Internet Specialties West v. Milon-Digiorgio

• Decision Date: 17 March 2009
• Docket Number: No. 07-55199.,No. 07-55087.,07-55087.,07-55199.
• Citation: 559 F.3d 985
• Parties: INTERNET SPECIALTIES WEST, INC., a California corporation, Plaintiff-Appellee, v. MILON-DIGIORGIO ENTERPRISES, INC., a California corporation, Defendant-Appellant. Internet Specialties West, Inc., a California corporation, Plaintiff-Appellant, v. ISPwest, a California company; Milon-DiGiorgio Enterprises Inc., a California corporation; AceWeb Internet, a California company, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

559 F.3d 985

INTERNET SPECIALTIES WEST, INC., a California corporation, Plaintiff-Appellee, v. MILON-DIGIORGIO ENTERPRISES, INC., a California corporation, Defendant-Appellant.

Internet Specialties West, Inc., a California corporation, Plaintiff-Appellant, v. ISPwest, a California company; Milon-DiGiorgio Enterprises Inc., a California corporation; AceWeb Internet, a California company, Defendants-Appellees.

No. 07-55087.

No. 07-55199.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted September 8, 2008.

Filed March 17, 2009.

William E. Lloyd, Jr., Law Office of William E. Lloyd, Beverly Hills, CA, for defendant-appellant Milon-DiGiorgio Enterprises, Inc.

William A. Delgado, Willenken Wilson Loh & Lieb, LLP, Los Angeles, CA, for plaintiff-appellee Internet Specialties West, Inc.

Appeal from the United States District Court for the Central District of California Florence-Marie Cooper, District Judge, Presiding. D.C. No. CV-05-03296-FMC.

Before B. FLETCHER, ANDREW J. KLEINFELD, and JOHNNIE B. RAWLINSON, Circuit Judges.

OPINION

Betty B. FLETCHER, Circuit Judge:

Milon-Digiorgio Enterprises, Inc. ("MDE") appeals the district court's grant of an injunction against any further use of its registered domain name, "ISPWest.com." MDE asserts three challenges to the injunction: 1) that the jury's finding of trademark infringement, which gave rise to the injunction, was the result of an improper jury instruction; 2) that the district court erred in finding that the plaintiff's claim was not barred by laches; and 3) that the injunction is overbroad. We find that each of these claims fails, and affirm the district court's grant of the injunction.

I. CHRONOLOGY

Internet Specialties West ("Internet Specialties") and MDE are both internet service providers offering substantially similar services, including internet access, e-mail, and web-hosting. Internet Specialties uses the domain name "ISPWest.com", which it registered in May of 1996. MDE uses the domain name "ISPWest.com", which it registered in July of 1998.

Internet Specialties became aware of ISPWest's existence in late 1998. At that time, the companies did not offer equal services: Internet Specialties offered dial-up, DSL and T-1 internet access nationwide, whereas MDE offered only dial-up internet access and only in southern California. Internet Specialties' CEO testified that his company was not concerned about competition from MDE at that time, because it did not offer DSL and because the general market for internet technology start-ups was so volatile that most companies were expected to go out of business.

MDE expanded to nation-wide service in 2002, and began offering DSL in mid-2004. Both parties agree that the shift from supplying dial-up to supplying DSL was a "natural and gradual technological evolution" which was necessary for MDE to stay in business. However, this evolution triggered action by Internet Specialties. In 2005, after giving MDE a cease-and-desist letter, Internet Specialties brought suit alleging that MDE's use of the name "ISPWest" constituted trademark infringement in violation of the Lanham Act, 15 U.S.C. § 1125(a)(1).¹

The trial was bifurcated. In the first phase, the jury found that MDE had infringed on Internet Specialties' trademark, but found no damages from the infringement. In the second phase, the district court ruled that MDE did not have a laches defense to the action. Accordingly, the court issued an injunction against the use of the name ISPWest.

MDE moved for a new trial that the district court denied. MDE appeals the jury's findings, the district court's findings, and the scope of the injunction.

II. JURISDICTION

The district court had jurisdiction pursuant to 28 U.S.C. § 1331 and § 1338. The district court entered its Judgment and Permanent Injunction on November 14, 2006. The district court denied MDE's motion for a new trial on December 18, 2006. The Notice of Appeal was timely filed on January 17, 2007. This court has jurisdiction under 28 U.S.C. § 1291.

III. ANALYSIS

A. Jury Instruction 18.15

First we consider MDE's contention that jury instruction 18.15 was improper and prejudiced the jury in favor of Internet Specialties on its trademark infringement claim. We review de novo a district court's statement of the law, but its formulation of the instructions for abuse of discretion. Medtronic, Inc. v. White, 526 F.3d 487, 493 (9th Cir.2008) ("We review de novo whether the instructions misstated the law. We review a district court's formulation of jury instructions in a civil case for abuse of discretion.") (internal quotation marks omitted). We hold that instruction 18.15 correctly states the law and is appropriately formulated.

Jury instruction 18.15 followed the Model Civil Instructions by identifying the elements of trademark infringement, and by listing the eight Sleekcraft factors under the element of likelihood of confusion. See, e.g., AMF Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir.1979). After listing these factors, however, 18.15 departed from the Model Instructions by stating the following:

In an Internet case such as this one, the law considers three of these factors to be of greatest importance: (i) similarity of plaintiff's and defendant's mark; (ii) relatedness of services; and (iii) simultaneous use of the Internet as a marketing channel.

Therefore, if you find that the names "ISWest" and "ISPWest" are confusingly similar, and that the services offered by the plaintiff and defendant are related, and that both the plaintiff and the defendant use the Internet as a marketing channel, then you should find that the plaintiff has proven there is a likelihood of confusion as I have instructed you unless you find that the remaining factors weigh strongly in the defendant's favor.

This instruction is an accurate reflection of the law of our circuit, which places greater import on the "Internet Troika" factors in internet cases. Interstellar Starship Svcs., Ltd. v. Epix, Inc., 304 F.3d 936, 942 (9th Cir.2002); GoTo.com, Inc. v. Walt Disney Co., 202 F.3d 1199, 1205 (9th Cir. 2000). The instruction did not, as MDE contends, mislead the jury as to the source of these factors; the phrase "three of these factors" clearly refers to the eight Sleekcraft factors discussed immediately prior to the sentence at issue. Finally, the phrase "as I have instructed you", taken in context, was not an attempt to direct the jury to find for the plaintiff. Instead, it merely refers back to the judge's preceeding instructions on the likelihood of confusion.

Therefore, we reject MDE's claim that jury instruction 18.15 was improper. Accordingly, we do not need to consider Internet Specialties' assertion that MDE failed to preserve this issue for appeal.

B. Laches

Next, we turn to whether the district court erred in determining that laches did not bar Internet Specialties' trademark infringement claim. Laches is an equitable defense to Lanham Act claims. GoTo.Com, 202 F.3d at 1209. This defense embodies the principle that a plaintiff cannot sit on the knowledge that another company is using its trademark, and then later come forward and seek to enforce its rights. Grupo Gigante S.A. De C.V. v. Dallo & Co., 391 F.3d 1088, 1102-03 (9th Cir.2004).

The test for laches is two-fold: first, was the plaintiff's delay in bringing suit unreasonable? Second, was the defendant prejudiced by the delay? Jarrow Formulas, Inc. v. Nutrition Now, Inc., 304 F.3d 829, 838 (9th Cir.2002); Tillamook Country Smoker, Inc. v. Tillamook County Creamery Association, 465 F.3d 1102, 1108 (9th Cir.2006). As to whether Internet Specialties was diligent, we must first decide whether it filed suit within the applicable four-year statute-of-limitations period, thereby creating a presumption against laches.² See Jarrow, 304 F.3d at 835-36 ("If the Plaintiff filed suit within the analogous limitations period, the strong presumption is that laches is inapplicable. However, if suit is filed outside of the analogous limitations period, courts often have presumed that laches is applicable.") The parties dispute the correct starting date for the laches period. The district court found in favor of Internet Specialties, holding that the period started in 2004 when MDE began offering DSL, rather than in 1998 when Internet Specialties gained actual knowledge of MDE's existence.

There is an intracircuit conflict about the correct standard of review for a district court's determination of the starting date for laches. In Jarrow, the appellate court reviewed the laches determination as a whole, including the starting date, under a clear error/abuse of discretion hybrid (discussed below). 304 F.3d at 833-34; see also Grupo Gigante, 391 F.3d at 1102 (applying hybrid review from Jarrow to entire laches review). However, a more recent case held that a district court's decision on the narrow issue of the starting date is reviewed de novo, while giving deference to the ultimate decision on whether laches applied. Tillamook, 465 F.3d at 1109 ("In an analogous circumstance, the question of when the statute of limitations begins to run for an action at law is reviewed de novo. De novo review is thus appropriate here.") We need not resolve this inconsistency because we would reach the same result under either standard of review.

The limitations period for laches starts when the plaintiff "knew or should have known about its potential cause of action." Tillamook, 465 F.3d at 1108; see also Jarrow, 304 F.3d at 838. In this case, the potential cause of action was a trademark infringement claim. The essence of such a claim centers on the likelihood of confusion between two marks or products. GoTo.Com, Inc. v. Disney, 202 F.3d 1199, 1205 (9th Cir.2000) ("The likelihood of confusion is the central element of trademark infringement."); Brookfield Communications, Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1053 (9th Cir.1999) ("The core...