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ECash Technologies, Inc. v. Tmark Guagliardo dba Ecash.com, et al.

The court dismissed defendants' claim seeking cancellation of plaintiff's federal trademark registration of the mark "Ecash." The court held that plaintiff had no obligation to notify the PTO during the trademark registration process of defendants' use of the Ecash mark in a domain name because such use did not confer "clearly established" rights on defendants to use the mark in question.

On or about November 18, 1994, David Chaum, apparently a predecessor-in-interest to plaintiff, submitted an application for trademark registration of the mark Ecash to the United States Patent and Trademark Office ("PTO"). The rights to this mark were then assigned to Digicash Acquisition Corp. in October 1997, which in turn assigned them to plaintiff eCash in July 1999.

In or about July 1995, defendants registered the domain name "ecash.com" with Network Solutions Inc. Defendants' complaint alleged no other use of the ecash mark, in commerce or otherwise. Defendants claimed their registration was in conjunction with a proprietary technology for processing commercial transactions on the Internet. In 1996, plaintiff contacted defendants in an effort to obtain either ownership of, or the right to use the ecash.com domain name. This request was denied.

The original trademark application by plaintiff's predecessor-in-interest did not notify the PTO of defendants' registration of the ecash.com domain name, and plaintiff at no time brought this use to the attention of the PTO. Plaintiff was issued federal trademark registration of the Ecash mark in August 1999.

Claiming that plaintiff's failure to apprise the PTO of defendants' registration of the domain name ecash.com constituted a fraud in the procurement of a trademark registration, defendants sought cancellation of plaintiff's trademark registration. On plaintiff's application, the court dismissed this claim, finding it meritless.

"Fraud in [the] procurement of a trademark registration may be raised as a ground for cancellation [of a trademark] in civil litigation, in which case it may function as a "defense" to a claim of trademark infringement."

As explained by the court, a trademark applicant has a duty, when submitting an application for trademark registration, to inform the PTO of the use of the mark by others who possess "clearly established" rights to use the mark. Said the court "[o]nly in the rare circumstance that another user of the same mark's rights are "clearly established" must this use be disclosed." Such rights are "clearly established" when set forth in a court decree or settlement agreement, or evidenced by a trademark registration. Moreover, "the other user's rights must be at least equivalent to, if not superior to, the applicant's own rights to the mark."

The trademark applicant is not obligated, however "to investigate [or] report to the PTO all other possible users of the same or a similar mark." His obligation is limited to users possessing "clearly established" rights.

Based on the foregoing, the court determined that plaintiff had no obligation to inform the PTO of defendants' registration of the ecash.com domain name because such registration did not create "clearly established" rights in defendants to use the mark. Indeed, held the court, such registration by itself did not create in defendants any rights to the Ecash trademark in question. Said the court:

The only basis for their own rights to the "eCash" mark alleged in Defendants' Counterclaim is their registration of the "ecash.com" domain name. The Ninth Circuit has clearly said that mere registration of a domain name does not alone convey any rights to a trademark in the same name as the domain name. Thus defendants' allegations do not at present even support the accrual of any trademark rights that conflict with those asserted in Plaintiff's application, let alone "clearly established" rights that Plaintiff would be required to disclose. ... A bare allegation of domain name registration cannot support an assertion of trademark rights. See Brookfield Communications Inc. v. West Coast Entertainment Corp., 174 F.3d 1036 (9th Cir. 1999).

Moreover, finding that defendants could not allege facts sufficient to show that they had "clearly established" rights to the mark that were superior to plaintiff's, the court refused to grant defendants leave to amend their pleading. Apparently, any common law rights to use the mark defendants possessed did not rise to a level sufficient to obligate plaintiff to disclose them to the PTO. Said the court:

Defendants fail to comprehend the "clearly established" limitation on fraudulent registration. It is not enough that Defendants simply be able to show some common law rights to use the mark; they must be able to show that their rights were so "clearly established" that Plaintiff's failure to disclose Defendants' rights to the PTO would have to constitute fraud.

The court accordingly dismissed defendants' claim for cancellation of the mark.

Defendants also advanced various state law claims against plaintiff arising, in large part, out of a letter sent by plaintiff's counsel to Afternic.com, on who's site defendants' domain name was apparently listed for auction. The letter enclosed the complaint plaintiff brought in this action, which the letter went on to describe as asserting that "our client owns a registered trademark for Ecash and defendant's use of the domain name "ecash.com" violates our client's rights in that mark under federal cyberpiracy and trademark statutes, among other laws."

Defendants asserted that plaintiff's conduct, particularly in sending out the aforementioned letter, constituted trade libel, slander of title and unfair competition. Defendants voluntarily withdrew these claims, however, before the motion to dismiss was decided by the court. The court nonetheless noted that "it seems clear as a matter of settled California law that the letter at issue in this case would be subject to the privilege under Section 47(b) [of the California Civil Code] for communications 'with some relation' to judicial proceedings.' ... This privilege affords absolute immunity against tort liability arising out of such a communication ... [and] protects participants in judicial proceedings from derivative tort actions based on communications in or regarding judicial proceedings."

The court also stated that plaintiff's application under California Code of Civil Procedure Section 425.16(c) for the costs and attorney's fees expended in defending against defendants' claims would be ruled upon after plaintiff made a formal motion therefor.

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