Bosley Medical Institute, Inc. v. Kremer

• Decision Date: 04 April 2005
• Docket Number: No. 04-55962.,04-55962.
• Citation: 403 F.3d 672
• Parties: BOSLEY MEDICAL INSTITUTE, INC., a Delaware corporation, Plaintiff-Appellant, and Bosley Medical Group, S.C., an Illinois corporation, Plaintiff, v. Michael Steven KREMER, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 672

403 F.3d 672

BOSLEY MEDICAL INSTITUTE, INC., a Delaware corporation, Plaintiff-Appellant, and Bosley Medical Group, S.C., an Illinois corporation, Plaintiff, v. Michael Steven KREMER, Defendant-Appellee.

No. 04-55962.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted March 8, 2005.

Filed April 4, 2005.

COPYRIGHT MATERIAL OMITTED

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.

Appeal from the United States District Court for the Southern District of California, William Q. Hayes, District Judge, Presiding. D.C. No. CV-01-01752-WQH.

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 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 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 the owner's good will against the sale of another's...