Panavision International, L.P. v. Dennis Toeppen

United States Court of Appeals, Ninth Circuit
141 F.3d 1316 (1998)

ELI5:

Rule of Law:

Registering a well-known trademark as an internet domain name for the purpose of profiting by selling it back to the trademark owner constitutes commercial use that dilutes the mark under the Federal Trademark Dilution Act. Such a scheme, when targeting a company in a specific state, subjects the perpetrator to personal jurisdiction in that state under the "effects test."

Facts:

Panavision International, L.P. (Panavision) holds registered trademarks for the names 'Panavision' and 'Panaflex' in connection with its motion picture camera equipment.
Dennis Toeppen, an Illinois resident, registered the internet domain name 'Panavision.com'. His website at that address displayed photographs of the city of Pana, Illinois.
In December 1995, when Panavision attempted to register 'Panavision.com' for its own use, it discovered Toeppen had already registered it.
Panavision's counsel sent a letter from California to Toeppen in Illinois demanding that he cease using the trademark as a domain name.
In response, Toeppen sent a letter back to Panavision in California offering to sell the 'Panavision.com' domain name for $13,000.
After Panavision refused Toeppen's offer, he also registered Panavision's other trademark, 'Panaflex.com'.
Toeppen had a history of registering over 100 trademarks of other famous companies as domain names with the intent to sell them to the trademark owners.

Procedural Posture:

Panavision filed an action against Toeppen in the United States District Court for the Central District of California, alleging federal and state trademark dilution.
The district court determined that it could exercise personal jurisdiction over Toeppen, an Illinois resident.
The district court subsequently granted summary judgment in favor of Panavision on both its federal and state dilution claims.
Toeppen, the defendant, appealed the district court's rulings on personal jurisdiction and summary judgment to the United States Court of Appeals for the Ninth Circuit.

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Issue:

Does an out-of-state defendant's scheme of registering a company's trademark as an internet domain name for the purpose of extorting money subject the defendant to personal jurisdiction in the trademark owner's home state and constitute 'commercial use' that 'dilutes' the mark under the Federal Trademark Dilution Act?

Opinions:

Majority - Thompson, David R.

Yes. An out-of-state defendant's scheme of registering a company's trademark as an internet domain name for the purpose of extorting money subjects the defendant to personal jurisdiction in the trademark owner's home state and constitutes 'commercial use' that 'dilutes' the mark under the Federal Trademark Dilution Act. Regarding personal jurisdiction, the court found that simply registering a domain name is not enough to establish jurisdiction. However, Toeppen did 'something more.' He engaged in a scheme to extort money from Panavision, a California-based company. This conduct was purposefully directed at California, and the resulting harm was felt there. Applying the 'effects test' from Calder v. Jones, the court concluded that Toeppen's intentional actions were expressly aimed at the forum state (California) and caused harm that he knew was likely to be suffered there, thus satisfying the purposeful availment requirement for specific personal jurisdiction. Regarding the dilution claim, the court determined that Toeppen's actions constituted 'commercial use' under the Federal Trademark Dilution Act (FTDA). His business was registering trademarks as domain names to sell them to the rightful owners. This was not a passive, non-commercial use; it was an attempt to trade on the value of the trademarks themselves. The court held this act of 'cybersquatting' also diluted the marks by diminishing their capacity to identify Panavision's goods and services on the internet, preventing Panavision from using its own name as its domain name and frustrating potential customers.

Analysis:

This is a landmark case in internet law that established key precedents for combating 'cybersquatting.' By applying the traditional 'effects test' for personal jurisdiction to conduct in cyberspace, the court affirmed that defendants cannot use the internet to intentionally harm a company in another state and then hide behind jurisdictional lines. Furthermore, the court's broad interpretation of 'commercial use' under the FTDA to include the act of registering and attempting to sell a domain name gave trademark holders a powerful tool to fight individuals who registered their marks in bad faith before the passage of specific anti-cybersquatting legislation.

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