl, Analysis and Suggestions Regarding NSI Domain Name Trademark Dispute Policy, 7 Fordham Intell. Prop. Media & Ent. L.J. 73 (1996). Once the domain name system was established, "nobody would have expected xerox.com to map to anything but the Xerox corporation." Id. at 95.

[5] See Boston Pro. Hockey Assoc., Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004 (1975), which involved the sale of National Hockey League logos. The defendant was selling the logos themselves, unattached to a product (such as a hat or sweatshirt). The court stated: "The difficulty with this case stems from the fact that a reproduction of the trademark itself is being sold, unattached to any other goods or services." Id. at 1010. The court concluded that trademark law should protect the trademark itself. "Although our decision here may slightly tilt the trademark laws from the purpose of protecting the public to the protection of the business interests of plaintiffs, we think that the two become ... intermeshed...." Id. at 1011. "Whereas traditional trademark law sought primarily to protect consumers, dilution laws place more emphasis on protecting the investment of the trademark owners." Panavision, 945 F.Supp. at 1301.

[6] The Lanham Act, 15 U.S.C. § 1127, provides definitions for the Trademark Dilution Act, 15 U.S.C. § 1125(c).

[7] Blurring occurs when a defendant uses a plaintiff's trademark to identify the defendant's goods or services, creating the possibility that the mark will lose its ability to serve as a unique identifier of the plaintiff's product. Ringling Bros.-Barnum & Bailey, Combined Shows, Inc. v. B.E. Windows, Corp., 937 F.Supp. 204, 209 (S.D.N.Y.1996) (citing Deere & Co. v. MTD Prods., Inc., 41 F.3d 39, 43 (2d Cir.1994)); Thomas McCarthy, McCarthy on Trademarks and Unfair Competition, § 24:68 at 24-111 (4th ed.1997); see also Ringling Bros.-Barnum & Bailey Combined Shows, Inc. v. Utah Div. of Travel Development, 955 F.Supp. 605, 614-15 (E.D.Va.1997) (discussing the inadequacies of current definitions of blurring and determining that blurring requires consumers to mistakenly associate a defendant's mark with a plaintiff's famous trademark).

Tarnishment occurs when a famous mark is improperly associated with an inferior or offensive product or service. McCarthy, § 24:104 at 24-172 to 173; Ringling Bros., 937 F.Supp. at 209 (citing Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497, 506 (2d Cir.1996)).

[8] This point was made in a recent legal periodical:

The domain name serves a dual purpose. It marks the location of the site within cyberspace, much like a postal address in the real world, but it may also indicate to users some information as to the content of the site, and, in instances of well-known trade names or trademarks, may provide information as to the origin of the contents of the site.

Peter Brown, New Issues in Internet Litigation, 17th Annual Institute on Computer Law: The Evolving Law of the Internet-Commerce, Free Speech, Security, Obscenity and Entertainment, 471 Prac. L. Inst. 151 (1997).

306 F.3d 509 (2002)

No. 02-1771.

Argued September 11, 2002.
Decided October 4, 2002.

[510] Richard W. Young (argued), Gardner, Carton & Douglas, Chicago, IL, for Plaintiff-Appellee.

Joan I. Norek (argued), Chicago, IL, for Defendant-Appellant.

Before POSNER, EASTERBROOK, and EVANS, Circuit Judges.

POSNER, Circuit Judge.

Ty Inc., the manufacturer of Beanie Babies, the well-known beanbag stuffed animals, brought this suit for trademark infringement against Ruth Perryman. Perryman sells second-hand beanbag stuffed animals, primarily but not exclusively Ty's Beanie Babies, over the Internet. Her Internet address ("domain name"), a particular focus of Ty's concern, is bargainbeanies.com. She has a like-named Web site (http://www.bargainbeanies.com) where she advertises her wares. Ty's suit is based on the federal antidilution statute, 15 U.S.C. § 1125(c), which protects "famous" marks from commercial uses that cause "dilution of the distinctive quality of the mark." See Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 214-16 (2d Cir.1999). The district court granted summary judgment in favor of Ty and entered an injunction that forbids the defendant to use "BEANIE or BEANIES or any colorable imitation thereof (whether alone or in connection with other terms) within any business name, Internet domain name, or trademark, or in connection with any non-Ty products." Perryman's appeal argues primarily that "beanies" has become a generic term for beanbag stuffed animals and therefore cannot be appropriated as a trademark at all, and that in any event the injunction (which has remained in effect during the appeal) is overbroad.

The fundamental purpose of a trademark is to reduce consumer search costs by providing a concise and unequivocal identifier of the particular source of particular goods. The consumer who knows at a glance whose brand he is being asked to buy knows whom to hold responsible if the brand disappoints and whose product to buy in the future if the brand pleases. This in turn gives producers an incentive to maintain high and uniform quality, since otherwise the investment in their trademark may be lost as customers turn away in disappointment from the brand. A successful brand, however, creates an incentive in unsuccessful competitors to pass off their inferior brand as the successful brand by adopting a confusingly similar trademark, in effect appropriating the goodwill created by the producer of the successful brand. The traditional and still central concern of trademark law is to provide remedies against this practice.

Confusion is not a factor here, however, with a minor exception discussed at the end of the opinion. Perryman is not a competing producer of beanbag stuffed animals, [511] and her Web site clearly disclaims any affiliation with Ty. But that does not get her off the hook. The reason is that state and now federal law also provides a remedy against the "dilution" of a trademark, though as noted at the outset of this opinion the federal statute is limited to the subset of "famous" trademarks and to dilutions of them caused by commercial uses that take place in interstate or foreign commerce. "Beanie Babies," and "Beanies" as the shortened form, are famous trademarks in the ordinary sense of the term: "everybody has heard of them"; they are "truly prominent and renowned," in the words of Professor McCarthy, 4 McCarthy on Trademarks and Unfair Competition § 24:109, p. 24-234 (2001), as distinguished from having a merely local celebrity. TCPIP Holding Co. v. Haar Communications Inc., 244 F.3d 88, 98-99 (2d Cir.2001). And while both this court and the Third Circuit have held, in opposition to the Second Circuit's TCPIP decision, that "fame," though it cannot be local, may be limited to "niche" markets, Syndicate Sales, Inc. v. Hampshire Paper Corp., 192 F.3d 633, 640-41 (7th Cir.1999); Times Mirror Magazines, Inc. v. Las Vegas Sports News, L.L.C., 212 F.3d 157, 164 (3d Cir.2000), this is not a conflict to worry over here; Ty's trademarks are household words. And Perryman's use of these words was commercial in nature and took place in interstate commerce, and doubtless, given the reach of the aptly named World Wide Web, in foreign commerce as well.

But what is "dilution"? There are (at least) three possibilities relevant to this case, each defined by a different underlying concern. First, there is concern that consumer search costs will rise if a trademark becomes associated with a variety of unrelated products. Suppose an upscale restaurant calls itself "Tiffany." There is little danger that the consuming public will think it's dealing with a branch of the Tiffany jewelry store if it patronizes this restaurant. But when consumers next see the name "Tiffany" they may think about both the restaurant and the jewelry store, and if so the efficacy of the name as an identifier of the store will be diminished. Consumers will have to think harder — incur as it were a higher imagination cost — to recognize the name as the name of the store. Exxon Corp. v. Exxene Corp., 696 F.2d 544, 549-50 (7th Cir.1982); cf. Mead Data Central, Inc. v. Toyota Motor Sales, U.S.A., Inc., 875 F.2d 1026, 1031 (2d Cir.1989) ("The [legislative] history [of New York's antidilution statute] disclosed a need for legislation to prevent such `hypothetical anomalies' as `Dupont shoes, Buick aspirin tablets, Schlitz varnish, Kodak pianos, Bulova gowns'"); 4 McCarthy on Trademarks and Unfair Competition, supra, § 24:68, pp. 24-120 to 24-121. So "blurring" is one form of dilution.

Now suppose that the "restaurant" that adopts the name "Tiffany" is actually a striptease joint. Again, and indeed even more certainly than in the previous case, consumers will not think the striptease joint under common ownership with the jewelry store. But because of the inveterate tendency of the human mind to proceed by association, every time they think of the word "Tiffany" their image of the fancy jewelry store will be tarnished by the association of the word with the strip joint. Hormel Foods Corp. v. Jim Henson Productions, Inc., 73 F.3d 497, 507 (2d Cir.1996); 4 McCarthy on Trademarks and Unfair Competition, supra, § 24:95, pp. 24-195, 24-198. So "tarnishment" is a second form of dilution. Analytically it is a subset of blurring, since it reduces the distinctness of the trademark as a signifier of the trademarked product or service.

[512] Third, and most far-reaching in its implications for the scope of the concept of dilution, there is a possible concern with situations in which, though there is neither blurring nor tarnishment, someone is still taking a free ride on the investment of the trademark owner in the trademark. Suppose the "Tiffany" restaurant in our first hypothetical example is located in Kuala Lumpur and though the people who patronize it (it is upscale) have heard of the Tiffany jewelry store, none of them is ever going to buy anything there, so that the efficacy of the trademark as an identifier will not be impaired. If appropriation of Tiffany's aura is nevertheless forbidden by an expansive concept of dilution, the benefits of the jewelry store's investment in creating a famous name will be, as economists say, "internalized" — that is, Tiffany will realize the full benefits of the investment rather than sharing those benefits with others — and as a result the amount of investing in creating a prestigious name will rise.

This rationale for antidilution law has not yet been articulated in or even implied by the case law, although a few cases suggest that the concept of dilution is not exhausted by blurring and tarnishment, see Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1326 (9th Cir.1998); Intermatic, Inc. v. Toeppen, 947 F.Supp. 1227, 1238-39 (N.D.Ill.1996); Rhee Bros., Inc. v. Han Ah Reum Corp., 178 F.Supp.2d 525, 530 (D.Md.2001), and the common law doctrine of "misappropriation" might conceivably be invoked in support of the rationale that we have sketched. See Rochelle Cooper Dreyfuss & Roberta Rosenthal Kwall, Intellectual Property: Cases and Materials on Trademark, Copyright and Patent Law 137-38 (1996). The validity of the rationale may be doubted, however. The number of prestigious names is so vast (and, as important, would be even if there were no antidilution laws) that it is unlikely that the owner of a prestigious trademark could obtain substantial license fees if commercial use of the mark without his consent were forbidden despite the absence of consumer confusion, blurring, or tarnishment. Competition would drive the fee to zero since, if the name is being used in an unrelated market, virtually every prestigious name will be a substitute for every other in that market.

None of the rationales we have canvassed supports Ty's position in this case. Perryman is not producing a product, or a service, such as dining at a restaurant, that is distinct from any specific product; rather, she is selling the very product to which the trademark sought to be defended against her "infringement" is attached. You can't sell a branded product without using its brand name, that is, its trademark. Supposing that Perryman sold only Beanie Babies (a potentially relevant qualification, as we'll see), we would find it impossible to understand how she could be thought to be blurring, tarnishing, or otherwise free riding to any significant extent on Ty's investment in its mark. To say she was would amount to saying that if a used car dealer truthfully advertised that it sold Toyotas, or if a muffler manufacturer truthfully advertised that it specialized in making mufflers for installation in Toyotas, Toyota would have a claim of trademark infringement. Of course there can be no aftermarket without an original market, and in that sense sellers in a trademarked good's aftermarket are free riding on the trademark. But in that attenuated sense of free riding, almost everyone in business is free riding.

Ty's argument is especially strained because of its marketing strategy. As we explained in an earlier case brought by Ty, Ty, Inc. v. GMA Accessories, Inc., 132 F.3d 1167, 1173 (7th Cir.1997), Ty deliberately produces a quantity of each Beanie [513] Baby that fails to clear the market at the very low price that it charges for Beanie Babies. The main goal is to stampede children into nagging their parents to buy the new Baby lest they be the only kid on the block who doesn't have it. A byproduct (or perhaps additional goal) is the creation of a secondary market, like the secondary market in works of art, in which prices on scarce Beanie Babies are bid up to a market-clearing level. Perryman is a middleman in this secondary market, the market, as we said, that came into existence as the result, either intended or foreseen, of a deliberate marketing strategy. That market is unlikely to operate efficiently if sellers who specialize in serving it cannot use "Beanies" to identify their business. Perryman's principal merchandise is Beanie Babies, so that to forbid it to use "Beanies" in its business name and advertising (Web or otherwise) is like forbidding a used car dealer who specializes in selling Chevrolets to mention the name in his advertising.

It is true that Web search engines do not stop with the Web address; if Perryman's Web address were www.perryman.com but her Web page mentioned Beanies, a search for the word "Beanies" would lead to her Web page. Yet we know from the events that led up to the passage in 1999 of the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), that many firms value having a domain name or Web address that signals their product. (The "cybersquatters" were individuals or firms that would register domain names for the purpose of selling them to companies that wanted a domain name that would be the name of their company or of their principal product.) After all, many consumers search by typing the name of a company in the Web address space (browser) on their home page rather than by use of a search engine. We do not think that by virtue of trademark law producers own their aftermarkets and can impede sellers in the aftermarket from marketing the trademarked product. In this respect the case parallels our most recent decision dealing with Ty's intellectual property, in which we found that Ty was attempting to control the market in collectors' guides to Beanie Babies by an overly expansive interpretation of its copyrights. Ty, Inc. v. Publications Int'l Ltd., 292 F.3d 512 (7th Cir.2002).

We surmise that what Ty is seeking in this case is an extension of antidilution law to forbid commercial uses that accelerate the transition from trademarks (brand names) to generic names (product names). Words such as "thermos," "yo-yo," "escalator," "cellophane," and "brassiere" started life as trademarks, but eventually lost their significance as source identifiers and became the popular names of the product rather than the name of the trademark owner's brand, and when that happened continued enforcement of the trademark would simply have undermined competition with the brand by making it difficult for competitors to indicate that they were selling the same product — by rendering them in effect speechless. Ty is doubtless cognizant of a similar and quite real danger to "Beanie Babies" and "Beanies." Notice that the illustrations we gave of trademarks that became generic names are all descriptive or at least suggestive of the product, which makes them better candidates for genericness than a fanciful trademark such as "Kodak" or "Exxon." Ty's trademarks likewise are descriptive of the product they denote; its argument that "Beanies" is "inherently distinctive" (like Kodak and Exxon), and therefore protected by trademark law without proof of secondary meaning, is nonsense. A trademark that describes a basic element [514] of the product, as "Beanies" does, is not protected unless the owner can establish that the consuming public accepts the word as the designation of a brand of the product (that it has acquired, as the cases say, secondary meaning). Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 769, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992); Platinum Home Mortgage Corp. v. Platinum Financial Group, Inc., 149 F.3d 722, 727 (7th Cir.1998). As the public does with regard to "Beanies" — for now. But because the word is catchier than "beanbag stuffed animals," "beanbag toys," or "plush toys," it may someday "catch on" to the point where the mark becomes generic, and then Ty will have to cast about for a different trademark.

Although there is a social cost when a mark becomes generic — the trademark owner has to invest in a new trademark to identify his brand — there is also a social benefit, namely an addition to ordinary language. A nontrivial number of words in common use began life as trademarks. See, e.g., Shawn M. Clankie, "Brand Name Use in Creative Writing: Genericide or Language Right?" in Perspectives on Plagiarism and Intellectual Property in a Postmodern World 253 (Lisa Buranen and Alice M. Roy eds.1999); Monroe Friedman, "The Changing Language of a Consumer Society: Brand Name Usage in Popular American Novels in the Postwar Era," 11 Journal of Consumer Research 927 (1985). An interpretation of antidilution law as arming trademark owners to enjoin uses of their mark that, while not confusing, threaten to render the mark generic may therefore not be in the public interest. Moreover, the vistas of litigation that such a theory of dilution opens up are staggering. Ty's counsel at argument refused to disclaim a right to sue the publishers of dictionaries should they include an entry for "beanie," lower-cased and defined as a beanbag stuffed animal, thus accelerating the transition from trademark to generic term. He should have disclaimed such a right. See Illinois High School Ass'n v. GTE Vantage Inc., 99 F.3d 244, 246 (7th Cir.1996); 2 McCarthy on Trademarks and Unfair Competition, supra, § 12:28, pp. 12-79 to 12-81.

We reject the extension of antidilution law that Ty beckons us to adopt, but having done so we must come back to the skipped issue of confusion. For although 80 percent of Perryman's sales are of Ty's products, this means that 20 percent are not, and on her Web page after listing the various Ty products under such names as "Beanie Babies" and "Teenie Beanies" she has the caption "Other Beanies" and under that is a list of products such as "Planet Plush" and "Rothschild Bears" that are not manufactured by Ty. This is plain misdescription, in fact false advertising, and supports the last prohibition in the injunction, the prohibition against using "Beanie" or "Beanies" "in connection with any non-Ty products." That much of the injunction should stand. But Ty has not demonstrated any basis for enjoining Perryman from using the terms in "any business name, Internet domain name, or trademark."

We can imagine an argument that merely deleting "Other Beanies" is not enough; that if the other beanbag stuffed animals look much like Ty's, consumers might assume they are "Beanies," or if not, that they still might associate "Beanies" with these other animals, causing the term to lose its distinctness as the name of Ty's products. But we do not understand Ty to be seeking a broadening of the injunction to require a disclaimer as to the source of the non-Ty products sold by Perryman. This however is a matter that can be pursued further on remand.

So the judgment must be vacated and the case remanded for the formulation of a proper injunction. But is more open on [515] remand? The judge merely granted summary judgment for Ty, and we are merely reversing (in part) that ruling. Ordinarily this would mean that Ty would have a shot at a trial in which it might try to convince the judge (as there is no jury in trademark cases) that its rights under antidilution law really were violated. But this case is unusual because, given Perryman's status as a seller in the secondary market created as a result of Ty's marketing strategy, we cannot imagine a state of facts consistent with the extensive record compiled in the summary judgment proceeding that could possibly justify an injunction against Perryman's representing in her business name and Internet and Web addresses that she is doing what she has a perfect right to do, namely sell Beanie Babies. We therefore direct that the proceedings on remand be limited to the reformulation of the injunction in conformity with this opinion.

VACATED AND REMANDED WITH INSTRUCTIONS.

29 F.Supp.2d 1161 (1998)

No. CV 98-1278 DDP (MANX).

December 21, 1998.

[1162] David Huebner, Glenn W. Trost, Coudert Bros., Los Angeles, CA, Eric E. Cohen, A. Sidney Katz, Eric C. Cohen, Welsh & Katz, Chicago, IL, for Plaintiff.

Kirk N. Sullivan, Gary Patrick Simonian, Jody Damon Angel, Hagenbaugh & Murphy, Glendale, CA, for Defendant.

ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

PREGERSON, District Judge.

Andrew S. Faber's motion for summary judgment came before the Court for oral argument on November 23, 1998. After reviewing and considering the materials submitted by the parties and hearing oral argument, the Court GRANTS Faber's motion for summary judgment.

BACKGROUND

Bally Total Fitness Holding Corp. ("Bally") brings this action for trademark infringement, unfair competition, and dilution against Andrew S. Faber ("Faber") in connection with Bally's federally registered trademarks and service marks in the terms "Bally," "Bally's Total Fitness," and "Bally Total Fitness," including the name and distinctive styles of these marks. Bally is suing Faber based on his use of Bally's marks in a web site he designed.

Faber calls his site "Bally sucks." The web site is dedicated to complaints about Bally's health club business. When the web site is accessed, the viewer is presented with Bally's mark with the word "sucks" printed across it. Immediately under this, the web site states "Bally Total Fitness Complaints! Un-Authorized."

Faber has several web sites in addition to the "Bally sucks" site. The domain^[1] in which Faber has placed his web sites is "www.compupix.com." Faber's other web sites within "www.compupix.com" include the "Bally sucks" site (URL address "www.compupix.com/ballysucks"); "Images of Men," a web site displaying and selling photographs of nude males (URL address "www.compupix.com/index.html"); a web site containing information regarding the gay community (URL address "www.compupix.com/gay"); a web site containing photographs of flowers and landscapes (URL address "www.compupix.com/fl/index.html"); and a web site advertising "Drew Faber Web Site Services" (URL address "www.compupix.com/biz.htm").

On April 22, 1998, Bally applied for a temporary restraining order directing Faber to withdraw his web site from the Internet. Bally represents that when its application for a TRO was initially filed, the "Bally sucks" site contained a direct link to Faber's "Images of Men" site. In his opposition to the application for a TRO, Faber indicated that this link had been removed. The Court denied Bally's application on April 30, 1998.

Bally brought a motion for summary judgment on its claims of trademark infringement, trademark dilution, and unfair competition which the Court denied on October 20, 1998. In that order, the Court ordered Faber to bring a motion for summary judgment. This motion is now before the Court.

DISCUSSION

I. Faber's Motion for Summary Judgment

A. Legal Standard

Summary judgment is appropriate where "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party," and material facts are those "that might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc., 477 [1163] U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, the "mere existence of a scintilla of evidence" in support of the nonmoving party's claim is insufficient to defeat summary judgment. Id. at 252, 106 S.Ct. 2505. In determining a motion for summary judgment, all reasonable inferences from the evidence must be drawn in favor of the non moving party. Id. at 242, 106 S.Ct. 2505.

B. Trademark Infringement

The Lanham Act provides the basic protections that a trademark owner receives. To find that Faber has infringed Bally's marks the Court would have to find that Bally has valid protectable trademarks and that Faber's use creates a likelihood of confusion. 15 U.S.C. § 1114(1)(a). Faber asserts that Bally cannot meet this standard as a matter of law.

1. Validity of Bally's marks

Bally has demonstrated that it has invested a substantial amount of money and effort to create valuable trademarks. Bally's marks are registered on the Principle Register of the U.S. Patent and Trademark Office. Additionally, Bally asserts that "[s]ince 1990, Bally has spent over $500,000,000.00 (one-half billion dollars) in advertising the Bally name in the health club industry." Further, "[i]n 1996, Bally spent over $5,000,000 in external signage for its clubs nationwide." Finally, Bally argues that it is the only business in the health club industry which uses the Bally marks. These facts establish that Bally has valid protectable marks.

2. Likelihood of confusion

In determining whether a defendant's use of a plaintiff's trademarks creates a likelihood of confusion, the courts apply an eight-factor test, including:

(1) strength of the mark;

(2) proximity of the goods;

(3) similarity of the marks;

(4) evidence of actual confusion;

(5) marketing channels used;

(6) type of goods and the degree of care likely to be exercised by the purchaser;

(7) defendant's intent in selecting the mark; and

(8) likelihood of expansion of the product lines.

See AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir.1979).

The Sleekcraft factors apply to related goods. Id. at 348. Bally is involved in the health club industry. Faber is an Internet web page designer who believes that Bally engages in unsatisfactory business practices. Faber operates a web site which is critical of Bally's operations. Bally, however, states that it uses the Internet to communicate with its members and to advertise its services. Consequently, Bally asserts that the parties have related goods because both parties use the Internet to communicate with current and potential Bally members.

"Related goods are those goods which, though not identical, are related in the minds of consumers." Levi Strauss & Co. v. Blue Bell, Inc., 778 F.2d 1352, 1363 (9th Cir.1985). Several courts have addressed whether goods are related. See id. (shirts and pants are related goods); Fleischmann Distilling Corp. v. Maier Brewing Co., 314 F.2d 149, 152-53 (9th Cir.1963) (beer and whiskey are related goods); Yale Elec. Corp. v. Robertson, 26 F.2d 972 (2d Cir.1928) (locks and flashlights are related goods). The modern rule protects marks against "any product or service which would reasonably be thought by the buying public to come from the same source, or thought to be affiliated with, connected with, or sponsored by, the trademark owner." 3 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 24:6 at 24-13 (1997).

The Court finds that the goods here are not related. Web page design is a service based on computer literacy and design skills. This service is far removed from the business of managing health clubs. The fact that the parties both advertise their respective services on the Internet may be a factor tending to show confusion, but it does not make the goods related. The Internet is a communications medium. It is not itself a product or a service. Further, Faber's site states that it is "unauthorized" and contains the words "Bally sucks." No reasonable consumer comparing Bally's official web site with Faber's site would assume Faber's site [1164] "to come from the same source, or thought to be affiliated with, connected with, or sponsored by, the trademark owner." Therefore, Bally's claim for trademark infringement fails as a matter of law.

However, even assuming that these goods are related, Bally's claims also fail to satisfy the Sleekcraft factors.

a. Strength of mark

This factor tips greatly toward Bally. Bally owns registered marks. Bally uses these marks extensively throughout the United States and Canada. Bally spends a significant amount of money each year to promote its marks. Finally, Bally asserts that no other company uses these marks in connection with health clubs, and that these marks are arbitrary. These facts demonstrate that Bally has strong marks.

b. Similarity of the marks

Bally argues that the marks are identical. Bally argues that the only difference between the marks is that Faber attached the word "sucks" to Bally's marks. Bally argues that this is a minor difference.

"Sucks" has entered the vernacular as a word loaded with criticism. Faber has superimposed this word over Bally's mark. It is impossible to see Bally's mark without seeing the word "sucks." Therefore, the attachment cannot be considered a minor change. See Int'l Ass'n of Machinists & Aerospace Workers v. Winship Green Nursing Ctr., 103 F.3d 196, 202-03 (1st Cir.1996).

This factor cuts against Bally.

c. Competitive proximity of the goods

Bally argues that the goods are in close proximity because both parties use the Internet. Bally uses the Internet to generate revenue and disseminate information to its customers in support of its health clubs. Faber uses his web site to criticize Bally and to provide others with a forum for expressing their opinions of Bally. Faber does not attempt to pass-off his site as Bally's site. Faber states that his site is "unauthorized." Bally asserts that its site offers similar services because it has a complaints section and it provides information about Bally's services and products.

The Court finds that Faber's site does not compete with Bally's site. It is true that both sites provide Internet users with the same service — information about Bally. These sites, however, have fundamentally different purposes. Bally's site is a commercial advertisement. Faber's site is a consumer commentary. Having such different purposes demonstrates that these sites are not proximately competitive.

Therefore, this factor cuts against Bally.

d. Evidence of actual confusion

Bally does not offer evidence of actual confusion. Instead, Bally states, "consumer confusion is patently obvious in this case because of the strength of the Bally marks, combined with the obvious similarities in appearance and proximity of the marks, although there is no evidence of actual confusion."

Faber's states that his site is "unauthorized" and he has superimposed the word "sucks" over Bally's mark. The Court finds that the reasonably prudent user would not mistake Faber's site for Bally's official site.

Therefore, this factor cuts against Bally.

e. Marketing channels used

Bally argues that both parties use the Internet to reach current and potential Bally members. Bally states that it uses the Internet to disseminate information and generate revenue. Bally contends that it has spent over $500,000,000 in advertisements including the Internet, television, radio, billboards and signage since 1990. Therefore, Bally has a broad marketing strategy which includes the Internet.

Bally has not shown that Faber uses all of these channels for marketing. Instead, Bally has shown that Faber has one site which offers his services for web design, and this site included a reference to his "Bally sucks" site for some time. However, this site no longer includes this link.

Arguably, listing the "Bally sucks" site as one of many sites Faber has created in order to advertise his web design services is a form of marketing. This fact, however, does not change the primary purpose of the "Bally sucks" site which is consumer commentary. Bally's goods and Faber's goods are not related. [1165] Therefore, the fact that marketing channels overlap is irrelevant.

This factor is, at best, neutral, and likely cuts against Bally.

f. Degree of care likely to be exercised

Bally argues that individual users may mistakenly access Faber's site rather than the official Bally site. Bally argues that this may happen when users employ an Internet search engine to locate Bally's site. Bally argues that the search result may list Faber's site and Bally's site. The result, it argues, will be that "[p]rospective users of plaintiff's services who mistakenly access defendant's web site may fail to continue to search for plaintiff's own home page, due to anger, frustration or the belief that plaintiff's home page does not exist." (Bally's Mot. for Sum. Judg. 19:1-3, quoting Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1327 (9th Cir.1998).) The Panavision case, however, concerned an individual who engaged in commercial use of plaintiff's registered mark in his Internet domain name, "Panavision.com." See Panavision, 141 F.3d at 1324.

Here, Faber uses the Bally mark in the context of consumer criticism. He does not use Bally in his domain name. He communicates that the site is unauthorized and that it is not Bally's official site. Moreover, Faber's use of the Bally mark does not significantly add to the large volume of information that the average user will have to sift through in performing an average Internet search. See Teletech Customer Care Management (California), Inc. v. Tele-Tech Co., Inc., 977 F.Supp. 1407, 1410 (C.D.Cal.1997) (noting that average search can result in 800 to 1000 "hits"). Whether the average user has to sift through 799 or 800 "hits" to find the official Bally site will not cause the frustration indicated in Teletech and Panavision because Faber is not using Bally's marks in the domain name. Moreover, even if Faber did use the mark as part of a larger domain name, such as "ballysucks.com", this would not necessarily be a violation as a matter of law.^[2]

Further, the average Internet user may want to receive all the information available on Bally. The user may want to access the official Internet site to see how Bally sells itself. Likewise, the user may also want to be apprised of the opinions of others about Bally. This individual will be unable to locate sites containing outside commentary unless those sites include Bally's marks in the machine readable code^[3] upon which search engines rely. Prohibiting Faber from using Bally's name in the machine readable code would effectively isolate him from all but the most savvy of Internet users.

Therefore, this factor cuts against Bally.

g. Defendant's intent in selecting the mark

Here, Faber purposely chose to use Bally's mark to build a "web site that is `dedicated to complaint, issues, problems, beefs, grievances, grumblings, accusations, and gripes with Bally Total Fitness health clubs.'" Faber, however, is exercising his right to publish critical commentary about Bally. He cannot do this without making reference to Bally.^[4] In this regard, Professor McCarthy states:

[1166] The main remedy of the trademark owner is not an injunction to suppress the message, but a rebuttal to the message. As Justice Brandeis long ago stated, "If there be time to expose through discussion the falsehood and fallacies, to avert the evil by the process of education, the remedy to be applied is more speech, not enforced silence."

5 McCarthy, § 31:148 at 31-216.

Applying Bally's argument would extend trademark protection to eclipse First Amendment rights. The courts, however, have rejected this approach by holding that trademark rights may be limited by First Amendment concerns. See L.L. Bean, Inc. v. Drake Publishers, Inc., 811 F.2d 26 (1st Cir.), cert. denied, 483 U.S. 1013, 107 S.Ct. 3254, 97 L.Ed.2d 753 (1987).

Therefore, this factor is neutral.

h. Likelihood of expansion of the product line

Bally essentially concedes that there is no likelihood that Bally will expand its product lines into the same areas in which Faber operates. However, Bally claims that Faber's intentional acts reduce the significance of this factor. Bally, though, relies on conclusions rejected by the Court. (See supra Part I-B-2-g.)

It is apparent that the parties will not expand into the other's line of business. Bally intends to use the Internet as a means of increased communication. However, Bally has not represented that it intends to enter the web design business or that it intends to operate an official anti-Bally site. Further, Faber has not indicated that he intends to operate a health club.

Therefore, this factor also cuts against Bally.

3. Conclusion

Bally owns valuable marks. However, Faber has established that there is no likelihood of confusion as a matter of law. Therefore, the Court grants Faber's motion for summary judgment on trademark infringement.

C. Trademark Dilution

The elements of a dilution claim are that:

(1) The plaintiff is the owner of a mark which qualifies as a "famous" mark as measured by the totality of the eight factors listed in § 43(c)(1),

(2) The defendant is making commercial use,

(3) In interstate commerce,

(4) Of a mark or trade name,

(5) And defendant's use began after the plaintiff's mark became famous,

(6) And defendant's use causes dilution by lessening the capacity of the plaintiff's mark to identify and distinguish goods or services.

3 McCarthy, § 24:89 at 24-137-38 (footnote omitted). Dilution may be either by blurring or by tarnishment. See Id. §§ 24:69, 24:68, at 24-116-17. Here, Bally argues that Faber has tarnished its mark by associating it with pornography.

Commercial use is an essential element of any dilution claim. Here, Bally argues that Faber has used Bally's mark to demonstrate his skills as a web site designer and to show current members how to effectively cancel their memberships with Bally. Bally asserts that Faber listed the "Bally sucks" web site on the "Drew Faber Web Site Services" site in an effort to advertise Faber's services.

Bally cites several "cybersquatting" cases in which individuals registered the trademarks of others as domain names for the purpose of selling or ransoming the domain name to the trademark owner. Bally asserts that these cases hold that using another's mark on the Internet is per se commercial use. The mere use of another's name on the Internet, however, is not per se commercial use. See 3 McCarthy, § 24:97.2 at 24-172.

Here, Faber used Bally's marks in connection with a site devoted to consumer product review of Bally's services. In congressional hearings, Senator Orrin Hatch stated that [1167] the dilution statute "will not prohibit or threaten noncommercial expression, such as parody, satire, editorial and other forms of expression that are not a part of a commercial transaction." 141 Cong.Rec. S19306-10 (Daily ed. Dec. 29, 1995). Therefore, this exception encompasses both parodies and consumer product reviews. See Panavision Int'l, L.P. v. Toeppen, 945 F.Supp. 1296, 1303 (C.D.Cal.1996).

Faber has shown that Bally cannot demonstrate that he is using Bally's mark in commerce. Bally argues that Faber's listing of the "Bally sucks" site, among others, in a site listing his available services and qualifications uses the Bally mark to promote a service. This argument is unpersuasive. Faber is not using the Bally mark to sell his services. Faber is not using Bally's mark to identify his goods in commerce. Faber merely listed the "Bally sucks" site as one of several web sites that he has designed so that those who are interested in his services may view his work. This is akin to an on-line resume.

Further, the courts have held that trademark owners may not quash unauthorized use of the mark by a person expressing a point of view. See L.L. Bean, 811 F.2d at 29, citing Lucasfilm Ltd. v. High Frontier, 622 F.Supp. 931, 933-35 (D.D.C.1985). This is so even if the opinion may come in the form of a commercial setting. See Id. at 33 (discussing Maine's anti-dilution statute). In L.L. Bean, the First Circuit held that a sexually-oriented parody of L.L. Bean's catalog in a commercial adult-oriented magazine was noncommercial use of the trademark. See Id. The court stated:

If the anti-dilution statute were construed as permitting a trademark owner to enjoin the use of his mark in a noncommercial context found to be negative or offensive, then a corporation could shield itself from criticism by forbidding the use of its name in commentaries critical of its conduct. The legitimate aim of the anti-dilution statute is to prohibit the unauthorized use of another's trademark in order to market incompatible products or services. The Constitution does not, however, permit the range of the anti-dilution statute to encompass the unauthorized use of a trademark in a noncommercial setting such as an editorial or artistic context.

Id.

Here, Bally wants to protect its valuable marks and ensure that they are not tarnished or otherwise diluted. This is an understandable goal. However, for the reasons set forth above, Faber's "Bally sucks" site is not a commercial use.

Even if Faber's use of Bally's mark is a commercial use, Bally also cannot show tarnishment. Bally cites several cases such as the "Enjoy Cocaine" and "Mutant of Omaha" cases for the proposition that this site and its relationship to other sites tarnishes their mark. See Mutual of Omaha Ins. Co. v. Novak, 648 F.Supp. 905 (D.Neb.1986) (discussing both infringement and disparagement), aff'd 836 F.2d 397 (8th Cir.1987) (addressing infringement, but not disparagement); Coca-Cola v. Gemini Rising, Inc., 346 F.Supp. 1183 (E.D.N.Y.1972).

There are, however, two flaws with Bally's argument. First, none of the cases that Bally cites involve consumer commentary. In Coca-Cola, the court enjoined the defendant's publication of a poster stating "Enjoy Cocaine" in the same script as Coca-Cola's trademark. See Coca-Cola, 346 F.Supp. at 1192. Likewise, in Mutual of Omaha, the court prohibited the use of the words "Mutual of Omaha," with a picture of an emaciated human head resembling the Mutual of Omaha's logo on a variety of products as a means of protesting the arms race. See Mutual of Omaha, 836 F.2d at 398. Here, however, Faber is using Bally's mark in the context of a consumer commentary to say that Bally engages in business practices which Faber finds distasteful or unsatisfactory. This is speech protected by the First Amendment. See L.L. Bean, 811 F.2d at 29; McCarthy, § 24:105 at 24-191. As such, Faber can use Bally's mark to identify the source of the goods or services of which he is complaining. This use is necessary to maintain broad opportunities for expression. See Restatement (Third) of Unfair Competition § 25(2), cmt. i (1995) (stating "extension of the antidilution statutes to protect against damaging non-trademark uses raises substantial free speech issues and duplicates other potential [1168] remedies better suited to balance the relevant interests").

The second problem with Bally's argument is that it is too broad in scope. Bally argues that the proximity of Faber's "Images of Men" site tarnishes the good will that Bally's mark enjoys because it improperly creates an association between Bally's mark and pornography. If the Court accepted this argument it would be an impossible task to determine dilution on the Internet. It is true that both sites are under the same domain name, "Compupix.com." Furthermore, it is also true that at a variety of times there were links between Faber's various sites. However, at no time was any pornographic material contained on Faber's "Bally sucks" site. From its inception, this site was devoted to consumer commentary. Looking beyond the "Bally sucks" site to other sites within the domain or to other linked sites would, to an extent, include the Internet in its entirety. The essence of the Internet is that sites are connected to facilitate access to information. Including linked sites as grounds for finding commercial use or dilution would extend the statute far beyond its intended purpose of protecting trademark owners from use that have the effect of "lessening ... the capacity of a famous mark to identify and distinguish goods or services." 15 U.S.C. § 1127. Further, it is not logical that a reasonably prudent Internet user would believe that sites which contains no reference to a trademark and which are linked to, or within the same domain as, a site that is clearly not sponsored by the trademark owner are in some way sponsored by the trademark owner.

Therefore, the Court grants Faber's motion for summary judgment on the claim of trademark dilution.

D. Unfair Competition

Bally relies on the claims of trademark dilution and trademark infringement to establish its claim of unfair competition. Because Faber has shown that he is entitled to summary judgment on the trademark infringement and dilution claims, the Court grants Faber's motion for summary judgment on the unfair competition claim as well.

II. Faber's motion for attorney's fees

In Faber's reply to Bally's opposition he raises the claim that he is entitled to attorney's fees under the Lanham Act because the plaintiff's claims have no substance. Because Faber did not include this argument in his motion, the Court declines to address this issue because Bally has not had an opportunity to respond.

III. Conclusion

The explosion of the Internet is not without its growing pains. It is an efficient means for business to disseminate information, but it also affords critics of those businesses an equally efficient means of disseminating commentary. Here, trademark infringement and trademark dilution do not provide a remedy for Bally.

The Court GRANTS Faber's motion for summary judgment on the claims of trademark infringement, trademark dilution, and unfair competition.

[1] "Domains" are used to provide organization to the Internet. The domain name is a word or series of words followed by ".edu" for education; ".org" for organizations; ".gov" for government entities; ".net" for networks; and ".com" as the catchall for other Internet users. Within each of these top level domains, there are many different sub-domains. An example of a domain name would be "www.Bally.com." Domain names are licensed to individuals by Network Solutions, Inc. Within any domain, the domain owner may place additional sub-domains and multiple web pages or may merely have one web site.

[2] The Court notes that there is a distinction between this example and cases like Panavision where an individual appropriates another's registered trademark as its domain name. In the "cybersquatter" cases like Panavision, there is a high likelihood of consumer confusion — reasonably prudent consumers would believe that the site using the appropriated name is the trademark owner's official site. Here, however, no reasonably prudent Internet user would believe that "Ballysucks.com" is the official Bally site or is sponsored by Bally.

[3] The machine readable code is the hidden part of the Internet upon which search engines rely to find sites that contain content which the individual user wishes to locate. The basic mechanics is that the web page designer places certain keywords in an unreadable portion of the web page that tells the search engines what is on a particular page.

[4] Bally concedes that Faber has some right to use Bally's name as part of his consumer commentary. However, Bally argues that Faber uses more than is necessary when making his commentary and that he has alternative means of communication. Specifically, Bally argues that Faber could use the name "Bally" or "Bally Total Fitness" in block lettering without using Bally's stylized "B" mark or distinctive script. This argument, however, would create an artificial distinction that does not exist under trademark law. Trademarks are defined broadly to include both names and stylized renditions of those names or other symbols. 15 U.S.C. §§ 1051, 1127 (1997). Furthermore, the purpose of a trademark is to identify the source of goods. Id. § 1127. An individual who wishes to engage in consumer commentary must have the full range of marks that the trademark owner has to identify the trademark owner as the object of the criticism. (See infra Part I-C.)

202 F.3d 489 (2000)

Docket Nos. 98-7452, 98-7538.

Argued March 17, 1999.
Decided February 2, 2000.

[490] [491] James R. Fogarty, Kirlin, Fogarty Cohen Selby & Nemiroff, Greenwich, CT (W. James Cousins, McGowan & Cousins, P.C., Wilton, CT, on the brief), for Plaintiff-Counter-Defendant-Appellant-Cross-Appellee.

James Sicilian, Day, Berry & Howard LLP, Hartford, CT (Peter M. Holland, Day, Berry & Howard, on the brief, and William H. Anderson, General Counsel of Sportsman's Market, Inc., Batavia, OH, of counsel), for Defendant-Third-Party-Plaintiff-Counter-Claimant-Appellee-Cross-Appellant.

[492] Before: OAKES, CALABRESI, and GIBSON,^[1] Circuit Judges.

CALABRESI, Circuit Judge:

This case originally involved the application of the Federal Trademark Dilution Act ("FTDA") to the Internet. See Federal Trademark Dilution Act of 1995, Pub.L. No. 104-98, 109 Stat. 985 (codified at 15 U.S.C. §§ 1125, 1127 (Supp.1996)). While the case was pending on appeal, however, the Anticybersquatting Consumer Protection Act ("ACPA"), Pub.L. No. 106-113 (1999), see H.R.Rep. No. 106-479 (Nov. 18, 1999), was passed and signed into law. That new law applies to this case.

Plaintiff-Counter-Defendant-Appellant-Cross-Appellee Sporty's Farm L.L.C. ("Sporty's Farm") appeals from a judgment, following a bench trial, of the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) dated March 13, 1998. Defendant-Third-Party-Plaintiff-Counter-Claimant-Appellee-Cross-Appellant Sportsman's Market, Inc. ("Sportsman's") cross-appeals from the same judgment.

The district court held: (1) that the Sportsman's trademark ("sporty's") was a famous mark entitled to protection under the FTDA; (2) that Sporty's Farm and its parent company, Third-Party-Defendant-Appellee Omega Engineering, Inc. ("Omega"), diluted the sporty's mark by using the Internet domain name "sportys.com" to sell Christmas trees and by preventing Sportsman's from using its trademark as a domain name; (3) that applying the FTDA to Sporty's Farm through an injunction requiring it to relinquish sportys.com was both equitable and not a retroactive application of the statute; (4) that Sportsman's was limited to injunctive relief since the conduct of Sporty's Farm and Omega did not constitute a willful intent to dilute under the FTDA; and (5) that Sporty's Farm and Omega did not violate the Connecticut Unfair Trade Practices Act ("CUTPA"), Conn. Gen.Stat. Ann. §§ 42-110a to 42-110q (West 1992 & Supp.1999). We apply the new anticybersquatting law and affirm the judgment in all respects, but, given the new law, on different grounds from those relied upon by the district court.

BACKGROUND

I

Although the Internet is on its way to becoming a familiar aspect in our daily lives, it is well to begin with a brief explanation of how it works. The Internet is a network of computers that allows a user to gain access to information stored on any other computer on the network. Information on the Internet is lodged on files called web pages, which can include printed matter, sound, pictures, and links to other web pages. An Internet user can move from one page to another with just the click of a mouse.^[2]

Web pages are designated by an address called a domain name. A domain name consists of two parts: a top level domain and a secondary level domain. The top level domain is the domain name's suffix. Currently, the Internet is divided primarily into six top level domains: (1) .edu for educational institutions; (2) .org for non-governmental and non-commercial organizations; (3) .gov for governmental entities; (4) .net for networks; (5) .com for commercial users, and (6) a nation-specific domain, which is .us in the United States. The secondary level domain is the remainder of the address, and can consist of combinations of letters, numbers, and some typographical symbols.^[3] To take a simple example, [493] in the domain name "cnn.com," cnn ("Cable News Network") represents the secondary level domain and .com represents the top level domain. Each domain name is unique.

Over the last few years, the commercial side of the Internet has grown rapidly. Web pages are now used by companies to provide information about their products in a much more detailed fashion than can be done through a standard advertisement. Moreover, many consumers and businesses now order goods and services directly from company web pages. Given that Internet sales are paperless and have lower transaction costs than other types of retail sales, the commercial potential of this technology is vast.

For consumers to buy things or gather information on the Internet, they need an easy way to find particular companies or brand names. The most common method of locating an unknown domain name is simply to type in the company name or logo with the suffix .com.^[4] If this proves unsuccessful, then Internet users turn to a device called a search engine.^[5] A search engine will find all web pages on the Internet with a particular word or phrase. Given the current state of search engine technology, that search will often produce a list of hundreds of web sites through which the user must sort in order to find what he or she is looking for. As a result, companies strongly prefer that their domain name be comprised of the company or brand trademark and the suffix .com. See H.R.Rep. No. 106-412, at 5 (1999).

Until recently, domain names with the .com top level domain could only be obtained from Network Solutions, Inc. ("NSI"). Now other registrars may also assign them. But all these registrars grant such names primarily on a first-come, first-served basis upon payment of a small registration fee. They do not generally inquire into whether a given domain name request matches a trademark held by someone other than the person requesting the name. See id.

Due to the lack of any regulatory control over domain name registration, an Internet phenomenon known as "cybersquatting" has become increasingly common in recent years.^[6]See, e.g., Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998). Cybersquatting involves the registration as domain names of well-known trademarks by non-trademark holders who then try to sell the names back to the trademark owners. Since domain name registrars do not check to see whether a domain name request is related to existing trademarks, it has been simple and inexpensive for any person to register as domain names the marks of established companies. This prevents use of the domain name by the mark owners, who not infrequently have been willing to pay "ransom" in order to get "their names" back. See H.R.Rep. No. 106-412, at 5-7; S.Rep. No. 106-140, at 4-7 (1999).

II

Sportsman's is a mail order catalog company that is quite well-known among pilots and aviation enthusiasts for selling products tailored to their needs. In recent years, Sportsman's has expanded its catalog business well beyond the aviation market into that for tools and home accessories. The company annually distributes approximately 18 million catalogs nationwide, and has yearly revenues of about $50 million. Aviation sales account for about [494] 60% of Sportsman's revenue, while non-aviation sales comprise the remaining 40%.

In the 1960s, Sportsman's began using the logo "sporty" to identify its catalogs and products. In 1985, Sportsman's registered the trademark sporty's with the United States Patent and Trademark Office. Since then, Sportsman's has complied with all statutory requirements to preserve its interest in the sporty's mark. Sporty's appears on the cover of all Sportsman's catalogs; Sportsman's international toll free number is 1-800-4sportys; and one of Sportsman's domestic toll free phone numbers is 1-800-Sportys. Sportsman's spends about $10 million per year advertising its sporty's logo.

Omega is a mail order catalog company that sells mainly scientific process measurement and control instruments. In late 1994 or early 1995, the owners of Omega, Arthur and Betty Hollander, decided to enter the aviation catalog business and, for that purpose, formed a wholly-owned subsidiary called Pilot's Depot, LLC ("Pilot's Depot"). Shortly thereafter, Omega registered the domain name sportys.com with NSI. Arthur Hollander was a pilot who received Sportsman's catalogs and thus was aware of the sporty's trademark.

In January 1996, nine months after registering sportys.com, Omega formed another wholly-owned subsidiary called Sporty's Farm and sold it the rights to sportys.com for $16,200. Sporty's Farm grows and sells Christmas trees, and soon began advertising its Christmas trees on a sportys.com web page. When asked how the name Sporty's Farm was selected for Omega's Christmas tree subsidiary, Ralph S. Michael, the CEO of Omega and manager of Sporty's Farm, explained, as summarized by the district court, that

in his own mind and among his family, he always thought of and referred to the Pennsylvania land where Sporty's Farm now operates as Spotty's farm. The origin of the name . . . derived from a childhood memory he had of his uncle's farm in upstate New York. As a youngster, Michael owned a dog named Spotty. Because the dog strayed, his uncle took him to his upstate farm. Michael thereafter referred to the farm as Spotty's farm. The name Sporty's Farm was . . . a subsequent derivation.

Joint Appendix ("JA") at 277 (emphasis added). There is, however, no evidence in the record that Hollander was considering starting a Christmas tree business when he registered sportys.com or that Hollander was ever acquainted with Michael's dog Spotty.

In March 1996, Sportsman's discovered that Omega had registered sportys.com as a domain name. Thereafter, and before Sportsman's could take any action, Sporty's Farm brought this declaratory action seeking the right to continue its use of sportys.com. Sportsman's counterclaimed and also sued Omega as a third-party defendant for, inter alia, (1) trademark infringement, (2) trademark dilution pursuant to the FTDA, and (3) unfair competition under state law. Both sides sought injunctive relief to force the other to relinquish its claims to sportys.com. While this litigation was ongoing, Sportsman's used "sportys-catalogs.com" as its primary domain name.

After a bench trial, the court rejected Sportsman's trademark infringement claim and all related claims that are based on a "likelihood of [consumer] confusion" since "the parties operate wholly unrelated businesses [and t]herefore, confusion in the marketplace is not likely to develop."^[7]Id. at 282-83. But on Sportsman's trademark dilution action, where a likelihood of confusion was not necessary, the district court found for Sportsman's. The court concluded (1) that sporty's was a famous mark entitled to protection under the FTDA since "the `Sporty's' mark enjoys general name recognition in the consuming [495] public," id. at 288, and (2) that Sporty's Farm and Omega had diluted sporty's because "registration of the `sportys.com' domain name effectively compromises Sportsman's Market's ability to identify and distinguish its goods on the Internet . . . . [by] preclud[ing] Sportsman's Market from using its `unique identifier,'" id. at 289. The court also held, however, that Sportsman's could only get injunctive relief and was not entitled to "punitive damages . . . profits, and attorney's fees and costs" pursuant to the FTDA since Sporty Farm and Omega's conduct did not constitute willful dilution under the FTDA.^[8]Id. at 292-93.

Finally, the district court ruled that, although Sporty's Farm had violated the FTDA, its conduct did not constitute a violation of CUTPA. This conclusion was based on the district court's finding that Sportsman's had failed to show by a preponderance of the evidence (1) that Sporty's Farm and Omega's "conduct was immoral, unethical, oppressive, or unscrupulous," and (2) that Sportsman's "suffered a substantial injury sufficient to establish a CUTPA claim." Id. at 291-92.

The district court then issued an injunction forcing Sporty's Farm to relinquish all rights to sportys.com. And Sportsman's subsequently acquired the domain name. Both Sporty's Farm and Sportsman's appeal.^[9] Specifically, Sporty's Farm appeals the judgment insofar as the district court granted an injunction in favor of Sportsman's for the use of the domain name. Sportsman's, on the other hand, in addition to urging this court to affirm the district court's injunction, cross-appeals, quite correctly as a procedural matter, the district court's denial of damages under both the FTDA and CUPTA. See 16A Charles Alan Wright, Arthur R. Miller, Edward H. Cooper, Federal Practice and Procedure § 3974.4 (3d ed.1999) ("[A] cross-appeal is required to support modification of the judgment. . . .").

III

As we noted above, while this appeal was pending, Congress passed the ACPA. That law was passed "to protect consumers and American businesses, to promote the growth of online commerce, and to provide clarity in the law for trademark owners by prohibiting the bad-faith and abusive registration of distinctive marks as Internet domain names with the intent to profit from the goodwill associated with such marks—a practice commonly referred to as `cybersquatting'." S.Rep. No. 106-140, at 4. In particular, Congress viewed the legal remedies available for victims of cybersquatting before the passage of the ACPA as "expensive and uncertain." H.R.Rep. No. 106-412, at 6. The Senate made clear its view on this point:

While the [FTDA] has been useful in pursuing cybersquatters, cybersquatters have become increasingly sophisticated as the case law has developed and now take the necessary precautions to insulate themselves from liability. For example, many cybersquatters are now careful to no longer offer the domain name for sale in any manner that could implicate liability under existing trademark dilution case law. And, in cases of warehousing and trafficking in domain names, courts have sometimes declined to provide assistance to trademark holders, leaving them without adequate and effective judicial remedies. This uncertainty as to the trademark law's application to the Internet has produced inconsistent judicial decisions and created extensive monitoring obligations, unnecessary legal costs, and uncertainty for consumers and trademark owners alike. [496] S.Rep. No. 106-140, at 7. In short, the ACPA was passed to remedy the perceived shortcomings of applying the FTDA in cybersquatting cases such as this one.

The new act accordingly amends the Trademark Act of 1946, creating a specific federal remedy for cybersquatting. New 15 U.S.C. § 1125(d)(1)(A) reads:

A person shall be liable in a civil action by the owner of a mark, including a personal name which is protected as a mark under this section, if, without regard to the goods or services of the parties, that person—

(i) has a bad faith intent to profit from that mark, including a personal name which is protected as a mark under this section; and

(ii) registers, traffics in, or uses a domain name that—

(I) in the case of a mark that is distinctive at the time of registration of the domain name, is identical or confusingly similar to that mark;

(II) in the case of a famous mark that is famous at the time of registration of the domain name, is identical or confusingly similar to or dilutive of that mark; . . .

The Act further provides that "a court may order the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark," 15 U.S.C. § 1125(d)(1)(C), if the domain name was "registered before, on, or after the date of the enactment of this Act," Pub.L. No. 106-113, § 3010. It also provides that damages can be awarded for violations of the Act,^[10] but that they are not "available with respect to the registration, trafficking, or use of a domain name that occurs before the date of the enactment of this Act." Id.

DISCUSSION

This case has three distinct features that are worth noting before we proceed further. First, our opinion appears to be the first interpretation of the ACPA at the appellate level. Second, we are asked to undertake the interpretation of this new statute even though the district court made its ruling based on the FTDA. Third, the case before us presents a factual situation that, as far as we can tell, is rare if not unique: A Competitor X of Company Y has registered Y's trademark as a domain name and then transferred that name to Subsidiary Z, which operates a business wholly unrelated to Y. These unusual features counsel that we decide no more than is absolutely necessary to resolve the case before us.

A. Application of the ACPA to this Case

The first issue before us is whether the ACPA governs this case. The district court based its holding on the FTDA since the ACPA had not been passed when it made its decision. Because the ACPA became law while this case was pending before us, we must decide how its passage affects this case. As a general rule, we apply the law that exists at the time of the appeal. See, e.g., Hamm v. City of Rock Hill, 379 U.S. 306, 312-13, 85 S.Ct. 384, 13 L.Ed.2d 300 (1964) ("`[I]f subsequent to the judgment and before the decision of the appellate court, a law intervenes and positively changes the rule which governs, the law must be obeyed, or its obligation denied.'" (quoting United States v. Schooner Peggy, 5 U.S. (1 Cranch) 103, 110, 2 L.Ed. 49 (1801))).

But even if a new law controls, the question remains whether in such circumstances it is more appropriate for the appellate court to apply it directly or, instead, [497] to remand to the district court to enable that court to consider the effect of the new law. We therefore asked for additional briefing from the parties regarding the applicability of the ACPA to the case before us. After receiving those briefs and fully considering the arguments there made, we think it is clear that the new law was adopted specifically to provide courts with a preferable alternative to stretching federal dilution law when dealing with cybersquatting cases. Indeed, the new law constitutes a particularly good fit with this case. Moreover, the findings of the district court, together with the rest of the record, enable us to apply the new law to the case before us without difficulty. Accordingly, we will do so and forego a remand.

B. "Distinctive" or "Famous"

Under the new Act, we must first determine whether sporty's is a distinctive or famous mark and thus entitled to the ACPA's protection. See 15 U.S.C. § 1125(d)(1)(A)(ii)(I), (II). The district court concluded that sporty's is both distinctive and famous. We agree that sporty's is a "distinctive" mark. As a result, and without casting any doubt on the district court's holding in this respect, we need not, and hence do not, decide whether sporty's is also a "famous" mark.^[11]

Distinctiveness refers to inherent qualities of a mark and is a completely different concept from fame. A mark may be distinctive before it has been used—when its fame is nonexistent. By the same token, even a famous mark may be so ordinary, or descriptive as to be notable for its lack of distinctiveness. See Nabisco, Inc. v. PF Brands, Inc., 191 F.3d 208, 215-26 (2d Cir.1999). We have no doubt that sporty's, as used in connection with Sportsman's catalogue of merchandise and advertising, is inherently distinctive. Furthermore, Sportsman's filed an affidavit under 15 U.S.C. § 1065 that rendered its registration of the sporty's mark incontestable, which entitles Sportsman's "to a presumption that its registered trademark is inherently distinctive." Equine Technologies, Inc. v. Equitechnology, Inc., 68 F.3d 542, 545 (1st Cir.1995). We therefore conclude that, for the purposes of § 1125(d)(1)(A)(ii)(I), the sporty's mark is distinctive.

C. "Identical and Confusingly Similar"

The next question is whether domain name sportys.com is "identical or confusingly similar to" the sporty's mark.^[12] 15 U.S.C. § 1125(d)(1)(A)(ii)(I). As we noted above, apostrophes cannot be used in domain names. See supra note 2. As a result, the secondary domain name in this [498] case (sportys) is indistinguishable from the Sportsman's trademark (sporty's). Cf. Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1055 (9th Cir.1999) (observing that the differences between the mark "MovieBuff" and the domain name "moviebuff.com" are "inconsequential in light of the fact that Web addresses are not caps-sensitive and that the `.com' top-level domain signifies the site's commercial nature"). We therefore conclude that, although the domain name sportys.com is not precisely identical to the sporty's mark, it is certainly "confusingly similar" to the protected mark under § 1125(d)(1)(A)(ii)(I). Cf. Wella Corp. v. Wella Graphics, Inc. 874 F.Supp. 54, 56 (E.D.N.Y.1994) (finding the new mark "Wello" confusingly similar to the trademark "Wella").

D. "Bad Faith Intent to Profit"

We next turn to the issue of whether Sporty's Farm acted with a "bad faith intent to profit" from the mark sporty's when it registered the domain name sportys.com. 15 U.S.C. § 1125(d)(1)(A)(i). The statute lists nine factors to assist courts in determining when a defendant has acted with a bad faith intent to profit from the use of a mark.^[13] But we are not limited to considering just the listed factors when making our determination of whether the statutory criterion has been met. The factors are, instead, expressly described as indicia that "may" be considered along with other facts. Id. § 1125(d)(1)(B)(i).

We hold that there is more than enough evidence in the record below of "bad faith intent to profit" on the part of Sporty's Farm (as that term is defined in the statute), so that "no reasonable factfinder could return a verdict against" Sportsman's. Norville v. Staten Island Univ. Hosp., 196 F.3d 89, 95 (2d Cir.1999). First, it is clear that neither Sporty's Farm nor Omega had any intellectual property rights in sportys.com at the time Omega registered the domain name. See id. § 1125(d)(1)(B)(i)(I). Sporty's Farm was not formed until nine months after the domain name was registered, and it did not begin operations or obtain the domain name from Omega until after this lawsuit was filed. Second, the domain name does [499] not consist of the legal name of the party that registered it, Omega. See id. § 1125(d)(1)(B)(i)(II). Moreover, although the domain name does include part of the name of Sporty's Farm, that entity did not exist at the time the domain name was registered.

The third factor, the prior use of the domain name in connection with the bona fide offering of any goods or services, also cuts against Sporty's Farm since it did not use the site until after this litigation began, undermining its claim that the offering of Christmas trees on the site was in good faith. See id. § 1125(d)(1)(B)(i)(III). Further weighing in favor of a conclusion that Sporty's Farm had the requisite statutory bad faith intent, as a matter of law, are the following: (1) Sporty's Farm does not claim that its use of the domain name was "noncommercial" or a "fair use of the mark," see id. § 1125(d)(1)(B)(i)(IV), (2) Omega sold the mark to Sporty's Farm under suspicious circumstances, see Sporty's Farm v. Sportsman's Market, No. 96CV0756 (D.Conn. Mar. 13, 1998), reprinted in Joint Appendix at A277 (describing the circumstances of the transfer of sportys.com); 15 U.S.C. § 1125(d)(1)(B)(i)(VI), and, (3) as we discussed above, the sporty's mark is undoubtedly distinctive, see id. § 1125(d)(1)(B)(i)(IX).

The most important grounds for our holding that Sporty's Farm acted with a bad faith intent, however, are the unique circumstances of this case, which do not fit neatly into the specific factors enumerated by Congress but may nevertheless be considered under the statute. We know from the record and from the district court's findings that Omega planned to enter into direct competition with Sportsman's in the pilot and aviation consumer market. As recipients of Sportsman's catalogs, Omega's owners, the Hollanders, were fully aware that sporty's was a very strong mark for consumers of those products. It cannot be doubted, as the court found below, that Omega registered sportys.com for the primary purpose of keeping Sportsman's from using that domain name. Several months later, and after this lawsuit was filed, Omega created another company in an unrelated business that received the name Sporty's Farm so that it could (1) use the sportys.com domain name in some commercial fashion, (2) keep the name away from Sportsman's, and (3) protect itself in the event that Sportsman's brought an infringement claim alleging that a "likelihood of confusion" had been created by Omega's version of cybersquatting. Finally, the explanation given for Sporty's Farm's desire to use the domain name, based on the existence of the dog Spotty, is more amusing than credible. Given these facts and the district court's grant of an equitable injunction under the FTDA, there is ample and overwhelming evidence that, as a matter of law, Sporty's Farm's acted with a "bad faith intent to profit" from the domain name sportys.com as those terms are used in the ACPA.^[14]See Luciano v. Olsten Corp., 110 F.3d 210, 214 (2d Cir.1997) (stating that, as a matter of law, judgment may be granted where "the evidence in favor of the movant is so overwhelming that `reasonable and fair minded [persons] could not arrive at a verdict against [it].'" (quoting Cruz v. Local Union No. 3, 34 F.3d 1148, 1154 (2d Cir.1994) (alteration in original))).

E. Remedy

Based on the foregoing, we hold that under § 1125(d)(1)(A), Sporty's Farm violated Sportsman's statutory rights by its use of the sportys.com domain name.^[15] [500] The question that remains is what remedy is Sportsman's entitled to. The Act permits a court to "order the forfeiture or cancellation of the domain name or the transfer of the domain name to the owner of the mark," § 1125(d)(1)(C) for any "domain name[] registered before, on, or after the date of the enactment of [the] Act," Pub.L. No. 106-113, § 3010. That is precisely what the district court did here, albeit under the pre-existing law, when it directed a) Omega and Sporty's Farm to release their interest in sportys.com and to transfer the name to Sportsman's, and b) permanently enjoined those entities from taking any action to prevent and/or hinder Sportsman's from obtaining the domain name. That relief remains appropriate under the ACPA. We therefore affirm the district court's grant of injunctive relief.

We must also determine, however, if Sportsman's is entitled to damages either under the ACPA or pre-existing law. Under the ACPA, damages are unavailable to Sportsman's since sportys.com was registered and used by Sporty's Farm prior to the passage of the new law. See id. (stating that damages can be awarded for violations of the Act but that they are not "available with respect to the registration, trafficking, or use of a domain name that occurs before the date of the enactment of this Act.").

But Sportsman's might, nonetheless, be eligible for damages under the FTDA since there is nothing in the ACPA that precludes, in cybersquatting cases, the award of damages under any pre-existing law. See 15 U.S.C § 1125(d)(3) (providing that any remedies created by the new act are "in addition to any other civil action or remedy otherwise applicable"). Under the FTDA, "[t]he owner of the famous mark shall be entitled only to injunctive relief unless the person against whom the injunction is sought willfully intended to trade on the owner's reputation or to cause dilution of the famous mark." Id. § 1125(c)(2) (emphasis added). Accordingly, where willful intent to dilute is demonstrated, the owner of the famous mark is—subject to the principles of equity—entitled to recover (1) damages (2) the dilutor's profits, and (3) costs. See id.; see also id. § 1117(a) (specifying remedies).

We conclude, however, that damages are not available to Sportsman's under the FTDA. The district court found that Sporty's Farm did not act willfully. We review such findings of "willfulness" by a district court for clear error. See Bambu Sales, Inc. v. Ozak Trading Inc., 58 F.3d 849, 854 (2d Cir.1995). Thus, even assuming the sporty's mark to be famous, we cannot say that the district court clearly erred when it found that Sporty's Farm's actions were not willful. To be sure, that question is a very close one, for the facts make clear that, as a Sportsman's customer, Arthur Hollander (Omega's owner) was aware of the significance of the sporty's logo. And the idea of creating a Christmas tree business named Sporty's Farm, allegedly in honor of Spotty the dog, and of giving that business the sportys.com domain name seems to have occurred to Omega only several months after it had registered the name. Nevertheless, given the uncertain state of the law at the time that Sporty's Farm and Omega acted, we cannot say that the district court clearly erred in finding that their behavior did not amount to willful dilution. It follows that Sportsman's is not entitled to damages under the FTDA.

Sportsman's also argues that it is entitled to damages under state law. Because neither the FTDA nor the ACPA preempts state remedies such as CUTPA, damages under Connecticut law are not barred, and hence may be available to Sportsman's. See H.R.Rep. No. 104-374, [501] at 4 (1995), reprinted in 1996 U.S.C.C.A.N. 1029, 1031; 15 U.S.C. § 1125(d)(3).

CUTPA, Conn. Gen.Stat. Ann. § 42-110b(a) (West Supp.1999), states that "[n]o person shall engage in unfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce." In construing this statute, the Connecticut courts have applied the so-called "cigarette rule"^[16] which asks:

(1) [W]hether the practice, without necessarily having been previously considered unlawful, offends public policy as it has been established by statutes, the common law, or otherwise-whether, in other words, it is within at least the penumbra of some common law, statutory, or other established concept of unfairness; (2) whether it is immoral, unethical, oppressive, or unscrupulous; (3) whether it causes substantial injury to consumers [competitors or other businessmen] . . . .

All three criteria do not need to be satisfied to support a finding of unfairness. A practice may be unfair because of the degree to which it meets one of the criteria or because to a lesser extent it meets all three . . . .

Saturn Const. Co. v. Premier Roofing Co., 238 Conn. 293, 310-11, 680 A.2d 1274, 1283 (1996) (internal quotation marks omitted).

We have no doubt that an ACPA violation meets the requirements of prong one of the cigarette rule test. But, despite our finding that Sporty's Farm acted with a bad faith intent, we do not think that its conduct meets prong two. While Sporty's Farm and Omega intended to do what they did, until today's holding interpreting the new ACPA, the line between business tactics with respect to domain name use that were unfair and those that, if hard-nosed, were nonetheless legitimate was blurry. Under the circumstances, we do not believe that the district court erred when it found that their conduct should not retrospectively be termed "immoral, unethical, oppressive, or unscrupulous." Moreover, prong three also cuts against a violation of CUTPA. Although the use of sportys.com and Sportsman's inability to use its trademark as a domain name injured Sportsman's, we cannot say that the record supports the additional contention that this injury was substantial enough to meet CUTPA's requirements.

This does not, however, end our inquiry since the three prongs of the cigarette rule test need not all be met to find that unfair competition took place. Nevertheless, after weighing the cigarette rule factors, we conclude — as the district court did — that the actions of Sporty's Farm and Omega did not contravene CUTPA. Although the removal of sportys.com from Sportsman's was designed to give Omega what we would now deem to be an unfair competitive advantage, we cannot say that this behavior was so unseemly at the time it occurred that Sporty's Farm and Omega should be found liable under state law.

In sum, then, we hold that the injunction issued by the district court was proper under the new anticybersquatting law, but that damages are not available to Sportsman's under the ACPA, the FTDA, or CUTPA.

[502] F. Retroactivity

Sporty Farm's also contends that even if its actions would today violate the FTDA or the ACPA, any injunction requiring it to relinquish use of sportys.com is impermissibly retroactive.^[17] We find Sporty's Farm's position to be meritless.

In Landgraf v. USI Film Products, 511 U.S. 244, 273, 114 S.Ct. 1483, 128 L.Ed.2d 229 (1994), the Supreme Court stated: "application of new statutes passed after the events in suit is unquestionably proper in many situations. When the intervening statute authorizes or affects the propriety of prospective relief, application of the new provision is not retroactive." In Viacom Inc. v. Ingram Enterprises, Inc., 141 F.3d 886, 889 (8th Cir.1998), the Eighth Circuit reasoned that trademark dilution was a continuing wrong, and therefore relief sought under the FTDA was prospective under Landgraf even if the use of the trademark began before the enactment of the statute. See United States v. Trans-Missouri Freight Ass'n, 166 U.S. 290, 342, 17 S.Ct. 540, 41 L.Ed. 1007 (1897) ("Assuming such action to have been legal at the time the agreement was first entered into, the continuation of the agreement, after it has been declared to be illegal, becomes a violation of [law]."). Similarly, the injunction that was issued in this case provided only prospective relief to Sportsman's. Since it did no more than avoid the continuing harm that would result from Sporty's Farm's use the domain name, there is no retroactivity problem.^[18]

CONCLUSION

The judgment of the district court is AFFIRMED in all particulars.

[1] The Honorable John R. Gibson, Circuit Judge of the United States Court of Appeals for the Eighth Circuit, sitting by designation.

[2] A mouse is a device that allows a computer user to issue commands by moving a marker across the screen and then clicking on the symbol, word, or icon that represents the particular information that the user wants to access.

[3] Certain symbols, such as apostrophes ('), cannot be used in a domain name.

[4] Nothing prevents an American commercial entity from seeking to use the .org or .us top level domains, but, especially in the United States, it has become customary for commercial web pages to use .com.

[5] Undoubtedly, there are many people who use a search engine before typing in a company name plus .com. The manner in which users search the Internet depends on how quickly they think the search engine is likely to locate the desired web page.

[6] "Cyber" is the prefix used to denote Internet-related things. The realm of the Internet is often referred to as "cyberspace."

[7] The district court also rejected Sportsman's federal actions for false designation and unfair competition on the same rationale. These rulings have not been appealed.

[8] The FTDA does not provide for punitive damages. It does, however, contemplate treble damages. See 15 U.S.C. § 1125(c)(2); § 1117(b).

[9] Omega has not appealed since it prevailed on all the claims made against it by Sportsman's.

[10] The new Act permits a plaintiff to "elect, at any time before final judgment is rendered by the trial court, to recover, instead of actual damages and profits, an award of statutory damages in the amount of not less than $1,000 and not more than $100,000 per domain name, as the court considers just." Pub.L. No. 106-113, § 3003. If the plaintiff does not so elect, the court may award damages under 15 U.S.C. § 1117(a) and (b), based on damages, profits, and the cost of the action. See id.

[11] In most respects, sporty's meets the rigorous criteria laid out in § 1125(c)(1), requiring both fame and distinctiveness for protection under the FTDA. See Nabisco Brands, Inc., v. PF Brands, Inc., 191 F.3d 208, 216 (2d Cir. 1999). The mark (1) is sufficiently distinctive (as we discuss in the text), (2) has been used by Sportsman's for an extended period of time, (3) has had millions of dollars in advertising spent on it, (4) is used nationwide, and (5) is traded in a wide variety of retail channels. See 15 U.S.C. § 1125(c)(1)(A)-(E). Moreover, the record does not indicate that anyone else besides Sportsman's uses sporty's, and the mark is, of course, registered with federal authorities. See id. at § 1125(c)(1)(G)-(H).

More vexing is the question posed by the criterion that focuses on "the degree of recognition of the mark in the trading areas and channels of trade used by the marks' owner and the person against whom the injunction is sought." Id. at § 1125(c)(1)(F). Sporty's Farm contends that, although sporty's is a very well-known mark in the pilot and aviation niche market, Sportsman's did not (and could not) prove that the mark was well-known to Sporty's Farm's customers. We need not reach this question, as we would have had to do under the FTDA, since the ACPA provides protection not only to famous marks but also to distinctive marks regardless of fame.

[12] We note that "confusingly similar" is a different standard from the "likelihood of confusion" standard for trademark infringement adopted by this court in Polaroid Corp. v. Polarad Electronics Corp., 287 F.2d 492 (2d Cir.1961). See Wella Corp. v. Wella Graphics, Inc., 37 F.3d 46, 48 (2d Cir.1994).

[13] These factors are:

(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 noncommercial 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 or 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 the 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 person'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 extent 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)(1) of section 43.

15 U.S.C. § 1125(d)(1)(B)(i).

[14] We expressly note that "bad faith intent to profit" are terms of art in the ACPA and hence should not necessarily be equated with "bad faith" in other contexts.

[15] The statute provides that a party "shall be liable in a civil action by the owner of a mark" if it meets the statutory requirements. 15 U.S.C. § 1125(d)(1)(A) (emphasis added). Although the statute uses the term "liable," it does not follow that damages will be assessed. As we discuss below, damages can be awarded for violations of the Act but they are not "available with respect to the registration, trafficking, or use of a domain name that occurs [,as in this case,] before the date of the enactment of this Act." Pub.L. No. 106-113, § 3010.

[16] The "cigarette rule" was originally adopted by the Federal Trade Commission in 1964. See Statement of Basis and Purpose of Trade Regulation Rule 408, Unfair or Deceptive Advertising and Labeling of Cigarettes in Relation to the Health Hazards of Smoking, 29 Fed.Reg. 8324, 8355 (1964), see also FTC v. Sperry & Hutchinson Co., 405 U.S. 233, 244-45 n. 5, 92 S.Ct. 898, 31 L.Ed.2d 170 (1972). This rule was later adopted by the Connecticut Supreme Court in Conaway v. Prestia, 191 Conn. 484, 464 A.2d 847 (1983), after the Connecticut legislature directed the Connecticut courts to "be guided by interpretations given by the Federal Trade Commission and the federal courts to Section 5(a)(1) of the Federal Trade Commission Act," when determining what constituted an unfair trade practice. Conn. Gen.Stat. Ann. § 42-110b(b) (West Supp.1999); see McLaughlin Ford, Inc. v. Ford Motor Co., 192 Conn. 558, 567-68, 473 A.2d 1185, 1191 (1984).

[17] The district court rejected the retroactivity argument on the ground that Sporty's Farm did not begin using sportys.com until after the FTDA came into effect. Since Sporty's Farm's retroactivity claim fails even if we analyze the issue as of the time when it initially contracted to acquire the domain name, we express no view on whether the district court's reference point was, in fact, the correct one.

[18] For the first time on appeal, Sporty's Farm argues that the district court's application of the FTDA constituted an unconstitutional taking of its property in sportys.com. We deem this argument waived. In the alternative, Sporty's Farm contends that the district court's injunction was inequitable because it deprived Sporty's Farm of its lawfully acquired interest in sportys.com and hence was issued in violation of 15 U.S.C. § 1125(c)(1), which provides that injunctions are "subject to the principles of equity and upon such terms as the court deems reasonable." The argument is meritless. The same facts that led us to find that Sporty's Farm is liable under the ACPA preclude, in the circumstances before us, any inequity in depriving Sporty's Farm of the domain name in issue.

368 F.3d 433 (2004)

Nos. 03-20243, 03-20291.

April 21, 2004.

[434] J. Timothy Headley (argued), Gardere Wynne Sewell, Houston, TX, for Plaintiff-Appellee.

Paul Alan Levy (argued), Pub. Citizen Lit. Group, Washington, DC, for Defendant-Appellant.

Before DAVIS, BARKSDALE and PRADO, Circuit Judges.

PRADO, Circuit Judge:

Following a bench trial, the district court determined that Appellant Joseph Maxwell's website that complained about Appellee TMI, Inc. violated the anti-dilution provision of the Lanham Act, 15 U.S.C. § 1125(c); the Anti-Cybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d); and the Texas Anti-Dilution Statute, TEX. BUS. & COM.CODE § 16.29. Concluding that Maxwell's site, as a non-commercial gripe site, violates none of these statutes, we reverse and render judgment in favor of Maxwell.

Appellant Joseph Maxwell intended to buy a house from Appellee TMI, Inc., a company that builds houses under the name TrendMaker Homes. Unhappy with what he viewed as the salesperson's misrepresentations about the availability of a certain model, Maxwell decided to create a website to tell his story. To this end, Maxwell registered an internet domain name — www.trendmakerhome.com — that resembled TMI's TrendMaker Homes mark. (TMI had already been using the domain name www.trendmakerhomes.com.) Maxwell registered his domain name for a year; after the year passed, Maxwell removed the site and let the registration expire.

[435] During its existence, the site contained Maxwell's story of his dispute with TMI, along with a disclaimer at the top of the home page indicating that it was not TMI's site. It also contained what Maxwell called the Treasure Chest. Maxwell envisioned the Treasure Chest as a place for readers to share and obtain information about contractors and tradespeople who had done good work. During the year of the site's existence, the Treasure Chest only contained one name, that of a man who had performed some work for Maxwell. The site did not contain any paid advertisements.

The parties agree that some e-mail intended for TMI was sent to Maxwell's site. They also agree that Maxwell forwarded each of these messages to TMI.

Shortly after Maxwell's registration expired, TMI sent Maxwell a letter demanding that he take down the site and relinquish the www.trendmakerhome.com domain name. In response, Maxwell attempted to re-register the domain name. His attempt was unsuccessful, however, because TMI had acquired the domain name once Maxwell's registration expired. Instead, Maxwell registered the domain name www.trendmakerhome.info. This lawsuit followed. Because of the suit, Maxwell has never posted any content on the trendmakerhome.info site.

Almost immediately, the parties entered into settlement negotiations. Maxwell retained a lawyer, but knew he would not be able to afford to pay the legal fees that would be required to defend the entire lawsuit. TMI and Maxwell's lawyer negotiated a settlement, while Maxwell researched his case. Following this research, Maxwell backed out of the settlement agreement and proceeded pro se. He continued to represent himself through the bench trial on January 17, 2003.

After the trial, the district court issued a Memorandum and Order. In it, the district court found that Maxwell violated the ACPA as well as the federal and Texas anti-dilution statutes. The district court also issued an injunction forbidding Maxwell "from using names, marks, and domain names similar to" ten of TMI's marks, including Trend Maker, and ordering Maxwell to transfer trendmakerhome.info to TMI. The district court also required TMI to submit a proposed judgment and gave Maxwell ten days to respond to that proposal. Maxwell immediately filed a notice of appeal.

Without allowing Maxwell ten days to respond, the district court signed TMI's proposed judgment. In many ways, this judgment expanded the Memorandum and Order's conclusions. For example, the Memorandum and Order contained no findings about either common law or statutory unfair competition. Yet the judgment stated that Maxwell's actions constituted unfair competition under both common law and the Lanham Act. The judgment provided a broader injunction than the one contained in the district court's original order by adding three marks to the injunction. The judgment also awarded statutory damages of $40,000 and, without elaboration, found the case to be an "exceptional case," justifying an award of $40,000 in attorney's fees. Additionally, the judgment addressed how Maxwell was to pay the judgment: "[w]ithin twenty (20) days after entry of this Order, defendant shall hand-deliver to plaintiff's lawyer a cashier's check in the amount of $80,000, made payable to TMI, Inc." Maxwell then filed his second notice of appeal.

TMI made several related claims in this lawsuit. In the first, TMI alleged that Maxwell violated ACPA. Additionally, TMI alleged that Maxwell's actions diluted its mark and thus violated the Texas Anti-Dilution [436] Statute, as well as the anti-dilution provision of the Lanham Act.^[1]

Commercial Use Requirement

We first address whether the two relevant sections of the Lanham Act — the anti-dilution provision and ACPA — require commercial use for liability.^[2] The district court concluded that ACPA requires commercial use, but did not address commercial use in the context of the anti-dilution provision. TMI argues that the anti-dilution provision applies even in the absence of commercial use.

In making this argument, TMI does not address the anti-dilution provision's language, which conditions liability on commercial use:

The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection.

15 U.S.C. § 1125(c)(1)(emphasis added).

Citing this language, courts have observed that the anti-dilution provision requires the diluter to have made commercial use of the mark.^[3]See, e.g., Bird v. Parsons, 289 F.3d 865, 879 (6th Cir.2002); Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1324 (9th Cir.1998). One of the exceptions to the anti-dilution provision further indicates that the provision only applies to commercial use: "(4) The following shall not be actionable under this section ... (B) Noncommercial use of a mark." 15 U.S.C. § 1125(c)(4). We conclude that, under the statute's language, Maxwell's use must be commercial to fall under the anti-dilution provision.

On the other hand, ACPA's language does not contain such a specific commercial-use requirement. Under ACPA, the owner of a mark can recover against a person who, acting with "a bad faith intent to profit from that mark ... registers, traffics in, or uses a domain name that ... is identical or confusingly similar to that mark." 15 U.S.C. § 1125(d). ACPA thus bases liability on a bad faith intent to profit. ACPA lists nine non-exclusive factors for courts to consider when determining whether a defendant had a bad faith intent to profit. One of those factors is "the person's bona fide noncommercial or fair use of the mark in a site accessible under the domain name." 15 U.S.C. § 1125(d)(1)(B)(i)(IV).

This Court has addressed ACPA and commercial use in E. & J. Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 276 n. 3 (5th Cir.2002). In Gallo, the defendant Spider Webs registered domain names [437] that "could be associated with existing businesses, including `ernestandjuliogallo.com,' `firestonetires.com,' `bridgestonetires.com,' `bluecross-blueshield.com,' `oreocookies.com,' `avoncosmetics.com,' and others." 286 F.3d at 272. Spider Webs then auctioned those domain names, refusing all bids of less than $10,000. Id. One of Spider Webs' owners testified during deposition that, after registering the domain name ernestandjuliogallo.com, Spider Webs hoped that Gallo would contact it so that Spider Webs could "assist" the company. Id. With this evidence, the Court determined that the defendant's use was commercial; the company registered domain names and then sold those names to trademark holders. Id. at 275. Because Spider Web's use was so clearly commercial, the Court noted that it did not need to decide whether ACPA also requires use in commerce. Id. at 276 n. 3. The Sixth Circuit, too, recently determined that it did not need to consider arguments about whether ACPA covers non-commercial use, "as the statute directs a reviewing court to consider only a defendant's `bad faith intent to profit' from the use of a mark held by another party." Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d 806, 809 (6th Cir.2004). Like the Lucas Nursery court, we, too, do not need to decide this question in this case.

Was Maxwell's site commercial use?

TMI argues that Maxwell's site was "mixed-use" and therefore not protected from the Lanham Act's coverage. According to TMI, Maxwell put the site to commercial use by including the Treasure Chest and in so doing removed any protections his speech might otherwise have had.

The Lanham Act defines "use in commerce" as "the bona fide use of a mark in the ordinary course of trade." 15 U.S.C. § 1127. When defining commercial use, courts have examined several different aspects of the defendant's use. The Ninth Circuit has emphasized that commercial use in commerce "refers to a use of a famous and distinctive mark to sell goods other than those produced or authorized by the mark's owner." Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir.2002) and that the phrase "requires the defendant to be using the trademark as a trademark, capitalizing on its trademark status." Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 880 (9th Cir.1999). Put another way, the Ninth Circuit in Avery Dennison also referred to "a classic `cybersquatter' case" in which a court referred to the "`intention to arbitrage' the registration which included the plaintiff's trademark." Id. (quoting Intermatic, Inc. v. Toeppen, 947 F.Supp. 1227, 1239 (N.D.Ill.1996)). This Court has provided a similar definition, determining in Gallo that the defendant's business of selling domain names containing marks satisfied the commercial use requirement. Gallo, 286 F.3d at 275. See also Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316, 1325 (9th Cir.1998) ("[defendant's] `business' is to register trademarks as domain names and then sell them to the rightful trademark owners"). Other courts have emphasized the content of the website. For example, while analyzing another section of the Lanham Act, the Sixth Circuit concluded that so long as the defendant's fan website contained no links to commercial sites, and contained no advertising or other specifically commercial content, his site was not commercial. Taubman Co. v. Webfeats, 319 F.3d 770, 775 (6th Cir.2003).

TMI agrees that the section of the site addressing Maxwell's complaints about TMI was noncommercial. TMI argues, however, that the Treasure Chest section was commercial, and thus the site "intermingle[d] gripes with commercial activities."

[438] Admittedly, Maxwell added the Treasure Chest to draw more people to his site so that they would see his story. This intent does not make his site commercial, however. Maxwell never accepted payment for a listing on the Treasure Chest, and he charged no money for viewing it.^[4] Further, TMI presented no evidence that Maxwell had any intent to ever charge money for using the site. Additionally, Maxwell's site contained neither advertising nor links to other sites. And unlike the defendants in Gallo, Maxwell was not engaged in the business of selling domain names. Gallo, 286 F.3d at 275; see also Panavision Int'l, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir.1998) ("Toeppen's commercial use was his attempt to sell the trademarks themselves"). Nor did TMI present evidence that Maxwell's use was "in the ordinary course of trade," or that it had any business purpose at all. Thus, no evidence suggests that Maxwell's use was commercial, and the district court's findings to the contrary were clear error.^[5]

Bad faith intent to profit

ACPA lists nine non-exclusive factors for courts to consider when determining whether a defendant had a bad faith intent to profit from use of the mark.^[6] These factors are:

(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 noncommercial 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 or 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 the 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 person's intentional failure to maintain accurate contact information, [439] 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 extent to which the mark incorporated in the person's domain name registration is or is not distinctive and famous ...

15 U.S.C. § 1125(d)(1)(B)(i).

Much of the district court's analysis of bad faith intent to profit focuses on Maxwell's behavior during the settlement negotiations and, particularly, his backing out of the settlement. Although the district court listed the nine relevant factors, in the Memorandum and Order it did not explain how those factors apply to this case.

Maxwell's behavior differs from other registrations made with bad faith intent to profit. For example, in Gallo, and other cases, the defendant essentially held hostage a domain name that resembled a mark with the intention of selling it back to the mark's owner. So, too, is Maxwell's use different from that of the defendant in Virtual Works, Inc. v. Volkswagen of America, Inc., 238 F.3d 264 (4th Cir.2001), where Virtual Works registered the domain name "VW.net" for its own website, but also hoping to sell the name to Volkswagen, whose VW mark the domain name resembled.^[7]

In contrast to these instances of bad faith intent to profit, the Sixth Circuit recently affirmed a trial court's finding that a disgruntled customer who posted a website similar to Maxwell's did not have a bad faith intent to profit. Lucas Nursery & Landscaping, Inc. v. Grosse, 359 F.3d at 811. In Lucas Nursery, a former customer of Lucas Nursery registered the domain name "lucasnursery.com" and used the site to post her complaints about the nursery's work. Id. at 808. The nursery sued her under ACPA. Id. After addressing the purposes behind ACPA,^[8] the Lucas Nursery court concluded that the former customer did not have the kind of intent to profit that the act was designed to prohibit. Id. at 808-11.

As in Lucas Nursery, here "[t]he paradigmatic harm that the ACPA was enacted to eradicate — the practice of cybersquatters registering several hundred domain names in an effort to sell them to the legitimate owners of the mark — is simply not present." Id. at 810. Also here, as in Lucas Nursery, the site's purpose as a method to inform potential customers about a negative experience with the company is key. As the Sixth Circuit noted:

[440] Perhaps most important to our conclusion are, [defendant's] actions, which seem to have been undertaken in the spirit of informing fellow consumers about the practices of a landscaping company that she believed had performed inferior work on her yard. One of the ACPA's main objectives is the protection of consumers from slick internet peddlers who trade on the names and reputations of established brands. The practice of informing fellow consumers of one's experience with a particular service provider is surely not inconsistent with this ideal.

Id. at 811.

In short, after analyzing the statutory factors and ACPA's purpose, we are convinced that TMI failed to establish that Maxwell had a bad faith intent to profit from TMI's mark and that the district court's conclusion to the contrary was clearly erroneous. Although factors I, II, III and IX seem to fall in favor of TMI because Maxwell had no pre-existing use of the TrendMaker name and Maxwell did not dispute that the mark was distinctive and famous, importantly, factors IV, V, VI, VII, and VIII favor Maxwell. Under factor IV, Maxwell made bona fide noncommercial use of the mark in his site, and for purposes of factor V, TMI made no showing that Maxwell intended to divert customers from its own site. Turning to factor VI, Maxwell never offered to sell the domain name, and certainly never had a pattern of selling domain names to mark owners. Maxwell did not behave improperly when providing contact information, as addressed in factor VII. Factor VIII concerns the registration of multiple domain names; Maxwell's registration of his second site related to TrendMaker Homes does not argue in favor of finding bad faith intent to profit. Maxwell registered the second domain name for the same purposes as the first one and only after his registration of the first name expired. Finally, like the Lucas Nursery court, we particularly note that Maxwell's conduct is not the kind of harm that ACPA was designed to prevent.

Texas Anti-Dilution Statute

The district court also found that Maxwell violated the Texas Anti-Dilution Statute.

That statute reads:

A person may bring an action to enjoin an act likely to injure a business reputation or to dilute the distinctive quality of a mark registered under this chapter or Title 15, U.S.C., or a mark or trade name valid at common law, regardless of whether there is competition between the parties or confusion as to the source of goods or services.

TEX. BUS. & COM.CODE § 16.29.

This statute "is not intended to address non-trademark uses of a name to comment on, criticize, ridicule, parody, or disparage the goods or business of the name's owner." Express One Int'l, Inc. v. Steinbeck, 53 S.W.3d 895, 899 (Tex.App. — Dallas 2001, no pet.)(citing McCarthy). Because this exception describes Maxwell's use, Maxwell's domain name is not actionable under the Texas Anti-Dilution Statute.

Conclusion

For these reasons, we reverse the judgment of the district court and render judgment in favor of Maxwell.

REVERSED AND RENDERED.

[1] TMI also alleged unfair competition under the Lanham Act and under the common law. The district court made no findings on unfair competition, until those claims were added to the judgment, and TMI makes no arguments in support of its judgment on those claims on appeal.

[2] This Court has previously determined that § 43(a) of the Lanham Act, 15 U.S.C. § 1125(a)(1), which addresses false and misleading descriptions, only applies to commercial speech. See Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 547 (5th Cir.2001).

[3] TMI refers to United We Stand America, Inc. v. United We Stand, America New York, Inc., 128 F.3d 86, 89-90 (2d Cir.1997), for the principle that the Lanham Act does not require commercial use. United We Stand America does not involve either the anti-dilution provision or ACPA and is, thus, irrelevant to the determination of whether these two sections require commercial use.

[4] In fact, the Treasure Chest only ever contained one listing, for a contractor who had done some work for Maxwell. This listing was not made at the contractor's request.

[5] The district court's discussion of commercial use (under ACPA) was: "[b]ased on the undisputed evidence, the Court holds that the defendant's actions have been intentional, flagrant, and in bad faith. Moreover, he has shown no remorse for his actions, even in trial. Thus, the defendant's use of `trendmakerhome.com' was the kind of commercial use prohibited by the ACPA."

[6] ACPA's safe harbor provision also provides that "[b]ad faith intent described under subparagraph (A) shall not be found in any case in which the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful." 15 U.S.C. § 1125(d)(1)(B)(ii).

[7] In fact, at one point, Virtual Works threatened to auction the domain name to the highest bidder unless Volkswagen paid them for it. Id. at 267.

[8] The Lucas Nursery court concisely summarized the Senate Report's description of cybersquatters, namely those who:

(1) "register well-known brand names as Internet domain names in order to extract payment from the rightful owners of the marks;" (2) "register well-known marks as domain names and warehouse those marks with the hope of selling them to the highest bidder;" (3) "register well-known marks to prey on consumer confusion by misusing the domain name to divert customers from the mark owner's site to the cybersquatter's own site;" (4) "target distinctive marks to defraud consumers, including to engage in counterfeiting activities."

Lucas Nursery, 359 F.3d at 809 (quoting S.Rep. No. 106-140 at 5-6).

403 F.3d 672 (2005)

No. 04-55962.

Argued and Submitted March 8, 2005.
Filed April 4, 2005.

[673] [674] Diana M. Torres, O'Melveny & Myers, Los Angeles, CA, for the plaintiff-appellant.

Paul Alan Levy, Public Citizen Litigation Group, Washington, DC, for the defendant-appellee.

Before: T.G. NELSON, SILVERMAN, and TALLMAN, Circuit Judges.

SILVERMAN, Circuit Judge.

Defendant Michael Kremer was dissatisfied with the hair restoration services provided to him by the Bosley Medical Institute, Inc. In a bald-faced effort to get even, Kremer started a website at www.BosleyMedical.com, which, to put it mildly, was uncomplimentary of the Bosley Medical Institute. The problem is that "Bosley Medical" is the registered trademark of the Bosley Medical Institute, Inc., which brought suit against Kremer for trademark infringement and like claims. Kremer argues that noncommercial use of the mark is not actionable as infringement under the Lanham Act. Bosley responds that Kremer is splitting hairs.

Like the district court, we agree with Kremer. We hold today that the noncommercial use of a trademark as the domain name of a website — the subject of which is consumer commentary about the products and services represented by the mark — does not constitute infringement under the Lanham Act.

Bosley Medical's cybersquatting claim is another matter. The issue under the Anticybersquatting Consumer Protection Act was whether Kremer had a "bad faith intent to profit" from the use of the trademark in his domain name, such as by making an extortionate offer to sell the BosleyMedical.com site to Bosley. Because discovery regarding that claim had not been completed, and the issue itself was not within the scope of the summary judgment motions, the district court erred in granting summary judgment to Kremer as to cybersquatting.

Finally, we hold that the district court should not have granted Kremer's motion to strike Bosley Medical's state-law claims pursuant to the California anti-SLAPP statute. Bosley Medical's complaint about the unauthorized use of its trademark as Kremer's domain name was not so lacking in merit as to be susceptible to an anti-SLAPP motion to strike at an early stage of the case.

I. Background

Bosley Medical provides surgical hair transplantation, restoration, and replacement services to the public. Bosley Medical owns the registered trademark "BOSLEY MEDICAL,"^[1] has used the mark "BOSLEY MEDICAL" since 1992, and registered the mark with the United States Patent and Trademark Office in January 2001. Bosley has spent millions of dollars on advertising and promotion [675] throughout the United States and the rest of the world.

Michael Kremer is a dissatisfied former patient of Bosley. Unhappy with the results of a hair replacement procedure performed by a Bosley physician in Seattle, Washington, he filed a medical malpractice lawsuit against Bosley Medical in 1994. That suit was eventually dismissed.

In January 2000, Kremer purchased the domain name www.BosleyMedical.com, the subject of this appeal, as well as the domain name www.BosleyMedicalViolations.com, which is not challenged by Bosley. Five days after registering the domain name, Kremer went to Bosley Medical's office in Beverly Hills, California and delivered a two-page letter to Dr. Bosley, Founder and President of Bosley Medical. The first page read:

Let me know if you want to discuss this. Once it is spread over the internet it will have a snowball effect and be too late to stop. M. Kremer [phone number]. P.S. I always follow through on my promises.

The second page was entitled "Courses of action against BMG" and listed eleven items. The first item stated: "1. Net web sites disclosing true operating nature of BMG. Letter 3/14/96 from LAC D.A. Negative testimonials from former clients. Links. Provide BMG competitors with this information." The letter contains no mention of domain names or any other reference to the Internet.

Kremer began to use www.BosleyMedical.com in 2001. His site summarizes the Los Angeles County District Attorney's 1996 investigative findings about Bosley, and allows visitors to view the entire document. It also contains other information that is highly critical of Bosley. Kremer earns no revenue from the website and no goods or services are sold on the website. There are no links to any of Bosley's competitors' websites. BosleyMedical.com does link to Kremer's sister site, BosleyMedicalViolations.com, which links to a newsgroup entitled alt.baldspot, which in turn contains advertisements for companies that compete with Bosley. BosleyMedical.com also contained a link to the Public Citizen website. Public Citizen is the organization that represents Kremer in this case.

Bosley brought this suit alleging trademark infringement, dilution, unfair competition, various state law claims, and a libel claim that was eventually settled. Bosley sought to take discovery aimed at the trademark and libel claims. The magistrate judge granted limited discovery on the libel claims. Following discovery, Bosley dismissed the libel claims and amended the complaint.

Kremer moved to dismiss the First Amended Complaint and in addition moved for partial summary judgment on the issues of commercial use and likelihood of confusion. Bosley filed a cross-motion for partial summary judgment on the infringement and dilution claims. Kremer agreed that the facts were undisputed with regard to the issues of commercial use and likelihood of confusion, and that these issues were ripe for summary judgment.

Ruling that Kremer's use of "Bosley Medical" in the domain name was noncommercial and unlikely to cause confusion, the district court entered summary judgment for Kremer on the federal claims and dismissed the state law claims under California's anti-SLAPP statute. Bosley now appeals.

II. Jurisdiction and Standard of Review

We have jurisdiction under 28 U.S.C. § 1291 and review a district court's grant of summary judgment de novo, viewing the evidence in the light most favorable [676] to the non-moving party. Prison Legal News v. Lehman, 397 F.3d 692, 698 (9th Cir.2005). A district court's grant of a special motion to strike under California's anti-SLAPP statute, Cal. Civ. P.Code § 425.16, is also reviewed de novo. Vess v. Ciba-Geigy Corp., 317 F.3d 1097, 1102 (9th Cir.2003).

III. Analysis

A. Trademark Infringement and Dilution Claims

The Trademark Act of 1946 ("Lanham Act") prohibits uses of trademarks, trade names, and trade dress that are likely to cause confusion about the source of a product or service. See 15 U.S.C. §§ 1114, 1125(a). In 1996, Congress amended § 43 of the Lanham Act to provide a remedy for the dilution of a famous mark. See 15 U.S.C. § 1125(c).

Infringement claims are subject to a commercial use requirement. The infringement section of the Lanham Act, 15 U.S.C. § 1114, states that any person who "use[s] in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive ..." can be held liable for such use. 15 U.S.C. § 1114(1)(a).

In 1996, Congress expanded the scope of federal trademark law when it enacted the Federal Trademark Dilution Act ("FTDA"). The FTDA allows the "owner of a famous mark" to obtain "an injunction against another person's commercial use in commerce of a mark or trade name...." 15 U.S.C. § 1125(c)(1) (emphasis added). While the meaning of the term "commercial use in commerce" is not entirely clear, we have interpreted the language to be roughly analogous to the "in connection with" sale of goods and services requirement of the infringement statute. See Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir.2002) ("Although this statutory language is ungainly, its meaning seems clear: It refers to a use of a famous and distinctive mark to sell goods other than those produced or authorized by the mark's owner."); see also Huthwaite, Inc. v. Sunrise Assisted Living, Inc., 261 F.Supp.2d 502, 517 (E.D.Va.2003) (holding that the commercial use requirement of the FTDA is "virtually synonymous with the `in connection with the sale, offering for sale, distribution, or advertising of goods and services' requirement" of the Lanham Act).

The inclusion of these requirements in the Lanham Act serves the Act's purpose: "to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 774, 112 S.Ct. 2753, 120 L.Ed.2d 615 (1992) (internal quotation marks and citations omitted). In other words, the Act is designed to protect consumers who have formed particular associations with a mark from buying a competing product using the same or substantially similar mark and to allow the mark holder to distinguish his product from that of his rivals. See Avery Dennison Corp. v. Sumpton, 189 F.3d 868, 873 (9th Cir.1999).

The Supreme Court has made it clear that trademark infringement law prevents only unauthorized uses of a trademark in connection with a commercial transaction in which the trademark is being used to confuse potential consumers. See Prestonettes, Inc. v. Coty, 264 U.S. 359, 368, 44 S.Ct. 350, 68 L.Ed. 731 (1924) ("A trade-mark only gives the right to prohibit the use of it so far as to protect [677] the owner's good will against the sale of another's product as his." [emphasis added]); see also Mishawaka Rubber & Woolen Mfg. Co. v. S.S. Kresge Co., 316 U.S. 203, 205, 62 S.Ct. 1022, 86 L.Ed. 1381 (1942) (explaining that the main purpose of the Lanham Act is to prevent the use of identical or similar marks in a way that confuses the public about the actual source of goods and services).

As the Second Circuit held, "[t]he Lanham Act seeks to prevent consumer confusion that enables a seller to pass off his goods as the goods of another.... [T]rademark infringement protects only against mistaken purchasing decisions and not against confusion generally." Lang v. Ret. Living Publ'g Co., Inc., 949 F.2d 576, 582-83 (2d Cir.1991) (internal quotation marks and citation omitted) (emphasis added).

As a matter of First Amendment law, commercial speech may be regulated in ways that would be impermissible if the same regulation were applied to noncommercial expressions. Florida Bar v. Went For It, Inc., 515 U.S. 618, 623, 115 S.Ct. 2371, 132 L.Ed.2d 541 (1995). "The First Amendment may offer little protection for a competitor who labels its commercial good with a confusingly similar mark, but trademark rights do not entitle the owner to quash an unauthorized use of the mark by another who is communicating ideas or expressing points of view." Mattel, 296 F.3d at 900(internal quotation marks and citations omitted).

The district court ruled that Kremer's use of Bosley's mark was noncommercial. To reach that conclusion, the court focused on the "use in commerce" language rather than the "use in connection with the sale of goods" clause. This approach is erroneous. "Use in commerce" is simply a jurisdictional predicate to any law passed by Congress under the Commerce Clause. See Steele v. Bulova Watch Co., 344 U.S. 280, 283, 73 S.Ct. 252, 97 L.Ed. 319 (1952); OBH, Inc. v. Spotlight Magazine, Inc., 86 F.Supp.2d 176, 185 (W.D.N.Y.2000). 15 U.S.C. § 1127 states that "unless the contrary is plainly apparent from the context ... [t]he word `commerce' means all commerce which may lawfully be regulated by Congress." Therefore, the district court should have determined instead whether Kremer's use was "in connection with a sale of goods or services" rather than a "use in commerce." However, we can affirm the district court's grant of summary judgment on any ground supported by the record. Lamps Plus, Inc. v. Seattle Lighting Fixture Co., 345 F.3d 1140, 1143 (9th Cir.2003). The question before us, then, boils down to whether Kremer's use of Bosley Medical as his domain name was "in connection with a sale of goods or services." If it was not, then Kremer's use was "noncommercial" and did not violate the Lanham Act.

Bosley argues that it has met the commercial use requirement in three ways. First, it argues that a mark used in an otherwise noncommercial website or as a domain name for an otherwise noncommercial website is nonetheless used in connection with goods and services where a user can click on a link available on that website to reach a commercial site. Nissan Motor Co. v. Nissan Computer Corp., 378 F.3d 1002 (9th Cir.2004). However, Bosley's reliance on Nissan is unfounded.

In Nissan, Nissan Motor Company sued Nissan Computer Corporation for using the Internet websites www.Nissan.com and www.Nissan.net. Id. at 1006. In Nissan, however, commercial use was undisputed, as the core function of the defendant's website was to advertise his computer business. Id. Additionally, the defendant in Nissan, like the defendant in [678] Taubman Co. v. Webfeats, 319 F.3d 770 (6th Cir.2003), placed links to other commercial businesses directly on their website. 319 F.3d at 772-73. Kremer's website contains no commercial links, but rather contains links to a discussion group, which in turn contains advertising. This roundabout path to the advertising of others is too attenuated to render Kremer's site commercial. At no time did Kremer's BosleyMedical.com site offer for sale any product or service or contain paid advertisements from any other commercial entity. See TMI, Inc. v. Maxwell, 368 F.3d 433, 435, 438 (5th Cir.2004) (holding that the commercial use requirement is not satisfied where defendant's site had no outside links).

Bosley also points out that Kremer's site contained a link to Public Citizen, the public interest group representing Kremer throughout this litigation. We hold that Kremer's identification of his lawyers and his provision of a link to same did not transform his noncommercial site into a commercial one.

Bosley's second argument that Kremer's website satisfies the "in connection with the sale of goods or services" requirement of the Lanham Act is that Kremer created his website to enable an extortion scheme in an attempt to profit from registering BosleyMedical.com. In Panavision International, L.P. v. Toeppen, 141 F.3d 1316 (9th Cir.1998), this court held that a defendant's "commercial use was his attempt to sell the trademarks themselves." Id. at 1325. Similarly, in Intermatic Inc. v. Toeppen, 947 F.Supp. 1227 (N.D.Ill.1996), the court found that "Toeppen's intention to arbitrage the `intermatic.com' domain name constitute[d] a commercial use." Id. at 1239; see also Boston Prof'l Hockey Ass'n, Inc. v. Dallas Cap & Emblem Mfg., Inc., 510 F.2d 1004, 1010 (5th Cir.1975) (holding that trademark law protects the trademark itself, despite the fact that only "a reproduction of the trademark itself is being sold, unattached to any other goods or services").

However, in this case, there is no evidence that Kremer was trying to sell the domain name itself. The letter delivered by Kremer to Bosley's headquarters is a threat to expose negative information about Bosley on the Internet, but it makes no reference whatsoever to ransoming Bosley's trademark or to Kremer's use of the mark as a domain name.

Bosley argues that it was denied an opportunity to pursue discovery on commercial use, and had it been allowed to proceed with discovery, it could further establish that Kremer has attempted to sell the domain name. However, in opposing Kremer's motion for summary judgment, Bosley did not make any such objections. Bosley failed to request further discovery under Federal Rule of Civil Procedure 56(f), but instead moved for summary judgment itself. Although Bosley's reply brief supporting its own motion for summary judgment complained about limited discovery in a footnote, Bosley did not move for leave to take discovery. The district court did not abuse its discretion in granting the summary judgment without permitting further discovery.

Bosley's third and final argument that it satisfied the commercial use requirement of the Lanham Act is that Kremer's use of Bosley's trademark was in connection with Bosley's goods and services. In other words, Kremer used the mark "in connection with goods and services" because he prevented users from obtaining the plaintiff's goods and services. See People for the Ethical Treatment of Animals v. Doughney, 263 F.3d 359 (4th Cir.2001) ("PETA"). In PETA, defendants created a site that promoted ideas antithetical to those of the PETA group. Id. at 362-63. The Fourth Circuit held that the defendant's [679] parody site, though not having a commercial purpose and not selling any goods or services, violated the Lanham Act because it "prevented users from obtaining or using PETA's goods or services." Id. at 365.

However, in PETA, the defendant's website "provide[d] links to more than 30 commercial operations offering goods and services." Id. at 366. To the extent that the PETA court held that the Lanham Act's commercial use requirement is satisfied because the defendant's use of the plaintiff's mark as the domain name may deter customers from reaching the plaintiff's site itself, we respectfully disagree with that rationale. While it is true that www.BosleyMedical.com is not sponsored by Bosley Medical, it is just as true that it is about Bosley Medical. The PETA approach would place most critical, otherwise protected consumer commentary under the restrictions of the Lanham Act. Other courts have also rejected this theory as over-expansive. See L.L. Bean, Inc. v. Drake Publishers, Inc., 811 F.2d 26, 33 (1st Cir.1987); see also Ford Motor Co. v. 2600 Enters., 177 F.Supp.2d 661, 664 (E.D.Mich.2001).

The PETA court's reading of the Lanham Act would encompass almost all uses of a registered trademark, even when the mark is merely being used to identify the object of consumer criticism.^[2] This broad view of the Lanham Act is supported by neither the text of the statute nor the history of trademark laws in this country. "[T]rademark laws are intended to protect" consumers from purchasing the products of an infringer "under the mistaken assumption that they are buying a product produced or sponsored by [the trademark holder]." Beneficial Corp. v. Beneficial Capital Corp., 529 F.Supp. 445, 450 (S.D.N.Y.1982). Limiting the Lanham Act to cases where a defendant is trying to profit from a plaintiff's trademark is consistent with the Supreme Court's view that "[a trademark's] function is simply to designate the goods as the product of a particular trader and to protect his good will against the sale of another's product as his." United Drug Co. v. Theodore Rectanus Co., 248 U.S. 90, 97, 39 S.Ct. 48, 63 L.Ed. 141 (1918); see also 1 McCarthy on Trademarks and Unfair Competition § 2:7 (4th ed.2004).

The Second Circuit held in United We Stand America, Inc. v. United We Stand, America New York, Inc., 128 F.3d 86, 90 (2d Cir.1997), that the "use in connection with the sale of goods and services" requirement of the Lanham Act does not require any actual sale of goods and services. Thus, the appropriate inquiry is whether Kremer offers competing services to the public. Kremer is not Bosley's competitor; he is their critic. His use of the Bosley mark is not in connection with a sale of goods or services — it is in connection with the expression of his opinion about Bosley's goods and services.

The dangers that the Lanham Act was designed to address are simply not at issue in this case. The Lanham Act, expressly enacted to be applied in commercial contexts, does not prohibit all unauthorized uses of a trademark. Kremer's use of the Bosley Medical mark simply cannot mislead consumers into buying a competing [680] product — no customer will mistakenly purchase a hair replacement service from Kremer under the belief that the service is being offered by Bosley. Neither is Kremer capitalizing on the good will Bosley has created in its mark. Any harm to Bosley arises not from a competitor's sale of a similar product under Bosley's mark, but from Kremer's criticism of their services. Bosley cannot use the Lanham Act either as a shield from Kremer's criticism, or as a sword to shut Kremer up.^[3]

B. Anticybersquatting Consumer Protection Act

In 1999, Congress passed the Anticybersquatting Consumer Protection Act ("ACPA"), 15 U.S.C. § 1125(d), as an amendment to the Lanham Act to prohibit cybersquatting.

[C]ybersquatting occurs when a person other than the trademark holder registers the domain name of a well known trademark and then attempts to profit from this by either ransoming the domain name back to the trademark holder or by using the domain name to divert business from the trademark holder to the domain name holder.

DaimlerChrysler v. The Net Inc., 388 F.3d 201, 204 (6th Cir.2004) (internal quotation marks omitted).

The ACPA states:

A person shall be liable in a civil action by the owner of a mark ... if, without regard to the goods or services of the parties, that person (i) has a bad faith intent to profit from that mark ...; and (ii) registers, traffics in, or uses a domain name [that is confusingly similar to another's mark or dilutes another's famous mark].

15 U.S.C. § 1125(d)(1)(A) (2004).

The district court dismissed Bosley's ACPA claim for the same reasons that it dismissed the infringement and dilution claims — namely, because Kremer did not make commercial use of Bosley's mark. However, the ACPA does not contain a commercial use requirement, and we therefore reverse.

Kremer argues that the "noncommercial use" proviso that appears in the dilution portion of § 1125 applies to cybersquatting claims with equal force. Admittedly, the language in § 1125 is confusing. 15 U.S.C. § 1125(c)(4) reads: "The following shall not be actionable under this section: ... (B) Noncommercial use of a mark." 15 U.S.C. § 1125(c)(4)(B). Kremer asserts that by using the word "section," rather than the more precise term "subsection," Congress meant for the proviso to apply to all of § 1125, as opposed to subsection (c).

This argument fails for two reasons. The noncommercial use exception, which appears in a different part of the Lanham Act, is in direct conflict with the language of the ACPA. The ACPA makes it clear that "use" is only one possible way to violate the Act ("registers, traffics in, or uses"). Allowing a cybersquatter to register the domain name with a bad faith intent to profit but get around the law by making noncommercial use of the mark would run counter to the purpose of the Act. "[T]he use of a domain name in connection with a site that makes a noncommercial or fair use of the mark does not necessarily mean that the domain name registrant lacked bad faith." Coca-Cola Co. v. Purdy, 382 F.3d 774, 778 (8th Cir. [681] 2004) (internal quotation marks and citation omitted); see also H.R.Rep. No. 106-412 at 11 (1999) ("This factor is not intended to create a loophole that otherwise might swallow the bill, however, by allowing a domain name registrant to evade application of the Act by merely putting up a noninfringing site under an infringing domain name."). "It is a well-established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute." Bob Jones Univ. v. United States, 461 U.S. 574, 586, 103 S.Ct. 2017, 76 L.Ed.2d 157 (1983); see also Albertson's, Inc. v. Commissioner, 42 F.3d 537, 546 (9th Cir.1994).

Additionally, one of the nine factors listed in the statute that courts must consider is the registrant's "bona fide noncommercial or fair use of the mark in a site accessible under the domain name." 15 U.S.C. § 1125(d)(1)(B)(i)(IV). This factor would be meaningless if the statute exempted all noncommercial uses of a trademark within a domain name. We try to avoid, where possible, an interpretation of a statute "that renders any part of it superfluous and does not give effect to all of the words used by Congress." Nevada v. Watkins, 939 F.2d 710, 715 (9th Cir.1991) (internal quotation marks and citation omitted).

Finally, other courts that have construed the ACPA have not required commercial use. In DaimlerChrysler, the Sixth Circuit held that a

trademark owner asserting a claim under the ACPA must establish the following: (1) it has a valid trademark entitled to protection; (2) its mark is distinctive or famous; (3) the defendant's domain name is identical or confusingly similar to, or in the case of famous marks, dilutive of, the owner's mark; and (4) the defendant used, registered, or trafficked in the domain name (5) with a bad faith intent to profit.

388 F.3d at 204. See also Ford Motor Co. v. Catalanotte, 342 F.3d 543, 546 (6th Cir.2003); E. & J. Gallo Winery v. Spider Webs Ltd., 129 F.Supp.2d 1033, 1047-48 (S.D.Tex.2001), aff'd, 286 F.3d 270 (5th Cir.2002) ("As reflected by the language of the ACPA and the case law interpreting it, there is no requirement ... that the `use' be a commercial use to run afoul of the ACPA").

The district court erred in applying the commercial use requirement to Bosley's ACPA claim. Rather, the court should confine its inquiry to the elements of the ACPA claim listed in the statute, particularly to whether Kremer had a bad faith intent to profit from his use of Bosley's mark in his site's domain name. Bosley has met the first prong of the ACPA (that the domain name is identical to the mark) because Kremer used an unmodified version of Bosley's mark as his domain name.

Concluding that all of Bosley's claims, including the ACPA claim, were subject to a commercial use requirement, the district judge granted summary judgment in Kremer's favor. But the ACPA claim was not in front of the district court in the motions for summary judgment. The court did not provide notice to Bosley that it would rule on this claim, and did not give Bosley an opportunity to conduct discovery on the issue. See Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). For this reason, the district court erred in granting summary judgment for Kremer on the ACPA claim. It remains to be seen whether Bosley can establish that Kremer registered the domain name in bad faith or can authenticate other letters that Bosley alleges were written and sent by Kremer.

[682] C. California's Anti-SLAPP Law

In 1993, responding to the "disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances," the California Legislature enacted the Anti-Strategic Lawsuit Against Public Participation ("anti-SLAPP") statute. Cal.Civ.Proc.Code § 425.16(a). "The hallmark of a SLAPP suit is that it lacks merit, and is brought with the goals of obtaining an economic advantage over a citizen party by increasing the cost of litigation to the point that the citizen party's case will be weakened or abandoned, and of deterring future litigation." United States ex rel. Newsham v. Lockheed Missiles & Space Co., 190 F.3d 963, 970-71 (9th Cir.1999) (citing Wilcox v. Superior Court, 27 Cal.App.4th 809, 814-17, 33 Cal.Rptr.2d 446, 449-50 (1994)). The anti-SLAPP statute was designed to curtail these lawsuits by establishing a procedure to promptly expose and dismiss meritless and harassing claims seeking to chill protected expression. The statute provides that a defendant may move to strike a plaintiff's complaint if it "aris[es] from any act of that person in furtherance of the person's right of petition or free speech under the United States or California Constitution in connection with a public issue." Cal.Civ.Proc.Code § 425.16(b)(1).

A defendant filing an anti-SLAPP motion to strike "must make an initial prima facie showing that the plaintiff's suit arises from an act in furtherance of defendant's right of petition or free speech." Braun v. Chronicle Publ'g Co., 52 Cal.App.4th 1036, 1042-43, 61 Cal.Rptr.2d 58, 61 (1997). The defendant need not show that plaintiff's suit was brought with the intention to chill defendant's speech; the plaintiff's "intentions are ultimately beside the point." Equilon Enters., LLC v. Consumer Cause, Inc., 29 Cal.4th 53, 67, 124 Cal.Rptr.2d 507, 519, 52 P.3d 685, 694 (2002).

The district court ruled that Bosley was seeking to limit Kremer's free speech and granted Kremer's anti-SLAPP motion to strike Bosley's state law trademark claims. We now reverse. An infringement lawsuit by a trademark owner over a defendant's unauthorized use of the mark as his domain name does not necessarily impair the defendant's free speech rights. As noted by the Second Circuit, "[d]omain names ... per se are neither automatically entitled to nor excluded from the protections of the First Amendment, and the appropriate inquiry is one that fully addresses particular circumstances presented with respect to each domain name." Name.Space, Inc. v. Network Solutions, Inc., 202 F.3d 573, 585 (2d Cir.2000). In Panavision, we stated that "[a] significant purpose of a domain name is to identify the entity that owns the web site," 141 F.3d at 1327, and we explained in Mattel that a source identifier is not entitled to full First Amendment protection. 296 F.3d at 900. While a summary judgment motion might have been well-taken, an anti-SLAPP motion to strike was not. We reverse the grant of the anti-SLAPP motion to strike and remand to the district court for further proceedings on the state law claims.

IV. Conclusion

We affirm the district court's entry of summary judgment in favor of Kremer with respect to the infringement and dilution claims. We remand the ACPA claim for further proceedings. The district court's grant of the anti-SLAPP motion to strike the state law claims is reversed.

[683] AFFIRMED in part, REVERSED in part, and REMANDED. No costs allowed.

[1] Bosley also owns the following trademarks: BOSLEY, BOSLEY HEALTHY HAIR, BOSLEY HEALTHY HAIR FORMULA, and BOSLEY HEALTHY HAIR COMPLEX.

[2] In fact, such a holding would suggest that any time a non-holder of a trademark uses the mark as his domain name, he would violate the Lanham Act. However, when Congress amended the Lanham Act to add the Anticybersquatting Consumer Protection Act, it limited violations only to situations where a person registers the site with a bad faith intent to profit. To find a Lanham Act violation without finding commercial use may contradict Congress' intent.

[3] Because we hold that Kremer's use of Bosley's mark was noncommercial, we do not reach the issue of initial interest confusion which was addressed in Interstellar Starship Services, Ltd. v. Epix, Inc., 304 F.3d 936 (9th Cir.2002).

FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER

SCHILLER.

[1] Presently before the court is plaintiff Electronics Boutique Holding Corporation's action for Internet cybersquatting^[1] against defendant John Zuccarini. A hearing on the merits consolidated with a hearing on damages was held on October 10, 2000. For the reasons set forth below, I find in favor of plaintiff Electronics Boutique Holdings Corporation.

I. Procedural background

On August 10, 2000, plaintiff Electronics Boutique Holding Corporation ("EB") filed a complaint against defendant John Zuccarini ("Mr. Zuccarini"), individually and trading as Cupcake Patrol and/or Cupcake Party, alleging violations of the Anticybersquatting Consumer Protection Act of 1999, 15 U.S.C. § 1125(d) ("ACPA"), violations of section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), dilution, common law service mark infringement and unfair competition.

Also on August 10, 2000, I granted EB's motion for a temporary restraining order, enjoining the use of domain names "www.electronicboutique.com," "www.eletronicsboutique.com," "www.electronicbotique.com," "www.ebwold.com," "www.ebworl.com." (collectively "domain misspellings") or any other domain name or mark identical to or confusingly similar to EB's registered service marks until August 20, 2000, and directing Mr. Zuccarini to deactivate the domain misspellings and present the Court with evidence of the deactivations within three days of the Court's Order.^[2] Additionally, I scheduled a hearing on EB's motion for a preliminary injunction to take place on August 15, 2000.

On August 15, 2000, upon representations by EB that its attempts to effect service upon Mr. Zuccarini at his home, which is also his workplace, were unsuccessful,^[3] I granted EB's motion for alternative service, extension of the temporary restraining order, and continuance of the hearing on EB's motion for a preliminary injunction. I authorized EB to effect service through the United States Marshals' service.^[4] The hearing on EB's motion for preliminary injunction was continued until August 29, 2000.

Mr. Zuccarini failed to appear, through counsel or otherwise, for the August 29 hearing. On that date, I granted EB's motion for preliminary injunction based on its ACPA claims, finding that Mr. Zuccarini had actual notice of this matter^[5] and that the requirements for the issuance of a preliminary injunction had been satisfied. I scheduled a hearing on the merits of EB's ACPA claims for October 10, 2000.^[6]

Mr. Zuccarini failed to obtain counsel and refused to appear himself for the October 10, 2000, hearing.

II. Findings of Fact

At the October 10, 2000, hearing I found as follows:^[7] EB, a specialty retailer in video games and personal computer software, operates more than 600 retail stores, primarily in shopping malls, and also sells its products via the Internet. EB has registered several service marks on the principal register of the United States Patent and Trademark Office for goods and services of electric and computer products, including "EB" and "Electronics Boutique." (Pl.Exh. 1). EB has applications for several other service marks on the principal register of the United States Patent and Trademark Office for goods and services of electric and computer products, including "ebworld.com." (Pl.Exh. 2). EB has continuously used its service marks in its business since 1977. They have appeared in print, trade literature, advertising, and on the Internet.

EB's online store can be accessed via the Internet at "www.ebworld.com" and "www.electronicsboutique.com." EB registered its "EBWorld" domain name on December 19, 1996 and its "Electronics Boutique" domain name on December 30, 1997. EB has invested heavily in promoting its website to online customers. EB has expended a considerable amount of resources towards making its website consumer friendly. An easy-to-use website is critical to EB's ability to generate revenue directly through Internet customers and indirectly as support for EB's "brick and mortar" stores. Over the last eight months, online purchases have yielded an average of more than 1.1 million in sales per month and EB has logged more than 2.6 million online visitors.

[2] On May 23, 2000, Mr. Zuccarini registered the domain names "www.electronicboutique.com," and "www.electronicbotique.com." (Pl.Exh. 3). One week later, Mr. Zuccarini registered the domain names "www.ebwold.com" and "www.ebworl.com." (Pl.Exh. 3). When a potential or existing online customer, attempting to access EB's website, mistakenly types one of Mr. Zuccarini's domain misspellings, he is "mousetrapped"^[8] in a barrage of advertising windows, featuring a variety of products, including credit cards, internet answering machines, games, and music. (Pl.Exh. 4). The Internet user cannot exit the Internet without clicking on the succession of advertisements that appears. Simply clicking on the "X" in the top right-hand corner of the screen, a common way to close a web browser window, will not allow a user to exit. (Pl.Exh. 5, Zuccarini Prelim. Inj. Hearing Testimony at 119, Shields v. Zuccarini, No. 00–494, (E.D.Pa. March 21, 2000)). Mr. Zuccarini is paid between 10 and 25 cents by the advertisers for every click. (Pl.Exh. 5, Zuccarini Dep. at 54–5, Shields v. Zuccarini, No. 00–494, (E.D.Pa.)). Sometimes, after wading through as many as 15 windows, the Internet user could gain access to EB's website.

III. Conclusions of law^[9]

A. EB's request for a permanent injunction

In determining whether the issuance of a permanent injunction is appropriate, a court must determine: (1) whether the moving party has actually succeeded on the merits; (2) whether the moving party will be irreparably injured by denial of the relief; (3) whether granting the permanent relief will result in even greater harm to the nonmoving party; and (4) whether granting permanent relief will be in the public interest. See ACLU v. Black Horse Pike Reg'l Bd. of Educ., 84 F.3d 1471, 1477 nn. 2–3 (3d Cir.1996).

1. Success on the merits

On August 29, 2000, I concluded that EB was likely to succeed on the merits of its ACPA claim. No facts to suggest to the contrary have been offered, as Mr. Zuccarini has failed to appear before this Court himself or through counsel, in person or through the filing of appropriate documents, and has not taken discovery. I will, nevertheless, evaluate EB's claim under the ACPA.

Under the ACPA, a person who registers, traffics in, or uses a domain name that is identical or confusingly similar to a distinctive or famous mark registered to someone else with a bad-faith intent to profit from that mark is subject to suit. See 15 U.S.C. § 1125(d)(1)(A). In order to determine whether EB is entitled to relief under the ACPA, this Court must evaluate the following: (1) whether EB's service marks are distinctive or famous; (2) whether Mr. Zuccarini's domain misspellings are identical or confusingly similar to EB's marks; and (3) whether Mr. Zuccarini registered the domain misspellings with a bad-faith intent to profit from them. See Shields, 89 F.Supp.2d at 638. In addition, I must determine whether Mr. Zuccarini is entitled to protection under the safe harbor provided by 15 U.S.C. § 1125(d)(1)(B)(ii). See id.

a. Distinctive or famous

[3] A court may consider the following factors in determining whether a mark is distinctive or famous:

(A) the degree of inherent or acquired distinctiveness of the mark;

(B) the duration and extent of use of the mark in connection with the goods and services with which the mark is used;

(C) the duration and extent of advertising and publicity of the mark;

(D) the geographical extent of the trading area in which the mark is used;

(E) the channels of trade for the goods or services with which the mark is used;

(F) the degree of recognition of the mark in the trading areas and the channels of trade used by the marks' owner and the person against whom the injunction is sought;

(G) the nature and extent of use of the same or similar marks by third parties; and

(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.

15 U.S.C. § 1125(c)(1).

I find that EB's marks are both distinctive and famous; therefore, they are entitled to protection. Since 1977, EB has used and traded under the "Electronics Boutique" name, which was registered on the principal register of the United States Patent and Trademark Office in January of 1987 and is incontestable. (Pl.Exh. 1, United States Trademark Registration No. 1,425,236). The name "Electronics Boutique" has been used for more than 20 years in connection with the sale of video games and computer software. Via the Internet, EB has traded under the name "Electronics Boutique" through its website, which can be accessed by both "www.ebworld.com" and "www.electronicsboutique.com," since the registration of those domain names on December 19, 1996, and December 30, 1997, respectively. (Pl.Exh. 12). EB has pending applications for several other service marks on the principal register of the United States Patent and Trademark Office for goods and services of electric and computer products, including "EBWorld.com." (Pl.Exh. 2, United States Trademark Serial No. 75,829,090). Registration of EB's marks entitles EB to a "presumption that its registered trademark is inherently distinctive." Morrison & Foerster LLP v. Wick, 94 F.Supp.2d 1125, 1130 (D.Colo.2000) (citation and quotation omitted). Mr. Zuccarini opted not to rebut this presumption through the presentation of evidence before this Court.

Additionally, over more than 20 years, EB has spent tens of millions of dollars on advertising utilizing the EB service marks. EB's advertising campaigns have been widespread, reaching national and international audiences. The EB service marks are recognized throughout the electronic games and computer software industry and among the general public. EB has spent millions of dollars advertising to promote its website in print, on television, on the radio, and on the Internet. One way that EB advertises is on the Internet through partnerships formed with other online entities who display EB's artwork and provide links to EB's website.^[10] It has become well-known to consumers of electronic games and computer software and throughout the industry that EB's website provides information about new products and opportunities to buy those products.

[4] In its last fiscal year, EB earned revenues of 273 million dollars using its marks. During the last eight months, EB has averaged more than 1.1 million dollars in sales per month from its website and 2.6 million people visited EB's website.

Mr. Zuccarini does not and has never offered any goods or services of his own for sale using any of the domain misspellings. Instead, Mr. Zuccarini's "business" consists entirely of trading on the goodwill developed by EB.^[11] Furthermore, no other entity uses trade names or service marks similar to the ones used by EB.

b. "Identical or confusingly similar"

Next, I must consider whether the domain misspellings are identical or confusingly similar to EB's marks. I note at the outset that the profitability of Mr. Zuccarini's enterprise is completely dependent on his ability to create and register domain names that are confusingly similar to famous names.^[12] (Pl.Exh. 5, Zuccarini Dep. at 41–45, Shields v. Zuccarini, No. 00–494, (E.D.Pa. March 21, 2000)). As the similarity in the spellings of Mr. Zuccarini's domain names to popular or famous names increases, the likelihood that an Internet user will inadvertently type one of Mr. Zuccarini's misspellings (and Mr. Zuccarini will be compensated) increases. Through an e-mail message it received, EB is aware of at least one customer who was in fact confused by the domain misspellings and who believes that EB is associated with the domain misspelling "www.electronicbotique.com."^[13] (Pl.Exh. 25). Thus, it is without hesitation that I find that the domain misspellings are confusingly similar to EB's marks.

c. Bad-faith intent to profit

Finally, I must consider whether Mr. Zuccarini acted with a bad-faith intent to profit from EB's marks, and if so, whether he is entitled to the protection of the safe harbor of § 1125(d)(1)(B)(2). In making that determination, I am guided by the following nine factors provided by § 1125(d)(1)(B):

(I) the trademark or other intellectual property rights of the [alleged cybersquatter], if any, in the domain name;

(II) the extent to which the domain name consists of the legal name of the [alleged cybersquatter] or a name that is otherwise commonly used to identify [the alleged cybersquatter];

(III) the [alleged cybersquatter's] prior use, if any, of the domain name in connection with the bona fide offering of any goods or services;

[5] (IV) the [alleged cybersquatter's] bona fide noncommercial or fair use of the mark in a site accessible under the domain name;

(V) the [alleged cybersquatter'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 or disparage the mark, by creating a likelihood of confusion as to the source, sponsorship, affiliation, or endorsement of the site;

(VI) the [alleged cybersquatter'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 the bona fide offering of any goods or services, or the person's prior conduct indicating a pattern of such conduct;

(VII) the [alleged cybersquatter's] provision of material and misleading false contact information when applying for the registration of the domain name, the person's intentional failure to maintain accurate contact information, or the [alleged cybersquatter's] prior conduct indicating a pattern of such conduct;

(VIII) the [alleged cybersquatter'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 extent to which the mark incorporated in the [alleged cybersquatter's] domain name registration is or is not distinctive and famous.

15 U.S.C. § 1125(d)(1)(B).

Mr. Zuccarini's bad-faith intent to profit from the domain misspellings is abundantly clear. Mr. Zuccarini registered the domain misspellings in order to generate advertising revenue for himself, despite being aware of the Electronics Boutique stores and website. Mr. Zuccarini believes that Internet users will misspell the domain names of the websites they intend to access and instead access one of Mr. Zuccarini's websites. (Pl.Exh. 5, Zuccarini Dep. at 44, Shields v. Zuccarini, No. 00–494, (E.D.Pa.)). Mr. Zuccarini then profits each time an Internet user makes a typing or spelling mistake which Mr. Zuccarini correctly forecasts.

In addition, the domain misspellings quite obviously do not consist of names used to identify Mr. Zuccarini, legally or otherwise. Also, Mr. Zuccarini has no bona fide business purpose for registering the domain misspellings, as he does not and has not offered any goods or services that relate to EB or electronic products. Lastly, Mr. Zuccarini has no intellectual property rights at issue in this matter. I find that Mr. Zuccarini specifically intended to prey on the confusion and typographical and/or spelling errors of Internet users to divert Internet users from EB's website for his own commercial gain.

Section 1125(d)(1)(B)(ii) provides a safe harbor available to Mr. Zuccarini if he establishes that he reasonably believed that his use of the domain misspellings was fair and lawful. Mr. Zuccarini declined to claim the protections of the safe harbor by refusing to participate in this matter.^[14]

2. Irreparable harm

[6] The second inquiry I must undertake in deciding whether a permanent injunction is appropriately granted is into whether EB will suffer irreparable injury if the injunction does not issue. In a trademark infringement action, the Third Circuit observed that "[g]rounds for finding irreparable injury include loss of control of reputation, loss of trade, and loss of good will." See Opticians Ass'n of America v. Independent Opticians of America, 920 F.2d 187, 195 (3d Cir.1990). Additionally, our court of appeals noted that a finding of irreparable injury "can also be based on likely confusion." Id. at 196. Although, as this court has previously noted, the "confusingly similar" language of the ACPA governs cybersquatting actions rather than the probability of "likely confusion" standard applied in trademark infringement cases, the consideration of factors articulated by the Third Circuit in Opticians Association is appropriate in cybersquatting cases.^[15]See Shields v. Zuccarini, 89 F.Supp.2d 634, 641 (E.D.Pa.2000).

It is impossible to determine the number of potential and existing customers diverted from EB's website by Mr. Zuccarini's domain misspellings. A user-friendly website is important to EB's online success. There must be as few steps, or clicks, as possible between initially accessing EB's website and the completion of the transaction as each computer click represents a significant amount of time. Those who get lost in the advertisements may abandon their intention to purchase from EB. Others simply may never find EB's website. These customers may not only be discouraged from shopping at EB online, but may also be discouraged from shopping at EB's outlets in person as well.

Furthermore, it is impossible to calculate the loss of reputation and goodwill caused by Mr. Zuccarini's domain misspellings. An essential component of a successful online business is trust. In order to purchase goods through the Internet, customers must supply personal information, including their credit card numbers. One customer, who believed that EB was associated with one of the domain misspellings sent an e-mail to EB expressing concern about a "possible security problem." (Pl.Exh. 25).

3. Balance of hardships

Third, I must balance the hardships to the parties resulting from an injunction issued by this Court. Mr. Zuccarini's failure to respond to this matter forces me to conclude that he willfully avoided service and that he made a conscious choice to allow this matter to proceed in his absence. The hardship was visited on the plaintiff alone.

4. Public interest

[7] Finally, I must determine whether an injunction would further the public interest. As the Third Circuit observed in Opticians Association with regard to trademark cases, the public interest suffers when the public's right not to be deceived is violated. See Opticians Association, 920 F.2d at 197, Shields, 89 F.Supp.2d at 641–42. Mr. Zuccarini's profitability is directly proportional to the number of Internet users that he deceives. Therefore, the fourth requirement is fulfilled.

B. EB's request for statutory damages

Pursuant to 15 U.S.C. § 1117(d), a plaintiff seeking recovery under the ACPA may elect to recover statutory damages in lieu of actual damages and profits.^[16] A court may award statutory damages in an amount between $1,000 and $100,000 per infringing domain name based on the court's determination of what is just. See 15 U.S.C. § 1117(d). EB has elected to recover statutory damages in this matter. (Pl. Pretrial Memo at 13). The recovery of "statutory damages in cybersquatting cases, both [ ] deter[s] wrongful conduct and [ ] provide[s] adequate remedies for trademark owners who seek to enforce their rights in court." S.REP. No. 106–140 (1999).

I emphasize that the actual damages suffered by EB as a result of lost customers and goodwill is incalculable. In proceedings before this Court, Mr. Zuccarini admitted that he yields between $800,000 and $1,000,000 annually from the thousands of domain names that he has registered. See Shields v. Zuccarini, No.00–494, 2000 WL 1053884, at *1 (E.D.Pa. July 18, 2000). Advertisers pay Mr. Zuccarini between 10 and 25 cents each time an Internet user clicks on one of their ads posted on Mr. Zuccarini's websites. (Pl.Exh. 5, Zuccarini Dep. at 54–5, Shields v. Zuccarini, No. 00–494, (E.D.Pa.)). Many of the domain names registered by Mr. Zuccarini are misspellings of famous names and infringe on the marks of others. (Pl.Exh. 20, Zuccarini's response to plaintiff's first request for inspection and production of documents pursuant to Fed.R.Civ.P. 34, Dennis Maxim, Inc. v. Zuccarini, No. 00–2104, (S.D.N.Y.)).