J.K. Harris & Company, LLC v. Kassel
| Decision Date | 28 March 2003 |
| Docket Number | No. 02-0400 CW.,02-0400 CW. |
| Citation | 253 F.Supp.2d 1120 |
| Court | U.S. District Court — Northern District of California |
| Parties | J.K. HARRIS & COMPANY, LLC, a South Carolina limited liability company, Plaintiff, v. Steven H. KASSEL, an individual; and Firse Tax, Inc., a California Corporation, d/b/a Taxes.com, Defendants. |
William Silas Farmer, Jr., Robert S. Lawrence, Collette & Erickson LLP, San Francisco, CA, for Plaintiff.
James B. Hicks, Ervin, Ellen S. Kornblum, Heather L. McCloskey, Cohen & Jessup LLP, Beverly Hills, CA, Fred von Lohmann, The Electronic Frontier Foundation, San Francisco, CA, for Defendants.
ORDER GRANTING RECONSIDERTION AND AMENDING ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S APPLICATION FOR A PRELIMINARY INJUNCTION
Plaintiff J.K. Harris & Company, LLC moved for a temporary restraining order (TRO) and then a preliminary injunction enjoining Defendants from 1) using the trade name "J.K. Harris" on Defendants' "taxes.com" web site; 2) publishing defamatory, untrue or misleading information about Plaintiff; 3) using HTML code and computer programming techniques to divert Internet users looking for Plaintiffs web site to Defendants' web site; and 4) using any editorial position at Internet directories to promote Defendants' business and interfere with Plaintiffs business. The Court granted Plaintiffs request for a TRO and then, in an Order dated March 22, 2002, the Court granted in part and denied in part Plaintiffs motion for a preliminary injunction. The Court enjoined Plaintiff from "using more of Plaintiffs trade name than is reasonably necessary to identify that it is Plaintiffs services being described" and from making or disseminating certain identified allegedly false statements. March 22, 2002 Order at 21-22. Defendants then requested that they and amicus curie the Electronic Frontier Foundation (EFF) be granted leave to file a motion for reconsideration. The Court granted Defendants' request as to the issues raised by EFF's brief in support of Defendants' request for reconsideration. After considering all of the papers filed by the parties and by the amicus curie, the Court now GRANTS Defendants' motion for reconsideration. The Court VCATES its March 22, 2002 Order and substitutes this Order. Specifically, the Court withdraws its prior analysis of New Kids on the Block v. News Am. Publ'g Co., 971 F.2d 302 (9th Cir.1992) located on pages 10 to 12 of the Court's March 22, 2002 Order and replaces it with a modified analysis located on pages 11 to 13 of the current Order. The Court also withdraws as moot its prior discussion of initial interest confusion located on pages 12 to 14 of the March 22, 2002 Order. Finally, the Court modifies the scope of preliminary injunctive relief in light of its new analysis.
Plaintiff claims to be the largest tax representation and negotiation company in the United States. It specializes in negotiating with the IRS to eliminate or reduce assessed tax liability and to work out favorable payment terms. Declaration of Monica Linder (Linder Dec.), ¶ 4. Defendants are direct competitors with Plaintiff in the business of tax representation. Id. 115.
Both Plaintiff and Defendants advertise their services on the Internet. Plaintiffs universal resource locator (URL) is www.jkharris.com. Defendants' URL is www.taxes.com. Defendants have published on their web site unfavorable information about Plaintiff. Prior to the issuance of the temporary restraining order in this case, Defendants' web site contained a page entitled "JK Harris Employees Tell of Wrongdoing While Complaints Pile Up." On this page, Defendants describe a federal investigation of Plaintiff, criticize Plaintiffs business practices, and republish anonymous statements about Plaintiff from individuals identified as former customers or former employees of Plaintiff. Defendants also solicit information critical of Plaintiff for publication on their web site. Plaintiff contends that numerous statements attributable both to Defendants and to those anonymously contributing to Defendants' web site are false and misleading.
Many consumers looking for services on the Internet use a "search engine" to identify the URL of the company they are seeking. When a user enters a name into a search engine, the search engine provides a list of web sites that contain that name and, presumably, the information sought by the user. Plaintiff alleges that Defendants have manipulated the web site architecture of taxes.com so that when a consumer searches for Plaintiffs web site, Defendants' web site is among those web sites displayed. Specifically, Plaintiff contends that this was done by a) "creating keyword density" using Plaintiffs trade name and permutations thereof; b) creating "header Tags" and "underline Tags" around sentences that use Plaintiffs trade name; c) using Plaintiffs trade name as a "keyword" in numerous areas of the web site; d) using various "hot links" to web sites with information about Plaintiff. Declaration of Tony D. Spencer (Spencer Dec.) H 5; Supplemental Declaration of Tony D. Spencer (Spencer Supp. Dec.) 114.
On October 23 and 24, 2001, Plaintiff conducted a series of searches for the name "JK Harris" on eleven different Internet search engines. In one of eleven searches, Defendants' web site was the first one listed. On most of the searches, a link to Defendants' web site under the title "Complaints about JK Harris Pile Up" was listed among the first ten links. On March 11, 2002, Plaintiff conducted an identical search. Defendants' web site appeared among the first ten web sites listed on all eleven search engines.
Defendant Kassel is an editor of the Open Directory Project (ODP). The ODP produces a comprehensive directory of web sites by relying on numerous volunteer editors who rank and decide which web sites are useful resources for the web public.
"The basis for injunctive relief in the federal courts has always been irreparable injury and the inadequacy of legal remedies." Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S.Ct. 1798, 72 L.Ed.2d 91 (1982). To establish entitlement to a preliminary injunction, a moving party must demonstrate either:
(1) a combination of probable success on the merits and the possibility of irreparable harm, or
(2) that there exist serious questions regarding the merits and the balance of hardships tips sharply in its favor.
Rodeo Collection, Ltd. v. West Seventh, 812 F.2d 1215, 1217 (9th Cir.1987); California Cooler, Inc. v. Loretto Winery, Ltd., 774 F.2d 1451, 1455 (9th Cir.1985); see also William Inglis & Sons Baking Co. v. ITT Continental Baking Co., 526 F.2d 86, 88 (9th Cir.1975); County of Alameda v. Weinberger, 520 F.2d 344, 349 (9th Cir. 1975). The test is a "continuum in which the required showing of harm varies inversely with the required showing of meritoriousness." Rodeo Collection, 812 F.2d at 1217 ). To overcome a weak showing of merit, a plaintiff seeking a preliminary injunction must make a very strong showing that the balance of hardships is in its favor. Rodeo Collection, 812 F.2d at 1217.
Plaintiff seeks injunctive relief under several distinct legal theories. Plaintiff asserts a claim under the Lanham Act both because Defendants' conduct creates "initial interest confusion" among consumers looking for Plaintiffs services and because, Plaintiff contends, Defendants have published false and misleading representations of fact on their web site. 15 U.S.C. § 1125(a).
Plaintiff also bases its request for injunctive relief on alleged violations of State laws prohibiting unfair competition and false and misleading advertising. See Cal. Bus. & Prof.Code §§ 17200,17500.
Lastly, Plaintiff brings a claim for defamation, contending that the false statements published on Defendants' web site are injurious to Plaintiffs reputation.
Section 43 of the Lanham Act provides:
Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol or device, or any combination thereof, of any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which (A) is likely to cause confusion or to cause mistake or to deceive as to the affiliation, connection or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person ... shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.
15 U.S.C. § 1125.
The Ninth Circuit has held that "initial interest confusion" is actionable under section 43 of the Lanham Act. Initial interest confusion "occurs when a consumer is lured to a product by its similarity to a known mark, even though the consumer realizes the true identity and origin of the product before consummating a purchase." Eli Lilly & Co. v. Natural Answers, Inc., 233 F.3d 456, 464 (7th Cir.2000); see also Brookfield Communications, Inc. v. West Coast Entm't Corp., 174 F.3d 1036, 1062 (9th Cir.1999).
In Brookfield Communications, the court enjoined the defendant from using the plaintiffs trademarked term in its HTML code. Although HTML code is not visible to consumers and, therefore, is not likely to cause consumer confusion, the use of trademarked terms in a web site's hidden code "will still result in what is known as initial interest confusion." Brookfield Communications, 174 F.3d at 1062.1 The court reasoned that
Web surfers looking for Brookfield's "MovieBuff' products who...
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