Skydive Arizona, Inc. v. Quattrocchi

• Citation: 673 F.3d 1105,12 Cal. Daily Op. Serv. 2930,2012 Daily Journal D.A.R. 3270,2012 Trade Cases P 77826,102 U.S.P.Q.2d 1046
• Decision Date: 12 March 2012
• Docket Number: Nos. 10–16099,10–16196.,s. 10–16099
• Parties: SKYDIVE ARIZONA, INC., Plaintiff–Counter–Defendant–Appellee, v. Cary QUATTROCCHI; Ben Butler, Defendants–Appellants,CASC, Inc.; USSO, LLC, dba 1800SkyRide, aka 1800Skyride.com; Atlanta SC, Inc. aka Atlanta Skydiving Center; IGOVincent, Inc., a Georgia Corporation, Defendants–Counter–Claimants–Appellants, v. Larry Hill, Third–Party–Defendant–Appellee.Skydive Arizona, Inc., Plaintiff–Counter–Defendant–Appellant, v. Cary Quattrocchi; Ben Butler, Defendants–Appellees,CASC, Inc.; USSO, LLC, dba 1800SkyRide, aka 1800Skyride.com; Atlanta SC, Inc.; IGOVincent, Inc., a Georgia Corporation, Defendants–Counter–Claimants–Appellees, v. Larry Hill, Third–Party–Defendant.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

102 U.S.P.Q.2d 1046

12 Cal. Daily Op. Serv. 2930

2012 Daily Journal D.A.R. 3270

2012-1 Trade Cases P 77,826

673 F.3d 1105

SKYDIVE ARIZONA, INC., Plaintiff–Counter–Defendant–Appellee,

v.Cary QUATTROCCHI; Ben Butler, Defendants–Appellants,CASC, Inc.; USSO, LLC, dba 1800SkyRide, aka 1800Skyride.com; Atlanta SC, Inc. aka Atlanta Skydiving Center; IGOVincent, Inc., a Georgia Corporation, Defendants–Counter–Claimants–Appellants,

v.Larry Hill, Third–Party–Defendant–Appellee.Skydive Arizona, Inc., Plaintiff–Counter–Defendant–Appellant,

v.Cary Quattrocchi; Ben Butler, Defendants–Appellees,CASC, Inc.; USSO, LLC, dba 1800SkyRide, aka 1800Skyride.com; Atlanta SC, Inc.; IGOVincent, Inc., a Georgia Corporation, Defendants–Counter–Claimants–Appellees,

v.Larry Hill, Third–Party–Defendant.

Nos. 10–16099

10–16196.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Jan. 11, 2012.Filed March 12, 2012.

Daniel H. Brombert (argued) and Timothy A. Butler, Quinn Emanuel Urquhart & Sullivan, LLP, Redwood Shores, CA, for the defendants-appellants.

Sid Leach (argued), Martha E. Gibbs, and Monica A. Limon–Wynn, Snell & Wilmer, LLP, Phoenix, AZ, for the plaintiff-appellee.

Appeal from the United States District Court for the District of Arizona, Mary H. Murguia, District Judge, Presiding. D.C. No. 2:05–cv–02656–MHM.Before: JOHN T. NOONAN, JR., and MILAN D. SMITH, JR., Circuit Judges, and JED S. RAKOFF, Senior District Judge.^*Opinion by Judge MILAN D. SMITH, JR.; Partial Concurrence and Partial Dissent by Judge NOONAN.

OPINION

M. SMITH, Circuit Judge:

Skydive Arizona owns and operates one of the largest skydiving centers in the world. Defendants Butler, Quattrocchi, Atlanta SC, Inc., CASC, Inc., and IGOVincent, Inc. (collectively, SKYRIDE) operate an Internet and telephone-based advertising service, making skydiving arrangements for customers, and issuing certificates that can be redeemed at various drop zones around the country. Skydive Arizona sued SKYRIDE for false advertising, trademark infringement and cybersquatting. Following partial summary judgment and a trial, a jury awarded Skydive Arizona $1 million in actual damages for false advertising, $2.5 million in actual damages for trademark infringement, $2,500,004 in profits resulting from the trademark infringement, and $600,000 for statutory cybersquatting damages. The district court denied SKYRIDE's motions to reduce the jury verdict, for judgment notwithstanding the verdict, for remittitur, and for a new trial, and instead doubled Skydive Arizona's $1 million actual damages award for false advertising and $2.5 million award for trademark infringement. The final judgment totaled $600,000 in statutory damages, $7 million in enhanced actual damages, and $2,500,004 in disgorged profits, plus attorney fees. The district court also entered a permanent injunction against SKYRIDE's operations in Arizona. SKYRIDE now appeals the district court's grant of partial summary judgment, the jury's actual damages and profits awards, and the district court's damages enhancement. Skydive Arizona cross-appeals the district court's limitation of the permanent injunction to Arizona, and seeks a nationwide injunction against SKYRIDE. We have jurisdiction under 28 U.S.C. § 1291, and we affirm as to all claims, except for the doubling of actual damages.

FACTUAL AND PROCEDURAL BACKGROUND

Appellee Skydive Arizona, Inc., located in Eloy, Arizona, has operated under the “SKYDIVE ARIZONA” mark since 1986, and is now one of the most well known skydiving centers in the world. Skydive Arizona hosts between 145,000 and 160,000 skydives each year. It also furnishes its planes and personnel for skydiving events in 30 states outside of Arizona. Skydive Arizona is widely known in the skydiving community, and has hosted national skydiving competitions. Skydive Arizona has also been featured on multiple television programs, and advertises extensively on the Internet, as well as in national and international skydiving magazines, Phoenix-area hotels, the Yellow Pages, and in the University of Arizona's and Arizona State University's college newspapers.

SKYRIDE acts essentially as a third-party advertising and booking service for skydiving centers. As advertisers, they provide national phone and Internet promotional services to various individual drop zones, in exchange for a fee. When SKYRIDE acts as a booking agent, customers pay SKYRIDE, either online or over the phone, for a certificate that can be redeemed at various drop zones around the country. Upon redemption, SKYRIDE is expected to pay the skydiving facility used by the customer.

As part of their advertising and booking business, SKYRIDE owned and operated numerous websites describing skydiving opportunities in multiple locations, without reference to specific drop zones. However, SKYRIDE also owned and operated numerous websites specifically referencing Arizona, including PhoenixSkydiving, ScottsdaleSkydiving, TempeSkydiving, ChandlerSkydiving, MesaSkydiving, GlendaleSkydiving, GilbertSkydiving, PeoriaSkydiving, TucsonSkydiving, YumaSkydiving, and FlagstaffSkydiving. SKYRIDE also registered numerous domain names for use in connection with the SKYRIDE business, including skydivearizona.net, arizonaskydive.com, and skydivingarizona.com. Skydive Arizona neither advertised with, nor accepted certificates from, SKYRIDE.

On August 30, 2005, Skydive Arizona filed a complaint against SKYRIDE, asserting claims of (1) False Designation or Origin and Unfair Competition, under Section 43(a) of the Lanham Act, 15 U.S.C. § 1115(a) (false advertising), (2) Trademark Infringement, under 15 U.S.C. § 1125(a)(trademark infringement), and (3) False Designation of Origin and Unfair Competition, under Section 43(d) of the Lanham Act, 15 U.S.C. § 1125(d) (cybersquatting). Skydive Arizona alleged that SKYRIDE misled consumers wishing to skydive in Arizona through false advertisements on their websites that misrepresented SKYRIDE's ownership of skydiving facilities in Arizona. In reality, SKYRIDE neither owned nor operated skydiving facilities in Arizona, but made a strategic business decision to represent ownership because they thought it would attract more customers. Skydive Arizona further claimed that SKYRIDE sold skydiving certificates by trading upon Skydive Arizona's goodwill and misleading customers into believing that Skydive Arizona would accept SKYRIDE certificates.

On February 2, 2009, the district court entered partial summary judgment in favor of Skydive Arizona for the false advertising claim under section 43(a) of the Lanham Act. On October 2, 2009, a jury found in favor of Skydive Arizona on the remaining claims. Specifically, the jury awarded $1 million in damages for willful false advertising, under section 43(a) of the Lanham Act, $2.5 million in actual damages for willful trademark infringement, along with $2,500,004 in lost profits, and statutory damages of $100,000 each for six violating domain names, under section 43(d).

In its March 31, 2010 order denying SKYRIDE's motions for a new trial, reduction of jury award, remittitur, and judgment notwithstanding the verdict, the district court doubled the actual damages awards for false advertising and trademark infringement, resulting in $5 million for trademark infringement and $2 million for false advertising. It declined to increase the award of profits.

The district court entered final judgment on April 16, 2010. Both parties timely appealed.

STANDARD OF REVIEW AND JURISDICTION

We review summary judgment rulings de novo. See, e.g., Fortune Dynamic, Inc. v. Victoria's Secret Stores Brand Mgm't., 618 F.3d 1025, 1031 (9th Cir.2010).

Because of the equitable discretion that district courts exercise over monetary relief under the Lanham Act, we review such rulings for abuse of discretion. See, e.g., Rolex Watch, U.S.A., Inc. v. Michel Co., 179 F.3d 704, 712 (9th Cir.1999). Correspondingly, we review orders upholding jury damages awards and denying new trials for abuse of discretion. Tortu v. Las Vegas Metro. Police Dep't, 556 F.3d 1075, 1086–87 (9th Cir.2009). A ruling constitutes an abuse of discretion if the record contains no evidence rationally supporting the conclusion. See, e.g., Lindy Pen Co., Inc. v. Bic Pen Corp., 982 F.2d 1400, 1405 (9th Cir.1993). In reviewing whether a district court abused its discretion in denying a motion for remittitur or new trial, we decide whether the jury's award was supported by reasonable inferences and assessments, based on substantial evidence in the record. La Quinta Corp. v. Heartland Props. LLC, 603 F.3d 327, 342 (9th Cir.2010).

We review the scope of an injunction for abuse of discretion. See Internet Specialties W., Inc. v. Milon–Digiorgio Enters., Inc., 559 F.3d 985, 993 (9th Cir.2009).

DISCUSSION

I. Partial Summary Judgment for False Advertising

We first consider whether the district court erred in granting partial summary judgment to Skydive Arizona on its false advertising claim. There are five elements to a false advertising claim under Section 43(a) of the Lanham Act:

(1) a false statement of fact by the defendant in a commercial advertisement about its own or another's product;

(2) the statement actually deceived or has the tendency to deceive a substantial segment of its audience;

(3) the deception is material, in that it is likely to influence the purchasing decision;

(4) the defendant caused its false statement to enter interstate commerce; and

(5) the plaintiff has been or is likely to be injured as a result of the false statement, either by direct diversion of sales from itself to defendant or by a lessening of the goodwill associated with its products.

15 U.S.C. § 1125(a)(1)(B); Southland Sod Farms v. Stover Seed Co., 108 F.3d 1134, 1139 (9th Cir.1997). Although materiality in false advertising claims is “typically” proven through consumer surveys, nothing in the Lanham Act, nor under our precedents, requires a plaintiff to use such...