Ninth Circuit Rules in Avery Dennison Domain Name Trademark Case

(August 25, 1999) The U.S. Court of Appeals for the Ninth Circuit issued its opinion in the Avery Dennison v. Jerry Sumpton cybersquatting case on Monday, August 23, 1999. The Court held that Sumpton's domain name registration of the trademarked terms "Avery" and "Dennison" did not constitute trademark dilution.

Avery Dennison Corp. v. Jerry Sumpton, U.S. District Court, C.D.Cal., Case No. CV-97-00407-JSL, on appeal to the U.S. Court of Appeals for the Ninth Circuit, Appeal No. 98-55810. See, Appeals Court Opinion.

The Opinion is a major setback for businesses whose trademarks have been seized by cybersquatters. The court departed from earlier precedent, and held that only holders of registered and famous marks are entitled to relief against cybersquatters under the federal and state trademark dilution statutes. Under the analysis followed by the Court, many trademarks would not qualify as "famous."

Avery Dennison [NYSE AVY] is an office supply company with a market capitalization of $6.4 Billion. It sells office products and industrial fasteners under the registered trademarks "Avery" and "Dennison." Its products include Avery-brand office automation products, Fasson-brand self-adhesive materials, peel-and-stick postage stamps, battery labels, automated retail tags and labeling systems, specialty tapes and chemicals. It has over 16,000 employees in 200 manufacturing and sales facilities.

Jerry Sumpton is the President of Freeview, an Internet e-mail provider doing business as Mailbank. This business sells vanity e-mail addresses. For this purpose, it has registered thousands of domain-name combinations. Most are common surnames. It registered avery.net and dennison.net.

Avery Dennison filed suit in U.S. District Court in California alleging trademark dilution under the Federal Trademark Dilution Act and the California dilution statute.

The District Court granted Avery Dennison summary judgment, and an injunction ordering Sumpton to transfer the two domain name registrations to it in exchange for $300 each. The district court opinion concluded as a matter of law the disputed trademarks were famous and granted summary judgment to Avery Dennison on its dilution claims.

The Ninth Circuit reversed, and instructed the district court to enter summary judgment for Sumpton.

The Court wrote that "injunctive relief is available under the Federal Trademark Dilution Act if a plaintiff can establish that (1) its mark is famous; (2) the defendant is making commercial use of the mark in commerce; (3) the defendant's use began after the plaintiff's mark became famous; and (4) the defendant's use presents a likelihood of dilution of the distinctive value of the mark." On this point, and frequently throughout the opinion, the Court cited a 1998 Ninth Circuit opinion pertaining to cybersquatting, Panavision Int'l, L.P. v. Toeppen. However, the Court reached opposite results in the two cases.

The Avery Dennison case turned on the question of whether Avery and Dennison were famous marks. The Court stated that "Dilution is a cause of action invented and reserved for a select class of marks -- those marks with such powerful consumer associations that even non-competing uses can impinge on their value."

The Federal Trademark Dilution Act lists eight non-exclusive considerations for the famousness inquiry, at 15 U.S.C. 1125(c)(1)(A)-(H). The Court listed these, are then examined which ones applied to Avery Dennison. The eight considerations are:

(A) the degree of inherent or acquired distinctiveness of the mark;

(B) the duration and extent of use of the mark in connection with the goods or services with which the mark is used;

(C) the duration and extent of advertising and publicity of the mark;

(D) the geographical extent of the trading area in which the mark is used;

(E) the channels of trade for the goods or services with which the mark is used;

(F) the degree of recognition of the mark in the trading areas and channels of trade used by the mark's owner and the person against whom the injunction is sought;

(G) the nature and extent of use of the same or similar marks by third parties; and

(H) whether the mark was registered . . . on the principal register.

The Appeals Court opined that only the first of the eight criteria, distinctiveness, was met by Avery and Dennison, and therefore, the marks are not "famous" for the purposes of applying the trademark dilution statutes.

In the earlier Panavision case, the Ninth Circuit found trademark dilution, and ruled in favor of the trademark holder, and against the cybersquatter. In that case, however, the Defendant's sole purpose was to register corporate names, and then demand huge payments for transferring them back. Also, his conduct of negotiations and litigation were less than impressive.

The Ninth Circuit wrote in its Avery Dennison opinion that it distinguished the Panavision case on three grounds.

"First, the defendant did not mount a challenge on the famousness prong of the dilution tests. Second, the Panavision defendant did not challenge the factual assertion that he sought to profit by arbitrage with famous trademarks. Third, the diluting registrations in Panavision both involved the TLD <.com>. In the instant case, by contrast, Appellants contest Avery Dennison's claim of famousness, Appellants contend that the nature of their business makes the trademark status of "Avery" and "Dennison" irrelevant, and the complained-of registrations involve the TLD <.net>." [citations omitted]

The three judge panel was comprised of Stephen Trott, who wrote the Opinion, Dorothy Nelson, and Stephen Reinhardt.

It is also possible that the holdings of the Court in Panavision and Avery Dennison will soon become moot. The Congress is considering several bills that would deal specifically with the problem of cybersquatting. One bill has already been approved by the Senate Judiciary Committee.