Maxnet Holdings, Inc. v. Maxnet, Inc., CIVIL ACTION NO. 98-3921 (E.D. Pa. 5/31/2000), CIVIL ACTION NO. 98-3921.

• Decision Date: 31 May 2000
• Docket Number: CIVIL ACTION NO. 98-3921.
• Parties: MAXNET HOLDINGS, INC. v. MAXNET, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

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MAXNET HOLDINGS, INC. v. MAXNET, INC.

CIVIL ACTION NO. 98-3921.

United States District Court, E.D. Pennsylvania.

May 31, 2000.

MEMORANDUM AND ORDER

HERBERT J. HUTTON, Judge.

Presently before the Court are Defendant Maxnet, Inc.'s ("Defendant") Motion for Summary Judgment on the Complaint and the Counterclaims (Docket No. 36), Plaintiff Maxnet Holdings, Inc.'s ("Plaintiff") response thereto (Docket No. 43), Defendant's reply thereto (Docket No. 55), Plaintiff's Motion for Summary Judgment (Docket No. 39), Defendant's response thereto (Docket No. 48), Plaintiff's reply thereto (Docket No. 49), Plaintiff's supplemental reply thereto (Docket No. 50), Plaintiff's Motion to Strike Defendant's Reply Memorandum and the Ference Declaration (Docket No. 56), Defendant's response thereto (Docket No. 59), Plaintiff's Motion for Withdrawal of Jury Trial Demand (Docket No. 42), Defendant's response thereto (Docket No. 52), Plaintiff's Motion for Rule 11 Sanctions (Docket No. 51), Defendant's response thereto (Docket No. 53), and the Declaration of Stanley D. Ference, III (Docket No. 53). For the reasons stated below, Defendant's Motion for Summary Judgment on the Complaint and the Counterclaims will be denied, Plaintiff's Motion for Summary Judgment will be denied, Plaintiff's Motion to Strike Defendant's Reply Memorandum and the Ference Declaration will be denied, Plaintiff's Motion for Withdrawal of Jury Trial Demand will be granted, Plaintiff's Motion for Rule 11 Sanctions will be denied.

I. BACKGROUND

This case is brought under the Lanham Trademark Act (the "Act"), Pennsylvania common law, and Pennsylvania statutory law. On July 28, 1998, Maxnet Holdings, Inc. filed a Complaint charging Maxnet, Inc. with violating 15 U.S.C. § 1114 and 1125(a), (c) (1994) of the Act, common law service mark infringement, common law unfair competition, common law unfair trade practices, trademark dilution in violation of Pennsylvania statute, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Act. The Court has jurisdiction over this matter pursuant to 15 U.S.C. § 1121(a) and 28 U.S.C. § 1338(a)-(b).

Plaintiff is a Delaware corporation and maintains its corporate headquarters in South Florida. The record is unclear as to the corporate status and domicile of Defendant.¹ Nevertheless, as times pertinent to this lawsuit, Defendant was a Pennsylvania corporation. Defendant is a publicly traded corporation, and is an Internet marketing company. Plaintiff is a private holding company.

The instant controversy concerns the ownership and use of the MAXNET mark. MAXNET is a registered trademark of Maxnet Systems, Inc. ("Maxnet Systems"). Maxnet Systems is a privately held operating company of Plaintiff that was created when Maxnet Communication Systems, Inc. was acquired by H.I.G. Capital Management. Maxnet Systems is an enterprise network engineering company that supports mission-critical building and campus networks, wide area networks, and metropolitan area networks.

Plaintiff possesses federal Certificate of Registration No. 2,098,687 for the service mark MAXNET. Plaintiff registered the MAXNET mark on September 23, 1997. While the mark was originally assigned to Maxnet Communications Systems, Inc., that company assigned to Plaintiff all right, title, and interest in the MAXNET mark. As early as July 1, 1990, Plaintiff used the MAXNET mark for the installation, design, and maintenance of computer networking systems.

Using the MAXNET mark, Defendant has advertised and offered for sale goods and/or services in the United States and within the Eastern District of Pennsylvania. Said goods and services relate to computers and the computer industry, especially as they relate to the Internet. Defendant's stock is registered with the NASDAQ and trades under the ticker symbol MXNT.

On October 1, 1997, Defendant issued a press release which stated that it "had begun the process of choosing a new name for" Maxnet. (Compl., Ex. B). The press release stated that because Plaintiff filed an application for a service mark, Defendant "agreed to change its name and . . . notify the public, its clients, and shareholders when a decision is reached" regarding Defendant's new corporate name. (Compl., Ex. B). While Defendant eventually changed its name to Maxplanet Corporation, said name change was not executed until July 1999. Approximately ten months later, in or about August 1998, Plaintiff mailed to Defendant a draft of the Complaint which Plaintiff later filed to commence this lawsuit. Prior to Defendant's receipt of the draft complaint, representatives of each party spoke about, inter alia, Defendant's use of the MAXNET mark and the fact that both companies operate in the computer industry.

In or about July 1998, a "spam e-mail"² of unknown origin was widely distributed. It discussed Defendant's stock and potential profitability.³ The distribution of the spam e-mail resulted in hundreds of people contacting Plaintiff, via both e-mail and the telephone, regarding stock sold under the MXNT ticker symbol. For example, in July and August 1998, Plaintiff received over 200 e-mails concerning the sale of stock under the MXNT ticker symbol. Plaintiff also received approximately fifty phone calls regarding the sale of stock under the MXNT ticker symbol. Plaintiff not only responded to many of these queries, it ultimately hired a public relations person to respond to the inquiries generated by the spam e-mail and Defendant's use of the MXNT ticker symbol.

On July 30, 1998, Plaintiff issued a press release which discussed, inter alia, its lawsuit against Defendant. (See Def.'s Mot. for Summ. J., Ex. A). Several months after the press release was disseminated, Defendant filed counterclaims against Plaintiff. Portions of the language contained therein are the focus of Defendant's defamation counterclaim. Defendant also brought seven additional counterclaims against Plaintiff under federal and Pennsylvania law.

II. DISCUSSION

A. The Parties' Summary Judgment Motions

Both Plaintiff and Defendant have pending before this court summary judgment motions. Plaintiff's Motion seeks the following relief: (1) summary judgment in favor of each of its claims; (2) the award of attorneys' fees and costs pursuant to 15 U.S.C. § 1117; and (3) an injunction against Defendant's further use of the MAXNET name. Defendant's Motion seeks the following relief: (1) summary judgment in its favor on Plaintiff's claims; and (2) summary judgment in its favor on its counterclaims. The Court hereafter considers each party's summary judgment motion.

1. Summary Judgment Standard

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party moving for summary judgment has the initial burden of showing the basis for its motion. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Ultimately, the moving party bears the burden of showing that there is an absence of evidence to support the nonmoving party's case. See id. at 325. Once the movant adequately supports his or her motion pursuant to Rule 56(c), the burden shifts to the nonmoving party to go beyond the mere pleadings and present evidence through affidavits, depositions, or admissions on file to show that there is a genuine issue for trial. See id. at 324. A genuine issue is one in which the evidence is such that a reasonable jury could return a verdict for the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2509 (1986). A fact is "material" only if it might affect the outcome of the suit under applicable rules of law. See id.

When deciding a motion for summary judgment, a court must draw all reasonable inferences in the light most favorable to the nonmovant. See Big Apple BMW, Inc. v. BMW of N. Am., Inc., 974 F.2d 1358, 1363 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993). Moreover, a court may not consider the credibility or weight of the evidence in deciding a motion for summary judgment, even if the quantity of the moving party's evidence far outweighs that of its opponent. See id. Nonetheless, a party opposing summary judgment must do more than rest upon mere allegations, general denials, or vague statements. See Trap Rock Indus., Inc. v. Local 825, 982 F.2d 884, 890 (3d Cir. 1992). The court's inquiry at the summary judgment stage is the threshold inquiry of determining whether there is need for a trial — that is whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that a one party must prevail as a matter of law. See Anderson, 477 U.S. at 250-52. If there is sufficient evidence to reasonably expect that a jury could return a verdict in favor of plaintiff, that is enough to thwart imposition of summary judgment. See id. at 248-51.

a. Defendant's Motion for Summary Judgment

It is appropriate to commence this discussion with the consideration of Plaintiff's response to Defendant's Motion for Summary Judgment. Plaintiff argues that Defendant's Motion violates Rule 11 of the Federal Rules of Civil Procedure for the following three reasons: (1) Defendant's Motion fails to provide a single fact and contains only speculative statements and attorney argument; (2) Defendant's Motion fails to provide case law in support of its Motion; and (3) Defendant seeks summary judgment against a party that was previously dismissed from this suit.⁴ (See Pl.'s Mem. of Law Opposing Def.'s Mot. for Summ. J. at 2). For these reasons alone, Plaintiff argues that Defendant's Motion must be denied. Additionally, Plaintiff argues that Defendant's Motion fails to raise a genuine issue of material fact. Plaintiff also contends that it should be awarded fees and costs...