June 2010 Issue

Civil Cases

Super−Krete Int’l, Inc. v. Sadleir,
2010 WL 1688533 (C.D. Cal. Apr. 22, 2010)

ABSTRACT
Plaintiff sued defendants, a direct competitor in the concrete−resurfacing business and its president, for trademark infringement, dilution, and cybersquatting based on defendants’ registration and use of a domain name consisting of plaintiff’s trademark to direct Internet users to defendants' own website marketing competing products.  After plaintiff lost a UDRP action filed against the domain some eight years after plaintiff first objected to defendants’ domain name, defendants threatened to sell the domain to a foreign third party.  Plaintiff then filed this lawsuit and the court granted plaintiff’s motion for a preliminary injunction to prevent defendants’ sale or transfer of the domain before the court decided the merits of plaintiff’s claims.

CASE SUMMARY

FACTS
Plaintiff Super−Krete International, Inc. (“Super−Krete”) sells products for the repair and restoration of concrete under the mark SUPER−CRETE, which was federally registered in 1975 and first used in 1966.  Super−Krete also registered the mark SUPER−KRETE in September 1999, which was first used in 1989.  Super−Krete promotes its products online through websites located at super−crete.com, super−krete.com, super−crete.ca, and super−krete.ca.  Defendant Concrete Solutions, Inc. (“CSI”) is a direct competitor of Super−Krete, and is located less than seventeen miles away.  In March 1999, Rod Sadleir, CSI’s president, registered the domain name supercrete.com and directed all traffic from supercrete.com to CSI’s website at concretesolutions.com that promoted CSI’s competing products.  CSI never used the terms “supercrete” or “super−crete” on its website, and Sadleir claimed to be unaware of Super−Krete’s trademarks when he registered the supercrete.com domain name.  Sadleir received an email in August 1999 from Super−Krete’s president indicating CSI’s awareness of the potentially infringing domain name, but Super−Krete did not pursue the matter further at that time.

In September 2007, Sadleir offered to sell the supercrete.com domain name to Super−Krete for $15,000.  Super−Krete refused and filed a UDRP complaint in 2008 seeking transfer of the domain name.  The UDRP panel denied Super−Krete’s complaint, finding that Super−Krete failed to provide evidence of commercial use of its trademarks before Sadleir registered the domain name and that the term SUPERCRETE was descriptive.  Super−Krete then filed this lawsuit in March 2010 asserting claims for trademark infringement, dilution, and cybersquatting.

After Super−Krete filed this lawsuit, CSI’s counsel informed Super−Krete that CSI was considering selling the supercrete.com domain name to a third party, possibly one located outside of the United States.  Super−Krete requested that CSI wait to sell the domain name until after Super−Krete’s claims were adjudicated in court, but CSI refused.  Super−Krete then sought an ex parte temporary restraining order enjoining CSI from transferring or selling the domain name to any third party pending resolution of Super−Krete’s claims, which the court granted.  At issue in this decision was Super−Krete’s motion for a preliminary injunction to extend this injunction on transfer or sale through the remainder of the litigation.

ANALYSIS
The district court granted Super−Krete’s motion for a preliminary injunction based on its cybersquatting claim and enjoined CSI from selling or transferring the supercrete.com domain name until Super−Krete’s claims were adjudicated.  Regarding the merits of its cybersquatting claim, although CSI argued that the SUPER−CRETE mark was descriptive and not inherently distinctive, the court held that the mark’s federal registration was sufficient evidence of its distinctiveness and validity.

The court also held that CSI’s supercrete.com domain name was confusingly similar to Super−Krete’s mark SUPER−CRETE, as it differed only by its lack of a hyphen.  CSI argued that the hyphen was “significant” in modifying the term, but the court rejected this argument as “contrary to the case law and common sense.”  Although the court did not need to look beyond the domain name itself, it also noted that both parties operated commercial websites marketing the same products and were located in the same geographical area.

The court then held that CSI registered the supercrete.com domain name with a bad−faith intent to profit from the SUPER−CRETE mark because it used the domain name solely to route potential Internet customers to CSI’s website.  Although CSI contended that SUPERCRETE could be used as a “purely descriptive” term, the court rejected that argument because CSI admittedly never used the term to describe its products.  CSI’s attempt to sell the domain name to Super−Krete in 2007 was further evidence of its bad faith.  CSI countered that its registration of the domain name six months prior to Super−Krete’s filing of its most recent trademark applications suggested sufficient prior use of its supercrete.com website to negate a finding of bad faith.  As support, CSI relied on the UDRP panel’s finding that Super−Krete had not demonstrated use of its marks in commerce prior to its September 1999 trademark registration.  The court noted, however, that the UDRP panel’s findings had no weight in this case, and recognized Super−Krete’s credible evidence that the SUPER−CRETE mark had been used well before CSI’s registration of the domain name.

CSI also claimed that its use of the supercrete.com domain name fell within the Anticybersquatting Consumer Protection Act’s (“ACPA”) safe−harbor provision, in which bad−faith intent shall not be found if the court determines that the person believed and had reasonable grounds to believe that the use of the domain name was a fair use or otherwise lawful.  CSI’s safe−harbor argument centered on the UDRP panel’s decision and its characterization of SUPERCRETE as a descriptive term.  As noted above, however, the court was not bound by the UDRP decision.  Moreover, the Ninth Circuit Court of Appeals, the reviewing court of the district court here, has held that courts should apply the ACPA’s safe−harbor provision “very sparingly and only in the most unusual cases.”  Indeed, “a defendant who acts even partially in bad faith in registering a domain name is not, as a matter of law, entitled to benefit from the safe−harbor provision.”  Because the court found that CSI acted in at least partial bad faith well before the UDRP decision by registering the domain name when it knew of Super−Krete’s operation, the safe−harbor provision did not apply.

CSI also argued that Super−Krete’s cybersquatting claim was barred by laches because it knew of CSI’s ownership of the supercrete.com domain in 1999, but did not take action until its UDRP filing in 2008.  The court found that a four−year statute of limitations was applicable to Super−Krete’s cybersquatting claim.  Although Super−Krete delayed some eight years, laches did not apply here because CSI could not prove clear prejudice as a result of Super−Krete’s delay because it invested nothing in developing or promoting the domain name and because the denial of relief would allow CSI to continue to use the domain name to “lure customers” to CSI’s competing website.  Finally, the court determined that Super−Krete proved irreparable harm based on the threatened loss of customers who would be diverted away from its website should CSI be allowed to transfer or sell the supercrete.com domain.  The balance of equities also favored Super−Krete, who would be forced to file new claims against third parties, potentially beyond the court’s jurisdiction, if CSI sold or transferred the domain before the end of the litigation.  The court thus granted Super−Krete’s motion for a preliminary injunction and enjoined CSI from selling or transferring the supercrete.com domain name until further order of the court.

CONCLUSION
This decision is of interest because it shows the court’s willingness to issue different types of injunctive relief to protect a trademark owner’s interests against cybersquatting activities.  Moreover, although plaintiff’s claim was presumptively barred by laches based on its eight−year delay in taking action, this decision shows that cybersquatters acting in bad faith to trade on the goodwill of another’s mark have a heavy burden to establish the defense of laches.