May 2011 Issue

Civil Cases

Newport News Holdings Corp. v. Virtual City Vision, Inc.,
2011 WL 1467183 (4th Cir. Apr. 18, 2011)

ABSTRACT
Plaintiff brought trademark and cybersquatting claims against the owner of the domain name newportnews.com based on its NEWPORT NEWS trademark.  In a previous UDRP decision between the parties, the UDRP panel held that defendant’s website provided bona fide services about the city of Newport News, Virginia, and was not likely to be confused with plaintiff’s women’s clothing.  Years later, defendant changed the focus of its website away from providing city information to displaying advertisements for women’s clothing.  The district court granted summary judgment to plaintiff on its cybersquatting claim and awarded plaintiff its attorney’s fees and $80,000 in ACPA statutory damages.  The Fourth Circuit affirmed, agreeing with the district court that defendant’s transformation of its website after the UDRP decision was an egregious example of a bad-faith intent to profit from plaintiff’s mark.

CASE SUMMARY

FACTS
Plaintiff Newport News Holdings Corporation (“NNHC”) sold women’s clothing under the federally registered mark NEWPORT NEWS at its retail locations and its website located at newport-news.com.  When NNHC registered the newport-news.com domain name in 1997, it also attempted to register newportnews.com, but that domain was already owned by defendant Virtual City Vision, Inc. (“VCV”).  VCV, which owned 31 domain names incorporating the names of geographic locations, initially used newportnews.com to provide information about Newport News, Virginia, to tourists and residents.  In 2000, NNHC filed a UDRP complaint against VCV and its newportnews.com domain name.  The UDRP panel denied NNHC’s complaint, finding that (1) consumers seeking NNHC’s clothing would not be confused by a website “that explicitly provides city information . . . with no connection whatsoever to women’s and home fashions”; (2) VCV’s site provided bona fide services by providing city information about Newport News; and (3) VCV did not register the domain name in bad faith because the two companies were not competitors.

Between 2000 and 2004, VCV’s newportnews.com website continued to provide city information about Newport News.  In 2004, however, VCV’s website began running “occasional” advertisements for women’s clothing.  NNHC placed its own ads on VCV’s website in February and March 2007 to measure revenue losses attributable to the website.  Later in 2007, NNHC offered to purchase newportnews.com from VCV, but VCV rejected the offer and stated that it would either sell the domain name for a “seven-figure” amount or sell NNHC’s goods on its website for a commission.  Shortly thereafter, VCV shifted the focus of the newportnews.com website to one emphasizing women’s fashion, with very little information about the city of Newport News.  VCV made more money on the women’s fashion website than all of its other city websites combined.

NNHC sued for trademark infringement and cybersquatting, among other claims.  VCV moved for summary judgment on all claims and NNHC moved only on its cybersquatting claim.  The district court granted NNHC’s motion for summary judgment on its cybersquatting claim, finding that VCV “substantially changed the content of the website and ceased to offer bona fide services related to the city of Newport News.”  It interpreted VCV’s change in its website content as “an egregious violation of the ACPA” because the UDRP proceeding clearly illustrated how VCV could use newportnews.com in a legitimate and good-faith manner to provide only city information.  The district court later dismissed NNHC’s remaining claims, awarded NNHC $80,000 in ACPA statutory damages and $249,753 in attorney’s fees, and ordered transfer of newportnews.com to NNHC.  VCV appealed.

ANALYSIS
The Fourth Circuit affirmed the district court’s judgment for NNHC in its entirety.  First, it rejected VCV’s argument that it did not act in bad faith, finding that VCV’s website underwent a “deliberate metamorphosis” in 2007 from the legitimate service of providing city information to advertising for women’s apparel.  That VCV’s website still contained a few references to the city of Newport News was irrelevant.  According to the court, VCV’s argument would allow any cybersquatter to avoid liability by simply providing a minimal amount of information about a legitimate subject on its otherwise infringing website.  The Fourth Circuit next rejected VCV’s argument that the district court failed to properly analyze whether there was a likelihood of confusion between NNHC’s and VCV’s “websites” because the ACPA standard is simply whether the disputed domain name is identical or confusingly similar to the plaintiff’s mark.  For the same reason, the Fourth Circuit rejected VCV’s argument that the disclaimer on its website eliminated any likelihood of confusion as to the domain name.  VCV also disputed the district court’s reliance on the UDRP decision to show bad faith because it did not expressly prohibit any of VCV’s later website changes.  The Fourth Circuit disagreed, stating that the UDRP decision was relevant because it found VCV’s previous website use proper precisely because its business of providing city information was unrelated to and not competitive with NNHC’s women’s clothing business.

VCV also challenged the district court’s rejection of its laches and acquiescence defenses.  The Fourth Circuit initially noted that it was unaware of a case from any circuit applying laches in the ACPA context.  Even assuming laches was applicable, it would not bar relief here because action against the infringing party is not necessary until “the right of protection has clearly ripened.”  VCV’s bad faith was not evident until November 2007, when it switched from a website providing city-based information to one focused on women’s fashion.  NNHC’s filing of its ACPA claim in November 2008, only a year after the relevant changes to VCV’s website, did not constitute an unreasonable delay that would support laches.  Regarding acquiescence, the doctrine of estoppel by acquiescence bars an infringement claim where the trademark owner expressly or impliedly consented to the infringement through affirmative word or deed.  Based on the court’s finding that VCV’s use of the newportnews.com domain name did not become a clear infringement until November 2007, NNHC’s placing of ads on VCV’s website in February 2007 could not establish its implied consent or acquiescence to VCV’s later infringing conduct.

Finally, VCV challenged the district court’s awards of attorney’s fees and statutory damages.  The Fourth Circuit upheld the district court’s decision that VCV’s conduct was “exceptional” and merited attorney’s fees because VCV “clear[ly] and deliberate[ly]” transformed its city website into a women’s fashion website after being made aware of NNHC’s trademark rights in the UDRP proceeding.  Regarding the $80,000 ACPA statutory-damages award, the district court awarded damages at the high end of the statutory range ($1,000 to $100,000 per domain name) because VCV’s conduct was “exceptional and egregious.”  VCV argued that its actions were not egregious because it advertised women’s clothing on its website during 2005-2007 before NNHC sued.  Once again, however, VCV missed the point that its wrongdoing did not take shape until VCV transformed its website into a women’s fashion site in November 2007.

CONCLUSION
This decision shows that a party can be liable for cybersquatting even if its original purpose for registering and its initial use of a domain name were legitimate, if it later abandons its good-faith purpose and transforms the website into one that is likely to cause consumer confusion.  The Fourth Circuit also reiterated that the test for likelihood of confusion in ACPA cases is simply whether the disputed domain name is identical or confusingly similar to the plaintiff’s mark, and not whether there is a likelihood of confusion between the parties’ websites.