Zmags Corporation and Zmags, Inc. a/k/a Zmags North America v. Corporate One, Inc. c/o Steve Birtcher
Claim Number: FA0907001272622
Complainant is Zmags Corporation and Zmags, Inc. a/k/a Zmags North America (“Complainant”), represented by Brenda R. Sharton, of Goodwin Procter LLP, Massachusetts, USA. Respondent is Corporate One, Inc. c/o Steve Birtcher (“Respondent”), Ohio, USA.
REGISTRAR AND DISPUTED DOMAIN NAME
The domain name at issue is <zmagsusa.com>, registered with 1 & 1 Internet Ag (the “Disputed Domain Name”).
The undersigned certifies that he or she has acted independently and impartially and to the best of his or her knowledge has no known conflict in serving as Panelist in this proceeding.
Kendall C. Reed as Panelist.
Complainant submitted a Complaint to the National Arbitration Forum electronically on July 7, 2009; the National Arbitration Forum received a hard copy of the Complaint on July 8, 2009.
On July 13, 2009, 1 & 1 Internet Ag confirmed by e-mail to the National Arbitration Forum that the <zmagsusa.com> domain name is registered with 1 & 1 Internet Ag and that the Respondent is the current registrant of the name. 1 & 1 Internet Ag has verified that Respondent is bound by the 1 & 1 Internet Ag registration agreement and has thereby agreed to resolve domain-name disputes brought by third parties in accordance with ICANN’s Uniform Domain Name Dispute Resolution Policy (the “Policy”).
On July 22, 2009, a Notification of Complaint and Commencement of Administrative Proceeding (the “Commencement Notification”), setting a deadline of August 11, 2009 by which Respondent could file a Response to the Complaint, was transmitted to Respondent via e-mail, post and fax, to all entities and persons listed on Respondent’s registration as technical, administrative and billing contacts, and to email@example.com by e-mail.
A timely Response was received and determined to be complete on August 5, 2009.
On August 12, 2009, pursuant to Complainant’s request to have the dispute decided by a single-member Panel, the National Arbitration Forum appointed Kendall C. Reed as Panelist.
Complainant requests that the domain name be transferred from Respondent to Complainant.
Complainant is the owner of a United States trademark registration for the mark “ZMAGS,” registration number 3,524,454, in international classes 9, 41, and 42 (“Complainant’s Mark”). The application for this trademark registration was filed on December 28, 2007. Complainant’s Trademark has been used in commerce continuously since at least 2006.
Complainant’s roots are in digital publishing. Complainant’s technology allows marketers to engage readers by providing a means to digitize collateral, enrich them with interactive features deliver them to readers, and track them for reader behavior. The technology can be used to digitize and analyze any type of collateral, including brochures, catalogs, magazines, newsletter, flyers, circulars, direct mail and other business documents. These services and capacities assist marketers increase reach and readership, generate more online and offline revenue, and lower production and distribution costs.
Complainant offers products and customer service through itself and its licenses resellers. Since Complainant’s founding, over 2,500 organizations in 35 countries utilize Complainant’s technology to engage their readers online.
On May 19, 2008, Complainant and Respondent entered into an exclusive agency agreement (the “Exclusive Agency Agreement”) for the purpose of Respondent arranging sales of Complainant’s technology to a limited number of other businesses, as defined therein. The Exclusive Agency Agreement granted no rights to Respondent in Complainant’s Trademark.
On September 30, 2008, Complainant and Respondent entered into a second agreement (the “Subscription License Agreement”) for the purpose of allowing Respondent, on a non-exclusive and revocable basis, to “upload, produce, host and deliver a specified number of ePulications for a specified period.” The Subscription License Agreement provided for certain listed specifications and limitations, including without limitation that: 1) Respondent acknowledge and warranted that it would “comply with all requirements for the conduct of business acceptable to personas conducting business both in the United States of America and Canada”; 2) Respondent warranted that it would not use its “web site or any service supplied by Zmags, Inc. for, or in connection with , any ‘spamming’ activity or any other illegal or unethical marketing practices”; 3) a right on Complainant’s part to terminate the agreement if Respondent failed to pay its debit to Complainant or committed any illegal, harmful, or offensive practices; and 4) “Zmags, Inc., is the sole and exclusive owner of the Services and products and the underlying software code and all Intellectual Property Rights in relation to the Services.”
In direct contravention to the express language of the Subscription License Agreement and the Exclusive License Agreement, Respondent registered the Disputed Domain Name on or about June 23, 2008. As a result of this breach and other breaches of these agreements, Complainant terminated both agreements. Complainant notified Respondent of these terminations by a correspondence dated October 7, 2008.
The Disputed Domain Name is identical and confusingly similar to Complainant’s Mark. Complainant has established its rights in Complainant’s Mark by virtue of the registration thereof in the United States Trademark Office.
The Disputed Domain Name differs from the Complainant’s Mark only in the addition of the letters “usa” added to “ZMAGS,” which is insufficient to create a meaningful distinction.
Respondent has no legitimate rights in the Disputed Domain Name. Respondent was never authorized by Complainant to use Complainant’s Mark in any way, including for a domain name, and to the extent that Respondent did have such rights at some point pursuant to either or both of the Exclusive Agency Agreement or the Subscription License Agreement, which Complainant denies, such authority ended when Complainant terminated those agreements.
Respondent’s use of the Disputed Domain Name is not in connection with a bona fide offering of goods or services. Respondent is using a domain name that is identical or confusingly similar to Complainant’s Mark and is doing so to compete with Complainant. Respondent is advertising Complainant’s competitors’ services on the website to which the Disputed Domain Name directs (“Respondent’s Website”).
There is no indication that Respondent has ever been “commonly known” as “Zmags” or any variation thereof. To the contrary, the Subscription License Agreement explicitly provided that Complainant maintained exclusive possession of Complainant’s Mark.
Respondent can make no genuine claim that it is making a legitimate noncommercial or fair use of the Disputed Domain Name.
Respondent’s registration and use of the Disputed Domain Name was in bad faith. Respondent has intentionally attempted to attract users to its website by creating a likelihood of confusion as to the potential affiliation with or endorsement of the Disputed Domain Name and Respondent’s Website. Respondent offers on Respondent’s Website services similar to, if not identical to, the services provided by Complainant.
Respondent’s registration and use of the Disputed Domain Name constitutes “opportunistic bad faith.” Complainant’s Mark is clearly associated with a particular trademark owner, Complainant, and use of a domain name that is identical or confusingly similar thereto could only have been done with the intent of creating a likelihood of confusion with Complaint’s mark as to source, sponsorship, or affiliation of Respondent’s Website.
Respondent’s use of the Disputed Domain Name is likely to cause confusion among those consumers looking for information about Complainant, and there is a very high likelihood that this effort will be successful.
Respondent breached its registration contract with the registrar of the Disputed Domain Name, which constitutes bad faith. Such contract includes a warranty that Respondent would not register a domain name that infringes the trademark of any person or company. The Disputed Domain Name does violate Complainant’s trademark rights. Further, at the time Respondent registered the Disputed Domain Name with the registrar, Respondent had actual knowledge of Complainant’s trademark rights by virtue of the restrictions contained in the Exclusive Agency Agreement and the Subscription License Agreement, and even if not, it had constructive knowledge based on Complainant’s registration of Complainant’s Mark.
The parties hereto are involved in a legal proceeding. Respondent brought action in the United States District Court for the Southern District of Ohio, Eastern Division, against Zmags alleging, among other claims, breach of contract.
The Disputed Domain Name is not identical or confusingly similar to Complainant’s Mark. The Disputed Domain Name is <zmagsusa.com>, not <zmags.com>. Just as <ipaperusa.com> is a separate company from <ipaper.com>, and <mags.com> is a different company from <zmags.com>, and <newsusa.com> is different from <news.com>.
Respondent has rights or legitimate interests in respect of the Disputed Domain Name because it is the exact name of a trade name owned by Respondent and registered in the state of Ohio.
For the past year, Respondent has invested in magazine advertisements placed in national magazines using the trademark ZMAGSUSA and the Disputed Domain Name <zmagsusa.com>. A loss of the Disputed Domain Name would constitute a loss to Respondent of this investment, which investment has been many thousands of dollars.
Respondent is the only company that has ever advertised using the Disputed Domain Name. Complainant, in contrast, has never advertised using the Disputed Domain Name and has always advertised using the <zmags.com> domain name.
Respondent has been publishing magazines for over 15 years and further provides consulting services for its many clients.
Respondent owns many product names that incorporate the expression “mags.”
Respondent has no competitors listed on Respondent’s Website. Complainant’s claim to the contrary is not correct. Complainant has included as an exhibit to its complaint herein a small portion of an old web page. However, even that portion of an old web page does not include any reference to any of Complainant’s competitors.
Respondent’s registration and use of the Disputed Domain Name was and is not done in bad faith. Respondent’s use of the Disputed Domain Name is strictly in connection with its own legitimate business and advertising. Respondent owns a registered trade name, and it is this that Respondent seeks to reflect in the Disputed Domain Name, not Complainant’s Mark.
The parties hereto are involved in a legal proceeding. Respondent has sued Complainant (Zmags North America), in federal district court. The complaint therein was filed in the fall of 2008 and is scheduled for trial in August 2010.
The parties entered into the Exclusive License Agreement on or about May 19, 2008, and entered into the Subscription License Agreement on or about September 30, 2008.
Complainant and Respondent are parties to a civil litigation action pending in the United States District Court for the Southern District of Ohio, case number 08 CVH 10 1338.
Paragraph 15(a) of the Rules for Uniform Domain Name Dispute Resolution Policy (the “Rules”) instructs this Panel to “decide a complaint on the basis of the statements and documents submitted in accordance with the Policy, these Rules and any rules and principles of law that it deems applicable.”
Paragraph 4(a) of the Policy requires that the Complainant must prove each of the following three elements to obtain an order that a domain name should be cancelled or transferred:
(1) the domain name registered by the Respondent is identical or confusingly similar to a trademark or service mark in which the Complainant has rights;
(2) the Respondent has no rights or legitimate interests in respect of the domain name; and
(3) the domain name has been registered and is being used in bad faith.
The central feature of this proceeding is that Respondent has filed a complaint against the Complainant in the Federal District Court of Ohio, and in that litigation Complainant has filed a counter-claim against Respondent.
In the instant proceeding, Complainant attached as an exhibit to its complainant a copy of its answer and cross-complaint from the federal court litigation. This cross-complaint includes several causes of action, including a cause of action for breach of contract with respect to the above noted Exclusive Agency Agreement and Subscription License Agreement, and a cause of action for trademark infringement with respect to the Disputed Domain Name.
This Panel is authorized by Policy Rule 18(a) to dismiss an administrative proceeding that is the subject of court action:
“In the event of any legal proceedings initiated prior to or during an administration proceeding in respect of a domain-name dispute that is the subject of the complaint, the panel shall have the discretion to decide whether to suspend or terminate the administrative proceeding, or to proceed to a decision.”
Other panels have taken both approaches under Policy Rule 18(a), but the weight of prior panel decisions is that when a dispute between a complainant and respondent under the Policy requires or could likely require decisions about preliminary matters that are otherwise outside the scope of the Policy (meaning primarily contract interpretation and breach of contract), then a panel should not decide the matter, but should defer to the courts. There are at least two reasons for this.
Firstly, the Policy creates a summary procedure specially tailored for the narrow issue of abusive cyber squatting. As a necessary consequence of this system, panels and parties have neither the available time nor the tools to adequately decide more complex issues of contract interpretation and breach. See Vail Valley Partnership d/b/a Vail Valley Chamber & Tourism Bureau f/k/a Vail Valley Tourism & Convention Bureau v. econmshare c/o Office Manager, FA 163682 (Nat. Arb. Forum May 7, 2008)(“The Panel determines that the unclear relationship between Complainant and Respondent, as well as the circumstances concerning the registration and use of the <vailonsale.com> domain name, are outside the scope of the UDRP and best left for a court to decide.”); see also Love v. Barnet, FA 944826 (Nat. Arb. Forum May 14, 2007)(“When the parties differ markedly with respect to the basic facts, and there is no clear and conclusive written evidence, it is difficult for a Panel operating under the Rules to determine which presentation of the facts is more credible. National courts are better equipped to take evidence and to evaluate its credibility.”).
Secondly, pursuant to Policy Rule 4(k), it is futile for a panel to render a decision that a domain name be cancelled or transferred when there is a pending litigation between the same parties involving the disputed domain name. This is because under such a circumstance, the administrator of the arbitration proceeding will withhold action on such a decision until the end of the litigation. See AmeriPlan Corp. id., v. Shane Gilbert d/b/a NewWave Solutions. Inc., FA 105737 (Nat. Arb. Forum Apr. 22, 2002)(“No purpose is served by our rendering a decision on the merits to transfer the domain name, or have it remain, when as here, a decision regarding the domain name will have no practical consequence.”).
In the present proceeding, the parties conducted business together beginning in or about May 2008, entering into two separate contracts governing their business relationship. These contracts contained certain undertakings with respect to intellectual property rights. In or about October 2008 Complainant took the position that Respondent breached these agreements because Respondent registered the Disputed Domain Name, among other things. Respondent asserts that it had the right to register and use the Disputed Domain Name.
Given this record, this Panel believes that it could not make an adequate decision as to the rights of the parties under the Policy without making decisions on certain preliminary issues concerning the proper interpretation of the contracts and the parties’ performance, or non-performance under these contracts. Such matters are better left to the court, which is better equipped to make these determinations. Further, even if this Panel did perform an analysis under the Policy, its decision would be moot given the pending court action.
For the reasons stated above, the complaint is hereby DISMISSED, and accordingly relief is DENIED.
Kendall C. Reed, Panelist
Dated: August 25, 2009
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