Southern Grouts & Mortars, Inc. v. 3M Co.

• Decision Date: 23 July 2009
• Docket Number: No. 08-15850.,08-15850.
• Citation: 575 F.3d 1235
• Parties: SOUTHERN GROUTS & MORTARS, INC., a Florida corporation, Plaintiff-Appellant, v. 3M COMPANY, a Foreign corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

575 F.3d 1235

SOUTHERN GROUTS & MORTARS, INC., a Florida corporation, Plaintiff-Appellant, v. 3M COMPANY, a Foreign corporation, Defendant-Appellee.

No. 08-15850.

United States Court of Appeals, Eleventh Circuit.

July 23, 2009.

Gustavo Sardina, Frank Herrera, JanPaul Guzman, Rothstein, Rosenfeldt & Adler, Ft. Lauderdale, FL, for Plaintiff-Appellant.

Mark A. Romance, Ethan Wall, Richman Greer, P.A., Miami, FL, Laura J. Hein, Gray, Plant, Mooty, Mooty & Bennett, P.A., Minneapolis, MN, Hildy Bowbeer, 3M Office of Intellectual Property Counsel, St. Paul, MN, for Defendant-Appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before CARNES, HULL and COX, Circuit Judges.

PER CURIAM:

Southern Grouts & Mortars, Inc. sells swimming pool finishes under the trademark DIAMOND BRITE, and it would like to register and use the domain name diamondbrite.com to advertise and sell its products. The problem for Southern Grouts is that its competitor in the swimming pool finishing industry, 3M Company, owns the registration. When 3M obtained the registration for diamondbrite.com, it also had trademark rights in the DIAMOND BRITE mark, but not for use with pool finishing products. Instead, the mark was registered for use in connection with "electronically controlled display panels and signs." Those trademark rights have lapsed, but 3M has continued to re-register the domain name. 3M displays no content on the website and has no intention of doing so. Southern Grouts sued 3M alleging that 3M's continued registration of the domain name violated the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d), and constituted unfair competition under the Lanham Act, 15 U.S.C. § 1125(a). The district court granted summary judgment in favor of 3M. Southern Grouts appeals that judgment as well as the district court's denial of its motion to amend its second amended complaint.

I.

Southern Grouts sells exposed quartz aggregate finishes under the registered trademark DIAMOND BRITE. 3M sells ceramic-coated aggregate finishes under the registered trademark COLORQUARTZ. Southern Grouts uses www. sgm.cc and www.diamondbrite.cc to advertise and distribute its products. Visitors to www.diamondbrite.cc are automatically redirected to www.sgm.cc. Because its website has increased its domestic and international sales, Southern Grouts wants to register another domain name: diamondbrite.com. According to Southern Grouts, its DIAMOND BRITE trademark is more widely known than its company name.

The diamondbrite.com domain name, however, has been registered to 3M since 2000. That year 3M expanded one of its forty divisions, the Traffic Safety Systems Division, which is separate from the division that manufactures and sells COLORQUARTZ products. As part of the expansion, 3M bought nearly all the assets of the American Electronic Sign Company. Among those assets were multiple patents and trademarks, including the trademark registrations for two different DIAMOND BRITE marks in connection with "electronically controlled display panels and signs." There were also three domain names, including diamondbrite.com.

3M integrated the Sign Company's business into its Traffic Systems Division and continued to use the www.diamondbrite. com website for eighteen months. By February 2001, the website included a graphic alerting visitors to the acquisition and provided a link that would take a visitor to 3M's Traffic Safety Division website. In early 2002, visitors to www. diamondbrite.com were automatically re-directed to 3M's Traffic Safety Division website. Then, between April and July 2002, 3M "deactivated" the website, in the sense that a would-be visitor who typed in the domain name would get one of two screens, depending on a browser's settings: a "no page can be displayed" message or a search result display listing alternative websites or spellings.

3M stopped using the DIAMOND BRITE trademark after the transition of products and customers from the Sign Company was complete. 3M decided to do that in part because it was worried that DIAMOND BRITE might dilute its most valuable mark, DIAMOND GRADE, which it has used since 1989 in connection with a retroreflective sheeting material. In August 2002, the United States Patent and Trademark Office cancelled 3M's registration for one of its DIAMOND BRITE trademarks because 3M failed to file a declaration of continued use. By July 2006, 3M's registration of its other DIAMOND BRITE trademark had expired. 3M has, however, continually renewed the registration of the diamondbrite.com domain name.

According to 3M, it has continued to renew the registration of the domain name to avoid the risk that a competitor of its DIAMOND GRADE products would use it to create consumer confusion as to the source of its products. Additionally, 3M has a policy that once it acquires a domain name—by registration, transfer, or purchase—it is strongly presumed that the domain name will be renewed absent an explicit decision to the contrary. 3M re-registered the domain name in 2002, 2003, 2005, 2007, and 2008.

Southern Grouts contacted 3M about the domain name three times before filing the complaint in this lawsuit. In 2002 Southern Grouts sent an email to 3M's Domain Name Administrator noting that the domain name was "not in use" and asking if 3M would "please let [it] take the domain name." It is unclear from the record whether 3M responded. Then in 2005 Southern Grouts' attorney sent 3M a cease and desist letter. That letter claimed that 3M was "using" the diamondbrite.com domain, accused 3M of "cyberpiracy," and demanded that 3M transfer the domain name to Southern Grouts. In its response letter, 3M refused to comply with the demand, denied any wrongful conduct, and invited any questions about or evidence of those claims. Southern Grouts did not accept that invitation.

In 2007 Southern Grouts' attorney sent another letter to 3M which stated that "it appears that the [diamondbrite.com] site has been entirely inactive for more than six (6) years" and asked for "an amicable and cost-effective resolution." 3M responded that its position remained the same. In its response letter, 3M also told Southern Grouts that it would not use the name to compete with Southern Grouts' DIAMOND BRITE products and explained its concern that the domain name would at some time fall into the hands of someone seeking to create confusion with 3M's DIAMOND GRADE product. The next time 3M heard from Southern Grouts was when it filed the complaint against 3M in this case.

Southern Grouts' complaint alleged that 3M's continued registration of the diamondbrite.com domain name violated the Anticybersquatting Consumer Protection Act, 15 U.S.C. § 1125(d)(1)(A), and constituted unfair competition under the Lanham Act, 15 U.S.C. § 1125(a).¹ Both parties filed motions for summary judgment. About a month later, long after the district court's deadline for amending the pleadings had passed, Southern Grouts filed a motion for leave to amend its second amended complaint based on "new" evidence from the deposition of 3M's Fed. R.Civ.P. 30(b)(6) corporate representative.

The district court denied Southern Grouts' motion for leave to amend its second amended complaint. The next day, the court granted summary judgment in favor of 3M and denied Southern Grouts' motion for summary judgment. The court concluded that Southern Grouts' unfair competition and cybersquatting claims were barred by laches and also were without merit. This is Southern Grouts' appeal.

II.

We first consider whether the district court abused its discretion in denying Southern Grouts' motion for leave to amend its second amended complaint. On August 5, 2008, Southern Grouts filed that motion based on the deposition testimony of 3M's corporate representative, Fred Zonino. Zonino testified that 3M had purchased a Google AdWord for "diamond brite." An Internet user who runs a Google search for a term that has been purchased as an AdWord will see a "Sponsored Link" to the purchaser's website in a display to the right of the search results. Southern Grouts asserts that information about that purchase supports its unfair competition claim "and likely" its cybersquatting claim too.

Under the district court's scheduling order the deadline to amend pleadings had passed on February 9, 2008. The court denied Southern Grouts' motion to amend because it found that Southern Grouts had not been diligent and had failed to establish good cause for the delay. We review that judgment only for abuse of discretion. Hinson v. Clinch County Bd. of Educ., 231 F.3d 821, 826 (11th Cir.2000); Tech. Res. Servs. v. Dornier Med. Sys., 134 F.3d 1458, 1464-65 (11th Cir.1998).

A.

Southern Grouts inquired into 3M's purchase of Google AdWords for the first time in a set of interrogatories served on May 12, 2008, which was three months after the deadline to amend pleadings had passed. The interrogatory asked 3M to "[i]dentify each and every instance in which 3M has used the term(s) `diamondbrite,' `diamond brite,' or any confusingly similar term as a Google AdWord or metatag."² 3M responded on June 11, 2008, about a month after the interrogatory was served. 3M answered that "it ha[d] located no information" indicating that either the Traffic Control Materials Division (the division that acquired the DIAMOND BRITE marks and associated domain names) or the Industrial Mineral Products Division (the division manufacturing and selling COLORQUARTZ pool finishing products that competed with DIAMOND BRITE products) had used AdWords for "diamondbrite" or "diamond brite."

About two weeks later, on June 23, 2008, 3M served its amended and supplemental responses to those interrogatory answers. It admitted that "[f]or a period of at most three to four months sometime between October 2004 and February 2005, the [Industrial Mineral Products Division] budgeted $500.00 per month total for the purchase of...