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Direct Niche, LLC v. Via Varejo

United States Court of Appeals, Eleventh Circuit

August 3, 2018

DIRECT NICHE, LLC, a Minnesota limited liability company, Plaintiff - Appellant,
v.
VIA VAREJO S/A, Defendant-Appellee.

          Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 0:15-cv-62344-DPG

          Before MARCUS and WILSON, Circuit Judges, and HOWARD, [*] District Judge.

          HOWARD, DISTRICT JUDGE

         Appellant Direct Niche, LLC initiated this case against Appellee Via Varejo S/A under the Anticybersquatting Consumer Protection Act (ACPA), 15 U.S.C. § 1114(2)(D)(v), seeking to obtain a declaratory judgment that its registration and use of the domain name casasbahia.com is not unlawful under the ACPA. Via Varejo maintained that Direct Niche is not entitled to the requested relief because Direct Niche registered the casasbahia.com domain with a bad faith intent to profit from Via Varejo's common law service mark, Casas Bahia. After a four-day bench trial, the United States District Court for the Southern District of Florida agreed with Via Varejo and entered judgment accordingly. On appeal, Direct Niche challenges only the district court's finding that Via Varejo has used the Casas Bahia mark in commerce in a manner sufficient to establish ownership rights. After careful review of the record and briefs of the parties, and with the benefit of oral argument, we affirm.

         I. Background

         Via Varejo is a Brazilian corporation with its principal place of business in São Paolo, Brazil. Via Varejo is the parent company of the Casas Bahia chain of retail stores. Casas Bahia is a multi-billion dollar retail brand with around 22, 000 employees and over 750 stores throughout Brazil. Via Varejo owns a trademark portfolio for its Casas Bahia mark, including about forty trademarks in countries around the world. At the time of the bench trial, Via Varejo had pending applications for three Casas Bahia service marks in the United States.[1] Via Varejo uses the Casas Bahia name to sell electronics, furniture, appliances, and other consumer goods. In addition to brick-and-mortar stores, Via Varejo has utilized the Casas Bahia brand in e-commerce since 2009, operating under the domain name casasbahia.com.br (the Casas Bahia Website). Via Varejo does not operate any physical Casas Bahia stores in the United States and does not ship goods ordered online to the United States, although millions of Internet Protocol (IP) addresses located in the United States access the Casas Bahia Website every year.

         In addition to the sale of products to consumers, Via Varejo also generates income from the Casas Bahia Website through the sale of advertising space to third-parties, including U.S. companies. Via Varejo does this in three ways: (1) preferred product placement, (2) a banner advertising program, and (3) its marketplace seller program. First, through preferred product placement, Via Varejo provides featured displays of a third-party supplier's products on the Casas Bahia Website in exchange for payment or a discount off the cost of the products purchased from the supplier. When a supplier transacts for preferred product placement, its products are displayed on the Casas Bahia Website for an agreed-upon period of time in a more prominent position with distinctive formatting, separate from the regular list of items for sale. Via Varejo and U.S. companies such as Intel, Microsoft, Black & Decker, Hewlett Packard, and Dell, have directly transacted for preferred product placement on the Casas Bahia Website dating as far back as 2009.

         Second, Via Varejo provides third parties, including U.S.-based advertisers, the opportunity to purchase advertising space on the Casas Bahia Website through its banner ad program. Via Varejo has engaged in the banner ad program since 2013. Through this program, Via Varejo sells space on the Casas Bahia Website to ad brokers such as Google, and Google populates the space with the banner advertisements of third parties. The banner ad program allows Via Varejo to monetize the traffic coming to the Casas Bahia Website (as only one in one hundred visitors makes a purchase), which provides a significant additional source of revenue for the company. And third, Via Varejo's marketplace seller program allows third-party vendors to display and independently sell their products on the Casas Bahia Website. Via Varejo first engaged U.S. vendors in its marketplace seller program in 2016.

         Direct Niche is a limited liability company in Minnesota whose sole business is the acquisition of Internet domain names. At the time of trial, Direct Niche's portfolio contained over 150 domain names, purchased through online auctions and sales, or through direct registration on websites like GoDaddy.com. Direct Niche monetizes the domain names it owns through resale, or by "parking" advertisements on the domain. "Parking" is an arrangement in which the domain name owner provides a third-party company with the exclusive right to "park" pay-per-click or other revenue-generating advertisements under the domain name. The "parking" company then pays Direct Niche a portion of the profits it generates from the advertisements. In this way, Direct Niche capitalizes on the web traffic to a particular domain. Any traffic to these domain names stems from the prior use of the domain name by a different owner, which often is, or was, a real business.

         On June 15, 2015, Direct Niche registered the domain name casasbahia.com (the Domain) after purchasing it in an online auction. Direct Niche paid $22, 850 for the Domain, the most it had ever paid for a domain name, and twenty times what it pays on average for a domain name. Direct Niche uses the Domain to generate revenue through the parking of advertisements. Traffic to the Domain occurs when individuals manually type casasbahia.com into their web browsers and are directed to the Domain where the parked advertisements appear. The Domain receives far more traffic than Direct Niche's other domains (over 3.5 million hits between June 2015 and May 2017), and at the time of trial, had generated $15, 867 in revenue for Direct Niche.

         In July 2015, Via Varejo filed a complaint under the Uniform Dispute Resolution Policy (UDRP) challenging Direct Niche's registration of the Domain. A panelist with the World Intellectual Property Organization (WIPO) issued an Administrative Panel Decision on October 17, 2015, ordering that the Domain be transferred to Via Varejo. As a result, Direct Niche filed this lawsuit on November 5, 2015, seeking a declaration that its registration or use of the Domain was not unlawful under the ACPA, and requesting an injunction against the transfer of the Domain. See 15 U.S.C. § 1114(2)(D)(v).[2] Via Varejo maintains that Direct Niche is not entitled to the relief it seeks because its registration and use of the Domain did violate the ACPA, specifically, 15 U.S.C. § 1125(d)(1)(A). Under this provision, a person is liable to the owner of a mark if he registers or uses a domain name that is identical or confusingly similar to the mark with a bad faith intent to profit from the use. See 15 U.S.C. § 1125(d)(1)(A).[3]

         The case proceeded to a four-day bench trial during which the district court heard from three witnesses - Michael Knight, the owner of Direct Niche, Carin Duran, the marketing manager of Via Varejo, and Othon Vela, Via Varejo's marketing director. On August 10, 2017, the district court issued findings of fact and conclusions of law in which it determined that Direct Niche's registration and use of the Domain does not comply with the ACPA. Specifically, the district court found that Via Varejo had appropriated ownership rights to the Casas Bahia mark in the United States because it used the mark in commerce to provide advertising services for others. The court further determined that the Casas Bahia mark is inherently distinctive; the Domain is identical or at least confusingly similar to the Casas Bahia mark; Direct Niche registered the domain with the bad faith intent to profit; and Direct Niche is not entitled to the statutory safe harbor defense. Based on these findings, the district court entered final judgment in favor of Via Varejo.

         Direct Niche timely appealed the district court's decision. After filing its notice of appeal, Direct Niche filed a motion to stay enforcement of the judgment pending appeal, which this Court denied on October 18, 2017. On appeal, Direct Niche challenges only the district court's determination that Via Varejo used the Casas Bahia service mark in the United States. Specifically, Direct Niche maintains that the district court failed to apply the correct legal test to determine ownership of a mark, and that the district court's finding of sufficient use is not supported by the evidence.

         II. ...


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