Rearden LLC v. Rearden Commerce Inc.,
9th Cir., No. 10-16665, 6/27/12
Case Summary: The Ninth Circuit vacates summary judgment awarded to a
defendant accused of infringing a series of trademarks incorporating the name
Key Takeaway: Although a reasonable finder of fact might yet find for
the defendant, it was in error to dispose of the claims at the summary judgment
By Anandashankar Mazumdar
A legal tussle between two groups of companies whose founders revered Ayn
Rand's fictional creation Hank Rearden will continue because outstanding
questions of fact made summary judgment in the proceeding inappropriate, the
U.S. Court of Appeals for the Ninth Circuit ruled June 27 (Rearden LLC v. Rearden Commerce Inc., 9th
Cir., No. 10-16665, 6/27/12).
Vacating summary judgment, the court found genuine outstanding questions of
material fact making fuller evidentiary proceedings necessary.
Steve Perlman is a technology products developer who in 1999 began
establishing a series of companies based in San Francisco using the name
“Rearden,” which he chose based on the name of a principal character in Ayn
Rand's Atlas Shrugged. Such companies include Rearden Productions LLC,
Rearden LLC, Rearden Studios LLC, Rearden Properties LLC, and Rearden Inc.
Rearden Productions and most of its affiliated entities, with 100 employees
in San Francisco and Palo Alto, Calif., focus on technology as applied to art
and entertainment. Rearden Properties manages real estate for the other
The companies maintain several websites, including ones associated with the
domain names rearden.com, reardensteel.com, reardenstudios.com, and
reardenlabs.com. Although the entities are incorporated as numerous separate
corporations and companies, it is standard practice for them not to distinguish
among themselves and refer simply to “the Rearden companies” or “Rearden.”
Rearden touts itself as an “incubator for new businesses.” It also purports
to be engaged in technological development and media production services.
In 2002, Perlman's companies registered two marks related to the term
“Rearden Studios” with the Patent and Trademark Office. In 2007, they filed
intent-to-use applications for many more marks, including “Rearden,” “Rearden
Companies,” “Rearden Commerce Email,” “Rearden Personal Email,” “Rearden
Mobile,” “Rearden Wireless,” and “Rearden Communications.” They also claim
rights in the terms “Rearden LLC,” “Rearden Productions,” “Rearden Properties,”
Rearden Commerce Email,” “Rearden Entertainment,” “Rearden Inc.,” “Rearden
Labs,” and “Rearden Steel.”
In 1999, Patrick Grady founded Gazoo Corp. in Foster City, Calif., a company
that specializes in software development, specifically focusing on software that
facilitates online purchasing of products and services, such as air travel, car
rental, hotel bookings, dining reservations, event tickets, online conferencing,
Later, Gazoo's name was changed to Talaris and in 2004, Grady, also an
admirer of Ayn Rand, registered the corporate name “Rearden Inc.” with the
Office of the Secretary of State of California. However, Grady lost out to
Perlman's companies and instead reserved the name “Rearden Commerce.” In 2005,
Talaris's name was officially changed to “Rearden Commerce Inc.” and it began
using the domain name reardencommerce.com.
In 2005, Grady's company sought to register two trademarks with the PTO
incorporating the term “Rearden Commerce.” Grady's company also began
registering a series of domain names that included the term “Rearden,” which
were all linked back to reardencommerce.com. The domain names included strings
such as “reardenllc” and “reardeninc.”
The Perlman companies sued Grady's company, alleging false designation of
origin under the Lanham Trademark Act of 1946, 15 U.S.C. §1125; cybersquatting
under the Anticybersquatting Consumer Protection Act of 1999, 15 U.S.C.
§1125(d); common law trademark infringement; violations of the Cal. Bus. &
Prof. Code §17,200; and false advertising under Cal. Bus. & Prof. Code
Both parties moved for summary judgment.
Judge Marilyn Hall Patel of the U.S. District Court for the Northern District
of California applied an eight-factor test for likelihood of confusion as set
forth in AMF Inc. v. Sleekcraft Boats, 599 F.2d 341, 204 USPQ 808 (9th
Cir. 1979). The district court also applied a nine-factor balancing test for bad
faith set forth in the ACPA, 15 U.S.C. §1125(d)(1)(B)(i).
Analyzing the allegations of the pleadings, the district court granted
summary judgment in favor of Grady's company.
The Perlman companies appealed.
Judge Robert E. Cowen, sitting by designation from the U.S. Court of Appeals
for the Third Circuit, first determined that there was an outstanding question
regarding whether and when the Perlman companies had used the term “Rearden” in
The district court had determined that the Perlman companies had failed to
establish that it had actually used the term “Rearden” in commerce as an
indicator of the origin of goods or services.
Specifically, the Perlman companies claimed to offer the service of
“incubation” for other people's ideas. But according to Grady's company, they
had served only to incubate Perlman's own ideas, and had not offered
“incubation” as a service in commerce.
However, the appeals court found claims sufficient in the pleadings to create
a triable question on that matter. The court did acknowledge that there was some
reason to believe that the district court might be correct in its
It does appear that, at the very
least, many (and possibly even all) of these incubated companies were actually
created by Perlman himself. … In turn, [Grady's company] claimed that [Perlman's
companies] have only ever incubated Perlman's ideas and no one has paid them to
have their ideas incubated …. There is even evidence in the record indicating
that [an alleged client of Perlman] was one of Perlman's own creations. If
[Perlman's companies] have only ever incubated new ventures started by Perlman
and have never provided or even offered their incubation services to outsiders,
their purported incubation business would fail to meet … the “use in commerce”
However, the court said that Perlman's companies should still have the
opportunity to try to demonstrate through evidence that they have actually
offered incubation services. Furthermore, the court found that even if there was
no incubation service offered in commerce, there was sufficient evidence to
establish that the Perlman companies had offered other kinds of services, such
as motion capturing services related to the making of a film, How to Make a
Turning to the question of likelihood of confusion, the court noted that
“summary judgment on 'likelihood of confusion' grounds is generally disfavored,”
because of “the open-ended nature of this multi-prong inquiry.”
Indeed, the court found outstanding fact questions regarding several of the
Sleekcraft factors as well as the overall balancing of those factors.
Acknowledging that given a full view of the relevant evidence, “a reasonable
finder of fact could still find in favor” of Grady's company on many of the
factors, the court found that the district court had erred in awarding summary
judgment in this case.
Turning to the cybersquatting claims, the court similarly found genuine
issues regarding whether Grady's company had acted in bad faith in registering
domain names. The state law claims were subject to the same standards; thus, the
court vacated summary judgment and remanded the matter for further
The court's opinion was joined by Judges Diarmuid F. O'Scannlain and Marsha
Perlman's companies were represented by Deanne E. Maynard of Morrison &
Foerster, Washington, D.C. Grady's company was represented by Richard D. Harris
of Greenberg Traurig, Chicago.
Opinion at http://pub.bna.com/ptcj/ReardenJune27.pdf