Cybersquatting, Texas Style

Have you ever done a Google search on your business’s name, only to find that the first website reference is to a website set up by a disgruntled customer to punish your business? Or worse yet, a competitor? They could be stealing your web traffic, as in leads generation, moolah, “show me the money.” They could be running your potential customers off. Do you have rights? Can you stop it? Well the answer is a resoundingly firm “it depends.” This article surveys several cybersquatting cases in light of a recent case on this subject, and distinguishes between legitimate “alternate” sites you can’t do anything about, and those that you can eliminate.

TMI, Inc., d/b/a TrendMaker Homes, builds houses. Their internet site is “www.trendmakerhomes.com.” Until this situation developed, it was their one and only domain name. Joseph Maxwell became interested in their product, and began the process of selecting his dream home, his Shangri-la and all the visions of Camelot that come with it (sorry to mix metaphors like that). But he didn’t get very far. He decided that TrendMaker Homes’ salesperson made “misrepresentations about the availability of a certain model.” Oooooh. Sounds baaad. But nothing was apparently purchased, no money was lost.

Irrelevant. Maxwell was sufficiently peeved to register “www.trendmakerhome.com” and set it up for a year. During this site’s existence, it contained Maxwell’s story of his dispute with TrendMaker Homes. He was careful to put a disclaimer at the top of the website that it was not TrendMaker Homes’ website, but it was your basic “gripe site.”

And his website included a page called the “Treasure Chest”, for readers to share and obtain information about contractors and tradespeople who had done good work. This amazingly clever idea spawned all of only one name, and that was of a man who had performed some work for Maxwell. And–it gets better–this listing “was not made at the contractor’s request.”

One year to the date after obtaining the domain name, it expired and Maxwell didn’t renew it. So, that very day TrendMaker Homes, which had predictably been watching the expiration date, registered the name. It then sent a letter to Maxwell demanding that he take down the site and relinquish the “www.trendmakerhome.com” domain name.

And here’s where things got a bit funny. Maxwell immediately tried to re-register “www.trendmakerhome.com” but found that his nemesis had beaten him to that punch. SO, he registered instead “www.trendmakerhome.info.” Needless to say, TrendMaker Homes was less than thrilled, and so they sued Maxwell under just about every state and federal law that addresses cybersquatting. We’ll get to that in a minute but first we’ll look at some interesting litigation strategy.

Let me just quote the Court’s opinion on this next set of facts. It is interesting to me that these sort of facts even made it into the opinion.

 Almost immediately, the parties entered into settlement negotiations. Maxwell retained a lawyer, but knew he would not be able to afford to pay the legal fees that would be required to defend the entire lawsuit. TMI and Maxwell’s lawyer negotiated a settlement, while Maxwell researched his case. Following this research, Maxwell backed out of the settlement agreement and proceeded pro se [on his own without counsel]. He continued to represent himself through the bench trial….

Can’t you just imagine Maxwell having to divulge all that in a deposition? Can you imagine how angry TMI was? TMI likely concluded that Maxwell had not negotiated in good faith, so they were probably in full blown punishment mode themselves by this time.

Well, Maxwell lost the bench trial in just about every possible way. That was predictable. Never proceed pro se. Even a lawyer who represents himself has a fool for a client. I can’t imagine that rule as applied to non-lawyers. In any event, for the appeal he apparently retained counsel, and competent counsel at that, because he got the judgment not just reversed, but got one entered in his favor. Here’s why.

One of TrendMaker Homes’ claims was based on the federal Lanham Act, a part known as the anti-dilution provision. Here’s what it says:

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.

“Commercial use” means used in the ordinary course of trade. Maxwell’s use was not commercial, so he didn’t violate this section. His was a “gripe site”, he didn’t use it to sell anything, nor was the use in any ordinary course of trade for Maxwell. So long as the site does not contain any links to commercial sites, and contains no advertising or other certain content, the site is not commercial. Maxwell’s failure to turn the “Treasure Chest” portion of his site into an advertising feeding frenzy saved him on this one.

Then there’s the Anti-Cybersquatting Consumer Protection Act, or the ACPA. Under this act, the owner of a mark can recover against a person who, acting with a bad faith intent to profit from that mark, registers, traffics in or uses a domain name that is identical or confusingly similar to that mark. The ACPA then lists 9 non-exclusive factors for courts to consider when determining whether a defendant has a bad faith intent to profit. When the appeals court reviewed these nine factors, they found 4 factors in favor of TrendMaker Homes, and 5 factors in favor of Maxwell.

Finally there’s the Texas Anti-Dilution Statute. This statute reads:

A person may bring an action to enjoin an act likely to injure a business reputation or to dilute the distinctive quality of a mark registered under this chapter or Title 15, U.S.C., or a mark or trade name valid at common law, regardless of whether there is competition between the parties or confusion as to the source of goods or services.

This statute specifically excepts from its coverage non-trademark issues of a name to comment on, criticize, ridicule, parody, or disparage the goods or business of the name’s owner. Since this exception described Maxwell’s use, he was not liable under this statute either.

And so it was one, two, three strikes against TrendMaker Homes, and Maxwell took the game. Free speech was not so free, but it was eventually allowed.

What lessons can be drawn from this? Two, I think. First, if you want to protect your business against “gripe sites”, you should get your business a novel and unique name, what is known as a “strong mark”, meaning one that can be registered as a trademark, and defended successfully. Examples are Nabisco, and FedEx. Avoid common names like “Trendy” or “Quality” or “North Texas.” It needs to be unique. If you can find it in the dictionary, consider avoiding it. Then, register as many domain names as you can afford, with dot com, dot net, dot info, dot whatever. Include any common misspellings of your name as well.

Second, to protect against other commercial parties, be aware of your rights under these statutes, and run Internet searches from time to time on your company’s name, and on its website address, just to see if anyone is misusing it. As soon as you find one, contact a lawyer (of the intellectual property sort) so the necessary notices and “cease and desist” demands can be sent. Protect yourself; if you don’t, who will?

TMI, Inc., v. Joseph M. Maxwell, Case No. 03-20243; 03-20291, 5th Circuit U.S. Court of Appeals, decided April 21, 2004.

Enviropinions are original writings of Mark McPherson.
© 2014, Mark McPherson. All rights reserved.
15950 Dallas Parkway, Suite 400
Dallas, TX 75248
214-722-7096 Office
214-540-9866 Facsimile
mark@texasenvironmentallaw.com
www.TexasEnvironmentalLaw.com

Leave a Reply

Your email address will not be published. Required fields are marked *