Planetary Motion v. Techplosion

• Citation: 59 USPQ2d 1894,261 F.3d 1188
• Decision Date: 16 August 2001
• Docket Number: No. 00-10872,00-10872
• Parties: (11th Cir. 2001) PLANETARY MOTION, INC., Plaintiff-Counter- Defendant-Appellee, v. TECHPLOSION, INC., MICHAEL GAY a.k.a. Michael Carson, Defendants-Counter-Claimants-Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (11th Circuit)

Page 1188

261 F.3d 1188 (11th Cir. 2001)

PLANETARY MOTION, INC., Plaintiff-Counter- Defendant-Appellee, v. TECHPLOSION, INC., MICHAEL GAY a.k.a. Michael Carson, Defendants-Counter-Claimants-Appellants.

No. 00-10872

UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

August 16, 2001

[Copyrighted Material Omitted] Appeal from the United States District Court for the Southern District of Florida.

Before TJOFLAT and WILSON, Circuit Judges, and RESTANI^*, Judge.

RESTANI, Judge:

Planetary Motion, Inc. ("Planetary Motion" or "Appellee") sued Techsplosion, Inc. and Michael Gay a/k/a Michael Carson (respectively "Techsplosion" and "Carson"; collectively "Appellants") for infringement and dilution of an unregistered trademark under Section 43(a) and (c) of the Federal Trademark Act, 15 U.S.C. § 1051 et seq. (1994) ("Lanham Act"), and for violation of Florida's unfair competition law. Fla. Stat. Ann. § 495.151 (West 2000). Finding that Planetary Motion had established priority of use and a likelihood of confusion, the United States District Court for the Southern District of Florida entered summary judgment in favor of Planetary Motion. We affirm the judgment and vacate the award of attorney fees.

Facts

I. Development and Distribution of the "Coolmail" Software

In late 1994, Byron Darrah ("Darrah") developed a UNIX-based program (the "Software") that provides e-mail users with notice of new e-mail and serves as a gateway to the users' e-mail application. On December 31, 1994, Darrah distributed the Software over the Internet by posting it on a UNIX user site called "Sunsite," from which it could be downloaded for free. Darrah had named the Software "Coolmail" and this designation appeared on the announcement sent to the end-users on Sunsite as well as on the Software user-manual, both of which accompanied the release.

The Software was distributed without charge to users pursuant to a GNU General Public License that also accompanied the release. A GNU General Public License allows users to copy, distribute and/or modify the Software under certain restrictions, e.g., users modifying licensed files must carry "prominent notices" stating that the user changed the files and the date of any change. After the release of the Software, Darrah received correspondence from users referencing the "Coolmail" mark and in some cases suggesting improvements. In 1995, Darrah released two subsequent versions of the Software under the same mark and also pursuant to the GNU General Public License.

In early 1995, a German company named S.u.S.E. GmbH sought permission from Darrah to include the Software in a CD-ROM package sold as a compilation of Unix-based programs. Darrah consented and, pursuant to the GNU licensing agreement, S.u.S.E. distributed the Software in its compilation product and in subsequent versions thereof. S.u.S.E. sold and continues to sell the software compilation in stores in the United States and abroad, as well as over the Internet.

II. Launch of Techsplosion's "CoolMail" E-mail Service

In 1998, Appellant Carson formed Techsplosion, for the purpose of operating a business based on an e-mail service that he had developed. On April 16, 1998, Techsplosion began offering the e-mail service on the Internet under the mark "CoolMail." Two days later, Techsplosion activated the domain name "coolmail.to" Techsplosion delivered an e-mail solicitation under the "CoolMail" mark to approximately 11,000 members of the Paramount Banner Network, an Internet advertising network, also created and operated by Carson. Techsplosion charged no fee to subscribe to the service and generated revenues through the sale of banner advertisements on its web site.

III. Planetary Motion's E-mail Service & Application for Trademark Registration

Appellee Planetary Motion is a computer software and telecommunications company that developed and owns an electronic mail service called "Coolmail." As part of its service, Planetary Motion enables a person to check e-mail via telephone without logging onto a computer. On April 24, 1998, Planetary Motion filed three intent-to-use applications to register the mark "Coolmail" with the United States Patent and Trademark Office. Though Planetary Motion was aware that Darrah's Software also bore the mark "Coolmail," it represented in its applications that it was not aware of any mark upon which its proposed registered mark would infringe. Planetary Motion launched its Coolmail e-mail service to subscribers on June 8, 1998.

IV. Planetary Motion's Complaint and Subsequent Acquisition of Darrah's Rights

On April 22, 1999, Planetary Motion filed a complaint against Techsplosion. In the complaint, Planetary Motion alleged infringement of the alleged mark "Coolmail" for use in connection with e-mail services. Planetary alleged federal trademark infringement and unfair competition under Section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), as well as injury to business reputation and dilution under Florida Statute § 495.151.

On June 10, 1999, Techsplosion filed an Answer, Affirmative Defenses, and Counterclaims. The counterclaims alleged infringement of the mark "Coolmail" for use in connection with e-mail services. Techsplosion alleged unfair competition, false designation, description, and representation under the Lanham Act, common trademark infringement, common law unfair competition, and injury to business reputation and dilution.

In July of 1999, Planetary Motion purchased from Darrah all rights, title, and interest to the Software including all copyrights, trademarks, patents and other intellectual property rights.¹ On August 31, 1999, Planetary filed an Amended Verified Complaint, adding a claim for dilution under Section 43(c) of the Lanham Act, 15 U.S.C. § 1125(c), and alleging violation of trademark rights assigned from Darrah.

V. Disposition of Planetary Motion's Complaint

On January 31, 2000, the district court entered an Order granting Planetary Motion's motion for summary judgment and denying Carson's and Techsplosion's motion for summary judgment. The district court based the Order on two findings: (1) that the alleged mark was affixed to Darrah's software, and that Darrah's distribution of the software over the Internet constituted a "transport in commerce," resulting in the creation of trademark rights and priority, and (2) there was a likelihood of confusion because the marks "are essentially the same." The district court did not reach the issue of whether Techsplosion's use of "CoolMail" in connection with its e-mail service diluted Planetary Motion's mark.

On the same date, the district court entered final judgment granting Planetary Motion permanent injunctive relief. See 15 U.S.C. § 1116. The order also awarded Planetary Motion profits and damages, as well as attorney fees and costs, pursuant to section 35 of the Lanham Act, 15 U.S.C. § 1117. The district court requested a report and recommendation from a magistrate judge fixing the amounts to be awarded.

A Notice of Appeal was filed on February 15, 2000. On February 15, 2000, Techsplosion filed an Emergency Motion to Stay Pending Appeal, reasserting that Darrah never established any rights in the alleged mark. This motion was denied on February 17, 2000.

On May 9, 2000 the magistrate judge entered his report recommending that Planetary Motion be awarded $275,508 in attorneys' fees and $6,562.34 in costs, but that its request for damages be denied for lack of specificity. Techsplosion served its appeal brief on May 22, 2000. On June 9, 2000, the district court entered an order adopting the report and recommendation in its entirety. On July 7, 2000, Techsplosion filed a Notice of Appeal from the order adopting the magistrate judge's report and recommendation.²

Standard of Review

Review of a district court's grant of summary judgment is de novo, with all facts and reasonable inferences therefrom reviewed in the light most favorable to the non-moving party. Carnival Brand Seafood Co. v. Carnival Brands, Inc., 187 F.3d 1307, 1309 (11th Cir. 1999).

Discussion

Section 43(a) of the Lanham Act forbids unfair trade practices involving infringement of trade dress, service marks, or trademarks, even in the absence of federal trademark registration.³ Two Pesos, Inc. v. Taco Cabana, Inc., 505 U.S. 763, 768 (1992). Section 43(a) is remedial in nature and should be interpreted and applied broadly so as to effectuate its remedial purpose. Montgomery v. Noga, 168 F.3d 1282, 1300 & n. 29 (11th Cir. 1999) (citing Warner Bros., Inc. v. Gay Toys, Inc., 658 F.2d 76, 79 (2d Cir. 1981)). To prevail under this section, a claimant must show (1) that it had prior rights to the mark at issue and (2) that the defendant had adopted a mark or name that was the same, or confusingly similar to its mark, such that consumers were likely to confuse the two.⁴ Lone Star Steakhouse & Saloon, Inc. v. Longhorn Steaks, Inc., 106 F.3d 355, 360 (11th Cir. 1997) (citing Conagra Inc. v. Singleton, 743 F.2d 1508, 1512 (11th Cir. 1984)), modified, 122 F.3d 1379 (1997). Appellants argue that the district court erred in finding that Planetary Motion had established both elements. Appellants also dispute the scope of injunctive relief, as well as the award of attorney fees and costs.

I. Prior Use in Commerce

Under common law, trademark ownership rights are "appropriated only through actual prior use in commerce." Tally-Ho, Inc. v. Coast Cmty College Dist., 889 F.2d 1018, 1022 (11th Cir. 1989) (citation omitted). Under the Lanham Act,⁵ the term "use in commerce" is defined in relevant part as follows:

the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in a mark. . . . [A] mark shall be deemed to be in use in commerce . . . on goods when (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...