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Designer Skin LLC v. S & L Vitamins, Inc., et al.
Unauthorized internet reseller of plaintiff’s products is not guilty of trademark infringement, and does not cause actionable initial interest confusion, by using plaintiff’s trademarks in meta tags of website at which plaintiff’s and its competitors’ products are sold, and in...

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Oyster Software Inc. v. Forms Processing Inc., et al.

No. C00-0724 JCS, 2001 US Dist. Lexis 22520 (N.D.Cal. November 13, 2001)

Court grants in part and denies in part defendant's motion for summary judgment. Plaintiff alleged that defendant and/or its agent posted meta tags on defendant's web site which were identical to those found on plaintiff's own site, and included a description of the plaintiff company and, apparently, plaintiff's trademark. Upon receiving a complaint from plaintiff, defendant removed the offending meta tags from its site. Plaintiff thereafter brought an action seeking redress, alleging that defendant's conduct constituted trademark infringement in violation of the Lanham Act and the California Civil Code, copyright infringement, and trespass to chattels. The court granted in part defendant's motion for summary judgment, finding that plaintiff had not submitted sufficient evidence to be entitled to an award of lost profits arising out of the alleged trademark infringement, despite plaintiff's showing that its web site traffic was adversely impacted during the period of defendant's infringing activities. The court reached this conclusion because of plaintiff's inability to demonstrate that its web site had actually generated business. The court denied the balance of defendant's motion, finding the evidence sufficient to require a trial as to plaintiff's trespass claim, its copyright infringement claim, and its entitlement, as a result of trademark infringement, to an accounting and injunctive relief.

Plaintiff Oyster develops software products to aid customers in processing the data contained on electronic and paper documents. In connection with its business, Oyster uses the registered trademark "FormsPro" and a web site it operates at Defendant Forms Processing Inc. ("FPI") "offers document management services" and also utilizes a web site to promote its business. Defendant and/or its agent, Top Ten Promotions, placed meta tags on defendant's web site that were identical to those found on plaintiff's Oyster's site, and included both a description of plaintiff's business and its trademark. Upon receiving a complaint from plaintiff, defendant removed the offending meta tags.

Plaintiff thereafter commenced this lawsuit, asserting, inter alia, claims that defendants, by their conduct, infringed plaintiff's trademark in violation of both the Lanham Act and California law, trespassed on its chattels, and committed copyright infringement.

Defendant FPI moved for partial summary judgment. There are a number of remedies available to redress trademark infringement, including injunctive relief, an accounting and award to plaintiff of the profits it lost as a result of defendant's infringing activities. Plaintiff sought a recovery of such lost profits. Defendant moved for summary judgment, dismissing this claim on the ground that plaintiff had failed to advance sufficient evidence to establish that it suffered any lost profits as a result of defendant's activities. According to the court, "although damages in trademark infringement actions need not be calculated with absolute exactness, there must be a reasonable basis for calculation of damages. Thus, 'many courts have denied a monetary award in infringement cases when damages are remote and speculative.'" (citations omitted).

Plaintiff submitted evidence that its web site and e-mail traffic was adversely effected by defendant's misuse of its meta tags. This evidence showed that the number of hits and e-mails plaintiff received during the period in which defendant was infringing its meta tags increased only slightly from prior periods, while the level of such activity "shot up dramatically" after the infringing materials were removed. Plaintiff's expert concluded that this loss of traffic cost plaintiff profits, a conclusion he supported by pointing to the success during this period of one of plaintiff's competitors.

The court rejected this evidence as insufficient, on the ground that plaintiff had failed to demonstrate that it derived any business from its web site. According to the court, plaintiff was a relatively early stage company with five clients. Even if it derived two from the Internet, a fact in dispute, plaintiff had failed "as a matter of law [to] establish the requisite track record that would provide a reasonable basis for calculating lost profits caused by FPI's alleged infringement."

The court held that issues of fact existed which precluded it from dismissing plaintiff's claims either for an accounting or injunctive relief arising out of defendant's infringing activities. The fact that defendant had withdrawn the meta tags in question did not moot plaintiff's application for injunctive relief. Rather, said the court "past infringement may be sufficient to demonstrate a threat of future infringement." As far at plaintiff's claim for an accounting, the court found that plaintiff had presented sufficient evidence that defendant had profited from its infringing activities to withstand the instant motion. According to the court, plaintiff only had to show that "new customers were obtained by [defendant] via the Internet during the infringing period." Plaintiff did not have to show that these customers were attracted to defendant as a result of its use of the meta tags in question. The burden then shifted to defendant to show that the profits it made in the period in question were not the result of the infringing activity.

Lastly, the court denied defendant's motion to dismiss plaintiff's trespass claim. This claim arose out defendant Top Ten's use of robots to enter plaintiff's site and obtain its meta tags, which were subsequently installed on defendant's site. The fact that any actual damage arising out of such 'trespass' was negligible, and did not interfere with the use of plaintiff's computers, did not dictate a contrary result.

To establish a trespass to computers, a "plaintiff must demonstrate that 1) defendant intentionally and without authorization interfered with plaintiff's possessory interest in the computer system; and 2) defendant's unauthorized use proximately resulted in damage to plaintiff." The issue before the court was whether a cause of action for trespass could proceed where the plaintiff had only sustained negligible injury. The court held that such a showing was indeed sufficient to permit a trespass claim to go forward. Said the court:

Oyster concedes that Top Ten's robot's placed a 'negligible' load on Oyster's computer system. Oyster asserts that Top Ten's copying of its meta tags is, nonetheless, sufficient to prevail on its trespass claim. The court agrees. ... Therefore, the Court declines to dismiss Oyster's trespass claim on the grounds that Oyster has shown only a minimal interference because Oyster has presented evidence of use by Top Ten.

The full text of the court's decision can be found on a web site maintained by the United States District Court for the Northern District of California.

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