Freecycle Network, Inc. v. Oey

• Citation: 505 F.3d 898
• Decision Date: 26 September 2007
• Docket Number: No. 06-16219.,06-16219.
• Parties: The FREECYCLE NETWORK, INC., Plaintiff-Appellee, v. Tim OEY; Jane Doe Oey, Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

505 F.3d 898

The FREECYCLE NETWORK, INC., Plaintiff-Appellee, v. Tim OEY; Jane Doe Oey, Defendants-Appellants.

No. 06-16219.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted August 15, 2007.

Filed September 26, 2007.

Donald M. Falk, Mayer, Brown, Rowe & Maw LLP, Palo Alto, CA, for the appellants.

Paul J. Andre, Perkins Coie LLP, Menlo Park, CA, for appellee.

Bruce Adelstein, The Law Offices of Bruce Adelstein, Los Angeles, CA, David Post, I. Herman Stern Professor, James E. Beasley School of Law, Philadelphia, PA, for Amici James Boyle, Lauren Gelman, Lawrence Lessig, Declan McCullagh, David Post, Glenn Harlan Reynolds, Martin Schwimmer, Jimmy Wales, and Jonathan Zittrain, in support of the appellants.

Mark A. Lemley, William H. Neukom Professor, Stanford Law School, Palo Alto, CA, for Amici 38 Intellectual Property Law Professors and the Electronic Frontier Foundation, in support of the appellants.

Appeal from the United States District Court for the District of Arizona; Raner C. Collins, District Judge, Presiding, D.C. No. CV-06-00173-RCC.

Before: DIARMUID F. O'SCANNLAIN, HAWKINS, and KIM McLANE WARDLAW, Circuit Judges.

HAWKINS, Circuit Judge:

Tim Oey ("Oey") appeals a preliminary injunction preventing him "from making any comments that could be construed as to disparage upon [The Freecycle Network]'s possible trademark and logo" and requiring that he "remove all postings from the [I]nternet and any other public forums that he has previously made that disparage [The Freecycle Network]'s possible trademark and logo."¹ The Freecycle Network, Inc. v. Oey, No. CV 06-173, Order at 5 (May 11, 2006) (emphasis added). We have jurisdiction under 28 U.S.C. § 1291 and, for the following reasons, vacate the injunction and remand.

I.

The Freecycle Network ("TFN") is a nonprofit Arizona corporation "dedicated to encouraging and coordinating the reusing, recycling, and gifting of goods." Through its website, http://www.freecycle.org, TFN coordinates the efforts of over 3,700 Freecycle groups worldwide. Via the local groups' webpages, individuals can post goods they no longer want. If another member wants the item offered, an exchange is arranged between the parties and the item thus avoids the landfill.

Although TFN claims to have consistently used the marks FREECYCLE and THE FREECYCLE NETWORK, and "The Freecycle Network" logo since May 2003 to refer to TFN, it also admits that it initially used the term "freecycle" and its various derivations (e.g., freecycling, freecycler) to refer more generally to the act of recycling goods for free via the Internet. In 2004, based on the advice of then-member Oey, TFN decided to more actively police its use of the term "freecycle" and to formally pursue trademark protection for it, filing a trademark registration application on August 27, 2004. Shortly thereafter, TFN instituted a strict usage policy, drafted by Oey, preventing use of the term "freecycle" in any sense other than to refer to TFN or TFN's services. On January 17, 2006, TFN's proposed mark was published for opposition in the Official Gazette. An opposition was filed the next day and the mark currently remains unregistered.²

A member of TFN since February 2004 and active in the corporation's early development, Oey initially supported TFN's claim to the FREECYCLE mark. Experiencing a change of heart and convinced that the term should remain in the public domain, Oey later urged TFN to abandon its efforts to secure the mark, conveying his feelings in an August 8, 2005, email to fellow TFN group moderators.³ In the following weeks, Oey made various statements on the Internet that TFN lacked trademark rights in "freecycle" because it was a generic term, and he encouraged others to use the term in its generic sense and to write letters to the United States Patent and Trademark Office ("PTO") opposing TFN's pending registration.

Not surprisingly, TFN took issue with Oey's views and, on September 16, 2005, asked him to sever ties with the company. In the ensuing months, Oey continued to make statements on the Internet challenging the validity of TFN's claimed trademark in the term "freecycle" and encouraging others to use the term in its generic sense.

In April 2006, TFN sued Oey, seeking an injunction and damages, alleging that Oey's statements constituted contributory trademark infringement and trademark disparagement under section 43(a) of the Lanham Act, 15 U.S.C. § 1125(a), as well as injurious falsehood, defamation, and intentional interference with a business relationship under Arizona law. The district court granted a preliminary injunction based solely on TFN's § 1125(a) claims, apparently conflating TFN's allegations of contributory trademark infringement and trademark disparagement. Oey timely appealed, and, on July 20, 2006, we stayed the district court's injunction pending the outcome of this appeal.

II.

We review a district court's grant of a preliminary injunction for an abuse of discretion. Perfect 10, Inc. v. Amazon.com, Inc., 487 F.3d 701, 713 (9th Cir.2007). A district court abuses its discretion in granting an injunction if its decision is based on "either an erroneous legal standard or clearly erroneous factual findings." Clear Channel Outdoor, Inc. v. City of Los Angeles, 340 F.3d 810, 813 (9th Cir.2003) (internal quotations and citations omitted). "A district court's decision is based on an erroneous legal standard if: (1) the court did not employ the appropriate legal standards that govern the issuance of a preliminary injunction; or (2) in applying the appropriate standards, the court misapprehended the law with respect to the underlying issues in the litigation." Id.

We have established two sets of criteria for evaluating a request for a preliminary injunction. Earth Island Inst. v. United States Forest Serv., 351 F.3d 1291, 1297 (9th Cir.2003).

Under the "traditional" criteria, a plaintiff must show (1) a strong likelihood of success on the merits, (2) the possibility of irreparable injury to plaintiff if preliminary relief is not granted, (3) a balance of hardships favoring the plaintiff, and (4) advancement of the public interest (in certain cases). Alternatively, a court may grant the injunction if the plaintiff demonstrates either a combination of probable success on the merits and the possibility of irreparable injury or that serious questions are raised and the balance of hardships tips sharply in his favor.

Id. at 1297-98 (internal quotations and citations omitted). Thus, under either criteria, where a plaintiff fails to even raise serious questions about its likelihood of success, an injunction may not issue.

III.

Although the district court correctly identified the "traditional" criteria for granting a preliminary injunction, it issued the injunction based solely on TFN's Lanham Act claims of trademark infringement and trademark disparagement. As we detail below, the district court's "likelihood of success" analysis did not adequately analyze the necessary elements for trademark infringement, see Clear Channel Outdoor, Inc., 340 F.3d at 813, and the district court "misapprehended the law" insofar as the Lanham Act contains no cause of action for trademark disparagement.

A) Trademark Infringement

The district court's order characterized TFN's § 1125(a) claims as allegations of "trademark infringement."⁴ To be liable for trademark infringement under § 1125(a), a person must (1) use in commerce (2) any word, false designation of origin, false or misleading description, or representation of fact, which (3) is likely to cause confusion or misrepresents the characteristics of his or another person's goods or services. 15 U.S.C. § 1125(a). "The core element of trademark infringement is the likelihood of confusion, i.e., whether the similarity of the marks is likely to confuse customers about the source of the products." Abercrombie & Fitch Co. v. Moose Creek, Inc., 486 F.3d 629, 633 (9th Cir.2007) (internal quotations omitted). We have identified eight nonexclusive factors relevant to evaluating likelihood of confusion. AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 348-49 (9th Cir. 1979).⁵ In its order, the district court did not mention, let alone analyze, these critical factors in evaluating TFN's likelihood of success on its trademark infringement claim. Rather, the district court simply concluded that: (1) TFN appears to have a legitimate mark; (2) Oey at one time acknowledged TFN's mark and sought to protect it; and (3) "after his separation from the organization, [Oey] began to publicly encourage the disparagement of the Freecycle trademark." Contrary to the district court's conclusion, these facts— even if true⁶—simply do not demonstrate that TFN has a likelihood of success on its § 1125(a) infringement claim.

As a threshold matter, Oey's actions likely did not constitute a "use in commerce," 15 U.S.C. § 1125(a)(1), as the record in this case does not indicate they were made to promote any competing service or reap any commercial benefit whatsoever. See 15 U.S.C. § 1127 (defining "use in commerce"); Mattel, Inc. v. MCA Records, Inc., 296 F.3d 894, 903 (9th Cir. 2002) ("[Trademark law's `use in commerce'] refers to a use of a famous and distinctive mark to sell goods [or services] other than those produced or authorized by the mark's owner."). Rather, based on his view that the term was generic, Oey simply expressed an opinion that TFN lacked trademark rights in the term "freecycle" and encouraged like-minded individuals to continue to use the term in its generic sense and to inform the PTO of their opinions.⁷

Furthermore, even if Oey's statements could somehow be construed to be a "use in commerce," such use was not likely to cause confusion, mistake, or deceive anyone as to the connection of Oey's services (or any other) with TFN. Id. § 1125(a)(1)(A). Although the district court did not examine the relevant Sleekcraft factors, our review of the...