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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 entities.
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, and shipping.
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 §17,500.
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 commerce.
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 conclusion:
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” requirement.
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 Monster.
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 proceedings.
The court's opinion was joined by Judges Diarmuid F. O'Scannlain and Marsha S. Berzon.
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
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