is whether such conduct is illegal. Cyber-squatters such as Toeppen contend that because they were the first to register the domain name through NSI it is theirs. Intermatic argues that it is entitled to protect its valuable trademark by preventing Toeppen from using "intermatic.com" as a domain name.
The practical effect of Toeppen's conduct is to enjoin Intermatic from using its trademark as its domain name on the Internet. Unlike the typical trademark dispute, where both parties are using the name simultaneously and arguing whether confusion exists, the current configuration of the Internet allows only one party to use the "intermatic.com" domain name. Because the Internet assigns the top-level domain name .com to commercial and non-commercial users, there does not currently appear to be a way in which both Intermatic and Toeppen can both use the intermatic.com name.
Congress and the states have been slow to respond to the activities of the cyber-squatters. Some commentators take an extremely dim view of their activities. As one commentator has noted: "There is no doubt that some of these pirates, if not most, anticipated a lottery-like bonanza, selling the domain registration to the trademark owner or canceling it in return for a huge amount of money." 1 Gilson, Trademark Protection and Practice, § 5.11, p. 5-237 (1996). "Dozens of companies, including Taco Bell, MTV, Kentucky Fried Chicken and others have had to cajole, pay thousands of dollars or even sue to gain the rights to domain names that match trademarks they have spent millions of dollars cultivating and protecting." Miller, Cyber Squatters Give Carl's Jr., Others Net Loss, Los Angeles Times, 1996 WL 11004750. However, becoming rich does not make one's activity necessarily illegal. Speculation and arbitrage have a long history in this country.
For the reasons set forth below, the Court recommends that Intermatic's motion for summary judgment be granted in part as to the Dilution counts III and IV and denied as to the remaining counts and Toeppen's motion be denied as to all counts. We will begin our analysis with a discussion of Intermatic's trademark and unfair competition claims (section IV) and we will then turn to its trademark dilution claims (section V).
IV. INTERMATIC'S TRADEMARK INFRINGEMENT AND UNFAIR COMPETITION CLAIMS - LIKELIHOOD OF CONFUSION.
Our discussion begins with an analysis of Intermatic's trademark and unfair competition claims. Intermatic asserts that it is entitled to summary judgment on all counts by showing the likelihood of confusion resulting from Toeppen's use of Intermatic's trademark as a domain name. In order to prevail under the federal trademark infringement claim, the federal unfair competition claim, and the state deceptive trade practices and unfair competition claims, (Counts I, II, V, VI, and VII), Intermatic need only prove that: 1) it owns prior rights in the INTERMATIC mark; and 2) Toeppen's use of "intermatic.com" is likely to cause consumer confusion, deception or mistake. Dorr-Oliver, Inc. v. Fluid-Quip, Inc., 94 F.3d 376 (7th Cir. 1996).
Intermatic's name and prior rights over Toeppen to use the INTERMATIC name are clear. Intermatic's first use of the INTERMATIC name and mark predates Toeppen's first use of "intermatic.com" by more than fifty years. Also, it is undisputed that Intermatic holds a valid registration for the trademark INTERMATIC.
The Seventh Circuit has held that the following seven factors should be weighed to determine if there is a likelihood of confusion: 1) the degree of similarity between the marks in appearance and suggestion; 2) the similarity of products or services for which the name is used; 3) the area and manner of concurrent use; 4) the degree of care likely to be exercised by consumers; 5) the strength of the complainant's mark; 6) actual confusion; and 7) an intent on the part of the alleged infringer to palm off his products as those of another. Forum Corp. of North Am. v. Forum Ltd., 903 F.2d 434, 439 (7th Cir. 1990). The test is not whether the public would confuse the marks, but whether the viewer of an accused mark would be likely to associate the product or service with which it is connected with the source of products or services with which an earlier mark is connected. Nike, Inc. v. "Just Did It" Enterprises, 6 F.3d 1225, 1228-29 (7th Cir. 1993). Where factual issues exist on these criteria, the Seventh Circuit has clearly stated that summary judgment is inappropriate. McGraw-Edison Company v. Walt Disney Products, 787 F.2d 1163, 1173 (7th Cir. 1987) ("the district court erred in concluding as a matter of law that no likelihood of confusion exist and in granting summary judgment in favor of defendants on count I"); Nike, Incorporated v. "Just Did It" Enterprises, 6 F.3d 1225 (7th Cir. 1993) (reversing district court grant of summary judgment and holding that genuine issue of material fact existed as to whether parody of "Nike," "Just Do It" and swoosh symbol trademarks was likely to confuse consumers).
1. Similarity of Marks
In this case, Toeppen's use of "intermatic.com" is similar to the federally registered name and mark of INTERMATIC because it contains the term "intermatic." Each of the five registered INTERMATIC trademarks contain the Intermatic name. (SF P 4 and Ex. 2 thereto).
2. Similarity of Products or Services
There is no similarity between the products and services that Toeppen and Intermatic provide. Toeppen's web page contained a map of the city of Urbana, whereas Intermatic's web page would presumably contain product information or catalogs of the various Intermatic products. At the present time, Intermatic has chosen to await the outcome of this litigation before initiating its own Internet web page. More importantly though, Toeppen is willing to be enjoined from using the website for the sale of any product or service thereby guaranteeing that his use would be entirely dissimilar from Intermatic's use.
3. The Area and Manner of Use
This factor requires the Court to "consider whether there is a relationship in use, promotion, distribution, or sales between the goods or services of the parties." Forum Corp. of North Am. v. Forum, Ltd., 903 F.2d 434, 442 (7th Cir. 1990). Also, a trademark protects the owner against not only its use upon the articles to which he has applied it but also upon such other articles as might naturally be supposed to come from him. Nike, Inc. v. "Just Did It" Enterprises, 6 F.3d 1225, 1228-29 (7th Cir. 1993). Toeppen will not be selling any goods or services through the intermatic.com domain.
Both parties are attempting to establish a presence on the Internet through the creation of a web page. The distribution channel in this case is cyberspace. As consumers "surf the net" they seek out information on a plethora of subjects or companies. Companies around the globe are scrambling to establish their presence on the Internet. It is axiomatic that companies seek to register their trademarks as domain names so that consumers can easily find information about them or their products and services. However, at the present time, there is no area and manner of concurrent use. There is no bar to Intermatic setting up a web page under a name other than intermatic.com. Because Intermatic has not set up its own web page, it is unable to demonstrate any relationship in use, promotion, distribution or sales between the goods or services of the parties.
4. Degree of Care Likely To Be Exercised By Consumers
The record contains no information regarding consumer behavior on the Internet. The Court finds that the degree of care to be exercised by consumers raises a question of fact. The consumers in this case are individuals that log onto the Internet to seek information, products, or services. There has been no evidence presented as to the degree of care that could be expected among the average Internet user. The Court cannot simply infer what degree of care would be used by consumers. Because this matter is before the Court on summary judgment, the Court infers that a fact question exists as to whether a web surfer who logged onto the intermatic.com web page and found a map of Urbana, Illinois would associate that page with Intermatic. Nike, Inc. v. "Just Did It" Enterprises, 6 F.3d 1225, 1230-1 (7th Cir. 1993). Thus, the Court finds that a fact question exists on this issue.
5. Strength of Intermatic's Mark
Toeppen does not contest the fact that Intermatic's mark is strong. The Court finds that the mark is strong and entitled to broad protection as a matter of law. As the Seventh Circuit noted in Polaroid Corp. v. Polaraid Inc., 319 F.2d 830, 831 (7th Cir. 1963), a trademark or trade name that is a coined or invented word which has never been used as a trade name or trademark by any other entity acquires the status of a famous-brand trademark. The following language from Polaroid is applicable to the case at bar: "in the instant case plaintiff's trademark and trade name was original -- it was coined and invented -- and was a strong name exclusively appropriated by plaintiff. It was a name which through much effort and the expenditure of large amounts of money had acquired a widespread reputation and much good will, which plaintiff should not be required to share with defendant." Id. at 837.
6. Actual Confusion
There has been no evidence presented of actual confusion. Intermatic states that the use of the "intermatic.com" domain name in and of itself would cause confusion. However, this is a question of fact to be determined. Nike, Inc. v. "Just Did It" Enterprises, 6 F.3d 1225, 1231 (7th Cir. 1993).
7. Toeppen's Intent
Intermatic argues that Toeppen's registration of more than 200 domain names is indicia of willful intent. However, Toeppen argues that he was motivated in part to test the legality of arbitraging domain names. This is a relatively new area of law and Toeppen is free to test the waters. There has been no evidence that Toeppen intended to pass off any of his products or services as Intermatic's. Neither the software nor the map of Urbana are in anyway similar to Intermatic's products. He immediately ceased to market the software under the Intermatic name when contacted by Intermatic's counsel. Whether Toeppen's registration of several domain names is sufficient to rise to the level of willful intent is also a question of fact. Id. at 1231-32.
Therefore the Court recommends that since there are questions of fact as to a likelihood of confusion, the parties' cross motions for summary judgment as to counts I, II, V, VI, and VII should be denied.
V. INTERMATIC'S DILUTION CLAIMS
The parties also move for summary judgment on the Dilution claims. The issue squarely presented is whether the Federal Trademark Dilution Act of 1995 and the Illinois Anti-Dilution Act protect Intermatic from having its federally registered trademarks used as a domain name by Toeppen. For the reasons set forth below the Court holds that Toeppen's action in registering and using "intermatic.com" as a domain name violates section 43(c) of the Lanham Act and the Illinois Anti-Dilution Act because it lessens the capacity of a famous mark, Intermatic, to identify and distinguish goods or services as a matter of law.
A. History of Dilution Statutes.
The concept of trademark dilution dates back
to an article written by Frank I. Schechter and published in the Harvard Law Review in 1927. The Rational Basis of Trademark Protection, 40 Harv. L. Rev. 813 (1927). Schechter explained that the true function of a trademark is "to identify a product as satisfactory and thereby to stimulate further purchases by the consuming public." Id. at 818. Schechter rejected the theory that the exclusive role of a trademark was to serve as a source identifier. He argued that the true function of a mark is to identify a product as satisfactory and thereby stimulate further purchases by the consuming public. He argued that injury occurs to a trademark owner whenever a trademark is used by another, even when used on non-competing goods. He explained that an injury to the trademark owner occurs when there is "a gradual whittling away or dispersion of the identity and hold upon the public mind of the mark or name by its use upon non-competing goods. The more distinctive or unique the mark, the deeper is its impress upon the public consciousness, and the greater is its need for protection against vitiation or dissociation from the particular product in connection with which it has been used." Id. at 825. This argument that the trademark laws should protect owners in connection with non-competing goods was novel. Attempts to enact a federal dilution statute in 1932 were unsuccessful. See, Gilson, at p. 3.
Massachusetts became the first state to adopt a trademark dilution law in 1947. Since then, over twenty other states have followed suit. In addition, at least three states, Michigan, New Jersey and Ohio recognize dilution as a common law cause of action. Section 12 of the Model State Trademark Act contains the following dilution provision:
Likelihood of injury to business reputation or of dilution of the distinctive quality of a mark registered under this Act, or a mark valid at common law, shall be a ground for injunctive relief notwithstanding the absence of competition between the parties or the absence of confusion as to the source of goods or services.
Mod State Trademark Bill, § 12 (USTA 1964). A trademark dilution provision is also contained in Section 25 of the Restatement (Third) of Unfair Competition.
B. The Trademark Dilution Act of 1995.6
The serious push for a federal trademark dilution law began in 1987 with the publication of "The United States Trademark Association Review Commission Report and Recommendations to USTA President and Board of Directors." In that report, the Commission proposed the adoption of a new federal trademark dilution law. Trademark dilution provisions were included in S. 1883, the proposed Trademark Law Revision Act of 1987. However, while most of the bill's provisions eventually became law, concerns - raised by the broadcast industry and rallied by Rep. Robert Kastenmeier (D. Wis.) - that dilution protection would impinge on the First Amendment resulted in the deletion of the dilution provisions from the final legislation.
In 1991, the United States Trademark Association (USTA) Board of Directors adopted a resolution supporting a federal trademark dilution provision. The American Bar Association Patent, Trademark and Copyright Law Section, in its 1991-92 Annual Report, voted overwhelmingly in favor of adding a dilution section to the Lanham Act.
On March 22, 1995, the Federal Trademark Dilution Act of 1995 was introduced in the House of Representatives as H.R. 1295. With changes largely designed to make the bill applicable to the owners of both federally registered and common law trademarks, the bill was signed into law on January 16, 1996 as Public Law 104-98, creating a new Section 43(c) to the Lanham Act.
C. Analysis of the Act.
Section 43(c) of the Lanham Act, also known as the Federal Trademark Dilution Act of 1995 ("Act") became effective on January 16, 1996. A copy of the Act is attached as Appendix A. The new law benefits only "famous" trademarks. The "federal dilution statute is necessary because famous marks ordinarily are used on a nationwide basis and dilution protection is currently only available on a patch-quilt system of protection, in that only approximately 25 states have laws that prohibit trademark dilution." H.R. Rep. No. 374, 104th Cong., 1st Sess. 1995, 1195 WL 709280, pg. 4 (Leg. Hist.) The Federal Trademark Dilution Act provides that:
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, ... 15 U.S.C. 1125(c)