CORPORATE DISCLOSURE STATEMENT
Pursuant to Federal Rule of Appellate Procedure 26.1, counsel for Appellant HASBRO, INC. certifies the following:
Appellant HASBRO, INC. is a publicly traded company having its principal place of business in Pawtucket, Rhode Island. Appellant HASBRO, INC. has no parent corporations. No publicly held company owns 10 percent or more of the stock of HASBRO, INC.
TABLE OF CONTENTS
CORPORATE DISCLOSURE STATEMENT i
REASONS WHY ORAL ARGUMENT SHOULD BE HEARD ... ... x
JURISDICTIONAL STATEMENT ... 1
STATEMENT OF THE ISSUES ON APPEAL 2
STATEMENT OF THE CASE 3
A. PRELIMINARY STATEMENT 3
B. NATURE OF THE CASE, COURSE OF
PROCEEDINGS, AND DISPOSITION BELOW .5
C. STATEMENT OF RELEVANT FACTS ...7
1. Hasbro and Its Famous CLUE9 Mark ...7
2. CCI's Registration and Use of the clue.com
Domain Name in Violation of Hasbro's Rights 9
SUMMARY OF ARGUMENT .11
ARGUMENT . 12
GENUINE ISSUES OF MATERIAL FACT EXIST REGARDING
HASBRO'S TRADEMARK INFRINGEMEN CLAIM 12
A. Standard of Review .. .12
B. The Law of Trademark Infringement ...13
The District Court Improperly Applied the Eight Factor Test for
Likelihood of Confusion, Resolving Factual Disputes Against Hasbro . .. ... 144
1. Similarity of Marks . .. ..145
2. Similarity of Goods and Services 15
3-5. Channels of Trade-, Channels of Advertising;
Classes of Prospective Purchasers 17
6. Actual Confusion 19
7. Intent .22
8. Strength of the Mark .23
The District Court Improperly Balanced the Eight Factors of
Likelihood of Confusion, Wrongly Drawing Factual Inferences
Against Hasbro .24
Genuine Issues of Fact Support Infringement Under the Initial Interest
Confusion doctrine 25
II. THE DISTRICT COURT CLEARLY ERRED IN FINDING
THAT HASBRO'S FAMOUS CLUES MARK WAS NOT
DILUTED BY CCI'S CLUE.COM DOMAIN NAME ...28
A. Standard of Review ..28
B. Federal Trademark Dilution Act 299
C. The District Court Erred by Finding That "CLUES" Is
Not a Famous Mark Under the FTDA ...30
1. The Distinctiveness of the "CLUE(V" Trademark
Supports a Finding of Famousness .322
2. Limited, Unsubstantiated Third Party Usage of the
Word "Clue" Does Not Defeat the Strong
Evidence of Famousness of the Mark ...34
3. The District Court Erroneously Weighed the Famousness Factors and Ignored the Overwhelming Evidence Fame ...37
D. The CLUES Mark Is Diluted by CCI's Registration and
Use of the CLUE-COM Domain Name ...38
1. Under Panavision, CCI Has Caused Dilution of the
CLUES Mark on the Internet 38
2. The District Court Misapplied the First Circuit's Test for Blurring, Under- Which Hasbro Should Prevail ..40
E. The District Court Improperly Added, and Erroneously
Found Against Hasbro on, a New Equity Element 42
1 There Is No "Equity" Element for Liability under
the FTDA ..42
The District Court Abused Its Discretion in Finding That Principles
of Equity Warrant Denying Hasbro Relief .. ...45
III. FOR SIMILAR REASONS, THE DISTRICT COURT
ERRONEOUSLY AWARDED JUDGMENT FOR CCI ON
HASBRO'S MASSACHUSETTS TRADEMARK DILUTION
TABLE OF AUTHORITIES
American Intl Group, Inc. v. London American Int'l Corp.,
664 F.2d 348 (2d Cir. 1981) ...16, 23
Anderson v. City of Bessemer City, 470 U.S. 564 (1985) ..28
Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) ...12
Big Top USA, Inc. v. Wittern Group, 998 F. Supp. 30
(D. Mass. 1998) 26
Black Dog Tavern Co., Inc. v. Hall, 823 F. Supp. 48 (D. Mass.
Boston Athletic Assn v. Sullivan, 867 F.2d 22 (1st Cir. 1989) ..passim
Brookfield Communs., Inc. v. West Coast Entertainment
Corp., 174 F.3d 1036 (9th Cir. 1999) ...passim
Brown Daltas & Assocs. v. General Accident Ins. Co. of
America, 48 F.3d 30 (1st Cir. 1995) ...28,48
Cadbury Beverages, Inc. v. Cott Corp., 73 F.3d 474 (2d Cir.
Chrysler Corp. v. Silva, 118 F.3d 56 (1st Cir. 1997) ..22
Cohen v. de la Cruz, 523 U.S. 213 (1998) ..44
Cortes-Irizarry v. Corporacion Insular de Seguros, 111 F.3d
184 (1st Cir. 19-97) ..12
Country Floors, Inc. v. Gepner, 930 F.2d 1056 (3d Cir. 1991) ..12
Daddys Junky Music Stores v. Big Daddy's Family Music
Ctr., 109 F.3d 275 (6th Cir. 1997) passim
DeCosta v. Viacom Intl, 981 F.2d 602 (I st Cir. 1992) ...13
EEOC v. Steamship Clerks Union, 48 F.3d 594 (1st Cir. 1995) .42
EMC Corp. v. Hewlett-Packard Co., 59 F. Supp. 2d 147
(D. Mass. 1999) 26
Equine Techs., Inc. V. Equitechnology, Inc., 68 F.3d 542 (1st
Cir. 1995) .25
Euromotion, Inc. v. BMW of North America, Inc., 136 F.3d
866 (1st Cir. 1998) .. .12
Forum Corp. of North America v. Forum, Ltd., 903 F.2d 434
(7th Cir. 1990) . 22
Frehling Enters. v. International Select Group, 192 F-3d 1330
(11th Cir. 1999), petition for cert. filed (April 6, 2000) . .15
Gazette Newspapers, Inc. v. New Paper, Inc., 934 F. Supp.
688 (D' Md. 1'996) ... 33
Green Prods. Co. v. Independence Corn By-Prods., 992 F.
Supp. 1070, 1079 (N.D. Iowa 1997) 20
Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 497
(2d Cir. 1996); ..43
I.P. Lund Trading ApS & Kroin v. Kohler Co., 163 F.3d 27
(1st Cir 1996) passim
Interstellar Starship Servs. v, Epix, 184 F.3d 1107 (9th Cir.
I.P. Lund Trading ApS & Kron v. Kohler Co., 163 F.3d 27 passim
Jews for Jesus v. Brodsky, 993 F Supp .282 (D.N.J.), affd
without op., 159 F.3d 1351 (3d Cir. 1998) ..20
Johnson Publishing, Co. v. Willits Designs Intl Inc.,
No. 98-C-2653, 1998 WL 34161-8 (N.D. 111. June 22, 1998) 33
Lexington Mgmt. Corp. v Lexington Capital Partners, 10 F. Supp. 2d 271, 281 (S.D.N.Y. 1998) 35
Lozano Enters. v. La Opinion Publ'g Co., 44 U.S.P.Q.2d 1764
(C.D. Cal. 1997) ..33,38
Manpower, Inc. v. Foley, 212 U.S.P.Q. 445 (D. Mass. 1980) 47
Mead Data Central, Inc. v. Toyota Motor Sales U.S.A., Inc.,
875 F.2d 1026 (2d Cir. 1989) ..40
Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254
(2d Cir. 1987) ..16
Nissan Motor Co.. Ltd. v. Nissan Computer Corp., F. Supp.
2d _, 2000 WL 305744 (C.D. C-al. March 23,-2000) .27
Northern Light Tech. v. Northern Lights Club, No. 99-11664
DPW-(D . Mass. March 31, 2000) . .46
Park N Fly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189 (1985) .32
Panavision Int'l v. Toeppen, 14 t F.3d 1316 (9th Cir. 1998) ...passim
Polo Ralph Lauren v. Schuman, 46 U.S.P.Q.2d 1046 (S.D
Tex. 1998) 33
Pritzker v. Yari, 42 F.3d 53 (1st Cir. 1994) 45
Public Serv. Co. v. Nexus Energy Software, Inc., 36 F. Supp.
2d 436 (D. Mass. 1999) .. .13
Ruiz-Troche v. Pepsi Cola of Puerto Rico Bottling Co., 161
F.3d 77 (1st Cir. 1999) 42
Smith v. F. W. Morse & Co., 76 F.3d 413 (1st Cir. 1996) ..24
Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982
F.2d 633 (I st Cir. 1992) ..46
Sports Authority, Inc. v. Abercrombie & Fitch, Inc., 965
F. Supp. 025 (E.D. Mich. 1997) ..35
Star Fin. Servs. v. AASTAR Mortg. Corp., 89 F.3d 5 (1st Cir.
Teletech Customer Care Mgmt. v. Tele-Tech. Co., 977
F. Supp. 1407 (C.D. Cal. 1997) .28
Television Enter. Network, Inc. v. Entertainment Network,
Inc., 630 F. Supp. 244 (D.N.J. 1986) ...27
The.-Snorts Authority, Inc. v. Prime Hospitality Corp., 89 F.3d
955 (2d Cir. 1996) 25
Tiffany & Co. v. Boston Club, Inc., 231 F. Supp. 836
(D. Mass. 1964) 47
Trustees of Columbia University. v. Columbia/HCA
Healthcare Corp., 964 F.Supp 733 (S.D.N.Y. 1997) 35
Viacom, Inc. v. Ingram Enters., 141 F.3d 886 (8th Cir. 1998) ...44
Vinick v. United States, 205 F.3d I (1st Cir. 2000) .48
Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812,
818 (1st Cir. 1987) ..19,24
Wal-Mart Stores, Inc. v. Samara Bros., Inc., 120 S. Ct. 1339
Williams v. Poulos, 11 F.3d 271 (1st Cir. 1993) .48
15 U.S.C. § 1058 .36
15 U.S.C. § 1065 .32
15 U.S.C. § 1116(a) ..43,44
15 U.S.C. § 1117(a) 44
15 U.S.C. § 1121 ...1
15 U.S.C. § 1125(c) passim
15 U.S.C. § 1127 ...34, 38
28 U.S.C. § 1291 ...1
28 U.S.C. § l338 1
Mass. Gen. Laws ch. 110B § 12 . ...46,48
Fed. R. App. P. 4(a)(1)(A) 1
Fed. R. App. P. 26.1 .i
Fed. R. Civ. P. 52(a) 45
4 J. Thomas McCarthy, MCCARTHY.ON TRADEMARKS AND
UNFAIR COMPETITION § 24 (4"' ed. 2000) passim
REASONS WHY ORAL ARGUMENT SHOULD BE HEARD
Hasbro respectfully requests that oral argument be heard on this appeal. A number of novel and complex legal issues are raised by this appeal, including issues relating to the interpretation of the Federal Trademark Dilution Act of 1996 ("FTDA"), the standard for "famous marks" under the FTDA, the test for dilution of trademarks in this Circuit in the context of Internet domain names, and the "initial interest" confusion doctrine of trademark law. This area of the law is rapidly evolving, and Hasbro believes that oral argument may assist the Court in addressing-the important issues in this appeal.
The Jurisdiction of the United States district court over this action arises under 28 U.S.C. § 1338 and 15 U.S.C. § 1121 in that it is an action arising out of the Lanham Act, 15 U.S.C. §§ 1051 1127. The district court additionally has supplemental Jurisdiction over the Third Claim pursuant to 28 U.S.C. § 1338(b) since that claim is joined with a substantial and related claim under the Lanham Act, and since the state and federal claims derive from a common nucleus of operative facts.
The United States District Court for the District of Massachusetts entered its Order awarding Judgment to Defendant CCI and against Plaintiff Hasbro on all claims, and entered a separate judgment dismissing Plaintiff s entire case, on September 2, 1999. The Court of Appeals has jurisdiction over this appeal pursuant to 28 U.S.C. § 1291 in that it is an appeal from the final decision of the district court.
On September 30, 1999, Appellant Hasbro filed its notice of appeal in the District of Massachusetts, and paid the appellate docketing fees. Pursuant to Fed. R. App. P. 4(a)(1)(A), that appeal was timely filed because it was filed within 30 days of the September 2, 1999 Order and Judgment being appealed.
STATEMENT OF THE ISSUES ON APPEAL
This appeal presents the following issues:
(1) Whether the district court erred in granting CCI's motion for summary judgment on Hasbro's trademark infringement claim by: (a) improperly resolving genuine issues of material fact against Hasbro; (b) applying an incorrect rule of law regarding likelihood of confusion; (c) improperly failing to apply the initial interest confusion doctrine.'
(2) Whether the district court erred in awarding judgment for CCI on Hasbro's Federal Trademark Dilution Act clairn by: (a) failing to give proper weight to the statutory "famousness" factors; and (b) improperly creating and applying a new and legally erroneous test for dilution.
(3) Whether the district court erred in awarding judgment for CCI on Hasbro's state trademark dilution claim by improperly creating and applying a new and legally erroneous test for dilution.
STATEMENT OF THE CASE
A. PRELIMINARY STATEMENT
Was it Professor Plum in the library with the lead pipe, or Miss Scarlet in the billiard room with the candlestick? Millions of Americans recognize these questions from Appellant Hasbro's classic CLUEâ detective game. More than 80 percent of Americans and approximately 92 percent of American families are familiar with Hasbro's incontestable CLUEâ trademark, which Hasbro has spent millions of dollars advertising and promoting, During the last fifty years, over a hundred million copies of the CLUEâ games have been sold in over 40 countries, and CLUEâ is consistently one of the most popular board games in the country. More recently, Hasbro has been offering popular CDROM versions of its games, including the CLUEâ game, for use on personal computers and the Internet.
However, when CLUEâ fans go to the Internet for information about the CLUEâ game or looking to play the on line version of the game, they are currently unable to locate the CLUEâ web site. Instead, they come across the web site of Appellee Clue Computing, Inc. ("CCI"), a computer and Internet services business that operates a commercial web site at clue.com. That is because CCI's founders, with full knowledge of Hasbro's famous CLUEâ mark, paid $35 to reserve the Internet domain name clue.com, and now run their business at that site.
To guard against the prospect of consumer confusion and to combat the encroachment on its world renowned brand, Hasbro filed suit against CCI asserting claims for trademark infringement under the Lanham Act and trademark dilution under both federal and state law. The district court clearly erred in resolving each of those claims in favor of CCI.
Hasbro's trademark infringement claim was decided in the context of CCI's motion for summary judgment. But in granting that motion, the court ignored the constraints of the summary judgment procedure by resolving genuine issues of fact in CCI's favor, and by ignoring or discounting substantial evidence that favored Hasbro. The district court's usurpation of the role of the jury was reversible error.
The district court also erred by refusing to recognize and apply the "initial interest confusion" doctrine, which has been openly embraced by two Ninth Circuit panels and another district court 'in this Circuit in domain name disputes. The doctrine recognizes that by using another's trademark as a domain name, a party may divert consumers looking for the trademark owner's Internet web site to its own site (at least temporarily), thereby improperly obtaining consumers' initial interest because of the trademark's renown. In this case, the court acknowledged that CCI's use of the clue.com domain name may attract consumers searching for information on Hasbro's classic game. But in stark contrast to the decisions in several other Circuits, the district court here concluded that this initial interest confusion was not actionable. This error also mandates vacating summary judgment on the trademark infringement claim.
With respect to the federal trademark dilution claim (which the parties submitted to the district court to be decided on the written record), the court erred in concluding that Hasbro's world renowned CLUES trademark was not sufficiently "famous" to qualify for protection. In so ruling, the court ignored the overwhelming evidence in the record regarding the strength and popularity of the CLUES mark, and instead based its ruling on the fact that the word 4cclue" appears in the dictionary and may be found as part of other trademarks. This holding is not supported by law or by the evidence.
The district court then erroneously concluded that CCI's use of the clue.com domain did not dilute the distinctiveness of the CLUE9 mark. But by its very nature, CCI's use of clue..com as an Internet domain name necessarily blurs the distinctiveness of the mark by causing consumers to associate the CLUE name with CCI instead of Hasbro. Indeed, the court found that Hasbro's showing on the issue of dilution satisfied the two factor test set forth by the First Circuit in the Lund case. LP. Lund Trading ApS & Kron v. Kohler Co., 163 F.3d 27 (1st Cir. 1998) (hereafter "Lund"). Nonetheless, by creating and misapplying its own test for dilution that conflicts with the controlling First Circuit law, the district court erroneously concluded that CC1 was not diluting Hasbro's mark under federal law.
Finally, the district court erred as a matter of law in applying its self-created federal dilution test to assess Hasbro's trademark dilution claim under Massachusetts law. Applying the correct standard, the district court's findings (and the evidence of record) require that judgment be entered in Hasbro's favor on the state law dilution claim.
B. NATURE OF THE CASE, COURSE OF PROCEEDINGS.,
AND DISPOSITION BELOW
In January 1997, Hasbro filed this action against CC1 in the District of Massachusetts, asserting three causes of action arising from CCI's use of Hasbro's CLUEâ mark as its domain name: (1) trademark infringement under the Lanham Act; (2) trademark dilution under the Lanham Act; and (3) trademark dilution under Massachusetts law. App. at 11 16. Following discovery, Hasbro moved for partial summary judgment that CCI was liable for trademark dilution. CCI cross moved for summary judgment on Hasbro's dilution claims, as well as on Hasbro's trademark infringement claim. At the summary judgment hearing, the parties stipulated that Judge Woodlock could
rule on the dilution issue as the ultimate finder of fact based on the summary judgment record. App. at 968.
On September 2, 1999, the district court issued a Memorandum and Order disposing of the claims before it (the "Order"). A copy of the Order is attached hereto as Addendum A. On Hasbro's trademark infringement claim, the court found that Hasbro's CLUEâ mark was a strong mark, that it likely fell into the category of suggestive marks, and that the mark had acquired secondary meaning. Order at 18. In analyzing the likelihood of confusion issue, the court also found that Hasbro's CLUE®R mark was "essentially identical" to CCI's clue.com domain name; that there was at least some overlap in the services offered by the companies, that both advertised and conducted business over the Internet; that there was some overlap between the classes of prospective purchasers; and that several people experienced confusion upon reaching CCI's web site. Order at 8 IS. In spite of these findings, the court granted summary judgment for CCI, ruling that Hasbro had not raised any genuine issues of material fact on this claim. Order at 19; App. at 1047.
Regarding Hasbro's federal dilution claim, the court conceded that six of the eight statutory "famousness" factors favored a finding that CLUEâ is a famous mark. Order at 30. Nonetheless, the court concluded that the CLUEâ mark was not famous, based solely on unverified third party uses of the word clue in their businesses, and a finding that "clue" is "a common word with a variety of meanings." Order at 30 33. The court further ruled that CCI's registration and use of clue.com domain name did not dilute the CLUEâ mark. Order at 36. In so ruling, the court rejected case law holding that a mark's ability to uniquely identify the mark holder's famous goods or services is necessarily diminished when it is prevented from using the mark as a domain
name. Moreover, while the court conceded that Hasbro would prevail under the blurring test endorsed by the First Circuit's Lund decision, it added two new elements" to that test a requirement that consumers "associate the two products with the same mark" and an undefined equitable standard and found Hasbro had not met those new elements. Order at 41 44.
Finally, the court held that the standard for assessing dilution by blurring under Massachusetts state law is the same as the new standard that the district court created and applied to the federal claim. Accordingly, the court ruled that CCI should prevail on Hasbro's state law dilution claim as well. Order at 44-46.
C. STATEMENT OF RELEVANT FACTS
1. Hasbro and Its Famous CLUES Mark
The CLUEâ board game is a classic "whodunit" detective game for both children and adults in which players guess the details of a fictional murder. App. at 1096 ¶ 2. Invented in 1944 in Great Britain, the CLUEâ game was introduced in the United States in 1949. App. at 1096 ¶ 3, 1100. Since then, Hasbro' has sold millions of CLUEâ board games in the United States and in over forty other countries. App. at 1097 99 ¶¶ 4, 11. On average, U.S. consumers buy more than a million CLUEâ branded games each year. App. at 1097 ¶ 4, 1104 09.
1 Unless otherwise noted "Hasbro" refers to Hasbro and the predecessors ininterest in the CLUEâ mark.
2 Certain confidential information relating to the scope of Hasbro's marketing, licensing, advertising and sales of CLUEâ products is contained in a separate appendix, which is filed under seal.
Hasbro has spent millions of dollars advertising CLUEâ products in various media, including promotional catalogues, television, and on the Internet. App. at 1098 ¶¶ 7 8, 1124 35. Hasbro's efforts have been quite successful. A brand awareness survey showed that 92 percent of families with children, and 80 percent of all households, were familiar with the CLUEâ game App. at 1097 ¶ 5, 1111 22. Other studies have shown that the CLUEâ board game is one of the five most popular board games. App. at 662. Due to this enormous popularity, consumers associate the CLUEâ mark with Hasbro's game, and the mark is a valuable corporate asset for Hasbro. App. at 481 ¶ 2.
Hasbro has further capitalized on the strength and success of the CLUEâ mark by releasing several different variations of the board game. App. at 109697 ¶ 3. Hasbro also sells CLUEâ mystery puzzles, and a host of other quality CLUEâ products. App. at 1098 ¶ 10. The CLUES brand was further enhanced by the release, of "CLUEâ The Movie" in 1985, and by a 1996 musical based on the CLUEâ game. App. at 1098 ¶ 10.
More recently, through its Hasbro Interactive division, Hasbro has expanded into the rapidly growing electronic game industry. App. at 113 6 ¶ 2. In 1996, Hasbro introduced an interactive CD ROM version of the CLUEâ game, which earned more than $4 million in revenue in its first two years of release, and has further added to the strength of the CLUEâ mark. Id. Hasbro Interactive also developed CD ROM versions of its other classic games, which it markets on the Internet at web sites corresponding with the marks, including BATTLESHIPS at battleship.com, TRIVIAL PURSUITS at trivlalpursuit.com, and MONOPOLY9 at monopoly.com. Id.
Hasbro owns several registered trademarks consisting of the word "CLUE , including trademarks in the following classes: equipment for use in
playing the board game, equipment sold as a unit for playing a video game, computer game software and video game, interactive mystery storybooks, and entertainment services in the nature of live theater production. App. at 257 63, 481¶ 2, 485 515. The original CLUES mark was first registered on the principal register in 1950, and has since become incontestable. See 15 U.S.C. § 1065.
The CLUE9 board game has received acclaim from the game industry and the popular press. In 1997, GAMES Magazine inducted the CLUES board game into its Games Hall of Fame. App. at 1099 ¶ 12. The CLUES board game has also been honored by Parenting Magazine as a member of that publication's Toy Hall of Fame. Id. In addition, the CLUES board game has been featured in numerous articles recognizing its general fame. See, e.g., App. at 522 ¶ 2, 525 37, 793 801. Hasbro recently expanded its marketing efforts even further to celebrate the game's fiftieth anniversary. App. at 522 ¶ 3, 828¶6, 1096 97 ¶ 3.
2. CCI's Registration and Use of the clue.com Domain
Name in Violation of Hasbro's Rights
In 1994, fifty years after the invention of the CLUES board game, Eric Robison and Dieter Muller formed a company called "Clue Computing," which was later incorporated as "Clue Computing, Inc." App. at 229. Through its web site, CCI offers various computer and Internet related services. App. at 730, 739. CCI is essentially a "virtual company," marketing itself and offering services almost entirely over the Internet. App. at 689 90, 751 52.
In June 1994, CCI registered the clue.com domain name by filling out a form and mailing a check for $35 to NSI, the company responsible for
registering .Com domain names. App. at 732. Access to CCI's services is provided via the clue.com domain name. App. at 750 752 .3
CCIs founders were fully aware of the CLUE trademark and board game prior to their choice of the clue.com domain name, yet they performed no trademark search prior to registering the name. App. at 730 31, 734, 768. Moreover, in designing their company's logo, CCI's founders adopted designs and graphics that are suspiciously similar to those used by Hasbro in the CLUES game. Compare App. at 550 and 517 521 with 552; see also App. at 617 (comparing logos). In particular, CCI specifically chose for their logo a magnifying glass, which Hasbro has used with the CLUES game for many years, and a knife or sword similar to the knife used in the CLUES board game. App. at 614 15, 741 44, 770 72.
In 1996, Hasbro learned that CCI was using the domain name clue.com to promote its computer consulting company. App. at 482 83 ¶¶ 6 7. Hasbro was concerned that CCI's use of clue.'com would dilute Hasbro's valuable CLUES mark, and knew that such use would cause confusion among consumers. Id. Discovery revealed that Hasbro's fears were well founded: CCI produced several e malls from visitors to CCI's clue.com web site who were looking for information about Hasbro's CLUES games. App. at 670 72, 745 49. In these e mails, consumers ask: "Are you the game of Clue" and "Looking for on line troubleshooting ... for the Clue game (CD ROM) made by Hasbro . . . ." Id.
3 Since this dispute arose, CCI has also had a "mirror site" containing the identical content at a domain name corresponding to its corporate name: "cluecomputing. com. " App. at 773.
To prevent further consumer confusion, and to protect against dilution of its famous mark, Hasbro brought this action.
SUMMARY OF ARGUMENT
By this appeal, Hasbro seeks to reverse the district court's erroneous judgment in favor of CCI on Hasbro's trademark infringement and dilution claims.
On the trademark infringement claim, the court erred by resolving genuine issues of material fact and drawing inferences in favor of CCI, the nonmoving party. The court also improperly weighed the likelihood of confusion factors, concluding that no reasonable jury could find likelihood of confusion notwithstanding its own findings that Hasbro prevailed on a number of the confusion factors. Finally, the court improperly rejected the "Initial interest" confusion doctrine as a basis for establishing likelihood of confusion. Accordingly, summary judgment on this claim should be reversed.
The district court also committed clear error by finding that CCI's use and registration of a commercial web site at clue.com does not dilute Hasbro's famous CLUES trademark. As the court conceded, Hasbro prevails on all but two of the eight statutory famousness factors. The district court committed clear error in finding for CCI on the two remaining factors, and in weighing the factors to conclude that the renowned CLUES mark is not famous. In addition, the district court committed reversible error by creating and applying an incorrect legal standard for dilution, and in misapplying its own standard. Because the value of Hasbro's CLUES mark is lessened by CCI's clue.com web site, Judgment on the federal dilution claim should be entered for Hasbro.
Finally, the court committed legal error by concluding that its new test for dilution under the federal dilution statute applies equally to a claim under Massachusetts state law. Accordingly, judgment against Hasbro on its state dilution claim should also be reversed.
1. GENUINE ISSUES OF MATERIAL FACT EXIST REGARDING
HASBRO'S TRADEMARK INFRINGEMENT CLAIM
A. Standard of Review
The Court of Appeals reviews summary judgments de novo. See
Euromotion, Inc. v. BMW of North America, Inc., 13 6 F.3d 866, 869 (1st Cir. 1998). Rule 56(c) of the Federal Rules of Civil Procedure permits summary judgment only where the evidence of record "show[s] 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." Summary judgment should be denied where the opposing party here, Hasbro submits evidence on which a rational juror could find for it. See Cortes Irizarry v. Corporacion Insular de Seguros, I I I F.3d 184, 191 92 (1st Cir. 1997). The Court must view the evidence in the light most favorable to Hasbro, and draw all reasonable inferences in its favor. Boston Athletic Ass'n v. Sullivan, 867 F.2d 22, 24 (1st Cir. 1989). Unless no reasonable juror could find for Hasbro on its trademark infringement claim, summary is improper. See Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 250 (1986).
Appellate courts have held that summary judgment is the exception in a trademark infringement case. See Country Floors, Inc. v. Gepner, 930 F.2d 1056, 1062 63 (3d Cir. 1991). This is especially true as to likelihood of confusion, a highly factual issue. Id.
B. The Law of Trademark Infringement
Hasbro's trademark infringement claim is brought under Section 43(a) of the Lanham Act, which requires proof of the following:
(1) use and ownership by the plaintiff of a mark;
(2) use by the defendant of a similar mark; and
(3) a likelihood that the defendant's conduct will confuse the public, thereby harming the plaintiff.
See DeCosta v. Viacom Int'l, 981 F.2d 602, 605 (1st Cir. 1992).
On the first element, the district court found that Hasbro owns and uses the CLUE9 trademark, which is registered and incontestable. Order at 7 8. As CC1 uses the identical mark "CLUE" for its ".com" domain name, the second element was also easily established. Order at 7.
The sole issue on appeal with respect to Hasbro's trademark claim is therefore whether a reasonable jury could find a likelihood of confusion. Traditionally, the First Circuit has applied an eight factor test. See Lund, 163 F.3d at 43. In the context of confusion created by the registration of domain names that are similar to trademarks, courts also recognize a theory of "Initial interest" confusion under the Lanham Act. Brookfield Communs., Inc. v. West Coast Entertainment Corp., 174 F.3d 1036, 1061 64 (9th Cir. 1999); Public Serv. Co. v. Nexus Energy Software, Inc., 36 F. Supp. 2d 436, 439 (D. Mass. 1999).
Under either theory, Hasbro has raised a genuine issue of fact.
4 The court further found that Hasbro had shown that the CLUEâ mark was used in cornmerce, is non functional, and is distinctive. Order at 7 8 n.4.
C. The District Court Improperly Applied the Eight Factor Test for Likelihood of Contusion, Resolving Factual Disputes. Against Hasbro
The First Circuit has traditionally analyzed likelihood of confusion under the following eight non exclusive factors:
(1) similarity of the marks;
(2) similarity of the goods or services;
(3) the relationship between the parties' channels of trade;
(4) the relationship between the parties' channels of advertising;
(5) the classes of prospective purchasers;
(6) evidence of actual confusion;
the defendant's intent in adopting its mark; and
(8) the strength of the plaintiffs mark.
Lund, 163 F.3d. at 43; Star Fin. Servs. v. AASTAR Mortg. Corp., 89 F.3d 5, 10 (1st Cir. 1996). No single factor is meant to be determinative. Boston Athletic Ass'n. 867 F.2d at 29.
1. Similarity of Marks
The first factor involves the "similarity of the marks." See Lund, 163 F.3d. at 43. In cases where the defendant has taken a ".com" domain name identical to the plaintiffs mark, courts have consistently found a virtual identity of marks, since the ".com" suffix is merely a generic locator for commercial web sites. See, e.g., Brookfield, 174 F.3d at 1054 55 (citing cases).
As the district court recognized, Hasbro's CLUES mark and CCI's domain name "clue.com" are "essentially identical." Order at 8; see also Order at 19 ("Hasbro has produced evidence proving similarity of the marks."). Accordingly, this factor strongly favors Hasbro.
2. Similarity of Goods and Services
Where the parties' goods and services are similar, the second factor will favor the plaintiff. See Boston Athletic Ass'n, 867 F.2d at 30. This factor is relevant to whether reasonable consumers could infer that there is some affiliation between the plaintiff and the defendant. See Frehling Enters. v. International Select Group, 192 F.3d 1330, 1338 (11th Cir. 1999), petition for cert. filed (Apr. 6, 2000). Applying this factor to web sites, courts look at the 'parties' Internet presence, not their overall businesses. Interstellar Starship Servs. v. Epix, 184 F.3d 1107, 1110 11 (9th Cir. 1999) (hereafter "Epix") ("ISS correctly points out that its use of the 'epix.com' web site, rather than the entirety of the business transacted under the ISS name, is the relevant criterion ).
Here, the district court acknowledged some overlap in services, but improperly gave that overlap short shrift. Through its clue.com web site, CCI offers, advertises and markets a bro'ad range of computer related services for its prospective customers, including Internet consulting, software installation and support, and web hosting. App. at 552, 559, 561. Hasbro also uses the Internet to offer, advertise, and market goods and services under the CLUES name, including the interactive computer version of the CLUES game, and offers assistance with software installation and technical support through its web site. App. at 827 2. At least one Internet user, seeking information and technical computer assistance to enable her to use her CLUES CD ROM product, found the services offered at the clue.com site to be sufficiently similar to the services offered by Hasbro that she was confused about the affiliation or sponsorship of the clue.com site. App. at 830 31¶¶ 3 6. At the very least, the evidence of similarities offered by Hasbro was sufficient to raise a triable issue of fact. See
American Int'l Group, Inc. v. London American Int'l Corp., 664 F.2d 348, 35 1 52 (2d Cir. 1981) (reversing summary judgment where possible overlap existed between provider of insurance and provider of international trade finance).
Instead of crediting the evidence indicating the overlap in services, the district court wrongly focused simply on Hasbro as selling a game and CCI as selling computer consulting services, noting that "to the extent that Hasbro may provide similar services, these services are at most a small component of the CLUE product and are entirely subordinate to its nature as a game." Order at 10. This analysis is legally erroneous. See Brookfield, 174 F.3d at 1056 (focusing on overlapping portion of offerings, not broader array of services). The fact that Hasbro has sold numerous versions of the CLUES game over the last fifty years, and that CLUE8 related web services are only a small portion of the overall CLUES products and services offered by Hasbro, is irrelevant to the issue of likelihood of confusion. See Epix, 184 F.3d at 1110 11 ("ISS correctly points out that its use of the 'epix.com' web site, rather than the entirety of the business transacted under the ISS name, is the relevant criterion. . . ."). A number of courts have found confusion where the infringing use overlapped with only one portion of the plaintiffs use of its mark. See, e.g., Daddy's Junky Music Stores v. Big Daddy's Family Music Ctr., 109 F.3d 275, 283 (6th Cir. 1997); Mobil Oil Corp. v. Pegasus Petroleum Corp., 818 F.2d 254, 257 58 (2d Cir. 1987).
In dismissing Hasbro's evidence of the overlap in computer support services, the court improperly resolved issues of fact and drew inferences against Hasbro. Accordingly, the court's finding on this factor should be reversed. See Cadbury Beverages, Inc. v. Cott Corp., 73 F.3d 474, 478 (2d Cir. 1996) ("If a factual inference must be drawn to arrive at a particular finding on
a [likelihood of confusion] factor, and if a reasonable trier of fact could reach a different conclusion, the district court may not properly resolve that issue on summary judgment.").
3 5. Channels of Trade; Channels of Advertising; Classes of
The First Circuit traditionally considers together the third factor (similarity in channels of trade), fourth factor (similarity in channels of advertising), and fifth factor (classes of prospective purchasers). See Boston Athletic Ass'n, 867 F.2d at 30.
The court properly found that there is overlap in the channels of trade. Order at 11; App. at 622. CCI does almost all of its business through the Internet. Order at 11. Likewise, Hasbro does substantial business over the Internet, selling millions of dollars worth of the interactive CLUE9 CD ROM game, and operating an interactive web site dedicated to the CLUE9 game, for which it budgets more than $1 million. App. at 1136 37 ~ 3, 1138 39; App. at 827 28 2 5, 1127. When both parties use the Internet as a channel of trade and advertising, this factor typically favors the plaintiff. See Brookfield, 174 F.3d at 1057 ("[B]oth utilize the Web as a marketing and advertising facility, a factor that courts have consistently recognized as exacerbating the likelihood of confusion,").
Although the district court specifically recognized that Hasbro has "some overlap with Clue Computing in advertising and channels of trade," the court improperly shifted its focus to the portion of Hasbro's business that is not related to the Internet, observing that "Internet advertising and sales make up a very small component of [Hasbro's] business involving the game CLUE." Order at 11. However, Hasbro's non Internet sales of the CLUE9 game are irrelevant; the issue is whether there are channels that overlap. See Star, 89
F.3d at 10. Thus, the court should not have allowed Hasbro's "brick and mortar" business to minimize the impact of the substantial overlap between Hasbro's and CCI's Internet presence, an overlap, that is likely to lead to confusion among Internet users.5
On the fifth factor, the court properly found that the parties both have overlapping classes of prospective customers "in the broad category of Internet users." Order at 12. Surveys indicate that the CLUE® mark is almost universally recognized among all classes of Americans in all geographic regions. App. at 1097 ¶ 5, 1117. Moreover, any computer or Internet users are prospective customers for Hasbro Interactive CLUEâ CD ROM games and Internet offerings. App. at 550, 827 28. CCI's potential customers for its computer and Internet services are also necessarily individuals with computers and access to the Internet, and CCI advertises that it targets customers "anywhere on the planet." App. at 558. Thus, the district court properly found the existence of overlap among prospective consumers.
As to the sophistication of the parties' prospective customers, Hasbro sells games that are suitable for people of all ages. App. at 519, 803, 1096 ¶ 2. As games often appeal to families, many of the individuals looking for Hasbro's products on the Internet are not sophisticated customers. Similarly, many Internet users are unsophisticated, and thus confusion is more likely to result in the context of the Internet. See Brookfield, 174 F.3d at 1060; Jews for Jesus v.
5 In domain name cases, the question of sharing a common channel takes on an even greater significance. While two companies could otherwise advertise through a shared channel, such as newspapers, only one company can have a domain name at <trademark.com>. Thus, a defendant does not just share a channel with the plaintiff, it can effectively preclude the plaintiff from using its trademark on the Internet at the <trademark.com> domain name. App. at 622; Panavision Int'l v. Toeppen, 141 F.3d 1316, 1325 (9th Cir. 1998).
Brodsky, 993 F. Supp. 282, 303 (D.N.J.) ("many Internet users are not sophisticated enough to distinguish between the subtle difference in the domain names of the parties"), aff'd without op., 159 F.3d 1351 (3d Cir. 1998). This factor likely favors Hasbro, and certainly does not favor CCL
Nonetheless, the court erroneously concludes its discussion of these factors with the statement that "[i]n any case, these prospective customers are plainly sophisticated enough to know the difference between a game and a computer consulting service." Order at 13. This statement does not go to this factor, but instead repeats the court's improper conclusion regarding the second factor (similarity of good and services). Moreover, the district court's finding regarding sophistication improperly draws inference's in favor of CCI .
Properly viewed, the evidence strongly supports Hasbro on the third, fourth and fifth factors.
6. Actual Confusion
The sixth factor recognizes that, in some cases, evidence of actual confusion is probative of a likelihood of confusion. Such evidence, however, is not required. Volkswagenwerk Aktiengesellschaft v. Wheeler, 814 F.2d 812, 818 (1st Cir. 1987) ("A showing of actual confusion is not essential in order to find a likelihood of confusion."). A lack of evidence of actual confusion is particularly insignificant where the ability to gather such evidence is difficult, such as in the context of confusion suffered by anonymous web surfers. See
6 At oral argument, the district court suggested that the First Circuit requires proof of actual confusion, not just a likelihood of confusion. App. at 974 75. This is legally erroneous. The First Circuit, like all the circuits balances evidence of actual confusion along with the other likelihood of confusion factors, none of which are absolute prerequisites. Volkswagenwerk, 814 F.2d at 818.
Brookfield, 174 F.3d at 1050. On the other hand, "the fact that some confusion already has occurred favors plaintiff at least to some extent." See Daddy's, 109 F.3d at 284 85.
Here, the record contains multiple instances of actual confusion. CCI received e malls through the clue.com web site which sought information on, and assistance with, Hasbro's CLUES products. See, e.g., App. at 670 71, 745 49. One individual inquired, "LOOKING FOR ON LINE TROUBLESHOOTING ... FOR THE CLUE GAME (CD ROM) MADE By HASBRO." App. at 671. Another individual, Joy Magestro, asked CCI after viewing its web site: "Are you the game of Clueâ App. at 670. Not receiving any response from CCI, Ms. Magestro gave up her attempts to get assistance using the CLUEâ game, and consequently lost respect for Hasbro and its products. App. at 830 31 ¶¶ 3 6. Yet another individual, Jerry Britt, was confused into accessing CCI's site while looking for information about the CLUES game. App. at 949 50. Ii is reasonable to assume that others suffered the same fate, and simply gave up. See Panavision, 141 F.3d at 1327.
In fact, the case law recognizes (consistent with the evidence of record) that where a famous product is not found at a <famous mark.com> Internet site, many users who would expect to be able to type in the <famous mark.com> will be unable to find the site. App. at 622 23; Jews for Jesus, 993 F. Supp. at 303; Green Prods. Co. v. Independence Corn By Prods., 992 F. Supp. 1070, 1079 (N.D. Iowa 1997). Internet search engines do not offer a satisfactory alternative for locating sites, as they frequently turn up thousands of irrelevant 4~ matches." Panavision, 141 F.3d at 1327 ("Use of a 'search engine' can turn up hundreds of web sites, and there is nothing equivalent to a phone book or directory assistance for the Internet".). Indeed, the court conceded that there is
a genuine dispute regarding "the ease of finding Hasbro's site for CLUE." Order at 16. This dispute is material to Hasbro's infringement case, and itself should have been grounds for denial of summary judgment.
Instead of drawing inferences in Hasbro's favor from the evidence (as it was required to do , the district court substituted its own judgment and independently determined that the confusion of two of the declarants, Joy Magestro and Jerry Britt, was "unreasonable." Order at 15. Specifically, the court found (without any evidence to support its conclusion) that Ms. Magestro and Mr. Britt's decision to seek information on the CLUEâ game at the clue.com web site was the product of "carelessness, indifference, or ennui." Order at 15. However, these individuals' confusion was not unreasonable, and certainly was not unreasonable as a matter of law. They simply did what many Internet users do when looking for a web site: they typed the name of the product they were looking for into their web browsers. Given Ms. Magestro's qualifications as a programmer of web sites, and Mr. Britt's position as a corporate executive, their logical decision to seek out information about the CLUB® products at clue.com hardly constitutes conduct that no jury could find reasonable.
Finally, although Hasbro submitted ample evidence of actual confusion, the court erroneously concluded (again without the benefit of supporting evidence) that even more evidence would have been submitted had there been a genuine likelihood of confusion. Order at 13 147. The absence of actual
7 Hasbro further notes that the court's focus on the "four years" during which confusion evidence should have been generated is incorrect. Order at 13. In fact, the proper measure of time from the date Hasbro first began promoting and selling its CLUE8 CD ROM game to the date CCI did its only (continued...)
confusion evidence is significant only where the "particular circumstances indicate such evidence should have been available." Daddy's, 109 F.3d at 284. Where the amount of actual confusion is unknown, rather than quantified as minimal, this factor favors the plaintiff. See Forum Corp, of North America v. Forum, Ltd., 903 F.2d 434~ 443 (7th Cir. 1990).
Here, the only way of finding out whether many (if not most) of those Internet users going to CCI's site at clue.com were in fact searching for information or services related to the CLUEâ products would be to examine logs tracking the Internet addresses of CCIs users. However, CCI chose not to keep such logs. App. at 720. Under the circumstances, the lack of such evidence cannot be used to support an inference that there was no' actual confusion.
The seventh factor looks at the subjective question of the defendant's intent in adopting the mark. As 'the district court recognized (Order at 17), while an affirmative showing on intent may help prove liability, a lack of intent does not minimize the likelihood of confusion, as the absence of intent does not impact the perception of consumers. Lund, 163 F.3d at 44; Chrysler Corp. v. Silva, 118 F.3d 56, 59 n.3 (1st Cir. 1997) ("Strictly, intent, or lack thereof, does not affect the eyes of the viewer.").
At a minimum, there is a genuine issue with respect to this intent factor. Both founders of M were familiar with the CLUE®R products at the time they adopted the clue.com mark as their domain name. App. at 730 31, 768 69.
( ... continued from previous pa e)
collection and production of e-mails relating to consumer confusion was approximately one year. Compare App. at 11 04 with App. at 716.
While CCI's trade name was "Clue Computing," CCI nonetheless chose to register clue.com as its domain name. CCI concedes that prior to registering the domain name, it failed to perform a trademark search to see if it had rights to use the CLUE9 mark. App. at 731, 734 35. Moreover , CCI adopted a corporate logo that resembled that used by Hasbro. App. at 617.'
Where there is evidence that the defendant proceeded with knowledge of the plaintiffs mark, such evidence is sufficient to support an inference of wrongful intent for purposes of summary judgment. Cadbury Beverages, 73 F.3d at 483; Daddy's, 109 F.3d at 286 287; AIG, 664 F.2d at 353. Thus, contrary to the district court's suggestion that there is "no evidence',' to support the intent factor, Order at 16, there are sufficient facts to raise a genuine dispute On the intent factor.
8. Strength of the Mark
On the eighth factor, the district court properly found that CLUEâ was clearly a strong mark." The court held that, notwithstanding its status as a 44common" noun, the CLUEâ mark fits into the category of "suggestive" marks - marks which "connote rather than describe a particular product or service and require the consumer's imagination to reach a conclusion as to the nature of the product or service." Order at 18 (citation omitted). Suggestive marks are "inherently distinctive" and require no farther proof to receive trademark protection. Nonetheless, Hasbro additionally "fully demonstrated that the mark has secondary meaning" by demonstrating evidence of long and exclusive use, prominence of Hasbro's enterprise, extensive advertising and promotion of the
8 In concluding that the similarities in marks were "not persuasive" and in disregarding the evidence cited above (see Order at 17), the district court again improperly drew inferences against Hasbro.
mark, and recognition of secondary meaning among the public. Order at 18. This factor weighs strongly in Hasbro's favor, and provides the mark with broad protection. See Volkswagenwerk, 814 F.2d at 819.
D. The District Court Improperly Balanced the Eight Factors of
Likelihood of Confusion, Wrongly Drawing Factual Inferences
Assessing each of the eight factors and drawing inferences in Hasbro's favor, the court is required to determine whether, on balance, a reasonable jury could find a likelihood of confusion based on all of the evidence. Instead, the district court found as follows:
Hasbro has produced evidence proving similarity of the marks and strength of its mark, but it has failed to produce any adequate evidence indicating intent to confuse, common channels of trade and advertising, common prospective purchasers, and the crucial categories of similarity of the products and actual confusion. Overall, Hasbro has failed. to demonstrate, as a matter of law, that there is a likelihood that consumers will confuse Clue Computing's computer consulting Web site with Hasbro's game.
Order at 19. Thus, the district court determined that, "as a matter of law," CCI should prevail based on the dissimilarity of goods and services and the lack of actual confusion evidence.
In reaching its conclusion, the district court discounted and weighed evidence, made improper credibility determinations, and drew inferences against Hasbro, none of which is permitted on summary judgment. See Smith v. F.W. Morse & Co., 76 F.3d 4133 425 (1st Cir. 1996). As indicated in the court's Order, Hasbro has "produced evidence proving" at least two of the factors, strength and similarity of the marks. As discussed above, Hasbro has certainly offered evidence on the other factors from which a trier of fact could reasonably find in Hasbro's favor. On this record, summary judgment is simply unwarranted.
Even if the district court had properly held that certain of the factors favored CCI, this alone would be insufficient to support summary judgment. As the First Circuit has held, no one factor should be dispositive. Boston Athletic Ass'n, 867 F.2d at 29. So long as the jury could decide to give less weight to the factors favoring CCI, summary judgment is inappropriate. See Epix, 184 F.3d at 1110 (reversing summary judgment where conflicting evidence on five of the factors); see also Star, 89 F.3d at 10 11 ("jury also could have given little relative weight to the less supported factors of intent and strength of the mark"); see also Equine Techs., Inc. v. Equitechnology, Inc., 68 F.3d 542, 546 (1st Cir. 1995); The Sports Authority, Inc. v. Prime Hospitality Corp., 89 F.3d 955, 965 (2d Cir. 1996); Cadbury Beverages, 73 F.3d at 478.
In an analogous case involving the domain name "epix.com", the Ninth Circuit reversed the lower court's grant of summary judgment to the defendant where plaintiff offered digital imaging services and defendant primarily advertised a local Rocky Horror Picture Show troupe. Epix, 184 F.3d at 1112. The Ninth Circuit held that the district court erroneously weighed the evidence on the confusion factors, instead of merely determining whether "evidence on the record would permit a rational fact finder to find a likelihood of confusion." Id.
As in Epix, a jury could reasonably find that all or nearly all of the factors favor Hasbro, and that the factors favoring Hasbro support a finding of likelihood of confusion. Thus, Hasbro has made more than a sufficient showing to overturn the district court's grant of summary judgment.
E. Genuine Issues of Fact Support Infringement Under the Initial Interest Confusion Doctrine
Even if Hasbro had not raised a genuine issue of fact on the traditional likelihood of confusion analysis (which it has), Hasbro has raised genuine
issues of fact under an alternative "initial interest" theory of confusion, which has recently been applied in place of the traditional multi factor likelihood of confusion test 'in a number of Internet domain name disputes', including two influential Ninth Circuit decisions. See Brookfield, 174 F.3d 1061 64 (9th Cir. 1999); Epix, 184 F.3d 1107. Although the district court improperly refused to apply the doctrine here, Hasbro submits that the theory is authorized by the Lanham Act and is applicable to the facts of this case.
The First Circuit has not yet addressed the question of whether the Lanham Act recognizes "initial interest" confusion. However, the theory has been at least implicitly recognized by district courts in this Circuit. See Big Top USA, Inc. v. Wittern Group, 998 F. Supp. 30, 52 (D. Mass. 1998) ("The Lanham Act 'forbids a competitor from luring potential customers from a producer by initially passing off its goods as those of the producer's, even if confusion as to the source of the goods is dispelled by the time any sales are consummated."'). Indeed, in EAYC Corp. v. Hewlett Packard Co., 59 F. Supp. 2d 147, 150 5.2 (D. Mass. 1999), the district court, following the earlier decision in Big Top, granted an injunction against trademark infringement based on the initial interest confusion doctrine. The EMC court found that, while the First Circuit has never expressly considered the initial interest theory, the theory was well supported by a 'number of other circuits. Id. at 150 & n.2 (collecting cases from second, fifth, seventh and ninth circuits, as well as treatises).
Hasbro respectfully asks the First Circuit to follow the recent line of cases that have nearly universally adopted the doctrine, holding that the Lanham Act supports a claim for initial interest confusion. See Brookfield, 174 F.3d at 1063 64 (collecting cases). The rationale for the theory is simple: "Although there is no source confusion in the sense that consumers know that
they are patronizing [defendant] rather than [plaintiffl, there is nevertheless initial interest confusion in the sense that by using [<trademark>. com] to divert people looking for [plaintiff] to its web site, [defendant] improperly benefits from the goodwill that [plaintiff] developed in its mark." Brookfield, 174 F.3d at 1062; see also Epix, 184 F.3d at 1109 10 (trademark holder "can defeat summary Judgment by placing evidence on the record tending to 'establish that [defendant] is using a mark confusingly similar to a valid, protectable trademark of [plaintiff]... as the domain name for its web site). "Even if the confusion is cured at some intermediate point before the deal is completed, the initial confusion may be damaging and wrongful." Television Enter. Network Inc. v. Entertainment Network, Inc., 630 F. Supp. 244, 247 (D.N.J. 1986).
If the initial interest theory is adopted by this Circuit, there can be no doubt that the district court's grant of summary judgment would have to be reversed. Even if no reasonable juror could find similarity in goods and services, CCI still causes a cognizable form of confusion by steering users, even if only temporarily, to the clue.com site. In this manner, CCI improperly benefits from the goodwill that Hasbro has developed in the CLUEâ mark. See Nissan JWotor Co., Ltd. v. Nissan Computer Corp., _ F. Supp. 2d _, 2000 WL 305744 (C.D. Cal. March 23, 2000) (enjoining Mr. Nissan's consulting business at nissan.com under initial interest confusion theory, since users would expect to find information about Nissan automobiles at nissan.com web site). Indeed, the district court recognized that the evidence of record supports a finding of initial interest confusion, noting that this is "the kind of confusion that is more likely to result from Clue Computing's use of the 'clue.com' domain name
namely, that consumers will realize they are at 'the wrong site and go to an Internet search engine to find the right one." Order at 15.9
In sum, because a reasonable jury could have found for Hasbro on either the traditional likelihood of confusion test, or on the initial interest confusion theory, summary judgment for CCI was improper and should be reversed.
11. THE DISTRICT COURT CLEARLY ERRED IN FINDING THAT
HASBRO'S FAMOUS CLUE9 MARK WAS NOT DILUTED BY
CCI'S CLUE.COM DOMAIN NAME
A. Standard of Review
In reviewing factual findings of a trial court made in connection with a bench trial, the First Circuit typically applies the clear error standard of review. See Brown Daltas & Assocs. v. General Accident Ins. Co. of America, 48 F.3d 30) 36 (1st Cir. 1995). Reversal is required where the Court of Appeals is "left with the definite and firm conviction that a mistake has been committed." Brown Daltas & Assocs, 48 F.3d at 36 (quoting Anderson v. City of Bessemer City, 470 U.S. 564, 573 (1985)).
However, if the trial court based its finding upon a mistaken impression of applicable legal principles, the reviewing court is not bound by the clearly erroneous standard. Brown Daltas & Assocs, 48 F.3d at 36; see also Lund, 163 F.3d at 33 ("If findings are made under incorrect standards, little or no deference is due those findings.").
9 Although the district court refused to apply the doctrine based on dicta from the Central District of California in T6etech Customer Care Mgmt. v Tele Tech. Co., 977 F. Supp. 1407, 1414 (C.D. Cal. 1997), the district court also provides a "But see" citation to the two seminal Ninth Circuit decisions Brookfield and gpix which adopt the initial interest confusion doctrine, and thus overrule whatever force the Teletech dicta ever had.
B. Federal Trademark Dilution Act
The Federal Trademark Dilution Act ("FTDA") creates a new "federal cause of action to protect famous marks from unauthorized users that attempt to trade upon the goodwill and established renown of such marks and, thereby, dilute their distinctive quality." Lund, 163 F.3d at 45 (citation omitted). In passing the FTDA, Congress was particularly concerned about dilution caused by the registration and use of famous trademarks as domain names by persons other than the trademark owner. See Panavision, 141 F.3d at 1326.
A claim for trademark dilution under the FTDA requires proof of the following elements:
(1) plaintiff owns a "famous" mark;
(2) defendant is making commercial use of a mark in commerce;
(3) defendant's use began after the plaintiffs mark became famous; and
(4) defendant's use causes dilution by lessening the capacity of plaintiffs mark to identify and distinguish goods or services.
See 4 J. Thomas McCarthy, McCARTHY ON TRADEMARKS AND UNFAIR COMPETITION § 24:89, at 24 142 to 143 (4th ed. 2000) (hereafter "McCARTHY").
The district court found for Hasbro on the second and third factors, but ruled in CCI's favor on the first and fourth factors, concluding that CLUEâ is not a famous mark and that CCI's registration and use of the clue.com domain name for its web site does not dilute the CLUEâ mark. These latter two findings constitute clear error and mandate reversal.
C. The District Court Erred by Finding That "CLUEâ" Is Not a Famous Mark Under the FTDA
The FTDA lists eight factors that a court "may consider" in deciding whether a mark is famous:
(A) the degree of inherent or acquired distinctiveness of the mark;
(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;
(C) the duration and extent of advertising and publicity of the mark;
(D) the geographical extent of the trading area in which the mark is used;
(E) the channels of trade for the goods or services with which the mark is used;
(F) the degree of recognition of the mark in the trading areas and channels of trade u0sed by the marks' owner and the person against whom the injunction is sought;
(G) the nature and extent of use of the same or similar marks by third parties; and
(H) whether the mark was registered under the Act of March 3, 1881, or the Act of February 20,1905, or on the principal register.
15 U.S.C. § 1125(c)(1).
Six of these factors so clearly favored a finding of famousness that neither CCI nor the district court suggested otherwise. The evidence on those factors (some of which is set forth below) overwhelmingly demonstrates that CLUEâ is a famous and distinctive mark:
Duration of use: The CLUEâ mark has been continuously used in the United States since 1949. App. at 1096.
Extent of use: Hasbro has sold over 150 million copies of the CLUEâ board game, as well as millions of dollars worth of other CLUEâ products, including the computer CD ROM versions of the game. Hasbro has sold a wide variety of entertainment products using
the mark and has licensed its use on an even wider array of goods and services. App. at 800, 1098 ¶ 10, 1136 37 ¶ 3.
Duration and extent of advertising: Hasbro has spent millions of dollars in promoting the CLUE®R line of products, and recently launched a marketing campaign to celebrate the game's fiftieth anniversary. App. at 522 ¶ 3, 1098 ¶ 7.
Geographical extent of trading: CLUEâ products are sold in over forty countries. Within the United States, the brand is known by at least 76 percent of the population in the Northeast, Midwest, West and South. App. at 1099 ¶ 11, 1117.
Channels of trade: Hasbro extensively promotes and sells CLUE® products using traditional marketing channels as well as the Internet. App. at 1098 ¶¶ 7 9, 1125 35.
Degree of recognition in Hasbro's channels of trade: The CLUEâ products are recognized by 80 percent of the population overall., and by'92 percent of households with children. App. at 1117.
Degree of recognition in CCI's channels of trade: Because recognition of the CLUEâ products is not limited to any particular channel, recognition among CCI's customers is likely to be equally high.
Registration of the Mark: Hasbro owns the incontestable CLUE® trademark, which was first placed on the principal register in 1950. Hasbro owns several other federal registrations for the CLUEâ mark and variations on that mark. App. at 481 ¶ 2, 485 515.
These facts lead to only one conclusion that Hasbro has established that CLUEâ is a "famous and distinctive" trademark.
Nonetheless, the district court essentially ignored the evidence on these six factors, and instead focused exclusively on the remaining two factors the mark's alleged lack of "distinctiveness" and the use of the word "clue" by third parties. By undertaking this faulty analysis, and by erroneously concluding that the distinctiveness and third party use factors favored CCI, the district court committed reversible error.
1. The Distinctiveness of the "CLUE@" Trademark
Supports a Finding of Famousness
The first famousness factor listed in the FTDA is "the degree of inherent or acquired distinctiveness of the mark." 15 U.S.C. § 1125(c)(1)(A). In analyzing this factor, the district court found that the registered CLUE®R mark was "suggestive." Order at 18. By definition, suggestive marks are considered inherently distinctive, and do not require proof of secondary meaning. See WalMart Stores, Inc. v. Samara Bros., Inc., 120 S. Ct. 1339, 1343 (2000). Indeed, the CLUE9 mark's distinctiveness is conclusively presumed, as the mark has become incontestable under 15 U.S.C. § 1065. See Park 'NFly, Inc. v. Dollar Park & Fly, Inc., 469 U.S. 189, 205 (1985).
Although the court's finding that the CLUEâ mark was suggestiv6 (and therefore inherently distinctive) should have ended the inquiry on the first factor, the court went on to look at acquired distinctiveness. In so doing, the court found that "the widespread recognition of Hasbro's mark and its longtime use and advertising ... suggest 'acquired distinctiveness, ' which is recognized by the FTDA." Order at 31; 4 MCCARTHY § 24:91, at 24 155 & n.10 ("The first factor makes it clear that a mark may be deemed 'famous' even if not inherently distinctive . . .").
Notwithstanding the court's conclusions that the CLUEâ mark was inherently distinctive and had strong secondary meaning, the court found the
distinctiveness factor favored CCI because "clue"' is "a common word" with a variety of meanings. This finding is premised on the erroneous assumption that trademarks based on common words" lack distinctiveness and are not subject to protection by the FTDA." While it is clear that "the mere acquisition of secondary meaning to achieve trademark status in a non inherently distinctive designation" is not enough to establish fame, Lund, 163 F.3d at 47, this does not mean that "common words" with acquired (or inherent) distinctiveness may not qualify as "famous" marks.
The district court's test for distinctiveness effectively requires trademarks to be fanciful in order to be protected. This directly contradicts the First Circuit's holding that the FTDA "applies to a famous 'mark' and applies to all types of marks recognized by the Lanham Act." Lund, 163 F.3d at 45. It also stands alone against a legion of cases that recognize that common word marks can qualify for protection under the dilution laws. See, e.g., Lozano Enters. v. La Opinion Publ'g Co., 44 U.S.P.Q.2d 1764, 1769 (C.D. Cal. 1997) ("LA OPINION"); Gazette Newspapers, Inc. v. New Paper, ln,~r., 934 F. Supp. 688, 696 96 (D. Md. 1996) ("GAZETTE"); Johnson Publishing Co. v. Willits Designs Int'l, Inc., No. 98 C 2653, 1998 WL 341618 at *7 (N.D. 111. June 22, 1998) ("EBONY"); Polo Ralph Lauren v. Schuman, 46 U.S.P.Q.2d 1046, 1054 (S.D Tex. 1998) ("POLO").
The court further suggests in one hard to understand portion of the Order that a common word may not be protectable as a famous trademark if the defendant is using the mark "consistent with the common usage of the 'Word."
10 Inconsistently, the district court later found that Hasbro had met the "distinctiveness" requirement of the Massachusetts dilution statute. Order at 45.
Order at 3 1. As a threshold matter, Hasbro could find no court that had ever applied such a rule.' Moreover, it is hard to imagine how a defendant's use of a mark can affect the mark's famousness. In any event, the court's statement that "defendant's use of the word 'Clue' is entirely consistent with the common usage of the word," Order at 3 1, is factually erroneous. CCI's uses of clue.corn and "Clue Computing" are neither generic nor descriptive. Neither Hasbro's use of "CLUE" nor CCI's use of clue.com are in any way descriptive of the parties' goods and services. Instead, they are likely suggestive. See Order at 18. Thus, they are used not as "common words" but as "marks" to "Identify and distinguish" goods and services. See 15 U.S C. § 1127.
Accordingly, the district court erroneously relied on the distinctiveness factor to support its finding that CLUEâ is not a famous mark.
2. Limited, Unsubstantiated Third Party Usage of the
Word "Clue" Does Not Defeat the Strong Evidence of
Famousness of the Mark
The district court erroneously found that unsubstantiated third party use of the word "clue" in various contexts diminished the famousness of Hasbro's CLUEâ trademark. The court primarily relied on the existence of third party trademarks that make some use of the word "clue," invariably as part of a larger mark, to find the existence of third party use. This was clearly erroneous, as there was no evidence that these marks were used at all, much less that they reached anywhere near the 80 percent recognition of Hasbro's mark, or any
The court bases its statement on dicta in Polo Ralph Lauren, 46 U.S.P.Q.2d 1046, even though in that case the court found the POLO" mark to be famous, and the analysis of defendant's use was conducted in connection with the damages provision of the FTDA, which adds the element of willfulness.
level that was likely to render the CLUE9 mark unprotectable from further dilution.
The district court did concede that "[t]hird party usage of a mark similar to [the plaintiff's mark] is relevant only when defendants can show that the third party's marks are actually used, well promoted or recognized by consumers." Order at 32. Indeed, the mere existence of third party uses is insignificant, as "the significance of third party trademarks depends wholly upon their usage." Lexington Mgmt. Corp. v. Lexington Capital Partners, 10 F. Supp. 2d 271, 281 (S.D.N.Y. 1998). Nonetheless, the district court went on to hold that the mere registration of marks was sufficient to "demonstrate" that "at least some of them are used (many are listed as 'active') and may be wellpromoted." Order at 32 (emphasis added). Such supposition is clearly an inadequate basis to support a finding that an otherwise "famous" mark is somehow so used by third parties that there is nothing left to dilute.
Moreover, the district court made this finding without any showing by CCI that any of the third party marks were "used" to an extent that would have any effect on the fame of the CLUEâ mark. 12 A defendant cannot establish third party usage merely by submitting an affidavit describing similar registered trademarks. See Daddy's, 109 F.3d at 281 ("[m]erely showing the existence of
12 The two cases on which the court bases its third party usage analysis are inapplicable. In Columbia, the court found the plaintiffs mark undermined by third party uses where the mark had been used extensively by third parties in the same field as the plaintiff, and plaintiff had shown no evidence that its mark was uniquely associated with plaintiff. Trustees of Columbia University. v. ColumbialHCA Healthcare Corp 964 F. Supp 733 (S.D.N.Y. 1997). In Sborts Authoritv, Inc. v. Abercrombie I Fitch, Inc., 965 F. Supp. 925 (E.D. Mich. 1997), the court provided no analysis of the eight factors, and there was no apparent evidence submitted by plaintiff on most of the factors. Accordingly, both of these cases are readily distinguishable, and neither provides support for the court's finding that the CLUEâ mark is not famous.
marks in the records of the Patent and Trademark Office will not materially affect the distinctiveness of another's mark which is actively used in commerce."). :Yet this is all that CCI did. On the record before the district court, it was clearly erroneous for the court to infer third party use from the mere registration of "clue" like trademarks.
While there is virtually no evidence on the extent of any of these third party uses, it seems rather unlikely that various trademarks containing the letters "CLUE" have so weakened the famous CLUE9 mark that it should no longer be eligible for protection. In fact, the evidence shows that the third party uses are insubstantial. CCI's expert admitted that she had never heard of any of the third party marks before receiving the trademark search report. App. at 782. 14 Hasbro's expert, Leland Harden, similarly concluded that none of the third party usage had risen to a level of recognition that would detract from the very strong association of the mark with Hasbro's products and services. App. at 627. Mr. Harden further found that even if there were some minor uses of the CLUEâ mark in commerce, 15 they did not cause the same type of dilution as the misappropriation of the clue.com domain name. App. at 627.
13 The court's reliance on the trademark registration reports listing of some third party marks. as "active" is misplaced. That a registered mark is active" simply means it has not expired or been canceled. See 15 U.S.C. § 1058. It says little about the extent (if any) of ongoing usage.
14 Any suggestion that Hasbro has to "prove the negative" b affirmatively showing that each of the references to third party CLUE related marks is improper. While Hasbro has the burden of proving famousness, it more than met the burden by providing substantial evidence on the other famousness factors. It is CCI's burden to submit competent evidence of third party usage in order for this factor to be relevant, a burden CCI did not meet.
15 CCI's "evidence" of third party usage includes such registered marks as "Cluett Cane Collection," "American Society of CLU & CHFC," and "Mark C. Lueg MD." App. at 337, 347, 417.
Consequently, a finding of lack of famousness based on third party usage of the mark was clearly erroneous.
3. The District Court Erroneously Weighed the Famousness Factors and Ignored the Overwhelming Evidence of Fame
In reviewing a finding of "famousness," this court will reverse findings of fact if clearly erroneous, but will not defer to findings that are based on an incorrect interpretation of law. Lund, 163 F.3d at 43. As described above, the court's findings on distinctiveness and third party usage were based on incorrect interpretations of the law, and shou.1d thus be given little weight. Moreover, when a holding is based on the weighing of several factors, this court will reverse "when a material factor deserving significant weight is ignored, when an improper factor is relied upon, or when all proper and no improper factors are assessed, but the court makes a serious mistake in weighing them." Id at 33. The district court's improper weighing of the eight famousness factors was clearly erroneous, as it unduly focused on only one or two of the eight factors.
While a famousness inquiry requires a court to consider all the factors, the district court erred by considering essentially only two factors - distinctiveness and third party usage. 15 U.S.C. § 1125(c). The court recognized that six of the eight factors favored Hasbro. See Order at 29 30. Moreover, in discussing the third party use factor, the court found that "any acquired distinctiveness of the plaintiffs mark has been seriously undermined by third party use of the same or similar marks." Order at 32. Thus, the district court collapsed its entire famousness analysis into an analysis of distinctiveness, even though the First Circuit has held that it would be clearly erroneous for a district court to treat one of the eight statutory famousness
factors as a per se test. See Lund, 163 F.3d at 43 (a holding of famousness based solely on distinctiveness "would be erroneous").
As shown in Section 11.C, supra, a proper analysis of the eight factors shows that CLUE®R is one of those rare marks that has achieved substantial nationwide fame. The court's conclusion to the contrary was legally and factually erroneous and should be reversed.
D. The CLUEâ Mark Is Diluted by CCI's Registration and Use of the CLUE.COM Domain Name
Dilution under the FTDA is defined as "the lessening of the capacity of a famous mark to identify and distinguish goods or services, regardless of the presence or absence of (1) competition between the owner of the famous mark and other parties, or (2) the likelihood of confusion, mistake or deception." 15 .U.S.C. § 1127 (attached as Addendum Q. Hasbro has 'established such a "lessening of the capacity" of the CLUEâ mark to identify Hasbro's goods and services on the Internet. This conclusion can be reached under the case law applying the FTDA to domain name disputes (see Section 11.13. 1 infra), as well as under the First Circuit case law regarding dilution by "blurring" (see Section 113.2 infra).
1. Under Panavision, CCI Has Caused Dilution of the
CLUE9 Mark on the Internet
A number of courts have held that the registration and use of a plaintiffs famous mark as an Internet domain name by another party necessarily "lessen[s] the capacity of a famous mark to identify and distinguish goods and services" on the Internet. See Panavision, 141 F.3d at 1326 27; Lozano, 44 U.S.P.Q.2d at 1769. As the Ninth Circuit held in Panavision, 141 F.3d at 1327, when a domain name corresponding to a famous trademark is taken, the mark holder can be seriously harmed. When customers cannot find the mark holder's
site, "[t]his dilutes the value of [the mark holder's] trademark. . . . [Defendant's] use of [the domain name] also puts [plaintiffs] name and reputation at his mercy." Id. Similarly, Hasbro should not be required to trust that CCI will put 'Its famous CLUE9 mark to good use. Hasbro thus respectfully requests that the First Circuit apply these principles in addressing the harm to its famous mark caused by the misappropriation of a domain name corresponding to that mark.
In rejecting what the court wrongly characterized as a per se rule, the district court held: I join those courts finding that, while use of a trademark as a domain name to extort money from the mark holder or to prevent that mark holder from using the domain name may be per se dilution, a legitimate competing use of the domain name is not." Order at 36 (emphasis added). The court farther held that an "innocent" first registrant of the domain name should be allowed to keep the domain name "provided that it has not otherwise infringed upon or diluted the trademark." Order at 36 (emphasis added). This analysis is circular. In effect, the court concluded that use of a domain name does not' cause dilution unless it causes dilution. Hasbro submits that CCI's registration and use of the famous CLUE9 mark in connection with its computer consulting and Internet service providing business are not "legitimate competing uses of the domain name," and do "otherwise dilute" the mark, as Panavision and its progeny have established.
Further, the court held that another Internet user with "an innocent and legitimate reason" for using the mark should not be found liable. However, the mens rea of the defendant bears no connection to the statutory definition of dilution, as good (or bad) intent does little to change the effect on the public's associations with the mark. Lund, 163 F.3d at 49 50. Regardless of CCI's
intent, CCI's use of the domain name has unquestionably "lessened" Hasbro's ability to identify its goods and services on the Internet.
2. The District Court Misapplied the First Circuit's Test for Blurring, Under Which Hasbro Should Prevail
A mark will be diluted under the theory of "blurring" when customers begin to see the one mark as identifying two sources. See 4 MCCARTHY § 24:94 at 24 169 to 172. Prior to the FTDA, a number of courts looked at six factors relevant to blurring, which became known as the "Sweet factors." See Mead Data Central, Inc. v. Toyota Motor Sales U.SA., Inc., 875 F.2d 1026, 1035 (2d Cir. 1989) (Sweet, J., concurring).
Analyzing blurring in a case involving competing water faucet designs, the First Circuit recently rejected four of the "Sweet factors." Lund, 163 F.3d at 49. The Court recognized that factors such as "predatory intent, similarity of products, sophistication of customers, and renown of the junior mark work directly contrary to the intent of a law whose primary purpose was to apply in cases of widely differing goods." Id."
The relevant dilution factors remaining following Lund are "similarity of the marks" and the "renown of the senior mark." Id. at 49. As the district court recognized, these factors clearly favor Hasbro. Order at 40 41 (finding marks "identical" and that "CLUE®R mark has gained widespread recognition nationwide"). Thus, as the district court conceded, Hasbro should prevail under the First Circuit's blurring test.
Hasbro notes that the parties did not submit briefing or argument regarding the effect of the Lund decision to the court below, as Lund was decided after or i al argument. However, Hasbro believes that the Lund decision is consistent with the Ninth Circuit's Panavision holding, as both reject the "Sweet factor" analysis in which CCI engages. See Panavision, 141 F.3d at 1326; Lund, 163 F.3d. at 49.
Nonetheless, the district court went on to invent a new test for dilution, purportedly based on Lund and MCCARTHY. The district court held that Hasbro was required to prove a third "element" for blurring: "that consumers associate the two different products with the mark even if they are not confused as to the different origins of these products." Order at 42. The district court cites to page 50 of the Lund decision and to Section 24:90.1 (now section 24:90.2) of MCCARTHY, which both involve discussions of the "similarity of the marks" factor. Order at 41 42. The similarity of marks factor was at issue in Lund, since the two different faucet designs did not necessarily involve the same "mark," and therefore defendant's faucet did not necessarily dilute the plaintiffs trade dress. See Lund, 163 F.3d at 34. These authorities merely held that where two marks are not identical, courts must analyze whether the marks are sufficiently similar that consumers identify them as "essentially the same mark." Contrary to the district court's analysis, the discussion in Lund and MCCARTHY are not about some new element for dilution.
As the district court concedes, Hasbro has clearly met the similarity of marks test, since Hasbro's CLUE(R) mark and CCI's clue.com domain name are for all practical purposes identical. Order at 8 9, 40. Thus, the district court's finding that Hasbro has not met the "third" factor is legally erroneous and contradicted by the court's own findings. Indeed, in concluding that Hasbro has failed to establish dilution, the district court has violated its own warnings against adding in a likelihood of confusion analysis. See Order at 39. Moreover, the court cites the purported "lack of actual confusion" and the "dissimilarity of the products" to bolster its finding. Order at 43. Reliance on these facts constitutes legal error. Lund, 163 F.3d at 49 50.
E. The District Court Improperly Added, and Erroneously Found Against Hasbro on, a New "Equity" Element
The district court erroneously added a new "equity element" to the liability analysis. Moreover, its conclusion (without any evidentiary support) that the equities favored allowing CCI to continue diluting Hasbro's famous' mark was a clear abuse of discretion. Ruiz Troche v. Pepsi Cola of Puerto Rico Bottling Co., 161 F.3d 77, 83 (1st Cir. 1998).
1. There Is No "Equity" Element for Liability under the
The court erroneously confused liability with remedies in holding that if Hasbro's CLUE® mark is famous, and even if CCI diluted that mark, judgment on liability should still be entered for CCI because of the "equities." Order at 44.
As background, Hasbro initially moved for summary judgment of dilution with respect to liability alone. App. at 479. At oral argument, both parties consented to a bench trial on the liability issue. The equitable issues, which are relevant to the remedies phase, had not been fully briefed to the court. Order at 6; App. at 968 69. In ruling against Hasbro, the district court treated a remedy's restriction as a liability element. By doing so, the district court improperly deprived Hasbro of its right to create a record on the equitable issues. See EEOC v. Steamship Clerks Union, 48 F.3d 594, 608 09 (1st Cir. 1995).
The district court held that "a distinctive analysis of the principles" of equity "is appropriate to a full consideration of plaintiffs claim." Order at 44. It further held: "I do not, strictly speaking, view such 'principles' as core 'elements."' Id. Despite this insistence, the court treated those "principles" as an element by resting its liability holding in part on the conclusion that "Hasbro
has failed to demonstrate equitable considerations sufficient to justify an injunctive judgment against Clue Computing under the FTDA." Id. Because equity" is no a prerequisite to liability for dilution, the court's analysis was unnecessary and legally erroneous."
An examination of the statute's language illustrates its distinction between liability and remedies. The FTDA reads in pertinent part:
The owner of a famous mark shall be entitled, subject to the principles of equity and upon such terms as the court deems reasonable, to an injunction against another person's commercial use in commerce of a mark or trade name, if such use begins after the mark has become famous and causes dilution of the distinctive quality of the mark, and to obtain such other relief as is provided in this subsection.
15 U.S.C. § 1125(c)(1) (emphasis added).
This sentence's clear structure separates the description of the offense from the remedy available to the plaintiff. The first portion of the section describes the remedy available to a plaintiff if the elements of liability are present. The "principles of equity," as well as other terms "the court deems reasonable," modify the extent to which a plaintiff "shall be entitled" to an injunction, but are not meant to be part of the prima facie case for dilution liability.
"Equity" in the context of the Lanham Act refers to remedies, not liability. See, e.g., 15 U.S.C. § I I 16(a) (allowing courts to issue injunctions
17 Courts interpreting the FTDA do not consider "principles of equity" among the elements of a prima facie case for dilution. See, e.g., Hormel Foods Corp. v. Jim Henson Prods., Inc., 73 F.3d 4971 506 (2d Cir. 1996); Panavision, 141 F.3d at 1324. Nor does the leading trademark treatise list the "principles of. equity" as an element of a prima facie case of trademark dilution. See 4 MCCARTHY § 24:89, at 24 142 to 143.
against trademark infringers. "according to the principles of equity"); 15 U.S.C. § I I 17(a) (making damage awards " subject to the principles of equity."). In addition to the language quoted above, the FTDA makes money damages available for willful dilution only "subject to the discretion of the court and the principles of equity." 15 U.S.C. § 1125(c)(2). In statutory construction, there is a "presumption that equivalent words have equivalent meaning when repeated in the same statute." Cohen v. de la Cruz, 523 U.S. 213, 220 (1998). Thus, the Court should presume that Congress intended for the "principles of equity" to restrict remedies in both parts of the FTDA. Traditionally, equitable issues are raised when considering whether to grant an injunctive remedy in a "balance of hardships" analysis. This limitation in the FTDA merely confirms that a court should engage in such an analysis before granting an injunction.
The court primarily relies on Viacom, Inc. v. Ingram Enters., 141 F.3d 886 (.8th Cir. 1998) for its "equity" holding. In Viacom, the lower court had enjoined the defendant for a violation of the state dilution statute, but had denied relief under the FTDA, finding that air injunction would render the statute impermissibly retroactive. The Eighth Circuit reversed, holding that new statutes can be applied prospectively, and remanded for consideration of whether an injunction should issue. The district court here improperly relies on the Eighth Circuit's dicta telling the district court that it may consider the equities in the remedies phase. Id. at 890. Here, the court has not yet reached the remedies phase, as the bench trial on dilution was solely on the issue of liability. Nothing in Viacom suggests that the equities factor into liability.
Viacom's dicta concerning "a nationwide monopoly in the use of this rather common word" merely suggests that plaintiff Viacom will not prevail if it cannot meet the FTDA's requirement of "famousness." Id. at 890 n.6. As
discussed at length above, the CLUE9 mark even if a "common word" is clearly famous. The court therefore committed legal error in reconsidering famousness in the guise of some discretionary, ill defined "equity" analysis.
2. The District Court Abused Its Discretion in Finding That Principles of Equity Warrant Denying Hasbro Relief
Having concluded that equity is an element of liability, the district court then "analyzed" that element by describing itself as a "Chancellor" and finding "no calibrated fairness in awarding Hasbro equitable relief." Order at 44. If 44 principles of equity" are an element of trademark dilution, there must be some finding to support a conclusion as to whom the equities favor.
The FTDA's reference to the "principles of equity" does not give courts free reign to decide cases guided only by personal senses of justice. American judges may "assume the role of chancellors only in the absence of a governing rule of positive law." Pritzker v. Yari, 42 F.3d 53, 63 (1st Cir. 1994). Sitting as a fact finder on the issue of trademark dilution liability,' 8 the district court was required to "find the facts specially and state separately its conclusions of law thereon." Fed. R. Civ. P. 52(a). No such findings were made on the equity issues.
If this Court is inclined to do a proper review of the equities, Hasbro submits that the equities strongly favor the granting of relief in this action. CCI has been simultaneously using the domain name corresponding to its corporate name "Clue Computing.com" for several years. App. at 773. CCI admitted
18 At oral argument, both parties consented to a bench trial on the issue of trademark dilution liability. App. at 968. Thus, unlike a summary judgment motion, the Court was required to state with particularity the facts that supported its holding. See Fed. R. Civ. P. 52(a). Hasbro notes that it informed the Court at oral argument that its consent extended solely to liability for dilution, not to the equitable remedy issues. App. at 968 69.
that the cost of completely changing over to the "mirror" clue computing. com site would be a mere $5,000. App. at 863 64, 625 26. Balancing the minor inconvenience lof abandoning one of its domain names against the millions of dollars spent by Hasbro in building and maintaining the strength of the famous CLUE®R mark, the equities clearly favor protecting the mark from dilution." Indeed, courts frequently hold that irreparable harm to the plaintiffs trademark will be presumed when a plaintiff has established a likelihood of confusion or dilution. See Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633, 640 (1st Cir. 1992).
Ill. FOR SIMILAR REASONS, THE DISTRICT COURT
ERRONEOUSLY AWARDED JUDGMENT FOR CCI ON
HASBRO'S MASSACHUSETTS TRADEMARK DILUTION
While the Internet was not created until decades after Massachusettss dilution law was developed, the law is certainly flexible enough to address the new harrn posed by trademark dilution on the Internet. Trademark dilution is actionable under Massachusettss law, which provides:
Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark registered under this chapter, or a mark valid at common law ... shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.
Mass. Gen. Laws ch. I I OB § 12 (attached as Addendum D).
19 Interestingly, Judge Woodlock recently granted an injunction under the Lanham Act in an analogous case, finding: "Given the significant resources spent by the Plaintiff in developing and advertising its service and the relatively minor investment of the Defendants, this factor favors interlocutory relief for the plaintiff." Northern Light Tech. v. Northern Lights Club, No. 99 11664DP, slip op. at 56 (D. Mass. March 31, 2000)i. The Court made this finding even though the defendant registered its domain name before Plaintiff first began using its mark in commerce. Id. at 4, 8 9.
Where a defendant's use of a mark is likely to dilute the distinctive quality of the plaintiffs mark, injunctive relief is appropriate. See Manpower, Inc. v. Foley, 212 U.S.P.Q. 445, 448 (D. Mass. 1980); Tiffany & Co. v. Boston Club Inc., 231 F. Supp. 836, 842 43 (D. Mass. 1964) (finding distinctive secondary meaning in TIFFANY mark for jewelry likely diluted by defendant's "Tiffany's Restaurant"). Dilution under the Massachusetts statute requires proof that: (1) plaintiff owns a distinctive mark; and (2) defendant's use of a similar mark has caused a likelihood of dilution. Black Dog Tavern Co., Inc. v. Hall, 823 F. Supp. 48, 59 (D. Mass. 1993). "Likelihood of dilution" may be shown by proof of "diminution of the uniqueness and individuality of a mark. " Id.
Unlike the federal statute, the state dilution law does not require a showing that the mark is famous. Rather, under the language of the statute, a showing of distinctiveness is sufficient. The district court properly found that Hasbro had established that the CLUE1 mark was "distinctive," and thus protectable. Order at 45. Thus, the only issue on appeal on this claim is whether the district court properly found no blurring.
Noting that courts have not "examined blurring methodically under the Massachusetts statute, Order at 45, the district court concluded that the same standard for blurring should apply as was applied under the FTDA. However, relying on its rejection of Hasbro's proof of dilution under the Lund test, the court held that Hasbro had similarly failed to show blurring under Massachusettss law. Order at 45 46.
The Lund blurring analysis should be extended to the similar Massachusetts statute. Both laws make clear that dilution is actionable "notwithstanding the absence of competition between the parties or the absence
of confusion as to the source of goods or services." Mass. Gen. Laws ch. 110B § 12. Because Hasbro should prevail on its dilution claim under the FTDA, see Section II.D, supra, it should also prevail under Massachusetts law..
Because the district court's finding of lack of blurring under the Lund test was clearly erroneous, judgment for CCI on the Third Claim should be reversed.
For all of the foregoing reasons, Hasbro respectfully requests that this Court reverse the district court 's September 2, 1999 Order and Judgment in its entirety. Hasbro farther requests that the Court remand the case to the District of Massachusetts with instructions to enter judgment in favor of Hasbro on its Second and Third Claims for trademark dilution. Brown Daltas & Assocs., 48 F.3d at 37 3 8; Williams v. Poulos, 11 F.3d 271, 280 81 (1st Cir. 1993).
Hasbro requests that this Court remand this case to the District of Massachusetts for a trial on Hasbro's First Claim for trademark infringement, with instructions to consider the initial interest confusion doctrine. Se e Vinick v. United States, 205 F.3 d 1 40 (1st Cir. 2000).
Dated: April 19, 2000 Respectfully submitted,
Kenneth B. Wilson (FCB No. 70728)
Michael B. Levin (FCB No. 70729
WILSON, SONSINI, GOODRICH & ROSATI
650 Pafe Mill Road
Palo Alto California 94304
(650) 493 9300
Richard J. McCarthy (FCB No. 57142)
EDWARDS & ANGELL, LLP
101 Federal Street
Boston, Massachusetts 02110
(617) 439 4444
CERTIFICATE OF COMPLIANCE WITH FED. R. APP. 32(a)(7)(B)
1, Kenneth B. Wilson, hereby certify that this brief complies with the type volume limitation of Fed. R. App. 32(a)(7)(B). According to the word count feature in Microsoft Word 97, this brief contains 13,928 words, including headings, footnotes and quotations,, but excluding the corporate disclosure statement, reasons why oral argument should be heard, table of contents, table of authorities, and all other addenda.
Dated: April 19, 2000
Kenneth B. Wilson