September 17, 1999

By CARL S. KAPLAN

Judges Pick David Over Goliath in Domain Name Suits

uppose a small company named Racer Inc., which sells a line of widgets, has set up its Web site at www.racer.com. And suppose a giant company that owns the trademark for Racer brand tires files a lawsuit because it wants to use the racer.com domain name.

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It's a classic Internet dispute. And until recently, many courts faced with such cases have tipped the scales in favor of the large companies who own famous trademarks.

But in a long-running domain name feud pitting Hasbro Inc., the giant toy maker, against Clue Computing Inc., a tiny Colorado-based computer consultant, a federal judge in Boston recently ruled in favor of the little guy.

Judge Douglas P. Woodlock of the United States District Court for the District of Massachusetts ruled on Sept. 2 that Hasbro's ownership of the well-known trademark "Clue" for its board game does not automatically entitle it to take away Clue Computing's Internet address "clue.com".

The Clue case comes on the heels of another domain-name decision that favored the smaller party. Jerry Sumpton, a small business owner, registered the names "avery.net" and "dennison.net" so that he could sell e-mail addresses with those domain names. Last month, the United States Court of Appeals for the Ninth Circuit ruled that Sumpton did not dilute the well-known trademarks "Avery" and "Dennison," which are held by the office supply company Avery Dennison Corp.

Legal experts believe the decisions may signal a turning point in how courts handle some domain name disputes -- particularly those cases involving charges of "dilution," a weakening of the power of a famous trademark to identify the owner's goods or services.

"Trademark law was built to tolerate lots of people having the same mark for different products," said Jessica Litman, a law professor at Wayne State University in Detroit who specializes in cyberlaw and intellectual property.

If everyone with a famous mark was able to take a domain name from someone who has legitimately registered it, merely because the domain name contains the famous mark, then "it would make a large mess," she said.

"Both the Hasbro case and Avery Dennison recognize that having a trademark, even a famous one, doesn't necessarily entitle you to a domain name" with the mark, Litman said. "That has to be the law."

The most recent case, Hasbro v. Clue Computing Inc., focused on the domain name "clue.com," which Clue Computing registered in June 1994. According to court papers, Eric Robison, the company's co-founder and current president, chose the name Clue Computing and the domain name "clue.com" for reasons unrelated to the mystery board game Clue.

Hasbro owns the "Clue" trademark for its game, which was invented in 1944. It discovered in 1996 that the rights to the domain name "clue.com" were already taken. The toy company has developed electronic versions of many of its traditional games, and is marketing its products on the Web at sites like Monopoly.com. Apparently, Clue Computing's registration of "clue.com" interfered with the toy company's marketing plans.

Hasbro notified Network Solutions Inc., the main registrar of ".com" domain names, of a potential trademark violation. In February 1996, Network Solutions, in line with its dispute resolution policies, told Robison that the Clue Computing site would be frozen until a court could resolve the issue.

Robison filed suit in Colorado state court and obtained an injunction against Network Solutions. Hasbro then brought a lawsuit against Clue Computing in federal court in Boston, charging trademark infringement and dilution.

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The heart of Hasbro's argument was a bold claim. Under the Federal Trademark Dilution Act, which became effective in 1996, the owner of a "famous" trademark is entitled to stop another's commercial use of that mark if it causes "dilution of the distinctive quality of the mark." The owner does not have to prove that consumers are confused by that use -- a requirement that must be met under the harder-to-win charge of trademark infringement.

Courts have traditionally recognized two types of dilution: blurring, the use of a famous trademark associated with one product to promote a different product; and tarnishment, a use which would give the trademark a negative association. But Hasbro, relying on recent cases, particularly the 1998 cybersquatting case Panavision International L.P. v. Toeppen, urged the court to recognize what would essentially be a third category of dilution -- use of another's trademark as a domain name.

In its papers and in his arguments in court, Hasbro's chief lawyer, Kenneth B. Wilson of the well-known law firm Wilson Sonsini Goodrich & Rosati in Palo Alto, Calif., argued that by simply preventing the toy maker from using its famous trademark "Clue" in a domain name, Clue Computer was automatically committing an act of trademark dilution.

That use meant that the capacity of Hasbro's trademark to identify its goods and services was inherently diminished. After all, Wilson said, if Hasbro couldn't use "clue.com" as the address for a Web site about its game, what use was its famous mark in the Internet age? Also, any Hasbro customer who went looking for information about the board game by punching in "clue.com" would wind up in a blind alley.

Judge Woodlock rejected this view of the law, finding that, while use of a trademark in a domain name to extort money from the holder of a trademark or to prevent the trademark holder from using the domain name may be dilution, a legitimate competing use of the domain name is not dilution.

"Holders of a famous mark are not automatically entitled to use that mark as their domain name; trademark law does not support such a monopoly," the judge wrote.

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The court went on to consider whether Clue Computing diluted Hasbro's "Clue" mark under existing dilution standards of blurring and tarnishment, and found no dilution. The court also rejected Hasbro's argument that its "Clue" trademark was famous -- a necessary condition for the dilution case -- because it is a common word used in many other contexts. Finally, the court said there was no trademark infringement involved in Clue Computing's actions.

Wayne Charness, a spokesman for Hasbro, said the company disagreed with the court's decision and would appeal the case.

Clue Computing's Robison said in an interview that he was "quite pleased and a little surprised" by the decision. He added that he has spent over $100,000 in his four-year fight. "I'm tired of seeing big companies come along and threaten people who inevitably cave because they can't afford to fight back," Robison said.

Thomas A. Mullen, Clue Computing's lawyer for the Boston suit, said that if Hasbro had won the case with its argument for a new kind of dilution, "it wold have been a sorry day for domain-name owners and an unfortunate day for trademark law."

Disputes like the one over clue.com could eventually be addressed outside of the courtroom if the Internet Corporation for Assigned Names and Numbers, the new Internet governing body, is successful in setting up its own dispute resolution process. But legal experts said many cases will continue to be fought out before a judge.

Some experts said they believe the immediate impact of the Clue and Avery Dennison cases will be to send a signal to other courts that they should tread more cautiously in domain-name disputes involving charges of dilution. Others said the cases should ease the anxieties of those small businessmen with Web sites who receive threatening "cease and desist" letters from famous trademark owners.

"In just the last nine months, I've read hundreds of cease-and-desist letters where the trademark owner is saying they've got a famous mark, and that my client has to give up his domain name," said Carl Oppedahl, an intellectual property lawyer based in Colorado.

"Here the judge in the Clue case said that even if the trademark is famous, it doesn't mean the domain name owner has done anything wrong," Oppedahl said. "That's going to help domain-name owners avoid being panicked by cease-and-desist letters. It should give them courage."

CYBER LAW JOURNAL is published weekly, on Fridays. Click here for a list of links to other columns in the series.

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Related Sites
These sites are not part of The New York Times on the Web, and The Times has no control over their content or availability.

• Clue Computing Inc.

• Hasbro Inc.

• Hasbro complaint

• Transcript of oral argument in Hasbro v. Clue Computing

• Decision of United States Court of Appeals for the 9th Circuit in Avery Dennison Corp. v. Sumpton

• "Trademarks and Domain Names: Property Rights and Institutional Evolution in Cyberspace," by Milton Mueller, Syracuse University School of Information Studies

• Domain name disputes resource page, John Marshall Law School

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Carl S. Kaplan at kaplanc@nytimes.com welcomes your comments and suggestions.

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