Internet Trademark Case Summaries

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

2008 WL 4346798 (S.D. Fla. Sept. 17, 2008)

Plaintiff Southern Grouts & Mortars (“SG”) and defendant 3M were competitors in the field of quartz aggregate products for surface finishes. 3M sold its products under the mark COLORQUARTZ and SG sold its products under the registered mark DIAMOND BRITE. In 2000, 3M acquired the assets of American Electronic Sign Co., which included the trademark DIAMOND BRITE for traffic-control devices and the domain name “diamondbrite.com.” 3M used the domain name to alert visitors of its recent acquisition and diverted them to 3M’s website. 3M ceased use of the diamondbrite.com domain in 2002, and phased-out use of the DIAMOND BRITE trademark soon thereafter. Although 3M’s federal registration on the DIAMOND BRITE mark lapsed in 2006, it continued to renew the diamondbrite.com domain name several times, even though the domain name remained unused. In 2002, SG emailed 3M to attempt to acquire the diamondbrite.com domain, and 3M apparently did not respond. SG did not contact 3M again until 2005, when it sent a cease-and-desist letter demanding the transfer of the diamondbrite.com domain name. 3M refused and denied any wrongdoing, but “welcomed any questions or evidence of [SG’s] claims.” SG again contacted 3M in 2007 with the same demand. When 3M again refused to transfer the domain name, SG sued for unfair competition and cybersquatting and 3M asserted a laches defense. The parties filed cross-motions for summary judgment. The court first addressed 3M’s laches defense and held that it barred SG’s unfair competition claim. It initially determined that the applicable limitation period was four years based on the period for analogous state law claims, and then found “no dispute that [SG] knew of 3M’s ownership of the diamondbrite.com domain name, and its inactive status, as early as July 16, 2002” and that it failed to file suit until 2007. Specifically, SG “failed to follow up in the two-and-one-half years between the email and the first letter, and the over two years between the first and second letters." The court rejected SG’s argument that its communications to 3M showed its “good faith intent” to settle the matter and tolled laches, stating that SG’s “three attempts [at contact] over five years simply do not constitute a serious attempt at settling the issue.” It also rejected SG’s argument that its delay was excusable due to its involvement in two unrelated litigations during that period because SG did not provide 3M with notice necessary to prevent 3M from “being lulled into a false sense of security.” The court also determined that 3M suffered evidentiary prejudice as a result of SG’s delay. In defending the action, 3M would need to prove that it had not unlawfully acquired the domain name or not used it in a way likely to cause consumer confusion. Because more than eight years had passed since SG’s first contact, documents had been destroyed or rendered incomplete, employees had left 3M or changed positions several times, causing “faded or incomplete memories of the relevant events,” and “significant data regarding web traffic . . . was not retained.”

SG argued that 3M’s unclean hands prevented application of laches because 3M’s re-registration of the diamondbrite.com domain was “in bad faith and . . . intentionally calculated to trade upon [SG’s] reputation.” The court, however, found the argument “unavailing” because SG failed to show that 3M’s alleged conduct was egregious and significantly change[d] the equities.” Indeed, “if anything, . . . 3M’s non-use of the domain name . . . directly contradicts the argument that 3M has traded off of [SG’s] reputation.” The court next rejected SG’s argument that 3M’s 2006 purchase of the Google keyword “Diamond Brite” and re-registrations of the domain name supported its unclean hands defense. 3M used the keyword for only three weeks, however, and SG did not even attempt to show how this or the domain name re-registrations amounted to “particularly egregious” conduct. Turning to cybersquatting, the court also barred that claim under laches for the same basic reasons discussed for the unfair competition claim. Despite its finding of laches, the court still addressed the merits of the unfair competition and ACPA claims. Regarding unfair competition, the court found that 3M had not used the diamondbrite.com domain in commerce as it had not hosted an “active website” at the domain name. It also rejected SG’s argument that Internet users would be confused when they did not encounter an active website at diamondbrite.com, “declining to adopt the position today that [I]nternet users of any significant number would be frustrated or hindered by merely not arriving at the expected site the first time a web address was typed in.” Moreover, SG did not present “a scintilla of evidence to show that consumers have been prevented from accessing [SG’s] own website or prevented from obtaining any of [SG’s] own goods or services.” Regarding the ACPA claim, the court found that only two of the statutory bad-faith factors favored SG—SG’s DIAMOND BRITE mark was strong and because 3M’s rights to the DIAMOND BRITE trademark had lapsed, its trademark rights in the domain name had lapsed as well. However, 3M’s lack of any intent to divert consumers from SG’s website, its prior, valid use of the domain name for the offering of goods, and its lack of offers to sell the domain name to SG, all favored 3M’s good-faith ownership of the domain name. Accordingly, SG’s ACPA claim failed on the merits as well.