Zmags Corporation and Zmags, Inc. a/k/a Zmags
North America v. Corporate One, Inc. c/o Steve Birtcher
Claim Number: FA0907001272622
PARTIES
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”).
PANEL
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.
PROCEDURAL HISTORY
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 postmaster@zmagsusa.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.
RELIEF SOUGHT
Complainant requests that the domain name be transferred from
Respondent to Complainant.
PARTIES’ CONTENTIONS
A. 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.
B. Respondent
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.
FINDINGS
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.
DISCUSSION
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.
Preliminary Issue
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.
DECISION
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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