Sporty's Farm v. Sportsman's Market

• Decision Date: 01 August 1998
• Docket Number: Docket Nos. 98-7452
• Citation: 202 F.3d 489
• Parties: (2nd Cir. 2000) SPORTY'S FARM L.L.C., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. SPORTSMAN'S MARKET, INC., Defendant-Third-Party-Plaintiff- Counter-Claimant- Appellee-Cross-Appellant, OMEGA ENGINEERING, INC., Third-Party-Defendant- Appellee. (L), 98-7538 (XAP)
• Court: U.S. Court of Appeals — Second Circuit

Page 489

202 F.3d 489 (2nd Cir. 2000)

SPORTY'S FARM L.L.C., Plaintiff-Counter-Defendant-Appellant-Cross-Appellee, v. SPORTSMAN'S MARKET, INC., Defendant-Third-Party-Plaintiff- Counter-Claimant- Appellee-Cross-Appellant, OMEGA ENGINEERING, INC., Third-Party-Defendant- Appellee.

Docket Nos. 98-7452 (L), 98-7538 (XAP)

August Term, 1998

UNITED STATES COURT OF APPEALS SECOND CIRCUIT

Argued: March 17, 1999

Decided: Feb. 2, 2000

Appeal from a judgment of the United States District Court for the District of Connecticut (Alfred V. Covello, Chief Judge) finding that Sporty's Farm violated the Federal Trademark Dilution Act, 15 U.S.C. 1125(c), and enjoining Sporty's Farm from using the Internet domain name "sportys.com."

Affirmed.

[Copyrighted Material Omitted] 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.

Before: OAKES, CALABRESI, and GIBSON,^* 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 (or "World Wide Web") 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.¹

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.² To take a simple example 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.³ If this proves unsuccessful, then Internet users turn to a device called a search engine.⁴ 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.⁵ 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 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 . ....