United States Court of Appeals
`Fifth Circuit
`F I L E D
`April 21, 2004
`
`Charles R. Fulbruge III
`Clerk
`
`IN THE UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`_______________________
`No. 03-20243
`No. 03-20291
`_______________________
`
`TMI INC,
`Plaintiff-Appellee
`v.
`JOSEPH M. MAXWELL,
`Defendant-Appellant
`--------------------
`Appeals from the United States District Court
`for the Southern District of Texas
`--------------------
`Before DAVIS, BARKSDALE and PRADO, Circuit Judges.
`EDWARD C. PRADO, Circuit Judge:
`Following a bench trial, the district court determined that
`Appellant Joseph Maxwell’s website that complained about Appellee
`TMI, Inc. violated the anti-dilution provision of the Lanham Act,
`15 U.S.C. § 1125(c); the Anti-Cybersquatting Consumer Protection
`Act (“ACPA”), 15 U.S.C. § 1125(d); and the Texas Anti-Dilution
`Statute, TEX. BUS. & COM. CODE § 16.29. Concluding that Maxwell’s
`site, as a non-commercial gripe site, violates none of these
`statutes, we reverse and render judgment in favor of Maxwell.
`Appellant Joseph Maxwell intended to buy a house from
`Appellee TMI, Inc., a company that builds houses under the name
`TrendMaker Homes. Unhappy with what he viewed as the
`
`1
`
`
`Fifth Circuit
`F I L E D
`April 21, 2004
`
`Charles R. Fulbruge III
`Clerk
`
`IN THE UNITED STATES COURT OF APPEALS
`FOR THE FIFTH CIRCUIT
`_______________________
`No. 03-20243
`No. 03-20291
`_______________________
`
`TMI INC,
`Plaintiff-Appellee
`v.
`JOSEPH M. MAXWELL,
`Defendant-Appellant
`--------------------
`Appeals from the United States District Court
`for the Southern District of Texas
`--------------------
`Before DAVIS, BARKSDALE and PRADO, Circuit Judges.
`EDWARD C. PRADO, Circuit Judge:
`Following a bench trial, the district court determined that
`Appellant Joseph Maxwell’s website that complained about Appellee
`TMI, Inc. violated the anti-dilution provision of the Lanham Act,
`15 U.S.C. § 1125(c); the Anti-Cybersquatting Consumer Protection
`Act (“ACPA”), 15 U.S.C. § 1125(d); and the Texas Anti-Dilution
`Statute, TEX. BUS. & COM. CODE § 16.29. Concluding that Maxwell’s
`site, as a non-commercial gripe site, violates none of these
`statutes, we reverse and render judgment in favor of Maxwell.
`Appellant Joseph Maxwell intended to buy a house from
`Appellee TMI, Inc., a company that builds houses under the name
`TrendMaker Homes. Unhappy with what he viewed as the
`
`1
`
`
`
`salesperson’s misrepresentations about the availability of a
`certain model, Maxwell decided to create a website to tell his
`story. To this end, Maxwell registered an internet domain name –
`www.trendmakerhome.com – that resembled TMI’s TrendMaker Homes
`mark. (TMI had already been using the domain name
`www.trendmakerhomes.com.) Maxwell registered his domain name for
`a year; after the year passed, Maxwell removed the site and let
`the registration expire.
`During its existence, the site contained Maxwell’s story of
`his dispute with TMI, along with a disclaimer at the top of the
`home page indicating that it was not TMI’s site. It also
`contained what Maxwell called the Treasure Chest. Maxwell
`envisioned the Treasure Chest as a place for readers to share and
`obtain information about contractors and tradespeople who had
`done good work. During the year of the site’s existence, the
`Treasure Chest only contained one name, that of a man who had
`performed some work for Maxwell. The site did not contain any
`paid advertisements.
`The parties agree that some e-mail intended for TMI was sent
`to Maxwell’s site. They also agree that Maxwell forwarded each
`of these messages to TMI.
`Shortly after Maxwell’s registration expired, TMI sent
`Maxwell a letter demanding that he take down the site and
`relinquish the www.trendmakerhome.com domain name. In response,
`Maxwell attempted to re-register the domain name. His attempt
`2
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`was unsuccessful, however, because TMI had acquired the domain
`name once Maxwell’s registration expired. Instead, Maxwell
`registered the domain name www.trendmakerhome.info. This lawsuit
`followed. Because of the suit, Maxwell has never posted any
`content on the trendmakerhome.info site.
`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. He continued to represent himself through the
`bench trial on January 17, 2003.
`After the trial, the district court issued a Memorandum and
`Order. In it, the district court found that Maxwell violated the
`ACPA as well as the federal and Texas anti-dilution statutes.
`The district court also issued an injunction forbidding Maxwell
`“from using names, marks, and domain names similar to” ten of
`TMI’s marks, including Trend Maker, and ordering Maxwell to
`transfer trendmakerhome.info to TMI. The district court also
`required TMI to submit a proposed judgment and gave Maxwell ten
`days to respond to that proposal. Maxwell immediately filed a
`notice of appeal.
`Without allowing Maxwell ten days to respond, the district
`court signed TMI’s proposed judgment. In many ways, this
`3
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`
`
`judgment expanded the Memorandum and Order’s conclusions. For
`example, the Memorandum and Order contained no findings about
`either common law or statutory unfair competition. Yet the
`judgment stated that Maxwell’s actions constituted unfair
`competition under both common law and the Lanham Act. The
`judgment provided a broader injunction than the one contained in
`the district court’s original order by adding three marks to the
`injunction. The judgment also awarded statutory damages of
`$40,000 and, without elaboration, found the case to be an
`“exceptional case,” justifying an award of $40,000 in attorney’s
`fees. Additionally, the judgment addressed how Maxwell was to
`pay the judgment: “[w]ithin twenty (20) days after entry of this
`Order, defendant shall hand-deliver to plaintiff’s lawyer a
`cashier’s check in the amount of $80,000, made payable to TMI,
`Inc.” Maxwell then filed his second notice of appeal.
`TMI made several related claims in this lawsuit. In the
`first, TMI alleged that Maxwell violated ACPA. Additionally, TMI
`alleged that Maxwell’s actions diluted its mark and thus violated
`the Texas Anti-Dilution Statute, as well as the anti-dilution
`provision of the Lanham Act.1
`Commercial Use Requirement
`
`1TMI also alleged unfair competition under the Lanham Act
`and under the common law. The district court made no findings on
`unfair competition, until those claims were added to the
`judgment, and TMI makes no arguments in support of its judgment
`on those claims on appeal.
`
`4
`
`
`
`We first address whether the two relevant sections of the
`Lanham Act – the anti-dilution provision and ACPA – require
`commercial use for liability.2 The district court concluded that
`ACPA requires commercial use, but did not address commercial use
`in the context of the anti-dilution provision. TMI argues that
`the anti-dilution provision applies even in the absence of
`commercial use.
`In making this argument, TMI does not address the anti-
`dilution provision’s language, which conditions liability on
`commercial use:
`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).
`Citing this language, courts have observed that the anti-
`dilution provision requires the diluter to have made commercial
`use of the mark.3 See, e.g, Bird v. Parsons, 289 F.3d 865, 879
`
`2This Court has previously determined that § 43(a) of the
`Lanham Act, 15 U.S.C. § 1125(a)(1), which addresses false and
`misleading descriptions, only applies to commercial speech. See
`Procter & Gamble Co. v. Amway Corp., 242 F.3d 539, 547 (5th Cir.
`2001).
`3TMI refers to United We Stand America, Inc. v. United We
`Stand, America New York, Inc., 128 F.3d 86, 89-90 (2d Cir. 1997),
`for the principle that the Lanham Act does not require commercial
`use. United We Stand America does not involve either the anti-
`dilution provision or ACPA and is, thus, irrelevant to the
`determination of whether these two sections require commercial
`5
`
`
`
`(6th Cir. 2002); Panavision Int’l, L.P. v. Toeppen, 141 F.3d
`1316, 1324 (9th Cir. 1998). One of the exceptions to the anti-
`dilution provision further indicates that the provision only
`applies to commercial use: “(4) The following shall not be
`actionable under this section . . . (B) Noncommercial use of a
`mark.” 15 U.S.C. § 1125(c)(4). We conclude that, under the
`statute’s language, Maxwell’s use must be commercial to fall
`under the anti-dilution provision.
`On the other hand, ACPA’s language does not contain such a
`specific commercial-use requirement. Under ACPA, 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.” 15 U.S.C. § 1125(d). ACPA thus bases liability on
`a bad faith intent to profit. ACPA lists nine non-exclusive
`factors for courts to consider when determining whether a
`defendant had a bad faith intent to profit. One of those factors
`is “the person's bona fide noncommercial or fair use of the mark
`in a site accessible under the domain name.” 15 U.S.C. §
`1125(d)(IV).
`This Court has addressed ACPA and commercial use in E. & J.
`Gallo Winery v. Spider Webs Ltd., 286 F.3d 270, 276 n.3 (5th Cir.
`2002). In Gallo, the defendant Spider Webs registered domain
`
`use.
`
`6
`
`
`
`names that “could be associated with existing businesses,
`including ‘ernestandjuliogallo.com,’ ‘firestonetires.com,’
`‘bridgestonetires.com,’ ‘bluecross-blueshield.com,’
`‘oreocookies.com,’ ‘avoncosmetics.com,’ and others.” 286 F.3d at
`272. Spider Webs then auctioned those domain names, refusing all
`bids of less than $10,000. Id. One of Spider Webs’ owners
`testified during deposition that, after registering the domain
`name ernestandjuliogallo.com, Spider Webs hoped that Gallo would
`contact it so that Spider Webs could “assist” the company. Id.
`With this evidence, the Court determined that the defendant’s use
`was commercial; the company registered domain names and then sold
`those names to trademark holders. Id. at 275. Because Spider
`Web’s use was so clearly commercial, the Court noted that it did
`not need to decide whether ACPA also requires use in commerce.
`Id. at 276 n.3. The Sixth Circuit, too, recently determined that
`it did not need to consider arguments about whether ACPA covers
`non-commercial use, “as the statute directs a reviewing court to
`consider only a defendant’s ‘bad faith intent to profit’ from the
`use of a mark held by another party. Lucas Nursery &
`Landscaping, Inc. v. Grosse, 359 F.3d 806, 809 (6th Cir. 2004).
`Like the Lucas Nursery court, we, too, do not need to decide this
`question in this case.
`Was Maxwell’s site commercial use?
`TMI argues that Maxwell’s site was “mixed-use” and therefore
`
`7
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`
`
`not protected from the Lanham Act’s coverage. According to TMI,
`Maxwell put the site to commercial use by including the Treasure
`Chest and in so doing removed any protections his speech might
`otherwise have had.
`The Lanham Act defines “use in commerce” as “the bona fide
`use of a mark in the ordinary course of trade.” 15 U.S.C. § 1127.
`When defining commercial use, courts have examined several
`different aspects of the defendant’s use. The Ninth Circuit has
`emphasized that commercial use in commerce “refers to a use of a
`famous and distinctive mark to sell goods other than those
`produced or authorized by the mark’s owner.” Mattel, Inc. v. MCA
`Records, Inc., 296 F.3d 894, 903 (9th Cir. 2002) and that the
`phrase “requires the defendant to be using the trademark as a
`trademark, capitalizing on its trademark status.” Avery Dennison
`Corp. v. Sumpton, 189 F.3d 868, 880 (9th Cir. 1999). Put another
`way, the Ninth Circuit in Avery Dennison also referred to “a
`classic ‘cybersquatter’ case” in which a court referred to the
`“‘intention to arbitrage’ the registration which included the
`plaintiff’s trademark.” Id. (quoting Intermatic, Inc. v.
`Toeppen, 947 F.Supp. 1227, 1239 (N.D. Ill. 1996). This Court
`has provided a similar definition, determining in Gallo that the
`defendant’s business of selling domain names containing marks
`satisfied the commercial use requirement. Gallo, 286 F.3d at
`275. See also Panavision Int’l, L.P. v. Toeppen, 141 F.3d 1316,
`1325 (9th Cir. 1998) (“[defendant’s] ‘business’ is to register
`8
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`
`
`trademarks as domain names and then sell them to the rightful
`trademark owners”). Other courts have emphasized the content of
`the website. For example, while analyzing another section of the
`Lanham Act, the Sixth Circuit concluded that so long as the
`defendant’s fan website contained no links to commercial sites,
`and contained no advertising or other specifically commercial
`content, his site was not commercial. Taubman Co. v. Webfeats,
`319 F.3d 770, 775 (6th Cir. 2003).
`TMI agrees that the section of the site addressing Maxwell’s
`complaints about TMI was noncommercial. TMI argues, however,
`that the Treasure Chest section was commercial, and thus the site
`“intermingle[d] gripes with commercial activities.”
`Admittedly, Maxwell added the Treasure Chest to draw more
`people to his site so that they would see his story. This intent
`does not make his site commercial, however. Maxwell never
`accepted payment for a listing on the Treasure Chest, and he
`charged no money for viewing it.4 Further, TMI presented no
`evidence that Maxwell had any intent to ever charge money for
`using the site. Additionally, Maxwell’s site contained neither
`advertising nor links to other sites. And unlike the defendants
`in Gallo, Maxwell was not engaged in the business of selling
`domain names. Gallo, 286 F.3d at 275; see also Panavision Int’l,
`
`4In fact, the Treasure Chest only ever contained one
`listing, for a contractor who had done some work for Maxwell.
`This listing was not made at the contractor’s request.
`9
`
`
`
`L.P. v. Toeppen, 141 F.3d 1316 (9th Cir. 1998) (“Toeppen’s
`commercial use was his attempt to sell the trademarks
`themselves”). Nor did TMI present evidence that Maxwell’s use
`was “in the ordinary course of trade,” or that it had any
`business purpose at all. Thus, no evidence suggests that
`Maxwell’s use was commercial, and the district court’s findings
`to the contrary were clear error.5
`Bad faith intent to profit
`ACPA lists nine non-exclusive factors for courts to consider
`when determining whether a defendant had a bad faith intent to
`profit from use of the mark.6 These factors are:
`(I) the trademark or other intellectual property rights
`of the person, if any, in the domain name;
`(II) the extent to which the domain name consists of the
`legal name of the person or a name that is otherwise
`commonly used to identify that person;
`(III) the person's prior use, if any, of the domain name
`in connection with the bona fide offering of any goods or
`services;
`(IV) the person's bona fide noncommercial or fair use of
`the mark in a site accessible under the domain name;
`(V) the person's intent to divert consumers from the mark
`
`5 The district court’s discussion of commercial use (under
`ACPA) was: “[b]ased on the undisputed evidence, the Court holds
`that the defendant’s actions have been intentional, flagrant, and
`in bad faith. Moreover, he has shown no remorse for his actions,
`even in trial. Thus, the defendant’s use of “trendmakerhome.com”
`was the kind of commercial use prohibited by the ACPA.”
`6 ACPA’s safe harbor provision also provides that “[b]ad
`faith intent described under subparagraph (A) shall not be found
`in any case in which 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.” 15 U.S.C. §
`1125(d)(1)(B)(ii).
`
`10
`
`
`
`owner's online location to a site accessible under the
`domain name that could harm the goodwill represented by
`the mark, either for commercial gain or with the intent
`to tarnish or disparage the mark, by creating a
`likelihood of confusion as to the source, sponsorship,
`affiliation, or endorsement of the site;
`(VI) the person's offer to transfer, sell, or otherwise
`assign the domain name to the mark owner or any third
`party for financial gain without having used, or having
`an intent to use, the domain name in the bona fide
`offering of any goods or services, or the person's prior
`conduct indicating a pattern of such conduct;
`(VII) the person's provision of material and misleading
`false contact information when applying for the
`registration of the domain name, the person's intentional
`failure to maintain accurate contact information, or the
`person's prior conduct indicating a pattern of such
`conduct;
`(VIII) the person's registration or acquisition of
`multiple domain names which the person knows are
`identical or confusingly similar to marks of others that
`are distinctive at the time of registration of such
`domain names, or dilutive of famous marks of others that
`are famous at the time of registration of such domain
`names, without regard to the goods or services of the
`parties; and
`(IX) the extent to which the mark incorporated in the
`person's domain name registration is or is not
`distinctive and famous . . .
`15 U.S.C. § 1125(d)(1)(B)(i).
`Much of the district court’s analysis of bad faith intent to
`profit focuses on Maxwell’s behavior during the settlement
`negotiations and, particularly, his backing out of the
`settlement. Although the district court listed the nine relevant
`factors, in the Memorandum and Order it did not explain how those
`factors apply to this case.
`Maxwell’s behavior differs from other registrations made
`with bad faith intent to profit. For example, in Gallo, and
`other cases, the defendant essentially held hostage a domain name
`
`11
`
`
`
`that resembled a mark with the intention of selling it back to
`the mark’s owner. So, too, is Maxwell’s use different from that
`of the defendant in Virtual Works, Inc. v. Volkswagen of America,
`Inc., 238 F.3d 264 (4th Cir. 2001), where Virtual Works
`registered the domain name “VW.net” for its own website, but also
`hoping to sell the name to Volkswagen, whose VW mark the domain
`name resembled.7
`In contrast to these instances of bad faith intent to
`profit, the Sixth Circuit recently affirmed a trial court’s
`finding that a disgruntled customer who posted a website similar
`to Maxwell’s did not have a bad faith intent to profit. Lucas
`Nursery & Landscaping, Inc. v. Grosse, 359 F.3d at 811. In Lucas
`Nursery, a former customer of Lucas Nursery registered the domain
`name “lucasnursery.com” and used the site to post her complaints
`about the nursery’s work. Id. at 808. The nursery sued her
`under ACPA. Id. After addressing the purposes behind ACPA,8 the
`
`7In fact, at one point, Virtual Works threatened to auction
`the domain name to the highest bidder unless Volkswagen paid them
`for it. Id. at 267.
`8The Lucas Nursery court concisely summarized the Senate
`Report’s description of cybersquatters, namely those who:
`(1) “register well-known brand names as Internet domain
`names in order to extract payment from the rightful
`owners of the marks;" (2) "register well-known marks as
`domain names and warehouse those marks with the hope of
`selling them to the highest bidder;" (3) "register
`well-known marks to prey on consumer confusion by
`misusing the domain name to divert customers from the
`mark owner's site to the cybersquatter's own site;" (4)
`"target distinctive marks to defraud consumers,
`including to engage in counterfeiting activities."
`12
`
`
`
`Lucas Nursery court concluded that the former customer did not
`have the kind of intent to profit that the act was designed to
`prohibit. Id. at 808-11.
`As in Lucas Nursery, here “[t]he paradigmatic harm that the
`ACPA was enacted to eradicate - the practice of cybersquatters
`registering several hundred domain names in an effort to sell
`them to the legitimate owners of the mark – is simply not
`present.” Id. at 810. Also here, as in Lucas Nursery, the
`site’s purpose as a method to inform potential customers about a
`negative experience with the company is key. As the Sixth
`Circuit noted:
`Perhaps most important to our conclusion are,
`[defendant’s] actions, which seem to have been undertaken
`in the spirit of informing fellow consumers about the
`practices of a landscaping company that she believed had
`performed inferior work on her yard. One of the ACPA's
`main objectives is the protection of consumers from slick
`internet peddlers who trade on the names and reputations
`of established brands. The practice of informing fellow
`consumers of one's experience with a particular service
`provider is surely not inconsistent with this ideal.
`Id. at 811.
`In short, after analyzing the statutory factors and ACPA’s
`purpose, we are convinced that TMI failed to establish that
`Maxwell had a bad faith intent to profit from TMI’s mark and that
`the district court’s conclusion to the contrary was clearly
`erroneous. Although factors I, II, III and IX seem to fall in
`favor of TMI because Maxwell had no pre-existing use of the
`
` Lucas Nursery, 359 F.3d at 809 (quoting S.Rep. No. 106-140
`at 5-6).
`
`13
`
`
`
`TrendMaker name and Maxwell did not dispute that the mark was
`distinctive and famous, importantly, factors IV, V, VI, VII, and
`VIII favor Maxwell. Under factor IV, Maxwell made bona fide
`noncommercial use of the mark in his site, and for purposes of
`factor V, TMI made no showing that Maxwell intended to divert
`customers from its own site. Turning to factor VI, Maxwell never
`offered to sell the domain name, and certainly never had a
`pattern of selling domain names to mark owners. Maxwell did not
`behave improperly when providing contact information, as
`addressed in factor VII. Factor VIII concerns the registration
`of multiple domain names; Maxwell’s registration of his second
`site related to TrendMaker Homes does not argue in favor of
`finding bad faith intent to profit. Maxwell registered the
`second domain name for the same purposes as the first one and
`only after his registration of the first name expired. Finally,
`like the Lucas Nursery court, we particularly note that Maxwell’s
`conduct is not the kind of harm that ACPA was designed to
`prevent.
`Texas Anti-Dilution Statute
`The district court also found that Maxwell violated the
`Texas Anti-Dilution Statute.
` That 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
`14
`
`
`
`parties or confusion as to the source of goods or
`services.
`TEX. BUS. & COM. CODE § 16.29.
`
`This statute “is not intended to address non-trademark uses
`of a name to comment on, criticize, ridicule, parody, or
`disparage the goods or business of the name’s owner.” Express One
`Int’l, Inc. v. Steinbeck, 53 S.W.3d 895, 899 (Tex. App. – Dallas
`2001, no pet.)(citing McCarthy). Because this exception describes
`Maxwell’s use, Maxwell’s domain name is not actionable under the
`Texas Anti-Dilution Statute.
`Conclusion
`For these reasons, we reverse the judgment of the district
`court and render judgment in favor of Maxwell.
`REVERSED AND RENDERED.
`
`15
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