The ACPA and Consumer Wrath: Is consumer criticism a “bad faith” act?

As we have learned in class, the origins of the Anticybersquatting Consumer Protection Act (ACPA) 15 U.S.C.A. § 1125(d), was to protect trademark owners from having others use their famous and distinctive trademark in a domain name that is confusingly similar.  This law was welcomed especially in the early days of the internet, when domain name registrations were driving the development of internet law. However, although there is less cyber-squatting or cyber-piracy today, the ACPA continues to be used in courts – and sometimes to defend against different and new types of cyber-squatting. In the present case we have a blend trademark, cybersquatting, and free speech on the Internet.

The owner of a website called “McAllister Olivarius Truth,” run by a former client of the law firm McAllister Olivarius, will be on trial this summer, accused of cybersquatting. The jury is scheduled to hear the case in July 2018.  How did we get to this?

The defendant who runs the “Truth” website, Mark Myers Mermel, committed a series of actions that led him to be sued by his own former law firm.

The creation of the website, and the lawsuit, all finds its origins in a “client-gone-wrong” scenario between the two parties. The law firm McAllister Olivarius actually represented Mermel, a real estate developer and one-time candidate for lieutenant governor of New York, in a dispute with Yale University. Mermel later, for some reason, decided to not pay his legal bills for that representation.

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The firm then filed a breach of contract suit in Connecticut in 2016 to recover the fees. And, sometime during this billing dispute, Mermel then registered McallisterOlivariusTruth.com and populated it with some law firm-like text.  The firm’s actual domain is mcolaw.com.

In addition to creating the website, Mermel also threatened to post documents on the site he said would “cripple if not close” the firm, according to the complaint. He also offered to forego the plan if the firm would “walk away” from the unpaid legal bills or, at least, reduce them.

After learning of the website and these threats, the firm wanted to add anti-cybersquatting and evidence spoliation claims to the original case, but the Connecticut court denied the request. As a result, McAllister brought the claims to a new case filed in New York.

McAllister alleges in the NY suit that defendant Mermel registered the domain name McallisterOlivariusTruth.com to divert potential clients and others searching for information about the firm – which in turn would force McAllister to accede to Mermel’s demands and reduce or eliminate the amount it was seeking in unpaid legal fees.  Mermel allegedly threatened to publish damaging documents about plaintiff on the website. Mermel thereby, in McAllister’s view, violated the Anticybersquatting Consumer Protection Act (ACPA). Mermel made a motion to dismiss for lack of jurisdiction and for failure to state a claim.

The ACPA was written to address various forms of piracy or bad fair action using someone else’ trademark e.g. cybersquatting – the deliberate, bad-faith, and abusive registration of Internet domain names in violation of the rights of trademark owners. The ACPA provides for liability if a person registers, traffics in, or uses a domain name that is identical or confusingly similar to a distinctive mark, with a bad faith intent to profit from that mark.

As we learned in class, in order to state a claim under ACPA, a trademark owner must show the defendant:

  1. registered, trafficked in, or used a domain name,
  2. that is confusingly similar to the plaintiff’s trademark, and
  3. had a bad faith intent to profit from that domain name.

But here, in the “McAllister Olivarius Truth” website case, is the defendant using the mark for bad faith or is he using the mark as a form of commentary and criticism, as protected by the Frist Amendment?  Many U.S. cases hold that the First Amendment may trump trademark rights in similar situations.

For instance, in Bosley Medical Institute, Inc. v. Kremer, the Ninth Circuit held that it was not a trademark infringement for a former customer of Bosley to register the domain name Bosleymedical.com and use it to operate a website critical of Bosley. The court stated that Kremer, the unhappy customer, was making a non-commercial use of the trademark on his website, and therefore not infringement under the applicable federal law. Kremer earned no revenue from the website, he sold no goods or services, and there was no link to any of Bosley’s competitors’ websites. However, the Bosley Court also held “An infringement lawsuit by a trademark owner over a defendant’s unauthorized use of the mark as his domain name does not necessarily impair the defendant’s free speech rights.”

Similarly, in Lucas Nursery v. Landscaping, Inc. v. Grosse, 359 F.3d 806 (6th Cir. 2004), a consumer won a case against a landscaping company when she registered its trademark as a domain name and used the website to express her anger with the landscape services. TMI, Inc. v. Maxwell, 368 F.3d 433 5th Cir. 2004), in the Fifth Circuit, had a similar outcome. A home builder had a very unhappy customer who registered the home builder’s trademark as a domain name after being upset with the quality of the home he purchased. The court did not find it “acting in bad faith” – the critical third element to any ACPA claim. The website featured the customer’s story of his dispute with the builder, along with a disclaimer at the top of the webpage indicating that it was most certainly not the home builder’s official website.

In these two cases, dissatisfied customers use of a site with a company’s trademark name to complain about the company is not bad faith – at least under the ACPA law. The free speech/consumer commentary rights of the customer are an important part of the U.S. law and commerce, and will be protected, even in the face of a trademark claim.

However, even with varying precedent, here Mermel’s argument that the attaching “Truth” in his website name, and thereby making it a forum for criticism, was a hard sell to the judge. Attaching “Truth” to a trademark is less of a distinguisher than, for instance, using a website name that ends in “.sucks.” [There is a line of litigation about .sucks websites]. In this case, then, without “Truth” clearly revealing the critical consumer nature of the website, McallisterOlivariusTruth.com could be confusingly similar to the firm trademark.

And, finding that the website was also potentially being used as a means to blackmail the law firm to lower or eliminate the owed legal bills also does not sit well for the ACPA test for “bad faith action.”   The website wasn’t so much created to tell the truth, but to extort the firms finances for Mermel’s  own gai. This put that action it within a “bad faith intent to profit” factor of the ACPA.

Therefore, in dismissing the motion, the court found McAllister Olivarius “has plausibly alleged that its mark is distinctive, that defendant’s domain name was confusingly similar to its mark, and that, on the facts pled, plaintiff adequately has alleged that defendant had a bad faith intent to profit from the mark.”

Mermel and McAllister will then be going to trial on the full ACPA claim in July. We will keep an eye out for this case over the summer session.

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