Bosley Medical Institute, Inc. v. Kremer

Barry G. Silverman, Circuit Judge.

Defendant Michael Kremer was dissatisfied with the hair restoration services provided to him by the Bosley Medical Institute, Inc. In a bald-faced effort to get even, Kremer started a website at www.BosleyMedical.com, which, to put it mildly, was uncomplimentary of the Bosley Medical Institute. The problem is that "Bosley Medical" is the registered trademark of the Bosley Medical Institute, Inc., which brought suit against Kremer for trademark infringement and like claims. Kremer argues that noncommercial use of the mark is not actionable as infringement under the Lanham Act. Bosley responds that Kremer is splitting hairs.

Like the district court, we agree with Kremer. We hold today that the noncommercial use of a trademark as the domain name of a website -- the subject of which is consumer commentary about the products and services represented by the mark -- does not constitute infringement under the Lanham Act.

Bosley Medical's cybersquatting claim is another matter. The issue under the Anticybersquatting Consumer Protection Act was whether Kremer had a "bad faith intent to profit" from the use of the trademark in his domain name, such as by making an extortionate offer to sell the BosleyMedical.com site to Bosley. Because discovery regarding that claim had not been completed, and the issue itself was not within the scope of the summary judgment motions, the district court erred in granting summary judgment to Kremer as to cybersquatting . . .

I. Background

Bosley Medical provides surgical hair transplantation, restoration, and replacement services to the public. Bosley Medical owns the registered trademark "BOSLEY MEDICAL," has used the mark "BOSLEY MEDICAL" since 1992, and registered the mark with the United States Patent and Trademark Office in January 2001. Bosley has spent millions of dollars on advertising and promotion throughout the United States and the rest of the world.

Michael Kremer is a dissatisfied former patient of Bosley. Unhappy with the results of a hair replacement procedure performed by a Bosley physician in Seattle, Washington, he filed a medical malpractice lawsuit against Bosley Medical in 1994. That suit was eventually dismissed.

In January 2000, Kremer purchased the domain name www.BosleyMedical.com, the subject of this appeal, as well as the domain name www.BosleyMedicalViolations.com, which is not challenged by Bosley. Five days after registering the domain name, Kremer went to Bosley Medical's office in Beverly Hills, California and delivered a two-page letter to Dr. Bosley, Founder and President of Bosley Medical. The first page read: Let me know if you want to discuss this. Once it is spread over the internet it will have a snowball effect and be too late to stop. M. Kremer [phone number]. P.S. I always follow through on my promises.

The second page was entitled "Courses of action against BMG" and listed eleven items. The first item stated: "1. Net web sites disclosing true operating nature of BMG. Letter 3/14/96 from LAC D.A. Negative testimonials from former clients. Links. Provide BMG competitors with this information." The letter contains no mention of domain names or any other reference to the Internet.

Kremer began to use www.BosleyMedical.com in 2001. His site summarizes the Los Angeles County District Attorney's 1996 investigative findings about Bosley, and allows visitors to view the entire document. It also contains other information that is highly critical of Bosley. Kremer earns no revenue from the website and no goods or services are sold on the website. There are no links to any of Bosley's competitors' websites. BosleyMedical.com does link to Kremer's sister site, BosleyMedicalViolations.com, which links to a newsgroup entitled alt.baldspot, which in turn contains advertisements for companies that compete with Bosley. BosleyMedical.com also contained a link to the Public Citizen website. Public Citizen is the organization that represents Kremer in this case.

Bosley brought this suit alleging trademark infringement, dilution, unfair competition, various state law claims, and a libel claim that was eventually settled. Bosley sought to take discovery aimed at the trademark and libel claims...

III. Analysis

A. Trademark Infringement and Dilution Claims

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Infringement claims are subject to a commercial use requirement. The infringement section of the Lanham Act, 15 U.S.C. Sec. 1114, states that any person who "uses in commerce any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive . . ." can be held liable for such use.

[These] requirements in the Lanham Act serves the Act's purpose: "to secure to the owner of the mark the goodwill of his business and to protect the ability of consumers to distinguish among competing producers." ... In other words, the Act is designed to protect consumers who have formed particular associations with a mark from buying a competing product using the same or substantially similar mark and to allow the mark holder to distinguish his product from that of his rivals.

The Supreme Court has made it clear that trademark infringement law prevents only unauthorized uses of a trademark in connection with a commercial transaction in which the trademark is being used to confuse potential consumers. . . .

As the Second Circuit held, "the Lanham Act seeks to prevent consumer confusion that enables a seller to pass off his goods as the goods of another . . . . Trademark infringement protects only against mistaken purchasing decisions and not against confusion generally."...

As a matter of First Amendment law, commercial speech may be regulated in ways that would be impermissible if the same regulation were applied to noncommercial expressions. Florida Bar v. Went For It, Inc. "The First Amendment may offer little protection for a competitor who labels its commercial good with a confusingly similar mark, but trademark rights do not entitle the owner to quash an unauthorized use of the mark by another who is communicating ideas or expressing points of view."

The district court ruled that Kremer's use of Bosley's mark was noncommercial. To reach that conclusion, the court focused on the "use in commerce" language rather than the "use in connection with the sale of goods" clause. This approach is erroneous. "Use in commerce" is simply a jurisdictional predicate to any law passed by Congress under the Commerce Clause. . . . 15 U.S.C. Sec. 1127 states that "unless the contrary is plainly apparent from the context . . . the word 'commerce' means all commerce which may lawfully be regulated by Congress." Therefore, the district court should have determined instead whether Kremer's use was "in connection with a sale of goods or services" rather than a "use in commerce." However, we can affirm the district court's grant of summary judgment on any ground supported by the record. The question before us, then, boils down to whether Kremer's use of Bosley Medical as his domain name was "in connection with a sale of goods or services." If it was not, then Kremer's use was "noncommercial" and did not violate the Lanham Act.

Bosley argues that it has met the commercial use requirement in three ways. First, it argues that a mark used in an otherwise noncommercial website or as a domain name for an otherwise noncommercial website is nonetheless used in connection with goods and services where a user can click on a link available on that website to reach a commercial site. However, Bosley's reliance on Nissan is unfounded.

In Nissan, Nissan Motor Company sued Nissan Computer Corporation for using the Internet websites www.Nissan.com and www.Nissan.net. In Nissan, however, commercial use was undisputed, as the core function of the defendant's website was to advertise his computer business. Additionally, the defendant in Nissan, like the defendant in Taubman Co. v. Webfeats, placed links to other commercial businesses directly on their website. Kremer's website contains no commercial links, but rather contains links to a discussion group, which in turn contains advertising. This roundabout path to the advertising of others is too attenuated to render Kremer's site commercial. At no time did Kremer's BosleyMedical.com site offer for sale any product or service or contain paid advertisements from any other commercial entity. . . .

Bosley also points out that Kremer's site contained a link to Public Citizen, the public interest group representing Kremer throughout this litigation. We hold that Kremer's identification of his lawyers and his provision of a link to same did not transform his noncommercial site into a commercial one.

Bosley's second argument that Kremer's website satisfies the "in connection with the sale of goods or services" requirement of the Lanham Act is that Kremer created his website to enable an extortion scheme in an attempt to profit from registering BosleyMedical.com. In Panavision International, L.P. v. Toeppen, this court held that a defendant's "commercial use was his attempt to sell the trademarks themselves." Similarly, in Intermatic Inc. v. Toeppen, the court found that "Toeppen's intention to arbitrage the 'intermatic.com' domain name constituted a commercial use." . . .

However, in this case, there is no evidence that Kremer was trying to sell the domain name itself. The letter delivered by Kremer to Bosley's headquarters is a threat to expose negative information about Bosley on the Internet, but it makes no reference whatsoever to ransoming Bosley's trademark or to Kremer's use of the mark as a domain name.

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Bosley's third and final argument that it satisfied the commercial use requirement of the Lanham Act is that Kremer's use of Bosley's trademark was in connection with Bosley's goods and services. In other words, Kremer used the mark "in connection with goods and services" because he prevented users from obtaining the plaintiff's goods and services. See People for the Ethical Treatment of Animals v. Doughney, ("PETA"). In PETA, defendants created a site that promoted ideas antithetical to those of the PETA group. The Fourth Circuit held that the defendant's parody site, though not having a commercial purpose and not selling any goods or services, violated the Lanham Act because it "prevented users from obtaining or using PETA's goods or services."

However, in PETA, the defendant's website "provided links to more than 30 commercial operations offering goods and services." To the extent that the PETA court held that the Lanham Act's commercial use requirement is satisfied because the defendant's use of the plaintiff's mark as the domain name may deter customers from reaching the plaintiff's site itself, we respectfully disagree with that rationale. While it is true that www.BosleyMedical.com is not sponsored by Bosley Medical, it is just as true that it is about Bosley Medical. The PETA approach would place most critical, otherwise protected consumer commentary under the restrictions of the Lanham Act. Other courts have also rejected this theory as over-expansive. . . .

The PETA court's reading of the Lanham Act would encompass almost all uses of a registered trademark, even when the mark is merely being used to identify the object of consumer criticism. This broad view of the Lanham Act is supported by neither the text of the statute nor the history of trademark laws in this country. "Trademark laws are intended to protect" consumers from purchasing the products of an infringer "under the mistaken assumption that they are buying a product produced or sponsored by [the trademark holder]." Limiting the Lanham Act to cases where a defendant is trying to profit from a plaintiff's trademark is consistent with the Supreme Court's view that "[a trademark's] function is simply to designate the goods as the product of a particular trader and to protect his good will against the sale of another's product as his.". . . .

The Second Circuit held in United We Stand America, Inc. v. United We Stand, America New York, Inc., that the "use in connection with the sale of goods and services" requirement of the Lanham Act does not require any actual sale of goods and services. Thus, the appropriate inquiry is whether Kremer offers competing services to the public. Kremer is not Bosley's competitor; he is their critic. His use of the Bosley mark is not in connection with a sale of goods or services -- it is in connection with the expression of his opinion about Bosley's goods and services.

The dangers that the Lanham Act was designed to address are simply not at issue in this case. The Lanham Act, expressly enacted to be applied in commercial contexts, does not prohibit all unauthorized uses of a trademark. Kremer's use of the Bosley Medical mark simply cannot mislead consumers into buying a competing product -- no customer will mistakenly purchase a hair replacement service from Kremer under the belief that the service is being offered by Bosley. Neither is Kremer capitalizing on the good will Bosley has created in its mark. Any harm to Bosley arises not from a competitor's sale of a similar product under Bosley's mark, but from Kremer's criticism of their services. Bosley cannot use the Lanham Act either as a shield from Kremer's criticism, or as a sword to shut Kremer up.

B. Anticybersquatting Consumer Protection Act

In 1999, Congress passed the Anticybersquatting Consumer Protection Act... as an amendment to the Lanham Act to prohibit cybersquatting.

Cybersquatting occurs when a person other than the trademark holder registers the domain name of a well known trademark and then attempts to profit from this by either ransoming the domain name back to the trademark holder or by using the domain name to divert business from the trademark holder to the domain name holder. . .

The district court dismissed Bosley's ACPA claim for the same reasons that it dismissed the infringement and dilution claims -- namely, because Kremer did not make commercial use of Bosley's mark. However, the ACPA does not contain a commercial use requirement, and we therefore reverse.

Kremer argues that the "noncommercial use" proviso that appears in the dilution portion of Sec. 1125 applies to cybersquatting claims with equal force. Admittedly, the language in Sec. 1125 is confusing. 15 U.S.C. Sec. 1125(c)(4) reads: "The following shall not be actionable under this section: . . . (B) Non-commercial use of a mark." 15 U.S.C. Sec. 1125(c)(4)(B). Kremer asserts that by using the word "section," rather than the more precise term "subsection," Congress meant for the proviso to apply to all of Sec. 1125, as opposed to subsection (c).

This argument fails for two reasons. The noncommercial use exception, which appears in a different part of the Lanham Act, is in direct conflict with the language of the ACPA. The ACPA makes it clear that "use" is only one possible way to violate the Act ("registers, traffics in, or uses"). Allowing a cybersquatter to register the domain name with a bad faith intent to profit but get around the law by making noncommercial use of the mark would run counter to the purpose of the Act. "The use of a domain name in connection with a site that makes a noncommercial or fair use of the mark does not necessarily mean that the domain name registrant lacked bad faith." . . . "It is a well-established canon of statutory construction that a court should go beyond the literal language of a statute if reliance on that language would defeat the plain purpose of the statute." . . .

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IV. Conclusion

We affirm the district court's entry of summary judgment in favor of Kremer with respect to the infringement and dilution claims. . . .

AFFIRMED in part, REVERSED in part, and REMANDED. No costs allowed.