Carnivale v. Staub Design, LLC

• Decision Date: 07 January 2013
• Docket Number: Civ. No. 08-764-SLR
• Parties: DAVID JOHN CARNIVALE, Plaintiff, v. STAUB DESIGN, LLC; JOHN STAUB; and DAVID STAUB; Defendants.
• Court: U.S. District Court — District of Delaware

DAVID JOHN CARNIVALE, Plaintiff,

v.STAUB DESIGN, LLC; JOHN STAUB; and DAVID STAUB; Defendants.

Civ. No. 08-764-SLR

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF DELAWARE

Dated: January 7, 2013

MEMORANDUM ORDER

At Wilmington this "1 th day of January, 2013, on remand from the United States Court of Appeals for the Third Circuit, having considered the parties' briefs on remand and the papers submitted therewith;

IT IS ORDERED that the clerk of court shall enter judgment in favor of plaintiff David John Carnivale and against defendants in the amount of $25,000, as follows:

1. Background. Plaintiff David John Carnivale ("plaintiff") filed a complaint against defendants Staub Design, LLC, John Staub, and David Staub (collectively, "defendants") in the United States District Court for the Eastern District of New York on May 30, 2007. (D.I. 1) The complaint alleges that defendants' use of the domain name "theaffordablehouse.com" violates the Anticybersquatting Consumer Protection Act ("ACPA"), codified as § 43(d) of the Lanham Act, 15 U.S.C. § 1125(d). (D.I. 1) The case was transferred to this court on October 10, 2008. (D.I. 27) 2. On March 31, 2010, this court granted in part and denied in part plaintiff's motion for summary judgment and denied defendants' cross-motion for summary judgment. (D.I. 57) The court found that plaintiff sufficiently proved his mark's distinctiveness and that defendants' domain name and plaintiff's mark are identical or confusingly similar, but the court determined that a fact finder should weigh the factors relevant to the bad faith inquiry. See Carnivale v. Staub Design, LLC, 700 F. Supp. 2d 660 (D. Del. 2010). After a bench trial on August 3, 2010, the court found that defendants used plaintiff's domain name in bad faith and defendants' wholesale use of plaintiff's mark in their domain name violated § 1125(d)(1)(B)(i) of the ACPA. See Carnivale v. Staub Design, LLC, 754 F. Supp. 2d 652 (D. Del. 2010). Specifically, the court found "that the first, second, third, fourth, fifth, and ninth factors [of § 1125(d)(1)(B)(i)] weigh in favor of bad faith, and the sixth, seventh, and eighth factors weigh against bad faith. Balancing these factors qualitatively in light of the circumstances in this case, the court concludes that the record supports plaintiff's contention that defendants acted in bad faith." Id. at 658. The court entered judgment for plaintiff and awarded damages in the amount of $25,000. Id. at 661.

3. On January 12,2011, defendants appealed this court's order on summary judgment and the judgment for plaintiff. (D.I. 72) On January 4, 2012, the Third Circuit reversed the judgment for plaintiff and remanded the case for further consideration of factors five and nine, "conclud[ing] that the District Court erred in evaluating factors five and nine, . . . [but] leav[ing] to the District Court the task of reanalyzing those factors and determining how any changes affect the overall balance of the factors in this case."Carnivale v. Staub Design, LLC, No. 11-1124, 456 Fed. App'x. 104, 108, 2012 WL 11214 (3d Cir. Jan. 4, 2012).

4. Legal Standard. To prevail under the ACPA, plaintiff must prove that defendants acted with a bad faith intent to profit from plaintiff's mark. 15 U.S.C. § 1125(d)(1).

In determining whether a person has a bad faith intent described under subparagraph (A), a court may consider factors such as, but not limited to--

. . .

(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;

. . . 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) of this section.

15 U.S.C. § 1125(d)(1)(B)(i) (emphasis added). In passing the ACPA, the Senate sought to prohibit those with a bad faith intent from trading on the goodwill associated with another's mark. S. Rep. No. 106-140, at 4 (1999). In evaluating the requisite bad faith intent, the statute sets forth balancing factors for courts to consider, but the Senate cautioned that "the presence or absence of any of these factors may not be determinative." Id. at 9; see, e.g., Mayflower Transit, LLC v. Prince, 314 F. Supp. 2d 362, 368 (D.N.J. 2004). "Courts must ultimately weigh the facts of each case and make a determination based on those facts whether or not the defendant registered, trafficked in, or used the domain name with bad-faith intent to profit from the goodwill ofthe mark of another." S. Rep. No. 106-140, at 10. The Third Circuit recognizes that applying these factors "is a holistic, not mechanical, exercise." Carnivale, 456 Fed. App'x. at 108 (citation omitted); Green v. Fornario, 486 F.3d 100, 106 (3d Cir. 2007). In the first appellate opinion evaluating the bad faith factors of the ACPA, the Second Circuit noted that the most important grounds for a decision "are the unique circumstances of [the] case, which do not fit neatly into the specific factors enumerated by Congress but may nevertheless be considered under the statute." Sporty's Farm LLC. v. Sportsman's Market, Inc., 202 F.3d 489, 499 (2d Cir. 2000); see also Mayflower Transit, 314 F. Supp. 2d at 368. Courts should also consider "any other elements of bad faith." Advance Magazine Publishers Inc. v. Vogue Int'l, 123 F. Supp. 2d 790, 799 (D.N.J. 2000).

5. The fifth factor evaluates "the person's intent to divert consumers." 15 U.S.C. § 1125(d)(1)(B)(i)(V). "As intent is rarely discernible directly, it must typically be inferred from pertinent facts and circumstances." Int'l Bancorp, LLC. v. Societe Des Baines De Mer Et Du Cercle Des Etrangers A Monaco, 192 F. Supp. 2d 467, 486 (E.D. Va. 2002). The wholesale inclusion of a mark in the disputed domain name implies a bad faith intent to divert customers from plaintiff's website. See id.

6. Plaintiff's website, affordablehouse.com, features the phrase, The Affordable House, in several places, lists plaintiff's book and house plans for sale, and offers help with specific projects or house plans. (DTX-9; DTX-31) Defendants admit to viewing plaintiff's website and noting the copyright. (D.I. 77 at 90:14-24, 131:13-22) Defendants then selected their domain name, theaffordablehouse.com. As this court previously discussed, defendants' knowing and wholesale inclusion of the mark THEAFFORDABLE HOUSE in the domain name implies that defendants sought to divert customers away from plaintiff's website. See Carnivale, 754 F. Supp. 2d at 660.

7. Defendants claim that their motivation and purpose for their website was to educate the public about a new building material, autoclaved aerated concrete ("AAC"). (D.I. 77 at 83:18-84:3) As previously discussed, defendants could have accomplished this education by using a .org website, but instead chose to register their website as a .com. See Carnivale, 754 F. Supp. 2d at 659-60 & n.2. Defendants admit that they were also interested in remodeling houses and that their company Staub Design, LLC, was intended to make profits. (D.I. 77 at 114:24-115:2, 124:14-15) Defendants tried unsuccessfully in their testimony to separate theaffordablehouse.com website - for teaching purposes - with Staub Design, LLC - for business purposes. (D.I. 77 at 112:25-116:3) Namely, even their earliest website design contained their names and contact information and used the slogan "The Affordable House - a project of Staub Design LLC," tying together the website and the business.¹ (PTX-34)

8. There is no dispute that plaintiff's website offered house plans for sale. (DTX-31) Customers seeking to build a new home would likely be customers for a new building material, a new way to build houses and house plans to build those houses, allof which defendants claim to be interested in and which Staub Design, LLC provides. Defendants admit that they found plaintiff's website at affordablehouse.com and then proceeded to use the domain name theaffordablehouse.com. (D.I. 77 at 90:18-24; PTX-34; DTX-1) The most logical conclusion is that defendants sought to profit from an older more established website, one whose customers were shopping for house plans or looking at new housing options.² For the forgoing reasons, the court again concludes that the fifth factor weighs in favor of bad faith.

9. The ninth factor involves the extent to which the mark incorporated in the registrant's domain name registration is or is not distinctive and famous. See 15 U.S.C. § 1125(d)(1)(B)(i)(IX). This court deemed the mark inherently distinctive in its summary judgment decision. See Carnivale, 700 F. Supp. 2d at 664-67. Plaintiff's trademark registration was applied for and "accepted on the basis of § 1(a) of the Lanham Act, the actual use in commerce provision, with no reliance on § 2(f), the acquired distinctiveness/secondary meaning provision," and plaintiff presented evidence of continuous use since 1996. Id. at 665-66. In line with the Third Circuit's instruction to evaluate "how strong or distinctive [plaintiff]'s mark was," this court now turns its attention to the factors from § 1125 (c)(2)(A):

(i) The duration, extent, and geographic reach of advertising and publicity of the mark, whether advertised or publicized by the owner or third parties.

(ii) The amount, volume, and geographic extent of sales of goods or services offered under the mark.

(iii) The extent of actual recognition of the mark.

(iv) Whether the mark was registered under the Act of March 3, 1881, or the Act of February 20, 1905, or on the principal register.

10. This court partly evaluated these factors in its summary judgment decision under the analysis used in Shields v. Zuccarini, 254 F.3d 476, 482 (3d Cir. 2001), which applied the statutory factors from §...